Agricultural Marketing Service
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Agricultural Marketing Service, USDA.
Final rule.
This rulemaking amends Marketing Order No. 981, which regulates the handling of almonds grown in California. This final rule modifies the definition of almonds and shelled almonds, establishes a definition for “almond biomass,” and changes dates when the Almond Board of California (Board) conducts elections to coincide with assessment collections and when the Board submits volume regulation recommendations to USDA. The amendments modify certain marketing order provisions to facilitate orderly administration of the program. Additionally, the amendments modernize, simplify, or align language with current industry practices and definitions.
This rule is effective June 6, 2024.
Thomas Nalepa, Marketing Specialist, or Matthew Pavone, Chief, Rulemaking Services Branch, Market Development Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, Stop 0237, Washington, DC 20250-0237; Telephone: (202) 720-8085, Fax: (202) 720-8938, or Email:
Small businesses may request information on complying with this regulation by contacting Richard Lower, Market Development Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-8085, or Email:
This action, pursuant to 5 U.S.C. 553, proposes to amend regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This final rule is issued under Marketing Order No. 981, as amended (7 CFR part 981), regulating the handling of almonds grown in California. Part 981 (referred to as the “Order”) is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” The Board locally administers the Order and is comprised of growers and handlers of almonds operating within the area of production.
The Agricultural Marketing Service (AMS) is issuing this final rule in conformance with Executive Orders 12866, 13563, and 14094. Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 reaffirms, supplements, and updates Executive Order 12866 and further directs agencies to solicit and consider input from a wide range of affected and interested parties through a variety of means. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review.
This final rule has been reviewed under Executive Order 13175—Consultation and Coordination with Indian Tribal Governments, which requires agencies to consider whether their rulemaking actions would have Tribal implications. AMS has determined this final rule is unlikely to have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes.
This final rule has also been reviewed under Executive Order 12988, Civil Justice Reform. This rule shall not be deemed to preclude, preempt, or supersede any State program covering almonds grown in California.
The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 8c(15)(A) of the Act (7 U.S.C. 608c(15)(A)), any handler subject to an order may file with the U.S. Department of Agriculture (USDA) a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed no later than 20 days after the date of entry of the ruling.
Section 1504 of the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) (Pub. L. 110-246) amended section 8c(17) of the Act, which in turn required the addition of supplemental rules of practice to 7 CFR part 900 (73 FR 49307; August 21, 2008). The amendment of section 8c(17) of the Act and the supplemental rules of practice authorize the use of informal rulemaking (5 U.S.C. 553) to amend Federal fruit, vegetable, and nut marketing agreements and orders. USDA may use informal rulemaking to amend marketing orders depending upon the nature and complexity of the proposed amendments, the potential regulatory and economic impacts on affected entities, and any other relevant matters.
AMS has considered these factors and has determined that the amendments in this final rule are not unduly complex, and the nature of the amendments is appropriate for utilizing the informal rulemaking process to amend the Order. This final rule encompasses changes that are primarily administrative or modernizing in nature. Following are the amendments voted on and the results for each:
• Amendment 1—“Modifying the definitions for “Almonds” and “Shelled
• Amendment 2—“Changing the date from December 31 to March 31 for determining handler weighted votes in the nomination process for handler positions on the Board.” This amendment was favored by 85.63 percent of voting almond producers, representing 94.28 percent of the production volume voted in the referendum.
• Amendment 3—“Changing from August 1 to September 1 the date the Board is required to submit volume regulation estimates/recommendations to the Secretary of Agriculture.” This amendment was favored by 86.61 percent of voting almond producers, representing 93.02 percent of the production volume voted in the referendum.
• Amendment 4—“Removing language that requires separate accounting of certain excess funds and sets the reserve fund limit at approximately six months' “expenses” instead of six months' “budget.” This amendment was favored by 84.59 percent of voting almond producers, representing 80.65 percent of the production volume voted in the referendum.
• Amendment 5—“Adding authority for the Board to accept advanced assessments from handlers or borrow funds from commercial lenders.” This amendment was favored by 63.59 percent of voting almond producers, representing 56.15 percent of the production volume voted in the referendum.
These changes simplify, clarify, or align Order language with current industry practices and definitions. A discussion of the potential regulatory and economic impacts on affected entities is discussed later in the “Final Regulatory Flexibility Analysis” section of this final rule. The amendments apply equally to all producers and handlers, regardless of size. The amendments also have no additional impact on the reporting, record-keeping, or compliance costs of small businesses.
The Board unanimously recommended seven proposed Order amendments following deliberations at a public meeting held on August 11, 2020. The Board submitted its formal recommendation to amend the Order through the informal rulemaking process on August 9, 2021. This final rule will amend the Order by modifying the definition of almonds and shelled almonds, establishing a definition for “almond biomass,” and changing dates when the Almond Board of California (Board) conducts elections to coincide with assessment collections and when the Board submits volume regulation recommendations to USDA.
A proposed rule soliciting public comments on the proposed amendments published in the
During the referendum, producers showed overwhelming support for Amendments 1, 2, 3, and 4, referenced above, which were related to definitions and timeframes. Amendment 5, which would have added authority for the Board to accept advanced assessments from handlers or borrow funds from commercial lenders, failed to achieve two-thirds support from producers by vote or volume voting.
Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act are unique in that they are brought about through group action of essentially small entities acting on their own behalf.
There are approximately 7,600 almond growers in the production area and approximately 100 handlers subject to regulation under the Order. In the previous proposed rule published in the
The National Agricultural Statistics Service (NASS) reported in its 2022 Census of Agriculture (Census) that there were 7,596 almond farms with bearing acres in the production area. Additionally, the Census indicates that out of the 7,596 California farms with bearing acres of almonds, 4,805 (63 percent) have fewer than 100 bearing acres.
In its annual
To estimate the proportion of almond handlers that would be considered small or large businesses, it was assumed that the unit value per pound of almonds exported in a particular year could serve as a representative almond price at the handler level. A unit value for a commodity is the value of exports divided by the quantity exported. Data from the Global Agricultural Trade System (GATS) database of USDA's Foreign Agricultural Service showed that the value of almond exports from August 2022 to July 2023 (shelled equivalent, combining shelled and inshell) was $4.117 billion. The quantity of almond exports over that time-period was 1.784 billion pounds. Dividing the export value by the quantity yields a unit value of $2.31 per shelled pound ($4.117 billion divided by 1.784 billion pounds equals $2.31).
NASS estimated that the California almond industry produced 2.511 billion pounds of almonds in 2022. Applying the $2.31 derived representative handler price per pound to total industry production results in an estimated total revenue at the handler level of $5.80 billion (2.511 billion pounds times $2.31 per pound). With an estimated 100 handlers in the California almond industry, average revenue per handler would be approximately $58.0 million ($5.80 billion divided by 100). Assuming a normal distribution of revenues, most almond handlers shipped almonds valued at more than $34,000,000 during the 2022 crop year. Therefore, the majority of handlers may be classified as large businesses.
AMS has determined that the amendments, as effectuated by this final rule, will not have a significant impact on a substantial number of small businesses. Rather, large and small entities alike would be expected to benefit from the Board's improved ability to address important issues of interest to all on a timely basis. No small businesses are unduly or disproportionately burdened.
The amendments to the Order are modernizing in nature and align Order provisions with current industry definitions and practices. They define commonly used industry terminology and simplify language to more broadly identify disposition outlets of almonds.
Additionally, the amendments are necessary to adjust or align dates to allow for the inclusion of more available data when determining weighting of handler votes for Board nominations and providing volume regulation recommendations to the Secretary. These changes do not impact how volume is calculated for handler vote weighting, materially affect crop estimates, or adversely impact Board activities.
Finally, these amendments remove language that distinguishes between funds for administrative-research and funds for marketing promotion activities in the accounting of excess funds. It also sets the reserve fund limit at approximately six-months' expenses instead of the current six-months' budget. This is an administrative adjustment that provides technical clarification on the accounting of assessments and reserves. It does not impact the percentage of assessments available for refund, nor does it materially impact reserves.
The Board considered the benefits and costs of maintaining the status quo as an alternative to this action. However, AMS believes the amendments are beneficial in either clarifying or updating the language of the Order for industry or improving the Board's continuity of operations at no additional costs to industry.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the Order's information collection requirements have been previously approved by OMB and assigned OMB No. 0581-0178, Vegetable and Specialty Crops. No changes in those requirements are necessary because of this action. Should any changes become necessary, they would be submitted to OMB for approval.
This final rule does not impose additional reporting or recordkeeping requirements on either small or large almond handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public-sector agencies.
AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this action.
The Board's meetings are widely publicized throughout the California almond production area. All interested persons are invited to attend the meeting and encouraged to participate in Board deliberations on all issues. Like all Board meetings, the meetings held on December 9, 2019, August 11, 2020, and December 7, 2020, were public, and all entities, both large and small, were encouraged to express their views on the proposals.
A proposed rule concerning this action published in the
A second proposed rule and referendum order was then published on October 4, 2023 (88 FR 68500). That document directed that a referendum among California almond growers be conducted from October 30, 2023, through November 20, 2023, to determine whether they favor the proposals. To become effective, the amendments had to be approved by either two-thirds of the producers voting in the referendum or by those representing at least two-thirds of the volume of almonds grown by those voting in the referendum. The referendum results show producers supported four amendments related to definitions and time frames by an average of 85.9 percent of producers voting, who represented 90.7 percent of the volume of almonds produced by those voting. Results also show that producers did not support by two-thirds voting or volume voting, the amendment to add authority for the Board to accept advanced assessments from handlers or borrow funds from commercial lenders.
A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at:
The findings and determinations hereinafter set forth are supplementary to the findings and determinations which were previously made in connection with the issuance of Marketing Order 981; and all said previous findings and determinations are hereby ratified and affirmed, except insofar as such findings and determinations may be in conflict with the findings and determinations set forth herein.
1. Marketing Order 981, as amended, and as hereby amended, and all the terms and conditions thereof, will tend to effectuate the declared policy of the Act;
2. Marketing Order 981, as amended, and as hereby further amended, regulates the handling of almonds grown in California and is applicable only to persons in the respective classes of commercial and industrial activity specified in the Order;
3. Marketing Order 981 as amended, and as hereby further amended, is limited in application to the smallest regional production area, which is practicable, consistent with carrying out the declared policy of the Act, and the issuance of several marketing orders applicable to subdivisions of the production area would not effectively carry out the declared policy of the Act;
4. Marketing Order 981, as amended, and as hereby amended, prescribes, insofar as practicable, such different terms applicable to different parts of the production area as are necessary to give due recognition to the differences in the production and marketing of almonds produced or packed in the production area; and
5. All handling of almonds grown or handled in the production area, as defined in Marketing Order 981, is in the current of interstate or foreign commerce, or directly burdens, obstructs, or affects such commerce.
It is hereby determined that:
1. The issuance of this amendatory Order, amending the aforesaid Order, is favored or approved by producers representing at least two-thirds of the volume of almonds produced by those voting in a referendum on the question of approval and who, during the period of August 1, 2022, through July 31, 2023, were engaged within the production area in the production of such almonds.
2. The issuance of this amendatory Order advances the interests of producers of citrus in the production area pursuant to the declared policy of the Act.
It is therefore ordered, that on and after the effective date hereof, all handling of almonds grown in California shall be in conformity to, and in compliance with, the terms and conditions of the said Order as hereby proposed to be amended as follows:
The provisions amending the Order contained in the proposed rule and referendum issued by the Administrator and published in the
Marketing agreements, Nuts, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Agricultural Marketing Service amends 7 CFR part 981 as follows:
7 U.S.C. 601-674.
(a)
(b)
(b) * * *
(2) Each handler may vote for a nominee for each position representing the group to which the handler belongs. Each handler vote shall be weighted by the quantity of almonds (kernel weight basis computed to the nearest whole ton) handled for the handler's own account through March 31 of the crop year in which nominations are made. The nominee for each position shall be the person receiving the highest weighted vote for the position.
The revisions read as follows:
(b) * * * Any amounts, not credited pursuant to § 981.41 for a crop year may be used by the Board for its marketing promotion expenses of the succeeding crop year, and any unexpended portion of those amounts at the end of that crop year shall be retained in the operating reserve fund. Any funds of the operating reserve fund in excess of the level authorized pursuant to paragraph (c) of this section shall be refunded to handlers or used to reduce the assessment rate of the subsequent crop year, as the Board may determine. * * *
(c)
Federal Aviation Administration (FAA), DOT.
Final special conditions.
These special conditions are issued for the Airbus Helicopters (Airbus) Model H160-B helicopter. This helicopter has a novel or unusual design feature when compared to the state of technology envisioned in the airworthiness standards for helicopters. This design feature is the extended duration of continued safe flight and landing beyond 30 minutes after indication to the flightcrew of the loss of main gearbox lubrication. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
Effective June 6, 2024.
Kamron Dowlatabadi, Mechanical Systems, AIR-623, Technical Policy Branch, Policy and Standards Division, Aircraft Certification Service, 10101 Hillwood Parkway, Fort Worth, TX 76177; telephone (817) 222-5219; email
On July 10, 2023, Airbus applied for an amendment to Type Certificate No. R00009RD for the Model H160-B helicopter to include continued safe flight and landing beyond 30 minutes after indication to the flightcrew of the loss of main gearbox lubrication.
The Airbus Model H160-B helicopter is a transport-category, twin-turboshaft-engine helicopter certificated under 14 CFR part 29. This helicopter has a maximum takeoff weight of 13,436 lbs. with seating for 12 passengers and 2 flightcrew members. The Airbus Model H160-B helicopter is also characterized by the integration of composite materials in its airframe, five main rotor blades (Blue Edge technology), a Fenestron tail rotor, and a Helionix avionics suite.
Under the provisions of 14 CFR 21.101, Airbus must show that the Model H160-B helicopter meets the applicable provisions of the regulations listed in Type Certificate No. R00009RD, or the applicable regulations in effect on the date of application for the change, except for earlier amendments as agreed upon by the FAA.
If the Administrator finds that the applicable airworthiness regulations (
Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same or similar novel or unusual design feature, the special conditions would also apply to the other model under § 21.101.
In addition to the applicable airworthiness regulations and special conditions, the Airbus Model H160-B helicopter must comply with the noise certification requirements of 14 CFR part 36.
The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type-certification basis under § 21.101.
The Airbus Model H160-B helicopter will incorporate the following novel or unusual design feature:
Extended duration of continued safe flight and landing beyond 30 minutes after indication to the flightcrew of the loss of main gearbox lubrication.
Current regulations do not prescribe a duration for continued safe flight and landing to be specifically called out in the rotorcraft flight manual when a loss of main gearbox lubrication is indicated to the flightcrew. Although § 29.927(c)(1) requires a 30-minute test to show that the rotor drive system, which is defined in § 29.917(a) and includes the main gearbox, is operational for 30 minutes following the indication to the flightcrew of a loss of lubrication, the associated bench test conditions may not be representative of aircraft flight conditions because a 30-minute bench test of the main gearbox may not translate to 30 minutes of continued safe flight and landing.
The novel or unusual design feature of the Airbus Model H160-B helicopter is intended to enable the helicopter to continue safe flight and landing, for a minimum of 30 minutes, to the intended destination or to a safe landing location after the indication to the flightcrew of a loss of main gearbox lubrication. To meet this minimum 30 minutes of continued safe flight and landing, the Airbus Model H160-B helicopter main gearbox is designed with a redundant lubrication system. This main gearbox redundant lubrication system would allow continued safe operation after the failure of a single lubrication system. Current regulations do not address a redundant lubrication system that allows operation after the failure of a single lubrication system because at the time the existing regulations were issued, the agency did not envision that a flight duration of more than 30 minutes after the indication to the flightcrew of the loss of main gearbox lubrication was needed. Accordingly, these special conditions provide testing criteria to ensure the reliability of the redundant lubrication system to provide an extended period for safe flight and landing beyond 30 minutes after indication to the flightcrew of the loss of the main gearbox lubrication.
These special conditions add new requirements in lieu of the existing airworthiness standards in §§ 29.917(a) and 29.927(c) and add a requirement to § 29.1585.
At the time of the issuance of the existing regulations, the FAA did not envision the evolving operations for these types of aircraft and the regulations did not include the main gearbox lubrication system components in the required design assessment of the rotor drive system. Accordingly, these special conditions include requirements for addressing “any associated lubrication system components including oil coolers” in the design assessment required by § 29.917(b).
These special conditions add a safety margin over the current 30-minute rotor drive system test specified in § 29.927(c)(1) by requiring a test duration of more than 30 minutes to
The term “confidence” specified in Category A and B in these special conditions necessitates the applicant provide supporting data with respect to the mechanical behavior of the main gearbox and must reflect the applicant's confidence in the repeatability of the certification test data. Test loading, in the context of these special conditions, refers to the engine, main gearbox, clutch system, and rotors (or similar test apparatus) interconnected and operating in unison, as this combination of mechanical elements pertains to power input transmitted to the main gearbox and subsequent reaction torques simulating operating conditions.
These special conditions add a requirement that the maximum duration of operation after a failure, which results in a loss of main gearbox lubrication and an associated indication to the flightcrew, must be furnished in the rotorcraft flight manual, and the duration must not exceed the maximum period of in-flight operational endurance capability substantiated.
These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
The FAA issued Notice of Proposed Special Conditions No. 29-21-01-SC for the Airbus Model H160-B helicopter, which was published in the
Leonardo Helicopters requested the FAA generally maintain harmonization and alignment with the EASA certification specifications (CS) 29 requirements by implementing the same changes to part 29 that were introduced by EASA rulemaking task RMT.0608, following notice of proposed amendment (NPA) 2017-07,
This request relating to the pursuit of future rulemaking for part 29 is beyond the scope of these special conditions. No change was made to these special conditions as a result of this comment.
Leonardo Helicopters stated that EASA's CS-29 requirements and acceptable means of compliance (AMC) clearly define how to establish the operational endurance capability through the application of reduction factors. However, the correlation between 30 and 60 minutes, and the criteria for defining this correlation, is not clear in the proposed special conditions. Leonardo Helicopters requested the FAA revise the proposed special conditions to define the proposed reduction factors and allow the public to comment. The FAA infers that Leonardo Helicopters is also requesting clarification regarding the correlation between 30 and 60 minutes for the bench test.
The FAA disagrees with the commenter's request to include reduction factors and related material in these special conditions. The FAA considers the details referenced by Leonardo Helicopters, including the correlation between the test duration and substantiated safe operation duration, to be related to the means of compliance for these special conditions. Means of compliance for these special conditions are defined separately between the FAA and the applicant via the FAA issue paper process, which is outside the scope of these special conditions. However, to address the Leonardo Helicopters comment, the FAA has clarified language in the discussion section. Specifically, the FAA removed the previous reference in these special conditions to a 60-minute bench test scenario, since it is not a requirement under 29.927(c), but rather an example to illustrate how applicants translate the time duration of a bench test into 30 minutes of substantiated operation for continued safe flight and landing. In addition, the term “reduction factor” has been removed from the discussion section and replaced with language to define the term “confidence” used in these special conditions.
Additionally, Leonardo Helicopters stated that EASA CS-29 does not have a similar requirement for a test duration of at least 60 minutes, and therefore the special conditions are not harmonized with the EASA requirements. The FAA infers Leonardo Helicopters is requesting that the FAA revise the proposed special conditions to address an alleged contradiction and lack of harmonization with the related EASA CS-29 requirements.
The FAA does not agree to revise the proposed special conditions to address a possible contradiction because the FAA does not find that a contradiction exists. The commenter suggests that these special conditions contain a 60-minute testing requirement. There is no specific requirement in these special conditions for a 60-minute test. However, in the preamble of the proposed special conditions, the FAA discussed a scenario where it may be necessary for an applicant to perform a 60-minute test, depending on reduction factors. As explained previously, this language has been removed to address the related public comment and replaced with language to describe the context of the word “confidence” used in these special conditions. The details related to the test duration and maximum period of in-flight operation following loss of main gearbox lubrication are associated with the means of compliance for these special conditions. As previously explained, the means of compliance are established between the FAA and applicant through the FAA issue paper process and the FAA's acceptance of a specific means of compliance is beyond the scope of these special conditions. No changes were made to these special conditions as a result of this comment. However, the FAA has made minor editorial changes to these special conditions to ensure consistency in the language of the requirements.
As discussed above, these special conditions are applicable to the Airbus Helicopters Model H160-B helicopter. Should Airbus Helicopters apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design feature, these special conditions would apply to that model as well.
This action affects only a certain novel or unusual design feature on one model of helicopter. It is not a rule of general applicability.
Aircraft, Aviation safety, Reporting and recordkeeping requirements.
The authority citation for these special conditions is as follows:
49 U.S.C. 106(f), 106(g), 40113, 44701-44702, 44704.
Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for the Airbus Helicopters Model H160-B helicopter. Unless stated otherwise, all requirements in §§ 29.917, 29.927, and 29.1585 still apply.
In lieu of § 29.917(a), the following special condition applies:
(a)
In lieu of § 29.927(c), the following special condition applies:
(i) For each rotor drive gearbox system necessary for continued safe flight or safe landing, the applicant must conduct a test that simulates the effect of the most severe failure mode of the pressurized, normal-use lubrication system, as determined by the failure analysis required by § 29.917(b). The duration of the test must be dependent on the number of tests and the component condition after each test.
(ii) The test must begin when the indication to the flightcrew shows a lubrication failure has occurred, and its loading must be consistent with 1 minute at maximum continuous power, followed by the minimum power needed for continued flight at the rotorcraft maximum gross weight.
(iii) The test must end with a 45-second out-of-ground-effect (OGE) hover to simulate a landing phase. Test results must substantiate the maximum period of operation following a loss of lubrication by means of an extended test duration or multiple test specimens, or another approach prescribed by the applicant and accepted by the FAA.
(2)
(i) For each rotor drive gearbox system necessary for safe autorotation descent or safe landing, the applicant must conduct a test of at least 16 minutes and 15 seconds, following the most severe failure mode of the pressurized, normal-use lubrication system, as determined by the failure analysis required by § 29.917(b).
(ii) The test must begin when the indication to the flightcrew shows that a lubrication failure has occurred, and its loading must be consistent with 1 minute at maximum continuous power. Thereafter, the input torque should be reduced to simulate autorotation for a minimum of 15 minutes.
(iii) The test must be conducted using an input torque to simulate a minimum power landing for approximately 15 seconds.
In addition to § 29.1585, the following special condition applies:
(h)
Federal Aviation Administration (FAA), U.S. Department of Transportation (DOT).
Final rule; request for comments; correction.
The FAA is correcting a final rule published on April 24, 2024. In that document the FAA adopts standards for measuring non-volatile particulate matter (nvPM) exhaust emissions from aircraft engines. With this rulemaking, the FAA implements the nvPM emissions standards adopted by the Environmental Protection Agency (EPA), allowing manufacturers to certificate engines to the new nvPM emissions standards in the United States and fulfilling the statutory obligations of the FAA under the Clean Air Act. This document corrects errors in the preamble and regulatory text of that document.
Effective May 24, 2024.
For technical questions concerning this action, contact Ralph Iovinelli, Office of Environment and Energy (AEE-300), Federal Aviation Administration, 800 Independence Ave. SW, Washington, DC 20591; telephone (202) 267-3566; email
A copy of the Control of Non-Volatile Particulate Matter From Aircraft Engines: Emission Standards and Test Procedures final rule may be viewed online at
Copies may also be obtained by sending a request to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue SW, Washington, DC 20591, or by calling (202) 267-9677. Commenters must identify the docket or amendment number of this rulemaking.
All documents the FAA considered in developing this correction, including economic analyses and technical reports, may be accessed in the electronic docket for this rulemaking.
On April 24, 2024, the FAA published a final rule titled “Control of Non-Volatile Particulate Matter From Aircraft Engines: Emission Standards and Test Procedures” (89 FR 31078). That document adopts standards for measuring non-volatile particulate matter nvPM exhaust emissions from aircraft engines. With this rulemaking, the FAA implements the nvPM emissions standards adopted by the EPA, allowing manufacturers to certificate engines to the new nvPM emissions standards in the United States and fulfilling the statutory obligations of the FAA under the Clean Air Act. After publishing the final rule, the FAA became aware that certain information in the preamble and regulatory text sections regarding compliance, were inadvertently omitted. This document corrects errors in the preamble and regulatory text of that document.
In FR Doc. 2024-08453, beginning on page 31078, in the
(d) For engines type certificated after January 1, 2023 and prior to May 24, 2024, compliance with this part must be demonstrated no later than August 22, 2024.
International Trade Administration, Department of Commerce.
Final rule.
The Department of Commerce, International Trade Administration (ITA), Global Markets is issuing regulations implementing the U.S. and Foreign Commercial Service Pilot Fellowship Program to increase the level of knowledge and awareness of, and interest in employment with the United States and Foreign Commercial Service (US&FCS) among students, including students from underserved communities. This Program is intended to recruit graduate students interested in building a career with the U.S. Foreign Commercial Service. The Notice of Funding Opportunity (NOFO) on
This rule is effective on May 6.
Wendy Thompson at
The U.S. and Foreign Commercial Service Pilot Fellowship Program establishes a graduate student fellowship program to increase the level of knowledge and awareness of, and interest in employment with the U.S. & Foreign Commercial Service among students, including students from underserved communities. The Consolidated Appropriations Act, 2023, Public Law 117-328, Division B, Title I, under the appropriation for the International Trade Administration, authorizes funds “for the purpose of carrying out a pilot fellowship program of the United States Commercial Service under which the Secretary of Commerce may make competitive grants to appropriate institutions of higher education or students to increase the level of knowledge and awareness of, and interest in employment with, that Service among minority students.” The Act also states that, “any grants awarded under such program shall be made pursuant to regulations to be prescribed by the Secretary, which shall require as a condition of the initial receipt of grant funds, a commitment by prospective grantees to accept full-time employment in the Global Markets unit of the International Trade Administration upon the completion of participation in the program.”
In the Memorandum on
The purpose of the U.S. and Foreign Commercial Service Pilot Fellowship Program is to educate and train graduate students in International Relations, Economics, Business, Trade or Public Policy, and International Studies to build a pool of candidates eligible for the future U.S. and Foreign Commercial Service workforce and ITA Pathways Program opportunities. ITA will conduct broad outreach to raise awareness of the Fellowship program, including to Minority Serving Institutions such as Historically Black Colleges and Universities, Hispanic Serving Institutions, Indian Tribally Controlled Colleges and Universities, Alaska Native-Serving Institutions, and Native Hawaiian-Serving Institutions to increase the level of knowledge and awareness of, and interest in employment with, the U.S. Foreign
While in school, Fellows participate in one overseas enrichment program within the U.S. Department of Commerce and several mentoring sessions throughout the end of the student's current graduate education program. After completing their current academic graduate degree programs, and successfully passing the Foreign Service entry requirements, Fellows may choose to apply for employment with the U.S. Department of Commerce Foreign Service as Foreign Commercial Service Officers or candidates for the ITA Pathways Program. Consideration for the Fellowship is given to all qualified applicants who demonstrate outstanding leadership skills and academic achievement. The number of fellowships awarded is determined by available funding. ITA will publish a Notice of Funding Opportunity (NOFO) on
This final rule implements the base parameters of the U.S. and Foreign Commercial Service Pilot Fellowship Program. The regulations are consistent with the information provided in the NOFO. Section 326.1 provides a description of the program consistent with the above description in this preamble. Section 326.2 addresses administration, noting that the eligibility criteria and the amount of funding will be determined and announced annually and publicized nationwide. Section 326.2 also provides the core eligibility requirements, including U.S. citizenship and employment criteria and requirements for Fellows upon the successful completion of their graduate degree program. Section 326.3 provides that grants are awarded directly to students to be Fellows. Section 326.4 provides that the Office of Global Talent Management within the International Trade Administration administers this program for the Department.
Pursuant to 5 U.S.C. 553(a)(2), the provisions of the Administrative Procedure Act requiring notice of proposed rulemaking and the 30-day delay in effective date for substantive rules are inapplicable because this rule pertains to personnel and grants.
This rule has been determined to be not significant for purposes of Executive Order 12866.
This regulation is exempt from the notice and comment provisions of the APA. Therefore, the requirements of the Regulatory Flexibility Act (5 U.S.C. 601
This rule does not have any collection of information requirements under the Paperwork Reduction Act.
Education, Educational study programs, Federal aid programs, Grant programs, Scholarships and fellowships, and Students.
Consolidated Appropriations Act, 2023, Pub. L. 117-328, Division B, Title I.
The U.S. and Foreign Commercial Service Pilot Fellowship Program targets graduate students interested in increasing the level of knowledge and awareness of and employment with the Foreign Service, consistent with 22 U.S.C. 3905. The Program develops a source of trained individuals, from academic disciplines representing the skill needs of the Department, who are dedicated to representing the United States' commercial interests abroad.
(a)
(b)
(c)
(2) As a condition of participation, fellows are required to complete prescribed coursework.
(3) As a condition of participation, foreign travel is required for all Fellows.
(4) Fellows are required to accept employment, if offered, with the Department of Commerce U.S. and Foreign Commercial Service upon successful completion of the Program and, if applicable, Foreign Service entry requirements.
(5) If offered employment, Fellows must commit to a two-year service agreement.
(6) Additional Program requirements may be determined annually by the Department of Commerce and publicized nationwide.
(a)
(b)
The Department of Commerce, International Trade Administration, Global Markets, Office of Global Talent Management is responsible for administering the U.S. and Foreign Commercial Service Pilot Fellowship Program and grants to students and may be contacted for more detailed information.
Coast Guard, DHS.
Final rule.
The Coast Guard is altering the operating schedule that governs the Atlantic Beach Bridge across the Reynolds Channel, mile 0.4, at Atlantic Beach, NY. The bridge owner, Nassau County Bridge Authority, submitted a request on September 22, 2022 to modify the regulation to decrease the amount of openings on signal from October through May. On November 16, 2023 Nassau County Bridge Authority sent an additional request to add a bridge tower call number and remove outdated language. It is expected that this change to the regulations will better serve the needs of the community while continuing to meet the reasonable needs of navigation.
This rule is effective June 6, 2024.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Ms. Stephanie E. Lopez, First Coast Guard District, Project Officer, telephone 212-514-4335, email
On August 25, 2023, the Coast Guard published a Notice of Proposed Rulemaking (NPRM) with a request for comments, entitled “Drawbridge Operation Regulation; Reynolds Channel, Atlantic Beach, NY” in the
On February 21, 2024, the Coast Guard published a Supplemental Notice of Proposed Rulemaking (SNPRM) with a request for comments, under the same title as the NPRM in the
The Coast Guard is issuing this rule under authority 33 U.S.C. 499. The Atlantic Beach Bridge at mile 0.4, across Reynolds Channel, Atlantic Beach, NY, has a vertical clearance of 25 feet at mean high water and a horizontal clearance of 125 feet. Waterway users include recreational and commercial vessels, including fishing vessels.
The existing drawbridge operating regulations are listed at 33 CFR 117.799(e). Under the current regulation, the bridge shall open on signal from October 1 through May 14. Nassau County is requesting the bridge shall open on signal from 8 a.m. to midnight October 1 through May 14; and from midnight to 8 a.m. year-round the draw shall open on signal if at least eight hours advance notice is given.
The Reynolds Channel is transited by recreational vessels and commercial vessels. In recent years, a significant amount of industrial and commercial business has closed along the waterfront. This change has caused a decrease in the number of bridge opening requests from midnight to 8 a.m.
Nassau County Bridge Authority held two public meetings on August 18, 2022 and August 25, 2022. No one from the public attended.
Coast Guard provided a comment period of 30 days and three comments were received. All three comments were positive and in favor of the rule change.
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.
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,
This regulatory action determination is based on the ability of vessels to still transit the bridge given advanced notice.
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard received no comments from the Small Business Administration on this rule. 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 bridge 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 contact the person listed in the
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
This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this rule under Department of Homeland Security Management Directive 023-01, Rev.1, associated implementing instructions, and Environmental Planning Policy COMDTINST 5090.1 (series) which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f). The Coast Guard has 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 promulgates the operating regulations or procedures for drawbridges and is categorically excluded from further review, under paragraph L49, of Chapter 3, Table 3-1 of the U.S. Coast Guard Environmental Planning Implementation Procedures.
Neither a Record of Environmental Consideration nor a Memorandum for the Record are required for this rule.
Bridges.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 117 as follows:
33 U.S.C. 499; 33 CFR 1.05-1; and DHS Delegation No. 00170.1. Revision No. 01.3
(e) The draw of the Atlantic Beach Bridge across Reynolds Channel, mile 0.4, shall operate as follows:
(1) From October 1 through May 14 the draw shall open on signal from 8 a.m. to midnight.
(2) From midnight to 8 a.m. year-round, the draw shall open on signal if at least eight (8) hours of notice is given by calling the Bridge Tower at 516-239-1821.
(3) From May 15 through September 30, the bridge will open on signal except from 4 p.m. to 7 p.m. on weekdays, and from 11 a.m. to 9 p.m. on Saturdays, Sundays, Memorial Day, Independence Day, and Labor Day, when the bridge will open on the hour and half-hour.
Office of Government-wide Policy (OGP), General Services Administration (GSA).
Final rule.
The United States (U.S.) General Services Administration (GSA) is issuing a final rule amending the Federal Travel Regulation (FTR) with respect to temporary quarters subsistence expenses (TQSE) allowances. Changes include implementing a third TQSE methodology, redefining the current TQSE methods, lowering the percentage multipliers for calculating TQSE maximum daily amounts, and prohibiting adjustments to TQSE percentage multipliers for househunting days. The final rule also exempts temporary quarters (TQ) located in Presidentially-Declared Disaster areas from the “reasonable proximity” requirement and allows agencies to authorize TQSE at the applicable locality per diem allowance or authorize actual expenses on an individual basis. This rule establishes an exception to authorizing actual expenses on an individual basis by which agencies can issue a blanket actual expense authorization for employees authorized to occupy TQ in Presidentially-Declared Disaster areas. The final rule will also update and clarify some TQSE sections and rearrange them into a more sequential order.
Effective June 6, 2024.
For clarification of content, contact Mr. Rodney (Rick) Miller, Program Analyst, Office of Government-wide Policy, at 202-501-3822 or
GSA published a proposed rule at 88 FR 33067 on May 23, 2023, which proposed changes to the FTR with respect to TQSE allowances. This rule finalizes those proposed changes as summarized above, and as set forth in greater detail below.
Pursuant to 5 United States Code (U.S.C.) 5738, the Administrator of General Services is authorized to prescribe regulations necessary to implement laws regarding Federal employees when assigned a temporary change of station (TCS) or when otherwise transferred in the interest of the Government. The overall implementing authority is the FTR, codified in title 41 of the Code of Federal Regulations, chapters 300 through 304.
GSA's Office of Government-wide Policy (OGP) continually reviews and adjusts policies and regulations under its purview to address current Government relocation needs and incorporate best practices, where appropriate, as a part of its ongoing mission to provide policies for travel by Federal civilian employees and others authorized to travel at Government expense.
Each year, the Federal Government spends more than $1.2 billion on relocation allowances to reimburse an average of 28,800 employees for their related expenses. Federal agencies can offer relocation allowances as an incentive to assist with defraying some of the costs for relocating individuals. The FTR provides regulatory procedures for certain mandatory and discretionary relocation allowances depending on the individual's type of movement.
Pursuant to 5 U.S.C. 5724a(c) and 5737(a)(5), an employee transferred in the interest of the Government may be authorized a TQSE allowance to reimburse the employee and the employee's immediate family members for subsistence expenses incurred when it is necessary to occupy TQ. TQSE may be authorized for the following transfers: between official duty stations within the U.S.; from a foreign area to an official duty station in the U.S.; or assignment to a temporary official station and/or permanently assigned to a temporary official station within the U.S.
Agencies may offer two existing methods of TQSE: TQSE-actual expense (TQSE-AE) or TQSE-lump sum (TQSE-LS). From fiscal years 2018 to 2022, Federal agencies have approved about 12,000 TQSE claims annually for employees who relocated, with agencies identifying TQSE-AE as the more utilized reimbursement method.
Under the TQSE-AE method, the employee is reimbursed the cost of their actual subsistence expenses not to exceed the authorized maximum allowable amount. The TQSE-AE method uses the standard continental United States (CONUS) per diem rate or the outside the continental United States (OCONUS) non-foreign area per diem rate as the applicable per diem rate based on the TQ location. The employee and each of the employee's immediate family members receives a percentage of that rate. The rate is applied to the first 30-day increment of occupying TQ and a reduced rate is applied after 30 days. Occupancy of TQ may extend up to the statutory maximum of 120 consecutive days. The employee documents their incurred daily allowable expenses, which may include: TQ lodging, including taxes; meals and/or groceries; fees and tips incident to meals and TQ lodging; and laundry/dry cleaning of clothes. The employee provides TQ lodging receipt(s) and a receipt for every expense over $75, for each 30-day period of TQ occupancy.
In 2005, the Governmentwide Relocation Advisory Board (GRAB), which included representatives from Government agencies, private-sector corporate relocation departments, relocation industry associations, and/or relocation industry service providers, mentioned in its “Findings and Recommendations” that the TQSE-AE method is administratively burdensome and time-consuming for employees, travel examiners, and certifying officials.
Since 1966, Title 5 of the U.S. Code has provided authority for agencies to reimburse TQSE in connection with an employee transferred in the interest of the Government. At that time, only one per diem rate was used within CONUS—the standard CONUS rate. Since that time, however, GSA began establishing CONUS non-standard area (NSA) per diem rates for areas where the standard CONUS rate was insufficient. Currently, Federal agencies have employees assigned to offices and military bases in CONUS NSAs where the standard CONUS rate is insufficient for obtaining TQ lodging and meals under the TQSE-AE method. This is particularly true for single employees. Accordingly, for TQSE-AE and all TQSE methods, the final rule will allow for CONUS NSA per diem rates to be used as an applicable per diem rate to calculate TQSE, depending upon where TQ will be occupied.
This final rule will also clarify that there is no requirement to separate maximum amounts for TQ lodging and M&IE in calculating TQSE-AE reimbursement. Accordingly, the separate allowances for TQ lodging and M&IE may be combined to produce a single maximum daily amount (which will allow some of the M&IE rate to offset the TQ lodging cost). Agencies can still ensure that an employee is not overcompensated by using the single maximum daily amount while also accounting for the rate change after 30 days in TQ.
Under the TQSE-LS method, agencies may offer a lump sum amount based on the standard CONUS, CONUS NSA, or OCONUS non-foreign area per diem rates, as appropriate, depending on the locality of the old and/or new official stations and wherever TQ will be occupied. Under this reimbursement method, a percentage of the maximum applicable per diem rate is paid to the employee and the employee's immediate family members for a maximum of 30 days of TQSE. Under TQSE-LS, there is no requirement to document and itemize expenses; however, the employee must certify that they occupied TQ.
To improve employees' relocation experience and assist agencies in processing relocation expenses reimbursement, GSA is implementing a third method of TQSE titled “temporary quarters subsistence expenses-lodgings plus” (TQSE-LP). This third method will be the preferred TQSE reimbursement method for agencies to offer to employees; however, agencies may continue to offer TQSE-AE and/or TQSE-LS as an alternative. In accordance with 5 U.S.C. 5724a(h), TQSE-LP must follow the limitations prescribed for payments of subsistence expenses under 5 U.S.C. 5702. TQSE-LP is in line with 5 U.S.C. 5702 which entitles an employee who performs official business away from their official station, a per diem allowance, reimbursement for actual and necessary expenses, or a combination of both. The FTR implements the “combination of both” statutory language by utilizing the temporary duty (TDY) “lodgings-plus per diem” methodology, which entitles an employee to reimbursement of actual lodging expenses up to a maximum amount by locality area, as supported by receipts, and a meals and incidental expense (M&IE) allowance, which may be reimbursed without itemization or receipts. Accordingly, the new TQSE-LP method will follow similar principles as the TDY travel “lodgings-plus” method of per diem for
A difference between TDY lodgings-plus and TQSE-LP is that the TDY per diem allowance excludes lodging taxes and laundry/dry cleaning expenses from the per diem rates in CONUS and allows the traveler to claim them as a separate TDY miscellaneous expense under part 301-12. However, part 302-6 does not contain or adopt by reference the provisions of Chapter 301 permitting recovery of these types of miscellaneous expenses, nor are lodging taxes and laundry/dry cleaning expenses included in part 302-16. The final rule clarifies that laundry/dry cleaning expenses are included in the TQSE daily allowable M&IE expenses and TQ lodging taxes are separately reimbursable TQSE miscellaneous expenses.
The new TQSE-LP method follows TQSE-LS and TQSE-AE by calculating reimbursement using the applicable per diem rate for the locality of the old and/or new official stations wherever TQ lodging will be occupied in the U.S. As with TQSE-AE, the new TQSE-LP method permits occupancy of TQ beyond the initial authorization of 30 days (up to a maximum of 120 consecutive days), and reduces the maximum daily amount of TQSE after the initial 30-day period of TQ occupancy. Unlike TQSE-AE, however, the TQSE-LP method will require that TQ lodging and M&IE remain as separate maximum amounts for purposes of calculating the maximum daily amount of TQSE for the employee and the employee's immediate family members.
When compared with TQSE-AE, the new TQSE-LP method results in a more efficient process for the traveler, travel examiner, and certifying official and significantly reduces the administrative burden of maintaining, submitting, and reviewing all subsistence expenses receipts and claims, other than the required lodging receipt. The reduced administrative burden should increase employee satisfaction with the relocation process, which is important for employee recruitment and retention purposes.
The final rule also, in some cases, reduces the percentage multipliers used to calculate the TQSE-AE and TQSE-LP maximum daily amount for each 30-day increment of TQSE. Because GSA is also authorizing the use of CONUS NSA rates instead of requiring use of the CONUS standard rate when applicable, GSA has determined that lowering the percentage multipliers will still provide reasonable and equitable reimbursement to employees and their immediate family members for TQSE-AE and TQSE-LP.
Pursuant to 5 U.S.C. 5724a(b), an agency may authorize an employee and/or spouse who is transferring between official stations located within the United States to take one househunting trip (HHT) to seek permanent residence quarters at a new official station. The purpose of the HHT is to lower the overall TQ cost. Accordingly, agencies may reduce the number of days of TQSE if HHT is authorized. The agency also has the discretion to authorize full HHT (5 U.S.C. 5724a(b)) and subsequent TQSE (5 U.S.C. 5724a(c)), as the two are separate entitlements.
This final rule clarifies the effect on TQSE when an employee performs an HHT prior to relocating to the new official station. Specifically, agencies may reduce the number of overall TQSE days by the HHT days, but are not permitted to use HHT days to reduce the percentage multiplier for calculating TQSE.
Further, the final rule eliminates the need for GSA to issue an FTR bulletin waiving FTR 302-6.9, which currently requires that TQ be in reasonable proximity to the old and/or new official stations, and FTR 302-6.102, which currently limits the applicable per diem allowance for TQSE-AE to the standard CONUS rate for TQ located in CONUS. Instead, the final rule lists TQ located in a Presidentially-Declared Disaster area as an exception to the “reasonable proximity” requirement, removes the limitation at 302-6.102, and allows agencies to authorize TQSE at the applicable locality per diem allowance or to authorize actual expenses (not to exceed the 300% ceiling) on an individual basis for TQ located in a Presidentially-Declared Disaster area. This rule establishes an exception to issuing individual actual expense authorizations by which agencies may issue a blanket actual expense authorization for employees authorized to occupy TQ in an area subject to a Presidentially-Declared Disaster. These changes should result in quicker notification to agencies and employees of their TQSE during a Presidentially-Declared Disaster rather than waiting for GSA to issue an FTR bulletin waiving such provisions.
Finally, the final rule will also modify some FTR sections regarding TQSE and rearrange them into a more sequential order.
GSA has not made any significant changes to the regulatory language from the proposed to final rule, only minor technical edits and edits that clarify the intent of the rule.
No public comments were received in response to the proposed rule.
GSA performed an economic analysis on the final rule. GSA used the Business Travel and Relocation Dashboard to calculate an average of 28,800 domestic and international relocations per year based on figures from across the Federal Government for fiscal years 2018 to 2022, with Federal agencies authorizing approximately 12,000 employees to receive TQSE annually. TQSE is a discretionary relocation entitlement that the agency may authorize. The agency chooses which TQSE methods are available to the employee and the number of days authorized for reimbursement. GSA notes that Federal agencies are only required to track specific relocation data appearing on the Business Travel and Relocation Dashboard, but are not required to specify the method of TQSE authorized (actual expense or lump sum), if TQSE is for an employee only or an employee with immediate family members, locations where TQ were occupied, or the total number of days of TQ for each claim within the U.S. GSA used the FY23 CONUS per diem rates to anticipate how TQSE-LP compares to existing policy in terms of cost for those relocating to high cost areas.
The standard CONUS per diem rate for FY23 was $157 ($98 Lodging + $59 M&IE). In FY23, there were 316 non-standard areas (NSAs) where GSA established per diem rates that were higher than the standard CONUS rate. Approximately half of the NSAs had seasonal rates. Adjustments to the TQSE percentage multipliers under the final rule, and their cost impact, are analyzed below: for the employee's (and/or unaccompanied spouse or domestic partner's) portion, the lodging and M&IE rates use the same percentage for the initial 30-days of TQ (currently 100%) and the second 30-day increment (currently 75%). However, the final rule reduces the percentage for the last 60 days of TQ from the current rate of 75% to 55%. The immediate family members' portion (currently 75% for accompanied spouses or domestic partners and immediate family members aged 12 and over; and 50% for immediate family members under 12) will be reduced for the first 30 days of TQ to 50% and 40% respectively, and further reduced for each 30 day increment (45% and 35% for the second
The final rule implements the TQSE-LP method which is similar to the Department of State foreign transfer allowance (FTA), “Pre-Departure Subsistence Allowance and Home Service Allowance—Partial Flat Rate” reimbursement methods used for Foreign Service Officers relocating to and from foreign assignments and occupying temporary quarters in the U.S. The reduction of TQSE percentage multipliers under this rule is similar to the way that temporary quarters subsistence allowance (TQSA) is structured for Foreign Service Officers and other Federal employees who relocate and occupy temporary quarters in a foreign country.
Use of the new TQSE-LP reimbursement method could result in an increase in overall cost; however, such increased costs are likely to be offset by anticipated cost savings from streamlining the administrative process for the traveler, agency travel examiners, and certifying officials. Notably, cost avoidance for employees electing TQSE-LP over TQSE-AE is difficult to measure in full as the calculations do not take into account time saved by travelers for retaining and recording each individual lodging, meal and laundry expense for all family members. TQSE-LP will increase employee satisfaction with the relocation process and significantly reduce the agency and employee administrative burden of maintaining, submitting and reviewing all subsistence expenses receipts and claims. Accordingly, TQSE-LP could maintain a budget neutral or possible cost reduction due to lower anticipated administrative costs.
Executive Order (E.O.s) 12866 (
OIRA has determined that this rule is not a “major rule” under 5 U.S.C. 804(2). Title II, Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, unless excepted, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each house of the Congress and to the Comptroller General of the United States. This rule is excepted from CRA reporting requirements prescribed under 5 U.S.C. 801 as it relates to agency management or personnel under 5 U.S.C. 804(3)(B).
This final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601,
The Paperwork Reduction Act does not apply because the changes to the FTR do not impose recordkeeping or information collection requirements, or the collection of information from offerors, contractors, or members of the public that require the approval of the Office of Management and Budget (OMB) under 44 U.S.C. 3501,
Government employees, Relocation, Travel and Transportation expenses.
For reasons set forth in the preamble, GSA amends 41 CFR parts 300-3, 302-6, and 302-17 as set forth below:
5 U.S.C. 5707; 40 U.S.C. 121(c); 49 U.S.C. 40118; 5 U.S.C. 5738; 5 U.S.C. 5741-5742; 20 U.S.C. 905(a); 31 U.S.C. 1353; E.O. 11609, as amended, 3 CFR, 1971-1975 Comp., p. 586, Office of Management and Budget Circular No. A-126, revised May 22, 1992.
The additions read as follows:
For the purposes of chapter 302 of this subtitle, laundry/dry cleaning expenses are part of the incidental expenses portion of the per diem allowance for temporary quarters subsistence expenses (TQSE) and temporary quarters (TQ) lodging taxes are separately reimbursable TQSE miscellaneous expenses (see § 302-6.28 and part 302-16 of this subtitle).
5 U.S.C. 5738; 20 U.S.C. 905(a); E.O. 11609, as amended, 3 CFR, 1971-1975 Comp., p. 586.
Use of pronouns “I”, “you”, and their variants throughout this subpart refers to the employee, unless otherwise noted.
The TQSE allowance is intended to reimburse an employee reasonably and equitably for subsistence expenses incurred when it is necessary to occupy temporary quarters incident to an official relocation or temporary change of station.
The term “temporary quarters” refers to lodging obtained for the purpose of temporary occupancy from a private or commercial source incident to an official relocation or temporary change of station.
You are eligible for a TQSE allowance if you are an employee who is authorized to transfer to a new official station, including upon assignment to a temporary official station (see FTR 302-3.413(b)) and permanent assignment to a temporary official station (see FTR 302-3.427(e)); and
(a) Your new official station is located within the United States; and
(b) Your old and new official stations are at least 50 miles apart (as measured by map distance) via a usually traveled surface route; and
(c) Your new official station meets the 50-mile distance test (see § 302-2.6(a)).
(a) New appointees;
(b) Employees assigned under the Government Employees Training Act (5 U.S.C. 4109);
(c) Senior Executive Service (SES) employees making their last move home for the purpose of separation from Government service;
(d) Employees returning from an overseas assignment for the purpose of separation from Government service; and
(e) Employees who were granted a waiver to the 50-mile distance test under § 302-2.6(b).
(a) You may not receive a TQSE allowance under this part when you transfer to a foreign area. However, you may qualify for a comparable allowance under the Department of State Standardized Regulations (DSSR) (Government Civilians, Foreign Areas) (see § 302-3.101 of this chapter).
(b) You may receive a TQSE allowance under this part when you transfer from a foreign area and occupy temporary quarters in the United States. You may also be authorized a comparable allowance, prescribed by the Department of State, at the foreign area preceding final departure subsequent to the necessary vacating of residence quarters (see § 302-3.101 of this chapter).
No, TQSE is a discretionary allowance. Your agency determines whether it is in the Government's interest to pay TQSE.
You will receive a TQSE allowance if:
(a) Your agency authorizes it before you occupy the temporary quarters;
(b) Your relocation authorization specifies the TQSE method and the number of days allowed for you to receive TQSE;
(c) You have signed a service agreement; and
(d) You meet any additional conditions your agency has established.
Only you and/or your immediate family, as annotated on the relocation authorization, may occupy temporary quarters at Government expense.
You and/or your immediate family may occupy temporary quarters in the United States at Government expense within reasonable proximity (approximately 50 miles) of the geographical area of your old and/or new official stations. Neither you nor your immediate family may be reimbursed for occupying temporary quarters at any other location, unless justified by special circumstances (
Yes. Under various circumstances, you and your immediate family may need to occupy temporary quarters at different locations (
You may begin occupying temporary quarters at Government expense after your agency has authorized you to receive a TQSE allowance and you have signed a service agreement.
The period must begin before the maximum time for completing all aspects of your relocation under § 302-2.9.
The period for TQSE reimbursement ends at midnight on either the day before you and/or any member of your immediate family occupies permanent residence quarters (even if some, but not all household goods have been delivered such that the residence is suitable for permanent occupancy), or the day your authorized period for TQSE reimbursement expires, whichever occurs first. (See § 302-6.207 for details.)
Yes, but you will not be reimbursed for any of the expenses you incur during the unauthorized period.
No, the eligibility period for which you are authorized to claim TQSE reimbursement for yourself and for each member of your immediate family must run concurrently.
Occupancy of temporary quarters is based on calendar days and partial days are counted as full days of TQSE. You may not receive reimbursement under both TQSE allowance and another subsistence expenses allowance within the same day, with one exception. If you claim TQSE reimbursement on the same day that official travel en route to your new official station ends, your per diem will be computed under applicable partial day rules, and you also may be reimbursed for actual TQSE you incur after 6 p.m. of that day.
If your temporary quarters become your permanent residence quarters, you may receive a TQSE allowance only if you show in a manner satisfactory to your agency that you initially intended to occupy the quarters temporarily. You will not be entitled to TQSE once your agency determines that your temporary quarters are your permanent residence. (See § 302-6.207 for details.)
No, unless your immediate family is claiming TQSE and you are performing separate official TDY travel, or you receive a cost-of-living allowance payable under 5 U.S.C. 5941 in addition to a TQSE allowance. (See § 302-6.17 for partial days for en route travel days.)
Transportation expenses incurred in the vicinity of the temporary quarters, such as rental car or mileage for commuting to/from work, parking, and bus or mass transit, etc., are not TQSE expenses, and therefore, there is no authority to pay such expenses under TQSE.
Your agency may authorize TQSE for a reasonable time when your residence at your old official station becomes temporary and no longer suitable for permanent residence (
(a) Your agency may use one of the following TQSE methods:
(1) TQSE—Lodgings-Plus (TQSE-LP);
(2) TQSE—Actual Expense (TQSE-AE); or
(3) TQSE—Lump Sum (TQSE-LS).
(b) Your agency will reimburse you for TQSE under the “lodgings-plus” method unless it offers you one or more of the alternate methods. If your agency makes multiple methods available to you, you may select the one you prefer; however, once your travel has begun, the authorized TQSE method may not be changed.
The “applicable per diem rate” is the rate in effect for the locality at the old or new official station or combination thereof, wherever temporary quarters will be occupied. The applicable per diem rate could be the standard CONUS, CONUS non-standard area (NSA), or OCONUS non-foreign locality per diem rate as determined by GSA or the Department of Defense.
Your agency should consider delaying all non-essential relocations to Presidentially-Declared Disaster areas because the ability to secure temporary quarters lodgings in those areas may be
(a) Authorize you to occupy temporary quarters outside of the proximity requirements at § 302-6.10; and
(b) Authorize TQSE at the applicable locality per diem allowance under FTR §§ 301-11.100 through 301-11.102 of this subtitle or authorize actual expenses on an individual basis under FTR §§ 301-11.300 through 301-11.306 of this subtitle not to exceed 300 percent of the applicable per diem in accordance with § 301-11.303 of this subtitle; or
(c) Issue a blanket actual expense authorization for official relocation travel performed on or after the date of the Presidentially-Declared Disaster.
(d) The authorizations in paragraphs (a), (b), and (c) of this section must apply to a specific Presidential Disaster Declaration, and must end on the expiration date of the Declaration, or one year from the date the Declaration is issued, whichever is sooner. The maximum limit of 120 consecutive days that TQSE may be authorized is statutorily based and remains in effect in accordance with FTR § 302-6.29(a). A blanket authorization issued under this section shall not apply to any travel performed pursuant to chapter 301 of this subtitle and does not permit an agency to change the TQSE method authorized once the travel has begun. See § 302-6.22(b).
(a)
(b)
(c)
(a)
(b)
Yes, you must use the Government contractor-issued travel charge card as the method of payment for all official relocation expenses, including TQSE, unless exempted under part 301-51 of this subtitle.
Temporary quarters lodging taxes are not included in your daily temporary quarters lodging rate and may be documented as a separate TQSE-LP or TQSE-AE miscellaneous expense. Lodging taxes for TQSE-LS are included in your overall lump sum amount. Laundry/dry cleaning expenses are included in your incidental portion of the daily M&IE allowance and are not separately reimbursed.
(a)
(b)
Your agency may reduce the total number of days you are authorized for TQSE by the number of househunting days (
A “compelling reason” is an event that is beyond your control and is acceptable to your agency. Examples include, but are not limited to:
(a) Delivery of your household goods to your new residence is delayed due to availability of service providers, pandemics, strikes, customs clearance, hazardous weather, fires, floods or other acts of God, or similar events.
(b) You cannot occupy your new permanent residence because of unanticipated problems (
(c) You are unable to locate a permanent residence that is adequate for your family's needs because of housing conditions at your new official station.
(d) Sudden illness, injury, your death or the death of your immediate family member.
Yes, your authorized period for claiming TQSE-LP and TQSE-AE reimbursement is measured on consecutive days, and once begun, normally continues to run whether or not you continue to occupy temporary quarters. However, you may interrupt your authorized period for claiming reimbursement in the following instances:
(a) For the time allowed for official travel en route between the old and new official stations;
(b) For circumstances attributable to official necessity such as an intervening temporary duty assignment or military duty; or
(c) For a non-official necessary interruption such as hospitalization, approved sick leave, or other reasons beyond your control and acceptable to your agency.
Your agency will pay your actual daily temporary quarters lodging cost and a daily M&IE allowance not to exceed the single maximum lodging amount and the single maximum M&IE amount for the applicable per diem rate (see § 302-6.23) for the locality at the old or new official station or combination thereof, wherever temporary quarters will be occupied. Your TQSE expenses must be reasonable and if expenses exceed the maximum allowable amount, you will not be reimbursed for more than the maximum allowable amount. The “maximum allowable amount” is the “maximum daily amount” multiplied by the number of days you actually incur TQSE not to exceed the number of days authorized, taking into account that the rates change after 30 days in temporary quarters. The “maximum daily amount” (see Note 1 to § 302-6.100) is determined by adding the rates for you and each member of your immediate family authorized to occupy temporary quarters:
(a) For the first 30 days of temporary quarters:
(1) You and/or your unaccompanied spouse or domestic partner (see Note 2 to § 302-6.100) may receive 100 percent of the temporary quarters lodging portion of the applicable per diem rate and 100 percent of the M&IE portion of the applicable per diem rate.
(2) Your accompanied spouse, domestic partner, or a member of your immediate family who is age 12 or older may receive 50 percent of the temporary quarters lodging portion of the applicable per diem rate and 50 percent of the M&IE portion of the applicable per diem rate.
(3) A member of your immediate family who is under age 12 may receive 40 percent of the temporary quarters lodging portion of the applicable per diem rate and 40 percent of the M&IE portion of the applicable per diem rate.
(b) For the second 30 days of temporary quarters:
(1) You and/or your unaccompanied spouse or domestic partner (see Note 2 to § 302-6.100) may receive 75 percent of the temporary quarters lodging portion of the applicable per diem rate and 75 percent of the M&IE portion of the applicable per diem rate.
(2) Your accompanied spouse, domestic partner, or a member of your immediate family who is age 12 or older may receive 45 percent of the temporary quarters lodging portion of the applicable per diem rate and 45 percent of the M&IE portion of the applicable per diem rate.
(3) A member of your immediate family who is under age 12 may receive 35 percent of the temporary quarters lodging portion of the applicable per diem rate and 35 percent of the M&IE portion of the applicable per diem rate.
(c) For any additional authorized days of temporary quarters:
(1) You and/or your unaccompanied spouse or domestic partner (see Note 2 to § 302-6.100) may receive 55 percent of the temporary quarters lodging portion of the applicable per diem rate and 55 percent of the M&IE portion of the applicable per diem rate.
(2) Your accompanied spouse, domestic partner, or a member of your immediate family who is age 12 or older may receive 40 percent of the temporary quarters lodging portion of the applicable per diem rate and 40 percent of the M&IE portion of the applicable per diem rate.
(3) A member of your immediate family who is under age 12 may receive 30 percent of the temporary quarters lodging portion of the applicable per diem rate and 30 percent of the M&IE portion of the applicable per diem rate.
Temporary quarters lodging and M&IE remain as separate maximum amounts for purposes of calculating TQSE-LP. Examples of TQSE calculations are published in an FTR bulletin at
That is, when your spouse or domestic partner necessarily occupies temporary quarters in lieu of yourself or in a location separate from you.
Your agency will pay your actual TQSE incurred, provided the expenses are reasonable and if expenses exceed the maximum allowable amount, you will not be reimbursed for more than the maximum allowable amount. The “maximum allowable amount” is the “maximum daily amount” multiplied by the number of days you actually incur TQSE not to exceed the number of days authorized, taking into account that the rates change after 30 days in temporary quarters. The “maximum daily amount” (see Note
(a) For the first 30 days of temporary quarters:
(1) You and/or your unaccompanied spouse or domestic partner (see Note 2 to § 302-6.101) may receive 100 percent of the applicable per diem rate.
(2) Your accompanied spouse, domestic partner, or a member of your immediate family who is age 12 or older may receive 50 percent of the applicable per diem rate.
(3) A member of your immediate family who is under age 12 may receive 40 percent of the applicable per diem rate.
(b) For the second 30 days of temporary quarters:
(1) You and/or your unaccompanied spouse or domestic partner (see Note 2 to § 302-6.101) may receive 75 percent of the applicable per diem rate.
(2) Your accompanied spouse, domestic partner, or a member of your immediate family who is age 12 or older may receive 45 percent of the applicable per diem rate.
(3) A member of your immediate family who is under age 12 may receive 35 percent of the applicable per diem rate.
(c) For any additional days of temporary quarters:
(1) You and/or your unaccompanied spouse or domestic partner (see Note 2 to § 302-6.101) may receive 55 percent of the applicable per diem rate.
(2) Your accompanied spouse, domestic partner, or a member of your immediate family who is age 12 or older may receive 40 percent of the applicable per diem rate.
(3) A member of your immediate family who is under age 12 may receive 30 percent of the applicable per diem rate.
Under TQSE-AE, separate amounts for temporary quarters lodging and M&IE may be combined to produce a single maximum daily amount to allow some of the M&IE rate to offset the lodging cost. Examples of TQSE calculations are published in an FTR bulletin at
That is, when your spouse or domestic partner necessarily
(a) For you or your unaccompanied spouse or domestic partner (see Note 1 to § 302-6.102), if you are receiving a lump sum for TQSE, multiply the number of days (up to 30 days) your agency authorizes TQSE-LS by 75 percent of the applicable per diem rate (see § 302-6.23) for the locality at the old or new official station or combination thereof, wherever temporary quarters will be occupied.
(b) For each member of your immediate family (excluding your unaccompanied spouse or domestic partner), multiply the same number of days by 25 percent of the same per diem rate, as referenced in paragraph (a) of this section.
(c) Your lump sum payment will be the sum of the calculations in paragraphs (a) and (b) of this section.
That is, when your spouse or domestic partner necessarily occupies temporary quarters in lieu of yourself or in a location separate from you. Examples of TQSE calculations are published in an FTR bulletin at
Yes, if the estimated daily amount of your TQSE is determined in advance to be lower than the maximum daily amount, your agency may reduce the maximum allowable amount to your expected expenses provided the new applicable amount is annotated on the relocation authorization before you occupy temporary quarters. However, see § 302-6.30 regarding househunting trips.
Use of pronouns “we”, “you”, and their variants throughout this subpart refers to the agency.
Temporary quarters should be authorized only if, and only for as long as necessary until the employee and the employee's immediate family can move into permanent residence quarters. You must administer the TQSE allowance to minimize or avoid other relocation expenses.
You must establish policies and procedures governing:
(a) When you will authorize temporary quarters for employees;
(b) Who will determine if temporary quarters is appropriate in each situation;
(c) What method of TQSE will be authorized;
(d) Who will determine the appropriate period of time for which TQSE reimbursement will be authorized, including approval of extensions and interruptions of temporary quarters occupancy;
(e) Who will determine whether quarters were indeed temporary; and
(f) Who will determine, and in what instances, to issue the authorizations at § 302-6.24, including a blanket authorization for actual expenses.
You may authorize a TQSE allowance on an individual-case basis when use of temporary quarters is justified in connection with an employee's transfer to a new official station, including upon assignment to a temporary official station and permanent assignment to a temporary official station. You may not authorize a TQSE allowance for vacation purposes or other reasons unrelated to the transfer.
The factors you should consider include:
(a) The length of time the employee should reasonably be expected to occupy their residence at the old official station before reporting for duty at the new official station. An employee and the employee's immediate family should continue to occupy the residence at the old official station for as long as practicable to avoid the necessity for temporary quarters.
(b) The existence of less expensive alternatives. If a less expensive alternative to the TQSE allowance exists that will enable the employee to find permanent quarters at the new official station, you should consider such an alternative. For example, authorize a househunting trip instead of temporary quarters if it would cost less overall.
(c) The existence of other opportunities to arrange for permanent quarters. Consider whether the employee had adequate opportunity to arrange for permanent quarters. For example, you should not authorize temporary quarters if the employee had adequate opportunity during an extended temporary duty assignment or long-term temporary change of station that became permanent, to arrange for permanent quarters.
When determining what TQSE method(s) to offer an employee the following factors should be considered:
(a)
(b)
(c)
(a) Transferees authorized TQSE-LP or TQSE-AE are not required to sign a statement asserting that they will occupy temporary quarters since they must document temporary quarters lodging expenses.
(b) Transferees electing the TQSE-LS payment option if offered by you, must sign a statement, which should be included as part of the service agreement, asserting that they will occupy temporary quarters and will incur TQSE. If a lump sum amount was paid, and if no TQSE are incurred, the transferee must return all monies received for the TQSE-LS payment to the agency.
You must pay the transferee the TQSE-LS payment before the occupancy of temporary quarters begins. You should make the TQSE-LS payment as close as is reasonably possible to the time that the transferee will begin occupancy of temporary quarters.
In determining whether quarters are “temporary”, you should consider factors such as reasonable time when
5 U.S.C. 5724b; 5 U.S.C. 5738; E.O. 11609, as amended, 3 CFR, 1971-1975 Comp., p. 586.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of Agency decision.
NMFS announces the approval of Amendments to the five fishery ecosystem plans (FEP) for fisheries in the Pacific Islands Region. The FEPs are amended to update data collection mechanisms identified as standardized bycatch reporting methodologies (SBRM) and to revise descriptions of SBRM for consistency with current NMFS regulations. These Amendments ensure conformance with national guidance for compliance with the SBRM requirement in the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act).
The Amendments were approved on May 2, 2024.
Electronic copies of the Amendments may be obtained via the Federal e-Rulemaking Portal. Go to
Brett Schumacher, Sustainable Fisheries Division, NMFS Pacific Islands Regional Office, 808-725-5176.
The Magnuson-Stevens Act requires that each regional fishery management council submit any fishery management plan (FMP) amendment it prepares to NMFS for review and approval, disapproval, or partial approval by the Secretary. 16 U.S.C. 1854(a). In lieu of FMPs, NMFS manages the fisheries in the Pacific Islands Region exclusive economic zone under five FEP: the American Samoa Archipelago FEP, the Hawaii Archipelago FEP, the Mariana Archipelago FEP, the Pacific Remote Island Areas (PRIA) FEP, and the Pelagic Fisheries of the Western Pacific Region FEP. The Western Pacific Fishery Management Council (Council) prepared these FEPs under the authority of the Magnuson-Stevens Act, 16 U.S.C. 1801
Regulations governing U.S. fisheries and implementation of the FEPs appear at 50 CFR parts 600 and 665. Section 303(a)(11) of the Magnuson-Stevens Act requires that any FEP establish a SBRM to assess the amount and type of bycatch occurring in the fishery, and include conservation and management measures that, to the extent practicable, minimize bycatch and minimize the mortality of bycatch that cannot be avoided.
On January 19, 2017, NMFS published a final rule (82 FR 6317) establishing national guidance regulations at 50 CFR 600.1600 through 50 CFR 600.1610 for compliance with the Magnuson-Stevens Act SBRM requirement (SBRM regulations). The SBRM regulations define SBRM as a consistent procedure or procedures used to collect, record, and report bycatch data in a fishery managed under a FEP. The SBRM regulations require the Council to explain how each FEP's SBRM meets the purpose described in the national guidelines, based on an analysis of four considerations: (1) characteristics of bycatch in the fishery, (2) the feasibility of the reporting methodology, (3) the uncertainty of data resulting from the methodology, and (4) how the data will be used to assess the amount and type of bycatch occurring in the fishery. The Council undertook a review of its FEPs to ensure they met these requirements. That review resulted in the Amendments referenced in this notice. The Amendments update data collection mechanisms identified as SBRM as needed, and revise descriptions of SBRM in each FEP for consistency with the SBRM regulations. The Amendments are administrative in nature and would not change any fishery data collection, recording, or reporting methods or requirements, and would not implement any new regulations.
Further detail describing the Amendments was provided in the Notice of Availability (NOA) for this action and is not repeated here.
The Council submitted the Amendments to the Secretary for review on February 1, 2024. On February 9, 2024, NMFS published a NOA for the Amendments, including background on the rationale for how the amendments proposed to satisfy the requirements of the SBRM regulations, and requested public review and comment (89 FR 9111). The public comment period for the subject Amendments ended on April 9, 2024. Two public comments were received pertaining to the omnibus amendment and are addressed below.
The Amendments do not add any new reporting requirements and do not change any regulatory requirements. Therefore, no proposed or final rule was prepared.
NMFS received two comments in support of the omnibus Amendment.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule.
This final rule implements an annual catch limit (ACL), annual catch target (ACT), and accountability measures (AM) for main Hawaiian Islands (MHI) Kona crab for fishing years 2024, 2025, and 2026. NMFS will close Federal waters to Kona crab fishing for the remainder of the fishing year if NMFS projects the fishery will reach the ACT. NMFS will reduce the ACT and ACL in the subsequent fishing year by the overage amount if landings exceed the ACL in a fishing year. NMFS intends this final rule to support the long-term sustainability of MHI Kona crab.
This rule is effective June 6, 2024.
Background information on main Hawaiian Island Kona crab fishery is found in the Fishery Ecosystem Plans for the Hawaii Archipelago (FEP) available from the Western Pacific Fishery Management Council (Council), 1164 Bishop St., Suite 1400, Honolulu, HI 96813, telephone 808-522-8220, fax 808-522-8226, or
Savannah Lewis, NMFS Pacific Islands Regional Office (PIRO) Sustainable Fisheries, 808-725-5144.
NMFS and the Council manage the Kona crab fishery in the U.S. Exclusive Economic Zone (Federal waters) around Hawaii under the Fishery Ecosystem Plan for the Hawaiian Archipelago (FEP), as authorized by the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) (50 CFR part 665). The FEP contains a process for the Council and NMFS to specify ACLs, ACTs, and AMs (see 50 CFR 665.4). NMFS must specify ACLs and AMs for each stock and stock complex of each management unit species (MUS) in an FEP, as recommended by the Council, and must consider the best available scientific, commercial, and other information about the fishery. If a fishery exceeds an ACL, the regulations require the Council to take action (
NMFS is implementing for the MHI Kona crab, an ACL of 30,802 pounds (lb; 13,972 kilograms (kg)) and an ACT of 25,491 lb (11,563 kg). The fishing year begins on January 1 and ends on December 31, and catch from both State (generally from the shoreline to three nautical miles, or 5.6 kilometers (km), offshore) and Federal waters are counted towards catch limits.
The rule will not change the current AM for the MHI Kona crab fishery (50 CFR 665.253(b)). As an in-season AM, NMFS will close Federal waters to commercial and non-commercial fishing for Kona crab for the remainder of the fishing year if NMFS projects that the fishery will reach the ACT. If a closure occurs, NMFS will publish a document to that effect in the
This rule is consistent with recommendations made by the Council at its 195th meeting in June 2023, and the 2024-2026 catch limits are identical to those implemented in 2020 for fishing years 2020-2023.
Additional background information on this action is in the preamble to the proposed rule (89 FR 7658, February 04, 2024).
On February 04, 2024, NMFS published a proposed rule and request for public comments (89 FR 7658). The comment period ended March 05, 2024. NMFS received two comments from the interested public generally supporting the action. One of these comments also expressed concern for effects on local businesses that may result if NMFS implements the AMs and closes the fishery early. NMFS summarizes the comments and responds below.
NMFS and the Council monitor the fishery in collaboration with the State of Hawaii based on monthly catch reports. This consistent data stream ensures that the fishery would not be closed prematurely, and would be closed only if necessary to prevent overfishing. NMFS does not anticipate the fishery will reach the ACT or ACL based on recent performance. Average catch of Kona crab over the last 3 years was 3,581 lb (1,624 kg), only 12 percent of the ACL and 14 percent of the ACT, and the fishery has not caught over 25,000 lb (11,340 kg) since 1998. Further, the Kona crab fishery has been managed under the same ACL, ACT and AM since 2020, and catch has not reached the ACT since in any year since 2020. Based on this information, we do not anticipate that we will need to apply the in-season AM to close the fishery in Federal waters. Should catch in the fishery reach the ACT and NMFS implement the AM to close the fishery in Federal waters, fishers could continue to operate in State waters, minimizing the potential socio-economic effects of the closure. Nevertheless, closing the fishery in Federal waters would provide enhanced protection of Kona crab stock in Federal waters to prevent overfishing of the stock and perpetuate the Kona crab fishery for communities in Hawaii. Therefore, NMFS does not anticipate the rule will result in significant environmental, social, or economic impacts.
This final rule contains no changes from the proposed rule.
Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that this final rule is consistent with the FEP, other provisions of the Magnuson-Stevens Act, and other applicable laws.
The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration during the proposed rule stage that this action would not have a significant economic impact on a substantial number of small entities. The factual basis for the certification was published in the proposed rule and is not repeated here. No comments were received regarding this certification. As a result, a regulatory flexibility analysis was not required and none was prepared.
This final rule has been determined to be not significant for purposes of Executive Order 12866.
This final rule contains no information collection requirements under the Paperwork Reduction Act of 1995.
Accountability measures, Annual catch limits, Fisheries, Fishing, Hawaii, Kona crab, Pacific Islands.
For the reasons set out in the preamble, NMFS proposes to amend 50 CFR part 665 as follows:
16 U.S.C. 1801
(b) * * * (1) In accordance with § 665.4, the ACLs and ACTs for each fishing year are as follows:
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of proposed rulemaking.
The Energy Policy and Conservation Act, as amended (“EPCA”), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including miscellaneous refrigeration products (“MREFs”). In this notice of proposed rulemaking (“NOPR”), DOE proposes new energy conservation standards for MREFs identical to those set forth in a direct final rule published elsewhere in this issue of the
DOE will accept comments, data, and information regarding this NOPR no later than August 26, 2024. Comments regarding the likely competitive impact of the proposed standard should be sent to the Department of Justice contact listed in the
See section IV of this document, “Public Participation,” for details. If DOE withdraws the direct final rule published elsewhere in this issue of the
Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at
(1)
(2)
(3)
No telefacsimiles (“faxes”) will be accepted. For detailed instructions on submitting comments and additional information on this process, see section IV of this document.
The docket web page can be found at
EPCA requires the Attorney General to provide DOE a written determination of whether the proposed standard is likely to lessen competition. The U.S. Department of Justice Antitrust Division invites input from market participants and other interested persons with views on the likely competitive impact of the proposed standard. Interested persons may contact the Division at
Mr. Lucas Adin, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 287-5904 Email:
Mr. Matthew Schneider, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 597-6265. Email:
For further information on how to submit a comment, review other public comments and the docket, or participate in the public meeting, contact the Appliance and Equipment Standards Program staff at (202) 287-1445 or by email:
The Energy Policy and Conservation Act, Public Law 94-163, as amended (“EPCA”),
Pursuant to EPCA, any new or amended energy conservation standard must, among other things, be designed to achieve the maximum improvement in energy efficiency that DOE determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B))
In light of the above and under the authority provided by 42 U.S.C. 6295(p)(4), DOE is proposing this rule establishing and amending the energy conservation standards for miscellaneous refrigeration products and is concurrently issuing a direct final rule elsewhere in this
In accordance with these and other statutory provisions discussed in this document, DOE proposes new and amended energy conservation standards for miscellaneous refrigeration products. The standards for miscellaneous refrigeration products are expressed in terms of integrated annual energy use (“AEU”), measured in kilowatt-hours per year (“kWh/year”), as measured according to DOE's current test procedure codified at title 10 of the Code of Federal Regulations (“CFR”) part 430, subpart B, appendix A (“appendix A”).
Table I.1 presents the proposed standards for MREFs. The proposed standards are the same as those recommended by the Joint Agreement. These standards would apply to all products listed in Table I.1 and manufactured in, or imported into the United States starting on January 31, 2029, as recommended in the Joint Agreement.
The following section briefly discusses the statutory authority underlying this proposed rule, as well as some of the relevant historical background related to the establishment of standards for MREFs.
EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA
The energy conservation program under EPCA, consists essentially of four parts: (1) testing, (2) labeling, (3) the establishment of Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of the EPCA specifically include definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), energy conservation standards (42 U.S.C. 6295), and the authority to require information and reports from manufacturers (42 U.S.C. 6296).
Federal energy efficiency requirements for covered products established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal preemption in limited instances for particular State laws or regulations, in accordance with the procedures and other provisions set forth under EPCA. (
Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of each covered product. (42 U.S.C. 6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products must use the prescribed DOE test procedure as the basis for certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA and when making representations to the public regarding the energy use or efficiency of those
DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including MREFs. Any new or amended standard for a covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary of Energy (“Secretary”) determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B)) Furthermore, DOE may not adopt any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o)(3))
Moreover, DOE may not prescribe a standard (1) for certain products, including MREFs, if no test procedure has been established for the product, or (2) if DOE determines by rule that the standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, the following seven statutory factors:
(1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water) savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
Further, EPCA, as codified, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA, as codified, also contains what is known as an “anti-backsliding” provision, which prevents the Secretary from prescribing any amended standard that either increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States in any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6295(o)(4))
EPCA specifies requirements when promulgating an energy conservation standard for a covered product that has two or more subcategories. A rule prescribing an energy conservation standard for a type (or class) of product must specify a different standard level for a type or class of products that has the same function or intended use if DOE determines that products within such group (A) consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature which other products within such type (or class) do not have and such feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-related feature justifies a different standard for a group of products, DOE considers such factors as the utility to the consumer of such a feature and other factors DOE deems appropriate. (
Additionally, pursuant to the amendments contained in the Energy Independence and Security Act of 2007 (“EISA 2007”), Public Law 110-140, any final rule for new or amended energy conservation standards promulgated after July 1, 2010, are required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) DOE's current test procedure for MREFs addresses standby mode and off mode energy use. The standards proposed in this NOPR incorporate standby and off mode energy use.
Finally, EISA 2007 amended EPCA, in relevant part, to grant DOE authority to issue a final rule (
A NOPR that proposes an identical energy efficiency standard must be published simultaneously with the direct final rule, and DOE must provide a public comment period of at least 110 days on this proposal. (42 U.S.C. 6295(p)(4)(A)-(B)) Based on the comments received during this period, the direct final rule will either become effective, or DOE will withdraw it not later than 120 days after its issuance if: (1) one or more adverse comments is received, and (2) DOE determines that those comments, when viewed in light of the rulemaking record related to the direct final rule, may provide a reasonable basis for withdrawal of the direct final rule under 42 U.S.C. 6295(o). (42 U.S.C. 6295(p)(4)(C)) Receipt of an alternative joint recommendation may also trigger a DOE withdrawal of the direct final rule in the same manner. (
DOE has previously explained its interpretation of its direct final rule authority. In a final rule amending the Department's “Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products” at 10 CFR part 430, subpart C, appendix A, DOE noted that it may issue standards recommended by interested persons that are fairly representative of relative points of view as a direct final rule when the recommended standards are in accordance with 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable. 86 FR 70892, 70912 (Dec. 13, 2021). But the direct final rule provision in EPCA, under which this proposed rule is issued, does not impose additional requirements applicable to other standards rulemakings, which is consistent with the unique circumstances of rules issued as consensus agreements under DOE's direct final rule authority.
In a direct final rule published on October 28, 2016 (“October 2016 Direct Final Rule”), DOE prescribed the current energy conservation standards for MREFs manufactured on and after October 28, 2019. 81 FR 75194. These standards are set forth in DOE's regulations at 10 CFR 430.32(a)(1)-(2). These standards are consistent with a negotiated term sheet submitted to DOE by interested parties representing manufacturers, energy and environmental advocates, and consumer groups.
On October 12, 2021, DOE published a test procedure final rule (“October 2021 TP Final Rule”) establishing test procedures for MREFs, at appendix A. 86 FR 56790. The test procedure amendments included adopting the latest version of the relevant industry standard published by the Association of Home Appliance Manufacturers (“AHAM”), updated in 2019, AHAM Standard HRF-1, “Energy and Internal Volume of Refrigerating Appliances” (“HRF-1-2019”). 10 CFR 430.3(i)(4). The standard levels adopted in this direct final rule are based on the annual energy use (“AEU”) metrics as measured according to appendix A.
On April 1, 2015, DOE published a notice announcing its intention to establish a negotiated rulemaking working group under the Appliance Standards Rulemaking Advisory Committee (“ASRAC”) to negotiate energy conservation standards for refrigeration products such as wine chillers. 80 FR 17355. DOE then created a working group of interested parties to develop a series of recommended energy conservation standards for MREFs. On July 18, 2016, DOE published the July 2016 Final Coverage Determination that added MREFs as covered products. 81 FR 46768. In that determination, DOE noted that MREFs, on average, consume more than 150 kilowatt-hours per year (“kWh/yr”) and that the aggregate annual national energy use of these products exceeds 4.2 terawatt hours (“TWh”). 81 FR 46768, 46775. In addition to establishing coverage, the July 2016 Final Coverage Determination established definitions for “miscellaneous refrigeration products,” “coolers,” and “combination cooler refrigeration products” in 10 CFR 430.2. 81 FR 46768, 46791-46792.
On October 28, 2016, a negotiated term sheet containing a series of recommended standards and other related recommendations were submitted to ASRAC for approval and, subsequently, DOE published the October 2016 Direct Final Rule adopting energy conservation standards consistent with the recommendations contained in the term sheet. 81 FR 75194. Concurrent with the October 2016 Direct Final Rule, DOE published a NOPR in which it proposed and requested comments on the standards set forth in the direct final rule. 81 FR 74950. On May 26, 2017, DOE published a notice in the
On September 25, 2023, DOE received a joint statement of recommended standards (
DOE has evaluated the Joint Agreement and believes that it meets the EPCA requirements for issuance of a direct final rule. As a result, DOE published a direct final rule establishing energy conservation standards for MREFs elsewhere in this issue of the
For further background information on these proposed standards and the supporting analyses, please see the direct final rule published elsewhere in this issue of the
DOE also notes that it was conducting a rulemaking to consider amending the standards for MREFs when the Joint Agreement was submitted. As part of that process, DOE published a NOPR and announced a public meeting on March 31, 2023 (“March 2023 NOPR”) seeking comment on its proposed amended standards to inform its decision consistent with its obligations under EPCA and the Administrative Procedure Act (“APA”). 88 FR 19382. DOE held a public webinar on May 2, 2023, to discuss and receive comments on the March 2023 NOPR and NOPR TSD (“May 2, 2023, public meeting”). The NOPR TSD is available at:
When considering new or amended energy conservation standards, the standards that DOE adopts for any type (or class) of covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining whether a standard is economically justified, the Secretary must determine whether the benefits of the standard exceed its burdens by, to the greatest extent
DOE considered the impacts of proposed standards for MREFs at each trial standard level (“TSL”), beginning with the maximum technologically feasible (“max-tech”) level, to determine whether that level was economically justified. Where the max-tech level was not justified, DOE then considered the next most efficient level and undertook the same evaluation until it reached the highest efficiency level that is both technologically feasible and economically justified and saves a significant amount of energy. DOE refers to this process as the “walk-down” analysis.
To aid the reader as DOE discusses the benefits and/or burdens of each TSL, tables in this section present a summary of the results of DOE's quantitative analysis for each TSL. In addition to the quantitative results presented in the tables, DOE also considers other burdens and benefits that affect economic justification. These include the impacts on identifiable subgroups of consumers who may be disproportionately affected by a national standard and impacts on employment.
DOE also notes that the economics literature provides a wide-ranging discussion of how consumers trade off upfront costs and energy savings in the absence of government intervention. Much of this literature attempts to explain why consumers appear to undervalue energy efficiency improvements. There is evidence that consumers undervalue future energy savings as a result of (1) a lack of information; (2) a lack of sufficient salience of the long-term or aggregate benefits; (3) a lack of sufficient savings to warrant delaying or altering purchases; (4) excessive focus on the short term, in the form of inconsistent weighting of future energy cost savings relative to available returns on other investments; (5) computational or other difficulties associated with the evaluation of relevant tradeoffs; and (6) a divergence in incentives (for example, between renters and owners, or builders and purchasers). Having less than perfect foresight and a high degree of uncertainty about the future, consumers may trade off these types of investments at a higher-than-expected rate between current consumption and uncertain future energy cost savings.
In DOE's current regulatory analysis, potential changes in the benefits and costs of a regulation due to changes in consumer purchase decisions are included in two ways. First, if consumers forgo the purchase of a product in the standards case, this decreases sales for product manufacturers, and the impact on manufacturers attributed to lost revenue is included in the manufacturer impact analysis (“MIA”). Second, DOE accounts for energy savings attributable only to products actually used by consumers in the standards case; if a standard decreases the number of products purchased by consumers, this decreases the potential energy savings from an energy conservation standard. DOE provides estimates of shipments and changes in the volume of product purchases in chapter 9 of the direct final rule TSD
DOE continues to explore additional potential updates to the quantifiable framework for estimating the benefits and costs of changes in consumer purchase decisions due to an energy conservation standard, and DOE is committed to developing a framework that can support empirical quantitative tools for improved assessment of the consumer welfare impacts of appliance standards. DOE has posted a paper that discusses the issue of consumer welfare impacts of appliance energy conservation standards, and potential enhancements to the methodology by which these impacts are defined and estimated in the regulatory process.
Table III.1 and Table III.2 summarize the quantitative impacts estimated for each TSL for MREFs. The national impacts are measured over the lifetime of MREFs purchased in the 30-year period that begins in the anticipated year of compliance with amended standards (2029-2058). The energy savings, emissions reductions, and value of emissions reductions refer to full-fuel-cycle (“FFC”) results. DOE is presenting monetized benefits of greenhouse gas (“GHG”) emissions reductions in accordance with the applicable Executive orders and DOE would reach the same conclusion presented in this document in the absence of the social cost of GHGs, including the Interim Estimates presented by the Interagency Working Group. The efficiency levels contained in each TSL are described in section V.A of the direct final rule published elsewhere in this issue of the
DOE first considered TSL 5, which represents the max-tech efficiency levels. For coolers (
The cumulative emissions reductions at TSL 5 are 10.0 Mt of CO
Using a 7-percent discount rate for consumer benefits and costs, health benefits from reduced SO
At TSL 5, for the product classes with the largest market share, which are FCC, FC, and C-13A and together account for approximately 92 percent of annual shipments, the life-cycle cost (“LCC”) savings are all negative (−$45.3, −$178.8, and −$73.4, respectively) and their payback periods are 13.0 years, 29.9 years, and 19.5 years, respectively, which are all longer than their corresponding average lifetimes. For these product classes, the fraction of consumers experiencing a net LCC cost is 81.6 percent, 98.2 percent, and 93.9 percent due to increases in first cost of $185.0, $420.5, and $167.5, respectively. Overall, a majority of MREF consumers (84.5 percent) would experience a net cost and the average LCC savings would be negative for all analyzed product classes.
At TSL 5, the projected change in industry net present value (“INPV”) ranges from a decrease of $421.0 million to a decrease of $283.2 million, which corresponds to decreases of 51.2 percent and 35.1 percent, respectively. DOE estimates that industry must invest $555.1 million to comply with standards set at TSL 5.
DOE estimates that approximately 2.9 percent of current MREF shipments meet the max-tech levels. For FCC, FC, and C-13A, which together account for approximately 92 percent of annual shipments, DOE estimates that zero shipments currently meet max-tech efficiencies.
At TSL 5, manufacturers would likely need to implement all the most efficient design options analyzed in the engineering analysis. Manufacturers that do not currently offer products that meet TSL 5 efficiencies would need to develop new product platforms, which would require significant investment. Conversion costs are driven by the need for changes to cabinet construction, such as increasing foam insulation thickness and/or incorporating VIP technology. Increasing insulation thickness could result in a loss of interior volume or an increase in exterior volume. If manufacturers chose to maintain exterior dimensions, increasing insulation thickness would require redesign of the cabinet as well as the designs and tooling associated with the interior of the product, such as the liner, shelving, racks, and drawers. Incorporating VIPs into MREF designs could also require redesign of the cabinet to maximize the efficiency benefit of this technology. In addition to insulation changes, manufacturers may need to implement triple-pane glass, which could require implementing reinforced hinges and redesigning the door structure.
At this level, DOE estimates a 13-percent drop in shipments in the year the standard takes effect compared to the no-new-standards case, as some consumers may forgo purchasing a new MREF due to the increased upfront cost of baseline models.
At TSL 5, the Secretary tentatively concludes that the benefits of energy savings, emission reductions, and the estimated monetary value of the emissions reductions would be outweighed by the economic burden on many consumers, negative NPV of consumer benefits, and the impacts on manufacturers, including the significant potential reduction in INPV. A majority of MREF consumers (84.5 percent) would experience a net cost and the average LCC savings would be negative. Additionally, manufacturers would need to make significant upfront investments to update product platforms. The potential reduction in INPV could be as high as 52.1 percent. Consequently, the Secretary has tentatively concluded that TSL 5 is not economically justified.
DOE then considered the Recommended TSL (
The cumulative emissions reductions at the Recommended TSL are 5.9 Mt of CO
Using a 7-percent discount rate for consumer benefits and costs, health benefits from reduced SO
At the Recommended TSL, for the product classes with the largest market share, which are FCC, FC, and C-13A, the LCC savings are $12.6, $28.0, and $12.0, respectively, and their payback periods are 6.8 years, 8.5 years, and 7.3 years, respectively, which are all shorter than their corresponding average lifetimes. For these product classes, the fraction of consumers experiencing a net
At the Recommended TSL (
DOE estimates that approximately 3.9 percent of shipments currently meet the efficiencies required at the Recommended TSL. For most product classes (
After considering the analysis and weighing the benefits and burdens, the Secretary has tentatively concluded that a potential standard set at the Recommended TSL for MREFs would be economically justified. At this TSL, the average LCC savings are positive for all product classes for which an amended standard is considered, with a shipment-weighted average of $15.2 savings. The FFC national energy savings are significant and the NPV of consumer benefits is positive using both a 3-percent and 7-percent discount rate. The standard levels at TSL 4 are economically justified even without weighing the estimated monetary value of emissions reductions. When those emissions reductions are included—representing $0.3 billion in climate benefits (associated with the average SC-GHG at a 3-percent discount rate), and $0.6 billion (using a 3-percent discount rate) or $0.2 billion (using a 7-percent discount rate) in health benefits—the rationale becomes stronger still.
As stated, DOE conducts the walk-down analysis to determine the TSL that represents the maximum improvement in energy efficiency that is technologically feasible and economically justified as required under EPCA. The walk-down is not a comparative analysis, as a comparative analysis would result in the maximization of net benefits instead of energy savings that are technologically feasible and economically justified, which would be contrary to the statute.
Although DOE considered amended standard levels for MREFs by grouping the efficiency levels for each product class into TSLs, DOE evaluates all analyzed efficiency levels in its analysis. TSL 4, the Recommended TSL and the one proposed here, includes an EL for BIC that is lower than the EL at TSL 2. That is because TSL 2 represents ENERGY STAR for all product classes for which an ENERGY STAR criterion exists, including EL 3 for BIC and EL2 for C-3A-BI. As such, DOE analyzed TSL 2 with a higher efficiency level for BIC than TSL 4 because of the ENERGY STAR criterion. TSL 4 also includes an EL for C-3A-BI, EL1, that is lower than another EL, EL2, considered but not discussed as part of DOE's consideration of TSL 5. DOE has considered standards at those ELs for those products and found them not to be economically justified. For all product classes, except for BIC and C-3A-BI, the amended standard level represents the maximum energy savings that does not result in negative LCC savings. For BIC and C-3A-BI, the standard level represents the maximum energy savings that is economically justified; for these classes, DOE examined higher ELs, which were not included in TSL 4 (EL3 and EL2, respectively). Although these ELs have positive LCC savings, they would result in a majority of purchasers experiencing a net cost (53 percent and 57 percent, respectively). Further, for BIC products, DOE expects some manufacturers would likely need to increase insulation thickness to meet efficiency levels above EL 2, which could require new cabinet designs and fixtures. Due to the high percentage of consumers with a net cost and the extensive redesigns that would be needed to support EL3 for BIC and EL2 for C-3A-BI, DOE has tentatively concluded that efficiency level 3 for BIC and efficiency level 2 for C-3A-BI is not economically justified. However, at the Recommended TSL (EL 2 for BIC), DOE expects manufacturers could likely meet the efficiency level required for BIC without significant redesign. The ELs at the proposed standard level result in positive LCC savings for all product classes and reduce the decrease in INPV and conversion costs to the point where DOE has tentatively concluded they are economically justified, as discussed for the Recommended TSL in the preceding paragraphs.
Therefore, based on the previous considerations, DOE proposes to adopt the energy conservation standards for MREFs at the Recommended TSL.
While DOE considered each potential TSL under the criteria laid out in 42 U.S.C. 6295(o) as discussed in the preceding paragraphs, DOE notes that the Recommended TSL for MREFs in this direct final rule is part of a multi-product Joint Agreement covering six rulemakings (refrigerators, refrigerator-freezers, and freezers (“RFs”); MREFs; conventional cooking products; residential clothes washers; consumer clothes dryers; and dishwashers). The signatories indicate that the Joint Agreement for the six rulemakings should be considered as a joint statement of recommended standards, to be adopted in its entirety. As discussed in section V.B.2.e of the direct final rule published elsewhere in this issue of the
The proposed energy conservation standards for MREFs, which are expressed in kWh/yr, are shown in Table III.3.
The benefits and costs of the proposed standards can also be expressed in terms of annualized values. The annualized net benefit is (1) the annualized national economic value (expressed in 2022$) of the benefits from operating products that meet the proposed standards (consisting primarily of operating cost savings from using less energy), minus increases in product purchase costs, and (2) the annualized monetary value of the climate and health benefits from emission reductions.
Table III.4 shows the annualized values for MREFs under the Recommended TSL, expressed in 2022$. The results under the primary estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and NO
DOE will accept comments, data, and information regarding this proposed rule until the date provided in the
However, your contact information will be publicly viewable if you include it in the comment itself or in any documents attached to your comment. Any information that you do not want to be publicly viewable should not be included in your comment, nor in any document attached to your comment. Otherwise, persons viewing comments will see only first and last names, organization names, correspondence containing comments, and any documents submitted with the comments.
Do not submit to
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Include contact information each time you submit comments, data, documents, and other information to DOE. If you submit via postal mail or hand delivery/courier, please provide all items on a CD, if feasible, in which case it is not necessary to submit printed copies. No telefacsimiles (“faxes”) will be accepted.
Comments, data, and other information submitted to DOE electronically should be provided in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format. Provide documents that are not secured, that are written in English, and that are free of any defects or viruses. Documents should not contain special characters or any form of encryption and, if possible, they should carry the electronic signature of the author.
As stated previously, if DOE withdraws the direct final rule published elsewhere in this issue of the
The regulatory reviews conducted for this proposed rule are identical to those conducted for the direct final rule published elsewhere in this issue of the
The Regulatory Flexibility Act (5 U.S.C. 601
For manufacturers of MREFs, the Small Business Administration (“SBA”) has set a size threshold, which defines those entities classified as “small businesses” for the purposes of the statute. DOE used the SBA's small business size standards to determine whether any small entities would be subject to the requirements of the rule. (
DOE is proposing amended energy conservation standards for MREFs. EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA established the Energy Conservation Program for Consumer Products Other Than Automobiles which, in addition to identifying particular consumer products and commercial equipment as covered under the statute, permits the Secretary of Energy to classify additional types of consumer products as covered products. (42 U.S.C. 6292(a)(20)) DOE added MREFs as covered products through a final determination of coverage published in the
Pursuant to EPCA, any new or amended energy conservation standard must be designed to achieve the maximum improvement in energy efficiency that DOE determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B))
In light of the above and the requirements under 42 U.S.C. 6295(p)(4)(A)-(B), DOE is issuing this NOPR proposing energy conservation standards for MREFs. These standard levels were submitted jointly to DOE on September 25, 2023, by groups representing manufacturers, energy and environmental advocates, consumer groups, and a utility.
EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA established the Energy Conservation Program for Consumer Products Other Than Automobiles, which in addition to identifying particular consumer products and commercial equipment as covered under the statute, permits the Secretary of Energy to classify additional types of consumer products as covered products. (42 U.S.C. 6292(a)(20)) DOE added MREFs as covered products through a final determination of coverage published in the
DOE reviewed this proposed rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. 68 FR 7990. DOE conducted a market survey to identify potential small manufacturers of MREFs. DOE conducted a market survey to identify potential small manufacturers of MREFs. DOE reviewed DOE's Compliance Certification Database (“CCD”),
Through DOE's review of its product database and other public sources, DOE identified 49 OEMs that sell MREFs in the United States for this proposed rule. Of the 49 OEMs identified, DOE determined that one company qualifies as a small business and is not foreign-owned and operated.
The small business identified has 14 MREF models certified in DOE's CCD. Of those 14 models, nine models are FCCs, two are built-in coolers, and three are C-13A combination coolers. None of the nine FCC models meet the Recommended TSL (
DOE is not aware of any rules or regulations that duplicate, overlap, or conflict with this proposed rule.
The discussion in the previous section analyzes impacts on small businesses that would result from DOE's proposed rule, represented by TSL 4 (
Based on the presented discussion, establishing standards at TSL 4 balances the benefits of the energy savings at TSL 4 with the potential burdens placed on MREF manufacturers, including small business manufacturers. Accordingly, DOE does not propose one of the other TSLs considered in the analysis, or the other policy alternatives examined as part of the regulatory impact analysis and included in chapter 17 of the direct final rule TSD.
Additional compliance flexibilities may be available through other means. EPCA provides that a manufacturer whose annual gross revenue from all of its operations does not exceed $8 million may apply for an exemption from all or part of an energy conservation standard for a period not longer than 24 months after the effective date of a final rule establishing the standard. (42 U.S.C. 6295(t)) Additionally, manufacturers subject to DOE's energy efficiency standards may apply to DOE's Office of Hearings and Appeals for exception relief under certain circumstances. Manufacturers should refer to 10 CFR part 430, subpart E, and 10 CFR part 1003 for additional details.
The Secretary of Energy has approved publication of this notice of proposed rulemaking.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Imports, Intergovernmental relations, Small businesses.
This document of the Department of Energy was signed on April 10, 2024, by Jeffrey Marootian, Principal Deputy Assistant Secretary for Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
For the reasons set forth in the preamble, DOE proposes to amend part 430 of chapter II, subchapter D, of title 10 of the Code of Federal Regulations, as set forth below:
42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
(aa)
(1)
(ii) Coolers manufactured on or after January 31, 2029, shall have an Annual Energy Use (AEU) no more than:
(2)
(ii) Combination cooler refrigeration products manufactured on or after January 31, 2029, shall have an Annual Energy Use (AEU) no more than:
Federal Aviation Administration (FAA), DOT
Notice of proposed special conditions.
This action proposes special conditions for the Airbus Model A321neoXLR airplane. This airplane will have a novel or unusual design feature when compared to the technology envisaged by the airworthiness standards for transport category airplanes. This design feature is an integral rear center tank (RCT). The applicable airworthiness regulations do not contain adequate or appropriate safety standards for fire-safety performance of fuel-tank skin or structure in a post-crash external fuel-fed ground fire. These proposed special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
Send comments on or before June 21, 2024.
Send comments identified by Docket No. FAA-2023-2412 using any of the following methods:
Douglas Bryant, Engine and Propulsion Section, AIR-625, Technical Policy Branch, Policy and Standards Division, Aircraft Certification Service, Federal Aviation Administration, 2200 South 216th Street, Des Moines, Washington 98198; telephone and fax 206-231-3166; email
The FAA invites interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the proposed special conditions, explain the reason for any recommended change, and include supporting data.
The FAA will consider all comments received by the closing date for comments, and will consider comments filed late if it is possible to do so without incurring delay. The FAA may change these special conditions based on the comments received.
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in title 14, Code of Federal Regulations (14 CFR) 11.35, the FAA will post all comments received without change to
Confidential Business Information (CBI) is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to these special conditions contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to these special conditions, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and the indicated comments will not be placed in the public docket of these special conditions. Send submissions containing CBI to the individual listed in the For Further Information Contact section. Comments the FAA receives, which are not specifically designated as CBI, will be placed in the public docket for these special conditions.
On September 16, 2019, Airbus applied for an amendment to Type Certificate No. A28NM to include the new Model A321neo XLR series airplane. The Airbus Model A321neo XLR series airplane, which is a derivative of the Model A321neo Airbus Cabin Flex (ACF) currently approved under Type Certificate No. A28NM, is a twin-engine transport category aircraft that seats up to 244 passengers and has a maximum takeoff weight of 222,667 lbs.
Under the provisions of title 14, Code of Federal Regulations (14 CFR) 21.101, Airbus must show that the Model A321neo XLR series airplane meets the applicable provisions of the regulations listed in Type Certificate No. A28NM, or the applicable regulations in effect on the date of application for the change, except for earlier amendments as agreed upon by the FAA.
If the Administrator finds that the applicable airworthiness regulations (
Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same novel or unusual design feature, or should any other model already included on the same type certificate be modified to incorporate the same novel or unusual design feature, these special conditions would also apply to the other model under § 21.101.
In addition to the applicable airworthiness regulations and special conditions, the Airbus Model A321neo XLR series airplane must comply with the fuel venting and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36.
The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type certification basis under § 21.101.
The Airbus Model A321neo XLR series airplane will incorporate the following novel or unusual design feature:
An integral RCT.
The proposed Airbus Model A321neo XLR series airplane incorporates an integral RCT. This tank is a “center” fuel tank, that would, if approved, be located in the airplane fuselage rather than in its wings. The tank is a “rear” tank, that would be located aft of the center wing fuel tank and behind the wheel bay; it would be in an area of the lower section of the fuselage, partially replacing the aft cargo compartment of the airplane from which this proposed model is derived. The top of the tank would be directly below the floor of the passenger cabin. The fuel tank would be “integral” to the airplane, in that its walls would be part of the airplane structure. The exterior skin of the airplane fuselage would constitute part of the walls of the fuel tank, and these areas are usually separate boundaries (not integral) on other fuselage fuel tanks. An integral fuel tank may be referred to as a conformal fuselage structural fuel tank since boundaries of the fuel tank “conform” with the airplane exterior. The integral RCT is installed in a location that may be exposed to the direct effects of post-crash ground, or pool, fuel-fed fires. An external fuel-fed ground fire or external fuel-fed pool fire is also referred to as `external ground fire'.
The airworthiness standards applicable to the Model A321neo XLR do not contain specific standards for post-crash fire-safety performance of fuel-tank skin or structure. In addition, the integral RCT on the A321neo XLR was not envisaged by the FAA when promulgating requirements related to occupant protection when fuel tanks are exposed to external fuel-fed fires. The FAA considered fuel tank designs in widespread use on transport airplanes, including main fuel tanks and auxiliary fuel tanks when promulgating requirements related to occupant protection. Auxiliary fuel tanks are normally located in the center wing and within cargo holds, and in such cases are sometimes referred to as an auxiliary center tank (ACT).
Airplane manufacturers commonly incorporate a center wing fuel tank as an auxiliary fuel tank to make fuel available for increasing the flight range of the airplane. Continued expansion of range performance requirements has resulted in airplane designs using other areas of the airplane to carry fuel, such as incorporating fuel tanks in the empennage and fuselage. The Airbus model A321neo XLR airplane includes a center wing fuel tank, an integral RCT and the option for additional ACTs within the fuselage. Unlike an integral RCT, a center wing fuel tank and optional ACTs are not expected by the FAA or manufacturers to be exposed to the direct effects of post-crash ground fire because the fuel tank walls are not exterior airplane skin on the center fuel tank or ACT designs.
Due to its unusual configuration, the A321neo XLR's integral RCT will also not incorporate the insulation that usually lines the fuselage skin of a modern transport category airplane. Therefore the FAA has issued, after notice and comment, a set of special conditions that address that novel or unusual aspect of the A321neo XLR's integral RCT with regard to certain of the FAA's regulatory requirements for thermal/acoustic insulation installations, specifically 14 CFR 25.856(b). Those special conditions, No. 25-825-SC, require that the lower half of the fuselage spanning the longitudinal location of the RCT resist penetration from an external fuel-fed fire, in order to ensure that the design provides the same level of passenger protection from such fires as do the FAA's existing regulations for such insulation.
Pertinent to the fuel tank structure, post-crash-fire occupant survivability is dependent on the time available for occupant evacuation prior to fuel-tank breach or structural failure. Structural failure can be a result of degradation in load-carrying capability caused by a fuel-fed ground fire. Structural failure can also be a result of over-pressurization caused by ignition of fuel vapors inside the fuel tank.
Past experience indicates that occupant survivability following a post-crash fire is greatly influenced by the size and intensity of any fire that occurs. The ability of main fuel tanks, when they have aluminum wing surfaces wetted by fuel on their interior surface, to withstand post-crash-fire conditions, has been demonstrated by tests conducted at the FAA William J. Hughes Technical Center.
The center wing tank and optional ACTs are surrounded by fuselage structure and would not be directly exposed to a post-crash ground fire. This inherent separation is also expected to significantly delay structural collapse or burn-through and reduce the threat of explosion for a time interval that usually exceeds evacuation times. Service history of conventional aluminum airplanes has shown that fuel-tank explosions caused by ground fires have been rare on airplanes configured with flame arrestors in the fuel-tank vent lines. The Model A321neo XLR integral RCT may or may not have equivalent capability of past designs approved with existing regulations, due to the RCT design and location being integral with the fuselage.
There are several Part 25 requirements that address fire-safety performance of the fuel tanks and fuselage in the Model A321neo XLR certification basis. However, these requirements do not directly or adequately address standards for post-crash fire-safety performance of fuel-tank skin or structure. These standards address failure conditions or minimize the hazard to the occupants in the event ignition of flammable fluids or vapors occurs. For example, § 25.863 requires applicants to minimize the probability of ignition and resultant hazards if ignition occurs for flammable fluid systems on the airplane. Another example is § 25.981(a) which requires applicants to demonstrate no ignition source may be present at each point in the fuel tank or fuel tank system where catastrophic failure could occur due to ignition of fuel or vapors. Specifically, § 25.981(a)(1) requires “determining the highest temperature allowing a safe margin below the lowest expected autoignition temperature of the fuel in the fuel tanks.” Then § 25.981(a)(2) requires “demonstrating that no temperature at each place inside each fuel tank where fuel ignition is possible will exceed the temperature determined under paragraph (a)(1) of this section. This must be verified under all probable operating, failure, and malfunction conditions of each component whose operation, failure, or malfunction could increase the temperature inside the tank.” In addition, § 25.981(a)(3) requires “except for ignition sources due to lightning addressed by § 25.954, demonstrating that an ignition source could not result from each single failure, from each single failure in combination with each latent failure condition not shown to be extremely remote, and from all combinations of failures not shown to be extremely improbable, taking into account the effects of manufacturing variability, aging, wear, corrosion, and likely damage.” These airworthiness requirements address ignition sources and are part of the FAA's regulatory framework for preventing fires and explosions; however, taken together, they do not adequately address the potential for a post-crash external ground fire to affect the safety of airplane occupants.
The FAA therefore determined that the airworthiness standards applicable to the Model A321neo XLR airplane do not contain adequate standards for post-crash fire-safety performance of fuel-tank skin or structure. The FAA therefore proposes that special conditions are needed for the Model A321neo XLR airplane, because the integral RCT design, including location in the lower fuselage, is considered an unusual or novel design feature that could expose the RCT to an external ground fire. Factors influencing occupant survival time when a fuel tank is exposed to a ground-fed fire are the structural integrity of the tank; burn-through resistance; flammability of the tank; and the presence of auto-ignition threats during exposure to a fire. As previously discussed, the FAA issued Special Conditions No. 25-825-SC were issued to address the novel or unusual aspect of the A321neo XLR's integral RCT with regard to requirements for thermal/acoustic insulation installations. The FAA considers the occupant survival time related to the burn-through resistance of the integral RCT to be adequately accounted for in those special conditions.
These proposed special conditions address standards for post-crash fire-safety performance of fuel-tank skin or structure by proposing a requirement to prevent the ignition of fuel vapor during an external fuel-fed ground fire. These proposed special conditions include accounting for the potential for hot surface ignition created by the external fuel-fed fire. As described in FAA Advisory Circular 25.981-1D, “Fuel Tank Ignition Source Prevention Guidelines,” hot surfaces that can exceed the autoignition temperature of the flammable vapor under consideration are considered to be ignition sources. The FAA intends this proposed requirement to adequately protect the airplane occupants from the consequences of an integral RCT exposed to an external fuel-fed ground, or pool fire.
The intention of the proposed requirement for the design to prevent ignition is for the applicant to show that ignition sources do not occur, such as from a hot surface, due to the external heat applied to the integral RCT from an external fuel-fed ground fire. Where previously discussed, § 25.981(a) requires applicants to demonstrate that no ignition source may be present but does not specifically address ignition due to an external fuel-fed ground fire.
To provide the same level of safety as provided by the relevant regulations in this model's certification basis, Airbus must demonstrate that the Model A321neo XLR series airplane has sufficient post-crash fire-safety performance of fuel-tank skin or structure to enable occupants to safely evacuate in the event that the integral RCT is exposed to an external fuel-fed ground fire.
The FAA assessed post-crash-survival time during the adoption of § 25.856 and revisions to appendix F to part 25 at Amendment 25-111 for fuselage burn-through protection. Studies conducted by and on behalf of the FAA indicated that following a survivable accident, prevention of fuselage burn-through for approximately 5 minutes can significantly enhance survivability.
The FAA would consider Airbus showing the design prevents ignition of fuel tank vapors in the integral RCT during at least 5 minutes of exposure to an external fuel-fed ground fire as a sufficient time duration for the purposes of these special conditions. The time duration of 5 minutes is consistent with the aforementioned studies showing prevention of fuselage burn-through for approximately 5 minutes enhances occupant survivability. The requirements of the proposed special conditions and the time duration are consistent with the European Union Aviation Safety Agency Special Conditions No. SC-D25.863-01, Cabin Evacuation—Protection from Fuel Tank Explosion due to External Fuel Fed Ground Fire applicable to integral RCTs.
Airbus may consider a flammability reduction system or ignition mitigation means that complies with § 25.981 when showing compliance with the proposed special conditions, provided the system's performance is demonstrated to meet the proposed special conditions. As discussed previously, showing compliance with only § 25.981(b) is insufficient to show post-crash fire-safety performance of fuel-tank skin or structure. Airbus must also meet the proposed special conditions.
The proposed special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
As discussed above, these proposed special conditions are applicable to the Airbus Model A321neo XLR series airplane for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same novel or unusual design feature, or should any other model already included on the same type certificate be modified to incorporate the same novel or unusual design feature, these special conditions would apply to the other model as well.
This action affects only certain novel or unusual design feature on A321neo XLR series airplanes. It is not a rule of general applicability.
Aircraft, Aviation safety, Reporting and recordkeeping requirements.
The authority citation for these special conditions is as follows:
49 U.S.C. 106(f), 106(g), 40113, 44701, 44702, and 44704.
▪ Accordingly, the Federal Aviation Administration (FAA) proposes the following special conditions as part of the type certification basis for Airbus Model A321neo XLR series airplanes.
Cabin Evacuation—Protection from Fuel Tank Explosion Due to External Fuel-Fed Ground Fire.
The applicant must show the design prevents ignition of fuel tank vapors (due to hot surface) from occurring in the integral rear center tank during the time required for evacuation. The applicant's showing must also demonstrate that the design provides sufficient time for a safe evacuation of all occupants after the initiation of an external fuel-fed ground fire.
Federal Communications Commission.
Proposed rule.
In this document, the Federal Communications Commission (Commission) seeks comment on the current state of the marketplace for diverse and independent programming and on the obstacles faced by independent programmers seeking carriage on multichannel video programming distributors (MVPDs) and online platforms. In order to alleviate such obstacles, the Commission proposes to prohibit two types of contractual provisions in program carriage agreements between independent programmers and MVPDs: most favored nation (MFN) provisions, and unreasonable alternative distribution method (ADM) provisions. The Commission also seeks comment on current program bundling practices.
Comments are due on or before June 6, 2024; reply comments are due on or before July 8, 2024.
Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS).
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• Filings can be sent by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.
• Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701.
• U.S. Postal Service first-class, Express, and Priority mail must be addressed to 45 L Street NE, Washington, DC 20554.
• Effective March 19, 2020, and until further notice, the Commission no longer accepts any hand or messenger delivered filings. This is a temporary measure taken to help protect the health and safety of individuals, and to mitigate the transmission of COVID-19.
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For additional information, contact Kathy Berthot,
This is a summary of the Commission's Notice of Proposed Rulemaking (NPRM), FCC 24-44, adopted on April 17, 2024 and released on April 19, 2024. The full text of this document is available on the FCC website at
1. Through this Notice of Proposed Rulemaking (NPRM), the Commission initiates a new proceeding to seek comment on the current state of the marketplace for diverse and independent programming. The Commission also seeks comment on the obstacles faced by independent video programmers seeking MVPD carriage and carriage on online platforms and how this impacts consumers. In order to alleviate marketplace obstacles that may hinder independent programmers from reaching consumers, the Commission proposes to prohibit two types of contractual provisions in program carriage agreements between independent programmers and MVPDs: (i) most favored nation (MFN) provisions, and (ii) unreasonable alternative distribution method (ADM) provisions. Additionally, the Commission seeks comment on current program bundling practices.
2. In 2016, the Commission launched a proceeding in MB Docket No. 16-41 to examine how certain contractual provisions in carriage agreements between programmers and distributors, such as most favored nation (MFN) and alternative distribution method (ADM) clauses, impact programming competition, innovation, and diversity. In general, an MFN provision entitles an MVPD to more favorable economic or non-economic contract terms that a video programming vendor has provided to another video programming distributor, whether an MVPD or an OVD. An ADM provision generally prohibits or restricts a video programming vendor from exhibiting its programming on OVDs, often for a specified period of time (sometimes referred to as a “holdback period” or “window”) following the programming's original linear airing, or until certain conditions are met. In 2020, having not received any new comments in the proceeding in over two years, Commission staff terminated this proceeding under the dormant proceedings rule.
3. The Commission seeks comment on developments and changes in the marketplace for independent programming and the availability of such programming to consumers since the comment cycle in the MB Docket No. 16-41 proceeding closed in 2017. For example, what is the current state of the marketplace? Are independent programmers still experiencing the same obstacles to carriage that the record described in response to our inquiries in 2016? Has the availability of carriage on a variety of platforms, including OVDs and MVPDs, increased or decreased in the intervening years? Specifically, we seek information on how many independent programmers currently are carried exclusively by MVPDs, how many are carried exclusively by OVDs, and how many are carried by both MVPDs and OVDs. Has the number of independent programmers carried on each of these platforms increased or decreased since 2017? If it has decreased, what factor or factors have led to such decrease? Is there more or less independent and diverse programming available to consumers today than there was in 2017? Have changes in the marketplace exacerbated the difficulty of independent programmers in obtaining carriage? We note that in the
4. In addition, the Commission seeks comment on whether it is more difficult for independent programmers to obtain carriage on certain types of MVPDs (
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6. Additionally, the Commission seeks comment on the current costs and benefits of both conditional and unconditional MFN provisions. What impact do conditional and unconditional MFNs have on the development and distribution of diverse and niche programming today? To what extent do MFN provisions limit the ability of independent programmers to experiment with new or unique distribution models or to tailor deals with smaller MVPDs or online distributors? Are there particular types of conditional MFN provisions that hinder the development and distribution of such programming and, if so, how do they have this effect? What impact do audits and other mechanisms used to enforce MFN provisions have on independent programmers' ability to compete in the marketplace? What benefits are associated with conditional and unconditional MFN provisions? Are there specific types of MFN provisions that are pro-competitive and enhance independent programmers' ability to gain MVPD carriage, making more diverse programming offerings available for consumers? How do MFN provisions ultimately affect consumers? What, if any, consideration, economic or non-economic, do independent programmers receive from MVPDs in exchange for agreeing to MFN provisions? To what extent do the benefits of MFN provisions, either conditional or unconditional, outweigh any harmful effects of such provisions?
7. The Commission proposes to adopt a rule prohibiting the inclusion of MFN provisions, either conditional or unconditional, in carriage agreements between MVPDs and independent programmers. The Commission proposes to define “independent video programmer” or “independent programmer” for purposes of this proceeding as “a non-broadcast programmer that (1) is not vertically integrated with an MVPD and (2) is not affiliated with a broadcast network or entity that holds broadcast station licenses.” The definition of “affiliated” set forth in 47 CFR 76.1300(a), which provides that “entities are affiliated if either entity has an attributable interest in the other or if a third party has an attributable interest in both entities,” would apply to the definition of “independent programmers.” For purposes of the prohibition on inclusion of MFN provisions in program carriage agreements, the Commission proposes to define “most favored nation provision” as “a provision that entitles a multichannel video programming distributor to contractual rights or benefits that an independent video programming vendor has offered or granted to another multichannel video programming distributor or online video distributor, either conditionally or unconditionally.” The Commission further proposes to define the terms (i) “conditionally” as “subject to the multichannel video programming distributor's acceptance of terms and conditions that are integrally related, logically linked, or directly tied to the grant of such rights or benefits in the other video programming distributor's agreement, and with which the multichannel video programming distributor can reasonably comply technologically and legally,” and (ii) “unconditionally” as “without obligating the multichannel video programming distributor to accept any such terms and conditions.” The Commission seeks comment on this proposal and the proposed definitions of “most favored nation provision,” “conditionally,” and “unconditionally.” In particular, the Commission seeks comment on how the proposed prohibition would enhance the ability of independent programmers to obtain MVPD carriage and compete in the marketplace. The Commission also seeks comment on whether the proposed prohibition would benefit consumers by, for example, facilitating the development and distribution of more diverse and niche programming. Would the proposed prohibition result in other benefits to consumers? Are there particular types of MFN provisions that should be excluded or exempted from the proposed prohibition because they provide procompetitive benefits that outweigh any harmful effects? What are the costs and benefits of the proposed prohibition to MVPDs, particularly small entities?
8. The Commission seeks comment on whether it should preclude MVPDs on a going forward basis from enforcing all MFN provisions in existing contracts. If so, should parties be afforded some period of time to reform their existing contracts before the prohibition takes effect? How much time would be reasonable? Commenters should explain the rationale for any time period proposed. The Commission proposes that complaints alleging violations of the prohibition on MFN provisions would be addressed under the program carriage complaint procedures. The Commission seeks comment on any amendments to the program carriage complaint procedures that would be necessitated by adoption of proposed prohibition on MFN provisions. What remedies and penalties should be imposed on an MVPD that violates the proposed prohibition on MFN provisions? To what extent, if any, would costs or other concerns associated with pursuing a program carriage complaint affect the ability of independent programmers to obtain relief if an MVPD violates the proposed prohibition?
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10. The Commission also seeks comment on the current costs and benefits of ADM provisions. What effect do ADM provisions have on the video marketplace and the availability of independent programming today? Do ADM provisions thwart competition, diversity, or innovation? If so, how? Parties should describe in detail. To what extent are ADM provisions used to limit the ability of independent programmers to experiment with new or unique distribution models or to tailor deals with smaller MVPDs or OVDs, and how does that impact their ability to compete? For example, are certain types of ADM provisions aimed more at restricting new means of distribution than at facilitating efficient negotiations or protecting an MVPD's investment in programming? What benefits are associated with ADM provisions? Do independent programmers receive any consideration, economic or non-economic, from MVPDs in exchange for agreeing to ADM provisions? Do certain types of ADM provisions enhance independent programmers' ability to gain MVPD carriage and thereby increase the exposure of their programming by incentivizing MVPDs to carry new content? How are ADM provisions enforced? Are there particular enforcement mechanisms for ADM provisions that are more common to independent programmers than other enforcement mechanisms? Do certain types of enforcement mechanisms for ADM provisions have a uniquely harmful impact on independent programmers' ability to compete?
11. The Commission proposes to prohibit the inclusion of “unreasonable” ADM provisions in carriage agreements between MVPDs and independent programmers. The Commission further proposes to define “alternative distribution method provision” to mean “a provision that prohibits or restricts a video programming vendor from exhibiting its programming on alternative, non-traditional video distribution platforms (such as OVDs) for a specified period of time following the programming's original linear airing, or until certain conditions are met.” Under the proposed prohibition on “unreasonable” ADM provisions, the issue of whether a particular ADM clause is “unreasonable” would be fact-specific and decided in the context of a program carriage complaint proceeding brought under section 616 of the Act. In determining whether a particular ADM provision is “unreasonable,” the Commission proposes to consider, among other factors, the extent to which an ADM provision prohibits an independent programmer from licensing content to other alternative, non-traditional distributors, including OVDs. By prohibiting only those ADM provisions determined to be “unreasonable,” this proposal would recognize that some ADM provisions may serve the public interest by incentivizing MVPDs to invest in new or emerging programming sources, including independent or niche content, while other ADM provisions may have no pro-competitive justifications and hinder the provision of diverse programming to consumers.
12. The Commission seeks comment on the proposed prohibition on unreasonable ADM provisions. The Commission seeks comment on whether the proposed prohibition would enhance the ability of independent programmers, particularly small entities, to compete fairly in the marketplace for video programming. Alternatively, would prohibiting certain ADM provisions make it less likely that MVPDs would agree to carry independent programmers or incentivize MVPDs to seek exclusive programming arrangements with independent programmers (subject to the restrictions in 47 U.S.C. 536(a)(2)) that would limit rather than expand their carriage opportunities? Additionally, the Commission seeks comment on how the proposed prohibition would affect consumers. Would it be expected to result in a greater choice of programming sources or lower costs for consumers? How would the proposed prohibition on unreasonable ADM provisions likely affect MVPDs, including small MVPDs? What costs and benefits are associated with the proposed prohibition for each of the affected parties? Should the Commission provide additional guidance in this proceeding on what constitutes an “unreasonable” ADM provision or should we make such determinations on a case-by-case basis in the context of program carriage complaint proceedings as proposed above? In this regard, the Commission seeks comment on what factors should be considered in determining whether an ADM provision is “unreasonable.” Are there specific ADM provisions that should be deemed presumptively “unreasonable”? Conversely, are there certain ADM provisions that should be considered to be presumptively reasonable?
13. The Commission seeks comment on whether it should preclude MVPDs on a going forward basis from enforcing existing contracts that contain unreasonable ADM provisions and, if so, whether it should afford the parties a specified period of time to revise their contracts to replace any unreasonable ADM provision with an ADM provision with reasonable terms before the prohibition takes effect. The Commission also seeks input on what, if any, amendments to the program carriage complaint procedures would be warranted if the proposed prohibition on unreasonable ADM provisions is adopted. In addition, the Commission seeks comment on what remedies and penalties should be imposed on an MVPD that violates the proposed prohibition on unreasonable ADM provisions. In such circumstances, would it be appropriate for the Media Bureau to simply order that an unreasonable ADM provision not be enforced or be replaced with an ADM provision with reasonable terms? Moreover, the Commission seeks comment on the extent to which costs or other concerns associated with pursuing a program carriage complaint would affect the ability of independent programmers to obtain relief if an MVPD violates the proposed ban on unreasonable ADM provisions.
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16. The Commission seeks comment on its legal authority to take action to curb practices that may adversely impact the ability of independent programmers to compete fairly. In particular, the Commission seeks comment on its authority under section 616 of the Act to adopt rules prohibiting the use of MFN provisions and unreasonable ADM provisions in program carriage agreements between MVPDs and independent programmers, as proposed above. Section 616(a) directs the Commission to “establish regulations governing program carriage agreements and related practices between cable operators or other [MVPDs] and video programming vendors.” The Commission seeks comment on whether the grant of authority under section 616(a) to adopt rules “governing program carriage agreements and related practices between [MVPDs] and video programming vendors” is sufficiently broad to permit us to ban the use of MFN or unreasonable ADM provisions. The Commission notes that the prohibitions on MFN provisions and unreasonable ADM provisions proposed above would apply to agreements between MVPDs and independent programmers, which are encompassed within the term “video programming vendors.” Congress's goal in enacting section 616 was “to stem and reduce the potential for abusive or anticompetitive actions [by MVPDs] against programming entities.” Consistent with this objective, the proposed prohibitions on MFN provisions and unreasonable ADM provisions discussed above are intended to enhance competition in the video marketplace and reflect Congress's belief that “competition is essential both for ensuring diversity in programming and for protecting consumers from potential abuses by cable operators possessing market power” and other MVPDs.
17. Moreover, the Commission tentatively concludes that Congress did not intend to limit the Commission's authority under section 616(a) to the specific practices listed in that section. The introductory language in section 616(a) grants the Commission broad authority to “establish regulations governing program carriage agreements and related practices between cable operators and multichannel video programming distributors and video programming vendors,” and nothing in the statute expressly precludes the Commission from establishing rules apart from those specifically listed. Further, sections 616(a)(1)-(a)(3)—the subsections relating to substantive requirements—are introduced by the verbs “include” or “contain,” which suggests that such requirements are not exhaustive. In instances where Congress intends to limit the Commission's rulemaking authority to specified areas, it has done so expressly. The Commission seeks comment on this analysis.
18. The Commission also seeks comment on whether section 616(a)(3) provides a basis for our proposed bans on MFN provisions and unreasonable ADM provisions in carriage agreements between MVPDs and independent programmers. Section 616(a)(3) directs the Commission to adopt rules “designed to prevent [an MVPD] from engaging in conduct the effect of which is to unreasonably restrain the ability of an unaffiliated video programming vendor to compete fairly by discriminating in video programming distribution on the basis of affiliation or nonaffiliation of vendors in the selection, terms, or conditions for carriage of video programming provided by such vendors.” The Commission seeks comment on whether this provision authorizes it to adopt rules that prohibit vertically integrated MVPDs from including MFN and unreasonable ADM clauses in carriage agreements with independent programmers, where such MVPDs do not include the same clauses in carriage agreements with affiliated programming networks. If so, would the application of such rules only to vertically integrated MVPDs adequately address the competition and diversity concerns raised by restrictive MFN and ADM clauses? Would such rules be effective given that an MVPD could enter into the same restrictive MFN and/or ADM clauses with both an affiliated programming network and an independent programmer but simply not exercise its rights with respect to the affiliated network?
19. The Commission further seeks comment on whether section 628 provides legal authority for adoption of our proposed rules. Similar to our proposed rules, the purpose of section 628 is to “increase[e] competition and diversity in the [[MVPD] market . . . and to spur the development of communications technologies.” Section 628(b) precludes a cable operator, a common carrier or its affiliate that provides video programming, and an Open Video System (OVS) operator, as
20. Finally, the Commission seeks comment on whether there are other provisions in the Act that afford the Commission the authority to alleviate marketplace obstacles to the distribution of independent and diverse programming, including obstacles posed by MFN provisions and unreasonable ADM provisions. For example, section 335(a) provides the Commission with authority to “impose, on providers of direct broadcast satellite service, public interest or other requirements for providing video programming.” Does the Commission have authority under other provisions of Title III? The Commission also seeks comment on whether it has—and should exercise—ancillary authority under section 4(i) of the Act to address MFN and ADM provisions.
21. The Commission, as part of its continuing effort to advance digital equity for all, including people of color, persons with disabilities, persons who live in rural or Tribal areas, and others who are or have been historically underserved, marginalized, or adversely affected by persistent poverty or inequality, invites comment on any equity-related considerations and benefits (if any) that may be associated with the issues discussed herein. Specifically, we seek comment on how any Commission actions taken to address barriers to the distribution of independent and diverse programming may promote or inhibit advances in diversity, equity, inclusion, and accessibility.
22. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the Commission has prepared this Initial Regulatory Flexibility Act Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in this Notice of Proposed Rulemaking (NPRM). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments provided on the first page of the NPRM. The Commission will send a copy of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA). In addition, the NPRM and IRFA (or summaries thereof) will be published in the
23. One of the Commission's primary objectives with respect to multichannel video programming is to foster a diverse, robust, and competitive marketplace for the delivery of such programming. We recognize that competition among distributors of video programming continues to evolve and consumers today have a wealth of video programming platforms from which to choose. Nevertheless, stakeholders continue to raise concerns that certain marketplace practices by distributors may hinder independent video programmers from reaching consumers and deprive them of access to their choice of diverse programming—one of the benefits of enhanced competition in the video marketplace. Specifically, independent programmers contend that their ability to thrive in the marketplace and reach consumers today depends on their ability to negotiate and secure carriage on multichannel video programming distributors (MVPDs) or online video distributors (OVDs). Despite the changes in the way that consumers access video programming—including via the growing number of platforms available to video consumers and the protracted decline in MVPD subscribers—independent video programmers have consistently asserted over the past several years that certain practices by incumbent cable operators and other MVPDs, particularly most favored nation (MFN) and alternative distribution method (ADM) clauses in program carriage agreements, have impeded their ability to reach consumers across all video platforms, leading to less competition and fewer choices for those who watch.
24. The NPRM seeks comment on the state of the marketplace for independent and diverse programming and the availability of such programming to consumers today. The NPRM also seeks comment on the obstacles faced by independent programmers in reaching consumers and the actions the Commission can take to alleviate such obstacles. Specifically, the NPRM seeks comment on the current usage of MFN provisions, both conditional and unconditional, in contracts for carriage of non-broadcast video programming and on the costs and benefits of conditional and unconditional MFN provisions. Additionally, the NPRM requests comment on the prevalence and scope of ADM provisions in contracts for carriage of non-broadcast video programming today and on the current costs and benefits of ADM provisions. The NPRM seeks comment on what the current program bundling practices are today and how such practices affect the ability of MVPDs to carry independent and diverse programming. Further, the NPRM seeks comment on other practices that may impede entry into the market by or growth of independent programmers. Finally, the NPRM invites comment on the need for Commission action to address any obstacles to the distribution of independent and diverse programming, as well as the Commission's legal authority to take action to curb program carriage practices that may adversely impact the ability of independent programmers to compete fairly.
25. In order to alleviate marketplace obstacles that may hinder independent programmers from reaching consumers, the NPRM proposes to prohibit the use of MFN provisions, either conditional or unconditional, in carriage agreements between MVPDs and independent programmers. In addition, the NPRM proposes to bar unreasonable ADM provisions in carriage agreements between MVPDs and independent programmers. The NPRM proposes that the issue of whether a particular ADM clause is “unreasonable” would be fact-specific and decided in the context of a program carriage complaint proceeding brought under section 616 of the Act, taking into account, among other factors, the extent to which an ADM provision prohibits an independent
26. The proposed action is authorized pursuant to sections 1, 4(i), 4(j),, 303, 307, 316, 335, 616 and 628 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 303, 307, 316, 335, 536, and 548.
27. 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 proposed rules, if adopted. 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 which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.
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29. In light of the use of wireless frequencies by BRS and EBS services, the closest industry with a SBA small business size standard applicable to these services is Wireless Telecommunications Carriers (
30. According to Commission data as December 2021, there were approximately 5,869 active BRS and EBS licenses. The Commission's small business size standards with respect to BRS involves eligibility for bidding credits and installment payments in the auction of licenses for these services. For the auction of BRS licenses, the Commission adopted criteria for three groups of small businesses. A very small business is an entity that, together with its affiliates and controlling interests, has average annual gross revenues exceed $3 million and did not exceed $15 million for the preceding three years, a small business is an entity that, together with its affiliates and controlling interests, has average gross revenues exceed $15 million and did not exceed $40 million for the preceding three years, and an entrepreneur is an entity that, together with its affiliates and controlling interests, has average gross revenues not exceeding $3 million for the preceding three years. Of the ten winning bidders for BRS licenses, two bidders claiming the small business status won 4 licenses, one bidder claiming the very small business status won three licenses and two bidders claiming entrepreneur status won six licenses. One of the winning bidders claiming a small business status classification in the BRS license auction has an active licenses as of December 2021.
31. The Commission's small business size standards for EBS define a small business as an entity that, together with its affiliates, its controlling interests and the affiliates of its controlling interests, has average gross revenues that are not more than $55 million for the preceding five (5) years, and a very small business is an entity that, together with its affiliates, its controlling interests and the affiliates of its controlling interests, has average gross revenues that are not more than $20 million for the preceding five (5) years. In frequency bands where licenses were subject to auction, the Commission notes that as a general matter, the number of winning bidders that qualify as small businesses at the close of an auction does not necessarily represent the number of small businesses currently in service. Further, the Commission does not generally track subsequent business size unless, in the context of assignments or transfers, unjust enrichment issues are implicated. Additionally, since the Commission does not collect data on the number of employees for licensees providing these services, at this time we are not able to estimate the number of licensees with active licenses that would qualify as small under the SBA's small business size standard.
32.
33.
34.
35.
36.
37. The SBA small business size standard for Wired Telecommunications Carriers classifies firms having 1,500 or fewer employees as small. U.S. Census Bureau data for 2017 show that 3,054 firms operated in this industry for the entire year. Of this number, 2,964 firms operated with fewer than 250 employees. Based on this data, the majority of firms in this industry can be considered small under the SBA small business size standard. According to Commission data however, only two entities provide DBS service—DIRECTV (owned by AT&T) and DISH Network, which require a great deal of capital for operation. DIRECTV and DISH Network both exceed the SBA size standard for classification as a small business. Therefore, we must conclude based on internally developed Commission data, in general DBS service is provided only by large firms.
38.
39. The Commission's small business size standards with respect to fixed microwave services involve eligibility for bidding credits and installment payments in the auction of licenses for the various frequency bands included in fixed microwave services. When bidding credits are adopted for the auction of licenses in fixed microwave services frequency bands, such credits may be available to several types of small businesses based average gross revenues (small, very small and entrepreneur) pursuant to the competitive bidding rules adopted in conjunction with the requirements for the auction and/or as identified in Part 101 of the Commission's rules for the specific fixed microwave services frequency bands.
40. In frequency bands where licenses were subject to auction, the Commission notes that as a general matter, the number of winning bidders that qualify as small businesses at the close of an auction does not necessarily represent the number of small businesses currently in service. Further, the Commission does not generally track subsequent business size unless, in the context of assignments or transfers, unjust enrichment issues are implicated. Additionally, since the Commission does not collect data on the number of employees for licensees providing these services, at this time we are not able to estimate the number of licensees with active licenses that would qualify as small under the SBA's small business size standard.
41.
42.
43.
44.
45.
46.
47. As of September 30, 2023, there were 1,377 licensed commercial television stations. Of this total, 1,258 stations (or 91.4%) had revenues of $41.5 million or less in 2022, according to Commission staff review of the BIA Kelsey Inc. Media Access Pro Television Database (BIA) on October 4, 2023, and therefore these licensees qualify as small entities under the SBA definition. In addition, the Commission estimates as of September 30, 2023, there were 383 licensed noncommercial educational (NCE) television stations, 380 Class A TV stations, 1,889 LPTV stations and 3,127 TV translator stations. The Commission, however, does not compile and otherwise does not have access to financial information for these television broadcast stations that would permit it to determine how many of these stations qualify as small entities under the SBA small business size standard. Nevertheless, given the SBA's large annual receipts threshold for this industry and the nature of these television station licensees, we presume that all of these entities qualify as small entities under the above SBA small business size standard.
48.
49. The SBA small business size standard for Wired Telecommunications Carriers classifies firms having 1,500 or fewer employees as small. U.S. Census Bureau data for 2017 show that there were 3,054 firms that operated in this industry for the entire year. Of this number, 2,964 firms operated with fewer than 250 employees. Additionally, based on Commission data in the 2022 Universal Service Monitoring Report, as of December 31, 2021, there were 4,590 providers that reported they were engaged in the provision of fixed local services. Of these providers, the Commission estimates that 4,146 providers have 1,500 or fewer employees. Consequently, using the SBA's small business size standard, most of these providers can be considered small entities.
50. The rule changes proposed in the NPRM, if adopted, will impose compliance obligations on small, as well as other entities. Specifically, the NPRM proposes to prohibit MFN provisions, either conditional or unconditional, in carriage agreements between MVPDs and independent programmers. The NPRM also proposes to prohibit unreasonable ADM provisions in carriage agreements between MVPDs and independent programmers. The NPRM proposes that a determination of whether a particular ADM provision is “unreasonable” would be fact-specific and decided in the context of a program carriage complaint proceeding brought under section 616 of the Act.
51. The RFA requires an agency to describe any significant, specifically small business, alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.
52. The proposals to prohibit MFN provisions and unreasonable ADM provisions, if adopted, would be expected to benefit small independent programmers by enhancing their ability to compete in the video marketplace and to create new, innovative program offerings. These proposals would also likely benefit small MVPDs and OVDs by removing barriers to mutually-beneficial carriage deals between these small entities and independent programmers. Nevertheless, the Commission seeks comment in the NPRM on how these proposals would affect small entities and expects to more fully consider the impact of these proposals and any alternatives on small entities, following review of the comments received in response to the NPRM.
53. The NPRM proposes to use the existing program carriage complaint procedures to address any complaints regarding violations of the proposed bans on MFN provisions and unreasonable ADM provisions. The NPRM seeks comment on whether costs or other concerns associated with pursuing a program carriage complaint would affect the ability of independent programmers, including small entities, to obtain relief if an MVPD violates the proposed ban on MFN provisions or unreasonable ADM provisions and asks whether any modifications to the program carriage complaint procedures are warranted.
54. None.
55.
56.
Television
For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 76 as follows:
47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303, 303a, 307, 308. 309. 312, 315, 317, 325, 335, 338, 339, 340, 341, 503, 521, 522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 558, 560, 561, 571, 572, 573.
The additions read as follows:
(b)
(e)
(f)
(d)
(e)
Natural Resources Conservation Service, United States Department of Agriculture.
Notice to solicit nominees; correction.
The Department of Agriculture's (USDA) Office of Urban Agriculture and Innovative Production (OUAIP) notice published in the
USDA will consider nominations received via email or postmarked by July 6, 2024.
Please send nominations via email to:
Markus Holliday, Coordinator, Office of Urban Agriculture and Innovative Production; telephone: (301) 974-1287; email:
Individuals who require alternative means for communication may contact the USDA TARGET Center at (202) 720-2600 (voice and text telephone (TTY)) or dial 711 for Telecommunications Relay service (both voice and text telephone users can initiate this call from any telephone).
The USDA OUAIP notice published in the
Section 222 of the Department of Agriculture Reorganization Act of 1994, as amended by section 12302 of the 2018 Farm Bill (7 U.S.C. 6923; Pub. L. 115-334), directed the Secretary of Agriculture to establish an “Urban Agriculture and Innovative Production Advisory Committee” to advise the Secretary on any aspect of section 222, including the development of policies and outreach relating to urban, indoor, and other emerging agricultural production practices as well as identify any barriers to urban agriculture. UAIPAC will host public meetings to deliberate on recommendations for the Secretary of Agriculture. These recommendations provide advice to the Secretary on supporting urban agriculture and innovative production through USDA's programs and services. For additional background and member information visit the UAIPAC website at
The UAIPAC consists of 12 members including:
• 4 representatives who are agriculture producers including 2 individuals who are located in an urban area or urban cluster; and 2 individuals who are farmers that use innovative technology;
• 2 representatives from an institution of higher education or extension program;
• 1 representative from a nonprofit organization, which may include a public health, environmental, or community organization;
• 1 representative who represents business and economic development, which may include a business development entity, a chamber of commerce, a city government, or a planning organization;
• 1 expert with supply chain experience, which may include a food aggregator, wholesale food distributor, food hub, or an individual who has direct-to-consumer market experience;
• 1 representative from a financing entity; and
• 2 representatives with related experience or expertise in urban, indoor, and other emerging agriculture production practices, as determined by the Secretary.
Nominations are open to the public. Any interested person or organization may nominate qualified individuals for membership, including self-nominations. Individuals who wish to be considered for membership must
(1) A completed background disclosure form (Form AD-755) signed by the nominee (see
(2) A brief summary explaining the nominee's interest in one or more open vacancies including any unique qualifications that address the membership composition and criteria described above; and
(3) A résumé providing the nominee's background, experience, and educational qualifications.
It will be helpful to include the following optional items in your nomination package:
(1) Recent publications by the nominee relative to extending support for urban agriculture or innovative production; and
(2) Letter(s) of endorsement.
Please send nominations via email to:
The USDA OUAIP is seeking nominations for individuals to serve on UAIPAC. The nomination period includes the following four vacancies:
• One individual who is an agirculture producer or farmer using innovative technology;
• One individual from an institution of higher education or extension program;
• One individual with supply chain experience, which may include a food aggregator, wholesale food distributor, food hub, or an individual who has direct-to-consumer market experience; and
• One individual with related experience in urban, indoor, and other emerging agriculture production practices.
To maintain the highest levels of honesty, integrity, and ethical conduct, no committee or subcommittee member may participate in any “specific party matters” (for example, matters are narrowly focused and typically involve specific transactions between identified parties) such as a lease, license, permit, contract, claim, grant, agreement, or related litigation with USDA in which the committee or subcommittee member has a direct financial interest. This includes the requirement for committee or subcommittee members to immediately disclose to the Designated Federal Officer (DFO) (for discussion with USDA's Office of Ethics) any specific party matter in which the member's immediate family, relatives, business partners or employer would be directly seeking to financially benefit from the committee's recommendations.
All members will receive ethics training to identify and avoid any actions that would cause the public to question the integrity of the committee's advice and recommendations. Members who are appointed as “Representatives” are not subject to Federal ethics laws because the appointment allows them to represent the point(s) of view of a particular group, business sector or segment of the public.
Members appointed as “Special Government Employees” (SGEs) are considered intermittent Federal employees and are subject to Federal ethics laws. SGE's are appointed due to their personal knowledge, academic scholarship, background or expertise. No SGE may participate in any activity in which the member has a prohibited financial interest. Appointees who are SGEs are required to complete and submit a Confidential Financial Disclosure Report (OGE-450 form) via the FDonline e-filing database system. Upon request USDA will assist SGEs in preparing these financial reports. To ensure the highest level of compliance with applicable ethical standards USDA will provide ethics training to SGEs on an annual basis. The provisions of these paragraphs are not meant to exhaustively cover all Federal ethics laws and do not affect any other statutory or regulatory obligations to which advisory committee members are subject.
In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family or parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.
Individuals who require alternative means of communication for program information (for example, braille, large print, audiotape, American Sign Language, etc.) should contact the responsible Agency or USDA TARGET Center at (202) 720-2600 (voice and text telephone (TTY)) or dial 711 for Telecommunicaions Relay Service (both voice and text telephone users can initiate this call from any phone). Additionally, program information may be made available in languages other than English.
Equal opportunity practices in accordance with USDA's policies will be followed in all appointments to the FACA Committee: UAIPAC. To ensure that the recommendations of the Committee have taken into account the needs of the diverse groups served by the Department, membership shall include, to the extent practicable, individuals with demonstrated ability to represent the many communities, identities, races, ethnicities, backgrounds, abilities, cultures, and beliefs of the American people, including underserved communities. USDA is an equal opportunity provider, employer, and lender.
To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD-3027, found online at
USDA is an equal opportunity provider, employer, and lender.
Dated: May 2, 2024.
Commission on Civil Rights.
Notice of public meeting.
Notice is hereby given, pursuant to the provisions of the rules
Wednesday, June 5, 2024, 9:00 a.m.-10:30 a.m. Chamorro Standard Time (Tuesday, June 4, 2024, 7:00 p.m.-8:30 p.m. Eastern Time)
The meeting will be held via Zoom Webinar.
Kayla Fajota, Designated Federal Officer, at
This committee meeting is available to the public through the registration link above. Any interested member of the public may listen to the meeting. An open comment period will be provided to allow members of the public to make a statement as time allows. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. If joining via phone, callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available for individuals who are deaf, hard of hearing, or who have certain cognitive or learning impairments. To request additional accommodations, please email Liliana Schiller, Support Services Specialist, at
Members of the public are entitled to submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be emailed to Kayla Fajota at
Records generated from this meeting may be inspected and reproduced at the Regional Programs Coordination Unit Office, as they become available, both before and after the meeting. Records of the meetings will be available via
International Trade Administration, U.S. Department of Commerce.
Notice of an open meeting.
The United States Travel and Tourism Advisory Board (Board or TTAB) will hold a meeting on Monday, June 3, 2024. The Board advises the Secretary of Commerce on matters relating to the U.S. travel and tourism industry. The main purpose of this meeting is for Board members to deliberate and potentially adopt three letters of recommendation and discuss priority issues related to travel and tourism. The final agenda will be posted on the Department of Commerce website for the Board at
Monday, June 3, 2024, 2 p.m.-3 p.m. EDT. The deadline for members of the public to register for the meeting or to submit written comments for dissemination prior to the meeting is 5 p.m. EDT on Thursday, May 30, 2024.
The meeting will be held virtually. The access information will be provided by email to registrants. Requests to register (including to speak or for auxiliary aids) and any written comments should be submitted by email to
Jennifer Aguinaga, the United States Travel and Tourism Advisory Board, National Travel and Tourism Office, U.S. Department of Commerce; telephone: 202-482-2404; email:
In addition, any member of the public may submit pertinent written comments concerning the Board's affairs at any time before or after the meeting. Comments may be submitted to Jennifer Aguinaga at the contact information indicated above. To be considered during the meeting, comments must be received no later than 5 p.m. EDT on Thursday, May 30, 2024, to ensure transmission to the Board prior to the meeting. Comments received after that date and time will be transmitted to the Board but may not be considered during
This Notice is published pursuant to the Federal Advisory Committee Act, as amended (FACA), 5 U. S. C. app., section 10(a)(2). The Committee was established pursuant to section 607 of the Visit America Act, subtitle A of title VI of division BB of the Consolidated Appropriations Act, 2023, Public Law 117-328, and in accordance with the provisions of the FACA, 5 U.S.C. 1001
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that Aluminum Extrusions from Colombia are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Jose Rivera or Lingjun Wang, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-0842 or (202) 482-2316, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation in the
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Colombia. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export prices in accordance with section 772(a) of the Act. Constructed export prices have been calculated in accordance with section 772(b) of the Act. Normal value is calculated in accordance with section 773 of the Act. For a full description of the methodology underlying the preliminary determination,
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in a preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
In this investigation, Commerce calculated estimated weighted-average dumping margins for Aluminio Nacional S.A. (Alumina)
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Commerce intends to disclose its calculations and analysis performed to interested parties in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
Between April 17 and 24, 2024, pursuant to 19 CFR 351.210(e), the petitioners,
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigation on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigation are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of the order resulting from this investigation) are excluded from the scope of this investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigation.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of these antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from Indonesia are being sold, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Samuel Brummitt or Katherine Sliney, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-7851 or (202) 482-2437, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on October 31, 2023.
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Indonesia. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce has calculated export prices in accordance with section 772(a) of the Act. Constructed export prices have been calculated in accordance with section 772(b) of the Act. Normal value is calculated in accordance with section 773 of the Act. In addition, pursuant to section 776(a) and (b) of the Act, Commerce has preliminarily relied upon facts otherwise available, with adverse inferences for Alupro Asia Tech (Alutech). For a full description of the methodology underlying the preliminary determination,
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in the preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
In this investigation, Commerce calculated estimated weighted-average dumping margins that are above
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Further, pursuant to section 733(d)(1)(B) of the Act and 19 CFR 351.205(d), Commerce will instruct CBP to require a cash deposit equal to the estimated weighted-average dumping margin or the estimated all-others rate, as follows: (1) the cash deposit rate for the respondents listed above will be equal to the company-specific estimated weighted-average dumping margins determined in this preliminary determination; (2) if the exporter is not a respondent identified above, but the producer is, then the cash deposit rate will be equal to the company-specific estimated weighted-average dumping margin established for that producer of the subject merchandise; and (3) the cash deposit rate for all other producers and exporters will be equal to the all-others estimated weighted-average dumping margin.
Commerce normally adjusts cash deposits for estimated antidumping duties by the amount of export subsidies countervailed in a companion countervailing duty (CVD) proceeding, when CVD provisional measures are in effect. Accordingly, where Commerce preliminarily made an affirmative determination for countervailable export subsidies, Commerce has offset the estimated weighted-average dumping margin by the appropriate CVD rate. Any such adjusted cash deposit rate may be found in the “Preliminary Determination” section above.
Should provisional measures in the companion CVD investigation expire prior to the expiration of provisional measures in this LTFV investigation, Commerce will direct CBP to begin collecting estimated antidumping duty cash deposits unadjusted for countervailed export subsidies at the time that the provisional CVD measures expire. These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose its calculations and analysis performed to interested parties in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
Between April 17 and 19, 2024, pursuant to 19 CFR 351.210(e), the petitioners,
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of orders resulting from this investigation) are excluded from the scope of this investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigation.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under Harmonized Tariff Schedule of the United States (HTSUS) 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under HTSUS subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of these antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from the People's Republic of China (China) are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is April 1, 2023, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Luke Caruso or Jonathan Hill, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-2081 or (202) 482-3518, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on October 31, 2023.
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from China. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export prices in accordance with section 772(a) of the Act and calculated constructed export prices in accordance with section 772(b) of the Act. Because China is a non-market economy, within the meaning of section 771(18) of the Act, Commerce has calculated normal value in accordance with section 773(c) of the Act. In addition, Commerce has applied partial facts available under section 776(a)(1) of the Act to the collapsed single entity that includes mandatory respondent Sanhua (Hangzhou) Micro Channel Heat Exchanger Co., Ltd (SHMC) and applied adverse facts available under sections 776(a) and (b) of the Act to the China-wide entity. For a full description of the methodology underlying the preliminary determination,
In the
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
To determine the cash deposit rate, Commerce normally adjusts the estimated weighted-average dumping margin by the amount of domestic subsidy pass-through and export subsidies determined in a companion countervailing duty (CVD) proceeding when CVD provisional measures are in effect. Accordingly, where Commerce has made a preliminary affirmative determination for domestic subsidy pass-through or export subsidies, Commerce has offset the calculated estimated weighted-average dumping margin by the appropriate rate(s). Any such adjusted rates may be found in the “Preliminary Determination” section's table of estimated weighted-average dumping margins above.
Should provisional measures in the companion CVD investigation expire prior to the expiration of provisional measures in this LTFV investigation, Commerce will direct CBP to begin collecting cash deposits at a rate equal to the estimated weighted-average dumping margins calculated in this preliminary determination unadjusted for the passed-through domestic subsidies or for export subsidies at the time that the CVD provisional measures expire.
These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose to parties to the proceeding the calculations and analysis it performed in this preliminary determination within five days of public announcement or, if there is no public announcement, within five days of the date of publication of this notice in the
As provided in section 782(i)(1) of the Act, Commerce intends to verify information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the deadlines for scope comments. After the submission of scope comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the final verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide, at the beginning of their briefs, a public, executive summary for each issue raised in their briefs.
Note that Commerce has amended certain of its requirements pertaining to the service of documents in 19 CFR 351.303(f).
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice in the
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Pursuant to 19 CFR 351.210(e)(2), Commerce requires that requests by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On April 21, 2024, pursuant to 19 CFR 351.210(e), SHMC requested that Commerce postpone the final determination and that provisional measures be extended to a period not to exceed six months.
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination of sales at LTFV. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether imports of subject merchandise are materially injuring, or threaten material injury to, the U.S. industry.
This preliminary determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act, and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of the order resulting from this investigation) are excluded from the scope of the investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigation.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from Mexico are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Carolyn Adie or Fred Baker, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-6250 and (202) 482-2924, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation in the
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Mexico. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce has calculated export prices in accordance with section 772(a) of the Act. Constructed export prices have been calculated in accordance with section
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in the preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Commerce normally adjusts cash deposits for estimated antidumping duties by the amount of export subsidies countervailed in a companion countervailing duty (CVD) proceeding, when CVD provisional measures are in effect. Accordingly, where Commerce preliminarily made an affirmative determination for countervailable export subsidies, Commerce has offset the estimated weighted-average dumping margin by the appropriate CVD rate. Any such adjusted cash deposit rate may be found in the “Preliminary Determination” section above.
Should provisional measures in the companion CVD investigation expire prior to the expiration of provisional measures in this LTFV investigation, Commerce will direct CBP to begin collecting estimated antidumping duty cash deposits unadjusted for countervailed export subsidies at the time that the provisional CVD measures expire. These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose its calculations and analysis performed to interested parties in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than five days after the date for filing case briefs.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On April 17 and 24, 2024, pursuant to 19 CFR 351.210(e), the petitioners,
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act, and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of orders resulting from this investigation) are excluded from the scope of this investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of this investigation.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under Harmonized Tariff Schedule of the United States (HTSUS) 8418.99.8050, which is being included for convenience.
Also excluded from the scope of the investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under HTSUS subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000;
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.00. While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.00000
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from Thailand are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 01, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Jun Jack Zhao, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1396.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation in the
For a complete description of the events that followed the initiation of this investigation,
The product covered by this investigation are aluminum extrusions from Thailand. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export prices in accordance with section 772(a) of the Act and constructed export prices in accordance with section 772(b) of the Act. Normal value is calculated in accordance with section 773 of the Act. For a full description of the
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in the preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
In this investigation, Commerce calculated estimated weighted-average dumping margins for Thai Metal Aluminum Co., Ltd. (Thai Metal) and for United Aluminum Industry Co., Ltd. (United) that are not zero,
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce with direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Further, pursuant to section 733(d)(1)(B) of the Act and 19 CFR 351.205(d), Commerce will instruct CBP to require a cash deposit equal to the estimated weighted-average dumping margin or the estimated all-others rate, as follows: (1) the cash deposit rate for the respondents listed above will be equal to the company-specific estimated weighted-average dumping margins determined in this preliminary determination; (2) if the exporter is not a respondent identified above, but the producer is, then the cash deposit rate will be equal to the company-specific estimated weighted-average dumping margin established for that producer of the subject merchandise; and (3) the cash deposit rate for all other producers and exporters will be equal to the all-others estimated weighted-average dumping margin. These suspension of liquidation measures will remain in effect until further notice.
Commerce intends to disclose its calculations and analysis performed in connection with this preliminary determination to interested parties within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date of the hearing.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such
On April 17, 24, and 25, 2024, pursuant to 19 CFR 351.210(e), the petitioner, Thai Metal, and United requested that Commerce postpone the final determination and that provisional measures be extended to a period not to exceed six months.
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports of aluminum extrusions from Thailand are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigation on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigation are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under HTSUS subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of these antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from the Republic of Türkiye (Türkiye) are being, or are likely to be, sold in the
Applicable May 7, 2024.
Sean Grossnickle or Taylor Hatley, AD/CVD Operations, Office II, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: 202-482-3818 or (202) 482-4886, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation in the
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Türkiye. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce has calculated export prices in accordance with section 772(a) of the Act and constructed export prices in accordance with section 772(b) of the Act. Normal value is calculated in accordance with section 773 of the Act. Furthermore, pursuant to section 776(a) and (b) of the Act, Commerce preliminarily relied upon facts otherwise available, with adverse inferences for certain companies. For a full description of the methodology underlying the preliminary determination,
Sections 733(d)(1)(A)(ii) and 735(c)(5)(A) of the Act provide that, in the preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
In this investigation, Commerce calculated estimated weighted-average dumping margins for Erdoganlar Aluminyum San. ve Tic. A.S. (Erdoganlar) and Sistem Aluminyum Sanayi ve Ticaret A.S. (Sistem) that are not zero,
We received timely Q&V responses from the following companies in addition to the mandatory respondents, Erdoganlar and System: ASAS Aluminyum Sanayi ve Ticaret A.S. (ASAS); Cansan Aluminyum Profil San Tic AS (Cansan); Cuhadaroglu Metal Sanayi ve Pazarlama A.S. (Cuhadaroglu); HAS Aluminyum San. Ve Tic. A.S (HAS Aluminyum);
Commerce issued a Q&V questionnaire to Birgi Birlesik Giyim (Birgi) following the initiation of the investigation which was not delivered.
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Further, pursuant to section 733(d)(1)(B) of the Act and 19 CFR 351.205(d), Commerce will instruct CBP to require a cash deposit equal to the estimated weighted-average dumping margins or the estimated all-others rate, as follows: (1) the cash deposit rate for the respondents listed above will be equal to the company-specific estimated weighted-average dumping margins determined in this preliminary determination; (2) if the exporter is not a respondent identified above, but the producer is, then the cash deposit rate will be equal to the company-specific estimated weighted-average dumping margin established for that producer of the subject merchandise; and (3) the cash deposit rate for all other producers and exporters will be equal to the all-others estimated weighted-average dumping margin.
Commerce normally adjusts cash deposits for estimated antidumping duties by the amount of export subsidies countervailed in a companion countervailing duty (CVD) proceeding, when CVD provisional measures are in effect. Accordingly, where Commerce preliminarily made an affirmative determination for countervailable export subsidies, Commerce has offset the estimated weighted-average dumping margin by the appropriate CVD rate. Any such adjusted cash deposit rate may be found in the “Preliminary Determination” section above.
Should provisional measures in the companion CVD investigation expire prior to the expiration of provisional measures in this LTFV investigation, Commerce will direct CBP to begin collecting estimated antidumping duty cash deposits unadjusted for countervailed export subsidies at the time that the provisional CVD measures expire. These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose the calculations and analysis performed in connection with this preliminary determination to interested parties within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice in the
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On April 17, 2024, pursuant to 19 CFR 351.210(e), all parties requested that Commerce postpone the final determination and that provisional measures be extended to a period not to exceed six months.
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports of aluminum extrusions from Türkiye are materially injuring, or threaten material injury to, the U.S. industry.
This preliminary determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigation on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigation are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of the order resulting from this investigation) are excluded from the scope of this investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigation.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of these antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000;
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
International Trade Administration, U.S. Department of Commerce.
Notice of an open meeting.
The Renewable Energy and Energy Efficiency Advisory Committee (REEEAC or the Committee) will hold an in-person meeting, accessible to the public in-person and online, on Wednesday, May 22, 2024 at the U.S. Department of Commerce in Washington, DC Registration instructions for the public to attend either in-person or online are provided below. The meeting has a limited number of spaces for members of the public to attend in-person. Requests to attend in-person will be considered on a first-come first-served basis.
Wednesday, May 22, 2024, from approximately 9:30 a.m. to 3:30 p.m. Eastern Daylight Time (EDT). Members of the public wishing to participate must register in advance with Cora Dickson at the contact information below by 5:00 p.m. EDT on Friday, May 17, 2024, including any requests to make comments during the meeting or for accommodations or auxiliary aids.
To register, please contact Cora Dickson, Designated Federal Officer (DFO), Office of Energy and Environmental Industries (OEEI), Industry and Analysis, International Trade Administration, U.S. Department of Commerce at (202) 482-6083; email:
Cora Dickson, DFO, Office of Energy and Environmental Industries (OEEI), Industry and Analysis, International Trade Administration, U.S. Department of Commerce at (202) 482-6083; email:
On Wednesday, May 22, 2024, the REEEAC will hold the eighth meeting of its current charter term. The Committee, with officials from the Department of Commerce and other agencies, will discuss major issues affecting the competitiveness of the U.S. renewable energy and energy efficiency industries. The Committee will provide an overview of its recommendations to the relevant U.S. Government officials from the Trade Promotion Coordinating Committee agencies. An agenda will be made available by May 17, 2024 upon request to Cora Dickson.
The meeting will be open to the public and will be accessible to people with disabilities. All guests are required to register in advance by the deadline identified under the
A limited amount of time before the close of the meeting will be available for oral comments from members of the public attending the meeting. Members of the public attending virtually who wish to speak during the public comment period must give the DFO advance notice in order to facilitate their access. To accommodate as many speakers as possible, the time for public comments will be limited to two to five minutes per person (depending on number of public participants). Individuals wishing to reserve speaking time during the meeting must contact Cora Dickson using the contact information above and submit a brief statement of the general nature of the comments, as well as the name and address of the proposed participant, by 5:00 p.m. EDT on Friday, May 17, 2024. If the number of registrants requesting to make statements is greater than can be reasonably accommodated during the meeting, the International Trade Administration may conduct a lottery to determine the speakers. Speakers are requested to submit a copy of their oral comments by email to Cora Dickson for distribution to the participants in advance of the meeting.
Any member of the public may submit written comments concerning the REEEAC's affairs at any time before or after the meeting. Comments may be submitted via email to the Renewable Energy and Energy Efficiency Advisory Committee, c/o: Cora Dickson, Designated Federal Officer, Office of Energy and Environmental Industries, U.S. Department of Commerce;
Copies of REEEAC meeting minutes will be available within 30 days following the meeting.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from Ecuador are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Elizabeth Bremer or Stephanie Trejo, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4987 or (202) 482-4390, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on October 31, 2023.
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Ecuador. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export price in accordance with section 772(a) of the Act. Constructed export prices have been calculated in accordance with section 772(b) of the Act. Normal value is calculated in accordance with section 773 of the Act. For a full description of the methodology underlying the preliminary determination,
Sections 733(d)(1)(A)(ii) and 735(c)(5)(A) of the Act provide that, in the preliminary determination, Commerce shall determine an estimated all-others rate for all other exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually examined, excluding rates that are zero,
In this investigation, Commerce calculated estimated weighted-average dumping margins for CEDAL Durán S.A. (CEDAL Durán) and FISA Fundiciones Industriales S.A. (FISA) that are not zero,
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Commerce intends to disclose its calculations and analysis performed in connection with this preliminary determination to interested parties within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination for CEDAL Durán and FISA.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of cases and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce will inform parties of the time and date for the hearing. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
Between April 17 and 19, 2024, pursuant to 19 CFR 351.210(e), the petitioners,
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This preliminary determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act, and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of these antidumping and countervailing duty
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from Malaysia are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Paola Aleman Ordaz or Benjamin Blythe, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4031 or (202) 482-3457, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on October 31, 2023.
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Malaysia. For a complete description of the scope of this investigation, see Appendix I.
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export price in accordance with sections 772(a) of the Act. Commerce calculated normal value in accordance with section 773 of the Act. Furthermore, pursuant to sections 776(a) and (b) of the Act, Commerce has preliminarily relied upon facts otherwise available, with adverse inferences, for EL Aluminium Billet (M) Sdn Bhd, Kosan Aluminum Extrusion SDN. BHD, and Winstar Group. For a full description of the methodology underlying the preliminary determination,
Sections 733(d)(1)(A)(ii) and 735(c)(5)(A) of the Act provide that, in the preliminary determination, Commerce shall determine an estimated all-others rate for all other exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually examined, excluding any rates that are zero,
Pursuant to section 735(c)(5)(B) of the Act, if the estimated weighted-average dumping margins established for all exporters and producers individually examined are zero,
Commerce has preliminarily determined that the estimated weighted-average dumping margins for Genesis Aluminium Industries Sdn. Bhd./Zenshin Industries Sdn. Bhd. and P.A. Extrusion (M) Sdn. Bhd. under section 776 of the Act are zero. Consequently, pursuant to section 735(c)(5)(B) of the Act, Commerce's normal practice under these circumstances has been to calculate the all-others rate as a simple average of the alleged dumping margin(s) from the petition.
For this preliminary determination, Commerce calculated a zero estimated weighted-average dumping margin for each individually examined producer and or exporter of the subject merchandise. Consistent with section 733(b)(3) of the Act, Commerce preliminarily determines that these individually examined respondents with zero rates have not made sales of subject merchandise at LTFV.
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Because the estimated weighted-average dumping margins for Genesis Aluminium Industries Sdn. Bhd/Zenshin Industries Sdn. Bhd. and P.A. Extrusion (M) Sdn. Bhd. are zero, entries of subject merchandise produced and exported by these companies will not be subject to suspension of liquidation or cash deposit requirements. In such situations, Commerce applies the exclusion to the provisional measures to the producer/exporter combination that was examined in the investigation. Accordingly, Commerce is directing CBP not to suspend the liquidation of entries of subject merchandise that was exported by Genesis Aluminium Industries Sdn. Bhd/Zenshin Industries Sdn. Bhd. and produced by Genesis Aluminium Industries Sdn. Bhd/Zenshin Industries Sdn. Bhd. or subject merchandise that was exported by P.A. Extrusion (M) Sdn. Bhd. and produced by P.A. Extrusion (M) Sdn. Bhd. Entries of shipments of subject merchandise from these companies in any other producer/exporter combination, or by third parties that sourced subject merchandise from the excluded producer/exporter combination, are subject to the provisional measures at the all-others rate.
Should the final estimated weighted-average dumping margin be zero or
These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose to parties to the proceeding the calculations and analysis it performed in this preliminary determination within five days of public announcement or, if there is no public announcement, within five days of the date of publication of this notice in the
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memo II for the deadlines for scope comments. After the submission of scope comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide, at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Note that Commerce has amended certain of its requirements pertaining to the service of documents in 19 CFR 351.303(f).
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Pursuant to 19 CFR 351.210(e)(2), Commerce requires that requests by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On April 17 and 18, 2024, pursuant to 19 CFR 351.210(e), Genesis Aluminium Industries Sdn. Bhd. and P.A. Resources Berhad, respectively, requested that Commerce postpone the final determination and that provisional measures be extended to a period not to exceed six months.
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination of sales at LTFV. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether imports of subject merchandise are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act, and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of the order resulting from this investigation) are excluded from the scope of the investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigations.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from India are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Deborah Cohen, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4521.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation in the
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from India. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export prices in accordance with section 772(a) of the Act. Normal value is calculated in accordance with section 773 of the Act. Furthermore, pursuant to sections 776(a) and (b) of the Act, Commerce preliminarily relied upon facts otherwise available, with adverse inferences for Global Aluminium Private Limited (Global Aluminium). Additionally, nine potential exporters and/or producers of aluminum extrusions from India did not respond to Commerce's quantity and value questionnaire. Thus, pursuant to sections 776(a) and (b) of the Act, Commerce has preliminarily relied upon facts otherwise available, with adverse inferences for these nine companies. For a full description of the methodology underlying the preliminary determination,
Sections 733(d)(1)(A)(ii) and 735(c)(5)(A) of the Act provide that in the preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
In this investigation, Commerce calculated an estimated weighted-average dumping margin for Maan Aluminium Limited (Maan) that is not zero,
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Further, pursuant to section 733(d)(1)(B) of the Act and 19 CFR 351.205(d), Commerce will instruct CBP to require a cash deposit equal to the estimated weighted-average dumping margin or the estimated all-others rate, as follows: (1) the cash deposit rate for the respondents listed above will be equal to the company-specific estimated weighted-average dumping margins determined in this preliminary determination; (2) if the exporter is not a respondent identified above, but the producer is, then the cash deposit rate will be equal to the company-specific estimated weighted-average dumping margin established for that producer of the subject merchandise; and (3) the cash deposit rate for all other producers and exporters will be equal to the all-others estimated weighted-average dumping margin. These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose its calculations and analysis performed to interested parties in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide a public, executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date of the hearing.
Section 735(a)(2)(A) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination may be accompanies by a request for extension of provisional measures from a four-month period to a period of not more than six months in duration.
On April 17 and 18, 2024, pursuant to 19 CFR 351.210(e), the petitioners
In accordance with section 733(f) of the Act, Commerce will notify the U.S.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigation are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of orders resulting from this investigation) are excluded from the scope of this investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigation.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from Italy are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Eric Hawkins, AD/CVD Operations, Office V, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1988.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on October 31, 2023.
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Italy. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export prices in accordance with section 772(a) of the Act and constructed export prices in accordance with section 772(b) of the Act. Normal value is calculated in accordance with section 773 of the Act. Furthermore, pursuant to sections 776(a) and (b) of the Act, Commerce preliminarily relied upon facts otherwise available, with adverse inferences for Alex S.p.A., Bodega G & C S.p.A., Estral S.p.A., Pasturi S.r.l., and PFA S.r.l.
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that, in the preliminary determination, Commerce shall determine an estimated all-others rate for all other exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually examined, excluding any rates that are zero,
In this investigation, Commerce calculated an estimated weighted-average dumping margin that is above
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce with direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Because the estimated weighted-average dumping margin for Eural is zero, entries of shipments of subject merchandise produced and exported by this company will not be subject to suspension of liquidation or cash deposit requirements. In such situations, Commerce applies the exclusion from the provisional measures to the producer/exporter combination that was examined in the investigation. Accordingly, Commerce is directing CBP not to suspend liquidation of entries of subject merchandise produced and exported by Eural. Entries of shipments of subject merchandise from this company in any other producer/exporter combination, or by third parties that sourced subject merchandise from the excluded producer/exporter combination, are subject to the provisional measures at the all-others rate.
Should the final estimated weighted-average dumping margin be zero or
These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose to parties to the proceeding the calculations and analysis it performed in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in the
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memo II for the deadlines for scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their briefs that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Note that Commerce has amended certain of its requirements pertaining to the service of documents in 19 CFR 351.303(f).
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice in the
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Pursuant to 19 CFR 351.210(e)(2), Commerce requires that requests by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period of not more than six months in duration.
On April 19, 2024, pursuant to 19 CFR 351.210(e), Eural and Metra requested that Commerce postpone the final determination and that provisional measures be extended to a period not to exceed six months.
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination of sales at LTFV. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether imports of subject merchandise are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act, and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of the order resulting from this investigation) are excluded from the scope of the investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigations.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Notice; correction.
The U.S. Department of Commerce (Commerce) published notice in the
Davyd Williams, AD/CVD Operations, Office VIII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4338.
On May 1, 2024, Commerce published in the
In the
This notice is issued and published in accordance with sections sections 751(a) and 777(i)(1) of the Act, and 19 CFR 351.221(b)(5).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily finds that countervailable subsidies were provided to producers and exporters of certain passenger vehicles and light truck tires (PVLT) from the People's Republic of China (China) during the period of review (POR), January 1, 2022, through December 31, 2022. In addition, Commerce is rescinding this review, in part, with respect to 18 companies. Interested parties are invited to comment on these preliminary results.
Applicable May 7, 2024.
Nicholas Czajkowski, AD/CVD Operations, Office I, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1395.
On August 10, 2015, Commerce published in the
For a complete description of the events that followed the initiation of this investigation,
The merchandise covered by the
Commerce is conducting this administrative review in accordance with section 751(a)(1)(A) of the Tariff Act of 1930, as amended (the Act). For each of the subsidy programs found to be countervailable, Commerce preliminarily determines that there is a subsidy (
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if the parties that requested a review withdraw the request within 90 days of the date of publication of the notice of initiation. Commerce received timely-filed withdrawal requests with respect to 16 companies, pursuant to 19 CFR 351.213(d)(1).
Based on our analysis of U.S. Customs and Border Protection (CBP) data, we determine that the following two companies had no entries of subject merchandise during the POR: Shandong Qilun Rubber Co., Ltd. and Shandong Transtone Tyre Co., Ltd. On March 29, 2024, we notified interested parties of our intent to rescind the review for Shandong Qilun Rubber Co., Ltd. and Shandong Transtone Tyre Co., Ltd.
Commerce preliminarily determines that the following net countervailable subsidy rates exist for the period January 1, 2022, through December 31, 2022:
In accordance with section 751(a)(2)(C) of the Act, Commerce also intends upon publication of the final results, to instruct CBP to collect cash
For all non-reviewed firms, CBP will continue to collect cash deposits of estimated countervailing duties at the all-others rate or the most recent company-specific rate applicable to the company, as appropriate. These cash deposit requirements, when imposed, shall remain in effect until further notice.
In accordance with section 751(a)(2)(C) of the Act and 19 CFR 351.221(b)(4)(i), we preliminarily determined subsidy rates in the amounts shown above for the producers/exporters shown above. Upon completion of the administrative review, consistent with section 751(a)(1) of the Act and 19 CFR 351.212(b)(2), Commerce shall determine, and CBP shall assess, countervailing duties on all appropriate entries covered by this review.
For the companies for which this review is rescinded with these preliminary results, we will instruct CBP to assess countervailing duties on all appropriate entries at a rate equal to the cash deposit of estimated countervailing duties required at the time of entry, or withdrawal from warehouse, for consumption, during the period January 1, 2022, through December 31, 2022, in accordance with 19 CFR 351.212(c)(l)(i). For the companies remaining in the review, we intend to issue assessment instructions to CBP no earlier than 35 days after the date of publication of the final results of this review in the
Normally, Commerce discloses its calculations and analysis performed in connection with the preliminary results to interested parties within five days of its public announcement, or if there is no public announcement, within five days of the date of publication of this notice, in accordance with 19 CFR 351.224(b). However, because Commerce preliminarily applied total AFA in the calculation of the benefit for Winrun and General Science, and the AFA rates are based on rates calculated in prior segments of the proceeding, there are no calculations to disclose.
Pursuant to 19 CFR 351.309(c), interested parties may submit case briefs to Commerce no later than 30 days after the date of publication of these preliminary results of review.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide a public executive summary of their brief that should be limited to five pages total, including footnotes. In this review, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Unless extended, we intend to issue the final results of this administrative review, which will include the results of our analysis of the issues raised in the case briefs, within 120 days of publication of these preliminary results in the
These preliminary results and notice are issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.213 and 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from the Socialist Republic of Vietnam (Vietnam) are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is April 1, 2023, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Rebecca Janz, AD/CVD Operations, Office II, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-2972.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on October 31, 2023.
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Vietnam. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export prices in accordance with section 772(a) of the Act and calculated constructed export prices in accordance with section 772(b) of the Act. Because Vietnam is a non-market economy (NME) country, within the meaning of section 771(18) of the Act, Commerce has calculated normal value in accordance with section 773(c) of the Act. In addition, pursuant to sections 776(a) and (b) of the Act, Commerce preliminarily relied upon facts otherwise available, with adverse inferences, to assign a dumping margin for the Vietnam-wide entity. For a full description of the methodology underlying the preliminary determination,
In the
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose to parties to the proceeding the calculations and analysis performed in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in the
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the deadlines of scope comments. After the submission of scope comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the final verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide, at the beginning of their briefs, a public, executive summary for each issue raised in their briefs.
Note that Commerce has amended certain of its requirements pertaining to the service of documents in 19 CFR 351.303(f).
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain (1) the party's name, address, and telephone number; (2) the number of participants and whether any participant is a foreign national; and (3) a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Pursuant to 19 CFR 351.210(e)(2), Commerce requires that requests by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On April 17, 2024, pursuant to 19 CFR 351.210(e), East Asia Aluminum Co., Ltd requested that Commerce postpone the final determination and that provisional measures be extended to a period not to exceed six months.
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination of sales at LTFV. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether imports of subject merchandise are materially injuring, or threaten material injury to, the U.S. industry.
This preliminary determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act, and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of the order resulting from this investigation) are excluded from the scope of the investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigations.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000;
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from Taiwan are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 01, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Hermes Pinilla, AD/CVD Operations, Office I, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3477.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation in the
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Taiwan. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce has calculated export prices in accordance with section 772(a) of the Act. Constructed export prices have been calculated in accordance with section 772(b) of the Act. Normal value is calculated in accordance with section 773 of the Act. Furthermore, pursuant to sections 776(a) and (b) of the Act, Commerce preliminarily relied upon facts otherwise available, with adverse inferences for Cheng Hsin Aluminum Corp. (Cheng Hsin), Chiao Tai Aluminum Industry (Chiao Tai), Formosa Shinn Yoan Industrial Co., Ltd. (Formosa Shinn), and Yuan Sheng Aluminium Mfg. Corp. (Yuan Sheng).
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in a preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any
In this investigation, Commerce has preliminarily determined the dumping margin for Yuan Sheng under section 776 of the Act and has calculated an estimated weighted-average dumping margin for Sow Shin of 0.00 percent.
We received timely Q&V questionnaire responses from the following companies in addition to the mandatory respondents, Shin Hsin Aluminum Co., Ltd. (Shin Hsin), E8 Green Energy Technology Co., Ltd. (Green Energy), Fusheng Precision Co., Ltd. (Fusheng), and M&M Hardware Corporation (M&M Hardware).
As such, we are preliminarily applying to the non-selected respondents, Shing Hsin Green Energy, Fusheng, and M&M Hardware, the all-others rate of 33.93 percent, which is the simple average of the zero percent dumping margin we preliminarily calculated for Sow Shin and the dumping margin we preliminarily assigned to Yuan Sheng, determined entirely under section 776 of the Act.
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce with direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Further, pursuant to section 733(d)(1)(B) of the Act and 19 CFR 351.205(d), Commerce will instruct CBP to require a cash deposit equal to the estimated weighted-average dumping margin or the estimated all-others rate, as follows: (1) the cash deposit rate for the respondents listed above will be equal to the company-specific estimated weighted-average dumping margins determined in this preliminary determination; (2) if the exporter is not a respondent identified above, but the producer is, then the cash deposit rate will be equal to the company-specific estimated weighted-average dumping margin established for that producer of the subject merchandise; and (3) the cash deposit rate for all other producers and exporters will be equal to the all-others estimated weighted-average dumping margin.
Because the estimated weighted-average dumping margin for Sow Shin is
Should the final estimated weighted-average dumping margin be zero or
Commerce intends to disclose the calculations and analysis performed in connection with this preliminary determination to interested parties within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of Commerce's regulations requires that a request by exporters for postponement of the final determination may be accompanies by a request for extension of provisional measures from a four-month period to a period of not more than six months in duration.
On April 17, 2024, pursuant to 19 CFR 351.210(e), the mandatory respondent (
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports of aluminum extrusions from Taiwan are materially injuring, or threaten material injury to, the U.S. industry.
This preliminary determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act, and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of the order resulting from this investigation) are excluded from the scope of the investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigations.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent zinc by weight.
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/− 0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/− 0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100; 7615.20.0000; 7616.10.9090; 7616.99.1000; 7616.99.5130; 7616.99.5140; 7616.99.5190; 8302.10.3000; 8302.10.6030; 8302.10.6060; 8302.10.6090; 8302.20.0000; 8302.30.3010; 8302.30.3060; 8302.41.3000; 8302.41.6015; 8302.41.6045; 8302.41.6050; 8302.41.6080; 8302.42.3010; 8302.42.3015; 8302.42.3065; 8302.49.6035; 8302.49.6045; 8302.49.6055; 8302.49.6085; 8302.50.0000; 8302.60.3000; 8302.60.9000; 8305.10.0050; 8306.30.0000; 8414.59.6590; 8415.90.8045; 8418.99.8005; 8418.99.8050; 8418.99.8060; 8419.50.5000; 8419.90.1000; 8422.90.0640; 8424.90.9080; 8473.30.2000; 8473.30.5100; 8479.89.9599; 8479.90.8500; 8479.90.9596; 8481.90.9060; 8481.90.9085; 8486.90.0000; 8487.90.0080; 8503.00.9520; 8508.70.0000; 8513.90.2000; 8515.90.2000; 8516.90.5000; 8516.90.8050; 8517.71.0000; 8517.79.0000; 8529.90.7300; 8529.90.9760; 8536.90.8585; 8538.10.0000; 8541.90.0000; 8543.90.8885; 8547.90.0020; 8547.90.0030; 8547.90.0040; 8708.10.3050; 8708.29.5160; 8708.80.6590; 8708.99.6890; 8807.30.0060; 9031.90.9195; 9401.99.9081; 9403.99.1040; 9403.99.9010; 9403.99.9015; 9403.99.9020; 9403.99.9040; 9403.99.9045; 9405.99.4020; 9506.11.4080; 9506.51.4000; 9506.51.6000; 9506.59.4040; 9506.70.2090; 9506.91.0010; 9506.91.0020; 9506.91.0030; 9506.99.0510; 9506.99.0520; 9506.99.0530; 9506.99.1500; 9506.99.2000; 9506.99.2580; 9506.99.2800; 9506.99.5500; 9506.99.6080; 9507.30.2000; 9507.30.4000; 9507.30.6000; 9507.30.8000; 9507.90.6000; and 9603.90.8050.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from the Republic of Korea (Korea) are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Brittany Bauer or Christopher Maciuba, AD/CVD Operations, Office V, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3860 or (202) 482-0413, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on October 31, 2023.
For a complete description of the events that followed the initiation of this investigation,
The products covered by this investigation are aluminum extrusions from Korea. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export prices in accordance with section 772(a) of the Act. Normal value is calculated in accordance with section 773 of the Act. Furthermore, pursuant to sections 776(a) and (b) of the Act, Commerce preliminarily relied upon facts otherwise available, with adverse inferences, to assign a dumping margin to: Bowon Light Metal Co., Ltd; Changwon Precision Extrusions; Dong Young Industrial Co., Ltd; Han Yeong Aluminum Industrial Co., Ltd; Kyung Hee Aluminum Co., Ltd; Namsun Aluminium Co., Ltd; Nam Sung Aluminum Co., Ltd; and Sung Hoon Aluminium Co., Ltd.
Sections 733(d)(1)(A)(ii) and 735(c)(5)(A) of the Act provide that, in the preliminary determination, Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually examined, excluding any rates that are zero,
In this investigation, Commerce calculated an estimated weighted-average dumping margin that is above
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Because the estimated weighted-average dumping margin for ALMAC is zero, entries of shipments of subject merchandise produced and exported by this company will not be subject to suspension of liquidation or cash deposit requirements. In such situations, Commerce applies the exclusion from the provisional measures to the producer/exporter combination that was examined in the investigation. Accordingly, Commerce is directing CBP not to suspend liquidation of entries of subject merchandise produced and exported by ALMAC. Entries of shipments of subject merchandise from this company in any other producer/exporter combination, or by third parties that sourced subject merchandise from the excluded producer/exporter combination, are subject to the provisional measures at the all-others rate.
Should the final estimated weighted-average dumping margin be zero or
These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose its calculations and analysis performed to interested parties in this preliminary determination within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memo II for the deadlines for scope comments. After the submission of scope comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309
Note that Commerce has amended certain of its requirements pertaining to the service of documents in 19 CFR 351.303(f).
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice in the
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Pursuant to 19 CFR 351.210(e)(2), Commerce requires that requests by exporters for postponement of the final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
On April 19 and 22, 2024, pursuant to 19 CFR 351.210(e), mandatory respondents ALMAC and SMI, respectively, requested that Commerce postpone the final determination and that provisional measures be extended to a period not to exceed six months.
In accordance with section 773(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary decision of sales at LTFV. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports of subject merchandise are materially injuring, or threaten material injury to, the U.S. industry.
This preliminary determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act, and 19 CFR 351.2025(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of the order resulting from this investigation) are excluded from the scope of the investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigations.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 7 (or proprietary equivalents or other certifying body
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS categories: 6603.90.8100; 7606.12.3091; 7606.12.3096; 7615.10.2015; 7615.10.2025; 7615.10.3015; 7615.10.3025; 7615.10.5020; 7615.10.5040; 7615.10.7125; 7615.10.7130; 7615.10.7155; 7615.10.7180; 7615.10.9100;
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that aluminum extrusions from the United Arab Emirates are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is October 1, 2022, through September 30, 2023. Interested parties are invited to comment on this preliminary determination.
Applicable May 7, 2024.
Jinny Ahn (OSE), or John K. Drury (Gulfex), AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-0339, and (202) 482-0195, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation in the
For a complete description of the events that followed the initiation of this investigation,
The product covered by this investigation are aluminum extrusions from the United Arab Emirates. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce calculated export prices in accordance with section 772(a) of the Act. Normal value is calculated in accordance with section 773 of the Act. Further, pursuant to sections 776(a) and (b) of the Act, Commerce has preliminarily relied upon facts otherwise available with adverse inferences (AFA) for Al Buraq Trading & Enterprises, Co.; Al Hamad Industrial Co., LLC; Al Jaber Aluminium Extrusions, LLC; Aluminum Products Co.; Arabian Extrusions Factory; Emirates Extrusion Factory, LLC; Taweelah Aluminium Extrusion Co.; and White Aluminum Extrusions, LLC. For a full description of the methodology underlying the preliminary determination,
Sections 733(d)(1)(ii) and 735(c)(5)(A) of the Act provide that in the preliminary determination Commerce shall determine an estimated all-others rate for all exporters and producers not individually examined. This rate shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
In this investigation, Commerce calculated estimated weighted-average dumping margins for Gulf Extrusions LLC (Gulfex) and OSE Industries LLC (OSE) that are not zero,
Commerce preliminarily determines that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, Commerce with direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise, as described in Appendix I, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Further, pursuant to section 733(d)(1)(B) of the Act and 19 CFR 351.205(d), Commerce will instruct CBP to require a cash deposit equal to the estimated weighted-average dumping margin or the estimated all-others rate, as follows: (1) the cash deposit rate for the respondents listed above will be equal to the company-specific estimated weighted-average dumping margins determined in this preliminary determination; (2) if the exported is not a respondent identified above, but the producer is, then the cash deposit rate will be equal to the company-specific estimated weighted-average dumping margin established for that producer of the subject merchandise; and (3) the cash deposit rate for all other producers and exporters will be equal to the all-others estimated weighted-average dumping margin. These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose its calculations and analysis performed in connection with this preliminary determination to interested parties within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
As provided in section 782(i)(1) of the Act, Commerce intends to verify the information relied upon in making its final determination.
For scope-related comments, please refer to the Preliminary Scope Decision Memorandum II for the timeline of scope comments. After the submission of comments, Commerce will set a schedule for the submission of case and rebuttal briefs limited to scope issues.
Case briefs or other written comments on non-scope issues may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last verification report is issued in this investigation.
As provided under 19 CFR 351.309(c)(2) and (d)(2), in prior proceedings we have encouraged interested parties to provide an executive summary of their brief that should be limited to five pages total, including footnotes. In this investigation, we instead request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date of the hearing.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination in the
On April 17 and April 22, 2024, pursuant to 19 CFR 351.210(e), Gulfex the petitioners,
In accordance with section 733(f) of the Act, Commerce will notify the U.S. International Trade Commission (ITC) of its preliminary determination. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports of aluminum extrusions from the United Arab Emirates are materially injuring, or threaten material injury to, the U.S. industry.
This preliminary determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise subject to this investigation are aluminum extrusions, regardless of form, finishing, or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized, or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99 percent aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3.0 percent of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1 percent but not more than 2.0 percent of total materials by weight, and silicon accounting for at least 0.1 percent but not more than 3.0 percent of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2.0 percent of total materials by weight.
The country of origin of the aluminum extrusion is determined by where the metal is extruded (
Aluminum extrusions are produced and imported in a wide variety of shapes and forms, including, but not limited to, hollow profiles, other solid profiles, pipes, tubes, bars, and rods. Aluminum extrusions that are drawn subsequent to extrusion (drawn aluminum) are also included in the scope.
Subject aluminum extrusions are produced and imported with a variety of coatings and surface treatments, and types of fabrication. The types of coatings and treatments applied to aluminum extrusions include, but are not limited to, extrusions that are mill finished (
The types of products that meet the definition of subject merchandise include but are not limited to, the aluminum extrusion portions of vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, telescoping poles, or cleaning system components.
Aluminum extrusions may be heat sinks, which are fabricated aluminum extrusions that dissipate heat away from a heat source and may serve other functions, such as structural functions. Heat sinks come in a variety of sizes and shapes, including but not limited to a flat electronic heat sink, which is a solid aluminum extrusion with at least one flat side used to mount electronic or mechanical devices; a heat sink that is a housing for electronic controls or motors; lighting heat sinks, which dissipate heat away from LED devices; and process and exchange heat sinks, which are tube extrusions with fins or plates used to hold radiator tubing. Heat sinks are included in the scope, regardless of whether the design and production of the heat sinks are organized around meeting specified thermal performance requirements and regardless of whether they have been tested to comply with such requirements. For purposes of the investigations on aluminum extrusions from the People's Republic of China, only heat sinks designed and produced around meeting specified thermal performance requirements and tested to comply with such requirements are included in the scope. Excluded from the scope of the investigations are large, multi-finned extruded aluminum heat sinks designed to dissipate heat, meeting the following criteria: (1) an aspect ratio (defined as the ratio of the area of a void in an extrusion to the size of the smallest gap opening at the entrance of that void and calculated by dividing the void area by the square of the gap opening) greater than 15 to 1; or (2) the circumscribing circle diameter (defined as the diameter of the smallest circle that will entirely enclose the extrusion's cross-sectional profile) rounded up to the next half inch, exceeds 10 inches, and the weight-per-foot (defined as the theoretical weight of the profile as extruded prior to any machining that may remove material and calculated by multiplying the area of the profile in square inches by 1.2) exceeds 3.50 pounds per foot.
Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.
The scope also includes aluminum extrusions contained in merchandise that is a part or subassembly of a larger whole, whether or not the merchandise also contains a component other than aluminum extrusions that is beyond a fastener. Such merchandise may be either assembled or unassembled at the time of importation. A “part or subassembly” is defined as a unit designed to be attached to, or incorporated with, one or more other units or components into a larger completed product. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject merchandise included in the scope and subject to duties. Examples of merchandise that is a part or subassembly of a larger whole include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies. Parts or subassemblies described by this paragraph that are subject to duties in their entirety pursuant to existing antidumping and countervailing duty orders (defined as those antidumping and countervailing duty orders that are in effect as of the date of publication of orders resulting from this investigation) are excluded from the scope of this investigation. Any part or subassembly that otherwise meets the requirements of this scope and that is not covered by other antidumping and/or countervailing duty orders remains subject to the scope of the investigation.
The scope excludes aluminum extrusions contained in fully and permanently assembled merchandise, if the assembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the assembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the assembled merchandise must be ready for use as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling).
The scope also excludes aluminum extrusions contained in unassembled merchandise if the unassembled merchandise is not a part or subassembly of a larger whole. To be excluded under this paragraph, the unassembled merchandise must also contain a component other than aluminum extrusions, beyond fasteners. In addition, to be excluded under this paragraph, the unassembled merchandise must be a packaged combination of parts that is ready to be assembled as imported, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material (with the exception of consumable parts or material or interchangeable media or tooling). To be excluded under this paragraph, the unassembled merchandise must be sold and enter as a discrete kit on one Customs entry form.
Examples of such excluded assembled and unassembled merchandise include windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, and solar panels and solar modules.
The scope also excludes merchandise containing multiple subassemblies of a larger whole with non-extruded aluminum components beyond fasteners. A subassembly that meets the definition of subject merchandise, including any product expressly identified as subject merchandise in this scope, can only be excluded if it is fully and permanently assembled with at least one other different subassembly, and where (1) at least one of the subassemblies, if entered individually, would not itself be subject to the scope; (2) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the actual weight of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations); and (3) the aluminum extrusions within the merchandise collectively account for 50 percent or less of the number of pieces of the combined multiple subassemblies (without including any non-extruded aluminum fasteners in the calculations).
The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.
The following aluminum extrusion products are excluded: aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 1.5 percent copper by weight; aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) and containing in excess of 2.0 percent magnesium by weight; and
The scope also excludes aluminum alloy sheet or plates produced by means other than the extrusion process, such as aluminum products produced by a method of continuous casting or rolling. Cast aluminum products are also excluded. The scope also excludes unwrought aluminum in any form.
The scope also excludes collapsible tubular containers composed of metallic elements corresponding to alloy code 1080A as designated by the Aluminum Association (not including proprietary equivalents or other certifying body equivalents) where the tubular container (excluding the nozzle) meets each of the following dimensional characteristics: (1) length of 37 millimeters (mm) or 62 mm; (2) outer diameter of 11.0 mm or 12.7 mm; and (3) wall thickness not exceeding 0.13 mm.
Also excluded from the scope are extruded drawn solid profiles made from an aluminum alloy with the Aluminum Association series designation commencing with the number 1, 3, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) solid cross sectional area greater than 62.4 mm
Also excluded from the scope are extruded tubing and drawn over a ID plug and through a OD die made from an aluminum alloy with the Aluminum Association series designation commencing with the number 3, 5, or 6 (or proprietary equivalents or other certifying body equivalents), including variants on individual alloying elements not to circumvent the other Aluminum Association series designations, which meet each of the following characteristics: (1) an outside mean diameter no greater than 30 mm with a tolerance less than or equal to +/−0.10 mm, (2) uniform wall thickness no greater than 2.7 mm with wall tolerances less than or equal to +/−0.1 mm, (3) may be coated with materials, including zinc, such that the coating material weight is no less than 3 g/m2 and no greater than 30 g/m2, and (4) packaged in continuous coils, straight lengths, bent or formed.
The scope also excludes fully and permanently assembled glass refrigerator shelves with decorative aluminum trim meeting the following characteristics: (1) aluminum trim meeting Aluminum Association series 6063-T5 designation that is anodized; (2) aluminum trim length of not more than 800 mm, and (3) aluminum trim width of not more than 40 mm. Such fully and permanently assembled glass refrigerator shelves include other components in addition to the aluminum trim, including, but not limited to, glass, steel, and plastic. Only fully and permanently assembled glass refrigerator shelves that require no further processing, fabrication, finishing, assembly, or the addition of any parts or material are excluded. Imports of glass refrigerator shelves are classified under HTSUS 8418.99.8050, which is being included for convenience.
Also excluded from the scope of this investigation is certain rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges. The product is made from aluminum alloy grade 1070 or 1370 (not including proprietary equivalents or other certifying body equivalents), with no recycled metal content allowed. The dimensions of the wire are 2.95 mm to 6.05 mm in width, and 0.65 mm to 1.25 mm in thickness. Imports of rectangular wire are provided for under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7605.19.0000, 7604.10.5000, or 7616.99.5190.
Also excluded from the scope of the antidumping and countervailing duty investigations on aluminum extrusions from the People's Republic of China are all products covered by the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from the People's Republic of China.
The aluminum extrusion portions of the following products are included in the scope of the investigations on aluminum extrusions from the People's Republic of China, whether assembled or unassembled: heat sinks as described above; cleaning system components like mops and poles; banner stands/back walls; fabric wall systems; drapery rails; side mount valve controls; water heater anodes; solar panel mounting systems; automotive heating and cooling system components; assembled motor cases with stators; louver assemblies; event décor; window wall units and parts; trade booths; micro channel heat exchangers; telescoping poles, pole handles, and pole attachments; flagpoles; wind sign frames; foreline hose assembly; electronics enclosures; parts and subassemblies for storefronts, including portal sets; light poles; air duct registers; outdoor sporting goods parts and subassemblies; glass refrigerator shelves; aluminum ramps; handicap ramp system parts and subassemblies; frames and parts for tents and clear span structures; parts and subassemblies for screen enclosures, patios, and sunrooms; parts and subassemblies for walkways and walkway covers; aluminum extrusions for Light Emitting Diode (LED) lights; parts and subassemblies for screen, storm, and patio doors; pontoon boat parts and subassemblies, including rub rails, flooring, decking, transom structures, canopy systems, seating; boat hulls, framing, ladders, and transom structures; parts and subassemblies for docks, piers, boat lifts and mounting; recreational and boat trailer parts and subassemblies, including subframes, crossmembers, and gates; solar tracker assemblies with gears; garage door framing systems; door threshold and sill assemblies; highway and bridge signs; bridge, street, and highway rails; scaffolding, including planks and struts; railing and support systems; parts and subassemblies for exercise equipment; weatherstripping; door bottom and sweeps; door seals; floor transitions and trims; parts and subassemblies for modular walls and office furniture; truck trailer parts and subassemblies; boat cover poles, outrigger poles, and rod holders; bleachers and benches; parts and subassemblies for elevators, lifts, and dumbwaiters; parts and subassemblies for mirror and framing systems; window treatments; parts and subassemblies for air foils and fans; bus and Recreational Vehicle (RV) window frames; sliding door rails; dock ladders; parts and subassemblies for RV frames and trailers; awning, canopy, and sunshade structures and their parts and subassemblies; marine motor mounts; linear lighting housings; and cluster mailbox systems.
Imports of the subject merchandise are primarily provided for under the following categories of the HTSUS: 7604.10.1000; 7604.10.3000; 7604.10.5000; 7604.21.0010; 7604.21.0090; 7604.29.1010; 7604.29.1090; 7604.29.3060; 7604.29.3090; 7604.29.5050; 7604.29.5090; 7608.10.0030; 7608.10.0090; 7608.20.0030; 7608.20.0090; 7609.00.0000; 7610.10.0010; 7610.10.0020; 7610.10.0030; 7610.90.0040; and 7610.90.0080.
Imports of the subject merchandise, including subject merchandise entered as parts of other products, may also be classifiable under the following additional HTSUS categories, as well as other HTSUS
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) finds that revocation of the countervailing duty (CVD) order on common alloy aluminum sheet (aluminum sheet) from the People's Republic of China (China) would likely lead to the continuation or recurrence of countervailable subsidies at the levels indicated in the “Final Results of Sunset Review” section of this notice.
Applicable May 7, 2024.
Theodora Mattei, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4834.
On February 6, 2019, Commerce published in the
On February 1, 2024, Commerce received an adequate substantive response from the Domestic Industry within the 30-day deadline specified in 19 CFR 351.218(d)(3)(i).
The product covered by the scope of the
A complete discussion of all issues raised in this sunset review, including the likelihood of the continuation or recurrence of subsidization in the event of revocation of the
Pursuant to sections 751(c)(1) and 752(b) of the Act, Commerce determines that revocation of the
This notice serves as the only reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a). Timely written notification of the return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction.
We are issuing and publishing these final results of expedited sunset review and this notice in accordance with sections 751(c), 752(b), and 777(i)(1) of the Act, and 19 CFR 351.218.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
As a result of this expedited sunset review, the U.S. Department of Commerce (Commerce) finds that revocation of the antidumping (AD) duty order on certain common alloy aluminum sheet (CAAS) from the People's Republic of China (China) would be likely to lead to continuation or recurrence of dumping at the levels indicated in the “Final Results of Sunset Review” section of this notice.
Applicable May 7, 2024.
Erin Kearney, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; (202) 482-0167.
On January 2, 2024, Commerce published the notice of initiation of the first sunset review of the
On February 1, 2024, the domestic interested parties filed an adequate substantive response within the deadline specified in 19 CFR 351.218(d)(3)(i).
The merchandise covered by this
A complete discussion of all issues raised in this sunset review, including the likelihood of continuation or recurrence of dumping in the event of revocation of the
Pursuant to sections 751(c)(1) and 752(c)(1) and (3) of the Act, Commerce determines that revocation of the
This notice serves as the only reminder to parties subject to administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305. Timely notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction.
We are issuing and publishing these expedited final results of sunset review and notice in accordance with sections 751(c), 752(c), and 777(i)(1) of the Act.
National Institute of Standards and Technology (NIST), Commerce.
Notice; request for comments.
The National Institute of Standards and Technology (NIST) requests comments on four draft documents responsive to NIST assignment under Executive Order 14110 on Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI) issued on October 30, 2023 (E.O. 14110): NIST AI 600-1, Artificial Intelligence Risk Management Framework: Generative Artificial Intelligence Profile; NIST SP 800-218A, Secure Software Development Practices for Generative AI and Dual-Use Foundation Models; NIST AI 100-5, A Plan for Global Engagement on AI Standards; and NIST AI 100-4, Reducing Risks Posed by Synthetic Content: An Overview of Technical Approaches to Digital Content Transparency.
Comments containing information in response to this notice must be received on or before June 2, 2024 at 11:59 p.m. Eastern Time. Submissions received after that date may not be considered.
The drafts of NIST AI 600-1, NIST AI 100-5, and NIST AI 100-4 are available for review and comment on the NIST Artificial Intelligence Resource Center website at
Comments may be submitted by either of the following methods:
By email:
• Comments on NIST AI 600-1 may be sent electronically to
Submitted via
• To submit electronic public comments via the Federal eRulemaking Portal.
1. Go to
2. Click the “Comment Now!” icon, complete the required fields, including the relevant NIST document number and title in the subject field, and
3. Enter or attach your comments.
• Written comments may also be submitted by mail to Information Technology Laboratory, ATTN: AI E.O. Document Comments, National Institute of Standards and Technology, 100 Bureau Drive, Mail Stop 8900, Gaithersburg, MD 20899-8900.
Comments containing references, studies, research, and other empirical data that are not widely published should include copies of the referenced materials. All submissions, including attachments and other supporting materials, will become part of the public record and subject to public disclosure.
NIST will not accept comments accompanied by a request that part or all of the material be treated confidentially because of its business proprietary nature or for any other reason. Therefore, do not submit confidential business information or otherwise sensitive, protected, or personal information, such as account numbers, Social Security numbers, or names of other individuals.
All relevant comments received by the deadline will be posted at
For questions about this request for comments contact:
NIST requests comments on four draft NIST documents that have been developed in response to NIST assignments under Executive Order 14110 on Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI) (E.O. 14110), issued on October 30, 2023 (88 FR 75191). The four draft documents are: NIST AI 600-1, Artificial Intelligence Risk Management Framework: Generative Artificial Intelligence Profile; NIST SP 800-218A, Secure Software Development Practices for Generative AI and Dual-Use Foundation Models; NIST AI 100-5, A Plan for Global Engagement on AI Standards; and NIST AI 100-4, Reducing Risks Posed by Synthetic Content: An Overview of Technical Approaches to Digital Content Transparency.
The drafts of NIST AI 600-1, NIST AI 100-5, and NIST AI 100-4 were informed by responses to a Request for Information (RFI) that was published in the
The drafts of NIST AI 600-1, NIST AI 100-5, and NIST AI 100-4 are available for review and comment on the NIST Artificial Intelligence Resource Center website at
National Institute of Standards and Technology, Department of Commerce.
Notice.
The National Institute of Standards and Technology (NIST or Institute) and the National Technical Information Service (NTIS) invites and requests nomination of individuals for appointment to eleven existing Federal Advisory Committees (Committees): Advisory Committee on Earthquake Hazards Reduction; Board of Overseers of the Malcolm Baldrige National Quality Award; Industrial Advisory Committee; Information Security and Privacy Advisory Board; Internet of Things Advisory Board; Judges Panel of the Malcolm Baldrige National Quality Award; Manufacturing Extension Partnership Advisory Board; National Artificial Intelligence Advisory Committee; National Construction Safety Team Advisory Committee; National Technical Information Service Advisory Board; and Visiting Committee on Advanced Technology. NIST and NTIS will consider nominations received in response to this notice for appointment to the Committees, in addition to nominations already received. Registered Federal lobbyists may not serve on NIST or NTIS Federal Advisory Committees in an individual capacity.
Nominations for all Committees will be accepted on an ongoing basis and will be considered as and when vacancies arise.
See below.
The Advisory Committee on Earthquake Hazards Reduction (Committee) was established in accordance with the National Earthquake Hazards Reduction Program Reauthorization Act of 2004, Public Law 108-360 (42 U.S.C. 7704(a)(5)) and the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Committee will act in the public interest to assess trends and developments in the science and engineering of earthquake hazards reduction; effectiveness of the National Earthquake Hazards Reduction Program (Program) in carrying out the activities under section (a)(2) of the Earthquake Hazards Reduction Act of 1977, as amended (42 U.S.C. 7704(a)(2)); the need to revise the Program; and the management, coordination, implementation, and activities of the Program.
2. The Committee will function solely as an advisory body, in accordance with the provisions of the Federal Advisory Committee Act.
3. The Committee shall report to the Director of NIST.
4. The Committee shall report to the Director of NIST at least once every two years on its findings of the assessments and its recommendations for ways to improve the Program. In developing recommendations, the Committee shall consider the recommendations of the United States Geological Survey (USGS) Scientific Earthquake Studies Advisory Committee (SESAC).
1. The Committee shall consist of not fewer than 11, nor more than 17 members. Members shall reflect the wide diversity of technical disciplines, competencies, and communities involved in earthquake hazards reduction. Members shall be selected on the basis of established records of distinguished service in their professional community and their knowledge of issues affecting the National Earthquake Hazards Reduction Program.
2. The Director of NIST shall appoint the members of the Committee. Members shall be selected on a clear, standardized basis, in accordance with applicable Department of Commerce guidance.
3. The term of office of each member of the Committee shall be three years, except that vacancy appointments shall be for the remainder of the unexpired term of the vacancy and that members shall have staggered terms such that the Committee will have approximately one-third new or reappointed members each year.
1. Members of the Committee shall not be compensated for their services, but may, upon request, be allowed travel and per diem expenses in accordance with 5 U.S.C. 5701
2. Members of the Committee shall serve as Special Government Employees (SGEs) and will be subject to the ethics standards applicable to SGEs and are required to file an annual Executive Branch Confidential Financial Disclosure Report.
3. The Committee members shall meet face-to-face at least once per year. Additional meetings may be called whenever requested by the NIST Director; such meetings may be in the form of telephone conference calls and/or videoconferences.
4. Committee meetings are open to the public.
1. Members will be drawn from industry and other communities having an interest in the Program, such as, but not limited to, research and academic institutions, industry standards development organizations, state and local government, and financial communities, who are qualified to provide advice on earthquake hazards reduction and represent all related scientific, architectural, and engineering disciplines.
2. Any person who has completed two consecutive full terms of service on the Committee shall be ineligible for appointment for a third term during the two-year period following the expiration of the second term.
3. Nominees should have established records of distinguished service. The field of expertise that the candidate represents should be specified in the nomination letter. A summary of the candidate's qualifications should be included with the nomination, including (where applicable) current or former service on federal advisory boards and Federal employment.
4. The Department of Commerce is committed to equal opportunity in the workplace and seeks a broad based and diverse Committee membership.
The Board of Overseers of the Malcolm Baldrige National Quality Award (Board) was established in accordance with 15 U.S.C. 3711a(d)(2)(B), pursuant the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Board shall review the work of the private sector contractor(s), which assists the Director of NIST in administering the Malcolm Baldrige National Quality Award (Award). The Board will make such suggestions for the improvement of the Award process as it deems necessary.
2. The Board shall make an annual report on the results of Award activities to the Director of NIST, along with its recommendations for the improvement of the Award process.
3. The Board will function solely as an advisory committee under the
4. The Board will report to the Director of NIST.
1. The Board will consist of at least five and approximately 12 members selected on a clear, standardized basis, in accordance with applicable Department of Commerce guidance, and for their preeminence in the field of organizational performance excellence. There will be a balanced representation from U.S. service, manufacturing, nonprofit, education, and health care industries. The Board will include members familiar with the quality, performance improvement operations, and competitiveness issues of manufacturing companies, service companies, nonprofits, health care providers, and educational institutions.
2. Board members will be appointed by the Secretary of Commerce for three-year terms and will serve at the discretion of the Secretary. All terms will commence on March 1 and end on the last day of February of the appropriate years.
1. Members of the Board shall serve without compensation, but may, upon request, be reimbursed travel expenses, including per diem, as authorized by 5 U.S.C. 5701
2. The Board will meet at least annually, but usually two times a year. Additional meetings may be called as deemed necessary by the NIST Director.
3. Board meetings are open to the public. Board members do not have access to classified or proprietary information in connection with their Board duties.
1. Nominations are sought from the private and public sector as described above.
2. Nominees should have established records of distinguished service and shall be familiar with the quality improvement operations and competitiveness issues of manufacturing companies, service companies, educational institutions, health care providers, and nonprofit organizations. The relevant expertise of the candidate should be specified in the nomination letter. A summary of the candidate's qualifications should be included with the nomination, including (where applicable) current or former service on Federal advisory boards and Federal employment. Besides participation at meetings, it is desired that members be able to devote the equivalent of seven days between meetings to either developing or researching topics of potential interest, and so forth, in furtherance of their Board duties.
3. The Department of Commerce is committed to equal opportunity in the workplace and seeks a broad-based and diverse Board membership.
The Secretary of Commerce (Secretary), in consultation with the Secretary of Defense, the Secretary of Energy, and the Secretary of Homeland Security, established the Industrial Advisory Committee (the Committee) in accordance with the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Committee shall act in the public interest to provide advice to the Secretary of Commerce through the National Institute of Standards and Technology (NIST) on matters relating to microelectronics research, development, manufacturing, and policy.
2. The Committee will function solely as an advisory body, in accordance with the provisions of FACA. The Committee shall assess and provide guidance to the Secretary of Commerce, through NIST, on—
a. science and technology needs of the nation's domestic microelectronics industry;
b. the extent to which the strategy developed under section 9906(a)(3) of the Act is helping maintain United States leadership in microelectronics manufacturing;
c. assessment of the research and development programs and activities authorized under section 9906 of the Act; and
d. opportunities for new public-private partnerships to advance microelectronics research, development, and domestic manufacturing.
The Committee shall not participate in selecting recipients of Federal financial assistance.
Members of the Committee shall be appointed by the Secretary of Commerce. The Committee shall be composed of not fewer than 12 members who are qualified to provide advice to the United States Government on matters relating to microelectronics research, development, manufacturing, and policy. The membership shall be fairly balanced among representatives of the semiconductor industry, representatives of Federal laboratories and academia, and other members. Members of the Committee shall serve as representative members or as regular government employee (RGE) members.
1. The Committee members serve three-year terms and may serve two consecutive terms at the discretion of the Secretary, except that vacancy appointments shall be for the remainder of the unexpired term of the vacancy and that members shall have staggered terms such that the Committee will have approximately one-third new or reappointed members each year. Members who are not able to fulfill the duties and responsibilities of the Committee will have their membership terminated. A member who has served two consecutive full terms is ineligible to serve a third term for a period of one year following the expiration of the second term. Vacancies are filled as soon as highly qualified candidates in needed areas are identified and available to serve.
2. The Secretary of Commerce shall appoint the Committee Chair and Vice-Chair from among the Committee membership. The tenures of the Chair and Vice-Chair shall be two years and can be modified at the discretion of the Secretary. The Vice-Chair shall perform the duties of the Chair in his or her absence. In case a vacancy occurs in the position of the Chair or Vice-Chair, the Secretary shall select a member to fill such a vacancy; the Vice-Chair will
3. Committee members will be reimbursed for travel and per diem as it pertains to official business of the Committee in accordance with 5 U.S.C. 5701
4. Members shall not reference or otherwise utilize their membership on the Committee in connection with public statements made in their personal capacities without a disclaimer that the views expressed are their own and do not represent the views of the Committee, NIST, or the Department of Commerce.
5. NIST, when necessary and consistent with the Committee's mission and Departmental policies and procedures, may establish subcommittees, task forces, and working groups, drawn in whole or in part from the Committee, pursuant to the provisions of FACA, the FACA implementing regulations, and applicable Departmental guidance. The Department of Commerce requires that each subcommittee include at least one member of the Committee. Subcommittees must report back to the Committee and must not provide advice or work products directly to NIST or the Secretary, and any recommendations based on their work will be deliberated and adopted by the Committee prior to dissemination.
NIST uses a nomination process to identify candidates for the Committee. Nominations are requested through annual announcements in the
The ISPAB (Committee or Board) was originally chartered as the Computer System Security and Privacy Advisory Board by the Department of Commerce pursuant to the Computer Security Act of 1987 (Pub. L. 100-235). The E-Government Act of 2002 (Pub. L. 107-347, title III), amended section 21 of the National Institute of Standards and Technology Act (15 U.S.C. 278g-4), including changing the Committee's name, and the charter was amended accordingly.
1. The Board will identify emerging managerial, technical, administrative, and physical safeguard issues relative to information security and privacy.
2. The Board will advise NIST, the Secretary of Homeland Security, and the Director of the Office of Management and Budget (OMB) on information security and privacy issues pertaining to Federal Government information systems, including through review of proposed standards and guidelines developed by NIST.
3. The Board shall report to the Director of NIST.
4. The Board reports annually to the Secretary of Commerce, the Secretary of Homeland Security, the Director of OMB, the Director of the National Security Agency, and the appropriate committees of the Congress.
5. The Board will function solely as an advisory body, in accordance with the provisions of the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Director of NIST will appoint the Chairperson and the members of the ISPAB, and members serve at the discretion of the NIST Director. Members will be selected on a clear, standardized basis, in accordance with applicable Department of Commerce guidance.
2. The ISPAB will consist of a total of 12 members and a Chairperson, for a total of 13.
• The Board will include four members from outside the Federal Government who are eminent in the information technology industry, at least one of whom is representative of small or medium sized companies in such industries.
• The Board will include four members from outside the Federal Government who are eminent in the fields of information technology, or related disciplines, but who are not employed by or representative of a producer of information technology.
• The Board will include four members from the Federal Government who have information system management experience, including experience in information security and privacy, at least one of whom shall be from the National Security Agency.
1. Members of the Board, other than full-time employees of the Federal government, will not be compensated for their services, but will, upon request, be allowed travel expenses pursuant to 5 U.S.C. 5701
2. Meetings of the ISPAB are usually two to three days in duration and are usually held quarterly. ISPAB meetings are open to the public, including the press. Members do not have access to classified or proprietary information in connection with their ISPAB duties.
1. Nominations are being accepted in all three categories described above.
2. Nominees should have specific experience related to information security or privacy issues, particularly as they pertain to Federal information
3. Besides participation at meetings, it is desired that members be able to devote a minimum of two days between meetings to developing draft issue papers, researching topics of potential interest, and so forth in furtherance of their ISPAB duties.
4. Selection of ISPAB members will not be limited to individuals who are nominated. Nominations that are received and meet the requirements will be kept on file to be reviewed as ISPAB vacancies occur.
5. The Department of Commerce is committed to equal opportunity in the workplace and seeks a broad-based and diverse ISPAB membership.
The Secretary of Commerce (Secretary) established the Internet of Things Advisory Board (IoTAB) in accordance with the requirements of 9204(b)(5) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Pub. L. 116-283), and in accordance with the Federal Advisory Committee Act, 5 U.S.C. 1001
The Board shall advise the Internet of Things Federal Working Group convened by the Secretary pursuant to section 9204(b)(1) of the Act on matters related to the Federal Working Group's activities, as specified below.
The Board shall advise the Federal Working Group with respect to—
a. the identification of any Federal regulations, statutes, grant practices, programs, budgetary or jurisdictional challenges, and other sector-specific policies that are inhibiting, or could inhibit, the development of the Internet of Things;
b. situations in which the use of the Internet of Things is likely to deliver significant and scalable economic and societal benefits to the United States, including benefits from or to—
i. smart traffic and transit technologies;
ii. augmented logistics and supply chains;
iii. sustainable infrastructure;
iv. precision agriculture;
v. environmental monitoring;
vi. public safety; and
vii. health care;
c. whether adequate spectrum is available to support the growing Internet of Things and what legal or regulatory barriers may exist to providing any spectrum needed in the future;
d. policies, programs, or multi-stakeholder activities that—
i. promote or are related to the privacy of individuals who use or are affected by the Internet of Things;
ii. may enhance the security of the Internet of Things, including the security of critical infrastructure;
iii. may protect users of the Internet of Things; and
iv. may encourage coordination among Federal agencies with jurisdiction over the Internet of Things;
e. the opportunities and challenges associated with the use of Internet of Things technology by small businesses; and
f. any international proceeding, international negotiation, or other international matter affecting the Internet of Things to which the United States is or should be a party.
The Board shall submit to the Internet of Things Federal Working Group a report that includes any of its findings or recommendations. The report will be administratively delivered to the Internet of Things Federal Working Group through the Director of the National Institute of Standards and Technology (NIST).
The Board shall set its own agenda in carrying out its duties. The Federal Working Group may suggest topics or items for the Board to study, and the Board shall take those suggestions into consideration in carrying out its duties.
The Board will function solely as an advisory body, in accordance with the provisions of FACA.
Members of the Board shall be appointed by the Secretary. The Board shall consist of 16 members representing a wide range of stakeholders outside of the Federal Government with expertise relating to the Internet of Things, including: (i) information and communications technology manufacturers, suppliers, service providers, and vendors; (ii) subject matter experts representing industrial sectors other than the technology sector that can benefit from the Internet of Things, including the transportation, energy, agriculture, and health care sectors; (iii) small, medium, and large businesses; (iv) think tanks and academia; (v) nonprofit organizations and consumer groups; (vi) security experts; (vii) rural stakeholders; and (viii) other stakeholders with relevant expertise, as determined by the Secretary.
The Board members shall serve terms of two years (unless the Board terminates earlier). Vacancies are filled as soon as highly qualified candidates in a needed area of stakeholder interest are identified and available to serve. Members of the Board shall serve as representative members. Full-time or permanent part-time Federal officers or employees will not be appointed to the Board. Members must be citizens of the United States of America.
Members of the Board shall not be compensated for their services. Members of the Board, while attending meetings of the Board away from their homes or regular place of business, may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by section 5703 of title 5, United States Code, for individuals intermittently serving in the Government without pay.
Members shall not reference or otherwise utilize their membership on the Board in connection with public statements made in their personal capacities without a disclaimer that the views expressed are their own and do not represent the views of the Board, the Federal Working Group, NIST, or the Department of Commerce.
The Secretary will appoint the Board's Chair from among the approved members in accordance with policies and procedures and, in doing so, shall determine the term of service for the Board's Chair.
Meetings will be conducted at least twice each year.
NIST uses a nomination process to identify candidates for the Board. Nominations are requested through an announcement in the
The Board members shall serve terms of two years (unless the Board terminates earlier). Vacancies are filled as soon as highly qualified candidates in a needed area of stakeholder interest are identified and available to serve.
The Department of Commerce seeks a broad-based and diverse IoTAB membership.
The Judges Panel of the Malcolm Baldrige National Quality Award (Panel) was established in accordance with 15 U.S.C. 3711a(d)(1) and the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Panel will ensure the integrity of the Malcolm Baldrige National Quality Award (Award) selection process. Based on a review of results of examiners' scoring of written applications, Panel members will vote on which applicants' merit site visits by examiners to verify the accuracy of quality improvements claimed by applicants. The Panel will also review results and findings from site visits, and recommend Award recipients.
2. The Panel will ensure that individual judges will not participate in the review of applicants as to which they have any real or perceived conflict of interest.
3. The Panel will function solely as an advisory body, and will comply with the provisions of the Federal Advisory Committee Act, 5 U.S.C. 1001
4. The Panel will report to the Director of NIST.
1. The Panel will consist of no less than 9, and not more than 12, members selected on a clear, standardized basis, in accordance with applicable Department of Commerce guidance. There will be a balanced representation from U.S. service, manufacturing, nonprofit, education, and health care industries. The Panel will include members familiar with the quality improvement operations and competitiveness issues of manufacturing companies, service companies, nonprofits, health care providers, and educational institutions.
2. Panel members will be appointed by the Secretary of Commerce for three-year terms and will serve at the discretion of the Secretary. All terms will commence on March 1 and end on the last day of February of the appropriate year.
3. Members who are not Federal employees will serve as Special Government Employees (SGEs) and will be subject to the ethical standards applicable to SGEs.
1. Members of the Panel shall serve without compensation, but may, upon request, be reimbursed travel expenses, including per diem, as authorized by 5 U.S.C. 5701
2. The Panel will meet three times per year. Additional meetings may be called as deemed necessary by the NIST Director or by the Chairperson. Meetings are usually one to four days in duration. In addition, each Judge must attend an annual three-day Examiner training course.
3. When approved by the Department of Commerce Chief Financial Officer and Assistant Secretary for Administration, Panel meetings are closed or partially closed to the public.
1. Nominations are sought from all U.S. service and manufacturing industries, education, health care, and nonprofits as described above.
2. Nominees should have established records of distinguished service and shall be familiar with the quality improvement operations and competitiveness issues of manufacturing companies, service companies, health care providers, educational institutions, and nonprofit organizations. The category (field of eminence) for which the candidate is qualified should be specified in the nomination letter. A summary of the candidate's qualifications should be included with the nomination, including (where applicable) current or former service on Federal advisory boards and Federal employment. Besides participation at meetings, it is desired that members be either developing or researching topics of potential interest, reading Baldrige applications, and so forth, in furtherance of their Panel duties.
3. The Department of Commerce is committed to equal opportunity in the workplace and seeks a broad-based and diverse Panel membership.
The MEP Advisory Board (Board) is authorized under section 501 of the American Innovation and Competitiveness Act (Pub. L. 114-329); codified at 15 U.S.C. 278k(m), as amended, in accordance with the provisions of the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Board will provide advice on MEP activities, plans, and policies.
2. The Board will assess the soundness of MEP plans and strategies.
3. The Board will assess current performance against MEP program plans.
4. The Board will function solely in an advisory capacity, and in accordance with the provisions of the Federal Advisory Committee Act, 5 U.S.C. 1001
5. The Board shall transmit through the Director of NIST an annual report to the Secretary of Commerce for transmittal to Congress not later than 30 days after the submission to Congress of the President's annual budget request each year. The report shall address the status of the MEP program.
1. The Board shall consist of not fewer than 10 members, appointed by the Director of NIST and broadly representative of stakeholders. At least 2 members shall be employed by or on an advisory board for a MEP Center, at least 5 members shall be from U.S. small businesses in the manufacturing sector, and at least 1 member shall represent a community college. No member shall be an employee of the Federal Government.
2. The Director of NIST shall appoint the members of the Board. Members shall be selected on a clear, standardized basis, in accordance with applicable Department of Commerce guidance. Board members serve at the discretion of the Director of NIST.
3. The term of office of each member of the Board shall be three years, except that vacancy appointments shall be for the remainder of the unexpired term of the vacancy. Any person who has completed two consecutive full terms of service on the Board shall thereafter be ineligible for appointment during the one-year period following the expiration of the second term.
1. Members of the Board will not be compensated for their services but will, upon request, be allowed travel and per diem expenses as authorized by 5 U.S.C. 5701
2. The Board will meet at least biannually. Additional meetings may be called by the Director of NIST or the Designated Federal Officer (DFO).
3. Committee meetings are open to the public.
1. Nominations are being accepted in all categories described above.
2. Nominees should have specific experience related to manufacturing and industrial extension services. Letters of nomination should include the category of membership for which the candidate is applying and a summary of the candidate's qualifications for that specific category.
3. Nominations that are received and meet the requirements will be kept on file to be reviewed as Board vacancies occur.
4. The Department of Commerce is committed to equal opportunity in the workplace and seeks a broad-based and diverse MEP Advisory Board membership.
The Secretary of Commerce established the National Artificial Intelligence Advisory Committee (the NAIAC or the Committee) pursuant to section 5104 of the National Artificial Intelligence Initiative Act of 2020 (Pub. L. 116-283), hereinafter referred to as the Act, and the Federal Advisory Committee Act, 5 U.S.C. 1001
The Committee shall provide advice to the President and the National Artificial Intelligence Initiative Office on matters related to the National Artificial Intelligence Initiative (Initiative). The purposes of the Initiative are: (1) ensuring continued United States leadership in artificial intelligence research and development; (2) leading the world in the development and use of trustworthy artificial intelligence systems in the public and private sectors; (3) preparing the present and future United States workforce for the integration of artificial intelligence systems across all sectors of the economy and society; and (4) coordinating ongoing artificial intelligence research, development, and demonstration activities among the civilian agencies, the Department of Defense, and the Intelligence Community to ensure that each informs the work of the others.
The Committee shall advise the President and the Initiative Office on matters related to the Initiative, including recommendations related to:
a. The current state of United States competitiveness and leadership in artificial intelligence, including the scope and scale of United States investments in artificial intelligence research and development in the international context;
b. The progress made in implementing the Initiative, including a review of the degree to which the Initiative has achieved the goals according to the metrics established by the Interagency Committee under section 5103(d)(2) of the Act;
c. The state of the science around artificial intelligence, including progress toward artificial general intelligence;
d. Issues related to artificial intelligence and the United States workforce, including matters relating to the potential for using artificial intelligence for workforce training, the possible consequences of technological displacement, and supporting workforce training opportunities for occupations that lead to economic self-sufficiency for individuals with barriers to employment and historically underrepresented populations, including minorities, Indians (as defined in 25 U.S.C. 5304), low-income populations, and persons with disabilities;
e. How to leverage the resources of the Initiative to streamline and enhance operations in various areas of government operations, including health care, cybersecurity, infrastructure, and disaster recovery;
f. The need to update the Initiative;
g. The balance of activities and funding across the Initiative;
h. Whether the strategic plan developed or updated by the Interagency Committee established under section 5103(d)(2) of the Act is helping to maintain United States leadership in artificial intelligence;
i. The management, coordination, and activities of the Initiative;
j. Whether ethical, legal, safety, security, and other appropriate societal issues are adequately addressed by the Initiative;
k. Opportunities for international cooperation with strategic allies on artificial intelligence research activities, standards development, and the compatibility of international regulations;
l. Accountability and legal rights, including matters relating to oversight of artificial intelligence systems using regulatory and nonregulatory approaches, the responsibility for any violations of existing laws by an artificial intelligence system, and ways to balance advancing innovation while protecting individual rights; and
m. How artificial intelligence can enhance opportunities for diverse geographic regions of the United States, including urban, Tribal, and rural communities.
In addition, pursuant to section 5104(e) of the Act, the Committee's Chairperson shall establish a subcommittee that shall provide advice to the President, through the Committee, on matters related to the development of AI relating to law enforcement, including advice on the following:
A. Bias, including whether the use of facial recognition by government authorities, including law enforcement agencies, is taking into account ethical considerations and addressing whether such use should be subject to additional oversight, controls, and limitations.
B. Security of data, including law enforcement's access to data and the security parameters for that data.
C. Adoptability, including methods to allow the United States Government and industry to take advantage of artificial intelligence systems for security or law enforcement purposes while at the same time ensuring the potential abuse of such technologies is sufficiently mitigated.
D. Legal standards, including those designed to ensure the use of artificial intelligence systems are consistent with the privacy rights, civil rights and civil liberties, and disability rights issues raised by the use of these technologies.
Members of the Committee shall be appointed by the Secretary of Commerce. The Committee shall consist of not less than 9 members, who represent broad and interdisciplinary expertise and perspectives, including from academic institutions, companies across diverse sectors, nonprofit and civil society entities, including civil rights and disability rights organizations, and Federal laboratories, who represent geographic diversity, and who are qualified to provide advice and information on science and technology research, development, ethics, standards, education, technology transfer, commercial application, security, and economic competitiveness related to artificial intelligence.
In selecting the members of the Committee, the Secretary of Commerce shall seek and give consideration to recommendations from Congress, industry, nonprofit organizations, the scientific community (including the National Academies of Sciences, Engineering, and Medicine, scientific professional societies, and academic institutions), the defense and law enforcement communities, and other appropriate organizations.
Meetings will be conducted at least twice each year.
1. Generally, Committee meetings are open to the public.
2. Meetings may be held in-person in selected locations across the country and/or virtually.
1. Nominations are sought from all fields, sectors, and perspectives described above.
2. Nominees should represent broad and interdisciplinary expertise and perspectives, including from academic institutions, companies across diverse sectors, nonprofit and civil society entities, including civil rights and disability rights organizations, and Federal laboratories, who represent geographic diversity, and who are qualified to provide advice and information on science and technology research, development, ethics, standards, education, technology transfer, commercial application, security, and economic competitiveness related to artificial intelligence. A resume or C.V. should be sent that includes a summary of the candidate's qualifications with a nomination letter, including (where applicable) current or former service on Federal advisory boards and Federal employment. The field of eminence for which the candidate is qualified should be specified in the nomination letter. In addition, each nomination letter should state whether the candidate seeks to serve on the Committee, the Subcommittee, or both; and that the candidate acknowledges the responsibilities of serving and will actively participate in good faith in the tasks of the Committee or Subcommittee, as appropriate. Third-party nomination letters should state that the candidate agrees to the nomination.
3. The Department of Commerce seeks a broad-based and diverse Committee and subcommittee membership.
The NCST Advisory Committee (Committee) was established in accordance with the National Construction Safety Team Act, Public Law 107-231, and the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Committee shall advise the Director of NIST on carrying out the National Construction Safety Team Act (Act), review the procedures developed under section 2(c)(1) of the Act, and review the reports issued under section 8 of the Act.
2. The Committee functions solely as an advisory body, in accordance with the provisions of the Federal Advisory Committee Act.
3. The Committee shall report to the Director of NIST.
4. On January 1 of each year, the Committee shall transmit to the Committee on Science, Space, and Technology of the House of Representatives and to the Committee
1. The Committee shall consist of no less than 4 and no more than 12 members. Members shall reflect the wide diversity of technical disciplines and competencies involved in the National Construction Safety Teams investigations. Members shall be selected on the basis of established records of distinguished service in their professional community and their knowledge of issues affecting the National Construction Safety Teams.
2. The Director of NIST shall appoint the members of the Committee, and they will be selected on a clear, standardized basis, in accordance with applicable Department of Commerce guidance.
1. Members of the Committee shall not be compensated for their services but may, upon request, be allowed travel and per diem expenses in accordance with 5 U.S.C. 5703.
2. Members of the Committee shall serve as Special Government Employees (SGEs), will be subject to the ethics standards applicable to SGEs, and are required to file an annual Executive Branch Confidential Financial Disclosure Report.
3. The Committee shall meet at least once per year. Additional meetings may be called whenever requested by the NIST Director or the Designated Federal Officer (DFO); such meetings may be in the form of telephone conference calls and/or videoconferences.
1. Nominations are sought from industry and other communities having an interest in the National Construction Safety Teams investigations.
2. Nominees should have established records of distinguished service. The field of expertise that the candidate represents should be specified in the nomination letter. Nominations for a particular field should come from organizations or individuals within that field. A summary of the candidate's qualifications should be included with the nomination, including (where applicable) current or former service on Federal advisory boards and Federal employment.
3. The Department of Commerce is committed to equal opportunity in the workplace and seeks a broad-based and diverse Committee membership.
The National Technical Information Service Advisory Board (NTIS Advisory Board or Advisory Board) was established in accordance with section 3704b(c) of title 15 of the United States Code, and the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Advisory Board shall review and make recommendations to improve NTIS programs, operations, and general policies in support of NTIS' mission to advance Federal data priorities, promote economic growth, and enable operational excellence by providing innovative data services to Federal agencies through joint venture partnerships with the private sector.
2. The Advisory Board shall act in the public interest to:
a. Provide advice on the optima data services business and operating model to best implement NTIS' joint venture authority.
b. Provide advice on the means, including infrastructure and process improvements, to make Federal data easier to find, access, analyze, and combine.
c. Assess progress in evolving NTIS programs toward a focus on Federal data priorities.
d. Assess the use of merit-based criteria and processes to plan, conduct, and oversee programs and projects, including the selection of joint venture partners.
e. Assess policies in connection with fees and charges for NTIS services in order for the agency to operate on a substantially self-sustaining basis, as required by law.
f. Assess organizational capabilities required to carry out NTIS's mission, including capabilities in data science and for operational management of its project portfolio.
3. The Committee will function solely as an advisory body, in accordance with the provisions of the Federal Advisory Committee Act, 5 U.S.C. 1001
4. The Committee shall report to the Secretary of Commerce and to the Under Secretary of Commerce for Standards and Technology through the Director of NTIS.
a. The NTIS Advisory Board shall be composed of a Chairperson appointed by the Secretary and four other members appointed by the Secretary. In the event of a vacancy in the Chairperson position, the NTIS Director may designate a member to serve as acting Chairperson until a Chairperson is appointed by the Secretary.
b. Members shall be selected solely on the basis of established records of distinguished service and objectivity; shall have recognized expertise in data collection, compilation, analysis, use, and dissemination, as well as data science, information technology, cybersecurity, and privacy. Members will be selected from the business, academic, non- profit, and state and local government communities. Reasonable efforts will be made to ensure members represent the entire spectrum of Federal data interests including demographic, economic, trade, health, scientific, patent, environmental, geospatial, cybersecurity, and transactional data. No Federal Government employee shall serve as a member of the Board.
c. The term of office of each member of the Board shall be three years, except that vacancy appointments shall be for the remainder of the unexpired term of the vacancy. All appointments shall automatically terminate if the charter is terminated or not renewed. All members serve at the pleasure of the Secretary.
d. Any person who has completed two consecutive full terms of service on the Board shall be ineligible for appointment for a third term during the one-year period following the expiration of the second term.
e. Members shall serve as Special Government Employees (SGEs) and will be subject to all ethical standards and rules applicable to SGEs.
2. Members shall not reference or otherwise utilize their membership on the Board in connection with public statements made in their personal capacities without a disclaimer that the views expressed are their own and do not represent the views of the Advisory Board, the National Technical
3. Subcommittees: NTIS may establish such subcommittees of its members as may be necessary, pursuant to the provisions of FACA, the FACA implementing regulations, and applicable Department of Commerce guidance. Subcommittees will report to the NTIS Advisory Board and may not provide advice or work products directly to the Department of Commerce or NTIS.
1. The Board shall meet at the call of the Secretary or the Secretary's designee, but not less often than once every six months.
2. Generally, Committee meetings are open to the public.
1. Nominations are sought from all fields described above.
2. Nominees should have established records of distinguished service and shall be eminent in fields. The category (field of eminence) for which the candidate is qualified should be specified in the nomination letter. A summary of the candidate's qualifications should be included with the nomination, including (where applicable) current or former service on Federal advisory boards and Federal employment.
3. The Department of Commerce is committed to equal opportunity in the workplace and seeks a broad-based and diverse NTIS membership.
The VCAT (Committee) was established in accordance with 15 U.S.C. 278 and the Federal Advisory Committee Act, 5 U.S.C. 1001
1. The Committee shall review and make recommendations regarding general policy for NIST, its organization, its budget, and its programs, within the framework of applicable national policies as set forth by the President and the Congress. 15 U.S.C. 278(a).
2. The Committee shall provide an annual report, through the Director of NIST, to the Secretary of Commerce for submission to the Congress not later than 30 days after the submittal to Congress of the President's annual budget request in each year. Such report shall deal essentially, though not necessarily exclusively, with policy issues or matters which affect NIST, or with which the Committee in its official role as the private sector policy adviser of NIST is concerned. Each such report shall identify areas of research and research techniques of the Institute of potential importance to the long-term competitiveness of United States industry, in which the Institute possesses special competence, which could be used to assist United States enterprises and Untied States industrial joint research and development ventures. 15 U.S.C. 278(h)(1). The Committee shall submit, through the Director of NIST, to the Secretary and the Congress such additional reports on specific policy matters as it deems appropriate. 15 U.S.C. 278(h)(2).
3. The Committee will function solely as an advisory body, in accordance with the provisions of the Federal Advisory Committee Act, as amended, 5 U.S.C. app.
4. The Committee shall report to the Director of NIST.
1. The Director of NIST shall appoint the members of the Committee. Members shall be selected on a clear, standardized basis, in accordance with applicable Department of Commerce guidance. 15 U.S.C. 278(a). Members shall be selected solely on the basis of established records of distinguished service; shall provide representation of a cross-section of traditional and emerging United States industries; and shall be eminent in fields such as business, research, new product development, engineering, labor, education, management consulting, environment, and international relations. No employee of the Federal Government shall serve as a member of the Committee. 15 U.S.C. 278(b).
2. Members of the Committee shall serve as Special Government Employees (SGEs) and will be subject to the ethics standards applicable to SGEs.
3. The Committee shall consist of not fewer than nine members appointed by the Director of NIST, a majority of whom shall be from United States industry. 15 U.S.C. 278(a). The term of office of each member of the Committee shall be three years, except that vacancy appointments shall be for the remainder of the unexpired term of the vacancy. 15 U.S.C. 278(c)(1). Members shall serve at the discretion of the Director of NIST.
4. Any person who has completed two consecutive full terms of service on the Committee shall be ineligible for appointment for a third term during the one-year period following the expiration of the second term. 15 U.S.C. 278(c)(1).
5. Pursuant to 15 U.S.C. 278(f), the Committee chairperson and vice chairperson shall be elected by the members of the Committee at each annual meeting occurring in an even-numbered year. The vice chairperson shall perform the duties of the chairperson in his or her absence. In case a vacancy occurs in the position of the chairperson or vice chairperson, the Committee shall elect a member to fill such vacancy.
6. Members of the Committee will not be compensated for their services, but will, upon request, be allowed travel expenses in accordance with 5 U.S.C. 5701
7. Pursuant to 15 U.S.C. 278(g), the Committee may, with the concurrence of a majority of its members, permit the appointment of a staff consisting of not more than four professional staff members and such clerical staff members as may be necessary. Such staff members shall be appointed by the Director after consultation with the chairperson of the Committee and assigned at the direction of the Committee.
8. Subcommittees: Pursuant to 15 U.S.C. 278(e), the Committee shall have an executive committee, and may delegate to it such powers and functions of the Committee as it deems appropriate. The Committee and/or the Director of NIST may establish such other subcommittees, task forces, and working groups consisting of members from the parent Committee as may be necessary, subject to the provisions of FACA, the FACA implementing regulations, and applicable Department of Commerce guidance. Subcommittees must report back to the Committee and any recommendations based on their work will be deliberated and agreed
1. Meetings of the VCAT usually take place at the NIST headquarters in Gaithersburg, Maryland. The Committee will meet at least twice each year at the call of the chairperson or whenever one-third of the members so request in writing. The Committee shall not act in the absence of a quorum, which shall consist of a majority of the members of the Committee not having a conflict of interest in the matter being considered by the Committee. 15 U.S.C. 278(d).
2. Generally, Committee meetings are open to the public.
1. Nominations are sought from all fields described above.
2. Nominees should have established records of distinguished service and shall be eminent in fields such as business, research, new product development, engineering, labor, education, management consulting, environment and international relations. The category (field of eminence) for which the candidate is qualified should be specified in the nomination letter. A summary of the candidate's qualifications should be included with the nomination, including (where applicable) current or former service on Federal advisory boards and Federal employment. In addition, each nomination letter should state that the candidate agrees to the nomination, acknowledges the responsibilities of serving on the VCAT, and will actively participate in good faith in the tasks of the VCAT.
3. The Department of Commerce is committed to equal opportunity in the workplace and seeks a broad-based and diverse VCAT membership.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Department of Commerce
Notice; request for applications.
Applications are being sought for appointment by the Secretary of Commerce (Secretary) for 9 membership positions to serve on the 22-member American Fisheries Advisory Committee (AFAC or Committee). Individuals selected to serve on the Committee will serve a term of three years, unless otherwise stipulated.
Applications must have an email date stamp on or before June 20, 2024.
Applications should be submitted by email to:
Cliff Cosgrove, American Fisheries Advisory Committee Designated Staff Member, NMFS Office of Management and Budget, by email, at
The AFAC Committee was created from Public Law (Pub. L. 117-121) signed on May 12, 2022. The Committee meets no more than 3 times annually and membership is comprised of 22 individuals appointed by the Secretary with the following geographic representation:
Region 1 consisting of Alaska, Hawaii, the Commonwealth of the Northern Mariana Islands, and the Territories of Guam and American Samoa;
Region 2 consisting of Maine, New Hampshire, Massachusetts, Rhode Island, and Connecticut;
Region 3 consisting of Texas, Alabama, Louisiana, Mississippi, Florida, Arkansas, Puerto Rico, and the Territory of the Virgin Islands of the United States;
Region 4 consisting of California, Washington, Oregon, and Idaho;
Region 5 consisting of New Jersey, New York, Delaware, Maryland, Virginia, North Carolina, South Carolina, and Georgia; and
Region 6 consisting of Michigan, Minnesota, Wisconsin, Illinois, Indiana, Ohio, and Pennsylvania.
Membership for each region will be composed of highly qualified, diverse individuals with experience in one or more of the following areas of expertise, and in as many seafood species as possible: seafood harvesting or processing; recreational or commercial fishing; growing seafood; fisheries science; and/or food distribution, marketing, retail, or food service.
Four at-large members shall also be appointed by the Secretary as follows: one individual with experience in food distribution, marketing, retail, or food service; one individual with experience in the recreational fishing industry supply chain, such as fishers, manufacturers, retailers, and distributors; one individual with experience in the commercial fishing industry supply chain, such as fishers, manufacturers, retailers, and distributors; and one individual who is an employee of NMFS with expertise in fisheries research.
AFAC is responsible for making recommendations to the Secretary for financial assistance awards under the S-K Grant Competition under the Department of Commerce. AFAC will also make recommendations to the Secretary to assist in the development of the annual Notice of Funding Opportunities (NOFO) for submission to the S-K Grant Competition. This may include identifying the needs of the fishing communities (program priorities), establishing individual award funding limits, specifying the application review criteria and selection processes, and other sections of the NOFO as appropriate and allowable. Applicants for these nine membership positions must have demonstrable experience listed below in as many seafood species as possible from the specific AFAC fisheries regions as follows:
• Region 1, one individual with experience in the Fisheries Science Community or Relevant Fishery Management Council;
• Region 2, one individual with experience as a Recreational or Commercial Fisher and/or Experience Growing Seafood;
• Region 3, two positions, one individual with experience as a Recreational or Commercial Fisher and/or Experience Growing Seafood and one individual with experience as a Seafood Harvester or Processor;
• Region 4, two positions, one individual with experience in the Fisheries Science Community or Relevant Fishery Management Council, one individual with experience as a Recreational or Commercial Fisher and/or Experience Growing Seafood;
• Region 5, one individual with experience as a Recreational or Commercial Fisher and/or Experience Growing Seafood;
• Region 6, one individual with experience as a Seafood Harvester or Processor; At-Large Region, one individual with experience in Food Distribution, Marketing, Retail, or Food Service.
Members must be able to fulfill the time commitments required for up to two annual in-person meetings and one virtual meeting. The in person meetings rotate between regions and last up to four business days, subject to the time needs of each meeting. The virtual meeting is one business day for approximately four to six hours.
Committee membership is voluntary and, except for reimbursable travel and related expenses per federal travel regulations, service is without compensation.
Each nominee must submit a cover letter and a resume/curriculum vitae (CV) in PDF format. The cover letter shall include a brief statement as to their interest in serving on the Committee and their qualifications. The resume/CV shall detail the applicant's contact information (address, telephone number, email address) and specific qualifications/experience/expertise as referenced in Public Law 117-121. Any applicants selected for Committee membership shall be required to complete a conflict of interest form. The first Committee meeting of members selected from this notice will be September 17 through September 20, 2024.
Applications must be submitted by email to
The Department of Commerce will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. We invite the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. Public comments were previously requested via the
The information required by 50 CFR 216.23 is of two types. Applications: Information is required to identify the applicant as a tanner/agent in order to preclude prosecution under the MMPA and to determine that he/she has an acceptable record keeping program to accurately account for those marine mammal products received. This information serves as a deterrent for those individuals who might use this registration program for entering prohibited marine mammal products into interstate commerce. Reports: Information is also needed annually to evaluate the agent/tanner's activities during the year, and his/her procedures for bookkeeping and yearly inventory to assure NMFS, the Marine Mammal Commission, and the general public that prohibited marine mammal products were not being transshipped through registered agents.
The reporting requirements are: report in writing to the Assistant Administrator for Fisheries, NMFS, any changes in the facts stated in Registrant's applications for this Certificate of Registration within 30 days of such change; maintain current records of each transaction authorized stating the marine mammals or marine mammal parts or products involved, from whom received, any processing accomplished, to whom returned, and the date of each such transaction. These records shall be kept separate and apart from other records maintained in the ordinary course of business and shall be retrained for not less than three years; and annually, during the month of January, send certified copies of such records (annual report) to the Assistant Administrator for Fisheries.
This information collection request may be viewed at
Written comments and recommendations for the proposed information collection should be submitted within 30 days of the publication of this notice on the following website
National Oceanic & Atmospheric Administration (NOAA), Commerce.
Notice of information collection, request for comment.
The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB.
To ensure consideration, comments regarding this proposed information collection must be received on or before July 8, 2024.
Interested persons are invited to submit written comments to Adrienne Thomas, NOAA PRA Officer, at
Requests for additional information or specific questions related to collection activities should be directed to Dr. Matthew J. Cutler, Social Scientist, NOAA/Northeast Fisheries Science Center, 166 Water St., Woods Hole, MA 02543, (508-495-4731),
This request is for an extension to an approved collection. This collection is currently approved for implementation in the New England, Mid-Atlantic, South Atlantic and Gulf of Mexico regions by NOAA National Marine Fisheries Service, Northeast Fisheries Science Center's Social Sciences Branch (NEFSC-SSB) and Southeast Fisheries Science Center Social Science Research Group (SEFSC-SSRG). The NEFSC and SEFSC seek to conduct surveys to provide for the ongoing collection of social and economic data related to the fishing industries in those states. The purpose of this survey is to assess and track over time the social and economic conditions of commercial fishing crews and hired captains for which little is known. This survey will provide data on social and economic impacts for this population and the changes in fisheries because of regulatory changes. Data to be collected include demographic information on crew, individual and community well-being, fishing practices, job satisfaction, job opportunities, and attitudes toward fisheries management.
The National Environmental Policy Act (NEPA) and Magnuson-Stevens Conservation and Management Act (MSA) both contain requirements for considering the social and economic impacts of fishery management decisions. There is a need to understand how such fishery management policies and programs will affect the social and economic characteristics of those involved in the commercial fishing industry. To help meet these requirements of NEPA and MSA, the NEFSC and SEFSC will collect data on an ongoing basis to track how socio-economic characteristics of fisheries are changing over time and the impact of fishery management policies and programs implemented in New England, Mid-Atlantic, South Atlantic and Gulf of Mexico regions.
This information will be collected through in-person intercept interviews.
We are soliciting public comments to permit the Department/Bureau to: (a) Evaluate whether the proposed information collection is necessary for the proper functions of the Department, including whether the information will have practical utility; (b) Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used; (c) Evaluate ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
The Corporation for National and Community Service.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, the Corporation for National and Community Service (operating as AmeriCorps) is proposing a new information collection.
Written comments must be submitted to the individual and office listed in the
You may submit comments, identified by the title of the information collection activity, by any of the following methods:
(1) Electronically through
(2) By mail sent to: AmeriCorps, Attention Emily Poore, 250 E Street SW, Washington, DC 20525.
(3) By hand delivery or by courier to the AmeriCorps mailroom at the mail address given in paragraph (2) above, between 9 a.m. and 4 p.m. Eastern Time, Monday through Friday, except Federal holidays.
Comments submitted in response to this notice may be made available to the public through
Emily Poore, (202) 355-2190, or by email at
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; to develop, acquire, install and utilize technology and systems for the purpose of collecting, validating and verifying information, processing and maintaining information, and disclosing and providing information; to train personnel and to be able to respond to a collection of information, to search data sources, to complete and review the collection of information; and to transmit or otherwise disclose the information. All written comments will be available for public inspection on
Federal Student Aid (FSA), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the Department is proposing a new information collection request (ICR).
Interested persons are invited to submit comments on or before June 6, 2024.
Written comments and recommendations for proposed information collection requests should be submitted within 30 days of publication of this notice. Click on this link
For specific questions related to collection activities, please contact Beth Grebeldinger, (202) 377-4018.
The Department is especially interested in public comment addressing the following issues: (1) is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Office of Special Education and Rehabilitative Services (OSERS), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the Department is proposing a new information collection request (ICR).
Interested persons are invited to submit comments on or before July 8, 2024.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Diandrea Bailey, 202-987-0126.
The Department, in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. The Department is soliciting comments on the proposed information collection request (ICR) that is described below. The Department is especially interested in public comment addressing the following issues: (1) is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
RSA's Training and Services Program Division (TSPD) contracted with Mathematica to assist RSA in evaluating the Federal fiscal year (FFY) 2022 DIF program. In September 2022, the RSA
Department of Energy, Office of Electricity.
Notice of open meeting.
This notice announces a meeting of the Electricity Advisory Committee (EAC). The Federal Advisory Committee Act (FACA) requires that public notice of these meetings be announced in the
Wednesday, June 5, 2024; 1 p.m.-5:35 p.m. EDT; Thursday, June 6, 2024; 8:30 a.m.-12:30 p.m. EDT.
The National Rural Electric Cooperative Association Conference Center, 4301 Wilson Blvd., Arlington, VA 22203. Members of the public are encouraged to participate virtually, however, limited physical space is available for members of the public to attend onsite. To register to attend either in-person or virtually, please visit the meeting website:
Ms. Jayne Faith, Designated Federal Officer, Office of Electricity, U.S. Department of Energy, Washington, DC 20585; Telephone: (202) 586-2983 or Email:
The meeting agenda and times may change to accommodate EAC business. For EAC agenda updates, see the EAC website at:
Office of Fossil Energy and Carbon Management, Department of Energy.
Notice of amended application.
The Office of Fossil Energy and Carbon Management (FECM) of the Department of Energy (DOE) gives notice (Notice) of receipt of an Amendment to Application (Amendment) filed by GULFSTREAM LNG DEVELOPMENT, LLC (Gulfstream LNG) on March 22, 2024, and corrected on April 4, 2024. Gulfstream LNG is amending its pending Application requesting authorization to export liquefied natural gas (LNG) filed on March 10, 2023, to change the site of its proposed LNG export project in Plaquemines Parish, Louisiana. No other part of the pending Application is affected. Gulfstream LNG filed the Amendment under the Natural Gas Act (NGA).
Protests, motions to intervene, or notices of intervention, as applicable, requests for additional procedures, and written comments are to be filed electronically as detailed in the Public Comment Procedures section no later than 4:30 p.m., Eastern time, June 6, 2024.
Due to potential delays in DOE's receipt and processing of mail sent through the U.S. Postal Service, we encourage respondents to submit filings electronically to ensure timely receipt.
On March 10, 2023, Gulfstream LNG filed an Application requesting long-term, multi-contract authorization to export domestically produced LNG in a volume equivalent to 237.5 billion cubic feet per year (Bcf/yr) of natural gas from the proposed Gulfstream LNG Project (Project), a LNG export project to be located in Plaquemines Parish, Louisiana. In the portion of the Application relevant here, Gulfstream LNG is seeking to export this LNG to any country with which the United States does not have a free trade agreement (FTA) requiring national treatment for trade in natural gas, and with which trade is not prohibited by United States law or policy (non-FTA countries), under section 3(a) of the NGA.
In the Amendment to the Application, Gulfstream LNG indicates that it was necessary to change the site for the Project. The new site “is on an approximate 418-acre parcel of land located south of the town of Belle Chasse, Plaquemines Parish, Louisiana, just three miles downstream on the same side of [the] river from the original site.”
Additional details can be found in the Amendment, posted on the DOE website at
In reviewing Gulfstream LNG's Amendment to its pending Application, DOE will consider any issues required by law or policy under NGA section 3(a), DOE's regulations, and any documents deemed appropriate. Parties that may oppose this Amendment should comment in their responses on any issues relevant to the Amendment.
The National Environmental Policy Act (NEPA), 42 U.S.C. 4321
In response to this Notice, any person may file a protest, comments, or a motion to intervene or notice of intervention, as applicable, addressing the Amendment. Interested parties will be provided 30 days from the date of publication of this Notice in which to submit comments, protests, motions to intervene, or notices of intervention. The public previously was given an opportunity to intervene in, protest, and comment on Gulfstream LNG's Application in Docket No. 23-34-LNG.
Any person wishing to become a party to this proceeding evaluating Gulfstream LNG's Amendment must file a motion to intervene or notice of intervention. The filing of comments or a protest with respect to the Amendment will not serve to make the commenter or protestant a party to this proceeding, although protests and comments received from persons who are not parties will be considered in determining the appropriate action to be taken on the Amendment. All protests, comments, motions to intervene, or notices of intervention must meet the
Filings may be submitted using one of the following methods:
(1) Submitting the filing electronically at
(2) Mailing the filing to the Office of Regulation, Analysis, and Engagement at the address listed in the
(3) Hand delivering the filing to the Office of Regulation, Analysis, and Engagement at the address listed in the
For administrative efficiency, DOE prefers filings to be filed electronically. All filings must include a reference to “Docket No. 23-34-LNG” or “Gulfstream LNG Amendment” in the title line.
The Amendment, and any filed protests, motions to intervene, notices of intervention, and comments will be available electronically on the DOE website at
A decisional record on the Amendment will be developed through responses to this Notice by parties, including the parties' written comments and replies thereto. Additional procedures will be used as necessary to achieve a complete understanding of the facts and issues. If an additional procedure is scheduled, notice will be provided to all parties. If no party requests additional procedures, a final Order may be issued based on the official record, including the Amendment and responses filed by parties pursuant to this Notice, in accordance with 10 CFR 590.316.
The Federal Energy Regulatory Commission (Commission) hereby gives notice that Commissioners and members of their staff may attend the meetings of the Southwest Power Pool, Inc., Regional State Committee (RSC), Quarterly Joint Stakeholder Meeting, Special Meeting of Members and Members' Committee/Board of Directors (Board), as noted below. Their attendance is part of the Commission's ongoing outreach efforts.
The meetings will be held at the Hyatt Regency Aurora-Denver Conference Center, 13200 East 14th Place, Aurora, CO 80111. All meetings are Mountain Time.
The discussions may address matters at issue in the following proceedings:
The meetings are open to the public by teleconference. Registration for the
For more information, contact Patrick Clarey, Office of Energy Market Regulation, Federal Energy Regulatory Commission at (317) 249-5937 or
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
The filings are accessible in the Commission's eLibrary system (
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Federal Energy Regulatory Commission, DOE.
Notice of information collection revision and extension and request for comments.
In compliance with the requirements of the Paperwork Reduction Act of 1995, the Federal Energy Regulatory Commission (Commission or FERC) is soliciting
Comments on the collection of information are due June 6, 2024.
Send written comments on FERC-725S and/or FERC-725A (identified by Docket No. RD24-1-000) to the Office of Management and Budget (OMB) through
Please submit copies of your comments (identified by Docket No. RD24-1-000, FERC-725S, and/or FERC-725A) to the Commission as noted below. Electronic filing through
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• For those unable to file electronically, comments may be filed by USPS mail or by hand (including courier) delivery:
Please reference the specific collection number(s) (FERC-725A and/or FERC-725S) and/or title(s) (Mandatory Reliability Standards: Emergency Preparedness and Operations [EOP]) Reliability Standards) or (Mandatory Reliability Standards for the Bulk-Power System) in your comments.
Jean Sonneman may be reached by email at
The EOP Reliability Standards are currently located in the FERC-725S (OMB Control No. 1902-0270) collection. The collection is currently approved by OMB and contains Reliability Standards EOP-010-1, EOP-011-2, EOP-004-4, EOP-005-3, EOP-006-3, EOP-008-2, and EOP-012-1. There is one Reliability Standard that is being updated within the FERC-725S due to the revisions in Docket No. RD24-1-000: Reliability Standard EOP-011-4. The currently approved Reliability Standard is EOP-011-3, which is being replaced by Reliability Standard EOP-011-4 (table 1).
The TOP Reliability Standards are currently located in FERC-725A (OMB Control No. 1902-0270) collection. This collection is currently approved by OMB and contains Reliability Standards TOP-001-4, TOP-002-4, TOP-003-4, FAC-008-5, FAC003-2, and “Mandatory Reliability Standards” recordkeeping and reporting. There are six information collections within the FERC-725A that will remain unchanged from the revisions in Docket No. RD24-1-000. These six collections include the Reliability Standards: TOP-001-4, TOP-003-4, FAC-008-5, FAC-003-2, and “Mandatory Reliability Standards” recordkeeping and reporting. There is one Reliability Standard being updated within the FERC-725A due to revisions in Docket No. RD24-1-000: Reliability Standard TOP-002-4, which is being replaced by Reliability Standard TOP-002-5 (table 2).
On April 22, 2024, the Massachusetts Department of Environmental Protection (Massachusetts DEP) filed with the Federal Energy Regulatory Commission (Commission) notice that it received complete requests for Clean Water Act section 401(a)(1) water quality certifications from FirstLight MA Hydro LLC and Northfield Mountain LLC in conjunction with the above captioned projects, on April 22, 2024. Pursuant to section 5.23(b) of the Commission's regulations,
If Massachusetts DEP fails or refuses to act on the water quality certification requests on or before the above date, then the certifying authority is deemed waived pursuant to section 401(a)(1) of the Clean Water Act, 33 U.S.C. 1341(a)(1).
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
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The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
The Commission's Rules of Practice and Procedure require all intervenors filing documents with the Commission to serve a copy of that document on each person whose name appears on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, they must also serve a copy of the document on that resource agency.
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n. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
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q. The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
The Office of Public Participation (OPP)'s “WorkshOPP on FERC's eLibrary” video is now available for the public. The WorkshOPP provides an overview of FERC's online library of documents issued or received by FERC, including its organization, services, and search functions. The video is posted on FERC's YouTube channel under OPP's Playlist at
OPP supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
On December 31, 2020, Triton Power Company (Triton), licensee for the Chateaugay High Falls Hydroelectric Project No. 5698 (project), filed a notice of intent (NOI) to file an application for a new license for the project pursuant to section 15(b)(1) of the Federal Power Act (FPA).
Pursuant to section 15(c)(1) of the FPA
After Triton failed to file a timely license application, on January 12, 2024, the Commission issued a notice soliciting applications from potential applicants other than the existing licensee, pursuant to sections 16.24(a)(2) and 16.25(a) of the Commission's regulations.
In comments filed on January 31, 2024, Triton states that it was not able to file a timely license application due to a number of extenuating circumstances, but it intends to file a license application as soon as possible.
Because no other potential applicant filed a notice of intent to file an application for the project in response to the January 12 notice, we are waiving sections 16.24(a)(2) and 16.25(a) of the
Questions concerning this notice should be directed to Arash Barsari at (202) 502-6207 or email at
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
On April 19, 2024, the Vermont Agency of Natural Resources (Vermont ANR) filed with the Federal Energy Regulatory Commission (Commission) notice that it received complete requests for Clean Water Act section 401(a)(1) water quality certifications from Great River Hydro, LLC in conjunction with the above captioned projects, on April 18, 2024. Pursuant to section 5.23(b) of the Commission's regulations,
If Vermont ANR fails or refuses to act on the water quality certification requests on or before the above date, then the certifying authority is deemed waived pursuant to section 401(a)(1) of the Clean Water Act, 33 U.S.C. 1341(a)(1).
On October 13, 2023, and supplemented on April 26, 2024, Alaska Electric Light & Power Company (licensee) filed an application for a non-capacity amendment for the Annex Creek and Salmon Creek Hydroelectric Project No. 2307. The project is located on Annex and Salmon Creeks in the City and Borough of Juneau, Alaska. The project occupies federal land within the Tongass National Forest, administered by the U.S. Forest Service.
The licensee proposes to replace the upper Salmon Creek penstock, which
This notice identifies Commission staff's intention to prepare an environmental assessment (EA) for the project. The planned schedule for the completion of the EA is October 2024.
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members, and others to access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Any questions regarding this notice may be directed to Marybeth Gay at (202) 502-6125 or
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Take notice that on April 26, 2024, ANR Pipeline Company (ANR), 700 Louisiana Street, Suite 1300, Houston, Texas 77002-2700, filed in the above referenced docket, a prior notice request pursuant to sections 157.205 and 157.216 of the Commission's regulations under the Natural Gas Act (NGA), and ANR's blanket certificate issued in Docket No. CP82-480-000, for authorization to abandon one injection/withdrawal well located in its Loreed Storage Field in Osceola County, Michigan (Loreed PN 8868 Well Abandonment Project). The project will allow ANR to limit integrity risk in alignment with the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration's Storage Final Rule. ANR estimates the cost for the project to be $265,000, all as more fully set forth in the request which is on file with the Commission and open to public inspection.
In addition to publishing the full text of this document in the
User assistance is available for eLibrary and the Commission's website during normal business hours from FERC Online Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at
Any questions concerning this request should be directed to David A. Alonzo, Manager of Project Authorizations, ANR Pipeline Company, 700 Louisiana Street, Suite 1300, Houston, Texas 77002-2700, at (832) 320-5477, or
There are three ways to become involved in the Commission's review of this project: you can file a protest to the project, you can file a motion to intervene in the proceeding, and you can file comments on the project. There is no fee or cost for filing protests, motions to intervene, or comments. The deadline for filing protests, motions to intervene, and comments is 5:00 p.m. Eastern Time on July 1, 2024. How to file protests, motions to intervene, and comments is explained below.
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Pursuant to section 157.205 of the Commission's regulations under the NGA,
Protests must comply with the requirements specified in section 157.205(e) of the Commission's regulations,
Any person has the option to file a motion to intervene in this proceeding. Only intervenors have the right to request rehearing of Commission orders issued in this proceeding and to subsequently challenge the Commission's orders in the U.S. Circuit Courts of Appeal.
To intervene, you must submit a motion to intervene to the Commission in accordance with Rule 214 of the Commission's Rules of Practice and Procedure
All timely, unopposed motions to intervene are automatically granted by operation of Rule 214(c)(1). Motions to intervene that are filed after the intervention deadline are untimely and may be denied. Any late-filed motion to intervene must show good cause for being late and must explain why the time limitation should be waived and provide justification by reference to factors set forth in Rule 214(d) of the Commission's Rules and Regulations. A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies (paper or electronic) of all documents filed by the applicant and by all other parties.
Any person wishing to comment on the project may do so. The Commission considers all comments received about the project in determining the appropriate action to be taken. To ensure that your comments are timely and properly recorded, please submit your comments on or before July 1, 2024. The filing of a comment alone will not serve to make the filer a party to the proceeding. To become a party, you must intervene in the proceeding.
There are two ways to submit protests, motions to intervene, and comments. In both instances, please reference the Project docket number CP24-239-000 in your submission.
(1) You may file your protest, motion to intervene, and comments by using the Commission's eFiling feature, which is located on the Commission's website (
(2) You can file a paper copy of your submission by mailing it to the address below. Your submission must reference the Project docket number CP24-239-000.
The Commission encourages electronic filing of submissions (option 1 above) and has eFiling staff available to assist you at (202) 502-8258 or
Protests and motions to intervene must be served on the applicant either by mail or email (with a link to the document) at: David A. Alonzo, Manager of Project Authorizations, ANR Pipeline Company, 700 Louisiana Street, Suite 1300, Houston, Texas 77002-2700, or
Throughout the proceeding, additional information about the project will be available from the Commission's Office of External Affairs, at (866) 208-FERC, or on the FERC website at
In addition, the Commission offers a free service called eSubscription which allows you to keep track of all formal issuances and submittals in specific dockets. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. For more information and to register, go to
Environmental Protection Agency (EPA).
Notice.
In accordance with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), EPA is issuing a notice of receipt of requests by the registrants to voluntarily cancel their registrations of certain products and/or to amend their product registrations to terminate one or more uses. EPA intends to grant these requests at the close of the comment period for this announcement unless the Agency receives substantive comments within the comment period that would merit its further review of the request, or unless the registrants withdraw its requests. If these requests are granted, any sale, distribution, or use of products listed in this notice will be permitted after the registrations have been cancelled and/or uses terminated only if such sale, distribution, or use is consistent with the terms as described in the final order.
Comments must be received on or before June 6, 2024.
Submit your comments, identified by docket identification (ID) number EPA-HQ-OPP-2024-0093, through the
Christopher Green, Registration Division (7505T), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001; telephone number: (202) 566-2707; email address:
This action is directed to the public in general and may be of interest to a wide range of stakeholders including environmental, human health, and agricultural advocates; the chemical industry; pesticide users; and members of the public interested in the sale, distribution, or use of pesticides. Since others also may be interested, the Agency has not attempted to describe all the specific entities that may be affected by this action.
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This notice announces receipt by EPA of requests from registrants to cancel certain and/or terminate certain pesticide product registrations. The affected products and the registrants making the requests are identified in Tables 1-3 of this unit.
Unless a request is withdrawn by the registrant or if the Agency determines that there are substantive comments that warrant further review of this request, EPA intends to issue an order canceling and/or amending the affected registrations.
Table 3 of this unit includes the names and addresses of record for the registrants of the products listed in Table 1 and Table 2 of this unit, in sequence by EPA company number. This number corresponds to the first part of the EPA registration numbers of the products listed in Table 1 and Table 2 of this unit.
Section 6(f)(1) of FIFRA (7 U.S.C. 136d(f)(1)) provides that a registrant of a pesticide product may at any time request that any of its pesticide registrations be canceled or amended to terminate one or more uses. FIFRA further provides that, before acting on the request, EPA must publish a notice of receipt of any such request in the
Section 6(f)(1)(B) of FIFRA (7 U.S.C. 136d(f)(1)(B)) requires that before acting on a request for voluntary cancellation, EPA must provide a 30-day public comment period on the request for voluntary cancellation or use termination. In addition, FIFRA section 6(f)(1)(C) (7 U.S.C. 136d(f)(1)(C)) requires that EPA provide a 180-day comment period on a request for voluntary cancellation or termination of any minor agricultural use before granting the request, unless:
1. The registrants request a waiver of the comment period, or
2. The EPA Administrator determines that continued use of the pesticide would pose an unreasonable adverse effect on the environment.
The registrants have requested that EPA waive the 180-day comment period. Accordingly, EPA will provide a 30-day comment period on the proposed requests.
Registrants who choose to withdraw a request for product cancellation or use termination should submit the withdrawal in writing to the person listed under
Existing stocks are those stocks of registered pesticide products that are currently in the United States and that were packaged, labeled, and released for shipment prior to the effective date of the action. If the requests for voluntary cancellation and/or amendments to terminate uses are granted, the Agency intends to publish the cancellation order in the
In any order issued in response to these requests for cancellation of product registrations and/or for amendments to terminate uses, EPA proposes to include the following provisions for the treatment of any existing stocks of the products listed in Tables 1 and 2 of Unit II.
For 352-98, Corteva, the registrant of the product subject to this cancellation order, did not request that EPA allow the continued sale, distribution, or use of existing stocks of this product. Additionally, Corteva confirmed that they ceased selling this product in 2021. Thus, all sale, distribution, and use of existing stocks of this product is prohibited, except for the sale or distribution of this product for export consistent with FIFRA section 17 (7 U.S.C. 136o) and for proper disposal.
For all other voluntary product cancellations, registrants will be permitted to sell and distribute existing stocks of voluntarily canceled products for 1 year after the effective date of the cancellation, which will be the date of publication of the cancellation order in the
Once EPA has approved product labels reflecting the requested amendments to terminate uses, registrants will be permitted to sell or distribute products under the previously approved labeling for a period of 18 months after the date of
Persons other than the registrant may sell, distribute, or use existing stocks of canceled products and/or products whose labels include the terminated uses until supplies are exhausted, provided that such sale, distribution, or use is consistent with the terms of the previously approved labeling on, or that accompanied, the canceled products and/or terminated uses.
Environmental Protection Agency (EPA).
Notice.
In accordance with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), EPA is issuing a notice of receipt of requests by the registrants to voluntarily cancel their registrations of certain products and/or to amend their product registrations to terminate one or more uses. EPA intends to grant these requests at the close of the comment period for this announcement unless the Agency receives substantive comments within the comment period that would merit its further review of the request, or unless the registrants withdraw its requests. If these requests are granted, any sale,
Comments must be received on or before November 4, 2024.
Submit your comments, identified by docket identification (ID) number EPA-HQ-OPP-2024-0093, through the
Christopher Green, Registration Division (7505T), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001; telephone number: (202) 566-2707; email address:
This action is directed to the public in general and may be of interest to a wide range of stakeholders including environmental, human health, and agricultural advocates; the chemical industry; pesticide users; and members of the public interested in the sale, distribution, or use of pesticides. Since others also may be interested, the Agency has not attempted to describe all the specific entities that may be affected by this action.
1.
2.
This notice announces receipt by EPA of requests from registrants to cancel certain and/or terminate certain uses of pesticide product registrations. The affected products and the registrants making the requests are identified in tables 1-3 of this unit.
Unless a request is withdrawn by the registrant or if the Agency determines that there are substantive comments that warrant further review of this request, EPA intends to issue an order canceling and/or amending the affected registrations.
Table 3 of this unit includes the name and addresses of record for the registrants of the products listed in table 1 and table 2 of this unit, in sequence by EPA company number. This number corresponds to the first part of the EPA registration numbers of the products listed in table 1 and table 2 of this unit.
Section 6(f)(1) of FIFRA (7 U.S.C. 136d(f)(1)) provides that a registrant of a pesticide product may at any time request that any of its pesticide registrations be canceled or amended to terminate one or more uses. FIFRA further provides that, before acting on the request, EPA must publish a notice of receipt of any such request in the
Section 6(f)(1)(B) of FIFRA (7 U.S.C. 136d(f)(1)(B)) requires that before acting on a request for voluntary cancellation, EPA must provide a 30-day public comment period on the request for voluntary cancellation or use termination. In addition, FIFRA section
1. The registrants request a waiver of the comment period, or
2. The EPA Administrator determines that continued use of the pesticide would pose an unreasonable adverse effect on the environment.
The registrants have not requested that EPA waive the 180-day comment period. Accordingly, EPA will provide a 180-day comment period on the proposed requests.
Registrants who choose to withdraw a request for product cancellation or use termination should submit the withdrawal in writing to the person listed under
Existing stocks are those stocks of registered pesticide products that are currently in the United States and that were packaged, labeled, and released for shipment prior to the effective date of the action. If the requests for voluntary cancellation and/or amendments to terminate uses are granted, the Agency intends to publish the cancellation order in the
In any order issued in response to these requests for cancellation of a product registration and/or for an amendment to terminate uses, EPA proposes to include the following provisions for the treatment of any existing stocks of the products listed in tables 1 and 2 of unit II.
For
For all other voluntary product cancellations, registrants will be permitted to sell and distribute existing stocks of voluntarily canceled products for 1 year after the effective date of the cancellation, which will be the date of publication of the cancellation order in the
Once EPA has approved product labels reflecting the requested amendments to terminate uses, registrants will be permitted to sell or distribute products under the previously approved labeling for a period of 18 months after the date of
Persons other than the registrant may sell, distribute, or use existing stocks of canceled products and/or products whose labels include the terminated uses until supplies are exhausted, provided that such sale, distribution, or use is consistent with the terms of the previously approved labeling on, or that accompanied, the canceled products and/or terminated uses.
Export-Import Bank of the United States.
Notice of information collection; request for comment.
The Export-Import Bank of the United States (EXIM), pursuant to the Export-Import Bank Act of 1945, as amended, facilitates the finance of the export of U.S. goods and services. As part of its continuing effort to reduce paperwork and respondent burden, EXIM invites the general public and other Federal Agencies to comment on the proposed information collection, as required by the paperwork Reduction Act of 1995.
Comments must be received on or before July 8, 2024 to be assured of consideration.
Comments may be submitted electronically on
To request additional information please contact Cristina Conti,
The “Report of Premiums Payable for Exporters Only” form is used by exporters to report and pay premiums on insured shipments to various foreign buyers under the terms of the policy and to certify that premiums have been correctly computed and remitted. Individual transactions that an exporter may have with the same foreign borrower can be sub-totaled and entered as a single line item for the specific month provided the length of payment term is identical. The use of sub-totals reduces the administrative burden on the exporter. The `Report of Premiums Payable for Exporters Only' is used by the Bank to determine the eligibility of the shipment(s) and to calculate the premium due to Ex-Im Bank for its support of the shipment(s) under its insurance program.
No changes are being made to the form in use.
The application tool can be reviewed at
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Pursuant to the Small Business Paperwork Relief Act of 2002, the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.” The Commission may not conduct or sponsor a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written comments and recommendations for the proposed information collection should be submitted on or before June 6, 2024.
Comments should be sent to
For additional information or copies of the information collection, contact Nicole Ongele at (202) 418-2991. To view a copy of this information collection request (ICR) submitted to OMB: (1) go to the web page
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the FCC invited the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. Pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
When asking for information about the status of a utility's poles for a
The Commission also required utilities to retain copies, in whatever form they were created, of any such cyclical or periodic pole inspection reports they conduct in the normal course of business, until such time as the utility completes a superseding cyclical pole inspection report covering the poles included in the attachment application. The Commission reiterated that utilities are required to provide only the information they already possess and track in the normal course of conducting pole inspections at the time of the attacher's request for data. The Commission did not require utilities to collect or create new information for the purpose of responding to such requests or to provide all information they may possess on the affected poles outside their pole inspection reports. The Commission found that adopting this limited requirement achieves a balance between a potential attacher's need for more information about the poles that it plans to use as part of a broadband buildout and the utility's interest in minimizing the burden of mandatory disclosures.
To request RBAT review and assessment of a dispute that a party to the dispute contends is impeding or delaying deployment of broadband facilities, the party must first notify the Chief of the Enforcement Bureau's Market Disputes Resolution Division (MDRD) of the request by phone and in writing. The MDRD Chief will direct the party to FCC Form 5653—Request for RBAT Review and Assessment—on the MDRD website and to instructions for completing and electronically transmitting the form to the RBAT. The form will elicit information relevant to the scope and nature of the dispute, and to whether the dispute is appropriate for expedited mediation and/or placement on the Accelerated Docket. The information submitted by a party on the FCC Form 5653 will assist the RBAT in efficiently reviewing and assessing the party's dispute and in providing guidance on the most effective means of resolving it. The RBAT also may request that one or both parties provide the RBAT with documentation or other information relevant to the dispute. After reviewing the parties' submissions, the RBAT will provide guidance and advice to the parties on the most effective means of resolving their dispute, including staff-supervised mediation, use of the Accelerated Docket, and/or other action.
Should the RBAT recommend staff-supervised mediation, it shall be conducted pursuant to 47 CFR 1.737, the requirements of which may be modified or waived as appropriate in this context or as needed in light of the facts or circumstances of a particular case. In the event that the parties are unable to settle their dispute, and a prospective complainant seeks placement of its complaint on the Accelerated Docket, the RBAT will decide whether the complaint or a portion of the complaint is suitable for inclusion on the Accelerated Docket based on a totality of the factors listed in 47 CFR 1.1415(e).
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Pursuant to the Small Business Paperwork Relief Act of 2002, the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
Written comments and recommendations for the proposed information collection should be submitted on or before June 6, 2024.
Comments should be sent to
For additional information or copies of the information collection, contact Cathy Williams at (202) 418-2918. To view a copy of this information collection request (ICR) submitted to OMB: (1) go to the web page
The Commission may not conduct or sponsor a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the FCC invited the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. Pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
The information collection requirements consist of:
(a) Mechanism for information about video programming subject to the IP closed captioning requirements.
Pursuant to 47 CFR 79.4(c)(1)(ii) and (c)(2)(ii) of the Commission's rules, VPOs and VPDs must agree upon a mechanism to make information available to VPDs about video programming that becomes subject to the requirements of 47 CFR 79.4 on an ongoing basis. VPDs must make a good faith effort to identify video programming that must be captioned when delivered using IP using the agreed upon mechanism.
For example, VPOs and VPDs may agree on a mechanism whereby the VPOs provide captions or certifications that captions are not required, and update those certifications and provide captions when captions later become required. A VPD may rely in good faith on a certification by a VPO that the programming need not be captioned if: (1) the certification includes a clear and concise explanation of why captions are not required; and (2) the VPD is able to produce the certification to the Commission in the event of a complaint. VPOs may provide certifications for specific programming or a more general certification, for example, for all programming covered by a particular contract.
VPDs may seek Commission determinations that other proposed mechanisms provide adequate information for them to rely on in good faith by filing an informal request and providing sufficient information for the Commission to make such determinations.
(b) Contact information for the receipt and handling of written closed captioning complaints.
Pursuant to 47 CFR 79.4(c)(2)(iii), VPDs must make their contact information available to end users for the receipt and handling of written IP closed captioning complaints. The required contact information includes the name of a person with primary responsibility for IP captioning issues and who can ensure compliance with these rules, as well as the person's title or office, telephone number, fax number, postal mailing address, and email address. VPDs must keep this information current and update it within 10 business days of any change. The Commission expects that such contact information will be prominently displayed in a way that it is accessible to all end users. A general notice on the VPD's website with such contact information, if provided, must be provided in a location that is conspicuous to viewers.
(c) Petitions for exemption based on economic burden.
Pursuant to 47 CFR 79.4(d), a VPO or VPD may petition the Commission for a full or partial exemption from the closed captioning requirements for IP-delivered video programming based upon a showing that they would be economically burdensome. Petitions for exemption must be supported with sufficient evidence to demonstrate economic burden (significant difficulty or expense). The Commission will consider four specific factors when determining economic burden and any other factors the petitioner deems relevant, along with any available alternatives that might constitute a
The Commission will place such petitions on public notice. Comments or oppositions to the petition may be filed electronically within 30 days after release of the public notice of the petition, and must include a certification that the petitioner was served with a copy. The petitioner may reply to any comments or oppositions filed within 20 days after the close of the period for filing comments or oppositions, and replies must include a certification that the commenting or opposing party was served with a copy. Upon a finding of good cause, the Commission may lengthen or shorten any comment period and waive or establish other procedural requirements. Petitions and responsive pleadings must include a detailed, full showing, supported by affidavit, of any facts or considerations relied on.
(d) Complaints alleging violations of the closed captioning rules for IP-delivered video programming.
Pursuant to 47 CFR 79.4(e), a written complaint alleging a violation of the closed captioning rules for IP-delivered video programming may be filed with the Commission or with the VPD responsible for enabling the rendering or pass through of the closed captions for the video programming. Complaints must be filed within 60 days after the date the complainant experienced a problem with captioning. Complaints should (but are not required to) include certain information.
If the complaint is filed first with the VPD, the VPD must respond in writing to the complainant within 30 days after receipt of a closed captioning complaint. If a VPD fails to respond timely, or the response does not satisfy the consumer, the complainant may re-file the complaint with the Commission within 30 days after the time allotted for the VPD to respond. If a consumer re-files the complaint with the Commission (after filing with the VPD) and the complaint satisfies the requirements, the Commission will forward the complaint to the named VPD, as well as to any other VPD and/or VPO that Commission staff determines may be involved, who then must respond in writing to the Commission and the complainant within 30 days after receipt of the complaint from the Commission.
If the complaint is filed first with the Commission and the complaint satisfies the requirements, the Commission will forward the complaint to the named VPD and/or VPO, and to any other VPD and/or VPO that Commission staff determine may be involved, who must respond in writing to the Commission and the complainant within 30 days after receipt of the complaint from the Commission. In response to a complaint, a VPD and/or VPO must provide the Commission with sufficient records and documentation. The Commission will review all relevant information provided by the complainant and the subject VPDs and/or VPOs, as well as any additional information the Commission deems relevant from its files or public sources. The Commission may request additional information from any relevant entities when, in the estimation of Commission staff, such information is needed to investigate the complaint or adjudicate potential violation(s) of Commission rules. When the Commission requests additional information, parties to which such requests are addressed must provide the requested information in the manner and within the time period the Commission specifies.
(e) Requests for Commission determination of technical feasibility of apparatus closed caption requirements.
Pursuant to 47 CFR 79.103(a), as of January 1, 2014, all digital apparatus designed to receive or play back video programming that uses a picture screen of any size must be equipped with built-in closed caption decoder circuitry or capability designed to display closed-captioned video programming, if technically feasible. If new apparatus or classes of apparatus for viewing video programming emerge on which it would not be technically feasible to include closed captioning, parties may raise that argument as a defense to a complaint or, alternatively, file a request under 47 CFR 1.41 for a Commission determination of technical feasibility before manufacturing or importing the product.
(f) Requests for Commission determination of achievability of apparatus closed caption requirements.
Pursuant to 47 CFR 79.103(a), as of January 1, 2014, all digital apparatus designed to receive or play back video programming that use a picture screen less than 13 inches in size must be equipped with built-in closed caption decoder circuitry or capability designed to display closed-captioned video programming, only if doing so is achievable. In addition, pursuant to 47 CFR 79.104(a), as of January 1, 2014, all apparatus designed to record video programming must enable the rendering or the pass through of closed captions such that viewers are able to activate and de-activate the closed captions as the video programming is played back, only if doing so is achievable.
Manufacturers of such apparatus may petition the Commission, pursuant to 47 CFR 1.41, for a full or partial exemption from the closed captioning requirements before manufacturing or importing the apparatus or may assert as a response to a complaint that these requirements, in full or in part, are not achievable. Pursuant to 47 CFR 79.103(b)(3), such a petition or response must be supported with sufficient evidence to demonstrate that compliance is not achievable (meaning with reasonable effort or expense) and the Commission will consider four specific factors when making such determinations.
(g) Petitions for purpose-based waivers of apparatus closed caption requirements.
Manufacturers seeking certainty prior to the sale of a device may petition the Commission, pursuant to 47 CFR 79.103(b)(4), for a full or partial waiver of the closed captioning requirements based on one of the following provisions:
(i) The apparatus is primarily designed for activities other than receiving or playing back video programming transmitted simultaneously with sound; or
(ii) The apparatus is designed for multiple purposes, capable of receiving or playing back video programming transmitted simultaneously with sound but whose essential utility is derived from other purposes.
(h) Complaints alleging violations of the apparatus closed caption requirements.
Consumers may file written complaints alleging violations of the Commission's rules, 47 CFR 79.101-79.104, requiring apparatus designed to receive, play back, or record video programming to be equipped with built-in closed caption decoder circuitry or capability designed to display closed captions. A written complaint filed with the Commission must be transmitted to the Consumer and Governmental Affairs Bureau through the Commission's online informal complaint filing system, U.S. Mail, overnight delivery, or facsimile. Such complaints should include certain information about the complainant and the alleged violation. The Commission may forward such complaints to the named manufacturer or provider, as well as to any other entity that Commission staff determines may be involved, and may request additional information from any relevant parties when, in the estimation of Commission staff, such information is needed to investigate the complaint or
Federal Communications Commission.
Federal Deposit Insurance Corporation (FDIC).
Notice and request for comment.
The FDIC, as part of its obligations under the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to take this opportunity to comment on the renewal of the existing information collections described below (OMB Control No. 3064-0082; -0084).
Comments must be submitted on or before July 8, 2024.
Interested parties are invited to submit written comments to the FDIC by any of the following methods:
•
•
•
•
All comments should refer to the relevant OMB control number. A copy of the comments may also be submitted to the OMB desk officer for the FDIC: Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Washington, DC 20503.
Manny Cabeza, Regulatory Counsel, 202-898-3767,
1.
The estimated annual burden, in hours, is the product of the estimated number of respondents per year, estimated number of responses per respondent per year, and estimated hours per response, as summarized in Table 1 for the implementation burden and in Table 2 for the ongoing burden, below. The total estimated annual burden for this Information Collection Request (ICR) is 1,959,766 hours (288 hours estimated implementation burden, plus 1,959,488 hours estimated ongoing burden), which is a decrease of 71,838 hours from the 2021 estimate. As the estimated time per response remained the same from the 2021 ICR, the change in the total estimated annual burden hours is attributable to the decrease in the estimated number of respondents in Table 2.
2.
Depository institutions that provide periodic statements are required to include information about fees imposed, interest earned, and the annual percentage yield (APY) earned during those statement periods. It also contains rules about advertising deposit accounts. This Information Collection Request (ICR) is being revised as a result of the addition of five (5) new information collection requirements contained in CFPB's Regulation E, Subpart B. The estimated annual burden, in hours, is the product of the estimated number of respondents per year, estimated number of responses per respondent per year, and estimated hours per response, as summarized in the Table above. The total estimated annual burden for this ICR is 546,946 hours, which is a decrease of 45,875 hours from our estimate in the 2021 memo (592,821 hours). This decrease can be explained largely by a decline in the number of FDIC-supervised IDIs from December 31, 2020 (the period used in the previous OMB renewal) to December 31, 2023. This decrease is attenuated by the inclusion of five ICs pertaining to recordkeeping and disclosure requirements associated with remittance transfers in Subpart B of CFPB Regulation E.
The estimated annual burden and change in burden, broken down by each Regulation (E, DD, and CC), is as follows:
Comments are invited on: (a) Whether the collections of information are necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collections, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collections of information on respondents, including through the
Federal Deposit Insurance Corporation.
Update listing of financial institutions in liquidation.
Notice is hereby given that the Federal Deposit Insurance Corporation (Corporation) has been appointed the sole receiver for the following financial institution effective as of the Date Closed as indicated in the listing.
This list (as updated from time to time in the
Appraisal Subcommittee of the Federal Financial Institutions Examination Council.
Notice of special closed meeting.
The ASC convened a Special Closed Meeting to discuss a personnel matter pursuant to section 1104(b) of title XI (12 U.S.C. 3333(b)). No action was taken by the ASC.
10 a.m., Tuesday, May 14, 2024.
The Richard V. Backley Hearing Room, Room 511, 1331 Pennsylvania Avenue NW, Suite 504 North, Washington, DC 20004 (enter from F Street entrance).
Open.
The Commission will consider and act upon the following in open session:
Any person attending this meeting who requires special accessibility features and/or auxiliary aids, such as sign language interpreters, must inform the Commission in advance of those needs. Subject to 29 CFR 2706.150(a)(3) and 2706.160(d).
Emogene Johnson (202) 434-9935/(202) 708-9300 for TDD Relay/1-800-877-8339 for toll free.
2 p.m., Tuesday, May 14, 2024.
The Richard V. Backley Hearing Room, Room 511, 1331 Pennsylvania Avenue NW, Suite 504 North, Washington, DC 20004 (enter from F Street entrance).
Open.
The Commission will consider and act upon the following in open session:
Any person attending this meeting who requires special accessibility features and/or auxiliary aids, such as sign language interpreters, must inform the Commission in advance of those needs. Subject to 29 CFR 2706.150(a)(3) and 2706.160(d).
Emogene Johnson (202) 434-9935/(202) 708-9300 for TDD Relay/1-800-877-8339 for toll free.
Phone Number for Listening to Meeting: 1-(866) 236-7472. Passcode: 678-100.
The notificants listed below have applied under the Change in Bank Control Act (Act) (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the applications are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments received are subject to public disclosure. In general, comments received will be made available without change and will not be modified to remove personal or business information including confidential, contact, or other identifying information. Comments should not include any information such as confidential information that would not be appropriate for public disclosure.
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington, DC 20551-0001, not later than May 22, 2024.
1.
Board of Governors of the Federal Reserve System.
The companies listed in this notice have given notice under section 4 of the Bank Holding Company Act (12 U.S.C. 1843) (BHC Act) and Regulation Y, (12 CFR part 225) to engage de novo, or to acquire or control voting securities or assets of a company, including the companies listed below, that engages either directly or through a subsidiary or other company, in a nonbanking activity that is listed in § 225.28 of Regulation Y (12 CFR 225.28) or that the Board has determined by Order to be closely related to banking and permissible for bank holding companies. Unless otherwise noted, these activities will be conducted throughout the United States.
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments received are subject to public disclosure. In general, comments received will be made available without change and will not be modified to remove personal or business information including confidential, contact, or other identifying information. Comments should not include any information such as confidential information that would not be appropriate for public disclosure.
Unless otherwise noted, comments regarding the applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington, DC 20551-0001, not later than May 22, 2024.
1.
Board of Governors of the Federal Reserve System.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments received are subject to public disclosure. In general, comments received will be made available without change and will not be modified to remove personal or business information including confidential, contact, or other identifying information. Comments should not include any information such as confidential information that would not be appropriate for public disclosure.
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington, DC 20551-0001, not later than June 6, 2024.
1.
Board of Governors of the Federal Reserve System.
Office of Government-wide Policy, General Services Administration (GSA).
Meeting notice.
In accordance with the requirements of the Federal Advisory Committee Act, this notice provides the agenda for a series of web-based meetings of the Green Building Advisory Committee's, (the Committee), Federal Buy Clean Implications Task Group (the Task Group).
The meetings are open to the public to observe; online attendees are required to register in advance to attend as instructed below.
The Committee's Federal Buy Clean Act Implications Task Group will hold a series of web-based meetings on alternate Thursdays from May 23, 2024, through February 27, 2025, from 3:00 p.m. to 4:00 p.m., Eastern Time (ET).
Mr. Michael Bloom, Designated Federal Officer, Office of Federal High-Performance Green Buildings, Office of Government-wide Policy, GSA, 1800 F Street NW, (Mail-code: MG), Washington, DC 20405, at
To register to observe any or all of these meetings, please send the following information via email to
Requests to observe the full series of Task Group meetings must be received by 5:00 p.m. ET, on Tuesday, May 21, 2024. After that time, requests to observe ongoing Task Group meetings must be received by 5:00 p.m. ET on the Tuesday before the meeting in question. Since Task Group meetings are conducted as a series, it will be most useful to observe all or most of them from the start.
For all online meetings, web meeting attendance information will be provided following registration. Time will be provided at all meetings for public comment wherever possible.
GSA will be unable to provide technical assistance to any listener experiencing technical difficulties. Testing access to the web meeting site before the calls is recommended. To request an accommodation, such as closed captioning, or to ask about accessibility, please contact Mr. Bloom at
The Administrator of GSA established the Committee on June 20, 2011 (
The Federal Buy Clean Implications Task Group will continue the Committee's work on the topic of Building Decarbonization by assessing the impact of the Federal Buy Clean Initiative within the broader scope of the Inflation Reduction Act, focusing on its influence on procurement practices and material selection in Federal Buildings.
The purpose of these web-based meetings is for the Task Group to develop consensus recommendations for submission to the full Committee. The Committee will, in turn, deliberate on the Task Group recommendations and decide whether to proceed with formal advice to GSA based upon them.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing efforts to reduce public burden and maximize the utility of government information, invites the general public and other federal agencies to take this opportunity to comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled Data Collection for the Residential Care Community and Adult Day Services Center Components of the National Post-Acute and Long-Term Care Study. The purpose is to collect data for the residential care community and adult day services center components for the 2024 wave of the National Post-Acute and Long-Term Care Study.
Written comments must be received on or before July 8, 2024.
You may submit comments, identified by Docket No. CDC-2024-0033 by either of the following methods:
•
•
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Data Collection for the Residential Care Community and Adult Day Service Center Components of the National Post-acute and Long-term Care Study (OMB Control No. 0920-0943 Exp. 7/31/2025)—Revision—National Center for Health Statistics (NCHS), Centers for Disease Control and Prevention (CDC).
Section 306 of the Public Health Service (PHS) Act (42 U.S.C. 242k), as amended, authorizes that the Secretary of Health and Human Services (DHHS), acting through NCHS, shall collect statistics on health resources . . . [and] utilization of health care, including extended care facilities, and other institutions. NCHS seeks approval to collect data for the residential care community (RCC) and adult day services center (ADSC) components of the 7th National Post-Acute and Long-Term Care Study (NPALS). A two-year clearance is requested.
Details on the complete study design include the following. The NPALS is designed to: (1) broaden NCHS' ongoing coverage of paid, regulated long-term care (LTC) providers; (2) present alongside existing administrative data on LTC providers and service users (
Data will be collected from two types of LTC providers in the 50 states and the District of Columbia: 11,600 RCCs and 5,500 ADSCs. Data were collected in 2012, 2014, 2016, 2018, 2020, and 2022. The data to be collected in 2024 include the basic characteristics, services, staffing, and practices of RCCs and ADSCs, and aggregate-level distributions of the demographics, selected health conditions and health care utilization, physical functioning, and cognitive functioning of RCC residents and ADSC participants. Expected users of data from this collection effort include, but are not limited to CDC; other Department of Health and Human Services (DHHS) agencies, such as the Office of the Assistant Secretary for Planning and Evaluation, The Administration for Community Living, and the Agency for Healthcare Research and Quality; associations, such as LeadingAge, National Center for Assisted Living, American Seniors Housing Association, Argentum, and National Adult Day Services Association; universities; foundations; and other private sector organizations such as the Alzheimer's Association and the AARP Public Policy Institute.
Expected burden from data collection for eligible cases is 30 minutes per respondent. An estimated 5% of RCC and ADSC respondents will have an additional five minutes of burden to complete a data retrieval call. We calculated the burden based on a 100% response rate. CDC requests OMB
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other federal agencies the opportunity to comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled the National Hospital Care Survey (NHCS). The goal of the project is to assess patient care in hospital-based settings and to describe patterns of health care delivery and utilization in the United States.
CDC must receive written comments on or before July 8, 2024.
You may submit comments, identified by Docket No. CDC-2024-0035 by any of the following methods:
•
•
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
National Hospital Care Survey (NHCS) (OMB Control No. 0920-0212, Exp. 12/31/2024)—Revision—National Center for Health Statistics (NCHS), Centers for Disease Control and Prevention (CDC).
Section 306 of the Public Health Service (PHS) Act (42 U.S.C. 242k), as amended, authorizes that the Secretary of Health and Human Services (DHHS), acting through NCHS, shall collect statistics on the extent and nature of illness and disability of the population of the United States. This three-year clearance request for National Hospital Care Survey (NHCS) includes the collection of all inpatient and ambulatory Uniform Bill-04 (UB-04) claims data or electronic health record (EHR) data as well as the collection of hospital-level information via a questionnaire from a sample of 608 hospitals.
The National Ambulatory Medical Care Survey (NAMCS) was conducted intermittently from 1973 through 1985,
In May 2011, recruitment of sampled hospitals for the NHCS began. Hospitals in the NHCS are asked to provide data on all inpatients from their UB-04 administrative claims, or EHRs. Hospital-level characteristics and information about telemedicine usage in the healthcare setting are collected through an Annual Hospital Interview. NHCS will continue to provide the same national health-care statistics on hospitals that NHDS provided. Additionally, NHCS collects more information at the hospital level (
Beginning in 2013, in addition to inpatient hospital data, hospitals participating in NHCS were asked to provide data on the utilization of health care services in their ambulatory settings (
Data collected through NHCS are essential for evaluating the health status of the population, for the planning of programs and policy to improve health care delivery systems of the Nation, for studying morbidity trends, and for research activities in the health field.
Changes to the data collection survey include the removal of COVID-19 questions from the Annual Hospital Interview (AHI). The burden hours have been reduced due to a decrease in the sample size. The new total annualized burden is 5,826 hours. There is no cost to respondents other than their time to participate.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other federal agencies the opportunity to comment on a proposed information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on an information collection project titled Human-Centered Design Effort on Bringing Guidelines to the Digital Age. This information collection will allow CDC to understand pain points in developing solutions that help develop and implement guidelines that leverage technology to improve patient care.
CDC must receive written comments on or before July 8, 2024.
You may submit comments, identified by Docket No. CDC-2024-0032 by either of the following methods:
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•
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Human-Centered Design Effort on Bringing Guidelines to the Digital Age—Existing Collection in Use Without an OMB Control Number—Office of Public Health Data, Surveillance, and Technology (OPHDST), Centers for Disease Control and Prevention (CDC).
Given the increased demand to improve clinical guideline development and implementation, a new approach that began with an initiative on Adapting Clinical Guidelines for the Digital Age has been expanded by Guidelines International Network (GIN) North America to implement a future state of guideline development and implementation that leverages advancements in technology. To identify pain points in the process, CDC plans to engage individuals from multiple perspectives in guideline development and implementation in discussion. CDC requests approval for an Existing Collection in Use Without an OMB Control Number for a data collection titled Human-Centered Design Effort on Bringing Guidelines to the Digital Age.
CDC will use semi-structured interviews to collect data for this study. The interviews will explore insights about guideline development and implementation as well as pain points in this process. Data will be used to inform the structure of a human-centered design workshop where participants use the pain points identified as starting points for designing solutions. Burden estimates include the time for respondents to be participate in semi-structured interviews. CDC requests OMB approval for an estimated 33 annual burden hours. There is no cost to respondents other than their time to participate.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other federal agencies the opportunity to comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled Evaluation of the Division of Overdose Prevention Technical Assistance Center. This data collection allows CDC to collect information from partner organizations regarding feedback on their experiences receiving technical assistance.
CDC must receive written comments on or before July 8, 2024.
You may submit comments, identified by Docket No. CDC-2024-0022 by either of the following methods:
•
•
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Evaluation of the Division of Overdose Prevention Technical Assistance Center (OMB Control No., 0920-1355, Exp. 11/30/202)—Revision—National Center for Injury Prevention and Control (NCIPC), Centers for Disease Control and Prevention (CDC).
The Centers for Disease Control and Prevention (CDC) is submitting a Revision request for the currently approved Evaluating the Overdose Data to Action TA Hub (OMB Control No. 0920-1355, Exp. Date 11/30/2024) for three years. CDC requests a three-year OMB approval to support the evaluation of technical assistance (TA) provided for the Overdose Data to Action (OD2A) in States (S) and OD2A: Limiting Overdose through Collaborative Actions in Localities (LOCAL) programs. OD2A-S and OD2A: LOCAL are cooperative agreements funded in 2023 to focus on comprehensive and interdisciplinary opioid overdose prevention efforts in 49 state health departments, 39 localities, Puerto Rico, and Washington, DC. Each program consists of two required components—a surveillance component and a prevention component. OD2A recipients implement a combination of activities across nine state strategies and eight local strategies within these components in order to gain access to high quality, complete, and timelier data on opioid prescribing and overdoses and to use those data to inform prevention and response efforts in their jurisdictions.
In the previously approved iteration of this data collection, the information collected surrounding OD2A (version 1.0) recipient feedback on their experiences receiving TA proved invaluable in the process of improving TA delivery and overall providing more useful TA. The feedback provided in the original data collection instruments was also used to improve the TA Strategy of the updated iterations of OD2A (including OD2A-S and OD2A: LOCAL) and their recipients. With the information that was collected in the previously approved ICR, CDC can more effectively deliver TA to an almost-doubled recipient group across two programs instead of one and ensure that continuous improvement in TA is occurring. Further information gathering through the two new instruments proposed in this ICR (the Implementation Feedback Form and the Focus Group script), will even more acutely enhance TA perspectives and needs to effectively and responsibly utilize the DOP TA Center resource.
Training and technical assistance (TA) is essential to building knowledge and strengthening the capacity of recipients to implement and evaluate OD2A program strategies. CDC will develop and deploy a TA hub (hereafter referred to as the DOP TA Center) to deliver comprehensive technical assistance and training to support the successful implementation and evaluation of surveillance and prevention activities. The DOP TA Center is designed to enhance the efficiency, coordination, and
CDC requests OMB approval for an estimated 388 annual burden hours. There is no cost to respondents other than their time to participate.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other federal agencies the opportunity to comment on a proposed and/or continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled Comprehensive Evaluations of the Division for Heart Disease and Stroke Prevention Programs (WISEWOMAN, National CVH Program, Innovative CVH Program). The purpose of the data collection is to evaluate the implementation of evidence-based strategies within these programs, measure their impact on cardiovascular disease (CVD) prevention and management, and to identify strategies that are most effective in reaching populations disproportionately affected by CVD.
CDC must receive written comments on or before July 8, 2024.
You may submit comments, identified by Docket No. CDC-2024-0036 by either of the following methods:
•
•
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Comprehensive Evaluations of the Division for Heart Disease and Stroke Prevention Programs (WISEWOMAN, National CVH Program, Innovative CVH Program)—New—National Center for Chronic Disease Prevention and Health Promotion (NCCDPHP), Centers for Disease Control and Prevention (CDC).
The Centers for Disease Control and Prevention (CDC) Division for Heart Disease and Stroke Prevention (DHDSP) are submitting this new three-year information collection request (ICR) for an evaluation of three recently launched cooperative agreements: Well-Integrated Screening of Women Across the Nation (WISEWOMAN), The National Cardiovascular Health Program (The National CVH Program), and The Innovative Cardiovascular Health Program (The Innovative CVH Program).
The WISEWOMAN program supports the early detection and treatment of hypertension in low-income, uninsured, and underinsured participants, ages 35-64. The National CVH Program implements evidence-based strategies to manage CVD in populations impacted by the high prevalence of CVD, exacerbated by health inequities and disparities, emphasizing hypertension and high cholesterol control among adults aged 18-85. The Innovative CVH Program focuses on implementing innovative evidence-based strategies to assess and address the health disparities and inequities in communities at highest risk (defined as census tracts with a crude hypertension prevalence of 53% or higher), where there is a particular need for equity-focused health system interventions to prevent, detect, control, and manage hypertension and high cholesterol. These three programs build upon CDC's previous work to identify promising CVD prevention and management practices and fund various organizations, including State and County governments, American Indian or Alaska Native tribal governments, non-government organizations, institutions of higher education, to implement evidence-based strategies in their jurisdictions. Since the programs are a substantial investment of federal funds, comprehensive evaluations are important to demonstrate the types of interventions being implemented and what is being accomplished using these funds.
The comprehensive evaluation of these programs includes process and outcome evaluations, and a cross-program analysis to assess the unique contributions of each program towards evidence-based strategies, health equity advancement, and health system transformation over the five program years. The evaluation aims to describe the implementation of the programs, assess the extent to which short-term, intermediate, and long-term outcomes have been met, and estimate the costs involved in implementing the programs. The comprehensive evaluation is designed to complement the evaluations already being conducted by program recipients. The data collection focuses on obtaining qualitative and cost information at the organizational and community levels about strategy implementation, facilitators and barriers, and other contextual information that affects program implementation and participant outcomes. Data collection activities of the comprehensive evaluation include qualitative interviews for evaluability assessments, exploratory assessments, and cost data collected for a cost study. During the qualitative data collection, semi-structured interviews will be conducted with recipients, their partnering sites, and Learning Collaborative members, providing a multifaceted view of the program's implementation and outcomes. Cost data will be used to estimate the implementation costs and value of resources invested by program recipients and their partners. Cost data will be collected through a spreadsheet-based cost inventory tool, key informant interviews, and document reviews. There are no costs to respondents except their time. Data collection tools are crafted to ensure relevance and capture essential information needed to evaluate the effectiveness and impact of the program strategies, while minimizing respondent burden.
The findings from the data collection will provide tailored, action-oriented, and timely recommendations for program improvement throughout the program period. Findings will foster documentation and sharing of lessons learned, contribute to the evidence base, and support replication and scaling of promising program strategies. Without collection of evaluative data, CDC will not be able to capture critical information needed to continuously improve programmatic efforts and clearly demonstrate the responsible use of federal funds.
CDC requests OMB approval for an estimated 2,054 annual burden hours. There is no cost to respondents other than their time to participate.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a proposed information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled Assessing Sexual and Gender Minority (SGM) Occupational Well-Being from The PRIDE Study. This project aims to describe the SGM workforce population, their health and well-being experiences,
CDC must receive written comments on or before July 8, 2024.
You may submit comments, identified by Docket No. CDC-2024-0031 by either of the following methods:
•
•
To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Assessing Sexual and Gender Minority Occupational Well-Being from The PRIDE Study—New—National Institute for Occupational Safety and Health (NIOSH), Centers for Disease Control and Prevention (CDC).
Persons who are lesbian, gay, bisexual, transgender, queer, intersex, or another sexual orientation/gender identity (LGBTQIA+), also known as sexual and gender minority (SGM) persons, comprise a notable and rapidly growing percentage of the U.S. working population. Yet they are often overlooked in terms of health research and policies offering health assurances and safety protections at work. Currently, there is no national dataset or data system that provides detailed health experiences and well-being information on SGM workers. The Population Research in Identity and Disparities for Equality (PRIDE) Study is a national SGM community health survey conducted by The University of California, San Francisco (UCSF) and Stanford University and the first national, longitudinal cohort study of comprehensive SGM physical, mental, and social health that studies how being LGBTQIA+ influences health. The proposed project will enable The PRIDE Study to collect, for the first time, information on the health and well-being experiences of SGM workers, and for NIOSH to use these findings to characterize the U.S. SGM workforce, their health experiences, and factors potentially associated with their work-related health outcomes. Primary data will be collected from The PRIDE Study's ongoing participant cohort, using a survey to collect information through The PRIDE Study's online digital survey platform. The survey will be a modified version of NIOSH's Worker Well-Being Questionnaire (Well-BQ) to include work and health experience information specific to SGM workers. Results will be used to establish descriptive baseline health information on U.S. SGM workers, describe factors that may be associated with SGM worker health and well-being outcomes, and improve the capabilities of The PRIDE Study, a population health assessment tool, to better assess the work-related health experiences of the SGM workforce.
CDC requests OMB approval for an estimated 1,015 annual burden hours. There are no costs to respondents other than their time to participate.
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled “Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery” to the Office of Management and Budget (OMB) for review and approval. CDC previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice on January 23, 2024 to obtain comments from the public and affected agencies. CDC received two comments related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(c) Enhance the quality, utility, and clarity of the information to be collected;
(d) Minimize the burden of the collection of information on those who are to respond, including, through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(e) Assess information collection costs.
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570. Comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery (OMB Control No. 0920-1071, Exp. 5/31/2024)—Revision—National Center for Emerging and Zoonotic Infectious Diseases (NCEZID), Centers for Disease Control and Prevention (CDC).
Executive Order 12862 directs federal agencies to provide service to the public that matches or exceeds the best service available in the private sector. In order to work continuously to ensure that our programs are effective and meet our customers' needs, the National Center for Emerging and Zoonotic Infectious Diseases (NCEZID), Centers for Disease Control and Prevention (CDC) (hereafter the “Agency”) seeks to obtain OMB approval of a Generic Clearance to collect qualitative feedback on our service delivery. By qualitative feedback we mean information that provides useful insights on perceptions and opinions, but are not statistical surveys that yield quantitative results that can be generalized to the population of study.
This collection of information is necessary to enable the Agency to garner customer and stakeholder feedback in an efficient, timely manner, in accordance with our commitment to improving service delivery. The information collected from our customers and stakeholders will help ensure that users have an effective, efficient, and satisfying experience with the Agency's programs. This feedback will provide insights into customer or stakeholder perceptions, experiences and expectations, provide an early warning of issues with service, or focus attention on areas where communication, training or changes in operations might improve delivery of products or services. These collections will allow for ongoing, collaborative and actionable communications between the Agency and its customers and stakeholders. It will also allow feedback to contribute directly to the improvement of program management.
This Revision includes a request to increase the burden allotment from the previously approved 3,850 hours to 5,000 hours. CDC's use of this Generic has continued to increase since 2015. Increasing the burden would help the Agency continue to garner customer and stakeholder feedback to improve service delivery. There is no cost to respondents other than their time to participate.
Office of Planning, Research, and Evaluation, Administration for Children and Families, U.S. Department of Health and Human Services.
Administration for Children and Families, Department of Health and Human Services.
Request for public comments.
The Administration for Children and Families (ACF) proposes to extend approval of the existing overarching generic clearance for Financial Reports used for ACF Non-discretionary Grant Programs (OMB #0970-0510) as well as all information collections currently approved under the overarching generic. There are no changes to the proposed types of information collection or uses of data as described in the overarching generic. The title of the collection has been updated from
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
The information included on the standard Federal Financial Report Form (SF-425; OMB #4040-0014) provides only minimal, bare-bones, non-program specific financial information insufficient for these purposes. This generic clearance allows ACF programs to efficiently develop and receive approval for financial reports that are tailored to specific funding recipients and the associated needs of the program. This umbrella generic is a mechanism that is available to all ACF non-discretionary grant programs to obtain OMB approval of financial forms. Currently only a small number of ACF's non-discretionary grant program financial forms are covered under this umbrella; it does
Program offices use the information collected under this generic information collection to:
• Monitor program operations and prepare technical assistance and guidance as needed.
• Assess the effect of program changes and make informed decisions.
• Assist in the computation of the grant awards issued to each program's grantees.
• Assist in the computation of the Child Support Services program's annual incentive payments.
• Determine that child support collections are being properly distributed (Child Support Services Program only).
• Ensure funding recipients are meeting funding requirements established by Congress.
• Produce annual financial and statistical reports as may be required by Congress and respond to periodic detailed inquiries from Congress.
ACF may require an information collection approved under this generic from funding recipients to obtain or retain benefits.
Prior to a new form being submitted for review under this umbrella generic, ACF will publish a notice in the
This request includes the extension of multiple GenICs and requests updates to three of these GenICs through this revision process.
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Find currently approved information collections here:
Based on use of this generic, we have revised burden estimates for the next 3 years.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration's (FDA), Center for Devices and Radiological Health's (CDRH), Office of Communication and Education (OCE) has modified their organizational structure. The new organizational structure was approved by the Secretary of Health and Human Services on December 21, 2023, and it became effective on January 22, 2024.
Yashika Rahaman, Director, Office of Planning, Evaluation and Risk Management, Office of Finance, Budget, Acquisitions and Planning, Food and Drug Administration, 4041 Powder Mill Rd., Beltsville, MD 20705-4304, 301-796-3843.
Part D, Chapter D-B, (Food and Drug Administration), the Statement of Organization, Functions and Delegations of Authority for the Department of Health and Human Services (35 FR 3685, February 25, 1970, 60 FR 56606, November 9, 1995, 64 FR 36361, July 6, 1999, 72 FR 50112, August 30, 2007, 74 FR 41713, August 18, 2009, 76 FR 45270, July 28, 2011, and 84 FR 22854, May 20, 2019) is amended to reflect the reorganization of the CDRH OCE.
The reorganization retitled OCE as the Office of Communication, Information Disclosure, Training, and Education (OCITE); abolished the Digital Communication Media Staff; established the Office of Communication and Content Development (OCCD) and the Office of Training and Education (OTE) within OCITE, established the Division of Digital Communication and Marketing (DDCM) within OCCD, and realigned the existing divisions to the new offices.
DCCE. ORGANIZATION. CDRH's OCITE is headed by the Director, and includes the following:
Pending further delegation, directives, or orders by the Commissioner of Food and Drugs, all delegations and redelegations of authority made to officials and employees of affected organizational components will continue in them or their successors pending further redelegations, provided they are consistent with this reorganization.
This reorganization is reflected in FDA's Staff Manual Guide (SMG). Persons interested in seeing the complete SMG can find it on FDA's website at:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration's (FDA), Center for Devices and Radiological Health's (CDRH), Office of Product Evaluation and Quality (OPEQ) has modified their organizational structure. The new organizational structure was approved by the Secretary of Health and Human Services on December 21, 2023, and it became effective on January 22, 2024.
Yashika Rahaman, Director, Office of Planning, Evaluation and Risk Management, Office of Finance, Budget, Acquisitions and Planning, Food and Drug Administration, 4041 Powder Mill Rd., Beltsville, MD 20705-4304, 301-796-3843.
Part D, Chapter D-B, (Food and Drug Administration), the Statement of Organization, Functions and Delegations of Authority for the Department of Health and Human Services (35 FR 3685, February 25, 1970, 60 FR 56606, November 9, 1995, 64 FR 36361, July 6, 1999, 72 FR 50112, August 30, 2007, 74 FR 41713, August 18, 2009, 76 FR 45270, July 28, 2011, and 84 FR 22854, May 20, 2019) is amended to reflect the reorganization of the CDRH OCE.
The reorganization of OPEQ impacted the OPEQ's Office of Clinical Evidence and Analysis (OCEA) and the OPEQ's Office of Health Technology IV (OHT IV). OCEA established the Division of Clinical Evidence and Analysis IV and the Division of Clinical Evidence and Analysis V. OHT IV established the Division of Health Technology IV C.
DCCFB. ORGANIZATION. CDRH's OPEQ OCEA is headed by the Director, and includes the following:
DCCFF. ORGANIZATION. CDRH's OPEQ OHT IV is headed by the Director, and includes the following:
Pending further delegation, directives, or orders by the Commissioner of Food and Drugs, all delegations and redelegations of authority made to officials and employees of affected organizational components will continue in them or their successors pending further redelegations, provided they are consistent with this reorganization.
This reorganization is reflected in FDA's Staff Manual Guide (SMG). Persons interested in seeing the complete SMG can find it on FDA's website at:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or Agency) is withdrawing approval of 12 abbreviated new drug applications (ANDAs) from multiple applicants. The applicants notified the Agency in writing that the drug products were no longer marketed and requested that the approval of the applications be withdrawn.
Approval is withdrawn as of June 6, 2024.
Martha Nguyen, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New
The applicants listed in the table have informed FDA that these drug products are no longer marketed and have requested that FDA withdraw approval of the applications under the process described in § 314.150(c) (21 CFR 314.150(c)). The applicants have also, by their requests, waived their opportunity for a hearing. Withdrawal of approval of an application or abbreviated application under § 314.150(c) is without prejudice to refiling.
Therefore, approval of the applications listed in the table, and all amendments and supplements thereto, is hereby withdrawn as of June 6, 2024. Approval of each entire application is withdrawn, including any strengths and dosage forms inadvertently missing from the table. Introduction or delivery for introduction into interstate commerce of products listed in the table without an approved new drug application or ANDA violates sections 505(a) and 301(d) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(a) and 331(d)). Drug products that are listed in the table that are in inventory on June 6, 2024 may continue to be dispensed until the inventories have been depleted or the drug products have reached their expiration dates or otherwise become violative, whichever occurs first.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is issuing an order under the Federal Food, Drug, and Cosmetic Act (FD&C Act) permanently debarring Adam Paul Runsdorf from providing services in any capacity to a person that has an approved or pending drug product application. FDA bases this order on a finding that Mr. Runsdorf was convicted of a felony under Federal law for conduct that relates to the regulation of a drug product under the FD&C Act. Mr. Runsdorf was given notice of the proposed debarment and an opportunity to request a hearing within the timeframe prescribed by regulation. As of February 25, 2024 (30 days after receipt of the notice), Mr. Runsdorf has not responded. Mr. Runsdorf's failure to respond and request a hearing constitutes a waiver of Mr. Runsdorf's right to a hearing concerning this matter.
This order is applicable May 7, 2024.
Any application by Mr. Runsdorf for special termination of debarment under section 306(d)(4) of the FD&C Act (21 U.S.C. 335a(d)(4)) may be submitted at any time as follows:
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• If you want to submit an application with confidential information that you do not wish to be made available to the public, submit the application as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
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• For a written/paper application submitted to the Dockets Management Staff, FDA will post your application, as well as any attachments, except for information submitted, marked, and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit an application with confidential information that you do not wish to be made publicly available, submit your application only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of your application. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Jaime Espinosa, Division of Compliance and Enforcement, Office of Policy, Compliance, and Enforcement, Office of Regulatory Affairs, Food and Drug Administration, 240-402-8743,
Section 306(a)(2)(B) of the FD&C Act requires debarment of an individual from providing services in any capacity to a person that has an approved or pending drug product application if FDA finds that the individual has been convicted of a felony under Federal law for conduct relating to the regulation of any drug product under the FD&C Act. On July 27, 2023, Adam Paul Runsdorf was convicted as defined in section 306(l)(1) of the FD&C Act, in the U.S. District Court for the Eastern District of Texas-Beaumont Division, when the court entered judgment against him, after his plea of guilty, to Conspiracy to Traffick in Drugs with Counterfeit Mark in violation of 18 U.S.C. 371, 18 U.S.C. 2320(a)(4) and Trafficking in Drugs with Counterfeit Mark in violation of 18 U.S.C. 2320(a)(4), 18 U.S.C. 2320(b)(3)(A). The underlying facts supporting the conviction are as follows:
As contained in the Third Superseding Indictment, and as contained in Factual Basis and Stipulation memorandum, between approximately April 2014 and February 2021, Mr. Runsdorf conspired to distribute counterfeit cough syrup. Specifically, Mr. Runsdorf owned a group of pharmaceutical companies including Woodfield Pharmaceutical LLC, a contract manufacturing company, and Woodfield Distribution LLC, a third-party logistics company (collectively, “Woodfield”). On April 25, 2014, Mr. Runsdorf acquired Pernix Manufacturing LLC (Pernix). Pernix had, in January 2014, entered into an agreement with Byron A. Marshall and his Drug Trafficking Organization (DTO) to copy and manufacture cough syrup according to the directions of Marshall and his associates.
Marshall was not licensed or authorized to distribute cough syrup and any background check of the personal information provided by Marshall to Pernix or later Woodfield would have revealed that he was not a licensed physician. Initially, Marshall sought to copy Actavis Prometh VC with Codeine (Actavis). Actavis is a purple, peach-mint flavor prescription cough syrup that was in demand as a street drug. Marshall and his associates wanted to mass produce and traffic a counterfeit version of Actavis that contained Promethazine, but not Codeine. On April 24, 2014, Actavis Holdco US discontinued production of the Actavis product due to its widespread abuse by recreational drug users. A Pernix product-development scientist worked with Marshall and his associates to re-create the Actavis product without Codeine and Promethazine in order to re-create the syrup base, which is a necessary component of cough syrup. Marshall and his associates would add Promethazine to the counterfeit substance prior to bottling and distribution in order to create the drug. Marshall and his DTO also obtained counterfeited commercial-grade pharmaceutical labels designed to look exactly like the genuine labels for the prescription cough syrup from another supplier. Later in the conspiracy, Marshall and his DTO asked Woodfield employees to reformulate other cough syrup to use in their drug trafficking scheme to include Hi-Tech Promethazine Hydrocholoride and Codeine Phosphate Oral Solution and Wockhardt Promethazine Syrup Plain.
As Pernix was scaling-up production of the syrup base for Marshall and his DTO in April 2014, Mr. Runsdorf acquired Pernix. Mr. Runsdorf retained Pernix employees but made changes to management staff who oversaw and were responsible for producing the syrup base for the Marshall DTO, to which they knew the Marshall DTO was adding active ingredients. During the conspiracy, Marshall communicated directly with Mr. Runsdorf regarding production of the counterfeit cough syrup. At Mr. Runsdorf's request, Marshall paid Woodfield in cash only, and Woodfield employees mailed the cash directly to him.
Mr. Runsdorf knew his company was producing thousands of gallons of the counterfeit cough syrup to be distributed to drug traffickers in Texas and other States. Woodfield's production of syrup base for Marshall and his DTO bypassed the protocols for safety and quality testing. Initially, there were no batch records to document the
As a result of this conviction, FDA sent Mr. Runsdorf, by certified mail, on January 23, 2024, a notice proposing to permanently debar him from providing services in any capacity to a person that has an approved or pending drug product application. The proposal was based on a finding, under section 306(a)(2)(B), that Mr. Runsdorf was convicted of two felonies under Federal law for conduct relating to the regulation of a drug product under the FD&C Act. The proposal informed Mr. Runsdorf of the proposed debarment and offered him an opportunity to request a hearing, providing him 30 days from the date of receipt of the letter in which to file the request, and advised him that failure to request a hearing constituted a waiver of the opportunity for a hearing and of any contentions concerning this action. Mr. Runsdorf received the proposal and notice of opportunity for a hearing on January 26, 2024. Mr. Runsdorf failed to request a hearing within the timeframe prescribed by regulation and has, therefore, waived his opportunity for a hearing and waived any contentions concerning his debarment (21 CFR part 12).
Therefore, the Assistant Commissioner, Office of Human and Animal Food Operations, under section 306(a)(2)(B) of the FD&C Act, under authority delegated to the Assistant Commissioner, finds that Mr. Runsdorf has been convicted of a felony under Federal law for conduct relating to the regulation of a drug product under the FD&C Act.
As a result of the foregoing finding, Mr. Runsdorf is permanently debarred from providing services in any capacity to a person with an approved or pending drug product application, effective (see
Food and Drug Administration, HHS.
Notice of availability.
The Food and Drug Administration (FDA or Agency) is announcing the availability of a draft guidance for industry entitled “REMS Logic Model: A Framework to Link Program Design With Assessment.” The guidance describes FDA's risk evaluation and mitigation strategy (REMS) logic model. The REMS logic model is a framework that FDA recommends, which provides applicants with a systematic, structured approach to the design, implementation, and evaluation of a REMS. The aim of applying the REMS logic model is to develop clear goals, objectives, and strategies that align with the intended outcomes and to help applicants of new drug applications (NDAs), biologics license applications (BLAs), and abbreviated new drug applications (ANDAs) incorporate REMS assessment planning into the design of a REMS. The principles in this guidance apply to designing a REMS, developing a REMS assessment, and modifying a REMS.
Submit either electronic or written comments on the draft guidance by August 5, 2024 to ensure that the Agency considers your comment on this draft guidance before it begins work on the final version of the guidance.
You may submit comments on any guidance at any time as follows:
Submit electronic comments in the following way:
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• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
You may submit comments on any guidance at any time (see 21 CFR 10.115(g)(5)).
Submit written requests for single copies of the draft guidance to the Division of Drug Information, Center for Drug Evaluation and Research, Food and Drug Administration, 10001 New Hampshire Ave., Hillandale Building, 4th Floor, Silver Spring, MD 20993-0002; or the Office of Communication, Outreach, and Development, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 3128, Silver Spring, MD 20993-0002. Send one self-addressed adhesive label to assist that office in processing your requests. See the
Gita Toyserkani, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 22, Rm. 1106, Silver Spring, MD, 20993-0002, 301-796-1783, or James Myers, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 7301, Silver Spring, MD 20993-0002, 240-402-7911.
FDA is announcing the availability of a draft guidance for industry entitled “REMS Logic Model: A Framework to Link Program Design With Assessment.” Section 505-1 of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 355-1) establishes FDA's REMS authority. A REMS is a required risk management strategy that can include one or more elements to ensure that the benefits of a drug outweigh its risks (see section 505-1(a) of the FD&C Act). A REMS can include a Medication Guide, a patient package insert, a communication plan, and certain packaging and safe disposal technologies for a drug that poses a serious risk of abuse or overdose. FDA also may require certain elements to assure safe use as part of the REMS for drugs or biological products (see section 505-1(f) of the FD&C Act).
A REMS, like other public health programs, involves a set of activities or interventions to achieve an intended outcome. Program evaluation is a systematic method of collecting, analyzing, and using data to examine the effectiveness and efficiency of those programs and to inform continuous program improvement. Several theories, frameworks, and logic models have been used to guide both program design and evaluation. In particular, logic models describe in detail how a program or intervention operationally works to achieve benefits and captures the logical flow and linkages that exist within the program or intervention and its proximal and distal outcomes. Leveraging this type of systematic approach is a critical aspect to the success and effectiveness of programs.
In 2013, FDA received feedback from the Office of the Inspector General (available at
This draft guidance describes FDA's REMS logic model, which uses common logic model principles adapted for use in a REMS and makes explicit the scientific evidence, assumptions, and underlying logic that support the program and the various processes behind it. The REMS logic model provides applicants
This draft guidance is being issued to fulfill the performance goals (available at
This draft guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The draft guidance, when finalized, will represent the current thinking of FDA on “REMS Logic Model: A Framework to Link Program Design With Assessment.” It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations.
While this guidance contains no collection of information, it does refer to previously approved FDA collections of information. The previously approved collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3521). The collections of information in 21 CFR part 312 for the submission of investigational new drug applications have been approved under OMB control number 0910-0014. The collections of information in 21 CFR part 314 for the submission of new drug applications and abbreviated new drug applications have been approved under OMB control number 0910-0001. The collections of information in 21 CFR part 601 for the submission of biologics license applications have been approved under OMB control number 0910-0338. The collections of information in 21 CFR part 208 pertaining to Medication Guides for prescription drug and biological products have been approved under OMB control number 0910-0393. The collections of information in 21 CFR 201.56 and 201.57 for the content and format requirements for labeling of drugs and biologics have been approved under OMB control number 0910-0572. The collections of information in 21 CFR part 316 regarding orphan drug product development are approved under OMB control number 0910-0167. The collections of information pertaining to Prescription Drug User Fee Program have been approved under OMB control number 0910-0297.
Persons with access to the internet may obtain the draft guidance at
Health Resources and Services Administration (HRSA), Department of Health and Human Services.
Notice.
In compliance with the requirement for opportunity for public comment on proposed data collection projects of the Paperwork Reduction Act of 1995, HRSA announces plans to submit an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB). Prior to submitting the ICR to OMB, HRSA seeks comments from the public regarding the burden estimate, below, or any other aspect of the ICR.
Comments on this ICR should be received no later than July 8, 2024.
Submit your comments to
To request more information on the proposed project or to obtain a copy of the data collection plans and draft instruments, email
When submitting comments or requesting information, please include the ICR title for reference.
• RCORP—Implementation grants fund established networks and consortia to deliver SUD/OUD prevention, treatment, and recovery activities in high-risk rural communities.
• RCORP—Psychostimulant Support grants aim to strengthen and expand access to prevention, treatment, and recovery services for individuals in rural areas who misuse psychostimulants, to enhance their ability to access treatment and move toward recovery.
• RCORP—Medication Assisted Treatment Access grants aim to establish new access points in rural facilities where none currently exist.
• RCORP—Behavioral Health Care support grants aim to expand access to and quality of behavioral health care services at the individual-, provider-, and community-levels.
• RCORP Overdose Response recipients address immediate needs in rural areas through improving access to, capacity for, and sustainability of prevention, treatment, and recovery services for SUD.
• RCORP Child and Adolescent Behavioral Health grants aim to establish and expand sustainable behavioral health care services for children and adolescents aged 5-17 years who live in rural communities.
• RCORP-Neonatal Abstinence Syndrome grants aim to reduce the incidence and impact of Neonatal Abstinence Syndrome in rural communities by improving systems of care, family supports, and social determinants of health.
• Note that additional grant initiatives may be added pending fiscal year 2025 and future fiscal year appropriations.
HRSA currently collects information about RCORP grants using approved
For this program, performance measures were developed to provide data on each RCORP initiative and to enable HRSA to provide aggregate program data required by Congress under the Government Performance and Results Act of 1993. These measures cover the principal topic areas of interest to HRSA's Federal Office of Rural Health Policy, including: (a) provision of, and referral to, rural behavioral health care services, including SUD prevention, treatment and recovery support services; (b) behavioral health care, including SUD prevention, treatment, and recovery, process and outcomes; (c) education of health care providers and community members; (d) emerging trends in rural behavioral health care needs and areas of concern; and (e) consortium strength and sustainability. All measures will speak to the progress on meeting the set goals of the Federal Office of Rural Health Policy.
HRSA specifically requests comments on (1) the necessity and utility of the proposed information collection for the proper performance of the agency's functions, (2) the accuracy of the estimated burden, (3) ways to enhance the quality, utility, and clarity of the information to be collected, and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the Board of Scientific Counselors, National Institute of Dental and Craniofacial Research.
The meeting will be closed to the public as indicated below in accordance with the provisions set forth in section 552b(c)(6), title 5 U.S.C., as amended for the review, discussion, and evaluation of individual intramural programs and projects conducted by the National Institute of Dental and Craniofacial Research, including consideration of personnel qualifications and performance, and the competence of individual investigators, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Fish and Wildlife Service, Interior.
Notice of receipt of application; proposed incidental harassment authorization; draft environmental assessment; request for comments.
We, the U.S. Fish and Wildlife Service, in response to a request under the Marine Mammal Protection Act of 1972, as amended, from the City and Borough of Sitka, Alaska, propose to authorize nonlethal, incidental take by harassment of small numbers of Southeast Alaska stock of northern sea otters (
Comments on this proposed incidental harassment authorization and the accompanying draft environmental assessment must be received by June 6, 2024.
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We will post all comments at
Charles Hamilton, U.S. Fish and Wildlife Service, 1011 East Tudor Road, MS-341, Anchorage, AK 99503; by email at
Section 101(a)(5)(D) of the Marine Mammal Protection Act of 1972 (MMPA; 16 U.S.C. 1361
(1) will affect only small numbers of individuals of the species or stock;
(2) will have no more than a negligible impact on the species or stock; and
(3) will not have an unmitigable adverse impact on the availability of the species or stock for taking for subsistence use by Alaska Natives.
If the requisite findings are made, we issue an authorization that sets forth the following, where applicable:
(1) permissible methods of taking;
(2) means of effecting the least practicable adverse impact on the species or stock and its habitat and the availability of the species or stock for subsistence uses; and
(3) requirements for monitoring and reporting of such taking by harassment, including, in certain circumstances, requirements for the independent peer review of proposed monitoring plans or other research proposals.
The term “take” means to harass, hunt, capture, or kill, or to attempt to harass, hunt, capture, or kill any marine mammal. “Harassment” for activities other than military readiness activities or scientific research conducted by or on behalf of the Federal Government means any act of pursuit, torment, or annoyance which (a) has the potential to injure a marine mammal or marine mammal stock in the wild (the MMPA defines this as “Level A harassment”), or (b) 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 (the MMPA defines this as “Level B harassment”).
The terms “negligible impact” and “unmitigable adverse impact” are defined in 50 CFR 18.27 (
The term “small numbers” is also defined in 50 CFR 18.27. However, we do not rely on that definition here as it conflates “small numbers” with “negligible impacts.” We recognize “small numbers” and “negligible impacts” as two separate and distinct considerations when reviewing requests for incidental harassment authorizations (IHA) under the MMPA (see
The term “least practicable adverse impact” is not defined in the MMPA or its enacting regulations. For this IHA, we ensure the least practicable adverse impact by requiring mitigation measures that are effective in reducing the impact of project activities, but they are not so restrictive as to make project activities unduly burdensome or impossible to undertake and complete.
If the requisite findings are made, we shall issue an IHA, which may set forth the following, where applicable: (i) permissible methods of taking; (ii) 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 subsistence uses by coastal-dwelling Alaska Natives (if applicable); and (iii) requirements for monitoring and reporting take by harassment.
On August 18, 2023, the City and Borough of Sitka (hereafter “CBS” or “the applicant”) submitted a request to the FWS for the nonlethal, incidental harassment of a small number of northern sea otters (
The specified activity (“the project”) involves the construction of a new seaplane base by the CBS on the shore of Japonski Island in Sitka, Alaska. Construction will include creation of an upland approach, storage area and
Twelve 16-inch galvanized steel piles will be temporarily installed as templates to guide permanent piles using a vibratory hammer for both installation and removal, and an impact hammer for installation only. Ten permanent 16-inch-diameter galvanized steel piles and 16 permanent 24-inch galvanized steel piles will be driven using a vibratory hammer, socketed using down-the-hole drilling equipment, and driven with an impact hammer. These piles will support the approach dock, pedestrian and vehicle transfer bridge, drive-down float, and seaplane ramp float.
The upland project area will be developed through blasting and excavation. Over a period of 62 days, approximately 7,263 cubic meters (m
A material barge, construction barge, and skiff will be used to transport materials, equipment, and personnel to the project location. The materials barge will originate in Seattle, Washington, travelling at an average of 6 knots, and be used on location as a staging area during construction, tied to existing harbor structures. The construction barge will originate in coastal Alaska, travelling at an average of 6 knots, and will be used on location to support construction, and will be secured in place by four mooring anchors. The skiff will be used to transport personnel less than 91 meters (m) (300 feet (ft)) to the barge work platform multiple times a day at a speed no higher than 5 knots. Additionally, standard barges, tugboats, and other equipment may be used to place and position piles on the substrate.
Project activities would begin as early as July 2024 and be completed by July 2025. During this time, piling driving activities are expected to occur for 46 hours over a period of 31 days with 18 days of activity. Vibratory pile driving would occur for approximately 8.4 hours, impact pile driving would occur for approximately 3.1 hours, and down-the-hole drilling would occur for approximately 34 hours. Fill in marine waters would occur over a period of 11 hours and fill in intertidal waters would occur over a period of 641 hours.
Additional project details may be reviewed in the application materials available as described under
The northern sea otter is the only marine mammal under the FWS's jurisdiction that normally occupies the Northeast Pacific Ocean. Sea otters in Alaska are represented by three stocks: the Southwest Alaska stock, the Southcentral Alaska stock, and the Southeast Alaska stock. Those in the Northeast Pacific Ocean belong to the Southeast Alaska stock. Detailed information about the biology of the Southeast Alaska stock can be found in the most recent stock assessment report (88 FR 53510, August 8, 2023), available at:
Sea otters may be distributed anywhere within the specific geographic region other than upland areas; however, they generally occur in shallow water near the shoreline. They are most commonly observed within the 40-meter (m) (131-foot (ft)) depth contour (88 FR 53510, August 8, 2023), although they can be found in areas with deeper water. Ocean depth is generally correlated with distance to shore, and sea otters typically remain within 1 to 2 kilometers (km) (0.62 to 1.24 miles (mi)) of shore (Riedman and Estes 1990). They tend to be found closer to shore during storms, but they venture farther out during good weather and calm seas (Lensink 1962; Kenyon 1969). In the 14 aerial surveys conducted from 1995 to 2012 in Southeast Alaska, 95 percent of otters were found in areas shallower than 40 m (131 ft) (Tinker et al. 2019). Areas important to mating for the Southeast Alaska stock include marine coastal regions containing adequate food resources within the 40-m (131-ft) depth contour.
The 1995-2012 survey data were combined with results from recent aerial surveys conducted in Glacier Bay National Park and incorporated into a spatiotemporal model of ecological diffusion using a Bayesian hierarchical framework as described in Eisaguirre et al. (2021) (88 FR 53510, August 8, 2023). This model was used to develop the most recent estimate of 27,285 otters in the Southeast Alaska stock and generated otter abundance estimates at a resolution of 1000 m by 1000 m. Abundance values within the project area ranged from 0.065 to 0.65 otters per square kilometer (km
The documented home range sizes and movement patterns of sea otters illustrate the types of movements that could be seen among otters responding to the proposed activities. Sea otters are nonmigratory and generally do not disperse over long distances (Garshelis and Garshelis 1984). They usually remain within a few kilometers of their established feeding grounds (Kenyon 1981). Breeding males stay for all or part of the year in a breeding territory covering up to 1 km (0.62 mi) of coastline while adult females have home ranges of approximately 8 to 16 km (5 to 10 mi), which may include one or more male territories. Juveniles move greater distances between resting and foraging areas (Lensink 1962; Kenyon 1969; Riedman and Estes 1990; Estes and Tinker 1996). Although sea otters generally remain local to an area, they are capable of long-distance travel. Otters in Alaska have shown daily movement distances greater than 3 km (1.9 mi) at speeds up to 5.5 km per hour (km/hr) (3.4 mi per hour (mi/h)) (Garshelis and Garshelis 1984).
The project has the potential to result in take of sea otters by Level B harassment from noise. Here, we characterize “noise” as sound released into the environment from human activities that exceeds ambient levels or interferes with normal sound production or reception by sea otters. The terms “acoustic disturbance” or “acoustic harassment” are disturbances or harassment events resulting from noise exposure. Potential effects of noise exposure are likely to depend on the distance of the sea otter from the sound source, the level and intensity of sound the sea otter receives, background noise levels, noise frequency, noise duration, and whether the noise is pulsed or continuous. The actual noise level perceived by individual sea otters will also depend on whether the sea otter is above or below water and atmospheric and environmental conditions. Temporary disturbance of sea otters or localized displacement reactions are the most likely effects to occur from noise exposure. No lethal take is anticipated, nor was it requested by the applicant. Therefore, none will be authorized.
Seaplane base construction activities will fall within the hearing range of sea otters. Controlled sound exposure trials on southern sea otters (
Exposure to high levels of sound may cause changes in behavior, masking of communications, temporary or permanent changes in hearing sensitivity, discomfort, and injury to marine mammals. Unlike other marine mammals, sea otters do not rely on sound to orient themselves, locate prey, or communicate under water; therefore, masking of communications by anthropogenic sound is less of a concern than for other marine mammals. However, sea otters, especially mothers and pups, do use sound for communication in air (McShane et al. 1995), and sea otters may monitor underwater sound to avoid predators (Davis et al. 1987).
Noise exposure criteria for identifying underwater noise levels capable of causing Level A harassment (injury) to marine mammal species, including sea otters, have been established using the same methods as those used by National Marine Fisheries Service (NMFS) (Southall et al. 2019). These criteria are based on estimated levels of sound exposure capable of causing a permanent shift in hearing sensitivity (
Sound exposure thresholds incorporate two metrics of exposure: the peak level of instantaneous exposure likely to cause PTS and the cumulative sound exposure level during a 24-hour period (SEL
Thresholds based on TTS have been used as a proxy for Level B harassment (70 FR 1871, January 11, 2005; 71 FR 3260, January 20, 2006; 73 FR 41318, July 18, 2008). Southall et al. (2007) derived TTS thresholds for pinnipeds based on 212 dB peak and 171 dB SEL
The NMFS (2018) criteria do not identify sound level thresholds for avoidance of Level B harassment. For pinnipeds under their jurisdiction (seals and sea lions), the NMFS has adopted a 160-dB threshold for Level B harassment from exposure to impulsive noise and a 120-dB threshold for continuous noise (81 FR 51693, August 4, 2016; NMFS 2022). These thresholds were developed from observations of mysticete (baleen) whales responding to airgun operations (Malme et al. 1983a, b; Richardson et al. 1986, 1995) and from equating Level B harassment with noise levels capable of causing TTS in lab settings. Southall et al. (2007, 2019) assessed behavioral response studies and found considerable variability among pinnipeds. The authors determined that exposures between approximately 90 to 140 dB generally do not appear to induce strong behavioral responses from pinnipeds in water. However, they found behavioral effects, including avoidance, become more likely in the range between 120 to 160 dB, and most marine mammals showed some, albeit variable, responses to sound between 140 to 180 dB. Wood et al. (2012) adapted the approach identified in Southall et al. (2007) to develop a probabilistic scale for marine mammal taxa at which 10 percent, 50 percent, and 90 percent of individuals exposed are assumed to produce a behavioral response. For many marine mammals, including pinnipeds, these response rates were set at sound pressure levels of 140, 160, and 180 dB, respectively.
We have evaluated these thresholds and determined that a Level B harassment threshold of 120 dB for nonimpulsive noise is not applicable to sea otters. The 120-dB threshold is based on studies in which gray whales (
Based on the best available scientific information about sea otters, and closely related marine mammals when sea otter data are limited, the FWS has set 160 dB of received underwater sound as a threshold for Level B take by disturbance for sea otters for this IHA. Exposure to unmitigated in-water noise levels between 125 Hz and 38 kHz that are greater than 160 dB—for both impulsive and nonimpulsive sound sources—will be considered by the FWS as Level B harassment. Thresholds for potentially injurious Level A take will be 232-dB peak or 203-dB SEL for impulsive sounds and 219-dB SEL for continuous sounds (table 1).
The NMFS (2018) guidance neither addresses thresholds for preventing injury or disturbance from airborne noise, nor provides thresholds for avoidance of Level B harassment. Southall et al. (2007) suggested thresholds for PTS and TTS for sea lions exposed to non-pulsed airborne noise of 172.5 and 159 dB re (20 µPa)2-s SEL. Conveyance of underwater noise into the air is of little concern since the effects of pressure release and interference at the water's surface reduce underwater noise transmission into the air. For activities that create both in-air and underwater sounds, we will estimate take based on parameters for underwater noise transmission. This estimation will also account for exposures to sea otters at the surface, as sound energy travels more efficiently through water than through air.
Sea otters may be more resistant to the effects of sound disturbance and human activities than other marine mammals. For example, southern sea otters were observed to not change their presence, density, or behavior in response to underwater sounds from industrial noise recordings at 110 dB and a frequency range of 50 Hz to 20 kHz, even at the closest distance of 0.5 nautical miles (<1 km or 0.6 mi) (Riedman 1983). Southern sea otters did not respond noticeably to noise from a single 1,638 cubic centimeter (cm
Noise exposure may be influenced by the amount of time sea otters spend at the water's surface. Noise at the water's surface can be attenuated by turbulence from wind and waves more quickly compared to within deeper water, reducing potential noise exposure (Greene and Richardson 1988, Richardson et al. 1995). Additionally, turbulence at the water's surface limits the transference of sound from water to air. A sea otter with its head above water will be exposed to only a small fraction of the sound energy traveling through the water beneath it. The average amount of time that sea otters spend above the water each day while resting and grooming varies between males and females and across seasons (Esslinger et al. 2014, Zellmer et al. 2021). For example, female sea otters foraged for an average of 8.78 hours per day compared to male sea otters, which foraged for an average of 7.85 hours per day during the summer months (Esslinger et al. 2014). Male and female sea otters spend an average of 63 to 67 percent of their day at the surface resting and grooming during the summer months (Esslinger et al. 2014). Few studies have evaluated foraging times during the winter months. Garshelis et al. (1986) found that foraging times increased from 5.1 hours per day to 16.6 hours per day in the winter; however, Gelatt et al. (2002) did not find a significant difference in seasonal foraging times. It is likely that seasonal variation is determined by seasonal differences in energetic demand and the quality and availability of prey sources (Esslinger et al. 2014). These findings suggest that the large portion of the day sea otters spend at the surface may help limit sea otters' exposure during noise-generating operations.
Sea otter sensitivity to industrial activities may be influenced by the overall level of human activity within the sea otter population's range. In locations that lack frequent human activity, sea otters appear to have a lower threshold for disturbance. Sea otters in Alaska exhibited escape behaviors in response to the presence and approach of vessels (Udevitz et al. 1995). Behaviors included diving or actively swimming away from a vessel, sea otters on haulouts entering the water, and groups of sea otters disbanding and swimming in multiple directions (Udevitz et al. 1995). Alaskan sea otters were observed to avoid areas with heavy boat traffic and return to these areas during seasons with less vessel traffic (Garshelis and Garshelis 1984). In Cook Inlet, sea otters drifting on a tide trajectory that would have taken them within 500 m (0.3 mi) of an active offshore drilling rig were observed to swim in order to avoid a close approach of the drilling rig despite near-ambient noise levels (BlueCrest 2013). Sea otter responses to disturbance can result in energetic costs, which increases the amount of prey required by sea otters (Barrett 2019). This increased prey consumption may impact sea otter prey availability and cause sea otters to spend more time foraging and less time resting (Barrett 2019).
Individual sea otters in Sitka will likely show a range of responses to noise from pile driving activities. Some sea otters will likely show startle responses, change direction of travel, dive, or prematurely surface. Sea otters reacting to survey activities may divert time and attention from biologically important behaviors, such as feeding and nursing pups. Some sea otters may abandon the project area and return when the disturbance has ceased. Based on the observed movement patterns of sea otters (Lensink 1962; Kenyon 1969, 1981; Garshelis and Garshelis 1984; Riedman and Estes 1990; Tinker and Estes 1996), we expect some individuals will respond to pile driving activities by dispersing to nearby areas of suitable habitat; however, other sea otters, especially territorial adult males, will not be displaced.
Vessel collisions with marine mammals can result in death or serious injury. Wounds resulting from vessel strike may include massive trauma, hemorrhaging, broken bones, or propeller lacerations (Knowlton and Kraus 2001). An individual may be harmed by a vessel if the vessel runs over the animal at the surface, the animal hits the bottom of a vessel while the animal is surfacing, or the animal is cut by a vessel's propeller. Mortality associated with vessel strike has been determined based on recovery of carcasses with lacerations indicative of propeller injuries (Wild and Ames 1974; Morejohn et al. 1975). Vessel strike has been documented as a cause of death across all three stocks of northern sea otters in Alaska. In a review of sea otter mortality that occurred during a 10-year period (2002-12), 10 individuals out of 483 with an identifiable cause of death were determined to die due to trauma from a boat strike (Burek-Huntington et al. 2021). These events occurred in across central and southeast Alaska, with fatalities occurring in the specified geographic region of Sitka. In many boat strike cases, trauma was determined to be the ultimate cause of death; however, there was a contributing factor, such as disease or biotoxin exposure, which incapacitated the sea otter and made it more vulnerable to vessel strike (88 FR 53510, August 8, 2023).
Vessel speed influences the likelihood of vessel strikes involving sea otters. The probability of death or serious injury to a marine mammal increases as vessel speed increases (Laist et al. 2001; Vanderlaan and Taggart 2007). Sea otters spend a considerable portion of their time at the water's surface (Esslinger et al. 2014), and are typically visually aware of approaching vessels and can move away if a vessel is not traveling too quickly. The CBS has committed to speeds of 6 knots for their materials and construction barges and 5 knots for their personnel skiffs. These speeds are slow enough to allow nearby sea otters to move away from vessels if needed, and significantly reduce the risk of potential boat strike.
Sea otters exhibit behavioral flexibility in response to vessels, and their responses may be influenced by the intensity and duration of the vessel's activity. For example, sea otter populations in Alaska were observed to avoid areas with heavy vessel traffic but return to those same areas during seasons with less vessel traffic (Garshelis and Garshelis 1984). Sea otters have also shown signs of disturbance or escape behaviors in response to the presence and approach of survey vessels, including: sea otters diving and/or actively swimming away from a vessel; sea otters on haulouts entering the water; and groups of sea otters disbanding and swimming in multiple different directions (Udevitz et al. 1995).
Additionally, sea otter responses to vessels may be influenced by the sea otter's previous experience with vessels. Sea otters in different study locations in California were found to exhibit markedly different responses to kayakers, suggesting a different level of tolerance between the groups (Gunvalson 2011). Benham (2006) found evidence that the sea otters exposed to high levels of recreational activity may have become more tolerant than individuals in less-disturbed areas. Sea otters off the California coast showed only mild interest in vessels passing
The reactions of wildlife to disturbance can range from short-term behavioral changes to long-term impacts that affect survival and reproduction. When disturbed by noise, animals may respond behaviorally (
These examples illustrate direct effects on survival and reproductive success, but disturbances can also have indirect effects. Response to noise disturbance is considered a nonlethal stimulus that is similar to an antipredator response (Frid and Dill 2002). Sea otters are susceptible to predation, particularly from killer whales and eagles, and have a well-developed antipredator response to perceived threats. For example, the presence of a harbor seal (
Although an increase in vigilance or a flight response is nonlethal, a tradeoff occurs between risk avoidance and energy conservation. An animal's reactions to noise disturbance may cause stress and direct an animal's energy away from fitness-enhancing activities such as feeding and mating (Frid and Dill 2002, Goudie and Jones 2004). For example, southern sea otters in areas with heavy recreational boat traffic demonstrated changes in behavioral time budgeting, showing decreased time resting and changes in haulout patterns and distribution (Benham et al. 2006, Maldini et al. 2012). Chronic stress can also lead to weakened reflexes, lowered learning responses (Welch and Welch 1970, van Polanen Petel et al. 2006), compromised immune function, decreased body weight, and abnormal thyroid function (Seyle 1979).
Changes in behavior resulting from anthropogenic disturbance can include increased agonistic interactions between individuals or temporary or permanent abandonment of an area (Barton et al. 1998). The extent of previous exposure to humans (Holcomb et al. 2009), the type of disturbance (Andersen et al. 2012), and the age or sex of the individuals (Shaughnessy et al. 2008, Holcomb et al. 2009) may influence the type and extent of response.
Physical and biological features of habitat essential to the conservation of sea otters include the benthic invertebrates (
Construction activities, such as pile driving and fill placement, may generate in-water noise at levels which can temporarily displace sea otters from important habitat and impact sea otter prey species. The primary prey species for sea otters are sea urchins, abalone, clams, mussels, crabs, and squid (Tinker and Estes 1996). When preferential prey are scarce, sea otters will also eat kelp, slow-moving benthic fishes, sea cucumbers, egg cases of rays, turban snails (
While these studies provide evidence of deleterious effects to invertebrates as a result of increased sound levels, Carroll et al. (2017) caution that there is a wide disparity between results obtained in field and laboratory settings. In experimental settings, changes were observed only when animals were housed in enclosed tanks and many were exposed to prolonged bouts of continuous, pure tones. We would not expect similar results in open marine conditions. It is unlikely that noises generated by project activities will have any lasting effect on sea otter prey given the short-term duration of sounds produced by each component of the proposed work.
Noise-generating activities that interact with the seabed can produce vibrations, resulting in the disturbance of sediment and increased turbidity in the water. Although turbidity is likely to have little impact on sea otters and prey species (Todd et al. 2015), there may be some impacts from vibrations and increased sedimentation. For example, mussels (
The proposed specified activities will occur near marine subsistence harvest areas used by Alaska Native Peoples from Sitka and the surrounding areas. Subsistence harvest of sea otters in the Sitka subregion has been consistent over time. Between 1988 and 2015, it is estimated that 12,546 sea otters were harvested in southeast Alaska. Of these harvests, 2,744, or roughly 22 percent, occurred in the Sitka subregion.
The proposed project is immediately adjacent to Sitka Airport and the Sitka harbor. Active subsistence harvest does not typically occur in these heavily used areas. Construction activities will not preclude access to hunting areas or interfere in any way with individuals wishing to hunt. In September 2018, the Alaska Harbor Seal Commission, the Alaska Sea Otter and Steller Sea Lion Commission, and the Sitka Tribe of Alaska were contacted by CBS to discuss a project in Sitka Channel and request comments. The Commissions and Sitka Tribe of Alaska did not express concerns with the project impacting the harvest of marine mammals. However, the Sitka Tribe of Alaska did request that no pile driving be conducted from March 15 to May 31 to protect herring, and the CBS will honor the request. If any conflicts are identified in the future, the CBS will develop a plan of cooperation (POC) specifying the particular steps necessary to minimize any effects the project may have on subsistence harvest.
If an IHA for the project is issued, it must specify means for effecting the least practicable adverse impact on sea otters and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance and the availability of sea otters for subsistence uses by coastal-dwelling Alaska Natives.
In evaluating what mitigation measures are appropriate to ensure the least practicable adverse impact on species or stocks and their habitat, as well as subsistence uses, we considered the manner and degree to which the successful implementation of the measures are expected to achieve this goal. We considered the nature of the potential adverse impact being mitigated (likelihood, scope, range), the likelihood that the measures will be effective if implemented, and the likelihood of effective implementation. We also considered the practicability of the measures for applicant implementation (
To reduce the potential for disturbance from acoustic stimuli associated with the activities, the applicants have proposed mitigation measures including the following:
• Development of a marine mammal monitoring and mitigation plan;
• Establishment of shutdown and monitoring zones;
• Monitoring by designated protected species observers (PSOs);
• Clearance of the site before startup;
• Limiting in-water activity to daylight hours;
• Use of silt curtains to prevent sedimentation and turbidity during down-the-hold drilling;
• Adherence to soft-start procedures; and
• Shutdown procedures.
These measures are further specified under Proposed Authorization, part
Below we provide definitions of three potential types of take of sea otters. The FWS does not anticipate and is not authorizing lethal take or Level A harassment as a part of this proposed IHA; however, the definitions of these take types are provided for context and background.
The FWS has identified the following sea otter behaviors as indicating possible Level B harassment:
• Swimming away at a fast pace on belly (
• Repeatedly raising the head vertically above the water to get a better view (spyhopping) while apparently agitated or while swimming away;
• In the case of a pup, repeatedly spyhopping while hiding behind and holding onto its mother's head;
• Abandoning prey or feeding area;
• Ceasing to nurse and/or rest (applies to dependent pups);
• Ceasing to rest (applies to independent animals);
• Ceasing to use movement corridors;
• Ceasing mating behaviors;
• Shifting/jostling/agitation in a raft so that the raft disperses;
• Sudden diving of an entire raft; or
• Flushing animals off a haulout.
This list is not meant to encompass all possible behaviors; other behavioral responses may also be indicative of Level B harassment. Relatively minor changes in behavior such as the animal raising its head or temporarily changing
The FWS does not anticipate, nor do we propose to authorize, the Level A or Level B harassment of sea otters as a result of vessel operations or placement of fill in the waterway. Vessels will be operated in areas with year-round boat traffic at conservatively slow speeds, significantly reducing the probability of sea otter harassment. Deposition of fill material is not anticipated to generate appreciable underwater noise (Dickerson et al. 2001, Nedwell and Howell 2004). Finally, otters are not anticipated to be physically injured due to fill deposition due to the use of protected species observers and shutdown zones.
We assumed all animals exposed to underwater sound levels from pile driving operations that meet the acoustic exposure criteria shown in table 1 will experience, at a minimum, take by Level B harassment due to exposure to underwater noise. Spatially explicit zones of ensonification were established around the proposed construction location to estimate the number of otters that may be exposed to these sound levels.
The project can be divided into three major components: down-the-hole drilling, vibratory hammering, and pile-driving using an impact hammer. Each of these components will generate a different type of in-water noise. Vibratory hammering will produce nonimpulsive or continuous noise, impact driving will produce impulsive noise, and down-the-hole drilling is considered to produce both impulsive and continuous noise (NMFS 2020).
The level of sound anticipated from each project component was established using recorded data from pile-driving in Friday Harbor, Washington, Bangor Naval Base, Washington, and Trinidad Bay, California (a proxy for vibratory hammering; NAVFAC 2015); Rodeo, California (a proxy for impact hammering of 24-inch piles; Caltrans 2020); Anderson, California (a proxy for impact hammering of 16-inch piles; Caltrans 2020); Tenakee Springs, Alaska (a proxy for down-the-hole drilling of 16-inch and 24-inch piles; Heyvaert and Reyff 2021); and Biorka Island, Alaska (a proxy for down-the-hole drilling of 24-inch piles; Guan and Miner 2020). The NMFS Technical Guidance and User Spreadsheet (NMFS 2018, 2020) was used to determine the distance at which sound levels would attenuate to Level A harassment thresholds, and we used the NMFS Multi-species pile driving calculator to determine the distance at which sound levels would attenuate to Level B harassment thresholds (table 2). The weighting factor adjustment included in the NMFS User Spreadsheet accounts for sound created in portions of an organism's hearing range where they have less sensitivity. We used the weighting factor adjustment for otariid pinnipeds (2), as they are the closest available physiological and anatomical proxy for sea otters. Both tools incorporate a transmission loss coefficient, which accounts for the reduction in sound level outward from a sound source. We used the NMFS-recommended transmission loss coefficient of 15 for coastal pile-driving activities to indicate simple spread (NMFS 2020).
Recent estimates of the number of sea otters in the project area are less than one otter per square kilometer. Tinker et al. (2019) estimated an average of 0.85 otters/km
To determine the number of sea otters that may experience in-water sound greater than 160 dB, we calculated the area of potential impact for each project activity (
Although sea otters are non-migratory, they typically move amongst focal areas within their home ranges to rest and forage (Garshelis and Garshelis 1984, Laidre et al. 2009). It is possible that given the density of sea otters in the region, the large variability in individual home range sizes, and the potential for up to daily movement in and out of foraging or resting areas, that a different mom-pup pair could be found within the ensonification zone each day of the project. Thus, the FWS conservatively assumes that the 36 estimated harassment events may impact up to 36 different sea otters. However, should an individual or mom-pup pair remain in the impact area more than one day, and therefore experience Level B harassment more than once, we do not anticipate repeated exposure events to lead to harassment greater than Level B. No Level A harassment (
We estimate 36 takes of 36 sea otters by Level B harassment will occur due to the proposed specified activities. To conduct this analysis and estimate the potential amount of Level B harassment, several critical assumptions were made.
Otter density was calculated using a state-space model created by Tinker et al. (2019) and a Bayesian hierarchical model created by Eisaguirre et al. (2021), which includes assumptions that can be found in the original publications. The northern sea otter southeast stock Stock Assessment Report (88 FR 53510, August 8, 2023) also elaborates on the inclusion of Glacier Bay National Park aerial surveys into the most recent iteration of the Eisaguirre et al. (2021) Bayesian hierarchical model.
Sound level estimates for construction activities were generated using sound source verification from recent pile-driving activities in several locations in California, Washington, and Alaska. Environmental conditions in these locations, including water depth, substrate, and ambient sound levels are similar to those in the project location but not identical. Further, estimation of ensonification zones were based on sound attenuation models using a simple spreading loss model. These factors may lead to actual sound values differing slightly from those estimated here.
Finally, the pile-driving activities described here will also create in-air noise. Because sea otters spend over half of their day with their heads above water (Esslinger et al. 2014), they will be exposed to increases in in-air noise from
Sea otters exposed to project-produced sounds are likely to respond with temporary behavioral modification or displacement. Project activities could temporarily interrupt the feeding, resting, and movement of sea otters. Because activities will occur during a limited amount of time and in a localized region, the impacts associated with the project are likewise temporary and localized. The anticipated effects are primarily short-term behavioral reactions and displacement of sea otters near active operations.
Sea otters that encounter the specified activity may exert more energy than they would otherwise due to temporary cessation of feeding, increased vigilance, and retreat from the project area. We expect that affected sea otters will tolerate this exertion without measurable effects on health or reproduction. Most of the anticipated takes will be due to short-term Level B harassment in the form of TTS, startling reactions, or temporary displacement. Chronic exposure to sound levels that cause TTS may lead to PTS (which would constitute Level A harassment). While more research into the relationship between chronic noise exposure and PTS is needed (Finneran 2015), it is likely that the transition from temporary effects to permanent cellular damage occurs over a longer time period than the proposed project activities (Southall et al. 2019). With the adoption of the mitigation measures proposed in the request and required by this proposed IHA, estimated take was reduced.
For our small numbers determination, we consider whether the estimated number of sea otters to be subjected to incidental take is small relative to the population size of the species or stock. We estimate the CBS's specified activities in the specified geographic region will take no more than 36 takes of sea otters by Level B harassment during the 1-year period of this proposed IHA (see
We propose a finding that any incidental take by Level B harassment resulting from the specified activities cannot be reasonably expected to, and is not reasonably likely to, adversely affect the Southeast Alaska stock of northern sea otters through effects on annual rates of recruitment or survival and will, therefore, have no more than a negligible impact on the stock. In making this finding, we considered the best available scientific information, including the biological and behavioral characteristics of the species, the most recent information on species distribution and abundance within the area of the specified activities, the current and expected future status of the stock (including existing and foreseeable human and natural stressors), the potential sources of disturbance caused by the project, and the potential responses of marine mammals to this disturbance. In addition, we reviewed applicant-provided materials, information in our files and datasets, published reference materials, and species experts.
Sea otters are likely to respond to planned activities with temporary behavioral modification or temporary displacement. These reactions are not anticipated to have consequences for the long-term health, reproduction, or survival of affected animals. Most animals will respond to disturbance by moving away from the source, which may cause temporary interruption of foraging, resting, or other natural behaviors. Affected animals are expected to resume normal behaviors soon after exposure, with no lasting consequences. Sea otters may move in and out of the project area during pile driving activities, leading to as many as 36 individuals experiencing one day of exposure. However, it is possible that an individual or a mom-pup pair may enter the ensonification area more than once during the project. At most, if the same mom-pup pair enters the ensonification area every day pile driving occurs, the mom-pup pair would experience Level B harassment for 18 days. However, injuries (
The total number of animals affected and severity of impact are not sufficient to change the current population dynamics at the stock scale. Although the specified activities may result in approximately 36 incidental takes of up to 36 sea otters from the Southeast Alaska stock, we do not expect this level of harassment to affect annual rates of recruitment or survival or result in adverse effects on the stock.
Our proposed finding of negligible impact applies to incidental take associated with the specified activities as mitigated by the avoidance and minimization measures identified in the City and Borough of Sitka's mitigation and monitoring plan. These mitigation measures are designed to minimize interactions with and impacts to sea otters. These measures and the monitoring and reporting procedures are required for the validity of our finding and are a necessary component of the proposed IHA. For these reasons, we propose a finding that the specified project will have a negligible impact on the Southeast Alaska stock of northern sea otters.
To reduce the potential for disturbance from their specified activities, the CBS will implement mitigation measures as described in Mitigation Measures and further specified under Proposed Authorization, part
We evaluated the manner and degree to which the successful implementation of the measures are expected to ensure the least practicable adverse impact on species or stocks and their habitat, as well as subsistence uses. We considered the nature of the potential adverse impact being mitigated (likelihood, scope, range), the likelihood that the measures will be effective if implemented, and the likelihood of effective implementation. We also considered the practicability of the measures for applicant implementation (
During the IHA application process, the FWS coordinated closely with the applicant to discuss potential mitigation measures and their practicability. A comprehensive list of these measures can be found in the supplemental information for this proposed IHA. One notable measure considered by both the FWS and CBS but deemed to be impracticable was the use of bubble curtains during pile driving. The CBS has stated the small-diameter piles used in this project will be placed closely together, and this close placement will not allow enough space to deploy bubble curtains, sound mitigation screens, or nets to dampen sound.
Following the discussion of potential mitigation measures with the applicant, the FWS has not identified any additional (
We propose a finding that the CBS's anticipated harassment will not have an unmitigable adverse impact on the availability of the Southeast Alaska stock of northern sea otters for taking for subsistence uses. In making this finding, we considered the timing and location of the proposed activities and the timing and location of subsistence harvest activities in the area of the proposed project. We also considered the applicant's consultation with subsistence communities, proposed measures for avoiding impacts to subsistence harvest, and commitment to development of a POC, should any concerns be identified.
We have prepared a draft environmental assessment in accordance with the NEPA (42 U.S.C. 4321
Under the Endangered Species Act (ESA) (16 U.S.C. 1536(a)(2)), all Federal agencies are required to ensure the actions they authorize are not likely to jeopardize the continued existence of any threatened or endangered species or result in destruction or adverse modification of critical habitat. The specified activities would occur entirely within the range of the Southeast Alaska stock of northern sea otters, which is not listed as threatened or endangered under the ESA.
The authorization of incidental take of sea otters and the measures included in the proposed IHA would not affect other listed species or designated critical habitat.
It is our responsibility to communicate and work directly on a Government-to-Government basis with federally recognized Alaska Native Tribes and organizations in developing programs for healthy ecosystems. We seek their full and meaningful participation in evaluating and addressing conservation concerns for protected species. It is our goal to remain sensitive to Alaska Native culture, and to make information available to Alaska Natives. Our efforts are guided by the following policies and directives:
(1)
(2)
(3)
(4)
(5)
(6) the Department of the Interior's policies on consultation with Alaska Native Tribes and organizations.
We have evaluated possible effects of the specified activities on federally recognized Alaska Native Tribes and organizations. Through the IHA process identified in the MMPA, the applicant has presented a communication process, culminating in a POC if needed, with the Native organizations and communities most likely to be affected by their work. The FWS does not anticipate impacts to Alaska Native Tribes or Alaska Native Claims Settlement Act corporations and does not anticipate requesting consultation; however, we invite continued discussion, either about the project and its impacts or about our coordination and information exchange throughout the IHA/POC process.
This rule does not contain any new collection of information that require approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
We propose to authorize the nonlethal, incidental take by Level B harassment of 36 Southeast Alaska stock northern sea otters. Authorized take will be limited to disruption of behavioral patterns that may be caused by construction of a seaplane base, and support activities conducted by the City and Borough of Sitka in the Sitka Channel, Sitka, Alaska, between July 1, 2024 and July 1, 2025. We do not anticipate or propose to authorize any lethal take or Level A harassment.
(1) Activities must be conducted in the manner described in the revised Request dated November 16, 2023, for an IHA and in accordance with all applicable conditions and mitigations measures. The taking of sea otters whenever the required conditions,
(2) If project activities cause unauthorized take (
(i) cease its activities immediately (or reduce activities to the minimum level necessary to maintain safety);
(ii) report the details of the incident to the FWS within 48 hours; and
(iii) suspend further activities until the FWS has reviewed the circumstances and determined whether additional mitigation measures are necessary to avoid further unauthorized taking.
(3) All operations managers, vehicle operators, and vessel operators must receive a copy of this IHA and maintain access to it for reference at all times during project work. These personnel must understand, be fully aware of, and be capable of implementing the conditions of the IHA at all times during project work.
(4) This IHA will apply to activities associated with the specified project as described in this document and in the City and Borough of Sitka's Request. Changes to the specified project without prior authorization may invalidate the IHA.
(5) The City and Borough of Sitka's Request is approved and fully incorporated into this IHA unless exceptions are specifically noted herein. The Request includes:
(i) The City and Borough of Sitka's original request for an IHA, dated August 18, 2023;
(ii) Revised requests, dated October 13, 2023, and November 16, 2023; and
(iii) Geospatial files of the project location and ensonification areas.
(6) Operators will allow FWS personnel or the FWS's designated representative to visit project work sites to monitor for impacts to sea otters and subsistence uses of sea otters at any time throughout project activities so long as it is safe to do so. “Operators” are all personnel operating under the City and Borough of Sitka's authority, including all contractors and subcontractors.
(7) Construction activities must be conducted using equipment that generates the lowest practicable levels of underwater sound within the range of frequencies audible to sea otters.
(8) During all pile-installation activities, regardless of predicted sound levels, a physical interaction shutdown zone of 30 m (98 ft) must be enforced. If a sea otter enters the shutdown zone, in-water activities must be delayed until either the animal has been visually observed outside the shutdown zone, or 30 minutes have elapsed since the last observation time without redetection of the animal.
(9) If the impact driver has been idled for more than 30 minutes, an initial set of 3 strikes from the impact driver must be delivered at reduced energy, followed by a 1-minute waiting period, and then two subsequent 3-strike sets before full-powered proofing strikes.
(10) In-water activity must be conducted in daylight. If environmental conditions prevent visual detection of sea otters within the shutdown zone, in-water activities must be stopped until visibility is regained.
Vessel operators must take every precaution to avoid harassment of sea otters when a vessel is operating near these animals. The applicant must carry out the following measures:
(11) Vessels must remain at least 500 m (0.3 mi) from rafts of 10 or more sea otters, unless safety is a factor. Vessels must reduce speed and maintain a distance of 100 m (328 ft) from all sea otters, unless safety is a factor.
(12) Vessels must not be operated in such a way as to separate members of a group of sea otters from other members of the group, and must avoid alongshore travel in shallow water (<20 m (66 ft)) whenever practicable.
(13) When weather conditions require, such as when visibility drops, vessels must adjust speed accordingly to avoid the likelihood of injury to sea otters.
(14) Vessel operators must be provided written guidance for avoiding collisions and minimizing disturbances to sea otters. Guidance will include measures identified in paragraphs (C)(11) through (13) of this section.
(15) Operators shall work with protected species observers (PSO) to apply mitigation measures and shall recognize the authority of PSOs up to and including stopping work, except where doing so poses a significant safety risk to personnel.
(16) Duties of the PSOs include watching for and identifying sea otters, recording observation details, documenting presence in any applicable monitoring zone, identifying and documenting potential harassment, and working with operators to implement all appropriate mitigation measures.
(17) A sufficient number of PSOs will be available to meet the following criteria: 100 percent monitoring of exclusion zones during all daytime periods of underwater noise-generating work; a maximum of 4 consecutive hours on watch per PSO; a maximum of approximately 12 hours on watch per day per PSO.
(18) All PSOs will complete a training course designed to familiarize individuals with monitoring and data collection procedures. A field crew leader with prior experience as a sea otter observer will supervise the PSO team. Initially, new or inexperienced PSOs will be paired with experienced PSOs so that the quality of marine mammal observations and data recording is kept consistent. Resumes for candidate PSOs will be made available for the FWS to review.
(19) Observers will be provided with reticule binoculars (7×50 or better), big-eye binoculars or spotting scopes (30×), inclinometers, and range finders. Field guides, instructional handbooks, maps, and a contact list will also be made available.
(20) Observers will collect data using the following procedures:
(i) All data will be recorded onto a field form or database.
(ii) Global positioning system data, sea state, wind force, and weather will be collected at the beginning and end of a monitoring period, every hour in between, at the change of an observer, and upon sightings of sea otters.
(iii) Observation records of sea otters will include date; time; the observer's locations, heading, and speed (if moving); weather; visibility; number of animals; group size and composition (adults/juveniles); and the location of the animals (or distance and direction from the observer).
(iv) Observation records will also include initial behaviors of the sea otters, descriptions of project activities and underwater sound levels being generated, the position of sea otters relative to applicable monitoring and mitigation zones, any mitigation measures applied, and any apparent reactions to the project activities before and after mitigation.
(v) For all sea otters in or near a mitigation zone, observers will record
(vi) Observers will note any instances of animals lingering close to or traveling with vessels for prolonged periods of time.
(21) Monitoring of the shutdown zone must continue for 30 minutes following completion of pile installation.
(22) Prior to conducting the work, the City and Borough of Sitka will take the following steps to reduce potential effects on subsistence harvest of sea otters:
(i) Avoid work in areas of known sea otter subsistence harvest;
(ii) Discuss the planned activities with subsistence stakeholders including Southeast Alaska villages and traditional councils;
(iii) Identify and work to resolve concerns of stakeholders regarding the project's effects on subsistence hunting of sea otters; and
(iv) If any concerns remain, develop a POC in consultation with the FWS and subsistence stakeholders to address these concerns.
(23) The City and Borough of Sitka must notify the FWS at least 48 hours prior to commencement of activities.
(24) Reports will be submitted to the FWS's MMM weekly during project activities. The reports will summarize project work and monitoring efforts.
(25) A final report will be submitted to the FWS's MMM within 90 days after completion of work or expiration of the IHA. It will summarize all monitoring efforts and observations, describe all project activities, and discuss any additional work yet to be done. Factors influencing visibility and detectability of marine mammals (
(26) Injured, dead, or distressed sea otters that are not associated with project activities (
(27) All reports shall be submitted by email to
(28) The City and Borough of Sitka must notify the FWS upon project completion or end of the work season.
If you wish to comment on this proposed authorization, the associated draft environmental assessment, or both documents, you may submit your comments by either of the methods described in
Comments, including names and street addresses of respondents, will become part of the administrative record for this proposal. Before including your address, telephone number, email address, or other personal identifying information in your comment, be advised that your entire comment, including your personal identifying information, may be made publicly available at any time. While you can ask us in your comments to withhold from public review your personal identifying information, we cannot guarantee that we will be able to do so.
Fish and Wildlife Service, Interior.
Notice of issuance.
In accordance with the Marine Mammal Protection Act of 1972, as amended, the U.S. Fish and Wildlife Service (Service) issues letters of authorization (LOA) for the nonlethal take of polar bears and Pacific walruses incidental to oil and gas industry exploration, development, and production activities in the Beaufort Sea and the adjacent northern coast of Alaska. The Service also issues LOAs for the nonlethal take of northern sea otters incidental to pile driving and marine construction activities in the Gulf of Alaska. This notice announces the LOAs issued in calendar year 2023. The LOAs stipulate conditions and methods that minimize impacts to polar bears, Pacific walruses, and northern sea otters from these activities.
Charles Hamilton, U.S. Fish and Wildlife Service, 1011 East Tudor Road MS-341, Anchorage, AK 99503, by email at
On August 5, 2021, the U.S. Fish and Wildlife Service (Service) published in the
Each LOA stipulates conditions or methods that are specific to the activity and location. Holders of the LOAs must use methods and conduct activities in a manner that minimizes to the greatest extent practicable adverse impacts on Pacific walruses and polar bears and their habitat, and on the availability of these marine mammals for subsistence purposes. No intentional take or lethal incidental take is authorized under these regulations.
In accordance with section 101(a)(5)(A) of the Marine Mammal Protection Act (16 U.S.C. 1361
On April 19, 2023, the Service published in the
Each LOA stipulates conditions or methods that are specific to the activity and location. Holders of the LOAs must use methods and conduct activities in a manner that minimizes to the greatest extent practicable adverse impacts on northern sea otters and their habitat, and on the availability of northern sea otters for subsistence purposes. No intentional take or lethal incidental take is authorized under these regulations.
In accordance with section 101(a)(5)(A) of the Marine Mammal Protection Act (16 U.S.C. 1361
Bureau of Land Management, Interior.
Second call for nominations to San Juan Islands National Monument Advisory Committee.
The purpose of this notice is to request public nominations for the Bureau of Land Management's (BLM) San Juan Islands National Monument Advisory Committee (MAC). The Council provides advice and recommendations to the BLM on land use planning and management of the public land resources located within the BLM's San Juan Islands National Monument, located in the Spokane District.
All nominations must be received no later than June 21, 2024.
Nominations and completed applications should be sent to the BLM office listed in the
Travis Edwards BLM Spokane District Office, 1103 N Fancher, Spokane Valley, WA 99212; telephone: (509) 536-1297; or email:
The Federal Land Policy and Management Act (FLPMA) directs the Secretary of the Interior to involve the public in planning and issues related to management of lands administered by the BLM. Section 309 of FLPMA, as amended (43 U.S.C. 1739), directs the Secretary to establish 10- to 15-member citizen-based advisory committees that are consistent with the Federal Advisory Committee Act (FACA). As required by FACA, MAC membership must be balanced and representative of the various interests concerned with the management of the public lands. The BLM's regulations governing resource advisory councils are found at 43 CFR 1784.
The MAC includes thirteen representative members to be appointed by the Secretary of the Interior as follows:
(a) One member representing archeological, cultural, and heritage interests;
(b) One member representing wildlife and ecological interests;
(c) One member representing the interests of a nonprofit organization whose mission is conservation and/or management of natural resources, land, or water;
(d) One member representing natural resource management or natural sciences interests;
(e) One member representing recreation and tourism interests;
(f) One member representing local youth, education, and interpretation interests;
(g) Two members that have significant cultural or historic connections to, and knowledge about, the landscape, archeological sites, or cultural sites connected to the Monument;
(h) One member who holds State, county, or local elected office;
(i) One member representing conservation and/or management of natural resources, land, or water interests;
(j) One member representing local interests that is a resident of Lopez Island; and
(k) One member of the public-at-large.
Members will be appointed to the MAC to serve three-year staggered terms.
Members of the MAC serve without compensation. However, while away from their homes or regular places of business, members engaged in MAC business may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by 5 U.S.C. 5703, in the same manner as persons employed intermittently in Federal Government service.
Simultaneous with this notice, the BLM will issue a press releases providing additional information for submitting nominations.
Before including any address, phone number, email address, or other personal identifying information in the application, nominees should be aware this information may be made publicly available at any time. While the nominee may ask to withhold the personal identifying information from public review, the BLM cannot guarantee that it will be able to do so.
Bureau of Ocean Energy Management, Interior.
Notice of availability.
The Bureau of Ocean Energy Management (BOEM) announces the availability of a final environmental assessment (EA) and its finding that additional site assessment activities in Lease Area OCS-A 0520 offshore Massachusetts will not significantly impact the environment. Beacon Wind, LLC (Beacon Wind), the leaseholder, requested to conduct the additional activities in the lease area, which were not analyzed in the initial EA titled “Commercial Wind Lease Issuance and Site Assessment Activities on the Atlantic Outer Continental Shelf Offshore Massachusetts” (2014 EA). This final EA analyzed the potential environmental impacts of the proposed additional site assessment activities. Those activities comprise 35 deployments and removals of a single suction bucket foundation at 26 locations within the lease area to gather engineering information to inform Beacon Wind's foundation design for wind turbines and offshore substations. This EA will inform BOEM's decision whether to approve Beacon Wind's site assessment plan (SAP) amendment for suction bucket foundation testing.
Laura Lee Wolfson, BOEM Office of Renewable Energy Programs, 45600 Woodland Road, Sterling, Virginia 20166, (703) 787-1433 or
Office on Violence Against Women, Department of Justice.
30-Day notice.
The Department of Justice (DOJ), Office on Violence Against Women, will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until June 6, 2024.
If you have comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact: Catherine Poston, Office on Violence Against Women, at 202-514-5430 or
The proposed information collection was previously published in the
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
Written comments and recommendations for this information collection should be submitted within 30 days of the publication of this notice on the following website
DOJ seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOJ notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
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Abstract; Authorized by 34 U.S.C. 12341, the Rural Program supports efforts to enhance the safety of rural victims of domestic violence, dating violence, sexual assault, and stalking and supports projects uniquely designed to address and prevent these crimes in rural areas.
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Federal Bureau of Investigation, Department of Justice.
60-Day notice.
The Federal Bureau of Investigation (FBI), Criminal Justice Information Services (CJIS) Division, Department of Justice (DOJ), will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 60 days until July 8, 2024.
If you have additional comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact: Timothy R. Wiles, National Instant Criminal Background Check System Section (NICS), NICS External Service Unit, Federal Bureau of Investigation, CJIS Division, 1000 Custer Hollow Road, Clarksburg, West Virginia 26306;
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should
On January 30, 2003, the U.S. Attorney General directed the FBI to conduct the Bioterrorism Security Risk Assessments (SRAs) under sections 201, 212 and 221 of the Public Health Security and Bioterrorism Act, Public Law 107-188, 166 Stat. 594 (2002). On March 25, 2003, FBI Director Mueller directed the Criminal Justice Information Services (CJIS) Division to promptly conduct the Bioterrorism SRAs. Under this delegation, the FBI receives biometric and biographic information submitted by individuals requesting access to select agents and toxins; utilizes criminal, immigration, national security and other electronic databases that are available to the Federal Government to conduct SRAs of such individuals; and consult with appropriate officials of the HHS and the USDA to determine whether certain individuals should be disqualified from possessing, using or transferring select agents and toxins.
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The total annual cost incurred by the FY2023 respondents is ($12,088.14 + $9,231.49 + $45,105) = $66,424.63 or $66,424.63/3,007 ($22.09 per person.)
Office on Violence Against Women, Department of Justice.
30-Day notice.
The Department of Justice (DOJ), Office on Violence Against Women, will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until June 6, 2024.
If you have comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact: Catherine Poston, Office on Violence Against Women, at 202-514-5430 or
The proposed information collection was previously published in the
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
Written comments and recommendations for this information collection should be submitted within 30 days of the publication of this notice on the following website
DOJ seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOJ notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
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If additional information is required, contact: John R. Carlson, Department Clearance Officer, Policy and Planning Staff, Justice Management Division, United States Department of Justice, Two Constitution Square, 145 N Street NE, 4W-218 Washington, DC 20530.
Office on Violence Against Women, Department of Justice.
30-Day notice.
The Department of Justice (DOJ), Office on Violence Against Women, will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until June 6, 2024.
If you have comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact: Catherine Poston, Office on Violence Against Women, at 202-514-5430 or
The proposed information collection was previously published in the
Written comments and recommendations for this information collection should be submitted within 30 days of the publication of this notice on the following website
DOJ seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOJ notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
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3. Agency form number, if any, and the applicable component of the Department of Justice sponsoring the collection:
4. Affected public who will be asked or required to respond, as well as a brief abstract:
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If additional information is required, contact: John R. Carlson, Department Clearance Officer, Policy and Planning Staff, Justice Management Division, United States Department of Justice, Two Constitution Square, 145 N Street NE, 4W-218 Washington, DC 20530.
Office on Violence Against Women, Department of Justice.
30-Day notice.
The Department of Justice (DOJ), Office on Violence Against Women, will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until June 6, 2024.
If you have comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact: Catherine Poston, Office on Violence Against Women, at 202-514-5430 or
The proposed information collection was previously published in the
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
Written comments and recommendations for this information collection should be submitted within 30 days of the publication of this notice on the following website
DOJ seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOJ notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
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(1) The annualized costs to the Federal Government resulting from the OVW staff review of the progress reports submitted by grantees are estimated to be $9,856.
Office on Violence Against Women, Department of Justice.
30-Day notice.
The Department of Justice (DOJ), Office on Violence Against Women, will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until June 6, 2024.
If you have comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact: Catherine Poston, Office on Violence Against Women, at 202-514-5430 or
The proposed information collection was previously published in the
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
Written comments and recommendations for this information collection should be submitted within 30 days of the publication of this notice on the following website
DOJ seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOJ notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
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The annualized costs to the Federal Government resulting from the OVW staff review of the progress reports submitted by grantees are estimated to be $11,200.
If additional information is required, contact: John R. Carlson, Department Clearance Officer, Policy and Planning Staff, Justice Management Division, United States Department of Justice, Two Constitution Square, 145 N Street NE, 4W-218 Washington, DC 20530.
In accordance with the Federal Advisory Committee Act (Pub. L. 92-463, as amended), the National Science Foundation (NSF) announces its intent to hold proposal review meetings throughout the year. The purpose of these meetings is to provide advice and recommendations concerning proposals submitted to the NSF for financial support. The agenda for each of these meetings is to review and evaluate proposals as part of the selection process for awards. The review and evaluation may also include assessment of the progress of awarded proposals. The majority of these meetings will take place at NSF, 2415 Eisenhower Avenue, Alexandria, VA 22314.
These meetings will be closed to the public. The proposals being reviewed include information of a proprietary or confidential nature, including technical information; financial data, such as salaries; and personal information concerning individuals associated with the proposals. These matters are exempt under 5 U.S.C. 552b(c), (4) and (6) of the Government in the Sunshine Act. NSF will continue to review the agenda and merits of each meeting for overall compliance of the Federal Advisory Committee Act.
These closed proposal review meetings will not be announced on an individual basis in the
Nuclear Regulatory Commission.
License amendment request; notice of opportunity to comment, request a hearing, and petition for leave to intervene; order imposing procedures.
The U.S. Nuclear Regulatory Commission (NRC) received and is considering approval of one amendment request. The amendment request is for Limerick Generating Station, Units 1 and 2. For the amendment request, the NRC proposes to determine that it involves no significant hazards consideration (NSHC). Because the amendment request contains sensitive unclassified non-safeguards information (SUNSI), an order imposes procedures to obtain access to SUNSI for contention preparation by persons who file a hearing request or petition for leave to intervene.
Comments must be filed by June 6, 2024. A request for a hearing or petitions for leave to intervene must be filed by July 8, 2024. Any potential party as defined in section 2.4 of title 10 of the
You may submit comments by any of the following methods; however, the NRC encourages electronic comment submission through the Federal rulemaking website.
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Shirley Rohrer, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone: 301-415-5411; email:
Please refer to Docket ID NRC-2024-0070, facility name, unit number(s), docket number(s), application date, and subject when contacting the NRC about the availability of information for this action. You may obtain publicly available information related to this action by any of the following methods:
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The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
Pursuant to Section 189a.(1)-(2) of the Atomic Energy Act of 1954, as amended (the Act), the NRC is publishing this notice. The Act requires the Commission to publish notice of any amendments issued or proposed to be issued and grants the Commission the authority to issue and make immediately effective any amendment to an operating license or combined license, as applicable, upon a determination by the Commission that such amendment involves NSHC, notwithstanding the pendency before the Commission of a request for a hearing from any person.
This notice includes a notice of an amendment containing SUNSI.
The Commission has made a proposed determination that the following amendment request involves NSHC. Under the Commission's regulations in 10 CFR 50.92, this means that operation of the facility in accordance with the proposed amendment would not (1) involve a significant increase in the probability or consequences of an accident previously evaluated, or (2) create the possibility of a new or different kind of accident from any accident previously evaluated, or (3) involve a significant reduction in a margin of safety. The basis for this proposed determination for the amendment request is shown as follows.
The Commission is seeking public comments on this proposed determination. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determination.
Normally, the Commission will not issue the amendment until the expiration of 60 days after the date of publication of this notice. The Commission may issue the license amendment before expiration of the 60-day period provided that its final determination is that the amendment involves no significant hazards consideration. In addition, the Commission may issue the amendment prior to the expiration of the 30-day comment period if circumstances change during the 30-day comment period such that failure to act in a timely way would result, for example, in derating or shutdown of the facility. If the Commission takes action on the amendment prior to the expiration of either the comment period or the notice period, it will publish a notice of issuance in the
Within 60 days after the date of publication of this notice, any person (petitioner) whose interest may be affected by any of these actions may file a request for a hearing and petition for leave to intervene (petition) with respect to that action. Petitions shall be filed in accordance with the Commission's “Agency Rules of Practice and Procedure” in 10 CFR part 2. Interested persons should consult a current copy of 10 CFR 2.309. If a petition is filed, the Commission or a presiding officer will rule on the petition and, if appropriate, a notice of a hearing will be issued.
Petitions must be filed no later than 60 days from the date of publication of this notice in accordance with the filing instructions in the “Electronic Submissions (E-Filing)” section of this document. Petitions and motions for leave to file new or amended contentions that are filed after the deadline will not be entertained absent a determination by the presiding officer that the filing demonstrates good cause by satisfying the three factors in 10 CFR 2.309(c)(1)(i) through (iii).
If a hearing is requested, and the Commission has not made a final determination on the issue of no significant hazards consideration, the Commission will make a final determination on the issue of no significant hazards consideration, which will serve to establish when the hearing is held. If the final determination is that the amendment request involves no significant hazards consideration, the Commission may issue the amendment and make it immediately effective, notwithstanding the request for a hearing. Any hearing would take place after issuance of the amendment. If the final determination is that the amendment request involves a significant hazards consideration, then any hearing held would take place before the issuance of the amendment unless the Commission finds an imminent danger to the health or safety of the public, in which case it will issue an appropriate order or rule under 10 CFR part 2.
A State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof, may submit a petition to the Commission to participate as a party under 10 CFR 2.309(h) no later than 60 days from the date of publication of this notice. Alternatively, a State, local governmental body, Federally recognized Indian Tribe, or agency thereof may participate as a non-party under 10 CFR 2.315(c).
For information about filing a petition and about participation by a person not a party under 10 CFR 2.315, see ADAMS Accession No. ML20340A053 (
All documents filed in NRC adjudicatory proceedings, including documents filed by an interested State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof that requests to participate under 10 CFR 2.315(c), must be filed in accordance with 10 CFR 2.302. The E-Filing process requires participants to submit and serve all adjudicatory documents over the internet, or in some cases, to mail copies on electronic storage media, unless an exemption permitting an alternative filing method, as further discussed, is granted. Detailed guidance on electronic submissions is located in the “Guidance for Electronic Submissions to the NRC” (ADAMS Accession No. ML13031A056) and on the NRC's public website at
To comply with the procedural requirements of E-Filing, at least 10 days prior to the filing deadline, the participant should contact the Office of the Secretary by email at
Information about applying for a digital ID certificate is available on the NRC's public website at
A person filing electronically using the NRC's adjudicatory E-Filing system may seek assistance by contacting the NRC's Electronic Filing Help Desk through the “Contact Us” link located on the NRC's public website at
Participants who believe that they have good cause for not submitting documents electronically must file an exemption request, in accordance with 10 CFR 2.302(g), with their initial paper filing stating why there is good cause for not filing electronically and requesting authorization to continue to submit documents in paper format. Such filings must be submitted in accordance with 10 CFR 2.302(b)-(d). Participants filing adjudicatory documents in this manner are responsible for serving their documents on all other participants. Participants granted an exemption under 10 CFR 2.302(g)(2) must still meet the electronic formatting requirement in 10 CFR 2.302(g)(1), unless the participant also seeks and is granted an exemption from 10 CFR 2.302(g)(1).
Documents submitted in adjudicatory proceedings will appear in the NRC's electronic hearing docket, which is publicly available at
The following table provides the plant name, docket numbers, date of application, ADAMS accession number, and location in the application of the licensee's proposed NSHC determination. For further details with respect to this license amendment application, see the application for amendment, publicly available portions of which are available for public inspection in ADAMS. For additional direction on accessing information related to this document, see the “Obtaining Information and Submitting Comments” section of this document.
A. This Order contains instructions regarding how potential parties to this proceeding may request access to documents containing Sensitive Unclassified Non-Safeguards Information (SUNSI).
B. Within 10 days after publication of this notice of hearing or opportunity for hearing, any potential party who believes access to SUNSI is necessary to respond to this notice may request access to SUNSI. A “potential party” is any person who intends to participate as a party by demonstrating standing and filing an admissible contention under 10 CFR 2.309. Requests for access to SUNSI submitted later than 10 days after publication of this notice will not be considered absent a showing of good cause for the late filing, addressing why the request could not have been filed earlier.
C. The requestor shall submit a letter requesting permission to access SUNSI to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemakings and Adjudications Staff, and provide a copy to the Deputy General Counsel for Licensing, Hearings, and Enforcement, Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. The expedited delivery or courier mail address for both offices is: U.S. Nuclear Regulatory Commission, 11555 Rockville Pike, Rockville, Maryland 20852. The email addresses for the Office of the Secretary and the Office of the General Counsel are
(1) A description of the licensing action with a citation to this
(2) The name and address of the potential party and a description of the potential party's particularized interest that could be harmed by the action identified in C.(1); and
(3) The identity of the individual or entity requesting access to SUNSI and the requestor's basis for the need for the information in order to meaningfully participate in this adjudicatory proceeding. In particular, the request must explain why publicly available versions of the information requested would not be sufficient to provide the basis and specificity for a proffered contention.
D. Based on an evaluation of the information submitted under paragraph C, the NRC staff will determine within 10 days of receipt of the request whether:
(1) There is a reasonable basis to believe the petitioner is likely to establish standing to participate in this NRC proceeding; and
(2) The requestor has established a legitimate need for access to SUNSI.
E. If the NRC staff determines that the requestor satisfies both D.(1) and D.(2), the NRC staff will notify the requestor in writing that access to SUNSI has been granted. The written notification will contain instructions on how the requestor may obtain copies of the requested documents, and any other conditions that may apply to access to those documents. These conditions may include, but are not limited to, the signing of a Non-Disclosure Agreement or Affidavit, or Protective Order
F. Filing of Contentions. Any contentions in these proceedings that are based upon the information received as a result of the request made for SUNSI must be filed by the requestor no later than 25 days after receipt of (or access to) that information. However, if more than 25 days remain between the petitioner's receipt of (or access to) the information and the deadline for filing all other contentions (as established in the notice of hearing or opportunity for hearing), the petitioner may file its SUNSI contentions by that later deadline.
G. Review of Denials of Access.
(1) If the request for access to SUNSI is denied by the NRC staff after a determination on standing and requisite need, the NRC staff shall immediately notify the requestor in writing, briefly stating the reason or reasons for the denial.
(2) The requestor may challenge the NRC staff's adverse determination by filing a challenge within 5 days of receipt of that determination with: (a) the presiding officer designated in this proceeding; (b) if no presiding officer has been appointed, the Chief Administrative Judge, or if this individual is unavailable, another administrative judge, or an Administrative Law Judge with jurisdiction pursuant to 10 CFR 2.318(a); or (c) if another officer has been designated to rule on information access issues, with that officer.
(3) Further appeals of decisions under this paragraph must be made pursuant to 10 CFR 2.311.
H. Review of Grants of Access. A party other than the requestor may challenge an NRC staff determination granting access to SUNSI whose release would harm that party's interest
If challenges to the NRC staff determinations are filed, these procedures give way to the normal process for litigating disputes concerning access to information. The availability of interlocutory review by the Commission of orders ruling on such NRC staff determinations (whether granting or denying access) is governed by 10 CFR 2.311.
I. The Commission expects that the NRC staff and presiding officers (and any other reviewing officers) will consider and resolve requests for access to SUNSI, and motions for protective orders, in a timely fashion in order to minimize any unnecessary delays in identifying those petitioners who have standing and who have propounded contentions meeting the specificity and basis requirements in 10 CFR part 2. The attachment to this Order summarizes the general target schedule for processing and resolving requests under these procedures.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Notice; issuance.
The U.S. Nuclear Regulatory Commission (NRC) has issued an exemption in response to the May 4, 2023, request from Yankee Atomic Electric Company (YAEC), for the Yankee Nuclear Power Station (YNPS or Yankee Rowe) located in Rowe, Massachusetts. The exemption permits YAEC to make withdrawals from a separate account within YAEC's overall nuclear decommissioning trust (NDT), on an annual basis, for spent nuclear fuel (SNF) and Greater than Class C
The exemption was issued on April 11, 2024.
Please refer to Docket ID NRC-2024-0067 when contacting the NRC about the availability of information regarding this document. You may obtain publicly available information related to this document using any of the following methods:
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Tilda Liu, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 404-997-4730, email:
By letter dated May 4, 2023 (ADAMS Accession No. ML23157A101), YAEC submitted a request to the NRC for an exemption from paragraphs 50.82(a)(8)(i)(A) and 50.75(h)(2) of title 10 of the
YAEC has established a separate (segregated) account within its over-arching NDT, entitled “ISFSI Radiological Decom,” that identifies the funds for radiological decommissioning of the ISFSI apart from the larger balance of funds in the NDT allocated for ongoing management of SNF and GTCC waste and for non-radiological site restoration activities. Although 10 CFR 50.82 applies to the segregated account, it does not apply to the overall NDT.
The exemption from 10 CFR 50.82(a)(8)(i)(A) and 50.75(h)(2) allows YAEC to make withdrawals from the segregated account, on an annual basis, for SNF and GTCC waste management and non-radiological site restoration without prior notification to the NRC. More specifically, with this exemption, YAEC can annually transfer funds exceeding 110 percent of the inflation-adjusted Decommissioning Cost Estimate, described in 10 CFR 50.75, from the segregated account to its overarching NDT and use those funds for SNF and GTCC waste management and non-radiological site restoration.
Based on the review, the NRC determined that, pursuant to 10 CFR 50.12(a), the exemption is authorized by law, will not present an undue risk to the public health and safety, and is consistent with the common defense and security. Also, the NRC determined that special circumstances are present. Therefore, the NRC granted YAEC an exemption from the requirements of 10 CFR 50.82(a)(8)(i)(A) and 10 CFR 50.75(h)(2) to permit YAEC to make withdrawals from the segregated account, on an annual basis, for SNF and GTCC waste management and non-radiological site restoration without prior notification to the NRC. All other relevant requirements shall be met. On April 11, 2024, the NRC issued an exemption for YAEC (ADAMS Package Accession No. ML23298A052). The NRC staff also prepared an environmental assessment and finding of no significant impact regarding the proposed exemption request, published in the
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Renewal of existing information collection; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) invites public comment on the renewal of Office of Management and Budget (OMB) approval for an existing collection of information. The information collection is entitled, “Fitness for Duty Programs.”
Submit comments by July 8, 2024. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date.
You may submit comments by any of the following methods; however, the NRC encourages electronic comment submission through the Federal rulemaking website:
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•
For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
David Cullison, Office of the Chief Information Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-2084; email:
Please refer to Docket ID NRC-2023-0169 when contacting the NRC about the availability of information for this action. Y ou may obtain publicly available information related to this action by any of the following methods:
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The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information in comment submissions that you do not want to be publicly disclosed in your comment submission. All comment submissions are posted at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that comment submissions are not routinely edited to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the NRC is requesting public comment on its intention to request the OMB's approval for the information collection summarized as follows.
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The NRC is seeking comments that address the following questions:
1. Is the proposed collection of information necessary for the NRC to properly perform its functions? Does the information have practical utility? Please explain your answer.
2. Is the estimate of the burden of the information collection accurate? Please explain your answer.
3. Is there a way to enhance the quality, utility, and clarity of the information to be collected?
4. How can the burden of the information collection on respondents be minimized, including the use of automated collection techniques or other forms of information technology?
The documents identified in the following table are available to interested persons through ADAMS.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Notice; receipt.
The U.S. Nuclear Regulatory Commission (NRC) has received an application for the renewal of Facility Operating License Nos. DPR-19 and DPR-25, which authorizes Constellation Energy Generation, LLC (CEG, the applicant) to operate Dresden Nuclear Power Station (Dresden), Units 2 and 3. The renewed licenses would authorize the applicant to operate Dresden, Units 2 and 3, for an additional 20 years beyond the period specified in the current licenses. The current operating license for Dresden, Unit 2, expires December 22, 2029. The current operating license for Dresden, Unit 3, expires January 12, 2031.
The subsequent license renewal application referenced in this document is available on May 7, 2024.
Please refer to Docket ID NRC-2024-0080 when contacting the NRC about the availability of information regarding this document. You may obtain publicly available information related to this document using any of the following methods:
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Mark Yoo, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-8583; email:
The NRC has received an application from CEG, dated April 17, 2024 (ADAMS Package Accession No. ML24108A007) filed pursuant to section 103 of the Atomic Energy Act of 1954, as amended, and part 54 of title 10 of the
A copy of the subsequent license renewal application for Dresden, Units 2 and 3, is also available to local residents near the site at the following public libraries: Morris Area Public Library, 604 Liberty St., Morris, IL 60450, and Coal City Public Library District, 85 N Garfield St., Coal City, IL 60416.
For the Nuclear Regulatory Commission.
U.S. Nuclear Regulatory Commission
Notice of meeting.
The U.S. Nuclear Regulatory Commission (NRC) will convene a meeting of the Advisory Committee on
June 5, 2024, from 1:00 p.m. to 3:00 p.m. Eastern Time.
This is a virtual meeting.
Ms. L. Armstead, email:
The ACMUI Vice Chair, Mr. Richard Green will preside over the meeting. Mr. Green will conduct the meeting in a manner that will facilitate the orderly conduct of business. The following procedures apply to public participation in the meeting:
1. Persons who wish to provide a written statement should submit an electronic copy to Ms. L. Armstead using the contact information listed above. All submittals must be received by the close of business on May 30, 2024, and must only pertain to the topics on the agenda.
2. Questions and comments from members of the public will be permitted during the meeting, at the discretion of the ACMUI Vice Chair.
3. The draft transcript and meeting summary will be available on ACMUI's website
4. Persons who require special services, such as those for the hearing impaired, should notify Ms. L. Armstead of their planned participation.
This meeting will be held in accordance with the Atomic Energy Act of 1954, as amended (primarily Section 161a); the Federal Advisory Committee Act (5 U.S.C. App); and the Commission's regulations in Title 10 of the
For the U.S. Nuclear Regulatory Commission.
Postal Service
Notice of a modified system of records.
The United States Postal Service® (USPS®) is proposing to revise one General Privacy Act Systems of Records (SOR). These updates are being made to support an effort to improve postal tool management and equipment support.
These revisions will become effective without further notice on June 6, 2024, unless comments received on or before that date result in a contrary determination.
Comments may be submitted via email to the Privacy and Records Management Office, United States Postal Service Headquarters (
Janine Castorina, Chief Privacy and Records Management Officer, Privacy and Records Management Office,
USPS seeks to implement a series of products to improve postal operations related to tool management and equipment support using Radio Frequency Identification (RFID) technology. USPS will utilize a suite of products, including an automated tool control application, industrial vending machines, RFID scanner tunnels, and electronically controlled lockers. These products will use RFID badge scans to track usage and provide access to tools. The system generates reports for restocking and analysis, and live dashboards are available to managers for customization. The aim of these systems is to enhance accountability and tool management, ensuring control of existing tools and adding cost-savings through enhanced tracking of equipment. This system will further promote efficiency, as not only with USPS be able to track its workroom and tool assets but anticipate when perishable resources are running low and take appropriate action.
To further its efforts, this SOR will be revised as follows:
Pursuant to 5 U.S.C. 552a (e)(11), interested persons are invited to submit written data, views, or arguments on this proposal. A report of the proposed
The notice for modifications to USPS SOR 500.000, Property Management Records is provided below in its entirety:
USPS 500.000, Property Management Records
None
All USPS facilities and contractor sites.
For records of accountable property, carpool membership, and use of USPS parking facilities:
Vice President, Facilities, United States Postal Service, 475 L'Enfant Plaza SW, Washington, DC 20260.
For records of building access and Postal Inspector computer access authorizations: Chief Postal Inspector, Inspection Service, United States Postal Service, 475 L'Enfant Plaza SW, Washington, DC 20260.
For other records of computer access authorizations: Chief Information Officer and Executive Vice President, United States Postal Service, 475 L'Enfant Plaza SW, Washington, DC 20260.
39 U.S.C. 401.
1. To ensure personal and building safety and security by controlling access to USPS facilities.
2. To ensure accountability for property issued to persons.
3. To assign computer logon IDs; to identify USPS computer users to resolve their computer access problems by telephone; and to monitor and audit the use of USPS information resources as necessary to ensure compliance with USPS regulations.
4. To enable access to the USPS meeting and video web conferencing applications.
5. To enhance your online meeting experience by utilizing enhanced features and functionality, including voluntary polling to gather responses from attendees to generate reports or the interactive chat feature.
6. To facilitate team collaboration and communication through information sharing and cross-functional participation.
7. To allow users to communicate through web-based applications.
8. To facilitate and support cybersecurity investigations of detected or reported information security incidents.
9. To share your personal image via your device camera during meetings and web conferences, if you voluntarily choose to turn the camera on, enabling virtual face-to-face conversations.
10. To authenticate user identity for the purpose of accessing USPS information systems.
11. To provide parking and carpooling services to individuals who use USPS parking facilities.
12. To provide pre-registration for guest access to online meetings and web conferences.
13. To provide visibility on unmeasured workroom floor activities.
14. To enhance visibility into work hours used by product type, standard work management, and overtime status.
15. To improve scheduling efficiency through visibility into the use of workroom floor assets and activities.
16. To generate clock ring data based on employee workroom floor activities, assignments and/or duties.
17. To enhance tool management, security, and efficiency for Mail Processing Equipment mechanics and technicians.
18. To provide analytic, surveillance, and reporting support for tool management services.
19. To enhance tool management accountability through reports and alerts.
20. To provide managers with visibility into employee tool management and use and provide remediation capabilities and enable personnel recourse related to improper tool management.
1. Individuals who are granted regular access to USPS facilities through the issuance of a building access badge, or who are assigned accountable property.
2. Individuals with authorized access to USPS computers and information resources, including USPS employees, contractors, and other individuals; Individuals participating in web-based meetings, video conferences, collaboration, and communication applications.
3. Individuals who are members of carpools with USPS employees or otherwise regularly use USPS parking facilities.
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Employees; contractors; subject individuals; and other systems of records.
Standard routine uses 1. through 9. apply.
Automated database, computer storage media, and paper.
1. Records about building access and issuance of accountable property are retrieved by name, Social Security Number, or Employee Identification Number.
2. Records about authorized access to computer and information resources are retrieved by name, logon ID, Employee Identification Number, or other unique identifier of the individual.
3. Report and tracking data created during web-based meetings and video conferences that pertain to individual participants, content shared, conference codes and other relevant session data and historical device usage data are retrieved by meeting ID, host name or host email address.
4. Records pertaining to web-based collaboration and communication applications are retrieved by organizer name and other associated personal identifiers.
5. Media recordings created during web-based meetings and video conferences are retrieved by meeting ID, host name or host email address.
6. Records of carpools and parking facilities are retrieved by name, ZIP Code, space number, or parking license number.
7. Records pertaining to workhour data derived from RFID and Bluetooth technologies are retrieved by name, Employee Identification Number, and Bluetooth Device ID.
8. Records pertaining to transactional data are retrievable by name, EIN, and ACE ID.
1. Building access and accountable property records are retained until termination of access or accountability.
2. Records of computer access privileges are retained 1 year after all authorizations are cancelled.
3. Report and tracking data created during web-based meeting and video conferences, such as other relevant session data and historical device usage data, are retained for twenty-four months.
4. Records pertaining to web-based collaboration and communication applications are retained for twenty-four months.
5. Web-based meeting or video session recordings are retained for twenty-four months.
6. Records of carpool membership and use of USPS parking facilities are retained 6 years.
7. Records existing on paper are destroyed by burning, pulping, or shredding. Records existing on computer storage media are destroyed according to the applicable USPS media sanitization practice.
8. Records pertaining to workhour data derived from RFID and Bluetooth technologies may be retained up to 90 days.
9. Records pertaining to transactional data are retained for two years.
Paper records, computers, and computer storage media are located in controlled-access areas under supervision of program personnel. Access to these areas is limited to authorized personnel, who must be identified with a badge.
Access to records is limited to individuals whose official duties require such access. Contractors and licensees are subject to contract controls and unannounced on-site audits and inspections. Computers are protected by mechanical locks, card key systems, or other physical access control methods. The use of computer systems is regulated with installed security software, computer logon identifications, and operating system controls including access controls, terminal and transaction logging, and file management software.
Requests for access must be made in accordance with the Notification Procedure above and USPS Privacy Act regulations regarding access to records and verification of identity under 39 CFR 266.5.
See Notification Procedure and Record Access Procedures above.
Inquiries for records about building access, accountable property, carpool membership, and use of USPS parking facilities must be addressed to the facility head. Inquiries about computer access authorization records must be directed to the Manager, Corporate Information Security, 475 L'Enfant Plaza SW, Suite 2141, Washington, DC 20260. For Inspection Service computer access records, inquiries must be submitted to the Inspector in Charge, Information Technology Division, 2111 Wilson Blvd., Suite 500, Arlington, VA 22201. Inquiries must include full name, Social Security Number or Employee Identification Number, and period of employment or residency at the location.
None
June 21, 2023, 88 FR 40340; December 23, 2022, 87 FR 79006; August 4, 2020, 85 FR 47258; June 1, 2020, 85 FR 33210; April 11, 2014, 79 FR 20249; June 27, 2012, 77 FR 38342; June 17, 2011, 76 FR 35483; April 29, 2005, 70 FR 22516
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 17g-5(a)(3) and (e) contain collection of information requirements.
Currently, there are 6 credit rating agencies registered as NRSROs in the issuer of asset-backed securities category of credit ratings, and it is estimated based on recent issuance data that there are approximately 1,480 new asset-backed securities transactions per year that implicate Rule 17g-5(a)(3). Based on staff experience, the
Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information on respondents; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by July 8, 2024.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Please direct your written comments to: Dave Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F St NE, Washington, DC 20549 or send an email to:
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rules 17g-8 and 17g-9 set forth collection of information requirements. Specifically, Rule 17g-8 requires nationally recognized statistical rating organizations (“NRSROs”) to establish, maintain, enforce, and document policies and procedures that are reasonably designed to achieve the objectives articulated in the rule. Generally, these policies and procedures pertain to (i) the procedures and methodologies NRSROs use to determine credit ratings, and (ii) the symbols, numbers, or scores NRSROs use to denote credit ratings.
Currently, there are 10 credit rating agencies registered as NRSROs with the Commission. The Commission estimates that the total annual hour burden for NRSROs to comply with Rule 17g-8 and Rule 17g-9 is 1,450 hours and 34,658 hours, respectively. The Commission further estimates that these annual hour burdens will result in a total annual cost with respect to Rule 17g-8 of $539,400 and with respect to Rule 17g-9 of $12,951,746. These costs are attributable to costs NRSROs may incur in completing updates and other activities relating to the policies and procedures adopted pursuant to Rule 17g-8 and the standards adopted pursuant to Rule 17g-9, and in conducting the periodic testing of credit analysts pursuant to standards adopted under Rule 17g-9.
Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information on respondents; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by July 8, 2024.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Please direct your written comments to: Dave Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F St NE, Washington, DC 20549 or send an email to:
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
FINRA is proposing, as required by Securities Exchange Act Rule 10c-1a, to adopt the new FINRA Rule 6500 Series (Securities Lending and Transparency Engine (SLATE
The text of the proposed rule change is available on FINRA's website at
In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On October 13, 2023, the Commission adopted new SEA Rule 10c-1a
SEA Rule 10c-1a prescribes the items of information that covered persons must report to an RNSA regarding a covered securities loan. These reportable data elements include both non-confidential items of information that would be publicly disseminated (
Specifically, SEA Rule 10c-1a(c) requires covered persons to report the following non-confidential items of information to an RNSA, if applicable, by the end of the day
(1) The legal name of the security issuer, and the Legal Entity Identifier (“LEI”) of the issuer, if the issuer has a non-lapsed LEI;
(2) The ticker symbol, International Securities Identification Number (“ISIN”), Committee on Uniform Securities Identification Procedures (“CUSIP”), or Financial Instrument Global Identifier (“FIGI”) of the security, or other security identifier;
(3) The date the covered securities loan was effected;
(4) The time the covered securities loan was effected;
(5) The name of the platform or venue where the covered securities loan was effected;
(6) The amount, such as size, volume, or both, of the reportable securities loaned;
(7) The type of collateral used to secure the covered securities loan;
(8) For a covered securities loan collateralized by cash, the rebate rate or any other fee or charges;
(9) For a covered securities loan not collateralized by cash, the securities lending fee or rate, or any other fee or charges;
(10) The percentage of collateral to value of reportable securities loaned required to secure such covered securities loan;
(11) The termination date of the covered securities loan; and
(12) Whether the borrower is a broker or dealer, a customer (if the person lending securities is a broker or dealer), a clearing agency, a bank, a custodian, or other person.
With respect to the confidential items of information, SEA Rule 10c-1a(e) requires covered persons to report the following items of information to an RNSA, if applicable, by the end of the day on which the covered securities loan is effected:
(1) If known, the legal name of each party to the covered securities loan, other than the customer from whom a broker or dealer borrows fully paid or excess margin securities pursuant to Rule 15c3-3(b)(3) of the Exchange Act, Central Registration Depository (“CRD”) or Investment Adviser Registration Depository (“IARD”) Number, market
(2) If the person lending securities is a broker or dealer and the borrower is its customer, whether the security is loaned from a broker's or dealer's securities inventory to a customer of such broker or dealer; and
(3) If known, whether the covered securities loan is being used to close out a fail to deliver pursuant to Rule 204 of Regulation SHO or to close out a fail to deliver outside of Regulation SHO.
SEA Rule 10c-1a also requires covered persons to report specified modifications to covered securities loans. Specifically, if a loan modification occurs after the non-confidential data elements for the covered securities loan were reported to an RNSA pursuant to SEA Rule 10c-1a(c), and results in a change to any of the non-confidential data elements previously provided to an RNSA, SEA Rule 10c-1a(d)(1) requires a covered person to provide to the RNSA: (1) the date and time of the modification; (2) the specific modification and the specific non-confidential data element being modified; and (3) the unique identifier assigned by the RNSA to the original covered securities loan. With respect to a modification to a covered securities loan for which reporting under SEA Rule 10c-1a was not required on the date the loan was agreed to or last modified that results in a change to any of the non-confidential data elements required to be provided to an RNSA under SEA Rule 10c-1a(c), SEA Rule 10c-1a(d)(2) requires that the covered person report all of the non-confidential data elements to the RNSA as of the date of the modification, as well as the date and time of the modification.
SEA Rule 10c-1a(g) (RNSA publication of data) sets forth the requirements applicable to an RNSA regarding securities loan data publication. Specifically, SEA Rule 10c-1a(g)(1) provides that, following receipt of the non-confidential data elements discussed above, as soon as practicable, and not later than the morning of the business day after the covered securities loan is effected, the RNSA must assign a unique identifier to the covered securities loan, and make publicly available for each covered securities loan effected on the previous business day: (1) the unique identifier assigned by the RNSA; (2) the non-confidential data elements required to be reported pursuant to SEA Rule 10c-1a(c), other than the loan amount; and (3) the security identifier under SEA Rule 10c-1a(c)(1) or 10c-1a(c)(2) that the RNSA determines is appropriate to identify the security (
SEA Rule 10c-1a(g)(2) provides that, following receipt of the non-confidential data elements reported pursuant to SEA Rule 10c-1a(c), on the twentieth business day after the covered securities loan is effected, the RNSA must make publicly available the loan amount reported to the RNSA pursuant to SEA Rule 10c-1a(c)(6) along with the applicable loan and security identifying information.
With respect to modifications to covered securities loans previously reported to the RNSA, SEA Rule 10c-1a(g)(3)(i) provides that, following the receipt of information regarding a modification (pursuant to SEA Rule 10c-1a(d)), the RNSA must assign a unique identifier to the covered securities loan (if one has not already been assigned), and as soon as practicable, and not later than the morning of the business day after the covered securities loan is modified, make publicly available information pertaining to any modification to the non-confidential data elements required to be reported pursuant to SEA Rule 10c-1a(c), other than the loan amount. With respect to covered securities loans for which reporting was not required on the date the loan was agreed to or last modified (
With respect to loan amounts, SEA Rule 10c-1a(g)(3)(ii) provides that, on the twentieth business day after the covered securities loan is modified, the RNSA must make publicly available the loan amount reported to the RNSA pursuant to SEA Rule 10c-1a(c)(6) along with the applicable loan and security identifying information.
The RNSA is required to keep confidential and not disseminate the confidential data elements reported pursuant to SEA Rule 10c-1a(e).
In addition, SEA Rule 10c-1a(g)(5) provides that, following the receipt of information reported pursuant to SEA Rule 10c-1a(c) when a covered securities loan is effected, or reported pursuant to SEA Rule 10c-1a(d) when a covered securities loan is modified, the RNSA must, as soon as practicable and not later than the morning of the business day after a covered securities loan is effected or modified, make publicly available, on a daily basis, information pertaining to the aggregate loan transaction activity and distribution of loan rates for each reportable security and the security identifier(s) that an RNSA determines is appropriate to identify the security (
SEA Rule 10c-1a(a)(2) permits a covered person to rely on a reporting agent to fulfill its reporting obligations under Rule 10c-1a. In order to use a reporting agent to fulfill its SEA Rule 10c-1a information reporting obligations, a covered person must: (1) enter into a written agreement with the reporting agent, and (2) provide the reporting agent with timely access to the required SEA Rule 10c-1a information.
SEA Rule 10c-1a(f) requires an RNSA to implement rules regarding the format and manner of its collection of information described in paragraphs 10c-1a(c) through 10c-1a(e) and make publicly available such information in
Consistent with SEA Rule 10c-1a, FINRA is proposing to adopt the new FINRA Rule 6500 Series (Securities Lending and Transparency Engine (SLATE))
Proposed Rule 6530(a) would govern the reporting requirements applicable to Covered Persons for reporting Initial Covered Securities Loans.
Proposed Rule 6530(a)(2) (Loan Information To Be Reported) would specify the items of information that must be reported to FINRA. Specifically, proposed Rule 6530(a)(2)(A) through (N) would require that Initial Covered Securities Loan reports must contain the below non-confidential data elements:
(1) The legal name of the security issuer and the LEI of the issuer (if the issuer has a non-lapsed LEI);
(2) Security symbol, CUSIP, ISIN, or FIGI, if any;
(3) The date the Covered Securities Loan was effected;
(4) The time the Covered Securities Loan was effected;
(5) The expected settlement date of the Covered Securities Loan;
(6) The platform or venue where the Covered Securities Loan was effected;
(7) The amount of the Reportable Securities loaned;
(8) The type of collateral used to secure the Covered Securities Loan;
(9) For a Covered Securities Loan collateralized by cash, the rebate rate;
(10) For a Covered Securities Loan not collateralized by cash, the securities lending fee;
(11) Any other fees or charges;
(12) The percentage of collateral to value of Reportable Securities loaned required to secure such Covered Securities Loan;
(13) For a Covered Securities Loan with a specified term, the termination date of the Covered Securities Loan;
(14) Whether the borrower is a Broker
Consistent with SEA Rule 10c-1a(e), proposed Rule 6530(a)(2)(O) through (U) would also require that Initial Covered Securities Loan reports contain the below confidential data elements:
(1) If known, the legal name of each party to the Covered Securities Loan (other than the customer from whom a Broker or Dealer borrows fully paid or excess margin securities pursuant to SEA Rule 15c3-3(b)(3));
(2) If known, the CRD Number or IARD Number of each party to the Covered Securities Loan, if applicable;
(3) If known, the MPID of each party to the Covered Securities Loan;
(4) If known, the LEI of each party to the Covered Securities Loan;
(5) If known, whether each party to the Covered Securities Loan is the lender, the borrower, or an intermediary between the lender and the borrower;
(6) If the person lending securities is a Broker or Dealer and the borrower is its customer, whether the security is loaned from the Broker's or Dealer's securities inventory to the customer of such Broker or Dealer; and
(7) If known, whether the Covered Securities Loan is being used to close out a fail to deliver pursuant to Rule 204 of SEC Regulation SHO or to close out a fail to deliver outside of Regulation SHO.
Additionally, proposed Rule 6530(a)(2)(V) through (Y) would require a Covered Person to report:
(1) Whether the Covered Person is the lender, borrower or intermediary;
(2) The unique internal identifier assigned to the Covered Securities Loan by the Covered Person responsible for reporting the loan to SLATE;
(3) If the Covered Securities Loan is an allocation of an omnibus loan effected pursuant to an agency lending agreement, the unique internal identifier for the associated omnibus loan assigned by the Covered Person responsible for reporting the Covered Securities Loan to SLATE;
(4) Such modifiers and indicators as required by either the Rule 6500 Series or the SLATE Participant specification.
FINRA intends to use the information required by proposed Rule 6530(a)(2)(V) (requiring Covered Persons to identify whether the Covered Person is the lender, borrower or intermediary), proposed Rule 6530(a)(2)(W) (requiring Covered Persons to report the unique internal identifier it has assigned for the loan), and proposed Rule 6530(a)(2)(X) (requiring, for a loan that is an allocation of an omnibus loan, that Covered Persons report the unique internal identifier it has assigned for the associated omnibus loan) for data validation and regulatory purposes. For example, the Covered Person party type (
The modifiers and indicators—set forth in proposed Rule 6530(c) (Modifiers and Indicators)—apply to specific scenarios where additional
Proposed Rule 6530(c)(2) (Loan to Affiliate) would require a Covered Person to append an indicator to identify a loan made to an Affiliate of the lender or intermediary. For purposes of this provision, “Affiliate” would be defined as “an entity that controls, is controlled by or is under common control with a Covered Person.”
Proposed Rule 6530(c)(3) (Unsettled Loan) would require a Covered Person to append an indicator to identify an Initial Covered Securities Loan or modification to the amount of Reportable Securities loaned that did not settle by the close of SLATE System Hours
Proposed Rule 6530(c)(4) (Terminated Loan) would require a Covered Person to indicate when a Covered Securities Loan has been terminated. The terminated loan indicator would therefore be required to be appended on reports of: (1) an Initial Covered Securities Loan that did not and will not settle; and (2) Loan Modifications reporting the termination of a Covered Securities Loan (whether an open-ended or a term loan).
Proposed Rule 6530(c)(5) (Rate or Fee Adjustment) would require a Covered Person to report the appropriate modifier if a loan rebate rate or lending fee accounts for: (1) a billing adjustment or correction to amounts previously rebated or charged; or (2) the value of a distribution or other economic benefit associated with the Reportable Security,
Proposed Rule 6530(b) would govern the reporting requirements applicable to Covered Persons for reporting Loan Modifications.
Proposed Rule 6530(b)(2) (Loan Modifications—Information To Be Reported) would specify the items of information that must be reported to FINRA. Specifically, proposed Rule 6530(b)(2)(A) through (I) would require that each Loan Modification report contain the information below:
(1) The unique identifier assigned by FINRA to the Initial Covered Securities Loan, or, if a unique identifier has not yet been assigned by FINRA, the unique internal identifier assigned to the Covered Securities Loan by the Covered Person responsible for reporting the loan to SLATE;
(2) If the Covered Securities Loan is an allocation of an omnibus loan effected pursuant to an agency lending agreement, the unique internal identifier for the associated omnibus loan assigned by the Covered Person responsible for reporting the Covered Securities Loan to SLATE;
(3) The MPID of the Covered Person;
(4) The date of the Loan Modification;
(5) The time of the Loan Modification;
(6) The expected settlement date for modifications to the loan amount (if the expected settlement date is a date other than the date of the Loan Modification), or the effective date for all other Loan Modifications (if the effective date is a date other than the date of the Loan Modification);
(7) Whether the Covered Person is the lender, borrower or intermediary;
(8) The modified Data Elements for a Loan Modification to a Covered Securities Loan previously reported to SLATE or all Data Elements for a Loan Modification to a Covered Securities Loan that was not previously required to be reported to SLATE;
(9) Such modifiers and indicators as required by either the Rule 6500 Series or the SLATE Participant specification.
Proposed Rule 6530.01 (Intraday Loan Modifications) addresses a Covered Person's reporting obligations when multiple Loan Modifications occur on a given day. Specifically, if a Covered Securities Loan (whether or not previously reported to SLATE) is modified multiple times throughout the day, a Covered Person must report each Loan Modification that occurs on a given day as set forth in proposed Rule 6530(b). For example, if Lender A and Borrower X agree at 10:00 a.m. ET to modify the rebate rate for a previously reported Covered Securities Loan from 0.15 percent to 0.20 percent, and then decide at 3:00 p.m. ET to modify the rate to 0.30 percent, the Covered Person must report two Loan Modifications pursuant to proposed Rule 6530(b)(2): one with a Loan Modification time of 10:00 a.m. ET reflecting the change in the rebate rate to 0.20 percent and a second with a Loan Modification time of 3:00 p.m. ET to reflect the change in the rebate rate to 0.30 percent. Because, in this example, the Covered Securities Loan was previously reported to SLATE, the Loan Modification reports must also include the unique identifier assigned by FINRA to the loan.
If, however, the Covered Securities Loan was not previously required to be reported (
A Loan Modification report is also required where a Covered Securities Loan is modified on the day upon which it was effected, even if the modification occurred prior to the submission of the Initial Covered Securities Loan report to SLATE. Thus, for example, Lender A and Borrower X agree to an Initial Covered Securities Loan at 10:00 a.m. ET with terms that include a rebate rate of 0.15 percent. At 3:00 p.m. ET that same day, before the Initial Covered Securities Loan was reported to SLATE, Lender A and Borrower X agree to change the previously agreed upon rebate rate from 0.15 to 0.20 percent. Under the proposed rule, the Initial Covered Securities Loan must be reported reflecting all of the Data Elements and Confidential Data Elements
As discussed in the Adopting Release, a change to any party to a Covered Securities Loan would constitute the termination of the prior Covered Securities Loan and the initiation of a new loan under proposed Rule 6530.
Similar to requirements that exist with respect to reporting obligations under other FINRA rules, FINRA is proposing to adopt proposed Rule 6530(d) (Compliance with Reporting Obligations) to implement provisions regarding Covered Persons' ongoing reporting obligations and the use of third parties in meeting SEA Rule 10c-1a and FINRA 6500 Rule Series obligations.
FINRA also is proposing to adopt a provision to specify that, even where a member employs a Reporting Agent consistent with SEA Rule 10c-1a(a)(2), the member must nonetheless take reasonable steps to ensure that the Reporting Agent is in fact complying with the securities lending reporting requirements of SEA Rule 10c-1a and proposed FINRA Rule 6530 on its behalf.
Finally, proposed Rule 6530(d)(4) would provide that, if a Covered Person makes a good faith determination that it has a reporting obligation under SEA Rule 10c-1a and this Rule 6500 Series, the Covered Person or Reporting Agent, as applicable, must report the Covered Securities Loan as provided in proposed Rule 6530. If the Reportable Security is not entered into the SLATE system, proposed Rule 6530(d)(4) would also require the Covered Person or Reporting Agent, as applicable, to promptly notify and provide FINRA Operations, in the form and manner required by FINRA, the information specified in Rule 6530(a)(2)(A) and (B), along with such other information as FINRA deems necessary to enter the Reportable Security for reporting through SLATE. This requirement would enable FINRA to set the security up in its systems and facilitate reporting of the Covered Securities Loan to SLATE, as required by SEA Rule 10c-1a and proposed Rule 6530.
Proposed Rule 6520 (Participation in SLATE) would establish the requirements applicable to Covered Persons and Reporting Agents with respect to participation in SLATE. Rule 6510(h) would define a “SLATE Participant” as “any person that reports securities loan information to SLATE, directly or indirectly.” “SLATE Participant” therefore would include both persons who connect to SLATE directly to report Covered Securities Loan information, including Reporting Agents, as well as any Covered Person who has engaged a Reporting Agent or other agent.
Paragraph (1) of proposed Rule 6520(a) (Mandatory Participation) would provide that participation in SLATE is mandatory for purposes of reporting Covered Securities Loans. Such mandatory participation would obligate a Covered Person to submit Covered Securities Loan information to SLATE in conformity with the SEA Rule 10c-1a and the FINRA Rule 6500 Series. Proposed Rule 6520(a)(2) would provide that participation in SLATE would be conditioned on the SLATE Participant's initial and continuing compliance with specified requirements. Specifically, SLATE Participants must: (i) obtain an MPID for reporting Covered Securities Loans to SLATE;
Proposed Rule 6520(b) (Reporting Agents) would set forth the participation requirements specific to Reporting Agents.
Finally, proposed Rule 6520(c) (SLATE Participant Obligations) would
As required by SEA Rule 10c-1a(g), proposed Rule 6540 (Dissemination of Loan Information) would provide for the public dissemination of securities loan data reported to SLATE and information pertaining to the aggregate loan transaction activity and distribution of loan rates for each Reportable Security. The publicly available data would include: (1) next day (T+1) loan-level data dissemination for Initial Covered Securities Loans and Loan Modifications (except for the loan amount); (2) T+20 dissemination of the loan amount for Initial Covered Securities Loans and Loan Modifications; and (3) daily loan statistics (
Under proposed Rule 6540(a) (Next Day Dissemination), for each Initial Covered Securities Loan and Loan Modification reported to SLATE on a given business day, no later than the morning of the next business day, FINRA would make publicly available: (1) the unique identifier assigned by FINRA to the Covered Securities Loan; (2) the security identifier(s) specified in Rule 6530(a)(2)(A) or (B) that FINRA determines is appropriate to disseminate; and (3) the requisite Data Elements.
With respect to each Initial Covered Securities Loan reported to SLATE, proposed Rule 6540(a)(3)(A) would specify that FINRA make publicly available no later than the morning of the next business day all other reported Data Elements, except the amount of Reportable Securities loaned (reported pursuant to Rule 6530(a)(2)(G)) and any modifier or indicator required by either the Rule 6500 Series or the SLATE Participant specification that FINRA determines shall not be publicly disseminated. Thus, for example, if a Covered Person reports an Initial Covered Securities Loan to SLATE on a Tuesday before 8:00:00 p.m. ET, on Wednesday morning, assuming Wednesday is a business day, FINRA would disseminate the unique identifier assigned by FINRA to the loan, the security identifier, and all other reported Data Elements, except the loan amount and any modifier or indicator required by either the Rule 6500 Series or the SLATE Participant specification that FINRA determines shall not be publicly disseminated.
With respect to each Loan Modification to a Covered Securities Loan reported to SLATE on the same or a prior business day, proposed Rule 6540(a)(3)(B) would specify that FINRA make publicly available no later than the morning of the next business day the modified Data Elements reported to SLATE, except the amount of Reportable Securities loaned and any modifier or indicator required by either the Rule 6500 Series or the SLATE Participant specification that FINRA determines shall not be publicly disseminated. For example, if a Covered Person reports a Loan Modification to SLATE on a Tuesday before 8:00:00 p.m. ET increasing the previously reported loan amount from 500 shares to 700 shares and decreasing the previously reported rebate rate from 0.25 percent to 0.15 percent, on Wednesday morning, assuming Wednesday is a business day, FINRA would disseminate the unique identifier assigned by FINRA to the loan, the security identifier, and the modified rebate rate,
Finally, in the case of a Loan Modification to a Covered Securities Loan that was not previously required to be reported to SLATE (
Pursuant to Rule 6540(b) (Delayed Dissemination), for each Initial Covered Securities Loan and Loan Modification reported to SLATE, 20 business days after the date on which the Initial Covered Securities Loan was effected or the loan amount was modified, FINRA would make publicly available: (1) the unique identifier assigned by FINRA to the Covered Securities Loan, (2) the security identifier(s) specified in Rule 6530(a)(2)(A) or (B) that FINRA determines is appropriate to disseminate, and (3) the amount of Reportable Securities loaned reported to SLATE. For Initial Covered Securities Loans, the 20-day delay period would begin the day after the Covered Securities Loan is effected (even in the case of late reports). For example, where a Covered Securities Loan is effected on a Monday, the 1st of the month
In addition to T+1 loan-level data disseminated pursuant to proposed Rule 6540(a), FINRA would disseminate statistics regarding Covered Securities Loans reported to FINRA, including aggregate loan activity and distribution of loan rebate rates and lending fees.
Pursuant to paragraph (1) of proposed Rule 6540(c) (Aggregate Loan Transaction Activity), for each Reportable Security for which an Initial Covered Securities Loan or Loan Modification is reported to SLATE on a given business day, FINRA would disseminate, no later than the morning
Pursuant to Rule 6540(c)(1)(C), FINRA would also disseminate the aggregate volume of securities subject to an Initial Covered Securities Loan or modification to the amount of Reportable Securities loaned subject to a term loan (
Pursuant to proposed Rule 6540(c)(1)(E), FINRA would disseminate the aggregate number of Initial Covered Securities Loans and terminated Covered Securities Loans (both in total and broken down by collateral type) reported on the prior business day. FINRA believes that these data would provide the public with useful information concerning current lending activity.
Pursuant to paragraph (2) of proposed Rule 6540(c) (Loan Rate Distribution Data), for each Reportable Security for which an Initial Covered Securities Loan or Loan Modification is reported to SLATE on a business day, FINRA would also disseminate, not later than the morning of the next business day, the security identifier (specified in Rule 6530(a)(2)(A) or (B)) that FINRA determines is appropriate to identify the relevant Reportable Security and information pertaining to the distribution of loan rebate rates or lending fees, as applicable,
Proposed Rule 6540(d) (Loan Transaction Information Not Disseminated) would specify the information reported to FINRA that would not be disseminated. As prescribed by SEA Rule 10c-1a(g)(4), proposed Rule 6540(d)(1) provides that the Confidential Data Elements reported to FINRA would not be disseminated. In addition, proposed Rule 6540(d)(2) would provide that FINRA may determine not to publicly disseminate any modifier or indicator required by either the Rule 6500 Series or the SLATE Participant specification. FINRA may determine not to disseminate a modifier or indicator where the use of such information is intended for regulatory purposes only or its public disclosure may otherwise be inappropriate (
Finally, as proposed in Rule 6540.02 (Means of Data Dissemination), FINRA would make the data pursuant to proposed Rule 6540(a) through (c) available on FINRA's website free of charge for personal, non-commercial purposes only. For other uses, FINRA would publish or distribute SLATE data for fees that have been filed with the SEC pursuant to Rule 19b-4 under the Exchange Act.
Consistent with FINRA's rules governing other reporting facilities that it operates, proposed Rule 6550 (Emergency Authority) would provide that, as market conditions may warrant, FINRA, in consultation with the SEC, may suspend the reporting or dissemination of certain Covered Securities Loans, or the reporting of certain Data Elements or Confidential Data Elements or the dissemination of certain Data Elements for such period of time as FINRA deems necessary.
The Commission's release adopting SEA Rule 10c-1a specified the
FINRA believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act, which require that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market, and, in general, to protect investors and the public interest and, among other things, must not be designed to permit unfair discrimination between customers, issuers, brokers or dealers.
The proposed Rule 6500 Series is designed to improve transparency and efficiency in the securities lending market, consistent with section 15(A)(b)(6) of the Act, SEA Rule 10c-1a, and section 984 of the Dodd-Frank Act.
FINRA's proposed Rule 6500 Series would also facilitate the availability to regulators of information that may be used to aid in assessing market events—“[f]or example, January 2021 information on market participants' securities lending activity would have provided FINRA and Commission staff a more timely and comprehensive view of who was entering into new loans and who was no longer borrowing securities. This would have facilitated a deeper understanding of how the events were or were not impacting market participants. Such analyses can help determine if further regulatory intervention in markets is warranted and can inform the nature of any intervention.”
SEA Rule 10c-1a also expressly permits FINRA to establish rules regarding the format and manner of its collection of securities loan information. To that end, FINRA's proposed rule change would require that Covered Persons report, in addition to the specific data elements prescribed in SEA Rule 10c-1a, specified loan identifiers
As noted above, SEA Rule 10c-1a(g) also mandates that FINRA publicly disseminate specified securities loan data reported to SLATE, along with information pertaining to the aggregate loan activity and distribution of loan rates for each Reportable Security. To that end, pursuant to proposed Rule 6540, FINRA would make SLATE data available on FINRA's website free of charge for personal, non-commercial purposes only. FINRA believes that making securities loan information available free of charge for personal,
Finally, the proposed rule change would include provisions designed to facilitate the timeliness, accuracy and completeness of the information reported to SLATE and provide additional clarity to members regarding their obligations under FINRA rules—consistent with section 15A(b)(6) of the Act, SEA Rule 10c-1a, and section 984 of the Dodd-Frank Act.
As stated in the Commission's Adopting Release, SEA Rule 10c-1a, which the proposed rule change is designed to implement, is expected to reduce information asymmetries and to “increase competition between broker-dealers and between lending programs.”
Based on the regulatory need discussed above and summarized below, FINRA has undertaken an economic impact assessment, as set forth below, to analyze the potential economic impacts of the proposed rule change, including potential costs, benefits, and distributional and competitive effects, relative to the current baseline.
On October 13, 2023, the SEC adopted SEA Rule 10c-1a, requiring Covered Persons to report Covered Securities Loan information to an RNSA, and the RNSA to make publicly available specified information regarding those reported securities loans. In its Adopting Release, the SEC stated, among other things, that SEA Rule 10c-1a was designed to increase the transparency and efficiency of the securities lending market.
As required by SEA Rule 10c-1a(f), FINRA, currently the only RNSA, is proposing to establish rules specifying the format and manner of its collection of information on Covered Securities Loans. As required by SEA Rule 10c-1a(g), FINRA also is proposing rules to make Covered Securities Loan information publicly available. Below FINRA discusses the potential economic impacts of FINRA's proposed changes specifying the format and manner of reporting for Covered Securities Loans and the dissemination of aggregate transaction activity and distribution of loan rates for each Reportable Security.
In the Commission's Adopting Release, the SEC outlined the baseline and considered the economic effects of Rule 10c-1a and how its costs and benefits impacted the economic baseline.
In its Adopting Release, the Commission noted that various types of entities participating in the securities lending market will be impacted by SEA Rule 10c-1a, including those that may need to enter into contracts and develop recording and reporting systems to comply with the rule.
In the Adopting Release, the SEC discussed its consideration of the economic effects of SEA Rule 10c-1a.
Furthermore, permitting the reporting of Initial Covered Securities Loans and Loan Modifications effected on a business day after 7:45:00 p.m. ET by no later than next business day (T+1) before 8:00:00 p.m. ET will provide Covered Persons with time to review the reportable information for end-of-day loans to facilitate accurate and complete reporting. FINRA believes that the proposed reporting timeframes strike an appropriate balance between providing Covered Persons with sufficient time to review and report the day's loan activity and providing FINRA with the time necessary to process the reported information for next-day dissemination.
SEA Rule 10c-1a(g)(5) generally requires that FINRA make publicly available information pertaining to the aggregate loan transaction activity and the distribution of loan rates on a daily basis. FINRA has proposed specific aggregation buckets, as described in detail above. The dissemination of these data, which would be compiled from the Data Elements required to be reported to SLATE pursuant to SEA Rule 10c-1a and proposed Rule 6530, does not impact the reporting requirements applicable to Covered Persons and, therefore, does not contribute to the direct costs of reporting for Covered Persons. Further, as FINRA would make these data available on its website free of charge for personal, non-commercial use, the dissemination of this information will similarly not contribute to any direct costs for such use.
Among other things, FINRA proposes to disseminate the aggregate volume of securities (both in total and by collateral type) subject to an Initial Covered Securities Loan or modification to the amount of Reportable Securities loaned reported on the prior business day, which would provide varied perspectives on the loan activity for the Reportable Security, including over time. FINRA also proposes to disseminate the aggregate volume of securities (both in total and by collateral type) subject to a rebate rate or fee modification reported on the prior business day, to provide insight into the frequency of rate changes for a Reportable Security. FINRA similarly proposes to disseminate the aggregate volume of securities subject to an Initial Covered Securities Loan or modification to the amount of Reportable Securities loaned with a specified term and, separately, without a specified term, reported on the prior business day, as well as the aggregate volume of securities subject to an Initial Covered Securities Loan or modification to the amount of Reportable Securities loaned to one or more borrower types specified in Rule 6530(a)(2)(N) reported on the prior business day. These categorizations would permit analysis of volume differences between loans that do not have a defined end date and those that have a defined term date, and volume differences between the wholesale versus end-customer market.
In specifying the format and manner of reporting for Covered Securities Loans and the dissemination of aggregate transaction activity and distribution of loan rates for Reportable Securities, FINRA considered various alternatives and the potential costs and benefits of those alternatives. On balance, FINRA believes the requirements in the proposed rule are appropriate in light of the anticipated benefits to the SLATE reporting, transparency, and regulatory framework.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On February 29, 2024, NYSE Arca, Inc. (“NYSE Arca” or the “Exchange”) filed with the Securities and Exchange Commission (the “Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”)
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 17g-7 requires each nationally recognized statistical rating organization (“NRSROs”) to publish certain items, including a form containing specified information, when taking a rating action with respect to a credit rating
Based on staff experience, the Commission estimates that the total annual hour burden to comply with Rule 17g-7 will be 641,673 hours. The Commission further estimates that this annual hour burden will result in a total annual cost of $238,688,856, reflecting the cost of preparing the form required to be published by Rule 17g-7 and standardizing and tailoring certain required disclosures, as well as the cost of maintaining a database of rating histories to comply with Rule 17g-7.
Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information on respondents; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by July 8, 2024.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Please direct your written comments to: Dave Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F St. NE, Washington, DC 20549 or send an email to:
9:00 a.m. CT on May 9, 2024.
Lipscomb University's George Shinn Event Center, Nashville, Tennessee.
Open.
The TVA Board of Directors will hold a public meeting on May 9, at the
The meeting will be called to order at 9:00 a.m. CT to consider the agenda items listed below. TVA management will answer questions from the news media following the Board meeting.
On May 8, at the George Shinn Event Center, the public may comment on any agenda item or subject at a board-hosted public listening session which begins at 2:00 p.m. CT and will last until 4:00 p.m. Preregistration is required to address the Board.
For more information: Please call TVA Media Relations at (865) 632-6000, Knoxville, Tennessee. Anyone who wishes to comment on any of the agenda in writing may send their comments to: TVA Board of Directors, Board Agenda Comments, 400 West Summit Hill Drive, Knoxville, Tennessee 37902.
Federal Highway Administration (FHWA), Department of Transportation.
Notice.
The FHWA is issuing this notice to advise the public that it is rescinding its Notice of Intent (NOI) and will not be preparing an Environmental Impact Statement (EIS) for a proposed highway project in Shelby County, Tennessee. A NOI to prepare an EIS was published in the
For FHWA: Gilberto De León, P.E.; Acting Division Administrator; Federal Highway Administration; Tennessee Division Office; 404 BNA Drive, Building 200, Suite 508, Nashville, TN 37217; Telephone: 615-426-3214; email:
The FHWA, in cooperation with the Tennessee Department of Transportation (TDOT), initiated an EIS with a NOI published in the
Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT).
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FMCSA announces its plan to submit the Information Collection Request (ICR) described below to the Office of Management and Budget (OMB) for review and approval. The information collected is required by the Office of Registration to process name changes, address changes, and reinstatements of operating authority for motor carriers, freight forwarders, and brokers. On December 14, 2023, FMCSA published a notice in the
Comments on this notice must be received on or before June 6, 2024.
Written comments and recommendations for the proposed information collection should be submitted within 30 days of publication of this notice to
Mr. Jeffrey Secrist, Office of Registration, Chief, Registration Division, DOT, FMCSA, West Building 6th Floor, 1200 New Jersey Avenue SE, Washington, DC 20590; (202) 385-2367;
FMCSA registers for-hire motor carriers under 49 U.S.C. 13902, surface freight forwarders under 49 U.S.C. 13903, and property brokers under 49 U.S.C. 13904. Each registration is effective from the date specified under 49 U.S.C. 13905(c). “Procedures for changing the name or business form of a motor carrier, freight forwarder, or property broker,” (49 CFR 365.413T) states that motor carriers, forwarders, and brokers must submit the required information to FMCSA's Office of Registration requesting the change. Paragraph (f) of § 360.3T mentions fees that FMCSA collects for “petition for reinstatement of revoked operating authority,” but does not provide any specifics for the content that petition should take.
Motor carriers, freight forwarders, and property brokers are required to use Form MCSA-5889 to request a name or address change and to request reinstatement of a revoked operating authority. Respondents can submit the form online through the Licensing and Insurance (L&I) website, by fax, or by mail. According to data collected between 2020 and 2022, annually, approximately 1 percent of forms are submitted by mail; 7 percent are submitted by fax; and 92 percent are submitted online. The information collected is then entered in the L&I database by FMCSA staff.
Form MCSA-5889 enables FMCSA to maintain up-to-date records so that the Agency can recognize the entity in question in case of enforcement actions or other procedures required to ensure that the carrier is willing and able to provide for-hire transportation services, and so that entities whose operating authority has been revoked can resume operation if they are not otherwise blocked from doing so. This multi-purpose form, filed by registrants on a voluntary, as-needed basis, simplifies the process of gathering the information needed to process the entities' requests in a timely manner, with the least amount of effort for all parties involved.
The form prompts users to report the following data points (whichever are relevant to their records change request):
1. Requestor's fax number, email address, and applicant's oath.
2. Entity's legal/doing business as names, USDOT number, docket MC/MX/FX number, current street address, and phone number(s).
3. Affiliations with FMCSA-licensed entities.
4. Requested changes to the entity's address.
5. Requested changes to the entity's name and/or ownership, management, or control.
6. Type(s) of operating authority the entity wishes to reinstate.
7. Credit card information (name, number, expiration date, address, date) if filing a name change or reinstatement.
The currently approved version of this ICR estimated the average annual burden to be 6,781 annual burden hours, with 27,122 total annual respondents. For this renewal the estimated average annual burden is 16,168, with 64,673 total average annual respondents. The annual burden hour increase of 9,387 is due to the increase in the average number of annual respondents.
Issued under the authority of 49 CFR 1.87.
Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT).
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FMCSA announces its plan to submit the Information Collection Request (ICR) described below to the Office of Management and Budget (OMB) requesting a renewal of an approved information collection for review and approval. This ICR applies to: Existing registrants (
Comments on this notice must be received on or before June 6, 2024.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Mr. Jeffrey Secrist, Office of Registration, Chief, Registration Division, DOT, FMCSA, West Building 6th Floor, 1200 New Jersey Avenue SE, Washington, DC 20590; (202) 385-2367;
No comments were received from the 60-day
FMCSA registers for-hire motor carriers of regulated commodities and of passengers under 49 U.S.C. 13902(a); surface freight forwarders under 49 U.S.C. 13903; property brokers under 49 U.S.C. 13904; and certain Mexico domiciled motor carriers under 49 U.S.C. 13902(c). These motor carriers may conduct transportation services in the United States only if they are registered with FMCSA. Each registration is effective from the date specified and remains in effect for such period as the Secretary of Transportation (Secretary) determines by regulations.
Prior to 2015, all entities seeking authority (both first-time applicants and registered entities seeking additional authorities) were required to apply for such authority using the OP-1 series of forms, including OP-1, OP-1(P), OP-1(FF), OP-1(NNA), and OP-1(MX) (for Mexico-domiciled carriers only).
The final rule titled “Unified Registration System,” (78 FR 52608) dated August 23, 2013, implemented statutory provisions for an online registration system for entities that are subject to FMCSA's licensing, registration, and certification regulations. The Unified Registration System (URS) streamlines the registration process and serves as a clearinghouse and repository of information on motor carriers, brokers, freight forwarders, intermodal equipment providers, hazardous materials safety permit applicants, and cargo tank facilities required to register with FMCSA. When developing URS, FMCSA planned that the OP-1 series of forms—except for OP-1(MX)—would ultimately be folded into one overarching electronic application (MCSA-1) which would be used by all motor carriers seeking authority.
FMCSA began a phased rollout of URS in 2015. The first phase, which went into effect on December 12, 2015, impacted only first-time applicants seeking an FMCSA-issued registration. FMCSA had planned subsequent rollout phases for existing registrants; however, there were substantial delays, and subsequent phases have not been rolled out to date.
On January 17, 2017, FMCSA issued a final rule titled “Unified Registration System; Suspension of Effectiveness,” which indefinitely suspended URS effective dates for existing registrants only (82 FR 5292). Pursuant to this final rule, FMCSA is still accepting forms OP-1, OP-1(P), OP-1(FF), and OP-1(NNA) for existing registrants wishing to apply for additional authorities. Separately, FMCSA requires Form OP-1(MX) for new and existing Mexico-domiciled motor carriers that wish to operate beyond the U.S. municipalities on the U.S.-Mexico border and their commercial zones. Information collected through URS, utilizing the MCSA-1, does not include registration form OP-1(MX), which continues to remain a paper form outside URS.
Forms in the OP-1 series request information to identify the applicant, the nature and scope of its proposed operations, a narrative description of the applicant's safety policies and procedures, and information regarding the drivers and vehicles it plans to use in U.S. operations. The OP-1 series also requests information on the applicant's familiarity with relevant safety requirements, the applicant's willingness to comply with those requirements during its operations, and the applicant's willingness to meet any specific statutory and regulatory requirements applicable to its proposed operations. Information collected through these forms aids FMCSA in determining the type of operation a company may run, the cargo it may carry, and the resulting level of insurance coverage the applicant will be required to obtain and maintain to continue its operating authority.
Issued under the authority of 49 CFR 1.87.
Under part 211 of title 49 Code of Federal Regulations (CFR), this document provides the public notice that on November 13, 2023, Union Pacific Railroad Company (UPRR) petitioned the Federal Railroad Administration (FRA) for a waiver of compliance from certain provisions of the Federal railroad safety regulations contained at 49 CFR part 231 (Railroad Safety Appliance Standards). FRA assigned the petition Docket Number FRA-2023-0096.
Specifically, UPRR requested a waiver from 49 CFR 231.27(h),
A copy of the petition, as well as any written communications concerning the petition, is available for review online at
Interested parties are invited to participate in these proceedings by submitting written views, data, or comments. FRA does not anticipate scheduling a public hearing in connection with these proceedings since the facts do not appear to warrant a hearing. If any interested party desires an opportunity for oral comment and a public hearing, they should notify FRA, in writing, before the end of the comment period and specify the basis for their request.
All communications concerning these proceedings should identify the appropriate docket number and may be submitted at
Communications received by July 8, 2024 will be considered by FRA before final action is taken. Comments received after that date will be considered if practicable.
Anyone can search the electronic form of any written communications and comments received into any of our dockets by the name of the individual submitting the comment (or signing the document, if submitted on behalf of an association, business, labor union, etc.). Under 5 U.S.C. 553(c), the U.S. Department of Transportation (DOT) solicits comments from the public to better inform its processes. DOT posts these comments, without edit, including any personal information the
Issued in Washington, DC.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service (IRS), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning, Notice of Intent to Operate.
Written comments should be received on or before July 8, 2024, to be assured of consideration.
Direct all written comments to Andres Garcia, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or by email to
Requests for additional information or copies of this collection should be directed to Martha R. Brinson, at (202) 317-5753, or at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
U.S.-China Economic and Security Review Commission.
Notice of open public hearing.
Notice is hereby given of the following hearing of the U.S.-China Economic and Security Review Commission. The Commission is mandated by Congress to investigate, assess, and report to Congress annually on “the national security implications of the economic relationship between the United States and the People's Republic of China.” Pursuant to this mandate, the Commission will hold a public hearing in Washington, DC on May 23, 2024 on “Key Economic Strategies for Leveling the U.S.-China Playing Field: Trade, Investment, and Technology.”
The hearing is scheduled for Thursday, May 23, 2024 at 9 a.m.
Members of the public will be able to attend in person at a location TBD or view a live webcast via the Commission's website at
Any member of the public seeking further information concerning the hearing should contact Jameson Cunningham, 444 North Capitol Street NW, Suite 602, Washington, DC 20001; telephone: 202-624-1496, or via email at
The hearing will be co-chaired by Commissioner Leland Miller and Commissioner Michael Wessel. Any interested party may file a written statement by May 23, 2024 by transmitting it to the contact above. A portion of the hearing will include a question and answer period between the Commissioners and the witnesses.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
Veterans Benefits Administration, Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the
Written comments and recommendations on the proposed collection of information should be received on or before July 8, 2024.
Submit written comments on the collection of information through Federal Docket Management System (FDMS) at
Maribel Aponte, Office of Enterprise and Integration, Data Governance Analytics (008), 810 Vermont Ave. NW, Washington, DC 20420, (202) 266-4688 or email
Under the PRA of 1995, Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VBA invites comments on: (1) whether the proposed collection of information is necessary for the proper performance of VBA's functions, including whether the information will have practical utility; (2) the accuracy of VBA's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology.
By direction of the Secretary.
Office of the Assistant Secretary for Public and Indian Housing, HUD.
Final rule.
This final rule amends HUD's regulations to implement changes to the Housing Choice Voucher (HCV) tenant-based program and the Project-Based Voucher (PBV) program made by the Housing Opportunity Through Modernization Act of 2016 (HOTMA). HOTMA made several amendments to the HCV and PBV programs, including establishing a statutory definition of public housing agency (PHA)-owned housing, and amending several elements of both programs. In response to public comments, HUD has also included additional regulatory changes in this final rule that are intended to reduce the burden on public housing agencies, by either modifying requirements or simplifying and clarifying existing regulatory language.
For more information,
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Ryan Jones, Director, Housing Voucher Management and Operations Division, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20011; telephone number 202-708-1112 (this is not a toll-free number); email
On July 29, 2016, HOTMA was signed into law (Pub. L. 114-201, 130 Stat. 782). HOTMA makes numerous significant changes to statutes that govern HUD programs, including section 8 of the United States Housing Act of 1937 (1937 Act) (42 U.S.C. 1437f).
On October 8, 2020, HUD issued a proposed rule
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The proposed rule also sought to implement the following HOTMA HCV provision:
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HUD also proposed changes that were not statutorily required, to better clarify or revise existing regulatory requirements, including changing the current requirements to refine the Davis-Bacon wage requirements and inserting references to obligations under Section 504 of the Rehabilitation Act of 1973 (Section 504) and the Americans with Disabilities Act (ADA). Through these changes, HUD sought to improve the administration of the program, simplify program rules, and reduce administrative burden and cost. For additional information, please see the proposed rule.
HUD received 44 comments on the proposed rule, which were considered and are discussed in Section IV of this preamble. Additional details about the proposed changes may be found in the “Housing Opportunity Through Modernization Act of 2016-Housing Choice Voucher (HCV) and Project-Based Voucher Implementation; Additional Streamlining Changes” proposed rule at 85 FR 63664 (Oct. 8, 2020).
On May 11, 2023, after the proposed rule was published, HUD published the “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE) final rulemaking (“the NSPIRE final rule”).
After considering the public comments received on the October 8, 2020, proposed rule, and after further review, HUD makes the following changes at this final rule stage. Where a section has been relocated either from the prior regulations or from what HUD proposed, the section numbers shown in the headings of this preamble refer to the regulation sections as they appear in this final rule.
HUD wishes to clarify that no change in this rulemaking requires a PHA, or any other party, to repeat a stage in the selection or development process which has already been completed for a PBV project prior to the compliance date of this rulemaking. If, for instance, a PHA has selected a site under the prior site selection standards before the effective date of this rulemaking, the PHA is not required to complete a new selection. Similarly, an Agreement to enter into HAP contract signed before the effective date of this rulemaking does not need to be amended to incorporate changes to this rulemaking.
Additionally, if parties wish to amend an existing Agreement to enter into HAP contract to take advantage of changes made by this rulemaking, such as the changes made to include a description of broadband infrastructure work in the Agreement, nothing in this rulemaking prevents such an amendment after the rule is in effect. However, HUD notes that if a project is under an Agreement to enter into HAP contract as of the effective date of this rule, parties cannot nullify the Agreement to enter into HAP contract to proceed without an Agreement as will be otherwise allowed under this rule when § 983.154(f) and (g) take effect.
In response to public comments, HUD revises § 888.113 to increase flexibility for PHAs. This final rule will provide PHAs the option in the HCV program to use Small Area Fair Market Rents (SAFMRs) in a non-metropolitan area with notification to their local HUD field office, which provides PHAs operating in non-metropolitan counties the same opportunity to establish payment standards that better align with rents that vary significantly between zip code areas within the non-metropolitan counties. In paragraph (a) this final rule modifies the requirement under § 888.113 that the FMR calculation exclude newly built units. HUD no longer publishes separate FMRs for newly constructed rental units; therefore, the FMRs calculated under § 888.113 should be reflective of the entire rental market. This final rule also clarifies existing practice in paragraph (c)(3) that where a PHA that elects to use SAFMRs may exercise this option in one metropolitan area or non-metropolitan county, and is not required to exercise this option in other metropolitan areas or non-metropolitan counties. This final rule changes paragraph (c)(3) which will allow PHAs to notify HUD when opting-in to use SAFMRs, rather than require HUD's approval.
This final rule revises paragraph (h) to align with the change to paragraph (c)(3) described above and to improve readability. Paragraph (h) is also revised to include a cross-reference to separate requirements regarding applicability of exception payment standards based on Small Area FMRs to PBV projects, to more clearly signal that Small Area FMRs may impact PBVs both as described in paragraph (h) and where HUD approves use of exception payment standards. This final rule also revises paragraph (h)(1) to clarify that the PHA and owner may mutually agree to apply the SAFMR to a PBV project where the project was selected before “either or both” the SAFMR designation and the PHA administrative policy. The intent of this provision, as explained in the preamble to the Small Area FMR final rule (81 FR 80567, published November 16, 2016), was to permit a PHA that had established an Administrative Plan policy to apply Small Area FMRs to all future PBV projects to also establish a policy permitting the PHA to apply the Small Area FMRs to current PBV projects, provided the owner was willing to mutually agree to do so. This approach was intended to offer “maximum flexibility” to the PHA for varied circumstances. However, the prior language the use of “both” inadvertently created confusion with respect to projects selected between the two events (the Small Area FMR designation and the PHA administrative policy extending Small Area FMRs to future PBV projects). Consequently, HUD is making a technical correction to paragraph (h)(1) to clarify that if the PHA is applying the Small Area FMRs to future PBV projects, the PHA may also establish a policy to extend the use of Small Area FMRs to current PBV projects, including those projects selected after the Small Area FMR designation but prior to the effective date of the PHA administrative policy, if the owner is willing to do so.
This final rule also makes minor revisions to paragraphs (h)(1) and (h)(2). First, the final rule includes “county-wide FMRs,” for consistency with other changes in the regulation that allow voluntary use of SAFMRs in non-
Finally, this final rule revises paragraph (i)(2) to reflect the renumbering of § 982.503(e) to (f). This final rule also revises paragraph (i)(3) to reflect the phase-out of success rate payment standards in 982.503(f).
This final rule clarifies HUD's intent regarding applicability of part 903 to the project-based voucher program. Previously, § 903.4(a)(2)(i) defined tenant-based assistance to broadly mean assistance provided under section 8(o) of the 1937 Act, which included project-based assistance under section 8(o)(13). When § 903.12 was amended to make express reference to project-based assistance under section 8(o)(13), an unintended consequence was confusion regarding whether the term “tenant-based assistance” should still be interpreted to include project-based assistance under section 8(o)(13). In § 903.3(b)(2), the term “project-based” is added to the reference of participants who benefit from PHA plans as a source to locate basic PHA policies, rules and requirements concerning the PHA's operations, programs and services.
This final rule revises and defines both tenant-based assistance and project-based assistance under 903.4(a)(2)(i) to address confusion regarding whether the existing regulatory language also covers project-based assistance under section 8(o)(13). HUD now also makes specific reference to tenant-based assistance, project-based assistance, and/or tenant and project-based assistance throughout part 903 to bring clearer meaning to each provision.
HUD adds paragraph (c) to § 903.6 to clarify that when a PHA intends to select one or more projects for project-based assistance without competition, the PHA must first include a statement of this intent in its 5-Year Plan to put the public on notice. The proposed rule referenced this requirement in 983.51(c)(1) but only generically referenced the PHA Plan.
This final rule clarifies the requirements for PHAs that provide project-based assistance under section 8(o)(13) with respect to what information a PHA must provide in the Annual Plan. HUD now makes specific references to project-based assistance in paragraphs (a)(1), (c), (d), (e)(4), (f), and (l)(1)(iii) and (2). HUD also inserts a new paragraph (r) which contains text that was previously located in § 903.12, as HUD determined that the project-based assistance statement requirement in that section was not appropriately located.
Finally, in the
HUD makes a minor revision to § 903.11(c)(1) and (3) to include the requirement that a PHA must identify its participation in the project-based assistance program in the streamlined Annual Plan consistent with the changes to § 903.7 made by this final rule.
HUD is also revising paragraphs (a)(3) and (c)(3). These paragraphs allow PHAs to submit a streamlined Annual Plan if they do not own or operate public housing. This final rule clarifies that PHAs that participate in the project-based assistance program are still eligible to submit a streamlined Annual Plan.
In this final rule, HUD moves the PBV requirements previously located in § 903.12 to § 903.7 as described above. HUD makes a minor revision to § 903.12 to include the requirement that in the streamlined Annual Plan for Small PHAs, a PHA must identify its participation in the PBV program consistent with the changes to § 903.7 made by this final rule. HUD also makes express reference to project-based assistance in paragraph (b).
This final rule clarifies in § 903.13(b)(1) and (3) the requirements that Resident Advisory Board composition provides for reasonable representation of families receiving project-based assistance, in addition to families receiving tenant-based assistance.
This final rule clarifies in paragraph (c) that all admission and occupancy policies for section 8 project-based housing programs, in addition to public housing and section 8 tenant-based must comply with Fair Housing Act requirements and other civil rights laws and regulations and with a PHA's plans to affirmatively further fair housing.
In this final rule, HUD has revised the organizational structure of the cross-references for clarity and consistency with cross references in other sections. In addition, this final rule makes the following changes to definitions:
HUD adds the definition of “building,” to clarify that a building is a structure with a roof and walls that contains one or more dwelling units.
HUD adds the definitions of “foster adult” and “foster child” to the HCV program to clarify that foster adult and foster child are members of the household, but not members of a family. These definitions are identical to the definitions added by the Housing Opportunity Through Modernization Act of 2016: Implementation of Sections 102, 103, and 104 final rule.
HUD revises the definition of “housing quality standards” to make a technical correction to the existing definition and eliminate confusion regarding the use of the alternative inspection option. Under the statute, the term “housing quality standards” (HQS) refers to the standards prescribed by HUD under section 8(o)(8)(B)(i) or variations approved by HUD under section 8(o)(8)(B)(ii) of the United States Housing Act of 1937. While the alternative inspection option at § 982.406 allows a PHA to comply with the initial and regular inspection requirements by relying on an alternative inspection (
HUD revises the definition of “independent entity” from the definition in the proposed rule to clarify when the unit of general local government meets the definition of an independent entity and more clearly explain the requirements and prohibited connections for a HUD-approved entity.
HUD revises the proposed definition of “Request for Tenancy Approval (RFTA)” to make clear that the RFTA may be submitted not just by the family, but also on behalf of a family.
HUD revises the definition of “Small Area Fair Market Rents” from the proposed rule to remove language suggesting that the definition only applies to areas meeting the definition at § 888.113(d)(2). HUD removed this reference because the SAFMRs in part 982 are not meant to be limited to the mandatory Small Area FMR metropolitan areas, and as such the “Small Area Fair Market Rents” definition deleted the citation to § 888.113(d)(2), which only covers mandatory metropolitan areas designated as Small Area FMR areas.
HUD revises the definition of “tenant-paid utilities” by stating that utilities and services may include those required by HUD through
This final rule revises the requirements for the PHA Administrative Plan. Specifically, this final rule requires PHAs at § 982.54(d)(22) to specify in the Administrative Plan the PHA's policy for withholding HAP for units that do not meet HQS. This final rule also requires at § 982.54(d)(4)(iv) that the PHA Administrative Plan include the PHA's policy concerning residency for foster children and adults and requires at § 982.54(d)(23) that the PHA's Administrative Plan include the PHA's policy on assisting families with relocating and finding a new unit. This final rule also modifies § 982.54(d)(4)(iii) to include §§ 982.552, 982.554, and 982.55 as regulations that PHAs must follow in establishing their standards for denying admission or terminating assistance based on criminal activity or alcohol abuse and which must be included in their Administrative Plan. HUD's directives and guidance on a PHA's use of criminal activity as an admission screening factor are contained in PIH Notice 2015-19,
Consistent with the NSPIRE final rule, HUD modifies § 982.54(d)(21)(i) to require the PHA to include in its Administrative Plan any life-threatening deficiencies adopted by the PHA. Under the proposed rule, the PHA's Administrative Plan had to include the specific life-threatening conditions that would be identified through the PHA's inspections, including the HUD required life-threatening conditions and any life-threatening deficiencies adopted by the PHA prior to January 18, 2017. Since the deficiencies that HUD requires must be considered life-threatening are mandatory and not a matter of PHA administrative policy, requiring the PHA to list the HUD-required life-threatening deficiencies in the Administrative Plan is unnecessary and burdensome. In addition, singling out life-threatening deficiencies adopted by the PHA prior to January 18, 2017, which was related to how HUD initially implemented the non-life-threatening initial inspection option in the HOTMA Implementation
This final rule makes changes to the information provided to a family when they are selected. For transparency and to ensure equal access, this section specifies that PHAs must provide information in a way that ensures meaningful access to individuals with limited English proficiency. Additionally, the final rule expands upon the requirement in the proposed rule to provide information on reasonable accommodation policies and procedures in the information packet, by also requiring that the packet specifically address an increase in the payment standard as a reasonable accommodation. The final rule also includes a requirement that reasonable accommodations must also be covered in the oral briefing. In this section, this final rule removes all references to the welfare to work program, since it no longer exists. Finally, this rule reorganizes paragraph (a) so that paragraph (a)(1) represents a list of what must be provided in an oral briefing, moving some content from paragraphs (a)(2) and (3); this reorganization does not change the requirements of paragraph (a) in any way.
This final rule reorganizes § 982.305(b) of the proposed rule by relocating paragraph (b)(2)(iii) of the proposed rule to a new paragraph (b)(3) and moving the previous paragraph (b)(3) to a new paragraph (b)(4). For clarity and simplicity, this final rule removes the requirement that the PHA determine that the unit is covered by the alternative inspection and simplifies this provision to state that an alternative inspection is allowed and alternatively cross references what the PHA is subject to and the alternative inspection option at § 982.406. In addition, this final rule does not make the proposed non-substantive change to paragraph (c)(3).
This final rule changes proposed § 982.352(b)(1)(v)(A)(
NSPIRE includes the new standards for setting HQS at § 5.703 for all HUD programs including the standards for life-threatening and non-life-threatening conditions and the amount of time required to correct such deficiencies. Other than a conforming change related to the revised definition of HQS discussed previously in the description of the changes to § 982.4, this final rule makes no change to the section as codified in the NSPIRE rule (88 FR 30442 (May 11, 2023)).
HUD makes several clarifying revisions to this section, which includes changes to certain terminology such as changing “fails to comply” to “has HQS deficiencies” and consistently changing “defect” to “deficiency.” These clarifying changes also make it clear that a unit is “not in compliance with HQS” when it has deficiencies that are not remedied within the appropriate timeframe. This final rule also revises paragraph (a)(2) to provide clarifying changes from the proposed rule text that ensure the paragraph is clear that it does not provide a different requirement from the remainder of the section, and amends paragraph (a)(4) to align with the HOTMA statutory text. HUD provides in paragraph (b)(4) that, in the case of a family being responsible for HQS deficiency repairs, the family need not itself make the repairs but rather is responsible for taking all steps permissible under the lease and State and local law to ensure the deficiency is corrected. This is in response to commenters who pointed out that in some cases the lease or local law may prevent the family from undertaking the repairs itself.
The proposed rule used varying terminology to explain HQS inspections throughout parts 982 and 983. To promote clarity, this final rule replaces the varied terminology to explain HQS inspections and consistently uses the inspection terms outlined in § 982.405. This rule specifically names each type of inspection that exists within its respective section and specifies when actions or provisions apply to specific inspections. As such, this final rule also removes references to “regular inspection” since it was undefined in the proposed rule, and this final rule clarifies that § 982.404(d) applies to every inspection type other than initial inspections. This final rule also adds the requirement at paragraph (d)(1) that a PHA's Administrative Plan contains the conditions for withholding HAP from an owner for such deficiencies, to align with § 982.54.
In paragraph (d)(2)(i), this final rule clarifies that the abatement requirement includes amounts that had previously been withheld. To better protect families from homelessness, in paragraph (d)(2)(ii), HUD outlines the timeframe in which a PHA must issue a family its voucher to include at least 30 days prior to the termination of the HAP contract. In paragraph (d)(3), this final rule specifies that the family has discretion to terminate their lease and that the termination will occur either immediately or when the family vacates the unit, whichever is earlier. This final rule also includes the requirement that PHAs promptly issue the family a voucher to move. In paragraph (e)(3), HUD expands what is included in costs associated with relocating to include temporary housing costs. The final rule further provides that if the PHA uses the withheld and abated assistance payments to assist with the family's relocation costs, the PHA must provide security deposit assistance to the family as necessary, and that PHAs must assist families with disabilities in locating available accessible units in accordance with 24 CFR 8.28(a)(3).
Lastly, in paragraph (f), HUD provides that the revised § 982.404 applies to HAP contracts that are executed on or after the effective date of this final rule, as well as HAP contracts renewed after the rule's effective date.
HUD has made technical organizational changes to § 982.405 by dividing paragraphs and changing the headers to consistently use identifiable names for each inspection type. New paragraph (d) splits up the proposed paragraph (g) to specifically outline the types of interim inspections to include life-threatening, non-life-threatening, and extraordinary circumstances.
HUD revises § 982.406 primarily to address issues with respect to compatibility between parts 982 and 983. Paragraph (a) now applies only to HCV, part 982 as HUD moved generally applicable language at proposed paragraph (a)(2) to paragraph (d) and removed the language at proposed paragraph (a)(3) applicable only to PBV. HUD also revises paragraph (c)(2)(ii) to align with the renumbering in § 982.405. This final rule revises paragraph (d) regarding use of alternative inspections to apply to both HCV and PBV, by removing specific citations to § 982.405.
In this final rule, the text from paragraph (c)(1)(i) has been moved under paragraph (c)(1), resulting in a renumbering of paragraphs (c)(1)(i)(A)-(E) from the proposed rule to (c)(1)(i)-(v) in the final rule. Paragraph (c)(1) now expressly states the requirement that the separate legal entity must execute the HAP contract with the PHA if it chooses the option of establishing a separate legal entity to serve as the owner. HUD deletes paragraph (c)(1)(ii) of the proposed rule and moves the text of proposed (c)(2)(i) under paragraph (c)(2) in the final rule. This final rule also revises paragraph (c)(2)(i) to clarify that the PHA-owned certification obligates the PHA, as the owner, to all of the requirements of the HAP contract. This revision prevents confusion with other regulations that reference HAP contracts, but not the PHA-owned certification. Finally, other minor changes were made in paragraph (c) to align with corresponding requirements in § 983.204(e).
HUD makes clarifying edits to paragraph (a)(1) to reflect HUD's practice of setting SAFMRs for ZIP codes outside designated SAFMRs. HUD also revises paragraph (d)(1) to explain the areas in which an exception payment standard may be established. In addition, in response to public comment, HUD revises paragraph (d)(2) to allow PHAs to set SAFMR-based exception payment standards above 110 percent of the FMR for non-metropolitan counties, just as they are currently permitted to do for metropolitan areas. This ensures parity between metropolitan and non-metro PHAs and provides non-metropolitan PHAs with the ability to establish exception payment standards that better reflect actual market conditions based on HUD's SAFMR determinations. In paragraph (d)(2), this final rule also allows PHAs that qualify for exception payment standards above 110 percent of the applicable FMR to set exception payment standards up to the same percentage of the SAFMR for the applicable ZIP code. HUD also divides proposed paragraph (d)(3) into paragraphs (d)(3) and (4) and moves proposed paragraph (d)(4) to (d)(5). In order to provide PHAs more flexibility to respond to rapidly changing rental markets, paragraph (d)(3) now provides set situations in which HUD will allow PHAs the discretion to establish an exception payment standard amount between 110 percent and 120 percent of applicable FMR upon notification to HUD that the PHA meets a specified criterion instead of requiring prior HUD approval. The PHA must meet one of three criteria: (i) Fewer than 75 percent of the families to whom the PHA issued tenant-based rental vouchers during the most recent 12-month period for which there is success rate data available have become participants in the voucher program; (ii) More than 40 percent of families with tenant-based rental assistance administered by the agency pay more than 30 percent of adjusted income as the family share; or (iii) Such other criteria as the Secretary establishes by notice. This change will allow PHAs to more quickly respond to changing rental market conditions, which will help them better manage program utilization, success rates, and rent burdens. New paragraph (d)(4) outlines how the PHA must request approval from HUD to establish payment standards above 110 percent of the applicable FMR except as provided in paragraphs (d)(2), (d)(3), and (d)(5). This new paragraph consolidates requirements related to exception payment standards for PHAs in designated SAFMR areas and for PHAs subject to the metropolitan area or non-metropolitan county FMRs. It also establishes criteria for designated SAFMR PHAs to request an exception payment standard over 110 percent of the SAFMR, which the current regulation previously stated would be provided in a separate
HUD also amends paragraph (e) by establishing a modified standard for approving payment standards below the basic range which will require a projection of rent burden based on the lower payment standard, rather than measuring rent burden based on current program participants prior to that reduction. The standard does allow HUD to approve a payment standard below the basic range to help prevent termination of assistance in the case of a PHA budget shortfall. In this final rule, HUD does not adopt the proposed rule modification to paragraph (e) and removes the PHA's option to go below the basic payment standard range for Small Area FMR ZIP code areas without HUD approval. In addition, HUD amends paragraph (f) to eliminate the option to establish success rate payment standards. HUD determined that the new flexibility provided in the rule to set payment standards up to 120 percent of the FMR makes this option unnecessary. In paragraph (h), this final rule specifies that HUD will monitor rent burdens only of families assisted with tenant-based rental assistance, because PBV tenants are unlikely to have rent burdens above 30 percent.
In this final rule, HUD revises paragraph (c)(3)(iv) to eliminate the option in the proposed rule for PHAs to adopt different policies related to applying decreases in payment standards in different geographic areas out of concern that this could result in discriminatory policies. Additionally, in response to public comment, HUD revises paragraph (c)(4)(ii) to require PHAs to apply payment standard increases at the family's next regular reexamination or the next interim recertification (in addition to the other events listed) and adds paragraph (c)(5) to give PHAs the flexibility to adopt policies to apply increases in the payment standard earlier than required. HUD also revised paragraph (c)(6), which was previously paragraph (c)(5), to clarify that while the new family unit size must be used in the recalculation by the first regular reexamination following the change, it may be used immediately.
In response to public comments HUD is not going forward with the proposed § 982.517(a)(2), which would have required PHAs to provide the utility allowance schedule to HUD only when HUD requests it, and instead maintains the current requirement that the PHA provide HUD with the utility allowance schedule regardless of whether HUD requests it, and to only require the PHA to provide information or procedures used in preparation of the schedule when HUD requests it. HUD also revises paragraph (b)(1)(i) to allow for the possibility of an expansion of utility allowances in the future through a
In paragraph (b)(2)(ii), HUD expands the utility allowance standards to include criteria for applying utility allowance to retrofitted units. The revised paragraph (b)(2)(ii) clarifies that while the entire building must meet Leadership in Energy and Environmental Design (LEED) or Energy Star standards, in the future HUD may provide by notice, when an energy-efficient utility allowance (EEUA) may be used for retrofitted units even if the entire building does not meet the standard. The revisions notes that there are only two design standards that can be used for energy-efficient utility allowance (EEUA) to prevent EEUAs from being applied broadly. HUD also moves paragraph (b)(2)(iv) to paragraph (b)(2)(v) and adds a new paragraph (b)(2)(iv) to state that the PHA must use the project-specific utility allowance schedule for tenant-based participants in projects that have an approved project-specific utility allowance under § 983.301(f)(4). This requirement was previously in § 983.301(f)(4) of the proposed rule and § 983.301(f)(2)(ii) of the previous regulatory text but has been moved from part 983. The Administrative Plan requirements to include PHAs state their policy for utility allowance payments are consistent with § 982.54.
This final rule makes a conforming change to remove § 982.552(c)(1)(viii), which denies housing assistance for a family's failure to comply with the FSS contract of participation, to align with a statutory amendment to the Family Self-Sufficiency (FSS) program authorizing language and the program's regulations, which amended 24 CFR 984.303(b)(5) through a final rule effective on June 16, 2022 (87 FR 30020). This change is in accordance with the Economic Growth, Regulatory Relief, and Consumer Protection Act (“the Economic Growth Act”) (Pub. L. 115-174)
The final rule makes a conforming change to §§ 982.605; 982.609; 982.614; 982.618; and 982.621 to align the text with the revised definition of HQS discussed previously in the description of the changes to § 982.4.
HUD revises § 983.2(c) to outline the specific part 982 provisions that do not apply to PBV assistance and revises paragraphs (c)(1) and (2) to specify that the HAP contract retention provisions at § 983.158(e)(2) do not apply to PBV assistance. HUD also clarifies in paragraph (c)(5) which provisions of part 982, subpart I do not apply to PBV assistance and in paragraph (c)(7)(i) which provisions of § 982.503 do not apply.
The final rule amends paragraph (d) to clarify that § 982.406 (Use of alternative inspections), along with § 982.405 (PHA unit inspection) as the CFR previously provided, does not apply to the homeownership option. Because no HAP or downpayment assistance may be paid until the PHA inspects a family's homeownership unit and determines it passes HQS (see 24 CFR 982.631(a)), §§ 982.405 and 982.406 describing inspection requirements particular to rental assistance are incompatible with the homeownership option. HUD notes that this is not a substantive change.
In response to public comment about the utility of establishing SAFMRs in some non-metropolitan counties, this final rule revises the definition of “area where vouchers are difficult to use” to include areas where 90 percent of the SAFMR exceeds 110 percent of FMR not just for metropolitan areas, but also for non-metropolitan counties. HUD determines that, when used in a non-metropolitan context, the difference between the SAFMR and FMR remains an easily identifiable and consistent data point for determining if an area is one in which vouchers are difficult to use.
This final rule also revises the definition of an “area where vouchers are difficult to use” to include a census tract with a poverty rate of 20 percent or less. This is not a substantive change, but rather a reorganization of the rule text for streamlining. In the proposed rule, § 983.54(b), regarding the project cap (income-mixing requirement), contained two separate categories of projects that were subject to a higher project cap: these categories were projects “located in a census tract with a poverty rate of 20 percent or less” and projects “located in an area where vouchers are difficult to use.” Similarly, § 983.6(d), regarding the program cap (percentage limitation), included both units “located in a census tract with a poverty rate of 20 percent or less” and units “located in an area where vouchers are difficult to use” as two separate categories of units eligible for an increased cap. For both the program cap and project cap, there was no difference between the requirements applicable to the two categories of projects and units. To simplify §§ 983.54(b) and 983.6(d), HUD examined whether the 1937 Act permitted the PBV regulatory definitions to consider a project or unit “located in a census tract with a poverty rate of 20 percent or less” to be a type of project or unit “located in an area where vouchers are difficult to use.” In the case of the program cap, section 8(o)(13)(B)(ii) of the 1937 Act provides for a specific 10 percent authority category for areas where vouchers are difficult to use “as specified in subparagraph (D)(ii)(II),” which is the subparagraph applying an exception to the project cap for areas where vouchers are difficult to use and for census tracts with a poverty rate of 20 percent or less. As a result, HUD determines that the authority for an exception to the program cap for census tracts with a poverty rate of 20 percent or less derives from the program cap exception for areas where vouchers are difficult to use, and therefore it would be more appropriate to include census tracts with a poverty rate of 20 percent or less within the definition of “areas where vouchers are difficult to use.” While the project cap exceptions for census tracts with a poverty rate of 20 percent or less and areas where vouchers are difficult to use are both mandated by section 8(o)(13)(D)(ii)(II) of the 1937 Act, given that the exception is identical for each category HUD determines the streamlining benefit makes placing census tracts with a poverty rate of 20 percent or less in the definition of “areas where vouchers are difficult to use” appropriate for purposes of codification of the project cap categories in the CFR.
Also, in response to public comment, HUD in this final rule changes the term “comparable rental assistance” to
As suggested by commenters, HUD revises the definition of “existing housing” to mean housing that meets or substantially complies with HQS, which housing is distinct from housing that will soon undergo development activity. “Substantial compliance” in this definition provides specific limitations to ensure the deficiencies in the project require minor work that can reasonably be completed within a 30-day period of time. These revisions reflect the need to better distinguish rehabilitated housing from existing housing so PHAs can comply with the distinct program requirements applicable to each housing type while also recognizing that HQS corrections may take a longer time than the period noted in the proposed rule. HUD changes the relevant time period in which existing housing is not expected to undergo or need substantial improvement from five years to two years after the HAP contract effective date in response to public comment. HUD also revises the definitions of “newly constructed housing” and “rehabilitated housing” by establishing a standard determined on a project-basis, rather than the prior unit-basis which was in the proposed rule, consistent with prior HUD guidance that a project can only be one type overall, and therefore specifying between the two types on a per-unit basis was impractical. HUD further amends the definition of “rehabilitated housing” to more directly note the difference between such projects and “existing housing.” HUD also clarifies the definition of “independent entity” to specify how it relates to the PBV program and revises the definition of “waiting list admission” to include owner-maintained waiting lists.
This final rule added to the definition of “project” to more clearly describe the discretion PHAs already have to modify the definition of project in their Administrative Plans. This final rule adds a definition of “tenant rent” as applicable to the PBV program. This final rule also adds the definitions for building, gross rent, manufactured home, PHA Plan, program receipts, total tenant payment, utility allowance, and utility reimbursement to clarify that these terms apply to the PBV program.
This final rule removes the term “eligible” from the definition of “in-place family,” and instead discusses the eligibility of an in-place family in § 983.251. HUD also changes “proposal selection date” to “proposal or project selection date” to align with changes made to § 983.51 (described below).
This final rule makes a conforming change to align the PBV program definition of “housing quality standards” with the revised HCV program definition discussed previously in the description of the changes to § 982.4.
In addition, this final rule removes the definition of “project-based certificate (PBC) program” because it is no longer in existence. Finally, this final rule removes the definition of “request for release of funds and certification” and moves the relevant information that was contained in the proposed rule to a more appropriate location, § 983.56.
HUD proposed to revise HUD's labor standards cross-reference regarding applicability of regulations implementing the Davis-Bacon Act, but HUD at this final rule removes this change. As explained in the summary of changes to § 983.153, HUD requires Davis-Bacon compliance regardless of whether an Agreement (referring to an Agreement to enter into a HAP contract) is used in this final rule so the change to this section is no longer necessary. HUD notes that under section 12(a) of the 1937 Act, the labor standards provisions cross-referenced in § 983.4 only apply where there is an agreement for section 8 use before construction or rehabilitation is commenced. As discussed in reference to the changes to § 983.153, the PHA's pre-construction offer and owner's acceptance of PBV assistance to be provided once the units are constructed or rehabilitated constitutes an agreement triggering Davis-Bacon requirements on projects with 9 or more assisted units, in accordance with section 12(a) of the 1937 Act, regardless of whether an Agreement is used.
Finally, as a technical matter, HUD has revised § 983.4 to remove the reference to the definitions in 24 CFR part 5, subpart D. Because HUD has revised § 982.4(a)(2) to properly incorporate the relevant definitions in 24 CFR part 5, subpart D, and because § 983.4 incorporates 982.4, this incorporation is not necessary.
HUD makes a minor revision to the proposed § 983.5(a)(1) to include the citation to the consolidated annual contributions contract (ACC). This final rule also revises paragraph (a)(3) to better describe the options available for development of newly constructed and rehabilitated housing, including adding reference to the option added in this final rule to § 983.157 (which is described in greater detail below). HUD revises paragraph (c) to require PHAs to provide notice to HUD when the PHA executes, amends,
This final rule revises paragraphs (a) and (e) to explain how to calculate the maximum number of PBV units to prevent the possibility of the PHA miscalculating the cap and project-basing more units than it should. This change reflects that the cap is 20 percent
This final rule also revises language in paragraph (d)(1)(iii) to require that the Administrative Plan describe the availability of supportive services in alignment with the language in § 983.10. HUD amends paragraph (d)(1)(iv) to remove the separate exception category for census tracts with a poverty rate of 20 percent or less, given the revised definition of an “area where vouchers are difficult to use” now includes a census tract with a poverty rate of 20 percent or less, as explained further in the discussion of § 983.3 above, and moves the proposed paragraph (d)(1)(v) to (d)(1)(iv). HUD adds a new exception in response to public comment to paragraph (d)(1)(v) for units that replace, on a different site, the units removed from the housing types listed in § 983.59(b)(1)-(2) (see discussion of comments received regarding § 983.59). HUD revises paragraph (d)(2) to increase the program cap and project cap for PBV units to include the Fostering Stable Housing Opportunity (FSHO) authority enacted in section 103 of division Q of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260, 134 Stat. 1182).
This final rule also revises paragraph (e) by explaining that units previously subject to federally required rent restrictions or that received long-term rental assistance from HUD are removed for purposes of calculating the percentages under paragraphs (a) and (d) of this section.
This final rule also revises paragraph (1)(ii) by adding “space service” to the definition of “veteran” to accurately include types of service encompassed within the current statutory definition of “veteran” found in the Department of Veterans Affairs governing statutes (
HUD revises the structure of § 983.10 to outline the areas in which PHAs have policymaking discretion specific to the PBV program and requires these policies be included in the PHA Administrative plan. The PHAs' policymaking discretion is noted throughout part 983 consistent with this section. Section 983.10 includes a brief description of the provisions that must be in the Administrative Plan for a PHA that operates a PBV program and a citation in each provision to the regulation that provides complete details about the requirement. However, HUD notes that the policies listed in § 983.10 are the minimum that the PHA must include in its Administrative Plan. There are additional areas, beyond those listed in § 983.10, where a PHA may properly exercise policy-making discretion consistent with language in other sections in this part. In cases where a PHA exercises this discretion, these additional policies must be included in the PHA's Administrative Plan.
In the proposed rule, HUD proposed to move § 983.10, dealing with Project-Based Certificates (PBC), to § 983.11. However, the PBC program was replaced by the PBV program in 2001 and no units remain in the PBC program.
In response to public comments, HUD revises paragraph (d)(2) dealing with subsidy layering review. Instead of requiring Subsidy Layering Review (SLR) any time new funding of any amount or percentage is added to the project during the term of the HAP contract, HUD will specify when a new SLR is required via a
This final rule adds a new § 983.12 to cover program accounts and records for the PBV program (§ 982.158 continues to apply to records applicable to both the tenant-based and project-based programs, except as now specified in § 983.2). While these documents should already be maintained for compliance with HUD's regulations, this section provides a specific list of documents, location, and time period for retention of the PBV HAP contract and any PBV-specific documents (
This final rule amends § 983.51 throughout to clarify the distinction between competitive selection of proposals versus noncompetitive selection of projects since selection without competition does not entail solicitation or selection of competing proposals. As recommended by commenters, this final rule revises paragraph (a) by allowing entities that have site control to submit PBV proposals. HUD intends to provide further guidance on what HUD considers to be “site control” through PIH notice.
Paragraph (a) also specifies that an owner may submit PBV proposals to cover multiple projects where each consists of a single-family building. Consistent with § 983.10, HUD clarifies the requirement that the PHA Administrative Plan must describe the procedures for submission and selection of PBV proposals under the methods of competitive selection in paragraph (b) and selection of projects under an exception to competitive selection under paragraph (c), including under what circumstances the PHA will use the selection methods described in paragraphs (b) and (c).
HUD amends paragraph (b)(1) to address the methods the PHA must use for competitive selection of PBV
HUD clarifies in paragraph (c) that prior to a PHA selecting one or more projects for PBV assistance without competition, the PHA must notify the public of its intent to do so in its 5-Year Plan. HUD also reorganizes paragraph (c)(1) in the proposed rule by moving applicable requirements to new paragraphs (c)(1)(i)-(ii). Further, in response to public comments, HUD adds clarifying language to paragraphs (c)(1) and (c)(2) to better align with the statutory language in section 8(o)(13)(N) of the 1937 Act as amended by HOTMA, including a clarification under (c)(1)(i) and a new paragraph at (c)(2)(iv) regarding the number of units permitted to be replaced.
This final rule also adds a new paragraph (c)(3), which provides increased flexibility for PHAs to noncompetitively select a project comprised of PHA-owned units. HOTMA expressly allows PHAs to attach PBVs to projects in which the PHA has an ownership interest without following a competitive process in cases where the PHA is engaged in an initiative to improve, develop, or replace a public housing property or site. HUD implemented this provision in 2017. Based on HUD's experience with these noncompetitive selections and after careful consideration, HUD believes that it is advisable to extend the exception to PHA-owned units in general. The main benefit of this final rule change is to strengthen the PHA's ability to preserve and expand affordable housing by increasing the viable options and paths available to the PHA through strategies such as acquisition followed by rehabilitation. HUD further adds paragraph (c)(4) to streamline the process of project-basing units when a family chooses to relinquish their enhanced voucher for PBV assistance. The new paragraph extends the types of housing that can be selected without going through a competition. HUD also notes that PIH Notice 2013-27 provides essential background on the voluntary relinquishment of enhanced voucher assistance (and regular housing choice voucher assistance) in exchange for PBV assistance.
HUD clarifies paragraph (e)(2)(i) to state that all contract units must fully or substantially comply with HQS on the proposal or project selection date. HUD also restructures and amends paragraph (f) of the proposed rule to add new paragraphs (1) through (5) to address the separate notice requirements depending upon whether a proposal is selected competitively, or a project is selected without competition and to provide a cross-reference to applicable language that must be in the notice for certain projects. Finally, HUD clarifies in paragraph (h) that under no circumstances may a HAP contract be effective for any of the subsidized housing types set forth in § 983.53(a).
HUD clarifies the meaning of paragraphs (a), (a)(3), (b), and (d) by replacing the term “attach” with clearer statements of the prohibited actions for the listed units, to align with the changes to § 983.53 described below. This final rule creates an exception to the total prohibition in the original PBV rule on project-basing for manufactured homes under paragraph (a)(5) where both the manufactured home is permanently attached to the ground and the owner owns both the manufactured home and the land. Allowing PBVs for manufactured homes will likely decrease the cost to build, allow PBVs to be in areas where traditional building would be difficult, and avoid requiring changes to construction plans solely for the purpose of compliance.
Paragraph (c) provides that a PHA may attach assistance to an occupied unit only if the occupant is eligible. HUD amends paragraph (c) to specify what “eligible” means in this context, and to clarify when eligibility is determined. Eligibility of the family is determined in accordance with § 982.201 prior to attaching assistance to the unit (
HUD updates the exceptions applicable to paragraph (d), adding that the requirements are not applicable if the PHA is undertaking rehabilitation after HAP contract execution per § 983.157 of this final rule. Also, because an Agreement may be executed prior to its effective date, HUD revises paragraph (d) to be clear that the construction or rehabilitation is prohibited prior to the Agreement's effective date rather than the execution date. HUD also modifies paragraph (d) to allow PHAs to approve exceptions, in recognition that there may be circumstances in which the prohibition is inappropriate.
For better readability, in this final rule, HUD restructures the list of subsidized housing that is prevented from receiving PBV assistance. In paragraph (a), HUD replaces the introductory text with “A HAP contract may not be effective and no PBV assistance may be provided for any of the following:” for several reasons. First, HUD determines that PBV program requirements should not prevent execution of an Agreement for the listed subsidized housing types, as this reduces administrative flexibility even though no HAP is paid when an Agreement is executed. HUD notes that this is a change from the prior regulatory requirement and use of this flexibility will be subject to any requirements of the relevant non-PBV subsidy program. Second, because a HAP contract must be executed prior to the effective date of the contract (when HAPs may begin), there was no need to separately specify that the HAPs cannot be made for the subsidized housing types. Finally, HUD believes the wording changes improve readability. This final rule also removes proposed rule paragraphs (e) and (j) concerning rental assistance payments (RAP) and rent supplement projects (Rent Supp) because the Rent Supp and RAP programs have ended. However, unlike the Rent Supp program, there were some RAP projects remaining less than five years prior to the effective date of this final rule. Consequently, units in a few former RAP projects may still qualify for a limited period of time as excepted units from the program cap and project cap under the requirements at § 983.59. Please see the related discussion in the description of § 983.59 below regarding the reference to units in former RAP projects in that section.
In this final rule, HUD clarifies in § 983.54(a) that a PHA cannot select a proposal where the project cap is not being met, in addition to the prohibition on entering the Agreement or HAP contract. HUD amends paragraph (b) to remove the separate exception categories, given the revision of the definition of an “area where vouchers are difficult to use” to include a census tract with a poverty rate of 20 percent or less, as explained previously in the discussion of § 983.3 above. HUD further clarifies in paragraph (c) that exception categories in a project may be combined; expands the exception categories to include eligible youth using Family Unification Program (FUP) assistance in paragraph (c)(2)(ii); and provides that supportive services must be made available in a reasonable period of time not to exceed 120 calendar days in paragraph (c)(2)(iii). Additionally, in paragraph (c)(2)(iii), which was paragraph (c)(2)(ii) in the proposed rule, this final rule does not include a requirement that a PHA offering FSS must not solely rely on FSS to meet the exception to the project cap. HUD revises paragraph (c)(3) to specify that units covered by a PBV HAP contract under § 983.59 will not count towards the project cap and that these units are removed to ensure accuracy when calculating the percentages of dwelling units. In paragraph (d), HUD updates and expands provisions applicable to HAP contracts already in effect to include HAP contracts in effect prior to December 27, 2020, when the FUP exception became available.
HUD revises paragraph (b)(3) to include the site selection standards that were formerly found in § 982.401(l) and were removed in the NSPIRE final rule (88 FR 30442 (May 11, 2023)). HUD also takes this opportunity to amend the standards to add a specific reference to contamination, which is particularly important to the health of occupants, and to add a qualification that the serious adverse environmental conditions at issue are those that could affect the health or safety of the project occupants. As recommended by commenters, use of these standards provides an important protection for families, especially in cases in which an environmental review is not performed. HUD also revises paragraph (e)(7) to remove a typo concerning “new construction,” which appears in the current regulations and the proposed rule.
In the proposed rule, HUD proposed to revise the environmental review requirements for existing housing in accordance with section 106(a)(8) of HOTMA to exempt existing housing from further environmental review if an existing housing project has ever undergone an earlier environmental review pursuant to receiving any form of Federal assistance. In other words, if a project that meets the definition of “existing housing” as defined in the PBV regulations for program purposes has not previously undergone a Federal environmental review because it did not receive Federal assistance, then the project would not be exempt from an environmental review.
In endeavoring to give full effect to the words of section 8(o)(13)(M)(ii) of the 1937 Act, HUD recognizes the statute provides only a partial exemption to environmental reviews. Specifically, the applicability of the provision is limited to “existing projects.” Environmental reviews continue to be applicable to PBV rehabilitation and new construction projects. The limited scope of the proposed exemption from environmental reviews reflects Congress's continuing emphasis on the importance of Federal assistance being used in an environmentally sound manner.
Upon consideration of comments, HUD revises paragraph (a)(2) to better balance the words of the amended section 8(o)(13)(M)(ii) of the 1937 Act with Congress's continued environmental emphasis by excusing existing housing from undertaking an environmental review before entering into a HAP contract, except where a Federal environmental review is required by law or regulation relating to funding other than PBV housing assistance payments. This paragraph (a)(2) applies to projects selected using the site selection standards applicable upon the effective date of this final rule. In paragraph (a)(2), HUD changes the characterization of the exception for existing housing so as not to imply that the project has been determined to be “exempt” pursuant to an environmental review.
HUD makes minor technical revisions throughout the section, such as to consistently use the phrasing of paragraph (a) of the proposed rule that environmental reviews apply to “activities” (see responses to comment on § 983.56 for further discussion of technical changes). HUD amends the description of the “responsible entity” in paragraph (b) to explain more clearly which unit of general local government serves as the responsible entity. HUD also removes the final sentence of paragraph (b) of the proposed rule, as it was duplicative of text that appeared later in the regulation. HUD also removes the proposed rule's reference in paragraph (d) to amending a HAP contract, to conform to changes described below relating to § 983.207. Further, HUD clarifies in (d)(2) that HUD will approve the Request for Release of Funds and Certification by issuing a Letter to Proceed or form HUD-7015.16 when a responsible entity must complete an environmental review. In paragraph (e), HUD clarifies that the reference to the prohibited activities refers only to the listed actions by the PHA, the owner, or its contractors, rather than the actions by described in paragraphs (d)(1)-(3) that are taken by the responsible entity or HUD. Lastly, HUD revises paragraph (f) to require PHAs to document mitigating measures in accordance with part 50 or 58 of title 24, as applicable, and to complete or require the owner to carry out such measures and conditions.
This final rule makes an edit to paragraph (b) to remove superfluous words. HUD also revises paragraph (b)(1) to clarify that the independent entity calculates the amount of reasonable rent and any rent adjustments by an OCAF, due to confusion the wording in the proposed rule raised given that HUD determines the OCAF. In response to comments received, HUD removes paragraph (b)(2) from the proposed rule, which results in a renumbering of paragraphs (b)(3) and (b)(4) to paragraphs (b)(2) and (b)(3) in this final rule. HUD also revises redesignated paragraph (b)(3) to clarify that the independent entity is responsible for not only reviewing the work completion certification, but also determining if the units are compliant with § 983.156. This final rule also makes this change to align redesignated paragraph (b)(3) with corresponding § 983.212 (which was § 983.157 in the proposed rule), per changes to § 983.212 described below. This final rule adds paragraph (b)(4) to expand the independent entity functions to include determining whether to approve substantial improvement to units under a HAP contract, since PHAs are required to perform this function for substantial improvement on units under a HAP contract for non-PHA-owned units.
Finally, HUD reorganizes and slightly modifies the language at paragraph (c) to
In this final rule, HUD revises proposed § 983.58 for clarity purposes, to avoid any misinterpretation that budget authority is intertwined with the program cap. HUD also adds a new paragraph (b) to require that PHAs analyze the impact of having a high percentage of vouchers committed as PBVs. The PHA should consider the needs of the community, including families on the waiting list and eligible PBV families that wish to move under § 983.261. The analysis performed by the PHA must be available as part of the public record.
HUD clarifies in paragraph (b) that excluded units must fall into one of the outlined categories provided that the units are removed from all categories by the time of execution of the Agreement or HAP contract. This clarification aligns with the statutory language stating, “units previously subject to federally required rent restrictions or receiving another type of long-term subsidy” and means that the units must no longer be subject to the rent restriction or receiving subsidy.
This final rule removes paragraph (b)(1)(v), because the Rent Supplement Program ended more than five years ago and no longer exists. HUD notes that the Rental Assistance Program (RAP) (section 236(f)(2) of National Housing Act of 1965) also expired, but, unlike the Rent Supplement Program, the RAP expired at the end of 2019, less than 5 years ago. Because paragraph (b) of § 983.59 allows project-basing of units that were removed from the listed programs up to 5 years prior to the request for proposals (RFP) or the proposal or project selection date, RAP units may still be eligible for project-basing under paragraph (b).
HUD has amended § 983.59(b)(2) and included two additional types of units in the list of units “previously subject to federally required rent restrictions” that were not included in the list of excepted units implemented under the HOTMA Implementation Notices
Further, to provide regulatory streamlining, this final rule removes proposed rule paragraph (c) which provided that other excluded units include both HUD's Rental Assistance Demonstration (RAD) program and HUD VASH set-aside vouchers from the PBV program and project caps (these programs continue to be governed by the applicable notices and waivers therein). Instead, HUD redesignates proposed rule paragraph (d) as paragraph (c), which discusses replacement units. In redesignated paragraph (c), HUD clarifies that replacement units can be built on the original project site, instead of the “public housing development.” This clarification removes the limitation of “public housing development” and expands the qualification of an original project site to include all of the formerly assisted or restricted projects covered by this section. In new paragraph (e), this final rule clarifies that the 10 percent exception under § 983.6 and the project cap exception under § 983.54(c)(2) are inapplicable to units excluded under this section.
This final rule makes a conforming change to align paragraph (a) with the revised PBV program definition of HQS at § 983.3.
HUD revises § 983.103(a) to clarify that the regulatory inspection provisions of paragraph (c) of this section apply only when the pre-selection inspection determines the project meets the definition of existing housing.
HUD amends paragraph (b) to specify the times at which an initial inspection is required for newly constructed or rehabilitated housing or for units that underwent substantial improvement prior to being added to the HAP contract. The times at which an initial inspection is required, and the specific units which are to be inspected, depend on whether the work was development activity or substantial improvement, and, in the case of rehabilitation, whether the development activity occurs before or after HAP contract execution. HUD believes separating the requirements in this final rule will improve readability. HUD also revises paragraph (c)(1) to better explain the Administrative Plan provisions that are applicable.
Paragraph (c)(2)(ii) of the proposed rule provided that the PHA must give a notice to families offered a unit with non-life-threatening deficiencies that explains, among other things, that the owner's failure to correct the deficiencies within the cure period will result in removal of the unit from the HAP contract. This final rule revises paragraph (c)(2)(ii) to also require the PHA to provide a similar notice to families offered units without deficiencies, if some units in the project have non-life-threatening deficiencies and the PHA's Administrative Plan provides that the PHA will terminate the entire PBV HAP contract if the owner fails to correct the deficiencies within the cure period.
In paragraph (c)(2)(iv), HUD revises the regulatory language to be clear that PHAs must release the withheld payment to the owner once the deficiencies are corrected within the cure period, as required by section 8(o)(8)(G)(ii) the 1937 Act. This statutory requirement provides that the PHA must resume assistance payments and must cover the withheld period if the owner made the repairs before the cure period ends. This change to align the regulations with the statute is also reflected in paragraphs (c)(3)(vii), (c)(4)(iv), and (c)(4)(v).
This final rule also modifies paragraph (c)(2)(v) (which was mistakenly labeled as paragraph (c)(2)(iv) in the proposed rule) by requiring PHAs to provide any affected family tenant-based assistance when the PHA terminates the PBV HAP contract or removes the unit from the HAP contract due to the owner's failure to correct deficiencies. The provision of tenant-based assistance in this circumstance is required by section 8(o)(13)(F)(iv) of the 1937 Act and was inadvertently omitted from the proposed rule's description of the process. This final rule makes the same modification to paragraphs (c)(3)(viii) and (c)(4)(vi).
HUD revises paragraphs (c)(3) and (c)(4) to align with changes in § 982.406 that apply to PBV. This final rule subjects the PHA's adoption of an alternative inspection option to the procedures and requirements outlined in § 982.406(b), (c), (d), and (g). The changes in paragraph (c)(3)(v) provide clarifying changes to existing established policy. To ensure that the PHA is transparent to families that are referred to and provided a unit with non-life-threatening deficiencies, this final rule revises paragraph (c)(4)(i) to require that PHAs provide these families
In paragraph (c)(4)(v), HUD clarifies that PHAs make retroactive payments upon correction of deficiencies beginning at the later of the effective date of the HAP contract or the PBV lease effective dates. This final rule revises paragraph (c)(4)(v) and (c)(4)(vi) explaining the PHA's requirements when the owner fails to make repairs within the applicable time periods. For the safety of the family, this final rule adds a requirement to paragraph (c)(4)(v) that explicitly prohibits PHAs from referring families from the PBV waiting list to occupy units with life-threatening deficiencies. In alignment with § 983.10, paragraph (c)(4)(vi)(B) clarifies that the PHA's Administrative Plan must specify whether the PHA will remove only a unit with deficiencies from the HAP contract for the owner's failure to correct the deficiencies, as opposed to terminating the entire HAP contract (only the latter, terminating the contract, had been included in paragraph (c)(4)(vi)(B) of the proposed rule).
This final rule also amends paragraph (e) concerning periodic inspections, to provide that the alternative inspection option is available for periodic inspections and to specify which provisions of § 982.406 apply. HUD makes changes to paragraph (e) to specify how to comply with the sampling requirement in the event that fewer than 20 percent of contract units are available for occupancy in accordance with development activity occurring under § 983.157. HUD also makes changes to align with the NSPIRE final rule (88 FR 30442 (May 11, 2023)) in paragraph (e), which incorporates the requirement that small rural PHAs inspect random sample units at least once every three years. This final rule makes changes to paragraph (f), which specifies the PHAs' timing and inspection requirements for life-threatening deficiencies, non-life-threatening deficiencies, and extraordinary circumstances, to align with § 982.405, which covers PHA inspections. The changes in paragraph (i) are a change in terminology to avoid conflict with the term “mixed finance” as used in public housing projects.
This final rule revises § 983.152(a)(2) to remove discussion of substantial improvement to add previously unassisted units and instead provide reference to the development activity applicable to a rehabilitated project undergoing work after HAP contract execution per § 983.157 of this final rule. As discussed in the description of changes to § 983.3 above, HUD determines that “development activity” should be clearly distinguished from “substantial improvement.” As a result, HUD removes the corresponding reference to activities now classified as “substantial improvement” in (a)(2) and deletes paragraph (b)(2), moving pertinent requirements applicable to substantial improvement to add or substitute units to § 983.207(d) of this final rule. The new language of paragraph (a)(2) is added to clearly describe the nature of the development activity under § 983.157, which is completed following HAP contract execution instead of beforehand. HUD also updates paragraph (b) to appropriately reference the new requirements applicable to § 983.157.
This final rule makes several minor revisions to citations in § 983.153 for consistency with the changes to § 983.152 described above. Also, this final rule makes a minor clarifying revision to the first sentence in paragraph (b)(2), by requiring subsidy layering review before a PHA attaches assistance to a project, instead of subsidy layering review occurring before a PHA commits to provide assistance to a project. This clarifying change is to prevent any possible ambiguity about whether the subsidy layering review is required before the proposal or project selection date; in other words, HUD makes clear that the rule only requires that the subsidy layering review occur no later than execution of an Agreement or HAP contract.
This final rule requires in § 983.153(b)(4) that the owner disclose changes to the information provided for the subsidy layering review, to ensure that the change(s) may be reviewed and that it does not result in excessive public assistance to the project.
This final rule revises paragraph (c) of the proposed rule to require Davis-Bacon compliance regardless of whether an Agreement is used. The PBV program is subject to statutory labor standards provisions in section 12(a) of the 1937 Act. Section 12(a) of the 1937 Act requires the applicability of Davis-Bacon prevailing wages to the development of low-income housing projects containing nine or more section 8-assisted units, where there is an agreement for section 8 use before construction or rehabilitation is commenced. In reconsidering both HUD's current position and the alternative suggested in the proposed rule with respect to the meaning of “agreement” in section 12(a), HUD has determined that an “agreement” under section 12(a) encompasses more than the PBV Agreement (
This final rule revises the development requirements that apply to PBV development activity by removing the reference that section 3 of the HUD Act of 1968
This final rule amends paragraph (a) to clarify project-basing of single-family scattered sites. As commenters suggested, paragraph (a) allows one Agreement to cover multiple projects that each consist of a single-family building. Finally, this final rule makes minor amendments to paragraph (a) to remove reference to § 983.152, consistent with changes to that section as described above, and to add reference to the new paragraph (g).
This final rule specifies in paragraph (b) that paragraph (f), concerning PHA discretion to execute an Agreement after construction or rehabilitation in compliance with § 983.153, is an exception for the timing of the Agreement. HUD also adds clarification that the Agreement must be executed on the same day as or in advance of its effective date.
This final rule inserts a new paragraph (c) to specify that the PHA and owner may agree to amend the Agreement per paragraph (e). In paragraph (d), this final rule clarifies that paragraphs (f) and (g) provide exceptions to the prohibition on entering into an Agreement if development activity has commenced. HUD also makes additional changes in paragraph (d) to clarify the timing of the Agreement that correspond to the change to paragraph (b) described above. This final rule revises paragraph (e) to expand the content of the agreement to include a description of any rehabilitation work agreed to, a deadline for the completion of work, and any additional design, architecture or quality requirements placed on the owner by the PHA. The addition of a deadline for completion of work addresses the oversight in the proposed rule wherein § 983.155(a) of the existing regulation was removed rather than relocated.
This final rule clarifies in paragraph (f) when the PHA may execute an Agreement later than the timing provided in paragraph (b) and corrects the applicability of requirements in the case of a project that is noncompetitively selected. The changes in paragraph (f) also provide PHAs with discretion to not use an Agreement or execute an Agreement after construction or rehabilitation for development activity in compliance with the requirements under § 983.153. Paragraph (f) also requires that the PHA explain the circumstances under which the PHA will enter a PBV HAP contract without first entering into an Agreement and the circumstances the PHA will enter into an Agreement after construction or rehabilitation in the Administrative Plan. This paragraph also requires that the PHA comply with the new requirement at § 983.153(c)(3) and confirm owner compliance with the owner's requirements under § 983.153. Finally, this final rule makes a minor amendment to paragraph (f) to remove reference to § 983.152, consistent with changes to that section as described above.
This final rule adds paragraph (g) to explain the exception to the requirement to enter into an Agreement established in § 983.157. Paragraph (g) also explains the relationship between the Agreement and the HAP contract in the event that some work occurs under an Agreement before the PHA exercises the option at § 983.157.
Lastly, this final rule adds paragraph (h) explaining the PHA's options when the units are PHA-owned with no separate legal entity to serve as the owner. A PHA cannot execute an Agreement with itself. In the proposed rule, HUD stated that a PHA-owned agreement certification is not needed as an alternative to an Agreement because projects may now be developed without an Agreement. Upon further review, HUD determined that there may be situations in which development without an Agreement is not feasible, such as when a lender requires use of an Agreement or equivalent commitment prior to development. Therefore, this final rule provides that unless a PHA is exercising its discretion not to use an Agreement, the PHA will need to follow a process similar to the process adopted in this final rule for executing the HAP contract or an equivalent certification (see § 983.204). For consistency with § 983.204 of this final rule, HUD provides that PHAs have the option to either establish a separate legal entity to execute the Agreement or use a PHA-owned agreement certification in this final § 983.154(h).
In tandem with requiring the owner to submit evidence and certify to the PHA that development activity or substantial improvement is completed, this final rule adds that a PHA must review the owner's completion evidence and determine whether development activity or substantial improvement was completed. This final rule also adds a new paragraph (b) for consistency throughout part 983 and to specifically address completion of work for PHA-owned units. Paragraph (b) provides in the case of a PHA-owned unit, the PHA must submit that evidence to the independent entity and the review is the responsibility of the independent entity. Finally, HUD clarifies that the form and manner of the submission and certification is specified in the PHA's Administrative Plan.
This final rule makes a minor revision to paragraph (a) to clarify that the PHA inspection is to determine whether the units comply with HQS and additional PHA requirements. HUD revises paragraph (b) to provide specific instruction with regard to completion of units, depending on whether the units are completed prior to HAP contract execution, following HAP contract execution, or in order to be added to the HAP contract. These changes to paragraph (b) accommodate changes to §§ 983.152 and 983.157, as discussed further in the description of changes to those sections. In response to public comments, this final rule adds a new paragraph (c) to provide that HAP contracts for projects that are not subject to § 983.157 may be executed in stages, as units in a newly constructed or rehabilitated project are completed. This final rule also adds paragraph (d) for consistency throughout part 983, to separate PHA-owned units from other units. Under new paragraph (d), this final rule requires that independent entities inspect units and determine whether those units are HQS-compliant.
In the proposed rule, HUD proposed to include provisions on substantial improvements (previously termed “development activity,” as explained in the discussion of § 983.3 above) to units under a HAP contract in § 983.157. However, HUD determines that such provisions are inappropriate under subpart D of part 983 (Requirements for Rehabilitated and Newly Constructed Units), as placing the provision there produced confusion about the distinction between development activity for newly constructed and rehabilitated projects and work to improve units well after a HAP contract is in effect (which could be performed in any type of project). Therefore, in this final rule, the provisions proposed to be in § 983.157 have been moved to § 983.212 and are discussed in that section below. Section § 983.157, as codified in this final rule, instead is new
This final rule adds the new provisions of § 983.157 in response to public comment. Commenters described situations in which development activity would be undertaken in rehabilitated projects that are already occupied and may meet HQS. HUD determined that occupants of such projects, if they qualify for PBV assistance, would benefit from receipt of assistance as soon as possible. Accordingly, and in addition to the options already available to the PHA under current regulations and in this final rule, § 983.157 of this final rule provides that the PHA may allow an owner of a rehabilitated housing project to conduct some or all of the development activity during the term of the HAP contract. Under this option, the PHA and owner place all proposed PBV units under the HAP contract before the owner completes development activity, subject to the limitations established in § 983.157 of this final rule. During the period of development activity, the PHA makes assistance payments to the owner for the contract units that are occupied and meet HQS. HUD determines this option is permissible in accordance with section 106(a)(4) of HOTMA.
Section 983.157 of this final rule provides for the PHA to exercise its discretion to use this option in accordance with the PHA's Administrative Plan. It establishes conditions that must be met to use this option and a contract framework, which applies a contract rider during the development period. Section 983.157 of this final rule also establishes requirements applicable to the occupancy of units during the rehabilitation period, completing the rehabilitation, and PHA-owned units. Under this option, the owner agrees to develop the contract units to comply with HQS, and the PHA agrees that, upon timely completion of such development activity in accordance with the terms of the rider, the rider will terminate and the HAP contract will remain in effect. HUD makes conforming changes throughout part 983 to accommodate this option (discussed further in the review of general technical changes below). The final rule clarifies that existing households be given an absolute selection preference to return to the project when a household needed to vacate for development activity. HUD notes that the leasing of units in a PBV project must comply with federal fair housing and related requirements, including ensuring that any designated accessible units are occupied by households who need the accessibility features, and that emergency transfers under VAWA are provided.
In response to public comments, HUD revises paragraph (a) to better clarify the existing flexibility that allows PHAs and owners to place multiple projects that each consist of a single-family building under one HAP contract.
HUD in this final rule revises § 983.203(h) to require that the HAP contract include units that are restricted to certain occupants via the project cap or program cap. The purpose of the change is in hopes of minimizing the possibility of PHAs losing track of what units must be set aside by ensuring that the HAP contract clearly specifies units that are restricted to certain occupants by virtue of the project cap
This final rule amends § 983.204(b) and (c) to clarify that HAP contracts must be promptly executed and effective as described. This final rule also amends paragraph (c) to specify requirements applicable to projects undergoing development activity after HAP contract execution, as described further above in the discussion of changes to § 983.157. This final rule inserts a new paragraph (d) to clarify that the effective date of a PBV HAP contract must be on or after the execution date of the PBV HAP contract. HUD also amends and reorganizes paragraph (e), which was paragraph (d) in the proposed rule, to align with corresponding requirements in § 982.451(c). Redesignated paragraph (e)(1) now expressly states the requirement that the separate legal entity must execute the HAP contract with the PHA, and HUD deletes paragraph (d)(1)(ii) from the proposed rule. HUD has revised paragraph (e)(2)(i) of this final rule to clarify that the PHA-owned Certification obligates the PHA, as owner, to all of the requirements of the HAP contract. This revision prevents ambiguity with other regulations that reference HAP contracts but not the PHA certifications.
HUD amends the extension of term provision in § 983.205(b) to clarify the process for HAP contract term extensions and, while it retained the maximum extension term of 20 years that was in the proposed rule, provides a mechanism to execute multiple extensions concurrently as supported by commenters. Also, HUD removes the proposed paragraph (c) concerning independent entity oversight of the contract term and extensions for PHA-owned units, in response to public comments.
HUD makes changes in this final rule to clarify the process for when a PHA manages the issuance of tenant-based vouchers to tenants at PBV contract termination, and related issues. Specifically, for § 983.206(a)(3), this final rule expands the definition of the term “termination” to include termination of the HAP contract by agreement of PHA and owner. As a necessary precondition of the statutory right to remain, in paragraph (b), this final rule also adds provisions specifying that the right to remain in a unit depends on the unit continuing to be used for rental housing and clarifies procedures for voucher issuance. As suggested by public comments, HUD provides additional clarification in paragraph (b) to specify that the PHA must issue vouchers, provide a timeframe for issuance, and require units to be removed from the contract if the family moves. HUD also moved the language in proposed paragraphs (b)(4) and (b)(5) into paragraph (b) to cover all families that are issued a voucher as the result of a PBV contract termination or expiration. This final rule made this change because the language in paragraphs (b)(4) and (b)(5) are applicable regardless of whether the family uses the voucher in the same project or in other housing.
After consideration of public comments, this final rule revises paragraph (b)(4) (proposed paragraph (b)(6)) to expand upon the exceptions in which an owner may refuse to initially lease and to limit “other good cause” to tenant misconduct and where the owner uses the unit for a non-residential purpose or renovates the unit. However, HUD provides a process by which families must be permitted to remain in
This final rule clarifies in paragraph (a) that substituted units may be vacant or, subject to paragraph (c), occupied. The final rule also removes the phrase “and subject to all PBV requirements” from paragraph (a) since the phrase is unnecessary and created confusion as to what requirements were at issue. HUD notes that this textual change is made for clarity only, and substitutions under paragraph (a) remain subject to all PBV requirements. HUD also clarifies the HQS and reasonable rent requirements to affirm that the unit must meet HQS and the rent must be reasonable in order to substitute the unit. Finally, the final rule includes in paragraph (a) a cross-reference to the requirements regarding units undergoing repairs or renovation before substitution (paragraph (d) in this final rule) and units that are newly built (paragraph (e) in this final rule).
HUD adds a requirement in paragraph (b), which provides that prior to adding a unit, the PHA must inspect the unit to determine that it complies with HQS, and the PHA must determine the reasonable rent for the unit. These additional requirements correspond to the same requirements that apply when substituting a unit. This final rule removes from paragraph (b)(1), which covers excluded and excepted units to the program or project cap, the citation to § 983.6, which discusses the percentage limitation for PBV units and discusses the types of units that will count toward the program cap.
HUD also revises paragraph (b)(3), moving the content of the proposed paragraph (b)(3) to a new paragraph (d) and including in paragraph (b)(3) only a cross-reference to paragraph (d). Paragraph (d) also contains significantly different text than that which appeared in proposed paragraph (b)(3). In accordance with the change to the definition of “development activity” described above in the discussion of changes to §§ 983.3 and 983.152, HUD replaces reference to “development activity” with reference to “substantial improvement.” Because projects containing units needing substantial improvement within the first two years must be categorized as rehabilitated housing (per discussion of changes to § 983.3 above), this final rule establishes that units may not undergo substantial improvement to be added to the project during this timeframe, barring extraordinary circumstances. For units that will undergo substantial improvement, HUD adds explanation of applicable requirements within paragraph (d), rather than referencing § 983.152 as proposed.
HUD similarly revises paragraph (b)(4) by moving the content of the proposed paragraph (b)(4) to a new paragraph (e) and instead including in paragraph (b)(4) only a cross-reference to paragraph (e). Paragraph (e) of this final rule also contains additional criteria beyond those that appeared in paragraph (b)(4) of the proposed rule. This final rule adds, in paragraph (e)(2), an amendment to the proposed requirement to address instances in which contract units are completed in stages. Further, the rule adds, in paragraph (e)(3), that a unit can be added to a HAP contract under certain situations in which part of the building is reconfigured into additional units. This latter addition expands the type of units that may be added to a HAP contract.
To clarify the requirements for adding units that are occupied, this final rule adds paragraph (b)(5), which cross-references the requirements regarding occupied units found in paragraph (c) of this final rule. This final rule moves paragraph (c) of the proposed rule to paragraph (g) and adds new paragraph (c) to address the requirements for substituting or adding occupied units and provide PHAs with the flexibility to place occupied units on the HAP contract.
In alignment with the requirements under § 983.10, HUD adds paragraph (f) requiring that PHAs describe in their Administrative Plan under what circumstances they will add or substitute contract units.
Finally, this final rule adds a new paragraph (h) explaining that HUD may establish procedures via
HUD revises § 983.208(a)(3) to require that the PHA specify conditions under which it will require additional housing quality requirements in its Administrative Plan consistent with § 983.10. To ensure that housing is decent, safe, and sanitary, this final rule requires in paragraph (b)(1) that the PHA take enforcement action against owners who fail to maintain a dwelling unit in accordance with HQS. HUD revises paragraph (b)(2) to align with § 982.404, and to remove the unclear phrasing “considered to be.” This final rule also specifies in paragraph (b)(2)(i) that “other inspector” is a person who is authorized by the State or local government. The proposed rule cross-referenced to §§ 982.401(a)(5) and 982.401(o) to cover the timeframes for units in noncompliance with HQS; however, in this final rule HUD outlines the timeframes for noncompliant units in paragraphs (b)(2)(iii)(A) and (B) in place of the cross-references. HUD clarifies in paragraph (b)(3) that the HAP is not withheld or abated in cases where the PHA waives the owner's responsibility for repairs, and revises the paragraph to better align with HOTMA in terms of when the waiver may be applied, namely for an HQS deficiency that the PHA determines is caused by the tenant, any member of the household, or any guest or other person under the tenant's control, other than damage resulting from ordinary use. HUD adds paragraphs (b)(4) and (5) to provide flexibility for PHAs to conduct substantial improvement in the case of an HQS deficiency caused by an extraordinary circumstance or to conduct development activity after HAP contract execution, respectively, and requires that the PHA withhold or abate HAP and remove or terminate HAP as long as the contract unit with deficiencies is occupied by an assisted family.
HUD also inserts a new paragraph (c) addressing family obligation. The addition of paragraph (c) reflects the contents of § 982.404, as § 982.404 is no longer applicable to PBVs in accordance with § 983.2 of this final rule. The changes in paragraph (c) outline how a family may be held responsible for a breach of the HQS, the family's required actions to cure the deficiency if the HQS breach is life-threatening, and the actions that the PHA must take in case of a breach of the HQS.
In revised paragraph (d), proposed paragraph (c), HUD replaces the use of the undefined term “regular inspections” with the specific inspections referred to, consistent with changes throughout this final rule. Consistent with § 983.10, revised paragraph (d) also requires that the PHA specify the conditions under which it will withhold HAP and abate HAP or terminate the contract for units other than the unit with HQS deficiencies in its Administrative Plan. Revised paragraph (d) also outlines the PHA's remedies when HQS deficiencies are identified in an inspection, excluding pre-selection, initial, or turnover inspections. In accordance with the 1937 Act as amended by HOTMA, this final rule revises paragraph (f) discussing the applicability of § 983.208 to HAP contracts. Per the statute, HUD determines that paragraph (f) applies to any dwelling unit for which a HAP contract is entered into or renewed after the effective date of this final rule, with “renew” under the statute meaning the earlier of agreement to extend or effective date of extension in the case of PBV.
To clarify the meaning of the certification in paragraph (a), given that compliance with HQS can include complying with requirements under part 983 to take specific actions in certain circumstances in which units do not fully meet HQS, HUD amends paragraph (a) to specify that the owner's compliance with HQS is subject to the requirements of part 983. To prevent a possible conflict with §§ 983.157 and 983.212, which allow the family to be temporarily housed while development activity or substantial improvement occurs, this final rule revises § 983.210(d) to specifically provide §§ 983.157(g)(6)(ii) and 983.212(a)(3)(ii) as an exception to the requirement that the unit be the family's only residence.
HUD moves from § 983.211(c) to paragraph (b) the requirement that reinstatement or substitution must be permissible under § 983.207. For clarification, HUD revises this requirement to reference § 983.207(a) and (b) specifically. This final rule also adds clarifying changes to paragraph (c) to require that the anniversary and expiration dates match all other units under the HAP contract. This clarification prevents the PHA and owner from matching the dates on the HAP contract for all other units with the dates for the reinstated or substituted units.
In this final rule, HUD moves the proposed § 983.157 to § 983.212 (as discussed further in the description of changes to § 983.157). HUD revises this section to address commenters' concerns over the timing of substantial improvement under a HAP contract. Specifically, HUD is breaking paragraph (a) into its components and revises paragraph (a) to outline the conditions under which the PHA may approve substantial improvement. The changes in paragraph (a)(1) set a reasonable expectation that the condition of housing placed under a PBV HAP contract should not need substantial improvement within the first two years of the HAP contract, barring the extraordinary circumstances subject to the exception in paragraph (a)(1)(i). To prevent tenants from being permanently displaced, paragraph (a)(1)(i) allows the PHA to approve the owner to undergo substantial improvement after a natural disaster or other “extraordinary circumstances” on a previously compliant unit and clarifies that “extraordinary circumstances” are unforeseen events that are not the fault of the owner. In paragraph (a)(1)(ii), HUD changes the relevant time period from five years to two years in response to public comment. Under paragraph (a)(2), HUD expands the description of the expected HQS deficiencies that must be reported to include the items at § 5.703(a)(2): components within the primary and secondary means of egress, common areas, and systems equipment. Further, HUD clarifies in paragraph (a)(2) the substantial improvement at issue must not include demolition and new construction of replacement units.
The changes in paragraph (a)(3) allow HUD to provide families with greater protection against being moved from the unit or project unnecessarily and against being required to remain in unsafe conditions. For paragraph (a)(3), this final rule adds several subsections to instruct the PHA and owner on what to do when families occupy units that will not comply with HQS during the substantial improvement. Paragraph (a)(3) also clarifies under what circumstances the family has to entirely vacate a unit during substantial improvement, which would only be when both in-place substantial improvement and temporary relocation cannot be achieved. HUD, in this final rule, explains whether families remain PBV participants or tenants under lease during re-housing and provides sufficient procedural information for a PHA and owner to carry out the moves. Paragraph (a)(3)(iii)(A) adds a requirement that a family that must be re-housed be offered an available vacant contract unit if there is one. In the case that the PHA issues the family a tenant-based voucher, paragraph (a)(3)(iii)(B) provides that the PHA must, either through voucher issuance based on family eligibility and willingness to request a voucher pursuant to § 983.261 or through removal of the unit from the HAP contract, issue the family its voucher to move. Finally, paragraph (a)(3)(iii)(C) requires that families that vacate the project be offered an opportunity to return. HUD notes that the leasing of units in a PBV project must comply with federal fair housing and related requirements, including ensuring that any designated accessible units are occupied by households who need the accessibility features, and that emergency transfers under VAWA are provided.
HUD clarifies that HAP and vacancy payments must be abated once the unit has any HQS deficiency during substantial improvement under paragraph (a)(4). This final rule adds paragraph (a)(5) to specify that vacant units are the units that may be temporarily removed from the contract and that failure to complete the substantial improvement as approved is a cause for a breach subject to § 983.206(c)(2). Paragraph (a)(5) also requires that the contract specify the terms of the PHA approval, to facilitate the PHA options for breach if the owner fails to comply.
This final rule amends the proposed paragraphs (b) and does not finalize the proposed paragraph (c) to conform to changes made across part 983 to separately characterize “development activity” and “substantial improvement” and remove descriptions of requirements applicable to substantial improvement from subpart D of part 983. Accordingly, paragraph (b) describes requirements that apply to substantial improvement. This final rule also adds a new paragraph (c) to require that for PHA-owned units an independent entity must make the
In this final rule, HUD clarifies in paragraph (a)(2) that the PHA determination of eligibility for a particular family must use information received and verified by the PHA. This is not a change to existing requirements, but the addition is necessary to ensure there is no confusion as a result of the explicit reference in § 983.2 that § 982.201(e) is inapplicable to the PBV program. This final rule also revises paragraphs (a)(2) and (b)(2) to clarify an existing requirement that the family cannot be zero-HAP at admission to the unit, and clarifies under paragraph (b)(1) that the eligibility of an in-place family is determined prior to attaching assistance to the unit (
To prevent the tenant from being subject to an impermissible requirement to accept services involuntarily, this final rule revises paragraph (d)(2) to state that the PHA must not require families to show they participate in their own equivalent services if they decline voluntary services. Consistent with § 983.10, in added paragraph (e)(2)(iii), HUD requires the PHA define “good cause” in the Administrative Plan, which, at a minimum, must include HQS deficiencies; a unit that is inaccessible or otherwise does not meet the disability-related needs of a household member with disabilities; circumstances beyond the family's control; and health or safety risk due to being a victim of domestic violence, dating violence, sexual assault, or stalking covered by 24 CFR part 5, subpart L. To benefit the tenants and based on public comments, HUD determines that PHAs cannot remove families from the waiting list when they reject units for any reason but must allow families to reject units for “good cause” without losing their place on the waiting list. This protects families from being penalized when a unit is not truly available to the family because the unit does not meet the family's needs.
HUD restructures proposed § 983.252(a), and moves the requirements previously at paragraph (c)(1) to paragraph (a)(2) so that the requirements that PHAs take appropriate steps to ensure effective communication in accordance with 24 CFR 8.6 and 28 CFR part 35, subpart E, and provide information on the reasonable accommodation process, applies for all families, and not only where the family head or spouse is a person with a disability. HUD further revises proposed § 983.252 to add the requirement that the PHA include in the family information packet information about the family's right to move in a new paragraph (b)(5). HUD has also moved the requirement at paragraph (c)(2) regarding accessible PBV units to § 983.251(c)(9), as discussed in the previous section. HUD also adds a new paragraph (c) to clarify the requirement that the PHA and family sign the statement of family responsibility. In accordance with Title VI of the Civil Rights Act of 1964 and HUD's implementing regulation at 24 CFR part 1, this final rule clarifies in redesignated paragraph (e) that it is a requirement that PHAs take reasonable steps to ensure meaningful access by persons with limited English proficiency. PHA's may reference HUD's
HUD aligns § 983.254(a)(1) with the new requirements of § 983.157, as described in the discussion of changes to that section. HUD also makes minor changes to paragraphs (a)(1)(i) and (ii) of this section to specify that PHAs should make every reasonable effort to make eligibility determinations and refer sufficient numbers of families to owners within thirty days.
For consistency purposes and to align this section with § 983.10, HUD revises § 983.255(a)(2) and (c)(4) to require that the PHA's tenant screening policies are in accordance with the policies in the PHA's Administrative Plan.
This final rule revises § 983.257 to add that the owner may terminate the tenancy in accordance with §§ 983.157(g)(6)(iii) and 983.212(a)(3)(iii).
After considering public comments, HUD creates additional flexibilities as requested, while ensuring units do not continue to remain overcrowded, underoccupied, or, in the case of accessible units, occupied by families that do not require accessibility features. Accordingly, in paragraph (a)(2)(ii), HUD provides PHAs with 60 days (an additional 30 days) to make an offer of continued housing assistance once a determination has been made that a family is occupying a wrong-size unit, or a unit with accessibility features that the family does not require and the unit is needed by a family that requires the accessibility features. HUD also reorganizes paragraph (b) and adds paragraphs (b)(2) to provide that the PHA must remove the wrong-size or accessible unit from the HAP contract to make voucher assistance available to issue the family a tenant-based voucher if continued housing assistance under paragraph (b)(1) is unavailable. HUD determined this policy change was necessary to ensure the family living in a wrong-size or accessible unit would be able to obtain voucher assistance when no options under paragraph (b)(1) were available.
HUD revises paragraphs (c)(2)(i) and (ii) to clarify the requirements when the PHA's offer of assistance is project-based. HUD also adds paragraph (c)(2)(iii) to address the requirements when the PHA's offer of assistance is other comparable tenant-based rental assistance. In response to requests for additional flexibility, HUD creates under (c)(2)(i) and (c)(2)(iii) an opportunity for a family to request and a PHA to grant one extension not to exceed 90 days in circumstances where a family either declines project-based assistance or accepts or declines other
Finally, HUD adds paragraph (d) to state that if units are removed under this section they can be reinstated later. This final rule also revises paragraph (b)(1)(iv) to align with the revised definition for the term “comparable tenant-based rental assistance” in § 983.3.
In response to public comments, HUD at this final rule reorganizes, adds headings to, and revises § 983.261. Paragraph (a) is revised to clarify that the family may terminate its lease at any time after one year of PBV assistance. To ensure PHAs properly manage voucher turnover, paragraph (b) requires that if the search term of a family that requested to move expires, the PHA must first issue a voucher to the next eligible family before issuing another voucher to the family that requested to move. This final rule moves the discussion in paragraphs (c)(1) and (2) of the rights of a family or a member of a family who has been the victim of domestic violence, dating violence, sexual assault, and stalking under the PBV program, to new paragraphs (e) through (g), and expands on these provisions. Paragraph (d) clarifies that if the family terminates its lease before one year of PBV assistance, the family relinquishes the opportunity for continued tenant-based assistance under this right to move section. Lastly, consistent with § 983.10, this final rule requires PHAs to have a policy on the family's right to move in the Administrative Plan in paragraph (b) and (c).
This final rule makes overall changes to § 983.262, to align the PBV rules with the Fostering Stable Housing Opportunities (FSHO) notice,
Paragraph (e) of this final rule specifically outlines the requirements for units for FUP youth under the increased program cap and project cap exceptions. This revision is made for better readability and to distinguish FUP youth requirements from other categories of excepted units and units under an increased program cap.
This final rule revises paragraphs (b)(1) and (c)(2)(i) to align with § 983.10. This final rule changes (f)(3) to align with the changes made to the exception payment standard regulation in § 982.503. Paragraph (f)(3) is also amended to clarify the criteria for whether an exception payment standard applies. Finally, HUD amends paragraph (f)(3) to clarify the purpose for which an exception payment standard applies to PBV projects, which is as a factor for determining rent to owner under paragraph (a)(2) or a factor for determining if the unit is a qualifying tax credit unit for purposes of setting the rent to owner under paragraph (c), as applicable.
HUD revises paragraph (f)(4) to provide HUD with the flexibility to develop a process to approve project-specific utility allowances. This final rule also adds paragraph (f)(5) to state that the PHA must use the applicable utility allowance schedule for the purpose of determining rent to owner and does not use a higher utility allowance from a reasonable accommodation for a person with a disability. This clarifies the existing requirement that a higher utility allowance as a reasonable accommodation is applied only to the particular family's tenant rent (or utility reimbursement) (see 24 CFR 983.353), rather than being used to determine the amount of the rent to owner per 24 CFR 983.301(b)(1) or (c)(2)(i). This final rule removes the proposed rule requirement in paragraph (g) that independent entities determine project-specific utility allowance, with the purpose that HUD will ensure sufficient oversight through the
This final rule revises paragraph (a)(2) to state that the PHA Administrative Plan must specify any advance notice the owner must give the PHA to request a redetermination of rent and the form of such request. This final rule revises paragraph (b)(2) to remove the term “maximum rent,” which was undefined, and state specifically how to calculate the maximum adjustment by OCAF. Further, this final rule moves information that was in paragraph (b)(2) in the proposed rule to new paragraphs (b)(3), (b)(4), and (b)(5) with simplified language for readability. HUD amends paragraph (b)(6) to conform to applicable HQS provisions of §§ 983.157 and 983.212.
HUD also clarifies when the rent to owner must be decreased in the case of adjustment by OCAF in revised paragraph (c)(1), to include when there is a decrease in the fair market rent, tax credit rent, or reasonable rent, as applicable, that requires a decrease to the rent to owner. In response to public comments on the proposed changes to rent floors, HUD determined that PHAs should have discretion whether to elect at any time, within the HAP contract, to not reduce rents below the initial rent to owner, as reflected in revised paragraph (c)(2). This revision reflects HUD's opinion that PHAs are in the best position to balance local considerations in making such a determination. To accomplish this change, HUD removed from paragraph (c)(2) the limitation on establishing a rent floor, to account for circumstances where the rent floor may need to be established after rents have fallen beneath the initial rent to owner.
HUD amends paragraph (b) to add two new situations in which rent reasonableness must be redetermined, which are when a unit is added to the contract and when development activity is completed and accepted for a unit subject to the new option in § 983.157 of this final rule (described in greater detail in the discussion of § 983.157 above). This final rule adds paragraph (c)(3) to explain how to calculate rent reasonableness, which must be based on actual and documentable conditions
This final rule aligns this section with § 983.10 by clarifying that the Administrative Plan must contain the PHA policy on the conditions which it will provide for vacancy payments in a HAP contract, the duration and amount of any vacancy payments it will make to an owner, and the required form and manner of requests for vacancy payments.
This final rule revises paragraph (d)(2) to align it with § 983.10, requiring that the PHA describe its policies on paying the utility reimbursement in the Administrative Plan.
This final rule revises paragraphs (i)(1), (i)(3)(i), and (i)(3)(ii) to align them with § 982.503. Further, this final rule clarifies paragraph (l)(1) to state that the initial unit inspection indicator includes both initial and turnover inspections for the PBV program. The purpose of this revision is to capture every time a family moves in and not just capture when a family moves in before the HAP contract. This final rule also revises the citation in paragraph (m)(1) from § 982.405(a) to §§ 982.405 and 983.103(e) to reflect changes made to those sections in this final rule.
This final rule also revises paragraph (c)(3)(i)(A) to reflect changes made to self-certification of assets under 88 FR 9600 (Feb. 14, 2023), which implemented HOTMA sections 102, 103, and 104. A revision has been made to the introductory text of this regulation to reflect that the Federal award expenditure threshold is established by 2 CFR subpart F and has changed from $300,000 to $750,000. The revision reflects the regulatory citation for audit thresholds to ensure that § 985.3 is always aligned with Federal audit requirements.
This final rule revises paragraph (p)(1) and (3)(i)(B) to reflect the renumbering of § 982.503(e) to (f).
Throughout parts 5, 50, 92, 93, 982 and 983, HUD moved, corrected, and removed outdated citations and revised headers for clarity purposes. This final rule also revises terminology throughout this final rule, including replacing all references to “biennial inspection” with “periodic inspection;” “tenant selection plan” with “owner waiting list;” and “defects” with “deficiencies.” This final rule also replaces references to “tenant's rent” with “total tenant payment” and replaces references to “rent to owner” with “gross rent.” This final rule removes all references to the Project-based certification (PBC) program as it is no longer in existence. HUD also redesignated paragraphs for readability in §§ 982.54, 982.406, 983.53, 983.54, 983.59, 983.153, 983.204, 983.207, 983.211, 983.252 and 983.260. In addition, HUD moved the definition of the term “Request for Release of Funds and Certification” from § 983.3 to § 983.56(d)(2). HUD also amended §§ 985.1 and 985.3 to incorporate the PBV program in SEMAP and to align with regulatory changes in § 982.503 which permits additional flexibilities for PHAs inspections and the NSPIRE final rule.
HUD also makes changes throughout this final rule to correspond with the changes described above adding an option to complete rehabilitation after HAP contract execution in § 983.157, moving proposed § 983.157 to § 983.212 of this final rule, and changing the term “development activity” to “substantial improvement” for a portion of the work described as “development activity” in the proposed rule. HUD adds cross-references to § 983.157 in this final rule, and brief descriptions of conforming changes, in appropriate sections of part 983. Also, HUD removes citations to § 983.157 that appeared in the proposed rule or changes them to instead reference § 983.212 throughout this final rule. HUD changes “development activity” to “substantial improvement” where appropriate throughout this final rule. Finally, HUD removes references to activities that constitute substantial improvements from subpart D of part 983 of this final rule where appropriate and, accordingly, removes references to provisions of subpart D from §§ 983.207 and 983.212 where appropriate.
HUD is also revising the definition of “household” at 24 CFR 5.100, consistent with HUD's rule implementing HOTMA at 88 FR 9600 (Feb. 14, 2023), to include foster children and foster adults. This is a technical change consistent with the definitions of “foster children” and “foster adults” present in 24 CFR 5.100. For more information, see HUD's discussion of foster children and adults at 88 FR 9600, 9602 (Feb. 14, 2023).
Finally, some technical changes throughout the proposed rule were either made by the NSPIRE final rule or rendered moot by the NSPIRE final rule. For example, HUD proposed to amend § 985.1 to update a reference to “project-based component (PBC).” This change was made in NSPIRE, and therefore not made here.
Almost all changes in this final rule are effective thirty days after the publication of this rule. However, HUD is delaying the effective date for §§ 982.451(c), 983.154(h), 983,154(g), 983,157, and 983.204(e) while HUD completes and publishes the PHA-owned certification form and HAP contract rider that are necessary for PHAs to implement these changes. HUD will publish a subsequent publication establishing an effective date for these changes, once the form and rider are ready for use.
Compliance with this final rule is required once the rule becomes effective, with some exceptions.
Many changes require updates to PHAs' Administrative Plans. HUD recommends that PHAs update their Administrative Plans at their earliest convenience. However, to aid in providing a smooth transition, PHAs are not required to update their Administrative Plans in response to this rule until 365 days after the effective date of this rule. HUD notes that PHAs wishing to take advantage of many of the changes in this rule are required to update their Administrative Plan to incorporate those changes.
Other sections have delayed compliance dates to provide PHAs with adequate time to update their forms, procedures, and any other written materials that reflect new requirements in accordance with this rule, and to provide HUD with time to provide additional resources advising PHAs. Also of note, §§ 983.57 and 983.155(b) will require some PHAs to either amend their independent entity contracts or select a new independent entity, and HUD is therefore giving PHAs one year from the effective date to make those changes.
HUD received 44 public comments from a wide range of commenters: individuals; PHAs; public housing and tenant interest groups; and legal services organizations. The public comments and responses to the substantive comments are found below.
One commenter stated that the definition of RFTA seems to imply a requirement that the RFTA be submitted by the voucher holder and suggested the definition be amended to clarify that either the family, or the owner on behalf of the family, may submit the form.
A commenter suggested that HUD include the definition of “utility” currently found in guidance to the regulation because the definition is a critical part of the program.
Commenters supported the proposed definition of a PHA-owned unit, which matches the statutory definition offered by HOTMA. These commenters stated this was clear and did not need expansion and supported tracking the statutory definition and conforming definitions across HCV and PBV regulations, notices, and guidance.
A commenter recommended that for a unit to be PHA-owned that HUD not rely on a bright-line, percentage of ownership test to determine control when a PHA owns more than 50 percent of the managing member or general partner, and HUD should not find a unit to be PHA-owned when a PHA controls less than 50 percent of a managing member or general partner interest. Another commenter supported excluding units in buildings owned by entities in which either a PHA is in the ownership structure, and/or the entity is subject to a ground lease by a PHA. A commenter recommended the definition of “owned by a public housing agency” should allow the statutory text to stand on its own, so that only units located in a project “owned by the PHA, by an entity wholly controlled by the PHA, or by a limited liability company (“LLC”) or limited partnership (“LP”) where the PHA holds a controlling interest” will be considered “owned by a public housing agency.” The same commenter opined that should HUD wish to clarify the control and other factors it will evaluate when determining whether a unit will be considered PHA-owned, HUD can do so through notice or other non-binding guidance. This commenter further stated that the definition of “controlling interest” conflates control and ownership contrary to Congressional intent, explaining that percentage of ownership does not guarantee control over the owner entity and that HUD should confirm whether the PHA exercises functional day-to-day control over the owner entity.
A commenter supported the modified definition of independent entity in the proposed rule because it would provide relief to PHAs and maintain a level of scrutiny and prevent the appearance of self-dealing. Another commenter doubted whether there is any circumstance under which a PHA and an independent entity should be connected financially, in the interest of complete fairness and impartiality under which an independent entity should be making decisions.
One commenter suggested that the proposed rule would increase the shortage of vendors for PHAs, especially located in smaller areas, if every vendor were disqualified based on prior contracts with the PHA for services performed on non-PHA-owned units. The commenter viewed HUD's current procedures in tandem with the PHAs' inability to exercise control over the independent entity, as sufficient to ensure independence.
The same commenter recommended that HUD revise the definition of independent entity because it is unclear what it means for an independent entity to “be connected to” a PHA, and the definition would prohibit a PHA from using a company it already contracts with as an independent entity. Another commenter stated the phrase “or in any other manner that could cause the PHA to improperly influence the independent entity” is vague and subjective, potentially leading to confusion, disputes, and conflict, and should be deleted.
For clarity, a commenter suggested HUD revise the definition as follows: “HUD-approved independent entities and PHAs cannot have a legal, financial (except regarding compensation for services performed for the PHA), or other connection that could cause either party to be improperly influenced by the other.” The same commenter suggested that this final rule specify the meaning of “connected to” because the current meaning could prohibit a PHA from using an independent entity it currently contracts with, even when these vendor contracts are procured at arm's length.
Another commenter suggested HUD allow PHAs that may have an allowable financial relationship with an independent entity to continue to use that independent entity if there is no chance that the PHA will “improperly influence” the independent entity.
A commenter stated that HUD should not add items to the Administrative Plan that are not necessary for the daily and core operations of the PHA. Another comment stated that several of the proposed additions would require frequent and burdensome changes for otherwise insignificant policy changes.
Another commenter suggested that the requirement that a TSP be included in the Administrative Plan must be mentioned in § 982.54.
A commenter stated that all PHAs should be allowed to be Moving to Work (MTW) agencies to decrease regulatory burdens and provide additional discretion for PHAs to control their local market. This commenter also recommended that PHAs that have Affordable Housing Accreditation Board (AHAB) accreditation and are high performing under SEMAP and PHAS should be rewarded with more discretion because they have shown their ability to properly operate their programs.
Commenters supported HUD's requirements wherein PHAs must provide families that include an individual with a disability a list of accessible units known to the PHA and assistance in locating an accessible unit. PHAs are already required to provide this information in the information packet, and as required in compliance with HUD's Section 504 requirements. One commenter suggested that PHAs be required to collaborate with local organizations that can provide housing search assistance to tenants with specific accommodation needs. Another commenter suggested that HUD require PHAs to keep track of whether tenants currently in accessible units require the accessible design features and use a lease addendum stating that the family may be required to move if they do not require the accessible design features. The same commenter suggested that HUD provide guidance to PHAs to proactively identify ways to make units accessible, including through new construction or other substantial rehabilitation.
A commenter stated that HUD should include written and oral briefings on exception payment standards as a reasonable accommodation, and not solely include subsidy standards as required by regulations. The commenter suggested that PHAs be required to inform families of the availability of an exception payment standard, and particularly for when a more expensive new construction unit is needed as an accommodation for a family member's disability. Alternatively, another commenter suggested that the regulation should not detail that there is a reasonable accommodation possible for subsidy standards because reasonable accommodations are available for all PHA policies.
A commenter recommended that the regulation for the briefing packet should outline the most critical information for families when they are provided their initial voucher, because excessive amounts of information can be overwhelming for families. The commenter also recommended that PHAs should have the discretion to determine which method of communication, including oral, print, and electronic communications, is proper for the briefing packet, and the regulation should explicitly state that the briefing can be provided in a manner that is not oral, according to the PHA's discretion, while acknowledging that accessibility and interaction between staff and families are required.
Another commenter recommended referencing § 982.301(a), the right to meaningful language access for families whose members are limited English proficient, and how to request and access meaningful language assistance from the PHA. The commenter further stated that in § 982.301(b)(10), HUD should reference how tenants can request language assistance, whether via written translation of documents or oral interpretation, for the PHA; HUD should require that the PHA identify staff members who will coordinate the PHA's language access policies; and the tenant briefing should include translation and oral interpretation for individuals who are limited English proficient in § 982.301(c).
A commenter disagreed with HUD's proposal to require a 60-day period to execute a HAP contract and a lease term and noted that requiring PHAs to get permission from HUD to execute a HAP contract in cases exceeding the 60-day period is unnecessary because it is not in the interest of the parties to unnecessarily delay the process. As an alternative, the commenter suggested increasing the contract execution time from 60 days to 90 days to eliminate the need for any additional action from the PHA or HUD and require PHAs to notify HUD when the PHA goes beyond the 60 days, so that HUD can track the prevalence of the extensions requests and re-examine this policy in the future while avoiding administratively burdening PHAs and landlords.
Another commenter did not support a maximum 60-day timeframe between lease effective date and the date of HAP contract execution. The commenter opined that many HCVs are lease-in-place vouchers in rent stabilized units, so PHAs cannot request that the owner sign a new lease at the start of the subsidy without violating local rent laws.
Commenters opposed adding duties to independent entities. One commenter stated the functions identified in the proposed rule are the same as the current regulation, and that no other functions should be authorized to an independent entity. Another commenter stated that HUD should not require independent entities to perform other functions beyond those proposed because doing so would increase the costs as well as decrease funding availability for other program functions. One commenter stated that the independent entity requirements should be re-examined so that PHAs are not burdened by the oversight of such entities, and that PHAs should be entrusted to carry out the activities, such as ensuring compliance with selection process, inspections and rent setting—just as PHAs are under the public housing program. The commenter suggested having the PHAs carry out these duties with proper documentation and subject to review through the required annual independent audit.
Another commenter disapproved of HUD requiring an independent entity to conduct duties that the PHA can do itself, such as approve contract renewals, conduct inspections, and conduct rent reasonableness tests. The commenter further emphasized the burden of using independent entities for activities, such as performing inspections because there is a shortage of vendors trained in UPCS-V protocol, and many PHAs conduct rent reasonableness tests through third-party software, making the need for independent entities obsolete. The commenter recommended that HUD require an independent entity to conduct inspections only for special inspections or compliance to lessen the PHA's burden. While another commenter noted that HUD's proposed list of activities to be performed by an independent entity is too long, suggesting HUD reconsider the requirement that an independent entity receive evidence that the PHA is following regulations during the development activity or rehabilitation. This commenter noted that there are already several layers of review at local and Federal levels, and that, in the case of mixed-finance, HUD may have already reviewed the transaction.
A commenter further suggested that independent entities not be required to review awards of Low-Income Housing Tax Credits (LIHTC) or HOME Investment Partnership Program (HOME) funds, as well as PHA-owned project selections and stated that HUD should defer to the PHA to determine when revitalization of a former public housing site is needed. Additionally, the commenter objected to the requirement that independent entities (rather than PHAs) must determine any rent adjustments by an OCAF as part of their rent calculation responsibilities for any PHA-owned units.
A commenter suggested that HUD expressly permit a PHA to seek reimbursement of independent entity expenses from project owners as operating costs.
Commenters supported PHAs keeping rent reasonableness and inspection documents and providing copies to the field office only upon request. A commenter noted that this is not required for non-PHA-owned units, and the field offices lack capacity to review these reports.
Some commenters approved of the list of Life-Threatening Conditions (LTCs). Other commenters suggested that the list should include other items such as mold, due to its harmful impact on individuals with respiratory and immune deficiencies; non-functioning locks; roaches; asbestos; radon; rat infestations; non-functioning heating or hot water systems; properties determined uninhabitable by a city agency; inability of heating system to maintain a minimum of 55 degrees Fahrenheit during cold season; utilities not in service; an absence of a functioning toilet; and missing exterior doors or windows. Another commenter stated that a missing lightbulb should not be an LTC.
One commenter suggested condensing and summarizing the list, as a high level of detail could lead to errors in inspections when multiple criteria must be met to be considered an LTC. Another commenter supported HOTMA's streamlining changes but stated that it is unwarranted to find minor HQS violations as a safety hazard or a reason to terminate HAP assistance. A separate commenter recommended that HUD immediately update the HQS inspector checklists to accurately reflect LTCs. Another commenter recommended that HUD only require the list for initial inspection and not for regularly scheduled annual or biennial inspections.
One commenter stated that HUD should clarify that a unit without a carbon monoxide (CO) detector should not be considered an LTC if there is no CO source in the unit. Another commenter urged HUD not to add CO detectors to HQS through HOTMA and instead ensure consistency across HUD programs by implementing statutory CO requirements through standalone rulemaking. One commenter suggested that voucher applicants and those moving with continued assistance should receive notice of proximity to a Superfund site or contaminated sites on the National Priorities List (NPL) at application, lease signing, and at recertification. This commenter also recommended that HUD expand its Memorandum of Understanding (MOU) with the EPA, which is currently limited to Project-Based Rental Assistance (PBRA) and public housing, to all forms of HUD assistance, and suggested HUD and EPA map all assisted projects and their proximity to sites on the NPL.
Commenters also suggested that PHAs should be allowed to add other conditions into their Administrative Plan. A commenter suggested that HUD allow PHAs to continue using their own pre-existing definitions as a replacement for HUD's NLT definitions. A commenter urged HUD not to require PHAs to adopt the NLT provisions as a prerequisite for adopting alternate inspections. One commenter stated that HUD should only require PHAs to outline deviations from the definition of “life-threatening conditions” in the Administrative Plan instead of repeating HUD's regulations. Another commenter suggested HUD waive the on-site inspection requirement when PHAs use alternative procedures to correct NLT deficiencies.
One commenter suggested that HUD undertake a thorough and public examination with significant stakeholder outreach and participation before changing to the proposed list of LTCs, which is based on UPCS-V and imposes a higher standard than is currently required.
Commenters opposed the expansion and addition of new HQS fail items being categorized as life-threatening because it would limit the PHAs' ability to consider local conditions and hinder applicants from quickly accessing their units.
Commenters suggested various usages for abated funds, such as security
A commenter suggested relocation assistance for affected tenants should be mandatory, using funds from the abated PBV HAP or TPVs. Commenters also stated that the proposed rule is unclear as to whether the security deposits and moving costs are the only eligible expenses or if the PHA can determine additional expenses and suggested that the PHAs should determine what comprises eligible assistance expenses and refer to the URA cost schedule for moving costs.
Consistent with the statutory language, and in response to the comments regarding the eligible expenses that may be covered, HUD has provided additional language regarding the permitted uses of abated funds for relocating tenants. Specifically, HUD has added that PHAs may assist families in finding a new unit, including using up to two months of the withheld and abated assistance payments for costs directly associated with relocating to a new unit, including security deposits, temporary housing costs, or other reasonable moving costs as determined by the PHA based on their locality. HUD has further clarified that if the PHA is using withheld or abated assistance payments to assist with the family's relocation costs, the PHA must provide security deposit assistance as necessary, as required by the statute.
Many commenters suggested going further to protect tenants from evictions and subsidy terminations in the event their unit fails an HQS inspection. Commenters warned that the proposed rule would allow PHAs to abate and terminate an entire HAP contract if a single unit fails HQS and tenants may face higher rent under HCV rules or face an owner that evicts them despite the regulatory language.
Commenters stated that withholding HAP during the cure period for HQS violations may create an incentive to evict tenants. Commenters recommended HUD require that tenants cannot be held liable for amounts of HAP withheld or abated, such abatement is not grounds for eviction, and tenants cannot be held liable for their own portion of the rent during abatement. A commenter noted that, in some cases, the PHA withholds HAP for HQS violations that are not an immediate threat to health and safety and do not warrant a tenant to withhold rent under State law and HUD should clearly state that when the PHA is relieved of paying back rent, the tenant is as well, despite any State law discrepancies regardless of State law unless the State law provides stronger tenant protections. A commenter further expressed that when HAP is abated, the tenants should be notified.
Commenters recommended that HUD explicitly state that if a PHA terminates a PBV HAP contract based on a breach of conditions requirements, any of the units that continue to meet or have been brought into compliance with HQS requirements should be allowed to continue under the program. Another commenter recommended that HUD should specify in § 982.404(d)(2)(ii) that the family's assistance may only be terminated in accordance with § 982.555 if a family fails to move within the allotted time. A commenter also suggested that HUD clarify § 982.404(e)(1) to include that a PHA may extend the 90 days for families as needed based on individual circumstances, without HUD approval, and state that for relocation protections, public housing includes properties either pre- or post-conversion under RAD, section 18, or other provision of law, not to include section 9 public housing.
One commenter requested further clarity on whether the requirement for families to be provided at least 90 days to find a new unit after the HAP contract is terminated, refers to 90 calendar days or 90 “tolled” days of voucher time, which is required under the Family Move regulations.
A commenter also stated that a PHA must provide a preference to families who relocated due to HQS deficiencies. This commenter sought clarification from HUD on whether the preference for the public housing waiting list would take precedence over other existing public housing preferences. Another commenter stated that HUD's proposed language in § 982.404(e)(2) does not consider that PHAs need to manage limited vacancies to best serve the residents already within the public housing program, or for the many applicants on that program's waiting list. This commenter recommended that HUD modify the proposed language within § 982.404(e)(2) to clarify that HCV family participants transfer into public housing units shall not take preference over the PHA's needs for a Section 504, VAWA, or other emergency need.
One commenter stated that HUD providing a public housing preference for families affected by HCV abatements unable to find a new voucher unit would potentially lead to decreased mobility for HCV participants. The commenter suggested that it would be advantageous to allow payments up to 120 percent of fair market rents for such families, which would enable them to access higher rental markets within the spectrum of ZIP codes served by the PHA. This commenter agreed with the HOTMA language, permitting the PHA to use up to two months of the assistance payments that were withheld or abated under the family's terminated HAP contract for cost directly associated with the relocation of the family because these provisions would provide greater mobility to HCV families.
HUD has clarified that the requirement for families to be provided at least 90 days to find a new unit after the HAP contract is terminated, refers to 90 calendar days.
HUD appreciates the suggestion to allow payment standards up to 120 percent of FMR. This change is not necessary as PHAs may currently apply for 120 percent fair market rents and/or SAFMRs under 982.503, which provides for expanded access to rental markets
HUD appreciates the recommendation that HCV participant transfers should not take preference over Section 504, VAWA, or other emergency transfers. HUD agrees and finds that 24 CFR 982.404(e)(2) as drafted in this final rule is sufficient and notes that Section 504 transfers must occur under the requirements of 24 CFR part 8, including 8.28, and VAWA emergency transfers must occur in accordance with HUD's VAWA regulations at 24 CFR part 5, subpart L, and program regulations.
A commenter warned that withholding HAP during the 30-day correction period would hurt smaller landlords and potentially discourage them from future participation.
A commenter opposed requiring a mandatory termination after 180 days of abatement because it would be an administrative burden and decrease availability of subsidized housing. Another commenter suggested clarification on whether the plural “HAP contracts” at § 982.404(a)(2) reflects other contracts for units besides noncompliant contracts would be terminated due to the HQS noncompliance of one unit. Another commenter suggested that the 180-day proposed timeline for termination is a reasonable balance of interests, as required by statute.
HUD has updated § 982.404(a)(2) to read that if the owner fails to maintain the dwelling unit in accordance with HQS, the PHA must take enforcement action in accordance with this section.
A commenter stated that HUD should expand this rule to include renewed HAP contracts or HAP contracts that are entered into after the rule's implementation.
One commenter supported the 90-day voucher terms for contracts cancelled due to abatement.
A commenter also recommended clarifying in § 982.404(a)(4) that the PHA has discretion to waive the requirement making the owner responsible for correcting deficiencies where the damage is not from ordinary use, and that the waiver is not just the requirement to be responsible for the deficiency, but the applicability of the entire subparagraph including abatement and withholding provisions. This commenter also urged HUD to clarify that PHAs have the discretionary authority to reimburse the property owner either for a portion or all HAP amounts withheld, which the commenter stated is clearly provided within HOTMA.
One commenter suggested that HUD monitor how many PHAs reimburse funds and review their reimbursement policies.
Commenters addressed whether the tenant or PHA should be responsible for repairs to unit damages. One commenter suggested that HUD provide an exception for § 982.404(a)(4) to address damages that have been caused by domestic abusers and obligate PHAs to require the owner to make the repairs in instances of domestic abuse. This commenter also suggested not using incidents of abuse as a means to terminate a survivor's tenancy and to allow the PHA and owner to take all legal action against the abuser for the damage.
Another commenter found the regulations to be confusing and potentially in conflict with State laws and local practice because in many states tenants are prohibited from carrying out their own repairs. The commenter suggested that for HUD to shift responsibility to the tenant to make the repairs, then HUD should place a higher burden on the landlord. The commenter additionally recommended that, if the landlord charges the tenants for repairs to tenant-caused damage, HUD should require a reasonable repayment plan and that the PHA must continue to pay the HAP during the term of the repayment agreement, so long as the tenant continues to abide by the terms of the lease. This commenter suggested the repayment plan allow landlords to charge an initial fee, which must not exceed 40 percent of the tenant's income, and then impose a reasonable period for the tenant to pay the remainder to the landlord, with longer repayment periods for tenants facing financial hardship. This commenter also recommended PHAs should terminate a HAP contract due to tenant-caused damages only after remedies, consistent with State landlord-tenant laws, have been exhausted and HUD should encourage maintaining units as part of the low-income housing stock.
Another commenter recommended that HUD revise § 982.404(a)(4) and (b)(2) as well as the procedure in the case of tenant-caused damages, consistent with HOTMA section 101(a)(3). Another commenter suggested waiving HQS deficiencies caused by tenants from the landlord's responsibility.
HUD has chosen not to add specific language around tenant damages caused by domestic abusers in this section. However, all VAWA housing protections under 24 CFR part 5, subpart L apply. HUD appreciates the commentor's suggestion but has not added a regulatory requirement for a repayment plan for owner correction of tenant-caused deficiencies. HUD is concerned that imposing additional restrictions on the owner in terms of how and when the owner can recover amounts owed under the lease will discourage owner participation in the HCV program. Nothing in the final rule would prevent the owner from choosing to offer a repayment plan to the family. However, the manner in which the owner may collect amounts owed under the lease for tenant-caused damages should continue to rest with the owner, subject to the terms of the owner's lease.
Another commenter stated that Remote Visual Inspections (RVI) should not be used to verify a HQS deficiency correction where there is a life-threatening condition on the property. The commenter suggested HUD should require PHAs to conduct in-person inspections prior to a family moving into a unit that failed HQS for health and safety reasons. This commenter expressed that PHAs should be required to independently check for lead hazards in any Housing Choice Voucher (HCV) home and warned that the proxy to test for lead-based paint after watching a short video is insufficient. This commenter recommended a select use of RVI to reduce administrative burdens for PHAs and increase the speed at which voucher tenants can lease-up, without impacting the family's health.
Commenters found HUD's proposed deadline reasonable because the adoption of the Non-Life-Threatening (NLT) process is optional. A commenter suggested that HUD include additional time in case a resident does not want to move and requests a “final appeal,” or courtesy inspection to remain in the unit if the deficiency is now remedied. Another commenter stated that HUD's proposal to allow flexibility in the rule for inspections and notification of deficiencies is adequate, and that the 30-day extension for inspections will permit adequate time for PHAs and owners to schedule the inspection and discuss deficiencies. One commenter stated that 24 hours for a PHA to notify the owner of any life-threatening deficiency is reasonable, but the commenter also suggested extending the timeline to inspect a unit and notify the landlord for emergency items to two days.
Commenters supported HUD maintaining the current timelines for inspections and repairs due to PHAs' discretion over whether to undertake the LTC/NLT process. One commenter offered 15 days to repair, and another commenter suggested PHAs have absolute discretion to establish their own timelines. Another commenter opposed the 30-day repair requirement because PHAs would be required to define what constitutes “receipt of written notice” in their Administrative Plan, which can present a challenge for PHAs that do not use email. A commenter recommended modifying § 983.103(c)(2) to specify that the 30-day inspection period applies if a PHA adopts the NLT exception to inspections.
Another commenter stated that HUD should extend the timeline for emergency inspections from 48 to 72 hours. This commenter further suggested that PHAs should be required to adopt HUD's NLT definition only if they implement the NLT inspection option. One commenter suggested that HUD clarify that the 24-hour correction period for LTCs should only apply when the family is in the unit, and that if the HAP is not being paid while the family is waiting for the landlord to correct a deficiency, the family is also not responsible for making the HAP payment. Another commenter stated that HUD is unnecessarily requiring NLT repairs to be made within 30 days of the owner receiving written notice of the defects, and that it is unclear whether requiring PHAs to proactively waive an owner's responsibility to correct defects will be conducted on a policy level or whether it will be conducted on a case-by-case basis, ultimately requiring notification.
HUD has clarified that, in the case of tenant-caused deficiencies, the owner is responsible until such time as it has been determined that the tenant is responsible in a particular case.
Commenters supported the proposal to not require the creation of a separate legal entity, which commenters stated would add costs and complexity and negatively impact PHAs participating in RAD and section 18 conversions. One commenter stated that HUD should not allow a PHA to permit certifications instead of HAP contracts, explaining that such permission would create ambiguity in other regulations that reference HAP contracts but not certifications, hurting those that rely on those regulations to enforce and protect the rights of tenants.
Another commenter suggested adding a statement that phasing groups of contract units into the HAP contract is acceptable in § 983.204(a). This commenter recommended adding, “or phases thereof” after “HAP contract,” for § 983.204(c).
Further, HUD determined the explanation of how to implement staged completion of contract units would be more appropriate in § 983.156. Therefore, HUD has added a paragraph addressing the commenter's concern to § 983.156 and has cross-referenced § 983.156 in § 983.204(c).
Another commenter stated that HUD should not establish a required maximum 60-day timeframe between the lease effective date and the HAP contract execution date, since complex
One commenter suggested that HUD revise § 982.503(c)(3) to refer to 90 days instead of three months for consistency.
Several commenters stated that HUD should provide greater flexibility to PHAs to establish exception payment standards without HUD approval to reduce PHAs' administrative burden and allow more rapid responses to changing rental markets. Another commenter stated that HUD should grant PHAs this flexibility if the PHA has the budget authority to support the increased payment standard as demonstrated by HUD's Two-Year Tool, which calculates the PHA leasing potential considering current Voucher Management System (VMS) data, HUD-held reserves (HHR), and Budget Authority (BA). This commenter remarked that HUD's Payment Standard Tool can also be used to establish exception payment standards.
One commenter expressed that HUD should allow exception payment standards for individual projects rather than require PHAs to apply exception payment standards to every project in the same ZIP code.
Commenters generally urged HUD to allow for higher payment standards. Commenters stated that higher standards would allow PHAs to expand geographic choices, allow families to stay in gentrifying neighborhoods, and make the SAFMR exception payment tool more cost-effective to expand housing opportunities in low-poverty areas. A commenter reasoned that in cases where the PHA chooses not to seek HUD approval, families would benefit from a higher SAFMR, which would ensure the prudence of policy because rents would remain subject to reasonableness.
Another commenter suggested that increased payment standards up to 120 percent of the SAFMR should apply for ZIP codes with SAFMRs that exceed the regional FMR. One commenter stated that PHAs should have discretion to set exception payment standards up to 150 percent of SAFMR. Commenters also supported HUD's proposed policy at § 982.503(d)(4) and (e)(1) allowing PHAs to choose to set payment standards up to 110 percent of the SAFMR without HUD approval, and asked HUD to clarify this allowance by explicitly stating it in § 982.503(d)(2). The commenters stated many PHAs are unaware of the flexibility the policy described in § 982.503(d)(2) provides them.
Commenters stated that HUD's proposal in § 982.503(d)(2) to require the lowest SAFMR in an area with more than one FMR constrains PHA authority and HUD should instead allow PHAs to utilize the highest FMR. As an alternative, a commenter recommended that HUD implement a threshold that is not dependent on the FMR and instead use a threshold that is reflective of the risk of excessively high payment standards. Another commenter stated that HUD should rely on its own ZIP code grouping guidance, which allows PHAs to set payment standards for a group of ZIP codes as long as the payment standard is 90 to 110 percent of the SAFMR of each ZIP code in the group. This commenter also stated that SAFMRs are burdensome and undesirable for PHAs to determine payment standards, and as an alternative, PHAs should be allowed to provide data to HUD and have the local field office approve the payment standards based on actual current market data. The commenter noted that there is no reason to change the ability of owners to request increases below 110 percent of the FMR or the reasonable rent.
A commenter supported payment standard increases as providing stability to families and landlords but urged HUD to ensure that rent increases occur at a reasonable rate and not forced with an abrupt increase.
HUD notes that § 982.503(d)(2) does explicitly allow PHAs that are not in designated SAFMR areas or have not opted voluntarily to adopt SAFMRs to establish exception payment standards up to 110 percent of SAFMR without HUD approval. Additionally, HUD will allow PHAs to opt-in to the SAFMR by notification to HUD, rather than requiring HUD approval by modifying § 888.113(c)(3).
HUD does not agree that requiring the lowest SAFMR in an exception area that crosses one or more FMR boundaries constrains PHA authority. Each ZIP code, regardless of whether it crosses one or more FMR boundaries has one established SAFMR amount. Therefore, a PHA adopting ZIP code-based SAFMRs will only have one SAFMR to choose from, which is how many PHAs establish exception payment standards
A commenter supported consolidating exceptions to payment standards in a single location.
Several commenters opposed HUD requiring PHAs to submit rent comparability studies or require certification of the rental market data in exchange for higher payment standards. A commenter stated that HUD does not indicate that PHAs are providing insufficient rental data in requests for an exception payment standard. Commenters also noted that HUD requiring data for exception payment standards to be prepared through a market study or by a certified appraiser is administratively and financially burdensome for PHAs. One commenter proposed that HUD establish a procedure to extend payment standards in rapidly changing, low-vacancy, and high-cost rental markets, seeing as there are existing mechanisms to request exception payment standards within the HCV program. Other commenters proposed that HUD accept data from various sources including local market studies from the PHA or other local entities that use data from a reputable or verifiable source, online surveys of the local renter community, PHAs that use a third-party vendor to conduct rent reasonableness for rental market data, rental market studies prepared by institutions of higher education, industry data, or the rent reasonableness evaluations.
A commenter proposed that HUD expand access to data on low-vacancy areas by unit size and exclude public housing developments from calculating FMR/SAFMR because a concentration of low rent units in large public housing developments are in exception payment standard areas. The commenter further stated that when there are differentials with the ACS data, HUD should allow PHAs to provide local data if the data is available.
Another commenter encouraged HUD to establish clear rental data standards for the exception payment standards that require HUD's approval to decrease the administrative burden so that PHAs can obtain justified exceptions, while simultaneously providing reasonable assurance that the higher standard is needed to cover market rents in the area.
Another commenter stated that the exception payment standard assessment HUD requires for a PHA should be easily accessible to under-resourced PHAs and that HUD should provide funding grants to PHAs that will conduct a study for purposes of applying for an EPS. The commenter also stated that HUD should require PHAs to make their assessments of rental market data and rent comparability data publicly available, because this would improve advocates' and residents' understanding of the PHA's assessment of the rental market, as well as create transparency and an opportunity to challenge FMR policies that do not further fair housing goals. One commenter recommended that HUD set the data requirements by notice for easier adjustment based on lessons learned and when new types of data become available.
Several commenters objected to HUD's maximum cap on exception payment standard amounts due to differences in high-cost markets and requested PHA flexibility. A commenter stated that limits on exception payment standards should be data driven. Another commenter recommended that HUD ensure that PHAs are setting payment standards to affirmatively further fair housing and reduce voucher concentration in high poverty communities, considering that some studies have shown that most SAFMR PHAs set higher payment standards in low-opportunity communities and lower payment standards in higher-opportunity communities. The commenter further suggested that HUD require PHAs to submit rent comparability studies and payment standard schedules to HUD, so that HUD can easily review them and compile them in a national database. According to the commenter, the database would easily allow voucher holders to explore their options regarding portability moves and would help HUD and advocates ensure that payment standards comply with the applicable requirements.
A commenter stated an additional level of scrutiny is reasonable for PBVs, because requiring approval for an exception payment standard above 120 percent of FMR for project-basing vouchers could prevent abuse and make development deals financially acceptable and profitable for developers. A commenter stated that HUD should allow exception payment standards, even if they are high, if there is data showing that the higher standard is needed to cover typical market rents in an exception area. The commenter expressed that instituting a cap preventing PHAs from establishing exception payment standards would risk excluding voucher holders from areas of the metropolitan area, therefore reinforcing economic and racial segregation. In the alternative, the commenter suggested that if HUD establishes a cap, it should be set high enough to ensure that voucher holders have access to a substantial variety of low-poverty and high-opportunity areas, including areas where their own racial or ethnic group does not predominate. This commenter also recommended that HUD adjust the proposed rule to accommodate the use of SAFMRs for non-metropolitan ZIP codes and publish SAFMRs for those ZIP codes whenever sufficient data is available. The commenter stated that HUD should apply the same standard to SAFMRs in non-metro areas as it does in metro areas as well as establish SAFMRs in ZIP codes where there are sufficient data and defaulting to a county-based FMR in ZIP codes where there are not. The commenter added that HUD should
A commenter encouraged HUD to implement methods for PHAs to increase payment standards where appropriate, such as requiring payment standards in areas with significant disparity between voucher concentration in impoverished neighborhoods and affordable unit distribution or financial incentives. The commenter found upper limits on exception payment standards as unnecessary and stated that PHAs should have maximum flexibility to seek higher standards, as there are already natural “limits” on requesting excessive rents. In conclusion, the commenter objected to using the success rate payment standards for metro areas with very low vacancy rates, while requiring other metro areas to use the SAFMR flexibilities.
A commenter recommended that HUD clarify that “FMR boundaries” refers to the ZIP code boundary and not the metropolitan boundary. This commenter further emphasized that HUD must revise the payment standard regulations as well as revise or rescind inconsistent PIH notices, to clearly state that tenants who request a reasonable accommodation for an increase in the payment standard are not required to pay 40 percent of their income in rent to see the benefits of the accommodation. The commenter mentioned that the fair housing laws allow individuals with disabilities to request higher payment standards as a reasonable accommodation if there is a disability-related need for a particular unit (for example, it has accessibility features or is located in proximity to services/supports which will be lost if the client has to relocate); however, the commenter noted that HUD should add to § 982.503(d)(4) because HUD has not fully implemented the third sentence of the HOTMA-revised section 8(o)(1)(D), which prohibits HUD from establishing additional requirements regarding the amount of adjusted income paid by a family receiving a reasonable accommodation.
A commenter suggested proactive requirements, such as HUD establishing limits for when PHAs can set payment standards below the basic range (below 90 percent of the applicable FMR) because PHAs have financial incentives to set lower payment standards, regardless of adverse effects on families. The commenter also recommended that HUD require PHAs seeking approval for payment standards below the basic range to provide rent data showing that the requested standard would be adequate to cover rents and utilities for at least 40 percent of units in each ZIP code and show that no more than 40 percent of current voucher holders would be required to pay more than 30 percent of their income for rent. The commenter stated that HUD should eliminate the success rate payment standard option because the SAFMR-based payment standard flexibility could effectively accomplish more.
A commenter opposed HUD's changes to how it will assess requests for payment standards below the basic range. The commenter expressed that the proposed language threatens the affordability characteristic of the voucher program because the proposed language sets low assessment standards, does not require PHAs to meet rent burden or market rents criteria, and removes the current prohibition on payment standards below the basic range at agencies where more than 40 percent of voucher families pay gross rents above 30 percent of their adjusted income. The commenter encouraged HUD to require PHAs seeking approval for a payment standard below the basic range to implement a policy that holds families harmless where the reduction in payment standard causes an increase in the family's rent. The commenter stated that requiring PHAs to hold families harmless would allow PHAs to incentivize new or moving voucher families to consider lower poverty communities, while not penalizing families who decide to remain in their current home.
Another commenter objected to HUD's proposal to provide PHAs with discretion to determine lower payment standards without HUD approval because PHAs cut corners or costs which end up falling on the participant. The commenter remarked that lower payment standards tend to cause tenants to pay higher rents they cannot afford, and to prevent this HUD should ensure tenants will be held harmless should the family remain in the unit for a reasonable period until the family can relocate to a new affordable unit.
Commenters stated that 40 percent is a reasonable “significant percentage of families.” Some commenters stated that a higher percentage would create a burden on families before an assessment is completed. One commenter stated that HUD should not increase the threshold for the share of families paying more than 30 percent of their income, as there are already more than 40 percent of voucher families paying more than 30 percent, and that HUD should lower the threshold below 40 percent. Another commenter stated that available data shows that HUD's monitoring has not lowered the cost-burden on households below 40 percent, which the commenter stated is a high definition of “significant.” This
Commenters recommended that HUD make the data and evaluations used to determine rent burdened percentages public with the opportunity for public comment, which would allow voucher holders and other public members to know how the PHA is doing.
Commenters suggested that HUD incorporate rent burdens into SEMAP. A commenter recommended doing this by adding an indicator measuring compliance with the 40 percent standard. Another commenter recommended adding two new indicators measuring the portion of assisted families that are rent burdened and the percentage of voucher families who are not able to lease up within search periods.
Commenters objected to HUD's proposal to establish an additional threshold that would trigger a review, even though the number of families paying more than 30 percent of AMI had not reached the significant percentage. One commenter stated that HUD's proposed standards are arbitrary because PHAs sufficiently conduct internal tracking to monitor rent burden and suggested that if HUD implements a rent burden standard, then PHAs should be exempt if they show that they are trying to address the rent burden issue by using SAFMRs or high opportunity payment standards or if they have an adequate success rate for voucher holders. Another commenter noted that it is unnecessary for HUD to add additional metrics for determining whether HUD should review a PHA's payment standards. One commenter suggested that the trigger for HUD's review should be when 50 percent of the families pay more than 30 percent AMI as the family share of the rent. The commenter explained that families may stay in a unit and pay more than 30 percent of income in tight rental markets where locating a new unit may be financially and administratively burdensome. This commenter suggested consistently defining “significant percentage” in all section 8 programs, defining “significant percentage” in regulation to prohibit PHAs from altering the definition, and providing additional information on what a PHA must do if the threshold is met.
Many commenters supported retaining success rate payment standards. One commenter objected to HUD tying additional payment standard functions to SAFMRs due to the lack of adoption of SAFMRs. Another commenter explained that the utility of the success rate payment standard is essentially eliminated if PHAs are given the option of setting exception payment standards at up to 120 percent of FMR without HUD approval, and stated that moving to and from the 40th to 50th percentile of rent has an almost identical impact on the resulting payment standard. This commenter supported retaining the success rate payment standard if HUD approval will still be required for exception payment standards above 110 percent of FMR. One commenter opposed retaining success rate payment standards. The commenter stated that the standards, set at the 50th percentile of the metro FMR, were ineffective at the stated goal of increasing housing opportunity for voucher families. Additionally, the commenter noted that the SAFMR final rule eliminated the regulations that governed the establishment of FMRs using 50th percentile rents, and HUD is currently phasing out its use of success rate payment standards. Another commenter stated that HUD should eliminate the success rate payment standard option because the SAFMR-based payment standard flexibility could effectively accomplish more.
A commenter stated that HUD must ensure that participants are provided due process and a reasonable opportunity to decide whether the family can afford to remain in the subsidized unit if HUD increases payment standards after the initial HAP contract. The commenter offered the following suggestions if HUD increases payment standards: (1) allow the tenant 60 days after the increase request to decide or request moving papers; (2) phase in the rent increase over time or require that the PHA make up the difference to the higher standard; or (3) mirror the timeframe in § 505(c)(3) for increases and decreases. The commenter stated the proposed rule fails to adequately address arising problems when PHAs create payment standards that trap residents in low-opportunity, high poverty, and high crime areas, when families may need higher exception rents to access better schools, employment, or other resources for self-sufficiency. As a remedy, the commenter recommended that HUD map where families can live within the PHA's payment standards. One commenter recommended that HUD remove § 982.505(c)(4)(iii) to streamline the rent change process and prevent confusion among families that expect changes during the recertification process and not outside of the recertification process.
One commenter supported HUD's revisions on when to apply a reduction in the payment standard because the changes will promote fairness and consistency in the voucher program. Another commenter opposed the two-year adjustment timeline as an administrative burden for PHAs and believed it would provide no tangible benefit for families over a shorter timeline. This commenter stated that the current timeline of the second recertification already ensures adequate preparation for families and is when all contact with the family is planned from the PHA's perspective.
A commenter supported requiring application of payment standard increases on the effective date of a gross rent increase instead of waiting until the next annual recertification or one year after the increase. The commenter recommended that HUD add a requirement to § 982.505(c)(4) that PHAs immediately address payment standard increases during the HAP contract term and before the effective date of the new payment standard, to protect tenants in rapidly rising rent markets.
A commenter opposed HUD's proposal at paragraph (c)(4) of § 982.505 (How to calculate HAP), adding two new points at which the family's payment standard may be increased, as unnecessarily burdensome and expressed concern regarding whether the number of transactions that would trigger the payment standard calculation to determine if an “increase in the family share” occurred will greatly outnumber the times the higher payment standard would be applied under the rule and expressed an appreciation for data supporting the proposed rule.
Specifically, the requirement that this commenter is concerned about, is as follows: when there is an increase in the payment standard, and when there is an increase in the gross rent, and the increase in gross rent would increase the family share, then the PHA must apply the increased payment standard, to reduce the burden on the family.
This requirement is limited to situations where the gross rent increase would increase the family share is intended to decrease the burden on the PHA, not increase it. If a PHA would prefer not to make this calculation, the PHA may apply the new payment standard every time there is a gross rent increase, or indeed as soon as they want to, regardless of whether the gross rent increase changes the family share calculation, per paragraph (c)(5).
Commenters suggested HUD allow PHAs to provide a UA for wireless internet to expand opportunity. A commenter noted that there is no statutory or regulatory prohibition on it and PHAs can use their own budgetary judgement to decide if they can afford to provide a UA for internet. Another commenter proposed that HUD consider broad ways to support assisted households during and after the pandemic. One commenter suggested that HCV UAs should include fees charged, as well as reflect the actual rates charged by the major utilities serving the units and the rate plans used by most tenants. This commenter also recommended that HUD not consider low-income discounts, unless there is universal access and verified tenant participation. To ensure transparency, the commenter also stated that supporting documentation for the calculation for the PHA's UA schedules for both HCV and PBV programs should be available to tenants' rights advocates, without resorting to cumbersome and vague FOIA and State public records acts. The commenter recommended that HUD's review should be retained and strengthened, to ensure compliance with the regulatory standards and consistency among UAs in similar climatic regions and markets, rather than ending the requirement for PHA submission of the schedule. Another commenter suggested that HUD continue to require PHAs to submit their UA schedules to HUD, which would provide a system of checks and balances and much needed oversight.
The language in § 982.517(b)(1) states that “the utility allowance schedule must be determined based on the typical cost of utilities and services paid by energy-conservative households that occupy housing of similar size and type in the same locality.” The typical cost of utilities and services includes surcharges charged by the utility company. Many PHAs separate the surcharge out on the UA schedule. For
PHAs develop their area-wide utility allowance schedules, both the regular schedule described in § 982.517(b)(v)(2)(i) and the new option for an energy-efficient schedule provided in § 982.517(b)(v)(2)(ii), based on the cost of utilities and services paid by energy-conservative households that occupy housing of similar size and type in the same locality. Household income or discounts provided to certain households are not a factor in the development of the utility allowance schedule.
HUD understands the concerns expressed by commenters encouraging HUD to continue collecting utility allowance schedules from PHAs. While the proposed language would have allowed submission to HUD only upon request for utility allowance schedules from PHAs, HUD agrees with commenters that proactive submission of utility allowance schedules will help with oversight. HUD has reverted § 982.517(a)(2) in this final rule to the existing codified language which requires submission of these schedules to HUD.
Commenters stated that HUD should authorize PHAs to use energy-efficient utility allowance (EEUA) schedules. Another commenter stated that PHAs should have the option to implement alternative utility allowance schedules though they may be burdensome to implement. One commenter suggested that HUD should not require entire buildings to achieve energy saving design certifications for an individual unit to qualify for an EEUA. Further, the commenter stated that due to the time and cost, many property owners may elect to only install energy-efficient appliances and other design standard upgrades, and if so, property owners should not be penalized for their inability to achieve energy savings design certifications for entire buildings especially where the property owners can demonstrate that the EEUA schedule would best encourage conservation and the efficient use of HAP funds based on historic utility consumption data.
Other commenters stated that EEUA schedules should be voluntary because they require annual updates and are costly, and, as a result, they are better suited to PBV where the owner can be required to commission an annual update to keep using the schedule, or PHAs could make their decision based on their market areas and funding. Another commenter stated that utility allowance options would present a high possibility for error and could open PHAs up to charges of discrimination because it would be hard to identify units where alternate utility allowances could be used. A commenter suggested that HUD use the HUD Utility Schedule Model (HUSM) for all project types to minimize project-specific utility's administrative burden as well as permit PHAs the ability to decide their HUSM approach to determine UAs and be required to publish this in their Administrative Plan.
Several commenters offered suggestions for HUD's proposal to provide PHAs the discretion to substitute flat fees charged for certain utilities. One commenter recommended that HUD modify § 982.517(b)(2)(iii)'s current language of “only if the flat fee charged by the owner is less than,” to “only if the flat fee charged by the owner [is] no greater than,” to account for the possibility that the flat fee is equal. One commenter objected to HUD's flat fee proposal by stating that flat fee UAs do not ensure that a tenant is exceeding their maximum share of the rent, stating that UA should be based on actual use.
Commenters recommended that HUD amend § 982.620 to require that PHAs must provide the option for tenants to use voucher funds for the costs of purchasing a manufactured home because without the requirement, the HOTMA amendments will be undermined. A commenter also noted that section 112 of HOTMA eliminated the option for a PHA to offer only assistance under a voucher for the cost of leasing land on which a manufactured home is sited (but not for the annual cost of purchasing a home) and therefore recommended HUD amend § 982.620(b)(2) to delete the phrase “to a manufactured homeowner to lease a manufactured home space” and add in its place, the words “under paragraph (a)(3) of this section.”
A commenter suggested the following modification for § 982.620(a)(3): “The
A commenter stated that homeownership counseling services should only be provided by HUD-certified counselors working with a HUD-approved housing counseling agency. Another commenter approved of HUD requiring certified counseling for the homeownership program as well as supported HUD excluding home equity as an asset and not decreasing the payment standard of the homeownership program.
A commenter supported maintaining utility amounts for homeownership families based on housing size, instead of family size.
A commenter supported HUD's policy to not require new verification at briefing for the PBV program and making the 60-day timeframe inapplicable under the PBV program because this approach improves PHAs' ability to administer PBVs.
A commenter expressed concern with HUD's definition of “development activity,” due to its potential harmful impact given its lack of previous implementation for other HUD programs. Another commenter stated that the definition is adequate because minor renovations are not included in the definition of development work. A commenter stated that the definition of “development activity,” was unclear and broad and should be limited to new construction, adaptive reuse, or substantial rehabilitation of existing housing in compliance with HQS. Another commenter suggested that including replacement of equipment and materials with items that are of improved quality in the definition of “development activity” would deter project owners from modernizing and completing other updates to properties, which neither HUD's regulations nor form of HAP contract require a project owner to report to a PHA. This commenter also recommended that the development activity should be limited to instances of new construction or substantive rehabilitation of housing that fails to substantially comply with HQS. This commenter further expressed that development requirements, such as subsidy layering review, should not continue to apply to units once they are placed under HAP contract or when units are being added to an existing HAP contract. A commenter warned that HUD is exceeding its statutory authority by having a broad definition of development activity, because HUD does not have the Congressional authority to regulate a project owner's ability to engage in development work following execution of a HAP contract, and HUD has not historically regulated this type of development activity. This commenter stated that the 1937 Act provides PHAs with discretion on when to allow owners to engage in development work.
HUD disagrees with the commenter's characterization of previous implementation, given HUD's prior use of a similar definition, as provided in the former 24 CFR 983.210(j) (which is removed in this final rule) and described in 80 FR 52511 (Mar. 9, 2015), which drew from requirements of other programs. HUD appreciates the positive comment. HUD does not adopt the proposal to define substantial improvement as new construction, adaptive reuse, or substantial rehabilitation, as HUD believes those terms are less clear than the proposed definition. HUD does not believe that including in the definition a substantial improvement in the quality or kind of equipment and materials will deter owners from modernizing projects, since this final rule implements a reasonable process for such activity to occur. HUD does not adopt the proposal to define substantial improvement as new construction or substantive rehabilitation of existing housing that fails to substantially comply with HQS, as HUD finds there is a compelling need to encompass additional activities that may greatly impact occupants in the rules governing substantial improvement. HUD also notes that it has a clear mandate under law to ensure housing occupied by assisted families is decent, safe, and sanitary, which includes establishing rules governing substantial improvement that occurs following contract execution, as such activity necessarily impacts occupants.
Another commenter proposed that the definitions of “newly constructed housing” and “rehabilitated housing” should incorporate the concept of housing “under construction” that HOTMA inserted in new section 8(o)(13)(F)(iii). This commenter suggested that HUD's proposed rule failed to account for this provision's direction that HUD allow PHAs to enter a HAP contract for “any unit that does not qualify as existing housing and is under construction[.]” This commenter suggested HUD make clear that projects which are under construction qualify as newly constructed.
Commenters approved of HUD's proposal to keep its current definition of “project,” which is statutory, and which a commenter preferred for administrative consistency and clarity purposes. Another commenter recommended that HUD delineate the definitions for each program. Commenters suggested that HUD create a definition that allows for buildings in scattered sites (
HUD declines to further define “project” to allow scattered sites to constitute one project. Doing so would increase the complexity of determining what constitutes a project, for purposes of the income-mixing requirement and for other purposes, to a level unwarranted by a relatively small administrative advantage in a small number of cases. However, HUD will continue to allow multiple projects, each consisting of a single-family building (defined in this § 983.3(b) as no more than four total dwelling units), to be under one HAP contract. HUD has taken this opportunity to update the language in § 983.202(a) to more clearly state that placing multiple projects, each consisting of a single-family building, under one HAP contract is allowable. HUD has also updated § 983.154(a) to clarify that it is allowable to place under one Agreement multiple projects that each consist of a single-family building and § 983.51(a) to clarify that PBV proposals may cover multiple projects where each consists of a single-family building. HUD agrees that whenever a HAP contract covers multiple projects all such projects must be owned by a single owner because, as a general principle, an owner can only execute a HAP contract for units the owner has authority to commit in a HAP contract (or a certification, in the case of a PHA-owned project exercising the option in § 983.204(e)(2)). The number of subsidized units in each project will continue to be governed by existing PBV requirements, particularly the income-mixing requirement (see § 983.54(a)).
Regarding the concern about buildings that span multiple blocks being classified as individual projects for purposes of PBV, HUD clarifies that the definition of “project” can include parcels separated by a public way, so long as such parcels can reasonably be considered contiguous (defined in this § 983.3(b) for this purpose to include “adjacent to” or “touching along a boundary or a point”). For simplicity, the definition describes in general terms the buildings and parcels of land that qualify as “projects” in the vast majority of cases. Where natural or engineered features make up a boundary between buildings or parcels, PHAs are expected to reasonably determine if the buildings or parcels make up a project. Considerations include the extent and difficulty of access from one building to another, public regard of the buildings as interrelated, and whether the classification proposed would serve the statutory purpose of the income-mixing requirement. HUD intends to publish further guidance on this matter.
A commenter suggested HUD delete the definition of “request for release of funds and certification,” which is not used in the regulations and creates an unintended parallel process to the environmental review and replace it with the definition of “letter to proceed,” which is used in the regulations. This commenter suggested in the alternative to change “PHAs” to “responsible entities,” because the responsible entity signs the request for release of funds under 24 CFR part 58 for environmental reviews, and reorder the current language under 24 CFR part 58 because it suggests that Authority to Use Grant Funds (AUGF) would authorize a HAP, which is inaccurate.
A commenter stated that the definition of comparable rental assistance does not explicitly include the statutory requirement that assistance must be tenant-based. This commenter suggested HUD specify that comparable assistance cannot be time-limited or subject to requirements that do not apply under section 8(o).
HUD in this final rule also takes this opportunity to clarify that the “gross rent” calculation refers to the family's share of the gross rent, and not the total gross rent. This is a clarifying change consistent with how HUD already applies this definition. Additionally, to consolidate definitional language, this final rule removes language explaining the meaning of “comparable tenant-based rental assistance” at § 983.260(b)(4) such that the complete definition is in this final rule at § 983.3(b).
A commenter supported the proposed definition of “existing housing” in relation to how long it would take to make any repairs needed to comply with applicable quality standards and stated that it is a significant improvement over the use of a fixed and arbitrary cost of repairs as HUD proposed previously.
Other commenters found the current existing housing definition more flexible for PHAs. The commenters stated that the proposed definition did not clarify the existing requirement and
One commenter urged HUD to reconsider the definition change due to the potential regulatory burden of narrowly defining “existing housing” while simultaneously expanding the definition of “development activity,” which could have chilling implications on PBV programs. Another commenter stated that treating some of the units as “existing” and some as “rehabilitation” would be confusing and regulatory burdensome for PBV purposes.
A commenter opposed shifting from building condition (
One commenter supported HUD's putting restrictions on the applicability of the definition of existing housing and noted it had experience with projects seeking to circumvent executing an Agreement for rehabilitation by requesting the project be defined as existing housing based on the units being already occupied, even though the owner was planning some level of rehabilitation.
Another commenter disagreed with the framing of the question because it suggests that PHAs and project owners are “circumventing” rehabilitation program requirements when selecting existing housing projects that comply with HUD's definition of existing housing.
One commenter supported HUD's proposed definition of “substantially complies with Housing Quality Standards (HQS).” Other commenters stated that the 48-hour timeframe is unreasonable, especially for large projects with multiple units requiring minor repairs or in housing markets where contractors are scarce because some units require renovations that are impossible to complete in a 48-hour timeframe.
One commenter suggested that the 48-hour timeframe only apply to individual units and not the entire building. Commenters also suggested alternative timeframes to cure HQS deficiencies including 72 hours for projects with more than 20 failed inspections, and a maximum of 5 or 10 business days to cure deficiencies.
A commenter expressed that the HOTMA alternatives to initial inspections are unusable if HUD requires a PHA to conduct and a project to pass an HQS inspection before making an existing housing determination.
One commenter proposed allowing PHAs to integrate in their policies a specific timeline for completion of the repairs based on local conditions.
Another commenter recommended defining the timeframe based on the time it takes to complete a repair, rather than the time it takes to begin a repair.
One commenter supported the prior proposed definition because it was clear
Commenters suggested that the definition should include units where planned rehab exceeds $1,000 over the next year per unit, as this amount is too low in many high-cost areas. Another commenter stated that the $1,000 limit previously proposed by HUD was not required by HOTMA. A commenter suggested that HUD permit PHA discretion to create alternative standards based on a reasonable cost for each unit, considering that 48 hours for deficiency correction may be impractical for large projects or in national emergency situations.
Commenters suggested that the standard should be a percentage of local rehabilitation or development costs or whether the apartment is occupied or available for occupancy. Another commenter supported the proposed definition of “existing housing,” but found the reliance on proposal selection date as impractical compared to using the HAP execution date because there can be a significant gap between selection and HAP execution. One commenter opposed the imposition of a bright line threshold that fails to account for PHA discretion and local circumstances as well as thresholds based on time or money because the test will affect project owners differently based on availability and costs of materials and labor associated with routine maintenance. Another commenter suggested that the standard for existing housing should be “housing that does not need to be rehabilitated,” which would require HUD to chart the cost threshold and number of PBV units in a development, and developments that must spend above the threshold to make PBV units HQS-compliant would not be considered “existing housing.”
HUD believes the linkage in this final rule to a standard cure period addresses the concern regarding a bright line threshold. HUD generally agrees that the nature of existing housing should be “housing that does not need to be rehabilitated,” but has implemented this principle in a manner different from what the commenter suggests. HUD has in this final rule defined “substantially comply” based on the nature of the correction of HQS deficiencies—whether they require only repairs to the unit's current components or replacement of equipment and/or materials by items of substantially the same kind to correct—in addition to the likelihood of compliance with HQS within the standard cure period.
Commenters stated that PHAs should have discretion to determine whether a project is ready to be placed under a HAP contract with “minimal delay” because the PHA is best positioned to judge whether the owner will quickly complete repairs and make the determination consistent with PHAs' own policies regarding the time that may elapse between the initial inspection and the HAP contract's execution.
One commenter suggested that HUD define the word “building” under § 983.103(d), and specifically as it relates to conducting an inspection of 20 percent of a building's units. The commenter stated that while the definition of “building” may be obvious, the definition is obscure, and the commenter suggested changing “building” to “project.”
Several commenters suggested HUD should allow PHAs to define areas where vouchers are “difficult to use” because PHAs can consider local and recent conditions and handle complex calculations.
A commenter warned that the proposed definition of “difficult to use” may inaccurately reflect the current status of rental markets at either end of the income spectrum and may insufficiently adjust if rapid market changes occur.
Commenters supported HUD's proposal to define areas where vouchers are “difficult to use” based on vacancy rates. Some commenters stated that HUD should use a three or four percent or lower target vacancy percentage for metropolitan Fair Market Rent areas and use ZIP code areas to analyze vacancy rates and allow exceptions in areas with accurate data at lower levels, such as census tracts. A commenter noted that it would be beneficial to examine vacancy rates separated by bedroom size, since bedroom size may impact vacancy rates. One commenter opposed HUD defining “difficult to use” based on vacancy rates because of the challenges and inaccuracies behind identifying vacancy rates based on ZIP code.
A commenter suggested that HUD add three additional criteria to define areas where it is “difficult to use” vouchers: (1) in areas experiencing rapid rent appreciation as shown by increases in fair market rent, (2) areas with low vacancy rates, and (3) areas undergoing revitalization. The commenter pointed out that these additional criteria would allow PHAs to preserve affordability in rapidly changing areas as well as present residents with the ability to choose whether to move or remain in areas of opportunity when they may otherwise be priced out. Moreover, this commenter stated that HUD should consider areas with defined exception payment standards as “difficult to use,” and “difficult to develop,” because it consolidates efforts to improve fair housing opportunities. Another commenter recommended that HUD identify areas where costs are high relative to metropolitan area FMRs based on a median salary comparison to SAFMR because it would identify areas where rent dramatically increases, but salaries remain stagnant.
One commenter suggested that defining areas where vouchers are “difficult to use” should include a poverty threshold to avoid voucher concentrations in high-poverty areas. This commenter also stated that the Small Area FMR (SAFMR) standard is a good proxy for areas of opportunity. Another commenter expressed that another means to identify areas where vouchers are difficult to use is by comparing actual costs to the area's FMR, since using other parameters may be complex to calculate and labor-intensive.
HUD appreciates the commenter's recommendation to incorporate high-cost areas but retains the proposed rule's definition because the criteria therein appear to provide adequate coverage of areas where vouchers are difficult to use. HUD intends to monitor the impact of this definition over time and consider this additional criterion for future rulemaking if the definition proves insufficient. HUD also declines to add a poverty threshold to this definition because the standards regarding deconcentration of poverty when siting PBV projects are adequately covered by existing requirements at § 983.55. HUD reviewed other methods to determine actual costs as recommended by commenters but determined none are available and verifiable in a manner adequate to be relied upon consistently on a national scale.
A commenter supported HUD's proposal to allow development without an Agreement to increase flexibility and reduce burdens on PBV developments. Other commenters suggested that HUD clearly state, potentially in the definition of “newly constructed,” that a PHA may enter an Agreement contract with prospective units of a property under construction.
One commenter requested that HUD outline in the preamble the situations in which a PHA would have to conduct a calculation.
A commenter recommended that a PHA should never be required to reduce units under an Agreement or HAP contract but should only be unable to enter new commitments, Agreements, or HAP contracts until they are back below the cap. This commenter stated that owners and PHAs need stability in the PBV program and should not be subject to reduction after Agreements or HAP contracts are entered. Therefore, this commenter recommended that HUD strike the first clause of § 983.6(a)(3), limiting the paragraph to paragraphs (a)(1) and (2) of the same section.
A commenter recommended using “authorized units” instead of “budget authority” in § 983.6(c).
A commenter stated that the use of census tract data “as determined by HUD” in §§ 983.6(d)(2)(iv) and 983.54(b)(1) is unclear whether it is determined by census data or other metrics, as the commenter believed it would be determined by census data, but the text suggests HUD may seek to use other metrics.
Commenters objected to HUD excluding dishonorably discharged veterans in its proposed definition of “veterans” and find it is counter to both other HUD programs and Congressional intent, because the proposed definition undermines local efforts to end veteran homelessness by denying assistance to dishonorably discharged veterans, who are likely to face barriers to stable housing. A commenter suggested that HUD should allow PHAs to define “families with veterans.”
One commenter disagreed with HUD's proposal to continue its existing policy that allows PHAs to exceed the 20 percent limitation on project-basing of authorized voucher units for “units that provide supportive housing to persons with disabilities or elderly persons” only when “the project makes supportive services available for all the assisted families in the project.” The commenter recommended that the statutory requirement to offer services to “all the assisted families in the project” be removed from this final rule.
A commenter suggested including survivors of domestic violence, sexual assault, and stalking to the list of circumstances under which PBV units may exceed the cap.
A commenter stated that § 983.10(a) is unclear in its requirements and recommended this paragraph be guidance instead of a requirement. This commenter also suggested HUD clarify in § 983.10(b)(7)(ii) that PHAs can use a combination of general, site-based, and owner-maintained waiting lists, as determined by the PHA's discretion. Finally, this commenter suggested that HUD create a section similar to § 983.10 for PHA Plan requirements or, if already identified in part 903, create a cross-reference, because combining requirements makes monitoring and compliance easier.
HUD's position is that § 983.251(c) is the appropriate location to explain PHAs' options to use a combination of general, site-based, and owner-maintained waiting lists. Section 983.10(b)(7) merely requires the PHA to include in the Administrative Plan a description of the waiting list policies the PHA has chosen to adopt; it does not impose a limitation different from § 983.251(c). To prevent any potential confusion, HUD revised this section to limit the discussion of each PHA policy in § 983.10 to a short description only. PHAs must look to the cross-referenced section for complete information about the contents of and requirements for each PHA policy.
As provided in § 983.2, the HCV program regulation explaining the relationship between the Administrative Plan and PHA Plan (§ 982.54(b)) applies to the PBV program. PHA Plan requirements themselves are contained in 24 CFR part 903 and HUD finds that repeating them in part 983 would be duplicative. However, HUD has clarified in § 983.3(b) that the definition of PHA Plan in § 982.4(b), which cross-references part 903, applies to the PBV program, to address the commenter's concern.
Several commenters opposed HUD's proposal to permit subsidy layering review upon rehabilitation or development activity. Commenters found the change administratively burdensome and recommended that subsidy layering reviews be limited to additional Federal resources for operating assistance or recommended that SLR only be applied at the time of signing an Agreement. Another commenter objected to the language in § 983.12(d)(1) (§ 983.11(d)(1) in this final rule) as harmfully broadening subsidy layering requirements, which is not done in other programs and, historically in PBV and Project Based Rental Assistance, has only been required when the PBVs are awarded, not for any subsequent rehabilitation or assistance. The commenter stated that this will be administratively burdensome for owners and PHAs, especially given the ninety-day plus review periods.
A commenter suggested that HUD clarify that rehabilitation projects which may be done without any additional funding, and which are unlikely to result in a rent increase, are exempt from the subsidy layering requirements. A commenter questioned whether HUD has the capacity and expertise to conduct the additional subsidy layering reviews that would be required by the proposed regulations. Another commenter stated that HUD's Regulatory Impact Analysis (RIA) is silent with respect to subsidy layering reviews.
Section 983.153(b)(1) clarifies that an SLR is required for rehabilitated housing projects only when housing assistance payment subsidy under the PBV program is combined with other governmental housing assistance from Federal, State, or local agencies. HUD confirms it has the capacity and expertise to conduct the required SLRs. HUD's statement in the RIA was that changes that are merely codifications of current HUD practice would not be analyzed. As discussed above, this final rule aligns with the policy in effect in the most recently applicable SLR Guidelines.
Several commenters supported HUD exempting the placement of PBVs that are used to replace previously federally assisted or rent-restricted property from the competitive selection requirements.
One commenter stated that PHAs and project owners of affordable housing units should not have to compete with private owners to preserve existing units through on-site or off-site development. This commenter expressed that PHAs and owners can use the voucher commitment to obtain additional financing to rehabilitate and preserve the affordable housing units, many of which have struggled due to insufficient appropriations, below-market rents, and unfunded capital needs. Another commenter stated that HUD should allow exceptions to the competitive selection process in housing-emergency situations, such as when the PHA is part of a local partnership to save Naturally Occurring Affordable Housing (NOAH) or to relieve homeless encampments.
Other commenters suggested that HUD exempt tax credit properties where the compliance period has come to an end to help protect the affordability of the units. One commenter stated that HUD should add Project-based Veterans Affairs Supportive Housing (VASH) vouchers on the condition that the local Veteran Affairs Office supports doing so. One commenter stated that HUD should remove the competitive selection requirements when PBVs are submitted with an application for a LIHTC credit, to ease the ability of entities to submit
If a PHA has identified preserving affordable housing or serving veterans and the homeless as a local priority, the PHA can incorporate that goal into their RFP or strategically utilize other funding competitions to select such projects. As a limited resource, PBV should be used to address local needs and priorities using a method that is intended to identify the best project.
A commenter encouraged HUD to remove the requirement that projects be selected solely based on previous competition, if the previous competition did not involve consideration of the PBVs, because most tax credit and other funding selections will require a provisional commitment of PBV assistance. The commenter warned that this puts PHAs and project owners in an untenable position, since they cannot compete for vouchers without tax credits, and PHAs cannot compete for tax credits without PBV assistance.
Language was added to § 983.51(b)(1) clarifying that a PHA may establish selection procedures that combine or are in conjunction with other Federal, State, or local government housing assistance, community development, or supportive services competitive selection processes, and HUD intends to provide future guidance to support PHAs in using these methods in combination with other funding sources.
A commenter suggested removing “regard to,” from § 983.51(c)(1) and (2) and modifying the statement, “newly developed or replacement housing,” in § 983.51(c)(1) to “newly developed, rehabilitated, or replacement housing.”
One commenter recommended deleting § 983.52(d). In the alternative, the commenter urged HUD to revise the requirement from applying upon “proposal submission” to only be triggered following “proposal selection.” According to the commenter, if the owner submits a proposal and that proposal is not successful (perhaps because there are not enough PBVs at that time or it is simply not awarded), this language will foreclose the owner's future participation in the PBV program.
HUD also takes this opportunity to amend the prohibition on using PBVs in manufactured homes. Under this final rule, PHAs may use PBVs in manufactured homes so long as they are permanently affixed to a permanent foundation and the owner owns the land on which the manufactured home is located, as these are necessary preconditions for compliance with the PBV program rules (all standard PBV rules continue to apply). Using PBVs in manufactured homes also means that the manufactured home can be made accessible in accordance with HUD's accessibility requirements, including requirements under HUD's Section 504 requirements at 24 CFR part 8. HUD finds this change necessary given the changes in industry practice since the rule was written.
One commenter supported HUD's changes as beneficial for families and PHAs. Other commenters suggested that HUD permit a continued excepted status for families that lose their excepted status, whether due to the death of an elderly family member or other reasons. Commenters warned that removing the unit could have negative financial implications especially when the project has been underwritten against the number of subsidized units. A commenter stated that this would align HUD with PIH Notice 2017-21, because this would allow units to remain excepted until turnover if the family no longer qualifies for the exception through no fault of its own.
One commenter proposed that HUD adopt a “next available unit” rule, which would allow a PHA and project owner to continue counting units as excepted so long as the next available unit is subsequently leased to an eligible family at turnover. In the alternative, this commenter suggested a cure period of 90 days, in which the project owner and PHA could avoid default under the HAP contract while assessing options, ensuring compliance, amending the HAP contract, and engaging in other related tasks. Another commenter suggested that PHAs should enforce families' excepted status without HUD intervention and that a de minimis standard should be set so a minimal number of units can be out of excepted status without changes needed to the PBV contract.
A commenter noted that no other options need to be considered. Another commenter suggested unit substitution as an option to PHAs when a unit loses its excepted status.
A commenter suggested PHAs have discretion, but not the obligation, to provide families with an HCV because requiring PHAs to provide all families in formerly excepted units with an HCV could create a loophole where families who are initially eligible for the excepted unit move in and promptly remove a household member from the lease to prematurely access an HCV. One commenter expressed that the option to temporarily convert to HCV seems burdensome to PHAs. Another commenter suggested that for § 983.262(f) (now moved to § 983.262(b)(4) in this final rule), HUD should require the owner to accept the tenant-based voucher issued to the family if the family chooses to remain or is unable to locate another suitable unit.
One commenter encouraged HUD to retain references to combining exception categories in a project and to permit the designation of units as elderly or eligible for supportive services in projects that are exempt from the income-mixing requirement. This commenter stated that HUD is not statutorily required to prohibit PHAs from designating units under the HAP contract once the income-mixing requirement does not apply, due to reasons beyond income-mixing, such as complying with various set asides and pointing allocations in LIHTC applications or seeking to convert existing elderly designated public housing to PBV.
One commenter supported HUD's emphasis that the use of supportive services is voluntary. Another commenter thought that families receiving drug and alcohol treatment as a condition of living in an excepted unit should agree to supportive services, if needed, and to comply with PBV regulations including following their supportive service plan and timely paying their rent.
Many commenters stated that the proposed rule is clear on how FSS can be used in meeting supportive services. A commenter supported the change that prohibits owners from terminating a family's lease for failure to complete an FSS contract without good cause. In response to question 18, one commenter found the proposed rule unclear on whether “supportive services used in connection to the FSS program” could be the sole services offered to families to meet the exception. Another commenter suggested putting the proposed rule on hold until HUD finalizes the FSS proposed rule
PHAs that choose to rely solely on FSS to meet the supportive services exception must, therefore, plan carefully for such an eventuality. The PHA may consider the following in making a determination on whether to rely solely on FSS: (a) FSS graduation rates, because if the PHA has low FSS graduation rates and a policy prohibiting the re-enrollment of previous FSS participants, this could potentially result in a high number of PBV units losing their excepted status; and (b) availability of an FSS slot at the time of the PBV family's request for enrollment since the supportive services must be made available to the family within a reasonable time, as defined by the PHA but not to exceed 120 calendar days from the family's request, for the exception to apply. Further, the PHA could avoid the potential loss of the PBV unit's excepted status by making the supportive services used in connection with the FSS program available to non-FSS PBV families at the project. Notwithstanding, PHAs cannot use the FSS grant-funded coordinators to serve non-FSS PBV families but non-
With respect to the commenter's suggestion to put this proposed rule on hold, the FSS rule was published on May 17, 2022, with an effective date of June 16, 2022 (compliance with the FSS rule was required no later than November 14, 2022). As a result, HUD can ensure all HOTMA final rule provisions are aligned with the FSS rule to avoid any potential conflict between both rules. HUD has also taken this opportunity to clarify that, to meet the exception, the supportive services must be made available to the family within a reasonable time, as defined by the PHA but not to exceed 120 calendar days from the family's request.
Another commenter supported permitting PHAs to use project-based vouchers in new construction developments in areas with poverty rates greater than 20 percent, but suggested HUD does not require the PHA to have gathered five years of information regarding poverty rates first.
One commenter supported an environmental review exception for existing housing that is formerly federally assisted property. Another agreed with the proposed rule but suggested broadening the definition of existing housing to encompass more properties.
Commenters warned that requiring owners to demonstrate that an environmental review was previously conducted would be an administrative burden. A commenter stated that it is unreasonable to require that new owners of older buildings provide environmental review documentation. Commenters stated that an exemption should be allowed even if documentation of prior review is unavailable. Commenters also stated that HUD should infer that those previous federally assisted projects must have conducted an environmental review and HUD should assume that the review was properly conducted and met environmental review requirements especially if the owner is in good standing with HUD. A commenter suggested an owner should be allowed to self-certify that the property was formerly federally assisted. Another commenter expressed that Congress set a bright line standard to exempt all existing housing from demonstrating that an environmental review was previously conducted, and, as such, there should be a rebuttable presumption that the existing housing received a proper environmental review, unless HUD can show otherwise. A commenter stated that if the PHA's environmental review records are unavailable, then a new review should be conducted.
Commenters expressed that HUD should exempt all existing housing that only receives HAP Federal assistance. A commenter suggested this exemption should not expire. Commenters stated that the statute clearly provides an exemption broader than HUD's proposal and noted legislative history shows that Congress intended such an exemption. A commenter stated that HUD's citation of Church of the Holy Trinity v. United States, 143 U.S. 457 (1892), as support for the proposed rule's environmental review position is inapplicable because there is no evidence that a plain reading of the text would be in contravention of Congress's intent that site-based housing comply with environmental review requirements. This commenter expressed that the HUD's Regulatory Impact Assessment concedes that the Housing and Economic Recovery Act (HERA) and HOTMA requirements contradict Congressional support for environmental review.
One commenter stated that HUD should exempt existing housing to prioritize environmental review for new construction and rehabilitation projects because they pose the greatest environmental risk. Another commenter stated that this requirement would do nothing to protect tenants from adverse environmental conditions. Another commenter found HUD's proposal legally questionable and unnecessary to protect subsidized tenants from living in areas with adverse environmental conditions. Commenters suggested that HUD allow exemption of existing housing from environmental review if it meets the criteria for environmental acceptability under § 982.401(l)(2). Another commenter also questioned HUD's statutory authority to impose an environmental review requirement on project owners of existing structures and suggested that HUD eliminate this requirement because it is significantly burdensome on responsible entities, PHAs, and project owners as the document retention policies adopted by responsible entities are not uniform.
A commenter stated that adding units generally does not create an environmental impact. The commenter encouraged HUD to provide technical and financial assistance to responsible entities and PHAs if HUD requires an environmental review for a project that seeks to add units to an existing HAP contract that has already undergone review, to ensure sufficient capacity and expertise. Another commenter suggested that HUD should not require review at the five-year review period if environmental conditions have not changed in the intervening years.
Commenters supported the current environmental review requirements, and requested HUD allow acceptable alternatives, such as an abbreviated review or other local environmental review reports.
One commenter recommended that existing housing projects be required to undergo environmental review if the site is located near a documented hazard site and suggested that HUD require PHAs to notify tenants and update HQS inspection lists when a housing project is close to a Superfund site or on the National Priorities List.
One commenter encouraged HUD to continue tracking environmental reviews via HUD's Environmental Review Online System (HEROS).
A commenter stated that § 983.56 should refer to parts 50 and 58 instead of summarizing the requirements to prevent inconsistencies. This commenter also stated that if there are differences between parts 50 and 58, the regulations should identify the deviations. This commenter further suggested that HUD revise § 983.56(d)(2) to read, “The responsible entity has completed the environmental review procedures required by 24 CFR part 58, and HUD has either issued authority to use grant funds or Letter to Proceed.” The commenter recommended revising § 983.56(e) to ensure consistent use of terminology with part 58. The commenter additionally expressed that § 983.56(f) is inapplicable to HUD, because PHAs cannot direct HUD's compliance with its own requirements. Another commenter suggested HUD clarify that a transfer of ownership of a property should not impact the definition of existing housing for environmental review purposes.
A commenter suggested expanding the definition of existing housing to include the entirety of the PIH Notice 2016-22 definition, which “clarifies the applicability of environmental reviews under 24 CFR parts 50 and 58 to all PHA activities at project site(s) assisted or to be assisted by HUD.”
A commenter suggested that HUD allow two years to write an environmental review.
Some commenters stated that there should be no time limit for when prior environmental reviews must have been conducted to be accepted for purposes of the exemption if no changes occurred during the intervening years. Other commenters suggested time ranges. One commenter suggested an environmental review for federally assisted property that has undergone significant work or rehabilitation in the past ten years. Another commenter objected to HUD establishing a time limit but suggested a review if the property has changed use. A commenter suggested every thirty years to remain coterminous with early PBV HAP contracts. Another commenter recommended every five years consistent with HUD's general recommendation. One commenter expressed that there should be a ten-year limit for the exemption since neighborhoods often change on a decadal scale, and another commenter stated that time limits should be tied to past evolution of the rule, rather than an arbitrary period.
Commenters stated that no national standard would be an adequate substitute for the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321
A commenter stated that it is unclear the conflict HUD is attempting to avoid by requiring independent entity oversight of development activity. Another commenter suggested that the PHA plan should contain details about the rights and obligations of the independent entity with respect to both the PHA and the tenants, and that HUD should require that applicants and tenants receive a written disclosure explaining: (1) the relationship between the PHA and independent entity; (2) contact information for the independent entity; (3) what rights the tenants may have; and (4) what to do in the case of a complaint. That same commenter stated that special care is needed to achieve the intended quality results from PBV investments, suggesting that HUD should ensure that PHA affiliate-owned PBV units receive adequate independent oversight—including compliance with HQS and civil rights obligations—by another public entity or HUD.
HUD does not believe it is necessary to add additional disclosures. When a family is accepted into the PBV program, § 983.252 requires the PHA to conduct an oral briefing and provide a written information packet. Although the topics listed in the comments are not explicitly covered in the rule, HUD believes that many of these items would be covered in meeting the requirements at § 983.252, such as how the program works and family and owner responsibilities. Additionally, § 982.352(b) sets conditions on assisted units that are PHA-owned, including that the PHA must inform the family, both orally and in writing, that the family has the right to select any eligible unit available for lease; the PHA-owned unit must be freely selected by the family, without PHA pressure or steering; and the PHA must obtain the services of an independent entity.
Some commenters disagreed with a cap on the number of PBVs a PHA can use based on the number of available HCVs. Commenters supported PHAs allocating PBVs and tenant-based vouchers (TBVs) based on local conditions, which some noted as Congressional intent for PHAs. One commenter expressed that HUD lacks the statutory authority to restrict a PHA's ability to project-base vouchers. This commenter stated that HUD's concerns about unintended consequences of cap exceptions are unfounded, given studies finding that Moving to Work (MTW) agencies usually fall within statutory program caps, and PHAs already consider the availability of vouchers due to families' right to move. The commenter further criticized HUD's analysis requirement of available vouchers for eligible PBV families as an unfunded mandate and duplicative of existing efforts. This commenter also recommended that the list of formerly assisted housing excluded from the portfolio cap should include HOME, and that replacement units excluded from the portfolio cap should include off-site replacement units, to enable owners and PHAs to site replacement housing in high opportunity areas, low vacancy areas, and areas outside of minority concentrations, which are locations that HUD has prioritized as important fair housing goals and has recognized as being better for the residents. The commenter further suggested that, in the case of newly constructed units developed to replace units that meet the criteria of § 983.59(b), units should be excluded even if the replacement units are built on a different site and the requirement at proposed § 983.59(d)(2) should require that the identification of the housing as replacement housing occur prior to PBV award rather than prior to demolition.
Commenters recommended that HUD establish an overall hard cap of 50 percent of vouchers, with exceptions to allow PHAs to project-base vouchers if local conditions warrant. Another commenter preferred PBV assistance over tenant-based assistance because it eliminates the barriers to lease from a private landlord in the open rental market. A commenter suggested the threshold at which the PHA or HUD should focus on the impact of providing PBV families with a meaningful opportunity should be when the waiting list is five years long.
The use of PBV assistance can be an effective preservation tool and HUD is supportive of the use of PBV to prevent the loss of affordable housing units in their communities. However, in cases where a PHA is selecting a project for PBV assistance that would result in a situation where the PHA would be project-basing 50 percent or more of the PHA's authorized units, HUD believes that it is critical that the PHA has first fully considered the ramifications of that decision for its program, including if and how the PHA will be able to fulfill its statutory obligation to provide priority for tenant-based rental assistance to PBV families that wish to move consistent with 42 U.S.C. 1437f(o)(13)(E). Furthermore, since available vouchers would need to be prioritized for PBV families exercising their statutory right to move with tenant-based assistance, PHAs should also want to take the potential impact on families on the PHA's tenant-based waiting list into consideration. Consequently, this final rule provides that PHAs must perform an analysis of the impact prior to selecting a project for PBV assistance if project-basing 50 percent or more of the PHA's authorized voucher units, and the analysis should consider the PHA's ability to fulfill its responsibilities to provide tenant-based assistance to PBV families that wish to move and the impact on the tenant-based waiting list in such cases.
One commenter proposed that HUD exempt off-site public housing replacement from caps to help deconcentrate poverty. Another commenter recommended that HUD allow off-site public housing replacement to maximize flexibility to use PBVs to replace public housing. Another commenter expressed concern over § 983.59, because replacement units should reflect the number and size of units required by the original residents to maximize their preference to return, reduce displacement, and maximize the preservation of site-based units in the community, according to the commenter. The commenter requested a civil rights review if there is any loss of units or change in unit size. As part of the redevelopment process, the commenter suggested that developers be required to survey residents about their housing size needs and only alter unit sizes if the survey demonstrates that the original residents require fewer or different sized units. The commenter further recommended the following: (1) that a reduction in the total assisted replacement units should be prohibited, unless the civil rights review makes no adverse finding; (2) the developer must demonstrate that the unit is in a voucher friendly area as well as located in a census tract where the poverty rate is greater than 20 percent; and (3) the resident notice and consultation reflect a desire not to return to PBV units. Commenters additionally opposed HUD's limitations that replacement units be on the same physical site as improper on fair housing grounds and overly restrictive, which the commenters stated was an unnecessary restriction and reinforced racial segregation.
HUD recognizes Congress's intent to preserve public and other affordable housing under the PBV program by (1) providing that on-site replacement units do not count toward the PBV percentage limitation and (2) giving HUD the authority to create additional exception categories. HUD acknowledges that sometimes attaching PBVs at an off-site location may better advance fair housing goals, including to racially integrate communities and to provide replacement housing of adequate bedroom size, which commenters cited as concerns. In many cases, the off-site project would be eligible for the increased cap at § 983.6(d)(1)(iv) (projects in areas where vouchers are difficult to use). In addition, to more directly facilitate opportunities to replace housing off-site, HUD is adding at § 983.6(d)(v) of this final rule an exception category specifically for off-site PBV replacement housing under the PHA's increased cap authority (under which the PHA may project-base an additional 10 percent of authorized voucher units). HUD believes this additional category will address the concerns raised and further notes that PHAs have other options beyond this new exception authority to develop off-site replacement housing with PBV assistance. Under the RAD PBV program, HUD waived section 8(o)(13)(B) of the 1937 Act so that covered projects, including those RAD PBV projects developed at a new location, do not count against the PBV percentage at all. Finally, PHAs can and should be making efforts to improve their tenant-based voucher programs to better address the aforementioned fair housing concerns.
Commenters supported HUD's proposal to include units that previously received LIHTC allocations or 515 loans as excepted units. However, commenters stated HUD lacks statutory authority to limit this exclusion to properties that have been subject to rent limitations or received specified types of assistance within five years prior to PHA commitment of PBVs. Commenters recommended removing this limitation or incorporating an exception for replacement of old public housing properties.
A commenter stated that requiring PHAs to analyze the impact on the availability of vouchers and demonstrate that they will still have sufficient tenant-based vouchers available within a reasonable period of time for eligible PBV families that wish to move is costly and burdensome to PHAs. One commenter opposed HUD requiring an analysis as a pre-requisite for project-basing additional vouchers, due to a concern that an analysis will remove the PHA's discretion to decide to project-base, which would impact PHAs' broader plans to serve their communities.
A commenter opposed HUD setting additional thresholds based on the percentage of vouchers and found the current turnover method for PBV assistance sufficient. This commenter stated that high rates of turnover at a property indicate the need for improvement and retention of tenants. Another commenter recommended that HUD provide PHAs with additional discretion in allowing PBV tenants to leave with their voucher or extending the occupancy requirement in PBV to two years, which is consistent with RAD, due to PBVs' higher turnover rate than other developments, which increases HCV waitlists. Commenters also recommended alternating the turnover voucher issuance between households on the HCV list or other waiting list.
A commenter stated that the increase in a PBV household's eligibility to request vouchers leads to a waitlist backlog and an impact on occupancy in some locations, increased vacancy rates, and higher turnover costs. This commenter recommended that PHAs have the flexibility to administer a 25 percent cap on tenant-based attrition vouchers to eligible requesting PBV households, so that 75 percent of attrition vouchers go to HCV waitlist families. The commenter suggested this approach as equitable to house unsubsidized families faster while preserving PBV residents' rights to continued HCV assistance.
A commenter stated that the uncertain availability of tenant-based vouchers due to attrition, being over-leased or under-leased, and spending shortfalls, makes it difficult to set a threshold that would ensure that PBV participants can be issued a tenant-based voucher within a certain timeframe. This commenter stated that the PBV cap as a percentage of a PHA's total allocation is a better predictor that tenant-based vouchers will be anticipated to be available for program transfers. The commenter also stated that PBV assistance is preferable over tenant-based assistance because PBV property owners target certain special needs population, eliminating the barriers experienced to lease from a private landlord in the open rental market.
Commenters stated that HUD does not have the statutory authority to control a PHA's authority to project-base vouchers. One commenter stated that if HUD decides to place more restrictions on PHAs, then it should be Congressionally authorized. Another commenter recommended that HUD increase the number of housing vouchers in general.
With regard to the commenter recommendation that HUD increase the number of housing vouchers in general, HUD cannot increase the number of authorized vouchers through this final rule. New vouchers and the funds to support them are provided by Congress through HUD's appropriations acts.
A commenter stated that families should not be forced to wait in potentially unsafe housing while they wait for the PHA to process the PBV-to-HCV transfer. Therefore, commenters suggested that HUD and PHAs monitor and report from the next three to five years increases in wait times for HCV assistance from PBV families where PHAs have increased the availability of PBV assistance, due to HOTMA.
One commenter stated that NLTs could effectively be used when newly constructed developments have units ready for occupancy, but the public space areas are still not fully developed, and the development can obtain a temporary certificate of occupancy. A commenter proposed that HUD continue to use the current definition for NLT conditions for new construction and rehabilitation housing because it streamlines standards and provides owners with the opportunity to address minor issues that arise from construction or rehabilitation work.
A commenter stated that there is no reason for new construction or rehabilitation to fail HQS when they have the final certificate of occupancy, especially where new construction is built under strict county and local requirements. Another commenter urged that new construction or rehabilitated units should be subject to regular HQS inspections, and not NLT or alternative inspections. However, this commenter suggested that PHAs should have discretion in applying NLT or alternative inspection options.
Another commenter expressed that while NLT conditions may occur in new construction or rehabilitated properties, other units, including PBVs, can use NLT/alternative inspections as well. A commenter stated that NLT provisions could be helpful on rehabilitation or new construction when minor defects fail HQS and NLT conditions are found. This commenter expressed that for rehabilitation or new construction, the NLT option could be helpful in expediting assistance approvals. This commenter also recommended changing the allowable timeframe, rather than eliminating the alternative inspection option, would be a better solution to the problem of the alternative inspection occurring prior to rehabilitation.
One commenter recommended that under § 983.103(b), inspection timing and procedures of new construction and rehabilitation projects be consistent with the NLT option, and that under § 983.103(f) additional time should be permitted for inspections of units in which the owner or family refuse access to the PHA, unless the regulation states otherwise. This commenter also supported HUD revising the repair time under § 983.103(f) to 30 days after the PHA provides owner notification of the deficiency.
One commenter supported HUD's proposal of alternative inspections, by stating that alternative inspections can fulfill the obligation for initial HQS inspection in unsafe circumstances for tenants and inspectors to enter units that are occupied. Another commenter noted the administrative burdens of alternative inspections such as tracking the units, notifying the landlords and tenants, scheduling the inspections, and obtaining results from the owner, or the agency doing the inspection. This commenter stated that this may create delays in assisting tenants, especially for units that must pass a PHA inspection. This commenter recommended that HUD use alternative verification methods of corrections to failed inspection items, which will help administratively and with producing positive relationships with landlords as well as assisting families quickly. This commenter also noted that PHA-owned housing should not have a problem passing HQS.
A commenter stated that PHAs should have the ability to utilize alternative inspection and NLT options with respect to PBV new construction and rehabilitation projects, because these projects must meet local code standards to receive a certificate of occupancy, and, therefore, they are unlikely to be uninhabitable. The commenter stated that, while minor items may remain, these items do not threaten the lives of renters, and they should not prevent a PHA from placing the unit under a HAP contract.
Commenters expressed that PHAs should have discretion deciding whether to implement NLT inspections for units because requiring NLT inspections for certain units makes implementation overly complex. Other commenters noted confusion and requested HUD clarify that PHAs can decide whether to apply initial inspection flexibilities project-by-project. Another commenter stated that another form of acceptable alternative inspections could include a city inspection or a certificate of occupancy. One commenter suggested that HUD incorporate alternative requirements from PIH Notice 2020-33.
A commenter stated that adding previously unassisted units to a HAP contract should not be considered development activity, as it is often due to availability of funding and/or eligibility of in-place families, and, as such, no additional regulatory approvals should be necessary.
A commenter suggested that the broadband requirements referenced in § 983.152(b)(2) should not apply when adding previously unassisted units to a HAP contract because the installation of broadband infrastructure requires construction work and should be triggered only if work is being done.
A commenter recommended that HUD continue to only require subsidy layering review for initial awards of PBV assistance and not upon subsequent rehabilitation or development activity because it will be administratively burdensome for project owners and PHAs.
This commenter also stated that HUD's section 3 compliance proposal is neither authorized by statute nor consistent with regulations in part 135, and, therefore, the commenter proposed that HUD delete section 3 compliance as a development requirement, because section 3 does not apply to monthly rental assistance payments.
Commenters stated that it would be unreasonable for HUD to require a PHA to enforce owner compliance with labor standards, specifically Davis-Bacon, in circumstances where there was no Agreement. A commenter further added that where a project's development does not depend on the provision of PBVs, as few obstacles as possible should be provided to permit affordability, because these developments do not need PBV assistance to be built and they are often the most desirable, best located, and most advantageous developments. Another commenter expressed that it is unclear how to reconcile the exemption of non-Agreement projects from Davis-Bacon (§ 983.153(c)(1) of the proposed rule) and the proposal that projects that do not enter Agreements must comply with the development requirements of § 983.153 (§ 983.154(e)(2) of the proposed rule, which has been moved to § 983.154(f)(2) of this final rule). Some commenters opposed excluding rehabilitated and newly constructed projects from the Davis-Bacon wage rate requirements. A commenter stated that PHAs do not have flexibility under the statute to exclude rehabilitation or new construction of PBV projects from Davis-Bacon coverage. A commenter suggested giving PHAs discretion to exclude rehabilitation or new construction from Davis-Bacon wage requirements.
HUD appreciates the comment regarding the relationship between § 983.153(c) and § 983.154(e) (now § 983.154(f) in this final rule). In response, HUD amends § 983.154(f) to better clarify that the owner need only comply with development requirements of § 983.153 that are applicable to the particular project when the development occurs without Agreement. For example, the Davis-Bacon compliance requirement is applicable only if the HAP contract will assist nine or more units.
A commenter stated that HUD should not require Davis-Bacon coverage through an alternate document. Another commenter suggested using an alternate document or a document created by a PHA. One commenter urged HUD to provide a clear and consistent policy regarding how to execute alternate documents to avoid confusion.
A commenter suggested that development activity for new construction should exclude environmental abatement.
A commenter recommended that HUD consult with industry groups and interested parties and utilize nonbinding notice documents to define and develop additional guidance on the term, “rehabilitation activity” noted in § 983.154(c)(2).
Commenters urged HUD to allow HAP contract extensions beyond 40 years to permit sufficient time to secure recapitalization and facilitate preservation. A commenter explained that HAP contracts do not always align with other regulatory agreements and projects may need to secure long-term financing during their regulatory agreement. Another commenter suggested that HUD allow for extensions 60 months prior to the contract expiration instead of the existing contract extension beyond 40 years until 24 months prior to the HAP contract expiration. Other commenters proposed that HUD allow PHAs to commit PBV contract extensions where re-syndication extends the affordable term tied to financing beyond the term of the PBVs and allow PHAs to establish the terms of the PBV HAP contracts as provided by PIH Notice 2017-21.
A commenter stated that HUD should modify § 983.205(b)(4) to allow the PHA and the owner to agree in advance to additional conditions applying to continuation, termination, or expiration of the contracts; instead of keeping the existing language, which the commenter stated requires that PHAs only use the contracts provided by HUD. One commenter stated that independent entities are unsuitable to determine the appropriateness of contract renewals, and that PHAs should make this determination because PHAs can assess resources and the local housing market demand to determine the best interests of the PHA's portfolio and residents.
In consideration of public comments, HUD also revises § 983.205(b) in this final rule to provide that, at any given time before a PBV HAP contract expires, the PHA may execute any number of extensions (with terms up to 20 years each) such that there are up to 40 remaining years on the contract. HUD believes this will provide PHAs sufficient flexibility to extend the HAP contract term as needed to meet the needs of the local community and align with common preservation efforts as described by commenters, while striking a reasonable balance with the PHA's obligation to make its statutorily required determination prior to extension. As such, the rule continues to require the PHA to determine that each extension is appropriate to continue providing affordable housing for low-income families or to expand housing opportunities but recognizes PHAs are in the best position to determine the appropriate time to consider an extension. Additionally, this change streamlines and simplifies PBV processes.
With respect to comments that propose that HUD allow the PHA and the owner to agree in advance to additional conditions applying to continuation, termination, or expiration of the contracts, the statute authorizes HUD (not the PHA) to impose such conditions. HUD has chosen not to do so. Lastly, with respect to the comment concerning the role of the independent entity in making determinations on HAP contract extensions, HUD finds the commenter's explanation persuasive and, further, determines that PHAs are best positioned to set the initial term of the contract. Therefore, HUD removes the independent entity function in agreeing to the initial term and extensions in this final rule.
Commenters suggested adding to § 983.206(d) a requirement that an owner's termination of the PBV contract because the PHA has lowered the rent below the initial rent cannot be effective until the PHA has (1) notified tenants of the upcoming change to HCVs; (2) executed the required tenant-based voucher HAP contract between the owner and PHA; and (3) provided tenant-based vouchers to the tenants. This commenter recommended requiring PHAs to complete these tasks within a specified timeframe (and PHAs can avoid this by agreeing in the initial contract or extension not to reduce rents below the initial rent to the owner).
Some commenters supported prohibiting owners from terminating the family's housing assistance due to the termination or expiration of a PBV HAP contract. Another commenter supported HUD not requiring that families be allowed to stay in their same units, and instead, allowing a PHA and owner to make decisions about handling terminations locally. This commenter claimed that HUD lacks the statutory authority to mandate that families be allowed to stay in their own units, since the statute explicitly mentions remaining in the same project.
Another commenter suggested modifying § 983.206, to state that tenants whose PBV units are re-developed should not be treated as contract terminations. One commenter supported families remaining in the same unit and not just the same project. In § 983.206(b) and (b)(6), regarding tenants' right to remain, a commenter recommended that the “other good cause” reference to the HCV rule at § 982.310 be limited to tenant misconduct; there should also include conforming language inserted into the HUD PBV tenancy addendum. This commenter also suggested that section 106 of the HOTMA statute extends the tenant's right to remain to the project, and not just the unit, as a guarantee for tenant housing stability upon subsidy expiration or termination in circumstances where family size has changed, or the current unit may need rehabilitation that requires extended absence. Another commenter supported families with disabled individuals or children remaining in the same unit due to hardships caused by moving and recommended letting the extension expire when they voluntarily leave or become ineligible for PBV.
A commenter recommended stating in § 983.206(d) that under situations of PBV HAP contract termination, that the PHA may not re-screen for eligibility beyond income when providing HCVs to former PBV tenants. The commenter suggested clearly stating tenants' right to replacement assistance and housing stability, despite PHA or HUD administrative delays in providing the required assistance. The commenter also stated that under § 983.206(d), the proposed exception to the one-year notice requirement for an owner who
HUD has considered the comments regarding whether a family should have the ability to remain in the same unit and has determined to retain the proposed rule language allowing a family instead to remain in the same project. While HUD recognizes that moves may cause hardship for families, HUD determines that PHAs are in the best position to consider conditions and limitations surrounding specific contract terminations and expirations and assist families to secure the best possible housing for them given those considerations. Notwithstanding, retaining the proposed language on allowing a family to remain in the same project does not exempt a PHA from receiving, processing, or granting a reasonable accommodation to remain in the unit. Regarding the comments concerning redevelopment, HUD is not adopting the proposed change. Section 983.212 in this final rule allows PHAs and owners to engage in substantial improvement on units under HAP contract without terminating the HAP contract, and where PHAs and owners agree to do so they must follow the rules set forth in § 983.212. Section 983.206, by contrast, has the requirements in cases of contract termination.
With regard to good cause for termination, HUD adopts the commenter's suggestion in part. HUD in this final rule allows for lease terminations on the basis of certain grounds in § 982.310, to include family duties, which the family has failed to fulfill and other family misconduct, as well as when the owner will use the unit for a non-residential purpose or to renovate the unit. Nothing in this final § 983.206 is intended to preempt operation of State and local laws that provide additional limitations regarding allowable causes for lease termination. HUD intends to issue a tenancy addendum specific to families who were residing in a PBV project at contract termination who elected to remain in the project with tenant-based assistance, which will also reflect the specific grounds on which the family's lease may be terminated. HUD determines this final rule allows for meaningful election by families to remain in the project while also providing exceptions for situations under which the owner cannot reasonably be expected to allow a family to remain.
HUD does not make changes in this final rule in response to the comment on re-screening when families get tenant-based vouchers, as the proposed § 983.206(b)(4), retained in this final rule, adequately explains that such families are not new admissions; rather, they are and remain section 8 voucher participants, subject to the rules relating to participants (as further explained in the definition of “admission” in § 983.3). As discussed above, HUD has clarified some of the provisions in § 983.206 to better explain the timeframes involved in provision of tenant-based assistance. Finally, section 8(c)(8) of the U.S. Housing Act of 1937 defines the term “termination” for purposes of the owner notice requirement as “the expiration of the assistance contract or an owner's refusal to renew the assistance contract. . . .” HUD declines to further extend the one-year notification requirement to an owner's termination of the contract during its term due to a reduction below initial rent, to preserve the existing authority of the owner to terminate timely, given the owner's substantial interest in maintaining sufficient project income. However, HUD has added a 90-day notice requirement, so as to provide the PHA sufficient time for voucher issuance per § 983.206(b). HUD has also taken this opportunity to clarify when mutual termination of a PBV HAP contract during its term would be allowable and to specify that in those cases the full notice period is required.
With regard to the comment on § 983.206(a)(4), HUD does not believe a change is necessary as the text is already clear that the family may remain “for the required notice period,” which aligns with the comment.
A commenter stated that HUD's implementation of the insufficient funding requirement (HOTMA section 106(a)(4), to be codified at 42 U.S.C. 1437f(o)(13)(F)(i)(I)), is critical to developers' ability to finance PBVs with minimal transition reserves. Commenters also recommended modifying language in § 983.206(c)(1) to clarify that sufficient funding is not necessary for a PHA to make PBV contract payments for a full year, despite unpredictable timing of full-year appropriations bills and the frequency of continuing resolutions.
A commenter stated that the legislative history indicates that Congress intended PHAs to prioritize project-based HAP contracts and provided neither HUD nor PHAs with the discretion contemplated by the proposed regulations.
Regarding the comment on prioritizing project-based HAP contracts, HOTMA section 106(a)(4), to be codified at 42 U.S.C. 1437f(o)(13)(F)(i)(I), provides “that in the event of insufficient appropriated funds, payments due under contracts under this paragraph shall take priority if other cost-saving measures
A commenter suggested that HUD should revise § 983.207(b)(3) to reinstate units under a HAP contract without being subject to development requirements at § 983.152(b) because without it, PHAs would be subject to subsidy layering reviews and other burdens and it would place a significant burden and cost upon project owners. This commenter also urged that HUD does not apply the set of “development activity” requirements to projects that undertake modifications to PBV units which result in adjustments to pre-existing contracts because PHAs may need to add units or substitute units after HAP signing, and this would make that process very burdensome.
Commenters supported the proposed Davis-Bacon changes that would remove the current owner certification under the HAP contract at § 983.210(j) that repair work on a project selected as an existing project may constitute development activity and, if determined to be development activity, the repair work shall be in compliance with Davis-Bacon requirements. One commenter supported HUD's Davis-Bacon wage rate requirement proposal due to its potential reduction in development costs; permittance of State independence to apply their own wage requirements; and the reduction of administrative burden on projects that have multiple funding sources. Another commenter expressed that the Davis-Bacon changes would encourage owners and operators of existing housing to incorporate PBVs while maintaining and improving living conditions for residents.
Commenters supported the removal of “existing housing” from the Davis-Bacon wage rate requirement. One commenter stated that excluding existing housing provides clarity, because it aligns with the language and spirit of the 1937 Act. Another commenter stated that applying the wage requirement to existing housing significantly increases the cost of developing affordable housing and reducing the number of households that could be served by the PBV program. One commenter stated that eliminating existing housing from the Davis-Bacon wage rate requirements would allow owners to utilize more PBVs and potentially erase operating deficits, reach more ELI and VLI residents, and reduce reliance on gap financing when seeking to refinance.
Several commenters supported HUD's proposal to establish a five-year timeframe, within which development work would not be permitted except in extraordinary circumstances. A commenter stated that permitting development work within the first five years is only reasonable to prevent the circumvention of certain requirements that would normally be stipulated in an Agreement.
Other commenters opposed HUD's proposal to establish a five-year timeframe because it is overly restrictive. Commenters stated that requiring a burdensome permitting process would disincentivize owners of older housing from making periodic substantial repairs and renovations to maintain the housing in good condition. A commenter expressed that it is challenging to anticipate all physical needs in a five-year period. Another commenter stated that HUD's proposal would have a significant impact on residents by discouraging owners from conducting voluntary repairs and replacements that would improve the quality of life for residents and may stall or prevent the start of a HAP contract for units that would otherwise be eligible to receive PBVs.
A commenter warned that the five-year period would impact projects that may need work within five years of being built due to flawed work by the original builder. A commenter stated that the HUD-prescribed process to request development activity (called “substantial improvement” in this final rule, per discussion of changes to § 983.3 above) would create an additional administrative burden for PHAs without the process and expertise to assess development requests and determinations. A commenter warned that HUD's proposal would require non-MTW PHAs to obtain a waiver or to adopt a MTW demonstration activity to complete the unit rehabilitation and would require non-MTW agencies attempting to pursue public housing repositioning to need regulatory waivers. Another commenter stated that HUD's proposal may present challenges to create affordable housing through the PBV program because of the disincentive to perform capital work within five years of HAP contract signing and would force owners to
HUD disagrees that the rule discourages repairs, replacements, and renovations. The owner is required to meet HQS and continues to be able to replace equipment and materials rendered unsatisfactory because of normal wear and tear by items of substantially the same kind (this is not substantial improvement as defined in § 983.3(b)), which should enable the owner to maintain the housing in good condition. An owner that instead has an immediate desire to undertake development activity remains able to do so through the process of project-basing rehabilitated housing, and HUD provides further flexibility at § 983.157 of this final rule to better accommodate these situations. An owner faced with an urgent, unanticipated need to engage in substantial improvement during the first two years of the contract may be able to receive PHA approval to do so under the exception for extraordinary circumstances. Taken as a whole, HUD determines that this final rule provides the greatest latitude possible to owners while still ensuring appropriate projects are subject to pre-development requirements such as subsidy layering review, Federal funds are used only in quality housing, and PBV-assisted families are housed stably.
The PHA (or independent entity, in the case of PHA-owned units) approval process codified in this final rule reflects minimum oversight necessary to ensure compliance with PBV requirements and protection of families. HUD incorporates into this final rule additional clarity for PHAs regarding the basis upon which to approve or disapprove owner requests. HUD does not anticipate that this final rule increases the potential need for waiver, as the prior rule also contained divergent processes to project-base rehabilitated housing versus existing housing, including limitations on development activity that could occur after HAP contract execution. This final rule improves the clarity and safeguards of existing limitations.
HUD is aware that project-basing rehabilitated housing entails a heavier workload upfront. Completing the development activity upfront typically has the intended result that the housing is in good condition longer and therefore is better positioned to serve as long-term housing for families. HUD expects that PHAs select existing housing for PBVs when the housing is in good enough condition to serve families for the contract period, without immediate housing instability due to substantial improvement. PBV funding supports rents to house assisted families, which may cover a project's ongoing operating expenses; it is not development funding.
Some commenters suggested HUD allow for exceptions in instances where improvement or upgrading is needed for the substantial improvement, such as energy efficiency efforts, security precautions, and previously scheduled projects that are part of effective long-term property maintenance plans. A commenter also stated that HUD should include a catch-all provision to allow improvements to protect the housing quality for assisted families or protect the viability of the project. Another commenter suggested that HUD create a “pass-through” of rental assistance where construction improvements are to be made in a property, similar to what is allowed in other project-based rental assistance. Commenters also recommended that PHAs have the discretion over permissibility, oversight, and monitoring of substantial improvement that commences after the beginning of the HAP contract as a means for PHAs to remain accountable to HUD for monitoring compliance and development requirements. Another commenter suggested that HUD adopt a three-year timeframe instead of a five-year timeframe.
A commenter expressed that because project owners are often required to utilize several funding sources to fund substantial rehabilitation, it is likely that other funding sources used to finance the substantial improvement may independently trigger many of the cross-cutting requirements that HUD cites in question 25. Another commenter further stated that PHAs have mechanisms in place to ensure that projects comply with development requirements; adding an additional mechanism to substantial improvement after HAP contract signing would be burdensome.
Commenters suggested that HUD add clarifying language stating that owners are permitted to continue receiving HAP for the family's re-housing during a fixed period of rehabilitation.
A commenter asked HUD to provide detail regarding emergency site work performed for health and safety, emergency rehabilitation work conducted for health and safety, and fit-out of non-residential spaces occurring under a different general contractor contract. The commenter also expressed uncertainty pertaining to the applicability of these types of activities under the definition of “substantial
One commenter suggested that HUD allow owners to maintain their own site-based waiting lists to expedite the tenant selection process as well as allow PHAs to establish compliance reviews to oversee owners. Another commenter encouraged HUD to maintain provisions describing roles and responsibilities of the owner and PHA in the guidance documents. This commenter disagreed with HUD requiring PHAs to formally incorporate site-specific tenant selection plans into their Administrative Plans if the plan is on file with the PHA and available to the public because incorporating the plans into the Administrative Plan will be burdensome for PHAs, due to frequent minor updates. The commenter also expressed concern regarding the statement in § 983.251(c)(7)(x) that HUD may act against the owner, PHA, or both, and suggested that if HUD intends to hold PHAs responsible for an owner's project-based waiting list, the regulations need to state that the PHA also has the right to take enforcement action directly against the owner. The commenter stated that in cases where a PHA has commenced enforcement actions against an owner, then HUD should not seek additional enforcement against the PHA.
Another commenter suggested deleting § 983.251(c)(7)(i). A commenter objected to the proposed requirement that a tenant selection plan (TSP) be included in the Administrative Plan for every owner. The commenter stated that owners may make frequent adjustments to their TSP, such as to respond to updates under the Violence Against Women Act or updated screening standards, and therefore every small TSP change, even if unrelated to waiting lists or preferences, would require an Administrative Plan amendment, and the PHA's Administrative Plan would have to be amended for every PBV project when the project is selected and then again when the TSP is approved by the PHA. The commenter suggested that selection plans should be on file with the PHA and posted online with the Administrative Plan but should not be specifically part of the Administrative Plan.
HUD maintains § 983.251(c)(7)(x) to ensure that the owner, PHA, or both, are held accountable and responsible for an owner's project-based waiting list. The administrative policy that is incorporated in a PHAs' Administrative Plan may state that the PHA also has the right to take enforcement action directly against the owner. Although there may be cases where a PHA has commenced enforcement actions against an owner, depending on the nature of the enforcement actions, HUD may still take additional enforcement actions against the PHA, if applicable.
HUD does not delete the requirement, as suggested by a commenter, at § 983.251(c)(7)(i). This final rule, however, does revise both §§ 983.251 and 983.10 by replacing tenant selection plan with owner waiting list policy. As a result of this change, the owner waiting list policy, not tenant selection plan, must be incorporated in the PHA's Administrative Plan.
A commenter recommended that the proposed rule's preamble discussion that projects using preferences for families eligible for supportive services, including disability-specific services, must comply with Section 504, the Americans with Disabilities Act, and the Home and Community-Based Settings requirements be placed in § 983.251. Another commenter suggested § 983.251 be revised to require that tenant selection plans, criteria, and preferences must comply with all applicable civil rights requirements, and that all tenant selection criteria must be demonstrably related to the applicant's ability to fulfill the obligations of a subsidized tenancy, which would eliminate poor credit or eviction for nonpayment of unassisted rent or most criminal history as grounds for denial of tenancy. The commenter further stated that the rejection notice should require specific content, such as sufficient facts and the legal basis supporting the rejection as well as due process procedures to enable a fair review, even absent a tenant's request for a hearing. The commenter also suggested modifying § 983.251(c)(6) to require that applicants on the HCV waitlist receive a PHA offer to be placed on the PBV waitlists.
One commenter approved of HUD's modification to § 983.251 to require eligible families to qualify for services as well as removing restrictions that limit service preferences only to families with severe disabilities for whom such services cannot be provided in non-segregated housing. Another commenter urged HUD to revise § 983.251, to prioritize housing survivors of violence who are in the PBV program and require an emergency transfer under VAWA. Another commenter opposed banning preferences for people within a category of disability under § 983.251(d)(1) and stated that this conflicts with the Section 504 rules and is a violation of HOTMA, which permits preferences based on the class of disability associated with a project's supportive services. This commenter stated that a ban on disability-specific preferences also interferes with procuring capital resources for housing because non-PBV resources often target permanent supportive housing for people within specific categories of disability. The commenter suggested that HUD defer to the PHA's preference plan for people who qualify for disability-specific services. The commenter also explained that the waiver and remedial action process conflicts with HOTMA, which delegates the decision to the PHA, and the process is intrusive as well as costly. The commenter encouraged HUD to adopt a similar process to RAD, where the PHA and project owner in consultation with the partnering State and local officials, determine the scope of a disability-specific preference.
This commenter also suggested that HUD adopt the Centers for Medicare & Medicaid Services Homes and Community-Based Services (CMS HCBS) rules on what is the most integrated setting possible, found in 42 CFR 441.710(a), because projects meeting those standards do not require additional waiver or remedial action approval. The commenter recommended that HUD use flexible approaches to concentration, because the existing rigid policies applied to projects with dwellings for families receiving supportive services conflict with the exception to PBV income-mixing standards, which permits owners to exceed the PBV project cap for units providing supportive services. Therefore, the commenter concluded that HUD should define, within the PBV rule, integrated places that do not impose fixed limits on the concentration of disabled individuals in a development and, ultimately, meet the standards for a community-based setting.
In response to the commenter that suggested revision of § 983.251 to provide that tenant selection criteria be demonstrably related to the applicant's ability to fulfill the obligations of a subsidized tenancy and proposing that HUD prescribe the contents of the rejection notice, HUD believes the commenter's concerns would not be appropriately addressed in § 983.251. Given the revision to § 983.251 in this final rule (described above in this discussion of § 983.251) to require the owner waiting list policy, not tenant selection plan, to be incorporated in the PHA's Administrative Plan where there will be an owner-maintained waiting list, § 983.251 is not an appropriate location for requirements relating to the owner's screening and selection of tenants.
HUD notes that PHAs already have the authority to and are encouraged to prioritize victims of domestic violence, dating violence, sexual assault, or stalking who are in the PBV program and require an emergency transfer under VAWA in its Administrative Plan. As stated earlier, VAWA emergency transfers must occur in accordance with HUD's VAWA regulations at 24 CFR part 5, subpart L, and program regulations.
HUD declines to modify § 983.251(c)(6). If the PHA chooses under its Administrative Plan to use a separate waiting list for admission to PBV units, under paragraphs (c)(2)(i) and (iii) of § 983.251 as proposed the PHA already must offer to place applicants who are listed on the waiting list for tenant-based assistance on the waiting list for PBV assistance (including owner-maintained PBV waiting lists).
One commenter recommended that HUD streamline the PBV waiting lists process for easier oversight and efficient enforcement. Other commenters stated that HUD should allow PHAs to develop their own procedures to remove families from the PBV waiting list if the procedures are outlined in the Administrative Plan. Another commenter stated that PHAs should manage the removal of the family from
One commenter stated that if a family meets the eligibility criteria and fulfilled all its obligations, an owner's rejection should not adversely affect the family's position on the PBV waiting list. One commenter stated there is no additional administrative burden involved in leaving a family on the general PBV list if the family rejects an opportunity or an owner rejects the family.
Another commenter expressed that owner-managed waiting lists have a history of discrimination, and that the proposed rule does not require enforcement, only an undefined “oversight.” The commenter stated that the authorities cited at § 5.105(a) are solely a list of Federal civil rights laws covering housing programs, and do not provide for specific oversight. A commenter suggested that HUD should revise § 983.251 to identify safety concerns for domestic violence survivors as a good cause to reject a unit, to prevent the survivor from choosing between housing and safety.
Although HUD appreciates the commenters' suggestions that HUD should not establish additional criteria, there can be situations in which the unit in question is not conducive to the needs of the family and is rejected, but the family still needs suitable housing, and, as a result, should not be removed from the project-based list. Therefore, HUD requires in this final rule that if a family rejects the offer of PBV assistance for good cause then the family cannot be removed from the PBV waiting list. Moreover, separate from this process, a family can always request a reasonable accommodation that may be necessary for a household member with a disability to remain on the PBV waiting list, including when the unit does not meet one's disability-related needs. Further, PHAs and owners are subject to all applicable Federal fair housing and civil rights requirements, including in their administration of this process. Even if the circumstances do not rise to the level of “good cause” as determined by the entity, a family may request a reasonable accommodation in accordance with Federal civil rights laws.
As for revising § 983.251 to identify safety concerns for domestic violence survivors, HUD already has protections for victims of domestic violence, dating violence, sexual assault, or stalking in 24 CFR part 5, subpart L, and these protections apply to admission to the project-based voucher program. Additionally, the provision added to this final rule specifying that if a family that rejects the offer of PBV assistance for good cause then the family cannot be removed from the PBV waiting list applies to these families; the safety concerns described in the comment constitute good cause.
One commenter stated that HUD should revise § 983.251(c)(7)(x) to not take enforcement action against a PHA due to actions of an owner. This commenter stated that HUD should have the ability to act against the owner, and HUD should explicitly state it will not act against the PHA, especially when the PHA is acting in good faith to provide oversight. Another commenter recommended that HUD streamline the process for PHAs, families, and owners, modifying § 983.251(c)(7)(viii) to state that PHAs should provide the oral briefing while the owner refers a family to the PHA for a final eligibility determination to provide the family with the information needed to determine whether to accept an owner's offer and eliminate the need to submit income and other eligibility-related information to the PHA.
Commenters suggested that PHAs should be given the discretion to manage their waiting lists, including how families reject the offer of assistance or if the owner rejects the family. One commenter favored HUD keeping the provisions under § 983.251(c), regarding selection from a waiting list, in nonbinding guidance. Another commenter stated that PHAs should have discretion over owner-maintained waiting lists because the PHA cannot control whether an owner would comply. Other commenters suggested that HUD's rule should clearly state that PHAs may permit owners to maintain their own lists, regardless of whether the PHA itself maintains separate waiting lists for some or all its PBV properties in § 983.251(c)(2)(iii) and (c)(7)).
A commenter suggested that the rule should explicitly state that owners and PHAs are subject to all civil rights and fair housing requirements throughout § 983.251(c)(7). Another commenter suggested that HUD amend § 983.251(e)(1) and (3) to allow PHAs additional discretion in deciding how to handle the family's position on the PHA waiting list if the family turns down PBV. This commenter also supported PHAs having discretion over the number of offers a family may reject. Another commenter recommended that HUD should not permit PHAs to alter a family's place on a central PBV waiting list based on an owner's rejection of a family because it would harmfully impact a family's admission with respect to any other property with a PBV contract and violate a pre-HOTMA sentence of section 8(o)(13)(J) of the 1937 Act.
Commenters also recommended deleting the final sentence of § 983.251(b)(2), because HCV participants are not subject to a denial of assistance, and deleting the part explaining that the usual termination grounds would apply, as well as signaling that rescreening by PHAs is allowed.
As for § 983.251(c)(7)(viii), HUD maintains the process for PHAs to determine eligibility for the program. This ensures that all parties appropriately coordinate the placement of the family in the unit and will ensure compliance by PHAs with their continued responsibility for eligibility determinations. This final rule also
One commenter suggested that the briefing packet include written information on the selected family's right to move with the next available voucher, because the right is unavailable to the family until after one year and so the family should be informed of the right in writing. The commenter also suggested that HUD modify § 983.252 to apply to both families selected by the PHA from its waiting list and to families selected from an owner-maintained list.
A commenter recommended that HUD add the following language to § 983.253: “PHAs are responsible for monitoring owner actions that may indicate rejection of applicants for legally impermissible reasons, as well as for informing applicants of other tenant-based and PBV waiting list options, whether referred by the PHA or on an owner's site-based waiting list.”
Commenters suggested a broad set of timeframes for the PHA to complete its final eligibility determination. Some commenters agreed that two weeks, 30 or 60 days is a reasonable timeframe for PHAs to complete final eligibility determinations. Other commenters noted that more time may be required on a case-by-case basis, to ensure proper eligibility review. Some commenters also suggested a 15-day timeframe to complete final eligibility determination for applicants on owner-maintained waiting lists. A commenter suggested that PHAs determine the timeframe for final eligibility determinations, because the PHAs may face uncontrollable factors that require more time than 30 days.
One commenter encouraged HUD to include in this final rule a reference to the authority granted to applicants by the last sentence of section 8(o)(13)(K), the Vacancies statutory provision, to bring legal actions to compel a PHA to reduce the number of PBV units committed under the contract if a unit is vacant for more than 120 days and use the funds for additional tenant-based assistance.
A commenter encouraged HUD to provide PHAs 30 calendar days to make an eligibility determination, and another commenter proposed two weeks for a PHA to make final eligibility determination. Another commenter objected to HUD's requirement that owners notify PHAs of actual or expected vacancies, and instead, the commenter proposed that owners refer families on waiting lists to the PHA, in advance of an actual vacancy, to reduce delay in filling the unit. This commenter stated that there is no reason to require a notification because the PHA is not responsible for referring applicants to the owner, rather than referring the selected family to the PHA. The commenter added that owners and PHAs should have a coordinated system to schedule PHA appointments as quickly as possible for the PHA and the selected family. This commenter recommended that PHAs be obligated to make reasonable efforts to promptly make the final eligibility determination and schedule the required oral briefing as well as eligibility. A commenter expressed that HUD should not specify a timeframe for the PHA to complete a final eligibility determination after receiving an application from an owner because PHAs have an interest in making determinations quickly, but frequent extenuating circumstances prolong resolving issues in the interest of the family, owner, or PHA.
A commenter supported HUD's proposed prohibition on charging a PBV-assisted family a higher security deposit than an unassisted family because it encourages and authorizes source of income discrimination.
Several commenters viewed the 30-day timeframe for the PHA to provide notice to the family and owner to remain in a wrong-sized unit, as well as the 90-day timeframe in which the family must move out, as reasonable if PHAs are permitted to extend the timeframe when needed.
Other commenters opposed HUD's timeframes for a family to move from wrong-sized or accessible units. One commenter stated that the timeframes are overly strict for the PHA to notify a family and owner that they are placed in either an overcrowded, under-
One commenter requested that HUD clarify § 983.260(c)(2) to express that the timeframe begins once the PHA offers the family assistance in another unit and not from the time that the PHA determines the family is in the wrong-sized unit. Another commenter stated that HUD's proposal is not required by HOTMA and does not recognize the limits imposed by PBV turnover and right-sized unit availability, whether with external partners or within a PHA's agency-owned portfolio. Another commenter expressed that for families that live in a wrong-sized PBV unit or a unit with unneeded accessible features, the PHAs should offer the option to move with the next available tenant-based voucher, and if the voucher is unavailable or is not the family's preference, then the PHA should offer the family alternative housing assistance. The commenter also disagreed with the option of reducing the number of units under the PBV contract because a PHA is unlikely to reduce the subsidy attached to the project to offer the tenant a suitable alternative unit, unless the PHA has no tenant-based voucher available within a reasonable time and does not own public housing, and the owner has no turnover in a suitable unit. The commenter further stated that the rule should require PHAs to help families locate a new suitable unit with the tenant-based voucher they receive to relinquish correct-sized and accessible units, which is required under § 982.403 and is consistent with HOTMA requirements to assist families that need to move due to unrepaired unit defects. One commenter stated that the proposed timeframes are overly prescriptive and administratively burdensome for PHAs to follow.
The 90-day timeframe, related to the termination of the housing assistance payments for the wrong-sized or accessible unit and removal of the unit from the HAP contract, begins once the PHA offers a form of continued assistance. The comments submitted to HUD are persuasive that a more flexible timeframe would be more practical to suit the needs of the family moving out, the unit owner, a prospective family moving in, and the PHA. At the same time, for certainty, accountability, and to encourage the owner to continue to make their unit with accessible features available to the PHA's HCV program, some limits on the timeframe need to be maintained. Therefore, HUD has included revisions at § 983.260(c)(2)(i) and (iii) to include additional flexibility in the form of the option for a family to request and the PHA to grant one extension not to exceed up to an additional 90 days to accommodate the family's efforts to locate affordable, safe, and geographically proximate replacement housing.
In accordance with § 983.260(b)(1), the continued assistance offered may be in the form of project-based voucher assistance in an appropriate-size unit (in the same project or in another project); other project-based housing assistance (
One commenter suggested that HUD clearly define the first year of occupancy in § 983.261(a). A commenter recommended that § 983.261 clearly state the roles and responsibilities of domestic violence survivors and PHAs, considering that some PHAs view their obligation to provide continued assistance to a survivor as discretionary. This commenter suggested clarifying that a “PHA must assure that the victim retains assistance” and “must” offer continued tenant-based assistance, subject to availability of funds. One commenter suggested § 983.261(d) have a VAWA exception, because survivors should not be penalized and lose tenant-based assistance if they must terminate their lease before the end of the one-year requirement because of violence. This commenter offered the following suggestions: (1) allowing a survivor to request another form of assistance before the family issues a written notice to vacate, at the time it issues the notice, or thereafter; (2) the PHA should also offer a tenant-based voucher or comparable tenant-based rental assistance if the notice to vacate is due to violence; and (3) if such assistance is not available, then the survivor should receive priority for the next tenant-based voucher and the PHA should be encouraged to reach out to area PHAs (with survivor consent) about available units or vouchers. In case the survivor
Another commenter stated that under § 983.261, the PHA should demonstrate the availability of tenant-based vouchers for eligible PBV families that exercise their right to move based on tenant-based voucher attrition rate. This commenter also recommended that HUD expand the PHA's discretion to set timeframes, and not be limited to “any time after the first year of occupancy” under § 983.261(a)), if the project provides housing assistance to families that require intensive supportive services. Another commenter recommended that HUD clarify § 983.261 to include language on terminations, by stating that a family living in a PBV-assisted unit for 12 months that has requested an HCV need not stay in the PBV unit while waiting for the transfer, as well as that a PHA may not terminate the tenants from the PBV program. One commenter suggested that HUD expand the list of reasons for transfer to include intimidated witnesses and crime victims before the one-year transfer period. A commenter suggested HUD clarify that the tenant is not automatically provided HCV assistance after 1 year of lease, and that the tenant may apply for the transfer list and may receive assistance when a voucher is available.
One commenter recommended clarifying in the rule that PHAs should periodically notify families of the right to move with continued tenant-based rental assistance, which could be provided as part of the regular income recertification process. This commenter suggested that HUD clearly state the actions the PHA must take if neither a regular voucher nor “comparable tenant-based rental assistance” is available at the family's requests because basic due process requires that PHAs maintain a written list of families that have requested a voucher to move from a PBV property after 12 months of occupancy and have a right to receive the next available voucher or comparable assistance.
Other commenters stated that § 983.261 is clear, but suggested splitting § 983.261(c)(1) into additional sentences for clarity.
The new § 983.261(f) further clarifies that PHAs must address project-based vouchers in their Emergency Transfer Plan consistent with the requirements in 24 CFR 5.2005(e), including when the victim has received PBV assistance
A commenter stated that § 983.262(f) (now moved to § 983.262(b)(4) in this final rule) sufficiently addresses the project cap requirements in relation to a unit losing its excepted status. Another commenter suggested adding: “or a family eligible for supportive services, or a family that otherwise qualifies to reside in an excepted unit under paragraphs (c) or (d) of this section” to § 983.262(b). The commenter encouraged HUD to clearly state in § 983.262(c) (now moved to § 983.262(d)(3) in this final rule) the qualifications for the supportive services exception, including: (1) if any member of the family is eligible for one or more of the available services; (2) if a member of the family successfully completes a service program and subsequently no other member of the household is eligible for one of the offered services. The commenter also proposed that HUD revise the third sentence of § 983.262 to clearly state that the exception applies even if the household member who successfully completes a service program leaves the household.
One commenter recommended providing PHAs with maximum flexibility in setting utility allowances for RAD PBV, traditional PBV, and HCV, noting that the statute is not very proscriptive. Another commenter stated that HUD should allow all of these programs to use the same utility allowance. A commenter stated that allowing project owners and PHAs to utilize project-specific UAs at traditional PBV properties will streamline policies between RAD PBV units and traditional PBV units and will streamline UA requirements between traditional PBV units and HOME program requirements which are incompatible and require regulatory waiver.
Many commenters supported HUD allowing project-specific UAs. Some commenters said PHAs should have maximum flexibility in setting project-specific UAs, while others recommended HUD issue more requirements to ensure project-specific UAs do not negatively impact families. Commenters stated that project-specific UA schedules would eliminate conflicts with other funding sources, including HOME. One commenter recommended that PHAs have the discretion to allow project-specific UAs on a case-by-case basis or throughout their HCV program to ensure families neither experience an undue cost nor are discouraged from conserving energy.
Commenters stated that any requirement to implement site-specific UAs would be administratively burdensome for the PHA, stating that it would not streamline requirements across programs and that PHAs' SEMAP scores may be negatively impacted due to difficulties in applying the correct UA schedule. Commenters stated that HUD's efforts to reduce program expenditures and promote energy efficiency need to be consistent with statutory tenant affordability protections. Another commenter noted that HUD has not provided evidence that reduced UAs will promote energy conservation and that the relationship between reducing UAs and avoiding wasteful consumption is tenuous considering the relative inelasticity of demand for energy among low-income households.
Another commenter stated that while a project-specific UA is appropriate in instances where another housing program has established an alternative EEUA, the standard should be based on accuracy and not whether allowances would create an undue cost on families or discourage efficient use of HAP funds. A commenter recommended that HUD should remove the requirement to have PHAs update UA schedules when there is a rate change of 10 percent or more; streamlining would be achieved if the local HUD field office performs the UA analysis for their respective geographic areas. Another commenter proposed that HUD issue UAs based on locality like FMRs.
Commenters recommended that HUD delay making this provision effective until it can issue further guidance providing specific standards and requirements for developing the project-specific UAs and how to ensure tenants are not negatively impacted and allowing for public comment. Commenters additionally expressed that using average consumption of the dataset is unreasonable for low-income tenants because it results in effectively 50 percent of the tenants receiving a UA that is too low. Commenters also supported consideration of the impact of time-of-use rate plans and tenants with special needs or larger families, which require higher consumption for special equipment or because tenants spend more time at home. Project-specific UAs that are determined based on an engineering analysis need to be carefully reviewed and subject to a periodic adjustment to ensure they reflect actual costs in the project. This commenter recommended HUD apply the same methodology for multifamily properties, which uses actual consumption data. One commenter recommended that HUD's approval process include adequate notice and comment for PBV tenants affected by any PHA proposal submitted to HUD, as well as require that PBV tenants timely complete supporting information, and receive adequate time for analysis (at least 60 days), because the data complexity will usually require additional expertise.
One commenter stated that there should be no need for a PHA to engage another independent entity to approve proposed project-specific UAs, as HUD's independent review and approval should be sufficient to avoid a conflict of interest.
Many suggestions were made on how to protect participant families from having a project-specific UA that is too low. HUD agrees that further protections are needed to ensure that families are not negatively impacted. HUD clarified under § 983.301(f)(4) that § 982.517(c) applies and an annual review of rates is required. HUD added that PHAs must review project-specific UAs after one year if they were not based on actual consumption data. Additional time is required to develop a process that ensures PHAs and PBV property owners are adequately considering the impact of project-specific UAs on families. HUD will continue to process these requests as waivers at HUD Headquarters until more guidance is issued via notice.
HUD appreciates the commenter's suggestion that PHAs should have the flexibility to apply project-specific or case-specific UAs for any HCV tenant, but this policy would be very difficult to manage and even more difficult to provide effective oversight. UAs provide for some adjustments through specific policies without creating a separate utility allowance for every HCV participant. Families that have additional utility allowance needs due to individual circumstances related to a disability are always able to request a reasonable accommodation (§ 982.517(e)). This applies to participants in the project-based and tenant-based programs. HUD is amending this final rule to clarify that reasonable accommodation UAs will not impact the determination of the contract rent for project-based units. Instead, the cap on contract rent will be determined using the appropriate area-wide UA (§ 983.301(f)(5)).
HUD has removed the regulatory requirement in § 983.301(g) that PHAs have an independent entity determine the project-specific UA for PHA-owned units. HUD will establish requirements for project-specific UAs in PHA-owned units in a
A commenter suggested HUD clarify § 983.301(b)(1) by including that the rent to owner can differ from the PHA's payment standard for the HCV program, as the statute specifies, since many
Commenters supported implementing the HOTMA provisions allowing an owner to request additional changes up to the statutory maximum if the OCAF is insufficient because these changes would help make PBV projects more competitive. A commenter suggested HUD consider this limit to be duplicative, because rent reasonableness standards must still be met, in effect keeping the rent amount in check. Another commenter stated that owners subject to OCAF should have the benefit of having the full OCAF percentage applied to better manage operations and improve on a property's ability to cover existing debt, and that further reducing the applicable percentage increase to properties puts additional financial strain on owners.
Commenters recommended a “lesser of” test, like that used in the Mod Rehab program, of OCAF or 110 percent of FMR. A commenter suggested PHAs should have sole discretion to choose OCAF or 110 percent of FMR, if HUD determines that the PBV rent increase amount should be discretionary. A commenter recommended HUD treat OCAF adjustments in a traditional PBV context the same as it would in a RAD PBV context and as permitted elsewhere for properties with HUD section 8 contracts. This commenter noted that OCAF adjustments applied elsewhere in the PBV program should not be arbitrarily capped by the FMR and SAFMR established by HUD. The commenter also encouraged HUD to explore ways in which the FMRs and SAFMRs can be better aligned with rent reasonableness assessments to ensure that FMRs and SAFMRs are able to keep up with the OCAF adjustments that properties receive, which would avoid this problem altogether.
A commenter suggested providing the option of OCAF adjustments to those units that are not otherwise regulated by local rent increase regulations or any other regulatory agreement.
A commenter supported the inclusion of OCAF rent increases as a discretionary option for PHAs. One commenter stated that PHAs would risk funding shortfalls if they guaranteed annual rent adjustment, and some owners may not request an increase every year, which benefits the PHA because it allows for those funds to be used elsewhere and for units in higher-cost areas.
One commenter recommended that HUD also clarify proposed § 983.302(b)(2)(ii)(B) to state that periodic adjustments above the OCAF-adjusted rent level may be less frequently than annually. This commenter also suggested that the contract specify how frequently a PHA must consider such requests if made by the owner, because allowing increases annually, beyond the OCAF level, would undermine the time- and cost-saving purpose of using an OCAF.
One commenter supported HUD's proposal to allow PHAs to reduce PBV rents below the initial rent to owner at any time during the HAP contract. The commenter further urged HUD to provide PHAs the tools to rectify unintended negative consequences stemming from an unestablished floor for rents and PBV rents falling below their initial rents, harming the initial underwriting.
One commenter recommended modifying PBV affordability terms to 30-year contracts to mirror HTF to address the incompatibility between affordability requirements as well as remove the challenge in obtaining financing.
Other commenters supported HTF requirements conforming to the HCV/PBV requirements, rather than the opposite. A commenter encouraged HUD to work with state HTF funding recipients to incorporate preferences and/or additional points in the HTF Allocation Plans for applicants that seek to couple the receipt of HTF funds with section 8 project-based vouchers. This commenter also supported streamlining environmental review requirements under § 983.301(f) and substantial rehab/new construction through parts 50 and 58, as well as HUD allowing a single environmental review to satisfy the requirements for both HTF and the PBV program. The commenter stated that the proposed suggestion is needed because of HUD's increased flexibility due to the absence of a HTF statutory environmental review requirement. Furthermore, the commenter stated that the current requirements often result in projects receiving HTF and PBV funding to undergo separate and duplicative environmental reviews.
Another commenter suggested that additional vouchers be made available to communities that offer resources for low-income households, including access to public transportation and jobs, where rents are prohibitive. This commenter also suggested using a voucher pool to connect developments that have HTF investments to bring development and operation funding to create more opportunities.
Amendments to the HTF program requirements are beyond the scope of this rulemaking. Nonetheless, where the State is selecting HTF applications submitted by eligible recipients, HUD notes that the HTF Allocation Plan requires HTF grantees to provide priority for funding for projects with Federal project-based rental assistance. See 24 CFR 91.320(k)(5). The underlying PBV environmental review requirements generally are statutory; HUD cannot unilaterally amend the applicability of NEPA and other laws and executive orders. HUD notes that the HTF environmental provisions are outcome-based and exclude certain consultation procedures that are otherwise required for environmental reviews under 24 CFR parts 50 and 58. HUD intends to consider these comments for future collaborations with the HTF program.
HUD allocates funding that can be used for project-based vouchers at the PHA's discretion. How PBV funding is allocated is an essential program requirement and revising it is beyond the scope of this rulemaking. See response below to Question 43 for additional information on how PBV works and is funded.
Commenters suggested that HUD create a new regulatory provision governing the transfer of assistance. One commenter suggested that HUD should allow both partial and full transfer of PBV assistance from one project to another. Other commenters suggested that the transfer be a voluntary agreement modeled after the PBRA provision. Some commenters stated that HUD should keep the transfer of assistance process as clear and simple as possible, as it has progressively become overregulated, with two of these commenters citing specifically the environmental review process and the inspection process. One commenter stated that the local PHAs can and should make the appropriate policy regarding when PBV assistance, which they awarded and oversee, can be transferred to another property.
A commenter stated that PHAs should continue to use their vouchers awarded in connection with the Rental Assistance Demonstration (RAD) where appropriate and in compliance with the HAP contract. Another commenter stated that additional regulatory provisions are not required to govern transfers of HAP contracts because PHAs will not experience a reduction in Annual Contributions Contract (ACC) authorized units when terminating a PBV HAP contract; instead, HUD should address needs on a case-by-case basis. This commenter also stated that HUD should eliminate the 1-year notice of termination when PBV assistance is relocated without a gap in subsidy, so long as any relocation is conducted in accordance with applicable Federal requirements.
One commenter recommended defining a RAD project based on its funding stream or ownership structure, rather than lots or sites. One commenter also recommended that HUD allow PHAs flexibility to develop new PBV or public housing units if it does not exceed its Faircloth limit.
A commenter suggested that regulations governing RAD transfers of assistance consider the following factors: (1) placing proposed transfers of assistance in the PHA Annual or MTW Plan and ensuring consistency with the Consolidated Plan as well as improving the resident notification and consultation requirements triggered with a transfer of assistance and having each transfer meet the notice and comment requirements; (2) transfers of assistance must receive certificates of compliance for fair housing and civil rights requirements and undergo multiple reviews such as: HUD's civil rights review, review for compliance with site selection standards under § 983.55, 8(bb), poverty concentration standards, change in number of units, availability of accessible units or units for families with children, change in admission preferences, relocation, and change in income eligibility; (3) explicitly prohibiting re-screening tenants for factors such as criminal history and credit scores as well as not applying new screening criteria to a family coming from public housing and prohibiting unreasonable screening criteria in subsequent recertifications; (4) prohibiting PHAs from changing unit type or size without the written consent of the individual tenants; (5) refusing involuntary permanent relocation, however explicitly stating the voluntary relocation processes, including the option to select a public housing unit of the PHA, and the PHA/owner must document compliance with Uniform Relocation Act (URA) and RAD relocation rights and publicize those records to HUD upon request; (6) HUD should closely evaluate and promulgate specific rules for transfers of assistance far from the current RAD site, and consider whether the distance would impose a significant burden on residents' access to existing employment, transportation options, schooling or other critical services, and whether the transfer advances or impedes fair housing and de-concentration goals; and (7) section 3 obligations once transfers are combined with rehabilitation and new construction.
HUD has reviewed the suggestions that transfer of assistance be modeled on Project-Based Rental Assistance (PBRA) transfers and determined that parallel conditions, namely with respect to HUD oversight and funding authority, do not exist in the PBV program that would enable use of the same process. Additionally, HUD does not have the statutory authority to alter several provisions of part 983 to facilitate a transfer of PBV assistance as other commenters suggested. These provisions include environmental review, inspection, and the one-year notice of contract termination. HUD notes that, aside from this statutory limitation, these aspects of the PBV program are critical elements to the purpose and functionality of the PBV program and to ensuring PBV tenants reside in decent, safe, and sanitary housing.
HUD notes that the provisions for RAD transfer of assistance, and other RAD requirements, continue to be located in the governing notices for the RAD program and are not altered by this final rule. HUD finds it inappropriate to codify in part 983 the alternative provisions created pursuant to waiver authority specific to the Demonstration. HUD encourages commenters wishing to revise the RAD requirements to respond to requests for comment on RAD provisions in the
Commenters suggested that HUD condition its funding to localities that reduce local barriers against expensive projects and provide funding only if local governments provide local fee reductions for affordable housing or adopt by-right zoning.
One commenter recommended that HUD increase the allocation of PBVs that PHAs could apply for. This commenter also suggested making the applications for the new PBVs available to jurisdictions that demonstrate that they are reducing local regulatory burden such as permitting streamlining, fee waivers, and caps on local developer fees, to incentivize decreased development and production cost.
Another commenter suggested that HUD should not consider any policies relating to PBVs designed to incentivize communities to reduce local regulatory barriers to development and production of housing. Instead, the commenter proposed that local housing authorities should be allowed to implement PBVs based on their local conditions. This commenter suggested that HUD use direct rewards and other programs relating to those municipal jurisdictions as an incentive to change local rules, instead of using the PHA as the middleman.
One commenter had the following typographical corrections: corrected § 983.5(3) to cite to § 983.154(e) and not § 983.155(e), which does not exist; corrected the reference in § 983.52(d) to § 983.155(e), which should be to § 983.154(e); suggested HUD use “new” instead of “newly” in § 983.12(a) and elsewhere for consistency; in § 983.59(a), suggested HUD delete “for exclusion” to avoid redundancy; in § 983.59(e), corrected two references to “program limitation” that should be “program cap;” and in § 983.204(d)(2)(iii), this commenter suggested replacing “PHA functions in accordance” with “PHA functions identified in.”
One commenter suggested that HUD allow PHAs to convert public housing to PBV without HCV to retain the PBVs, for ACC unit consistency and to benefit PHAs going through the RAD process.
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory
Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and, therefore, subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the order. Executive Order 14094 (Modernizing Regulatory Review) amends section 3(f) of Executive Order 12866, among other things.
This final rule would update HUD's regulations for the HCV and PBV programs to conform to changes made by HOTMA. These changes include alternatives to HUD's HQS inspection requirement, establishing a statutory definition of PHA-owned housing, and other elements of both programs, ranging from owner proposal selection procedures to how participants are selected. In addition to implementing these HOTMA provisions, HUD has included changes that are intended to reduce the burden on public housing agencies, by either modifying requirements or simplifying and clarifying existing regulatory language.
This final rule was determined to be a significant regulatory action under section 3(f) of Executive Order 12866 (although not an economically significant regulatory action under the Order). HUD has prepared a Regulatory Impact Analysis (RIA) that addresses the costs and benefits of this final rule. HUD's RIA is part of the docket file for this rule, which is available for public inspection at
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601
For purposes of this rule, HUD defines a small PHA as a PHA for which the sum of the number of public housing dwelling units administered by the agency and the number of vouchers is 550 or fewer. There are approximately 2,700 such agencies; some are voucher-only, some are combined, some are public housing-only. HUD includes all of these agencies among the number that could be affected by the proposed rule. For those that operate voucher programs, the potential to be affected is evident. For public housing-only agencies, the potential effect of this final rule depends on whether the agency removes its public housing from the public housing program via one of the available legal removal tools, then project-bases any tenant protection vouchers awarded in connection with that removal.
This final rule revises HUD regulations to reduce the burden on or provide flexibility for all PHAs, owners, and other responsible entities, irrespective of whether they are small entities. For example, this final rule leverages Small Area Fair Market Rents to provide PHAs with greater autonomy in setting exception payment standard amounts. It will implement HOTMA's exceptions to the program and project caps under the PBV program, such as authorizing a PHA to project-base 100 percent of the units in any project with 25 units or fewer. It extends from 15 to 20 years the permissible duration of a PBV HAP contract, resulting in less frequent need for extensions, and eliminates the three-year window during which units may be added to an existing contract without a PHA issuing a new request for proposals (RFP). The rule will eliminate extraneous requirements specific to the project-basing of HUD-VASH and FUP vouchers, if project-basing is done consistent with PBV program rules. It will provide PHAs with greater flexibility in the establishment of utility allowance schedules. It will also implement new discretionary authority for a PHA to enter into a PBV HAP contract with an owner for housing that is newly constructed or recently rehabilitated, as long as PBV program rules are followed, even if construction or rehabilitation commenced prior to the PHA issuing an RFP. HUD estimates that such changes have the potential to generate a range of cost savings but is unable to estimate the number of small entities that would experience cost savings as a result of changes proposed by this rule, as such savings depend largely on actions that PHAs will take (or not) at their own discretion.
For the reasons presented, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities.
The information collection requirements contained in this final rule have been submitted to the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2577-0226. In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information, unless the collection displays a currently valid OMB control number.
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. This final rule will not impose any Federal mandates on any State, local, or tribal governments or the private sector within the meaning of UMRA.
A Finding of No Significant Impact (FONSI) with respect to the environment has been made in accordance with HUD regulations in 24 CFR part 50 that implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is available online at
Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial direct compliance costs on State and local governments and is not required by statute, or the rule preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This final rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments nor preempt State law within the meaning of the Executive Order.
Administrative practice and procedure, Aged, Claims, Crime, Government contracts, Grant programs-housing and community development, Individuals with disabilities, Intergovernmental relations, Loan programs-housing and community development, Low and moderate income housing, Mortgage insurance, Penalties, Pets, Public housing, Rent subsidies, Reporting and recordkeeping requirements, Social security, Unemployment compensation, Wages.
Administrative practice and procedure, Civil rights, Equal employment opportunity, Grant programs-housing and community development, Individuals with disabilities, Loan programs-housing and community development, Reporting and recordkeeping requirements.
Administrative practice and procedure, Grant programs, Loan programs, Manufactured homes, Rates and fares, Relocation assistance, and Reporting and recordkeeping requirements.
Environmental impact statements.
Aged, Grant programs-housing and community development, Homeless, Individuals with disabilities, Low and moderate income housing, and Reporting and recordkeeping requirements.
Administrative practice and procedure, Low and moderate income housing, Manufactured homes, Rent subsidies, Reporting and recordkeeping requirements.
Administrative practice and procedure, Grant programs-housing and community development, Low and moderate income housing, Manufactured homes, Rent subsidies, Reporting and recordkeeping requirements.
Grant programs-housing and community development, Loan programs-housing and community development, Low and moderate income housing, and Rent subsidies.
Loan programs-housing and community development, Low and moderate income housing, Mortgage insurance, and Reporting and recordkeeping requirements.
Grant programs-housing and community development, Homeless, Lead poisoning, Manufactured homes, Rent subsidies, and Reporting and recordkeeping requirements.
Grant programs-housing and community development, rent subsidies.
Aged, Grant programs-housing and community development, Individuals with disabilities, Loan programs-housing and community development, Low and moderate income housing, Public assistance programs, Rent subsidies, and Reporting and recordkeeping requirements.
Administrative practice and procedure, Public housing, Reporting and recordkeeping requirements.
Computer technology, Grant programs-housing and community development, Rent subsidies, and Reporting and recordkeeping requirements.
Public Housing and Reporting and recordkeeping requirements.
Aged, Grant programs-housing and community development, Individuals with disabilities, Public housing, Reporting and recordkeeping requirements.
Aged, Grant programs-housing and community development, Individuals with disabilities, Pets, and Public housing.
Grant programs-housing and community development, Public housing, Reporting and recordkeeping requirements.
Grant programs-housing and community development, Grant programs-Indians, Indians, Public housing, Rent subsidies, Reporting and recordkeeping requirements.
Grant programs-housing and community development, Low and moderate income housing, Rent subsidies, Reporting and recordkeeping requirements.
Grant programs-housing and community development, Public housing, Rent subsidies, Reporting and recordkeeping requirements.
Aged, Community development block grants, Grant programs-housing and community development, Grant programs-Indians, Indians, Individuals with disabilities, Public housing, Reporting and recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, HUD amends 24 CFR parts 5, 8, 42, 50, 91, 92, 93, 247, 290, 882, 888, 891, 903, 908, 943, 945, 972, 982, 983, 985, and 1000 as follows:
12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437f, 1437n, 3535(d); 42 U.S.C. 2000bb
(1) For the Section 235 Program, the mortgagee.
(2) For Public Housing, the Section 8 Rental Voucher, and the Section 8 Moderate Rehabilitation programs, the PHA administering the program under an ACC with HUD.
(1) For the Section 235 Program, the mortgagee.
(2) For Public Housing, the Section 8 Rental Voucher, and the Section 8 Moderate Rehabilitation programs, the PHA administering the program under an ACC with HUD.
29 U.S.C. 794; 42 U.S.C. 3535(d) and 5309.
The revisions read as follows:
(a) * * *
(5) If necessary as a reasonable accommodation for a person with disabilities, approve a family request for an exception payment standard under § 982.503(d)(5) for a regular tenancy under the Section 8 voucher program so that the program is readily accessible to and usable by persons with disabilities.
42 U.S.C. 3535(d), 4601, 5304, and 12705(b).
42 U.S.C. 3535(d) and 4321-4335; and Executive Order 11991, 3 CFR, 1977 Comp., p. 123.
42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-11388, 12701-12711, 12741-12756, and 12901-12912.
42 U.S.C. 3535(d) and 12701-12839, 12 U.S.C. 1701x.
42 U.S.C. 3535(d), 12 U.S.C. 4568.
12 U.S.C. 1701q, 1701s, 1715b, 1715l, and 1715z-1; 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).
12 U.S.C. 1701z-11, 1701z-12, 1713, 1715b, 1715z-1b, 1715z-11a; 42 U.S.C. 3535(d) and 3535(i).
The purchaser of any multifamily housing project shall not refuse unreasonably to lease a dwelling unit offered for rent, offer to sell cooperative stock, or otherwise discriminate in the terms of tenancy or cooperative purchase and sale because any tenant or purchaser is the holder of a Voucher under Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f), or any successor legislation. The purchaser's agreement to this condition must be contained in any contract of sale and also may be contained in any regulatory agreement, use agreement, or deed entered into in connection with the disposition.
42 U.S.C. 1437f and 3535(d).
42 U.S.C. 1437f and 3535d.
The revisions read as follows:
(a)
(c) * * *
(3) If a metropolitan area meets the criteria of paragraph (c)(1) of this section, Small Area FMRs will apply to the metropolitan area and all PHAs administering HCV programs in that area will be required to use Small Area FMRs. A PHA administering an HCV program in either a metropolitan area not subject to the application of Small Area FMRs or in a non-metropolitan area for which HUD publishes Small Area FMRs may choose to use Small Area FMRs after notification to HUD. A PHA that exercises this option in one metropolitan area or non-metropolitan county is not required to exercise this option in other metropolitan areas or non-metropolitan counties.
(h)
(1) Where the proposal or project selection date under 24 CFR 983.51(g) was on or before the effective dates of either or both the Small Area FMR designation/implementation and the PHA administrative policy, the PHA and owner may mutually agree to apply the Small Area FMR. The application of the Small Area FMRs must be prospective and consistent with the PHA Administrative Plan. The owner and PHA may not subsequently choose to revert back to the use of the metropolitan-wide or county-wide FMRs for the PBV project. If the rent to owner will increase as a result of the mutual agreement to apply the Small Area FMRs to the PBV project, the rent increase shall not be effective until the next annual anniversary of the HAP contract in accordance with 24 CFR 983.302(b).
(2) Where the proposal or project selection date under 24 CFR 983.51(g) was after the effective dates of both the Small Area FMR designation/implementation and the PHA administrative policy, the Small Area FMRs shall apply to the PBV project if the PHA Administrative Plan provides that Small Area FMRs are used for all future PBV projects. If the PHA chooses to implement this administrative policy, the Small Area FMRs must apply to all future PBV projects located within the same metropolitan area or non-metropolitan county where the Small Area FMRs are in effect for the PHA's HCV program. An owner and the PHA may not subsequently choose to apply the metropolitan area or county FMR to the project, regardless of whether the PHA subsequently changes its Administrative Plan to revert to the use of metropolitan-wide or county-wide FMR for future PBV projects.
(3) For purposes of this section, the term “effective date of the Small Area FMR designation” means:
(i) The date that HUD designated a metropolitan area as a Small Area FMR area; or
(ii) The date that HUD approved a PHA request to voluntarily opt to use Small Area FMRs for its HCV program, as applicable.
(4) For purposes of this section, the term “effective date of the PHA administrative policy” means the date the administrative policy was formally adopted as part of the PHA administrative plan by the PHA Board of Commissioners or other authorized PHA officials in accordance with § 982.54(a).
(i) * * *
(3) HUD will calculate the 50th percentile rents for certain metropolitan areas for this purpose. * * *
12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.
42 U.S.C. 1437c; 42 U.S.C. 1437c-1; Pub. L. 110-289; 42 U.S.C. 3535d.
(a) * * *
(2) * * *
(i) Section 8 assistance (tenant-based assistance (24 CFR part 982) and project-based assistance (24 CFR part 983) under Section 8(o) of the U.S. Housing Act of 1937, 42 U.S.C. 1437f(o)); or
(c) If a PHA intends to select one or more projects for project-based assistance without competition in accordance with § 983.51(c), the PHA must include a statement of this intent in its 5-Year Plan (or an amendment to the 5-Year Plan) in order to notify the public prior to making a noncompetitive selection.
The revisions and addition read as follows:
(a) * * *
(1) This statement must address the housing needs of the low-income and very low-income families who reside in the jurisdiction served by the PHA, and other families who are on the public housing and Section 8 tenant-based and project-based assistance waiting lists, including:
(b) * * *
(3)
(c)
(d)
(e) * * *
(4) The information requested on a PHA's rules, standards and policies regarding management and maintenance of housing applies only to public housing. The information requested on PHA program management and listing of administered programs applies to public housing, tenant-based assistance, and project-based assistance.
(l) * * *
(1) * * *
(iii) How the PHA will comply with the requirements of section 12(c) and (d) of the 1937 Act (42 U.S.C. 1437j(c) and (d)). These statutory provisions relate to community service by public housing residents and treatment of income changes in public housing, tenant-based assistance, and project-based assistance recipients resulting from welfare program requirements. PHAs must address any cooperation agreements, as described in section 12(d)(7) of the 1937 Act (42 U.S.C. 1437j(d)(7)), that the PHA has entered into or plans to enter into.
(2) The information required by paragraph (l) of this section is applicable to public housing, tenant-based assistance, and project-based assistance, except that the information regarding the PHA's compliance with the community service requirement applies only to public housing.
(r)
The revisions read as follows:
(b)
(c) * * *
(1) The information required by § 903.7(g) and (o) and, if applicable, § 903.7(b)(2) with respect to site-based waiting lists, § 903.7(k)(1)(i) with respect to homeownership programs under Section 8(y) of the 1937 Act, and § 903.7(r) with respect to participation in the project-based assistance program;
(c)
42 U.S.C. 1437f, 3535(d), 3543, 3544, and 3608a.
42 U.S.C. 1437k and 3535(d).
42 U.S.C. 1473e and 3535(d).
42 U.S.C. 1437a, 1437c, 1437d, 1437n, 1437z-3, and 3535(d).
(c)
42 U.S.C. 1437t, 1437z-5, and 3535(d).
42 U.S.C. 1437f and 3535(d).
The revisions and additions read as follows:
(a)
(2) The following terms are defined in 24 CFR part 5, subpart D: Disabled family, Elderly family, Near-elderly family, and Person with disabilities.
(3) The following terms are defined in 24 CFR part 5, subpart F: Adjusted income, Annual income, Extremely low income family, Total tenant payment, Utility allowance, and Welfare assistance.
(b) * * *
(ii) A HUD-approved entity that is autonomous and recognized under State law as a separate legal entity from the PHA. The entity must not be connected financially (except regarding compensation for services performed for PHA-owned units) or in any other manner that could result in the PHA improperly influencing the entity.
(A) Owned by the PHA (including having a controlling interest in the entity that owns the project);
(B) Owned by an entity wholly controlled by the PHA; or
(C) Owned by a limited liability company or limited partnership in which the PHA (or an entity wholly controlled by the PHA) holds a controlling interest in the managing member or general partner.
(ii) A controlling interest is:
(A) Holding more than 50 percent of the stock of any corporation;
(B) Having the power to appoint more than 50 percent of the members of the board of directors of a non-stock corporation (such as a nonprofit corporation);
(C) Where more than 50 percent of the members of the board of directors of any corporation also serve as directors, officers, or employees of the PHA;
(D) Holding more than 50 percent of all managing member interests in an LLC;
(E) Holding more than 50 percent of all general partner interests in a partnership; or
(F) Equivalent levels of control in other ownership structures.
The revisions and additions read as follows:
(d) The PHA Administrative Plan must cover all the PHA's local policies for administration of the program, including the PHA's policies on the following subjects (see 24 CFR 983.10 for a list of subjects specific to the project-based voucher (PBV) program that also must be included in the Administrative Plan of a PHA that operates a PBV program):
(4) * * *
(iii) Standards for denying admission or terminating assistance based on criminal activity or alcohol abuse in accordance with § 982.553, or other factors in accordance with §§ 982.552, 982.554, and 982.555; and
(iv) Policies concerning residency by a foster child, foster adult, or live-in aide, including defining when PHA consent for occupancy by a foster child, foster adult, or live-in aide must be given or may be denied;
(14) Payment standard policies, including:
(i) The process for establishing and revising payment standards, including whether the PHA has voluntarily adopted the use of Small Area Fair Market Rents (SAFMRs);
(ii) A description of how the PHA will administer decreases in the payment standard amount for a family continuing to reside in a unit for which the family is receiving assistance (see § 982.505(c)(3)); and
(iii) If the PHA establishes different payment standard amounts for designated areas within its jurisdiction, including exception areas, the criteria used to determine the designated areas and the payment standard amounts for those designated areas. (See § 982.503(a)(2)). All such areas must be described in the PHA's Administrative Plan or payment standard schedule;
(18) Policies concerning interim redeterminations of family income and composition, the frequency of determinations of family income, and income-determination practices, including whether the PHA will accept a family declaration of assets;
(21) Procedural guidelines and performance standards for conducting required HQS inspections, including:
(i) Any deficiency that the PHA has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency.
(ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option:
(A) The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections.
(B) The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected.
(C) The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS.
(iii) For PHAs that adopt the alternative inspection provision:
(A) The PHA's policy on how it will apply the provision to initial and periodic inspections.
(B) The specific alternative inspection method used by the PHA.
(C) The specific properties or types of properties where the alternative inspection method will be employed.
(D) For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(iv) The PHA's policy on charging a reinspection fee to owners.
(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1));
(23) The PHA's policy on assisting families with relocating and finding a new unit (see § 982.404(e)(3));
(24) The PHA's policy on screening of applicants for family behavior or suitability for tenancy;
(25) Whether the PHA will permit a family to submit more than one Request for Tenancy Approval at a time (see § 982.302(b)); and
(26) In the event of insufficient funding, taking into account any cost-savings measures taken by the PHA, a description of the factors the PHA will consider when determining which HAP contracts to terminate first (
The revisions, addition, and republication read as follows:
(a)
(1) The briefing must include information on the following subjects:
(i) A description of how the program works;
(ii) Family and owner responsibilities;
(iii) Where the family may lease a unit, including renting a dwelling unit inside or outside the PHA jurisdiction, and any information on selecting a unit that HUD provides;
(iv) An explanation of how portability works; and
(v) An explanation of the advantages of areas that do not have a high concentration of low-income families.
(2) The PHA may not discourage the family from choosing to live anywhere in the PHA jurisdiction, or outside the PHA jurisdiction under portability procedures, unless otherwise expressly authorized by statute, regulation, PIH Notice, or court order. The family must be informed of how portability may affect the family's assistance through screening, subsidy standards, payment standards, and any other elements of the portability process which may affect the family's assistance.
(3) The PHA must take appropriate steps to ensure effective communication in accordance with 24 CFR 8.6 and 28 CFR part 35, subpart E, and must provide information on the reasonable accommodation process.
(b) * * *
(8) PHA subsidy standards, including when the PHA will consider granting exceptions to the standards as allowed by 24 CFR 982.402(b)(8), and when exceptions are required as a reasonable accommodation for persons with disabilities under Section 504, the Fair Housing Act, or the Americans with Disabilities Act;
(10) Information on Federal, State, and local equal opportunity laws, the contact information for the Section 504 coordinator, a copy of the housing discrimination complaint form, and information on how to request a reasonable accommodation or modification (including information on requesting exception payment standards as a reasonable accommodation) under Section 504, the Fair Housing Act, and the Americans with Disabilities Act;
(12) Notice that if the family includes a person with disabilities, the PHA is subject to the requirement under 24 CFR 8.28(a)(3) to provide a current listing of accessible units known to the PHA and, if necessary, other assistance in locating an available accessible dwelling unit;
(14) The advantages of areas that do not have a high concentration of low-income families which may include, access to accessible and high-quality housing, transit, employment opportunities, educational opportunities, recreational facilities, public safety stations, retail services, and health services; and
(15) A description of when the PHA is required to give a participant family the opportunity for an informal hearing and how to request a hearing.
(c)
The revision and additions read as follows:
(a)
(b) * * *
(1) The following must be completed before the beginning of the initial term of the lease for a unit:
(2) The timeframes for inspection:
(ii) The 15-day clock (under paragraph (b)(2)(i) of this section) is suspended during any period when the unit is not available for inspection.
(3) If the PHA has implemented, and the unit is covered by, the alternative inspection option for initial inspections under § 982.406(e), the PHA is not subject to paragraphs (a)(2), (b)(1)(i), and (b)(2) of this section.
(c) * * *
(4) Any HAP contract executed after the 60-day period is void, and the PHA may not pay any housing assistance payment to the owner, unless there are extenuating circumstances that prevent or prevented the PHA from meeting the 60-day deadline, then the PHA may submit to the HUD field office a request for an extension. The request, which must be submitted no later than two weeks after the 60-day deadline, must include an explanation of the extenuating circumstances and any supporting documentation. HUD at its sole discretion will determine if the extension request is approved.
(f)
(i) The PHA may approve the assisted tenancy and execute the HAP contract, and
(ii) The beginning of the initial lease term.
(2) If the PHA has implemented, and determines that the unit is covered by, the non-life-threatening deficiencies option at § 982.405(j), the unit must be inspected by the PHA and must have no life-threatening deficiencies before:
(i) The PHA may approve the assisted tenancy and execute the HAP contract; and
(ii) The beginning of the initial lease term.
(3) If the PHA has implemented and determines that the unit is covered by the alternative inspection option at § 982.406(e), then the PHA must determine that the unit was inspected in the previous 24 months by an inspection that meets the requirements of § 982.406 before:
(i) The PHA may approve the assisted tenancy and execute the HAP contract; and
(ii) The beginning of the initial lease term.
(4) If the PHA has implemented and determines that the unit is covered by both the no life-threatening deficiencies option and the alternative inspection option, the unit is subject only to paragraph (f)(3) of this section, not paragraph (f)(2) of this section.
The revision reads as follows:
(b)
(i) The PHA must inform the family, both orally and in writing, that the family has the right to select any eligible unit available for lease.
(ii) A PHA-owned unit is freely selected by the family, without PHA pressure or steering.
(iii) The unit selected by the family is not ineligible housing.
(iv) During assisted occupancy, the family may not benefit from any form of housing subsidy that is prohibited under paragraph (c) of this section.
(v)(A) The PHA must obtain the services of an independent entity, as defined in § 982.4, to perform the following PHA functions as required under the program rule:
(
(
(
(B) The PHA may compensate the independent entity from PHA administrative fees (including fees credited to the administrative fee reserve) for the services performed by the independent entity. The PHA may not use other program receipts to compensate the independent entity for such services. The PHA and the independent entity may not charge the family any fee or charge for the services provided by the independent entity.
(2) [Reserved]
As defined in § 982.4, HQS refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703, including any variations approved by HUD for the PHA under 24 CFR 5.705(a)(3).
(a)
(2) If the owner fails to maintain the dwelling unit in accordance with HQS, the PHA must take enforcement action in accordance with this section.
(3) If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification. For other deficiencies, the owner must correct the deficiency within 30 calendar days of notification (or any reasonable PHA-approved extension).
(4) In the case of an HQS deficiency that the PHA determines is caused by the tenant, any member of the household, or any guest or other person under the tenant's control, other than
(b)
(i) The family fails to pay for any utilities that the owner is not required to pay for, but which are to be paid by the tenant;
(ii) The family fails to provide and maintain any appliances that the owner is not required to provide, but which are to be provided by the tenant; or
(iii) Any member of the household or guest damages the dwelling unit or premises (damages beyond ordinary wear and tear)
(2) If the PHA has waived the owner's responsibility to remedy the violation in accordance with paragraph (a)(4) of this section, the following applies:
(i) If the HQS breach caused by the family is life-threatening, the family must take all steps permissible under the lease and State and local law to ensure the deficiency is corrected within 24 hours of notification.
(ii) For other family-caused deficiencies, the family must take all steps permissible under the lease and State and local law to ensure that the deficiency is corrected within 30 calendar days of notification (or any PHA-approved extension).
(3) If the family has caused a breach of the HQS, the PHA must take prompt and vigorous action to enforce the family obligations. The PHA may terminate assistance for the family in accordance with § 982.552.
(c)
(1) The PHA or authorized inspector determines the unit has HQS deficiencies based upon an inspection;
(2) The PHA notified the owner in writing of the unit HQS deficiencies; and
(3) The unit HQS deficiencies are not corrected in accordance with the timeframes established in paragraph (a)(3) of this section.
(d)
(1) A PHA may withhold assistance payments for units that have HQS deficiencies once the PHA has notified the owner in writing of the deficiencies. The PHA must identify in its Administrative Plan the conditions under which it will withhold HAP. If the unit is brought into compliance during the applicable cure period (within 24 hours of notification for life-threatening deficiencies and within 30 days of notification (or other reasonable period established by the PHA) for non-life-threatening deficiencies), the PHA:
(i) Must resume assistance payments; and
(ii) Must provide assistance payments to cover the time period for which the assistance payments were withheld.
(2)(i) The PHA must abate the HAP, including amounts that had been withheld, if the owner fails to make the repairs within the applicable cure period (within 24 hours of notification for life-threatening deficiencies and within 30 days of notification (or other reasonable period established by the PHA) for non-life-threatening deficiencies).
(ii) If a PHA abates the assistance payments under this paragraph, the PHA must notify the family and the owner that it is abating payments and that if the unit does not meet HQS within 60 days (or a reasonable longer period established by the PHA) after the determination of noncompliance in accordance with paragraph (c) of this section, the PHA will terminate the HAP contract for the unit, and the family will have to move if the family wishes to receive continued assistance. The PHA must issue the family its voucher to move at least 30 days prior to the termination of the HAP contract.
(3) An owner may not terminate the tenancy of any family due to the withholding or abatement of assistance under paragraph (a) of this section. During the period that assistance is abated, the family may terminate the tenancy by notifying the owner and the PHA. If the family chooses to terminate the tenancy, the HAP contract will automatically terminate on the effective date of the tenancy termination or the date the family vacates the unit, whichever is earlier. The PHA must promptly issue the family its voucher to move.
(4) If the family did not terminate the tenancy and the owner makes the repairs and the unit complies with HQS within 60 days (or a reasonable longer period established by the PHA) of the notice of abatement, the PHA must recommence payments to the owner. The PHA does not make any payments to the owner for the period of time that the payments were abated.
(5) If the owner fails to make the repairs within 60 days (or a reasonable longer period established by the PHA) of the notice of abatement, the PHA must terminate the HAP contract.
(e)
(2) If the family is unable to lease a new unit within the period provided by the PHA under paragraph (e)(1) of this section and the PHA owns or operates public housing, the PHA must offer, and, if accepted, provide the family a selection preference for an appropriate-size public housing unit that first becomes available for occupancy after the time period expires.
(3) PHAs may assist families relocating under this paragraph (e) in finding a new unit, including using up to 2 months of the withheld and abated assistance payments for costs directly associated with relocating to a new unit, including security deposits, temporary housing costs, or other reasonable moving costs as determined by the PHA based on their locality. If the PHA uses the withheld and abated assistance payments to assist with the family's relocation costs, the PHA must provide security deposit assistance to the family as necessary. PHAs must assist families with disabilities in locating available accessible units in accordance with 24 CFR 8.28(a)(3). If the family receives security deposit assistance from the PHA for the new unit, the PHA may require the family to remit the security deposit returned by the owner of the new unit at such time that the lease is terminated, up to the amount of the security deposit assistance provided by the PHA for that unit. The PHA must include in its Administrative Plan the policies it will implement for this provision.
(f)
(a)
(b)
(c)
(d)
(1)
(2)
(3)
(e)
(f)
(g)
(h)
(i)
(j)
(2) The PHA must notify the owner and the family if the NLT option is available for the unit selected by the family. After completing the inspection and determining there are no life-threatening deficiencies, the PHA provides both the owner and the family with a list of all the non-life-threatening deficiencies identified by the initial HQS inspection and, should the owner not complete the repairs within 30 days, the maximum amount of time the PHA will withhold HAP before abating assistance. The PHA must also inform the family that if the family accepts the unit and the owner fails to make the repairs within the cure period, which may not exceed 180 days from the effective date of the HAP contract, the PHA will terminate the HAP contract, and the family will have to move to another unit in order to receive voucher assistance. The family may choose to decline the unit based on the deficiencies and continue its housing search.
(3) If the family decides to lease the unit, the PHA and the owner execute the HAP contract, and the family enters into the assisted lease with the owner. The PHA commences making assistance payments to the owner.
(4) The owner must correct the deficiencies within 30 days from the effective date of the HAP contract. If the owner fails to correct the deficiencies within the 30-day cure period, the PHA must withhold the housing assistance payments until the owner makes the repairs and the PHA verifies the correction. Once the deficiencies are corrected, the PHA may use the withheld housing assistance payments to make payments for the period that payments were withheld.
(5) A PHA relying on the non-life-threatening inspection provision must identify in the PHA Administrative Plan all the optional policies identified in § 982.54(d)(21)(i) and (ii).
(6) The PHA establishes in the Administrative Plan:
(i) The maximum amount of time it will withhold payments if the owner fails to correct the deficiencies within the required cure period before abating payments; and
(ii) The date by which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(a)
(b)
(c)
(2) If a PHA wishes to rely on an inspection method other than a method listed in paragraph (c)(1) of this section, then, prior to amending its administrative plan, the PHA must submit to the Real Estate Assessment Center (REAC) a copy of the inspection method it wishes to use, along with its analysis of the inspection method that shows that the method “provides the same or greater protection to occupants of dwelling units” as would HQS.
(i) A PHA may rely upon such alternative inspection method only upon receiving approval from REAC to do so.
(ii) A PHA that uses an alternative inspection method approved under this paragraph must monitor changes to the standards and requirements applicable to such method. If any change is made to the alternative inspection method, then the PHA must submit to REAC a copy of the revised standards and requirements, along with a revised comparison to HQS. If the PHA or REAC determines that the revision would cause the alternative inspection to no longer meet or exceed HQS, then the PHA may no longer rely upon the alternative inspection method to comply with the inspection requirement at § 982.405(a) and (b).
(d)
(2) In order for a PHA to rely upon the results of an alternative inspection for purposes of an initial or periodic inspection, a property inspected pursuant to such method must meet the standards or requirements regarding housing quality or safety applicable to properties assisted under the program using the alternative inspection method. To make the determination of whether such standards or requirements are met, the PHA must adhere to the following procedures:
(i) If a property is inspected under an alternative inspection method, and the property receives a “pass” score, then the PHA may rely on that inspection.
(ii) If a property is inspected under an alternative inspection method, and the property receives a “fail” score, then the PHA may not rely on that inspection.
(iii) If a property is inspected under an alternative inspection method that does not employ a pass/fail determination—for example, in the case of a program where deficiencies are simply identified—then the PHA must review the list of deficiencies to determine whether any cited deficiency would have resulted in a “fail” score under HQS. If no such deficiency exists, then the PHA may rely on the inspection. If such a deficiency does exist, then the PHA may not rely on the inspection.
(3) Under any circumstance described in paragraph (d)(2) of this section in which a PHA is prohibited from relying on an alternative inspection method for a property, the PHA must, within a reasonable period of time, conduct an HQS inspection of any units in the property occupied by voucher program participants and follow HQS procedures to remedy any identified deficiencies.
(e)
(2) The PHA notifies the owner and the family that the unit selected by the family is eligible for the alternative inspection option. The PHA must provide the family with the PHA list of HQS deficiencies that are considered life-threatening as part of this notification. If the owner and family agree to the use of this option, the PHA approves the assisted tenancy, allows the family to enter into the lease agreement with the owner, and executes the HAP contract on the basis of the alternative inspection.
(3) The PHA must conduct an HQS inspection within 30 days of receiving the Request for Tenancy Approval. If the family reports a deficiency to the PHA prior to the PHA's HQS inspection, the PHA must inspect the unit within the time period required under § 982.405(d) or within 30 days of the effective date of the HAP contract, whichever time period ends first.
(4) The PHA must enter into the HAP contract with the owner before conducting the HQS inspection. The PHA may not make housing assistance payments to the owner until the PHA has inspected the unit.
(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract.
(6) The PHA establishes in the Administrative Plan:
(i) The maximum amount of time it will withhold payments if the owner does not correct the deficiencies within the required cure period before abating payments; and
(ii) The date by which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(f)
(2) The PHA must conduct an HQS inspection within 30 days after the family and owner submit a complete Request for Tenancy Approval. If the family reports a deficiency to the PHA prior to the PHA's HQS inspection, the PHA must inspect the unit within the time period required under § 982.405(d) or within 30 days of the effective date
(3) The PHA must enter into the HAP contract with the owner before conducting the HQS inspection. The PHA may not make housing assistance payments to the owner until the PHA has inspected the unit. If the unit passes the HQS inspection, the PHA commences making housing assistance payments to the owner and makes payments retroactive to the effective date of the HAP contract.
(4) If the unit fails the PHA's HQS inspection but has no life-threatening deficiencies, the PHA commences making housing assistance payments, which are made retroactive to the effective date of the HAP contract. The owner must correct the deficiencies within 30 days from the effective date of the HAP contract. If the owner fails to correct the deficiencies within the 30-day cure period, the PHA must withhold the housing assistance payments until the owner makes the repairs and the PHA verifies the correction. Once the unit is in compliance with HQS, the PHA may use the withheld housing assistance payments to make payments for the period that payments were withheld.
(5) If the unit does not pass the HQS inspection and has life-threatening deficiencies, the PHA may not commence making housing assistance payments to the owner until all the deficiencies have been corrected. The owner must correct all life-threatening deficiencies within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within 30 days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract.
(6) The PHA establishes in the Administrative Plan:
(i) The maximum amount of time it will withhold payments if the owner fails to correct the deficiencies within the required cure period before abating payments; and
(ii) The date by which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(g) Records retention. As with all other inspection reports, and as required by § 982.158(f)(4), reports for inspections conducted pursuant to an alternative inspection method must be obtained by the PHA. Such reports must be available for HUD inspection for at least three years from the date of the latest inspection.
The revision and additions read as follows:
(a)
(b)
(4)(i) The part of the rent to owner that is paid by the tenant may not be more than:
(c)
(1) Prior to execution of a HAP contract, the PHA must establish a separate legal entity to serve as the owner. That separate legal entity must execute the HAP contract with the PHA. The separate legal entity must have the legal capacity to lease units and must be one of the following:
(i) A non-profit affiliate or instrumentality of the PHA;
(ii) A limited liability corporation;
(iii) A limited partnership;
(iv) A corporation; or
(v) Any other legally acceptable entity recognized under State law.
(2) The PHA signs the HUD-prescribed PHA-owned certification covering a PHA-owned unit instead of executing the HAP contract for the PHA-owned unit. By signing the PHA-owned certification, the PHA certifies that it will fulfill all the required program responsibilities of the private owner under the HAP contract, and that it will also fulfill all of the program responsibilities required of the PHA for the PHA-owned unit.
(i) The PHA-owned certification serves as the equivalent of the HAP contract, and subjects the PHA, as owner, to all of the requirements of the HAP contract contained in part 982. Where the PHA has elected to use the PHA-owned certification, all references to the HAP contract throughout part 982 must be interpreted to be references to the PHA-owned certification.
(ii) The PHA must obtain the services of an independent entity to perform the required PHA functions identified in § 982.352(b)(1)(v)(A) before signing the PHA-owned certification.
(iii) The PHA may not use the PHA-owned certification if the PHA-owned unit is owned by a separate legal entity from the PHA (
(a)
(i) The HUD-published Small Area FMR for:
(A) Any metropolitan area designated as a Small Area FMR area by HUD in accordance with 24 CFR 888.113(c)(1).
(B) Any area where a PHA has notified HUD that the PHA will voluntarily use SAFMRs in accordance with 24 CFR 888.113(c)(3).
(ii) The HUD-published metropolitan FMR for any other metropolitan area.
(iii) The HUD-published FMR for any other non-metropolitan county.
(2) The PHA must adopt a payment standard schedule that establishes voucher payment standard amounts for each FMR area in the PHA jurisdiction. These payment standard amounts are used to calculate the monthly housing assistance payment for a family (§ 982.505).
(3) The PHA may designate payment standard areas within each FMR area. The PHA may establish different payment standard amounts for such designated areas. If the PHA designates payment standard areas, then it must include in its Administrative Plan the criteria used to determine the designated areas and the payment standard amounts for those areas.
(i) The PHA may designate payment standard areas within which payment standards will be established according to paragraph (c) (basic range) or paragraph (d) (exception payment standard), of this section.
(ii) A PHA-designated payment standard area may be no smaller than a census tract block group.
(b)
(c)
(1) The PHA may establish a payment standard amount within the basic range without HUD approval or prior notification to HUD.
(2) The PHA's basic range payment standard amount for each unit size may be based on the same percentage of the published FMR (
(3) The PHA must revise its payment standard amounts and schedule no later than 3 months following the effective date of the published FMR if revisions are necessary to stay within the basic range.
(d)
(1) The PHA may establish exception payment standard amounts for all units, or for units of a particular size. The exception payment standard may be established for a designated part of the FMR area (called an “exception area”) or for the entire FMR area. The exception area must meet the minimum area requirement at § 982.503(a)(3)(ii).
(2) A PHA that is not in a designated Small Area FMR area or has not opted voluntarily to implement Small Area FMRs under 24 CFR 888.113(c)(3) may establish exception payment standards for a ZIP code area that exceed the basic range for the metropolitan area or county FMR as long as the amounts established by the PHA do not exceed 110 percent of the HUD published SAFMR for the applicable ZIP code. The exception payment standard must apply to the entire ZIP code area. If an exception area crosses one or more FMR boundaries, then the maximum exception payment standard amount that a PHA may adopt for the exception area without HUD approval is 110 percent of the ZIP code area with the lowest SAFMR amount. If the PHA qualifies for an exception payment standard above 110 percent of the applicable FMR under paragraph (d)(3) or (4) of this section, it may establish exception payment standards up to the same percentage of the SAFMR for the applicable ZIP code.
(3) A PHA may establish exception payment standard amounts between 110 percent and 120 percent of the applicable FMR for such duration as HUD specifies by notice upon notification to HUD that the PHA meets at least one of the following criteria:
(i) Fewer than 75 percent of the families to whom the PHA issued tenant-based rental vouchers during the most recent 12-month period for which there is success rate data available have become participants in the voucher program;
(ii) More than 40 percent of families with tenant-based rental assistance administered by the agency pay more than 30 percent of adjusted income as the family share; or
(iii) Such other criteria as the Secretary establishes by notice.
(4) Except as provided in paragraphs (d)(2), (3), and (5) of this section, the PHA must request approval from HUD to establish an exception payment standard amount that exceeds 110 percent of the applicable FMR. In its request to HUD, the PHA must provide rental market data demonstrating that the requested exception payment standard amount is needed for families to access rental units. The rental market data must include a rent estimate for the entire FMR area compared with a rent estimate for the proposed exception area. To apply the exception payment standard to the entire FMR area, the rental market data provided by the PHA must also provide data that demonstrates that the annual percentage of rent inflation in the FMR area is greater than the rental inflation adjustment factor in the calculation of the published FMR. Once HUD has approved the exception payment standard for the requesting PHA, any other PHA with jurisdiction in the HUD approved exception payment standard area may also use the exception payment standard amount.
(5) If required as a reasonable accommodation in accordance with 24 CFR part 8 for a person with a disability, the PHA may establish, without HUD approval or prior notification to HUD, an exception payment standard amount for an individual family that does not exceed 120 percent of the applicable FMR. A PHA may establish a payment standard greater than 120 percent of the applicable FMR as a reasonable accommodation for a person with a disability in accordance with 24 CFR part 8, after requesting and receiving HUD approval.
(e)
(f)
(g)
(1) Such a PHA may obtain HUD Field Office approval of a payment standard amount based on the 50th percentile rent if the PHA scored the maximum number of points on the deconcentration bonus indicator in 24 CFR 985.3(h) in the prior year, or in two of the last three years.
(2) HUD approval of payment standard amounts based on the 50th percentile rent shall be for all unit sizes in the FMR area that had previously been set at the 50th percentile rent pursuant to 24 CFR 888.113(i)(3). A PHA may opt to establish a payment standard amount based on the 50th
(h)
(2) After such review, HUD may, at its discretion, require the PHA to modify payment standard amounts for any unit size on the PHA payment standard schedule. HUD may require the PHA to establish an increased payment standard amount within the basic range.
(c) Payment standard for family—(1)
(i) The payment standard amount for the family unit size; or
(ii) The payment standard amount for the size of the dwelling unit rented by the family.
(2)
(3)
(i) If the PHA chooses to reduce the payment standard amount used to calculate such a family's subsidy in accordance with its Administrative Plan, then the initial reduction to the family's payment standard amount may not be applied any earlier than two years following the effective date of the decrease in the payment standard, and then only if the family has received the notice required under paragraph (c)(3)(iii) of this section.
(ii) The PHA may choose to reduce the payment standard amount for the family to the current payment standard amount in effect on the PHA voucher payment standard schedule, or it may reduce the payment standard amount to an amount that is higher than the normally applicable payment standard amount on the PHA voucher payment standard schedule. After an initial reduction, the PHA may further reduce the payment standard amount for the family during the time the family resides in the unit, provided any subsequent reductions continue to result in a payment standard amount that meets or exceeds the normally applicable payment standard amount on the PHA voucher payment standard schedule.
(iii) The PHA must provide the family with at least 12 months' written notice of any reduction in the payment standard amount that will affect the family if the family remains in place. In the written notice, the PHA must state the new payment standard amount, explain that the family's new payment standard amount will be the greater of the amount listed in the current written notice or the new amount (if any) on the PHA's payment standard schedule at the end of the 12-month period, and make clear where the family will find the PHA's payment standard schedule.
(iv) The PHA must administer decreases in the payment standard amount for the family in accordance with the PHA policy as described in the PHA Administrative Plan.
(4)
(i) The effective date of an increase in the gross rent that would result in an increase in the family share;
(ii) The family's first regular or interim reexamination; or
(iii) One year following the effective date of the increase in the payment standard amount.
(5)
(6)
(a) * * *
(2) The PHA must provide a copy of the utility allowance schedule to HUD. * * *
(b)
(ii) In the utility allowance schedule, the PHA must classify utilities and other housing services according to the following general categories: space heating; air conditioning; cooking; water heating; water; sewer; trash collection (disposal of waste and refuse); other electric; refrigerator (cost of tenant-supplied refrigerator); range (cost of tenant-supplied range); applicable surcharges; and other specified housing services.
(iii) The PHA must provide a utility allowance for tenant-paid air-conditioning costs if the majority of housing units in the market provide centrally air-conditioned units or there is appropriate wiring for tenant-installed air conditioners.
(iv) The PHA may not provide any allowance for non-essential utility costs, such as costs of cable or satellite television.
(2)(i) The PHA must maintain an area-wide utility allowance schedule. The area-wide utility allowance schedule must be determined based on the typical cost of utilities and services paid by energy-conservative households that occupy housing of similar size and type in the same locality. In developing the schedule, the PHA must use normal patterns of consumption for the community as a whole and current utility rates.
(ii) The PHA may maintain an area-wide, energy-efficient utility allowance schedule to be used for units that are in a building that meets Leadership in
(iii) The PHA may base its utility allowance payments on actual flat fees charged by an owner for utilities that are billed directly by the owner, but only if the flat fee charged by the owner is no greater than the PHA's applicable utility allowance for the utilities covered by the fee. If an owner charges a flat fee for only some of the utilities, then the PHA must pay a separate allowance for any tenant-paid utilities that are not covered in the flat fee.
(iv) For tenant-based participants residing in units within a project that has an approved project-specific utility allowance under § 983.301(f)(4), the PHA must use the project-specific utility allowance schedule (see 24 CFR 983.301(f)(4)).
(v) The PHA must state its policy for utility allowance payments in its Administrative Plan and apply it consistently to all similarly situated households.
(e)
(a) * * * As defined in § 982.4, HQS refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program, including any variations approved by HUD for the PHA under 24 CFR 5.705(a)(3). * * *
(a) * * * As defined in § 982.4, HQS refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program, including any variations approved by HUD for the PHA under 24 CFR 5.705(a)(3). * * *
(a)
(a)
(b) * * * As defined in § 982.4, HQS refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program, including any variations approved by HUD for the PHA under 24 CFR 5.705(a)(3). * * *
As defined in § 982.4, HQS refers to the minimum quality standards developed by HUD in accordance with 24 CFR 5.703 for housing assisted under the HCV program, including any variations approved by HUD for the PHA under 24 CFR 5.705(a)(3). * * *
(a)
(1) The PHA payment standard, determined in accordance with § 982.503 minus the total tenant payment; or
(2) The family's eligible housing expenses minus the total tenant payment.
(b)
(1) The rent charged by the owner for the manufactured home space.
(2) Charges for the maintenance and management the space owner must provide under the lease.
(3) The monthly payments made by the family to amortize the cost of purchasing the manufactured home established at the time of application to a lender for financing the purchase of the manufactured home if monthly payments are still being made, including any required insurance and property taxes included in the loan payment to the lender.
(i) Any increase in debt service or term due to refinancing after purchase of the home may not be included in the amortization cost.
(ii) Debt service for installation charges incurred by a family may be included in the monthly amortization payments. Installation charges incurred before the family became an assisted family may be included in the amortization cost if monthly payments are still being made to amortize the charges.
(4) The applicable allowances for tenant-paid utilities, as determined under §§ 982.517 and 982.624.
(c)
(1) The PHA pays the owner of the space the lesser of the housing assistance payment or the portion of the monthly rent due to the owner. The
(i) The actual rent charged by the owner for the manufactured home space; and
(ii) Charges for the maintenance and management the space owner must provide under the lease.
(2) If the housing assistance payment exceeds the portion of the monthly rent due to the owner, the PHA may pay the balance of the housing assistance payment to the family. Alternatively, the PHA may pay the balance to the lender or utility company, in an amount no greater than the amount due for the month to each, respectively, subject to the lender's or utility company's willingness to accept the PHA's payment on behalf of the family. If the PHA elects to pay the lender or the utility company directly, the PHA must notify the family of the amount paid to the lender or the utility company and must pay any remaining balance directly to the family.
(d)
(2) The PHA and owner of the manufactured home space must still execute the HAP contract, and the owner is still responsible for fulfilling all of the owner obligations under the HAP contract, including but not limited to complying with HQS and rent reasonableness requirements. The owner's acceptance of the family's monthly rent payment during the term of the HAP contract serves as the owner's certification to the reasonableness of the rent charged for the space in accordance with § 982.622(b)(4).
(3) If the family and owner agree to the single housing assistance payment, the owner is responsible for collecting the full amount of the rent and other charges under the lease directly from the family. The PHA is not responsible for any amounts owed by the family to the owner and may not pay any claim by the owner against the family.
(a)
(b)
(c) * * *
(1)
(f)
(g)
The revisions read as follows:
(d)
(3) The PHA must obtain the services of an independent entity, as defined in § 982.4 and in accordance with § 982.352(b)(1)(v)(B), to perform the following PHA functions:
(e) * * *
(3) The unit has passed the required HQS inspection (see § 982.631(a)) and independent inspection (see § 982.631(b)).
The revision and additions read as follows:
(a)
(b)
(c)
(d)
(e)
The revision reads as follows:
(b) * * *
(3) The payment standard amount may not be lower than what the payment standard amount was at commencement of homeownership assistance.
(d) * * *
(3) Section 982.405 (PHA unit inspection); and
(4) Section 982.406 (Use of alternative inspections).
(f) * * *
(3) Section 982.517 (Utility allowance schedule), except that § 982.517(d) does not apply because the utility allowance is always based on the size of the home bought by the family with homeownership assistance.
42 U.S.C. 1437f and 3535(d).
(c)
(1) In subpart D of part 982: paragraph (e)(2) of 24 CFR 982.158;
(2) In subpart E of part 982: paragraph (e) of 24 CFR 982.201, paragraph (b)(2) of 24 CFR 982.202, and paragraph (d) of 24 CFR 982.204;
(3) Subpart G of part 982 does not apply, with the following exceptions:
(i) Section 982.310 (owner termination of tenancy) applies to the PBV program, but to the extent that those provisions differ from § 983.257, the provisions of § 983.257 govern; and
(ii) Section 982.312 (absence from unit) applies to the PBV Program, but to the extent that those provisions differ from § 983.256(g), the provisions of § 983.256(g) govern; and
(iii) Section 982.316 (live-in aide) applies to the PBV Program;
(4) Subpart H of part 982;
(5) In subpart I of part 982: 24 CFR 982.401; paragraphs (a)(3), (c), and (d) of 24 CFR 982.402; 24 CFR 982.403; 24 CFR 982.404; paragraphs (a), (b), (d), (i), and (j) of 24 CFR 982.405; paragraphs (a), (e), and (f) of 24 CFR 982.406; and 24 CFR 982.407;
(6) In subpart J of part 982: paragraphs (a), (b)(3), (b)(4), and (c) of § 982.451; and § 982.455;
(7) Subpart K of part 982: subpart K does not apply, except that the following provisions apply to the PBV Program:
(i) In 24 CFR 982.503, paragraphs (a)(1) and (d)(1)-(4) do apply;
(ii) Section 982.516 (family income and composition; regular and interim examinations);
(iii) Section 982.517 of this title (utility allowance schedule), except that 24 CFR 982.517(d) does not apply.
(8) In subpart M of part 982:
(i) Sections 982.603, 982.607, 982.611, 982.613(c)(2), 982.619(a), (b)(1), (b)(4), (c); and
(ii) Provisions concerning shared housing (§ 982.615 through § 982.618), manufactured home space rental (§ 982.622 through § 982.624), and the homeownership option (§ 982.625 through § 982.641).
(a)
(b)
(i) A census tract with a poverty rate of 20 percent or less, as determined by HUD;
(ii) A ZIP code area where the rental vacancy rate is less than 4 percent, as determined by HUD; or
(iii) A ZIP code area where 90 percent of the Small Area FMR is more than 110 percent of the metropolitan area or county FMR.
(i) The facility is licensed and regulated as an assisted living facility by the State, municipality, or other political subdivision;
(ii) The facility makes available supportive services to assist residents in carrying out activities of daily living; and
(iii) The facility provides separate dwelling units for residents and includes common rooms and other facilities appropriate and available to provide supportive services for the residents.
(i) The family's monthly payment is not more than 40 percent of the family's adjusted monthly gross income;
(ii) The rental assistance contains no limitation as to the length of time the family may receive the assistance;
(iii) The family is not required to be employed, to seek employment, or to participate in supportive services in order to receive the rental assistance; and
(iv) The family is able to use the rental assistance in one or more other PHAs' jurisdictions.
(i) All the proposed contract units in the project either fully comply or substantially comply with HQS on the proposal or project selection date, as determined per § 983.103(a). (The units must fully comply with HQS at the time
(A) The units only require repairs to current components or replacement of equipment and/or materials by items of substantially the same kind to correct deficiencies; and
(B) The PHA determines all deficiencies can reasonably be corrected within a 30-day period, taking into consideration the totality of the deficiencies in the project.
(ii) The PHA determines the project is not reasonably expected to require substantial improvement and the owner certifies it has no plans to undertake substantial improvement from the proposal submission date (for projects subject to competitive selection) or the project selection date (for projects excepted from competitive selection) through the first two years of the HAP contract.
(i) A payment to the owner for rent to owner under the family's lease minus the tenant rent; and
(ii) An additional payment to or on behalf of the family, if the utility allowance exceeds the total tenant payment, in the amount of such excess.
(i) Remodeling that alters the nature or type of housing units in a project;
(ii) Reconstruction; or
(iii) A substantial improvement in the quality or kind of equipment and materials. The replacement of equipment and/or materials rendered unsatisfactory because of normal wear and tear by items of substantially the same kind does not constitute substantial improvement.
(a)
(2) The PHA enters into a HAP contract with an owner for units in existing housing or in newly constructed or rehabilitated housing.
(3) In the case of new construction or rehabilitation, the owner may develop the housing pursuant to an Agreement (§ 983.154) between the owner and the PHA. In the Agreement, the PHA agrees to execute a HAP contract after the owner completes the construction or rehabilitation of the units. Alternatively:
(i) The owner may develop the housing without an Agreement, before execution of a HAP contract, in accordance with § 983.154(f); or
(ii) In the case of rehabilitation, the owner may develop the housing or complete development activity after execution of the HAP contract, in accordance with § 983.157.
(4) During the term of the HAP contract, the PHA makes housing assistance payments to the owner for units leased and occupied by eligible families.
(b)
(c)
(a)
(1) A PHA is not required to reduce the number of units to which it has committed PBV assistance under an Agreement or HAP contract if the number of authorized voucher units is subsequently reduced and the number of PBV units consequently exceeds the program limitation.
(2) A PHA that was within the program limit prior to April 18, 2017, and exceeded the program limit on that date due solely to the change in how the program cap is calculated is not required to reduce the number of PBV units under an Agreement or HAP contract.
(3) In the circumstances described in paragraphs (a)(1) and (2) of this section, the PHA may not add units to PBV HAP contracts, or enter into new Agreements or HAP contracts (except for HAP contracts resulting from Agreements entered into before the reduction of authorized units or April 18, 2017, as applicable), unless such units meet the conditions described in paragraph (d) or (e) of this section.
(b)
(c)
(d)
(1) The units are part of a HAP contract executed on or after April 18, 2017, or are added on or after that date to any current HAP contract, including a contract entered into prior to April 18, 2017, and the units fall into at least one of the following categories:
(i) The units are specifically made available to house individuals and families that meet the definition of homeless under Section 103 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11302), included in 24 CFR 578.3.
(ii) The units are specifically made available to house families that are comprised of or include a veteran. For purposes of the increased cap, a veteran means a person who served in the active military, naval, air, or space service, and who was discharged or released therefrom.
(iii) The units provide supportive housing to persons with disabilities or to elderly persons, as defined in 24 CFR 5.403. Supportive housing means that the project makes supportive services available for all of the assisted families in the project and provides a range of services tailored to the needs of the residents occupying such housing. Such supportive services need not be provided by the owner or on site but must be reasonably available to the families receiving PBV assistance in the project. The PHA's Administrative Plan must describe the type and availability of supportive services the PHA will consider as qualifying for the 10 percent increased cap.
(iv) The units are located in an area where vouchers are difficult to use as defined in § 983.3.
(v) The units replace, on a different site, the units listed in § 983.59(b)(1) and (2) for which the PHA had authority under § 983.59 to commit PBV assistance on the original site without the units counting toward the program cap or project cap. The units are eligible under this category only if the PHA has not committed and will not commit PBV assistance to the original site pursuant to the normally applicable exclusions of those units under § 983.59. If the PHA subsequently plans to commit PBV assistance to units on the original site, those proposed units count toward and must comply with the 20 percent maximum or increased cap of this section, as applicable, and the project cap requirements of § 983.54.
(2) The units are part of a HAP contract executed on or after December 27, 2020, or are added on or after that date to any current HAP contract, including a contract entered into prior to December 27, 2020, and meet the following requirements:
(i) The units are exclusively made available to eligible youth as described in Section 8(x)(2)(B) of the U.S. Housing Act; and
(ii) If the units exclusively made available to eligible youth use Family Unification Program (FUP) assistance that is normally available for eligible families and youth described in Section 8(x)(2) of the U.S. Housing Act, the PHA determines and documents that the limitation of the units to youth is consistent with the local housing needs of both eligible FUP populations (families and youth) and amends its Administrative Plan to specify that FUP PBV assistance is solely for eligible youth.
(3) The PBV HAP contract must specify, and the owner must set aside, the number of units meeting the conditions of paragraphs (d)(1)(i), (ii), (iii) and (d)(2) of this section. To qualify for the increased program cap for units meeting the conditions of paragraphs (d)(1)(i), (ii), (iii) and (d)(2) of this section, the unit must be occupied by the type of family specified in the applicable paragraph consistent with the requirements of § 983.262.
(e)
(a)
(b)
(1) The definition of “project” as consistent with this part (§ 983.3(b));
(2) The program cap:
(i) A description of the types and availability of services that will qualify units under the supportive services authority under the program cap (§ 983.6(d)(1)(iii)); and
(ii) The PHA's policy limiting Family Unification Program assistance normally available for eligible families and youth described in Section 8(x)(2) of the U.S. Housing Act to youth (§ 983.6(d)(2)(ii));
(3) A description of the circumstances under which the PHA will use the competitive and noncompetitive selection methods and the procedures for submission and selection of PBV proposals (§ 983.51(a));
(3) A description of the circumstances under which the PHA will use the competitive and noncompetitive selection methods and the procedures for submission and selection of PBV proposals (§ 983.51(a));
(4) The project cap:
(i) The PHA's policy limiting Family Unification Program assistance normally available for eligible families and youth described in Section 8(x)(2) of the U.S. Housing Act to youth (§ 983.54(c)(2)(ii)); and
(ii) A description of the types and availability of services that will qualify units under the supportive services exception from the project cap (§ 983.54(c)(2)(iii));
(5) The site selection standards:
(i) The PHA's standard for deconcentrating poverty and expanding housing and economic opportunities (§ 983.55(b)(1)); and
(ii) The PHA's site selection policy (§ 983.55(c));
(6) PHA inspection policies:
(i) The timing of an initial inspection of existing housing (§ 983.103(c)(1));
(ii) Whether the PHA adopts for initial inspection of PBV existing housing the non-life-threatening deficiencies option, the alternative inspection option, or both, and whether the PHA adopts for periodic inspection of PBV housing the alternative inspection option. If so, state all policies as required by 24 CFR 982.54(d)(21)(ii) and (iii), as they relate to the PHA's PBV program (§ 983.103(c)(2) through (4) and (e)(3));
(iii) The frequency of periodic inspections (§ 983.103(e) and (i)); and
(iv) Any verification methods other than on-site inspection for different inspection types or for different HQS deficiencies (§ 983.103(h)).
(7) A description of the circumstances (if any) under which the PHA will establish additional requirements for quality, architecture, or design of PBV housing at the time of initial rehabilitation or new construction (§§ 983.154(e)(11), 983.157(e)(4));
(8) A description of the circumstances (if any) under which the PHA will enter a PBV HAP contract for newly constructed and rehabilitated housing without first entering into an Agreement or execute an Agreement after construction or rehabilitation that complied with applicable requirements of § 983.153 has commenced (§ 983.154(f)(1));
(9) The PHA's policy on the form and manner in which the owner must submit evidence and certify that work has been completed (§ 983.155);
(10) Rehabilitated housing developed after HAP contract execution:
(i) A description of the circumstances (if any) under which the PHA will enter a PBV HAP contract for rehabilitated housing that allows for development activity to occur after HAP contract execution (§ 983.157(a)(2));
(ii) The timing of the initial inspection (§ 983.157(c)(4));
(iii) The form and manner of owner notifications of changes in the status of contract units (§ 983.157(e)(5)); and
(iv) The period for compliance (if any) for development activity that has not been completed by the deadline (§ 983.157(h)(1));
(11) The PHA's policy on amending PBV HAP contracts to substitute or add contract units (§ 983.207(f));
(12) PHA housing quality policies;
(i) A description of the circumstances (if any) under which the PHA will establish additional requirements for continued compliance with quality, architecture, or design of PBV housing during the term of the HAP contract (§ 983.208(a)(3));
(ii) The PHA's policy on the conditions under which it will withhold HAP and the conditions under which it will abate HAP or terminate the contract for units other than the unit with HQS deficiencies (§ 983.208(d)); and
(iii) The PHA's policy on assisting families with relocating and finding a new unit (§ 983.208(d)(6)(iii));
(13) A description of the PHA's waiting list policies for admission to PBV units, including any information on the owner waiting list policy (§ 983.251(c) and (e));
(14) A description of the PHA's policy on whether to conduct tenant screening and offer information to an owner (§ 983.255(a)(2) and (c)(4));
(15) The PHA's policy on continued housing assistance for a family that occupies a wrong-sized unit or a unit with accessibility features that the family does not require (§ 983.260(b));
(16) The PHA's policy on a family's right to move:
(i) The form of tenant-based rental assistance that the PHA will offer families (§ 983.261(b)); and
(ii) The procedures for tenants to request tenant-based rental assistance to move (§ 983.261(c));
(17) The PHA's policy regarding which options it will take if a unit is no longer qualified for excepted status or the increased program cap (§ 983.262(b)(4));
(18) The PHA's policy regarding continued occupancy of a unit under
(19) The PHA's policy regarding the PHA-determined amount it will use to calculate rent to owner (§ 983.301(b)(1) and (c)(2)(i));
(20) The PHA's policy on the required timing and form of owner requests for a rent increase (§ 983.302(a)(1));
(21) The PHA's policy on providing vacancy payments, including the required form and manner of requests for vacancy payments (§ 983.352(b)(1) and (4));
(22) The PHA's policy on utility reimbursements (§ 983.353(d)(2)); and
(23) The PHA's policy on applying SAFMRs to its PBV program per 24 CFR 888.113(h).
(a)
(b)
(c)
(d)
(2) If the additional related assistance in paragraph (d)(1) of this section meets certain threshold and other requirements established by HUD through publication in the
(3) Housing assistance payments must not be more than is necessary, as determined in accordance with HUD requirements, to provide affordable housing after taking account of such related assistance. The PHA must adjust, in accordance with HUD requirements, the amount of the housing assistance payments to the owner to compensate in whole or in part for such related assistance.
(a)
(1) Records to document the basis for PHA selection of the proposal, if selection is competitive, or project, if selection is noncompetitive, including records of the PHA's site selection determination (see § 983.55) and records to document the completion of the review of the selection process in the case of PHA-owned units and copies of the written notice of proposal selection and response of the appropriate party;
(2) The analysis of impact (see § 983.58(b)), if applicable;
(3) The subsidy layering determination, if applicable;
(4) The environmental review record, if applicable;
(5) The Agreement to enter into HAP contract, if applicable;
(6) Evidence of completion (see § 983.155), if applicable;
(7) The HAP contract and any rider and/or amendments, including amendments to extend the term of the contract;
(8) Records to document the basis for PHA determination and redetermination of rent to owner;
(9) Records to document HUD approval of the independent entity or entities, in the case of PHA-owned units;
(10) Records of the accessibility features of the project and each contract unit; and
(11) Other records as HUD may require.
(b) [RESERVED]
42 U.S.C. 1437f and 3535(d).
(a)
(b)
(1) The PHA may issue a request for proposals (RFP), selecting a PBV proposal through a competition. The PHA's RFP may not limit proposals to a single site or impose restrictions that explicitly or practically preclude owner submission of proposals for PBV housing on different sites. A PHA may establish selection procedures in the Administrative Plan that combine or are
(2) The PHA may select, without issuing an RFP, a proposal for housing assisted under a Federal, State, or local government housing assistance, community development, or supportive services program that required competitive selection of proposals, where the proposal has been selected in accordance with such program's competitive selection requirements within three years of the PBV proposal selection date. The PHA may not select a housing assistance proposal using this method if the competition involved any consideration that the project would receive PBV assistance.
(c)
(1) A PHA engaged in an initiative to improve, develop, or replace a public housing property or site may select for PBV assistance an existing, newly constructed, or rehabilitated project in which the PHA has an ownership interest or over which the PHA has control without following a competitive process.
(i) With respect to replacement housing, the PHA does not have to replace the housing on the same site as the original public housing, but the number of contract units in the replacement project may not exceed the number of units in the original public housing project by more than a de minimis amount for this exception to apply.
(ii) The public housing properties or sites may be in the public housing inventory at the time of project selection or they may have been removed from the public housing inventory through any available legal removal tool within five years of the project selection date.
(2) A PHA may select for future PBV assistance a project currently under the public housing program, or a project that is replacing the public housing project, in which a PHA has no ownership interest, or which a PHA has no control over, without following a competitive process, provided:
(i) The public housing project is either still in the public housing inventory or had been removed from the public housing inventory through any available legal removal tool within five years of the project selection date;
(ii) The PHA that owned or owns the public housing project does not administer the HCV program;
(iii) The project selected for PBV assistance was specifically identified as replacement housing for the impacted public housing residents as part of the public housing demolition/disposition application, voluntary conversion application, or any other application process submitted to and approved by HUD to remove the public housing project from the public housing inventory; and
(iv) With respect to replacement housing, the PHA does not have to replace the housing on the same site as the original public housing, but the number of contract units in the replacement project may not exceed the number of units in the original public housing project by more than a de minimis amount for this exception to apply.
(3) A PHA may select for PBV assistance a project consisting of PHA-owned units as defined at 24 CFR 982.4 without following a competitive process.
(i) The project units must continue to meet the definition of PHA-owned for the initial two years of the HAP contract unless there is a transfer of ownership approved by HUD.
(ii) The PHA must meet any conditions with respect to selection for PBV assistance of a project consisting of PHA-owned units without following a competitive process as may be established by HUD through publication in the
(4) A PHA may select for PBV assistance a project that underwent an eligibility event within five years of the project selection date, in which a family (or families) qualifies for enhanced voucher assistance under Section 8(t) of the Act and provides informed consent to relinquish its enhanced voucher for PBV assistance, without following a competitive process.
(d)
(e)
(2) The PHA may execute a HAP contract for existing housing if:
(i) All proposed contract units in the project fully or substantially comply with the HQS on the proposal or project selection date, which the PHA must determine via inspection;
(iii) The project meets the initial inspection requirements in accordance with § 983.103(c).
(iii) The project meets the initial inspection requirements in accordance with § 983.103(c).
(f)
(2) For selection of projects through exceptions to competition under paragraph (c) of this section, the PHA must give prompt written notice of project selection to the owner following the PHA board's resolution approving the project-basing of assistance at the specific project. The written notice of project selection must require the owner of the project selected to provide a written response to the PHA accepting the terms and requirements stated in the notice.
(3) Regardless of the method of selection, if the project contains PHA-owned units that are not owned by a separate legal entity from the PHA, the PHA must provide the written notice of proposal or project selection to the
(4) When an environmental review is required, if such a review has not been conducted prior to the project or proposal selection date, the PHA's written notice of project or proposal selection must state that the selection is subject to completion of a favorable environmental review and that the project or proposal may be rejected based on the results of the environmental review in accordance with 983.56(c).
(5) See § 983.153(c)(3) for additional notice requirements for newly constructed housing and rehabilitated housing.
(g)
(2) For properties selected in accordance with § 983.51(c), the project selection date is the date of the PHA's board resolution approving the project-basing of assistance at the specific project.
(h)
(i)
(j)
(k)
(a)
(1) Shared housing;
(2) Units on the grounds of a penal, reformatory, medical, mental, or similar public or private institution;
(3) Nursing homes or facilities providing continuous psychiatric, medical, nursing services, board and care, or intermediate care. However, the PHA may execute a HAP contract and provide PBV assistance for a dwelling unit in an assisted living facility that provides home health care services such as nursing and therapy for residents of the housing;
(4) Units that are owned or controlled by an educational institution or its affiliate and are designated for occupancy by students of the institution;
(5) Manufactured homes are ineligible only if the manufactured home is not permanently affixed to a permanent foundation or the owner does not own fee title to the real property (land) on which the manufactured home is located; and
(6) Transitional Housing.
(b)
(c)
(d)
(1) Units for which rehabilitation or new construction began after proposal submission or the date of board resolution but prior to the effective date of an Agreement (if applicable), as described in this paragraph (d), do not subsequently qualify as existing housing.
(2) Units that were newly constructed or rehabilitated in violation of program requirements do not qualify as existing housing.
(a)
(1) A public housing dwelling unit;
(2) A unit subsidized with any other form of Section 8 assistance (tenant-based or project-based);
(3) A unit subsidized with any governmental rent subsidy (a subsidy that pays all or any part of the rent);
(4) A unit subsidized with any governmental subsidy that covers all or any part of the operating costs of the housing;
(5) A unit subsidized with rental assistance payments under Section 521 of the Housing Act of 1949, 42 U.S.C. 1490a (a Rural Housing Service
(6) A Section 202 project for non-elderly persons with disabilities (assistance under Section 162 of the Housing and Community Development Act of 1987, 12 U.S.C. 1701q note);
(7) Section 811 project-based supportive housing for persons with disabilities (42 U.S.C. 8013);
(8) Section 202 supportive housing for the elderly (12 U.S.C. 1701q);
(9) A unit subsidized with any form of tenant-based rental assistance (as defined at 24 CFR 982.1(b)(2)) (
(10) A unit with any other duplicative Federal, State, or local housing subsidy, as determined by HUD or by the PHA in accordance with HUD requirements. For this purpose, “housing subsidy” does not include the housing component of a welfare payment; a social security payment; or a Federal, State, or local tax concession (such as relief from local real property taxes).
(b) [RESERVED]
(a)
(b)
(c)
(2) PBV units are not counted toward the project cap in the following cases:
(i) Units exclusively serving elderly families, as defined in 24 CFR 5.403;
(ii) Units exclusively made available to eligible youth described in Section 8(x)(2)(B) of the U.S. Housing Act. If the units exclusively made available to eligible youth use Family Unification Program (FUP) assistance that is normally available for eligible families and youth, the PHA must determine that the limitation of the units to youth is consistent with the local housing needs of both eligible FUP populations (families and youth), maintain documentation to support this determination, and amend its Administrative Plan to include the limitation of these FUP PBV units to eligible youth; or
(iii) Units exclusively made available to households eligible for supportive services available to the residents of the project assisted with PBV assistance. The project must make supportive services available to all PBV-assisted families in the project, but the family may not be required to participate in the services as a condition of living in the excepted unit. Such supportive services need not be provided by the owner or on-site but must be reasonably available to the families receiving PBV assistance in the project and designed to help the families in the project achieve self-sufficiency or live in the community as independently as possible. The supportive services must be made available to the family within a reasonable time as defined by the PHA, but not to exceed 120 calendar days from the family's request. The PHA must include in its Administrative Plan the types of services offered to families that will enable the units to qualify under the exception and the extent to which such services will be provided (
(3) Units that are excluded under § 983.59 do not count toward the project cap. Such units are removed from the number of dwelling units for purposes of calculating the percentages under paragraphs (a) and (b) of this section.
(4)(i) The PBV HAP contract must specify, and the owner must set aside, the number of excepted units made available for occupancy by families who qualify for the exception.
(ii) For a unit to be considered excepted it must be occupied by a family who qualifies for the exception.
(d)
(2) The owner and the PHA may mutually agree to change the requirements for excepted units under the HAP contract to comply with the excepted unit requirements in subsection (c) of this section. However, any change to the HAP contract may only be made if the change does not jeopardize an assisted family's eligibility for continued assistance at the project.
(e)
(f)
(a)
(b)
(1) Project-based assistance for housing at the selected site is consistent
(i) Whether the census tract in which the proposed PBV development will be located is in a HUD-designated Enterprise Zone, Economic Community, or Renewal Community;
(ii) Whether a PBV development will be located in a census tract where the concentration of assisted units will be or has decreased as a result of public housing demolition;
(iii) Whether the census tract in which the proposed PBV development will be located is undergoing significant revitalization;
(iv) Whether State, local, or Federal dollars have been invested in the area that has assisted in the achievement of the statutory requirement;
(v) Whether new market rate units are being developed in the same census tract where the proposed PBV development will be located and the likelihood that such market rate units will positively impact the poverty rate in the area;
(vi) If the poverty rate in the area where the proposed PBV development will be located is greater than 20 percent, the PHA must consider whether in the past five years there has been an overall decline in the poverty rate;
(vii) Whether there are meaningful opportunities for educational and economic advancement in the census tract where the proposed PBV development will be located.
(2) The site is suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d(4)) and HUD's implementing regulations at 24 CFR part 1; Title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601-3629) and HUD's implementing regulations at 24 CFR parts 100 through 199; Executive Order 11063 (27 FR 11527; 3 CFR, 1959-1963 Comp., p. 652) and HUD's implementing regulations at 24 CFR part 107. The site must also be suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of the Americans with Disabilities Act (42 U.S.C. 12131-12134) and implementing regulations (28 CFR part 35), and Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and HUD's implementing regulations at 24 CFR part 8, including meeting the Section 504 site selection requirements described in 24 CFR 8.4(b)(5).
(3) The site and neighborhood is reasonably free from disturbing noises and reverberations and other dangers to the health, safety, and general welfare of the occupants. The site and neighborhood may not be subject to serious adverse environmental conditions, natural or manmade, that could affect the health or safety of the project occupants, such as dangerous walks or steps; contamination; instability; flooding, poor drainage, septic tank back-ups or sewage hazards; mudslides; abnormal air pollution, smoke or dust; excessive noise, vibration or vehicular traffic; excessive accumulations of trash; vermin or rodent infestation; or fire hazards.
(c)
(2) The site selection policy must explain how the PHA's site selection procedures promote the PBV goals.
(3) The PHA must select PBV sites in accordance with the PHA's site selection policy in the PHA Administrative Plan.
(d)
(1) Be adequate in size, exposure, and contour to accommodate the number and type of units proposed, and adequate utilities and streets must be available to service the site. (The existence of a private disposal system and private sanitary water supply for the site, approved in accordance with law, may be considered adequate utilities.)
(2) Promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons.
(3) Be accessible to social, recreational, educational, commercial, and health facilities and services and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents.
(4) Be so located that travel time and cost via public transportation or private automobile from the neighborhood to places of employment providing a range of jobs for lower-income workers is not excessive. While it is important that housing for the elderly not be totally isolated from employment opportunities, this requirement need not be adhered to rigidly for such projects.
(e)
(1) The site must be adequate in size, exposure, and contour to accommodate the number and type of units proposed, and adequate utilities (water, sewer, gas, and electricity) and streets must be available to service the site.
(2) The site must not be located in an area of minority concentration, except as permitted under paragraph (e)(3) of this section, and must not be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to non-minority residents in the area.
(3) A project may be located in an area of minority concentration only if:
(i) Sufficient, comparable opportunities exist for housing for minority families in the income range to be served by the proposed project outside areas of minority concentration (see paragraphs (e)(3)(iii) through (v) of this section for further guidance on this criterion); or
(ii) The project is necessary to meet overriding housing needs that cannot be met in that housing market area (see paragraph (e)(3)(vi) of this section for further guidance on this criterion).
(iii) As used in paragraph (e)(3)(i) of this section, “sufficient” does not require that in every locality there be an equal number of assisted units within and outside of areas of minority concentration. Rather, application of this standard should produce a reasonable distribution of assisted units each year, that, over a period of several years, will approach an appropriate balance of housing choices within and outside areas of minority concentration. An appropriate balance in any jurisdiction must be determined in light of local conditions affecting the range of housing choices available for low-income minority families and in relation to the racial mix of the locality's population.
(iv) Units may be considered “comparable opportunities,” as used in paragraph (e)(3)(i) of this section, if they have the same household type (elderly, disabled, family, large family) and tenure type (owner/renter); require approximately the same tenant contribution towards rent; serve the same income group; are located in the
(v) Application of this sufficient, comparable opportunities standard involves assessing the overall impact of HUD-assisted housing on the availability of housing choices for low-income minority families in and outside areas of minority concentration, and must take into account the extent to which the following factors are present, along with other factors relevant to housing choice:
(A) A significant number of assisted housing units are available outside areas of minority concentration.
(B) There is significant integration of assisted housing projects constructed or rehabilitated in the past 10 years, relative to the racial mix of the eligible population.
(C) There are racially integrated neighborhoods in the locality.
(D) Programs are operated by the locality to assist minority families that wish to find housing outside areas of minority concentration.
(E) Minority families have benefited from local activities (
(F) A significant proportion of minority households has been successful in finding units in non-minority areas under the tenant-based assistance programs.
(G) Comparable housing opportunities have been made available outside areas of minority concentration through other programs.
(vi) Application of the “overriding housing needs” criterion, for example, permits approval of sites that are an integral part of an overall local strategy for the preservation or restoration of the immediate neighborhood and of sites in a neighborhood experiencing significant private investment that is demonstrably improving the economic character of the area (a “revitalizing area”). An “overriding housing need,” however, may not serve as the basis for determining that a site is acceptable, if the only reason the need cannot otherwise be feasibly met is that discrimination on the basis of race, color, religion, sex, national origin, age, familial status, or disability renders sites outside areas of minority concentration unavailable or if the use of this standard in recent years has had the effect of circumventing the obligation to provide housing choice.
(4) The site must promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons.
(5) The neighborhood must not be one that is seriously detrimental to family life or in which substandard dwellings or other undesirable conditions predominate, unless there is actively in progress a concerted program to remedy the undesirable conditions.
(6) The housing must be accessible to social, recreational, educational, commercial, and health facilities and services and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents.
(7) Except for housing designed for elderly persons, travel time and cost via public transportation or private automobile from the neighborhood to places of employment providing a range of jobs for lower-income workers, must not be excessive.
(a)
(2) For projects or proposals that were selected in accordance with the site selection standards at § 983.55 in effect on or after June 6, 2024, no environmental review is required to be undertaken before entering into a HAP contract for existing housing, except to the extent a Federal environmental review is required by law or regulation relating to funding other than PBV housing assistance payments.
(b)
(c)
(d)
(1) The responsible entity has determined that the activities to be undertaken are exempt under 24 CFR 58.34(a) or categorically excluded and not subject to compliance with environmental laws under 24 CFR 58.35(b);
(2) The responsible entity has completed the environmental review procedures required by 24 CFR part 58, and HUD has approved the PHA's Request for Release of Funds and Certification (form HUD-7015.15). HUD approves the Request for Release of Funds and Certification by issuing a Letter to Proceed or form HUD-7015.16, thereby authorizing the PHA to execute an Agreement or HAP contract, as applicable; or
(3) HUD has performed an environmental review under 24 CFR part 50 and has notified the PHA in writing of environmental clearance.
(e)
(f)
(g)
(a)
(b)
(1) The independent entity must determine rent to owner, including rent reasonableness and calculating any rent
(2) The independent entity must perform unit inspections in accordance with § 983.103(g).
(3) When the owner carries out development activity under § 983.152 or substantial improvement under §§ 983.207(d) or 983.212, the independent entity must review the evidence and work completion certification submitted by the owner in accordance with § 983.155(b) and determine if the units are complete in accordance with § 983.156.
(4) The independent entity must determine whether to approve substantial improvement to units under a HAP contract in accordance with § 983.212.
(c)
(a)
(b)
(a)
(b)
(1) The units have received one of the following forms of HUD assistance:
(i) Public Housing Capital or Operating Funds (Section 9 of the 1937 Act);
(ii) Project-Based Rental Assistance (Section 8 of the 1937 Act). Project-based rental assistance under Section 8 includes the Section 8 moderate rehabilitation program, including the single-room occupancy (SRO) program;
(iii) Housing For the Elderly (Section 202 of the Housing Act of 1959);
(iv) Housing for Persons with Disabilities (Section 811 of the Cranston-Gonzalez National Affordable Housing Act);
(v) Rental Assistance Program (RAP) (Section 236(f)(2) of the National Housing Act); or
(vi) Flexible Subsidy Program (Section 201 of the Housing and Community Development Amendments Act of 1978).
(2) The units have been subject to a federally required rent restriction under one of the following programs:
(i) The Low-Income Housing Tax Credit program (26 U.S.C. 42);
(ii) Section 515 Rural Rental Housing Loans (42 U.S.C. 1485); or
(iii) The following HUD programs:
(A) Section 236;
(B) Section 221(d)(3) Below Market Interest Rate;
(C) Housing For the Elderly (Section 202 of the Housing Act of 1959);
(D) Housing for Persons with Disabilities (Section 811 of the Cranston-Gonzalez National Affordable Housing Act);
(E) Flexible Subsidy Program (Section 201 of the Housing and Community Development Amendments Act of 1978); or
(iv) Any other program identified by HUD through
(c)
(1) Former residents of the original project must be provided with a selection preference that provides the residents with the right of first occupancy at the PBV newly constructed project when it is ready for occupancy.
(2) Prior to the demolition of the original project, the PBV newly constructed project must have been identified as replacement housing for that original project as part of a documented plan for the redevelopment of the site.
(d)
(e)
(a)
(e)
(a)
(b)
(1) For rehabilitated housing that is developed prior to the HAP contract term or newly constructed housing, the PHA must inspect each proposed newly constructed and rehabilitated PBV unit before execution of the HAP contract. Each proposed PBV unit must fully comply with HQS prior to HAP contract execution.
(2) For rehabilitated housing that will undergo development activity after HAP contract execution per § 983.157, the PHA must conduct unit inspections in accordance with the requirements of § 983.157.
(3) Inspect each unit that underwent substantial improvement pursuant to §§ 983.207(d) or 983.212. Each PBV unit that underwent substantial improvement must fully comply with HQS prior to the PHA adding the unit to the HAP contract, returning the unit temporarily removed to the HAP contract, allowing re-occupancy of the unit, and resuming housing assistance payments, as applicable.
(c)
(2)
(ii) After completing the inspections and determining there are no life-threatening deficiencies, for any unit with non-life-threatening deficiencies, the PHA must provide both the owner and the family (any eligible in-place family (§ 983.251(d)) or any family referred from the PBV waiting list being offered that unit) a list of the non-life-threatening deficiencies identified by the initial HQS inspection and an explanation of the maximum amount of time the PHA will withhold HAP before abating assistance if the owner does not complete the repairs within 30 days. The PHA must also inform the family that if the family accepts the unit and the owner fails to make the repairs within the cure period, which may not exceed 180 days from the effective date of the HAP contract, the PHA will remove the unit from the HAP contract, and the family will be issued a voucher to move to another unit in order to receive voucher assistance. If the PHA's Administrative Plan provides that the PHA will terminate the PBV HAP contract if the owner fails to correct deficiencies in any unit in the project within the cure period, the PHA must also provide the notice described above to families referred to units without any deficiencies. The family referred from the waiting list may choose to decline the unit and remain on the waiting list. An eligible in-place family may decline the unit, and the PHA must issue the family a tenant-based voucher to move from the unit in that circumstance.
(iii) If the family decides to lease the unit, the family enters into the assisted lease with the owner. The PHA commences making assistance payments to the owner.
(iv) The owner must correct the deficiencies within 30 days from the effective date of the HAP contract. If the owner fails to correct the deficiencies within the 30-day cure period, the PHA must withhold the housing assistance payments for the unit until the owner makes the repairs and the PHA verifies the correction. Once the deficiencies are corrected, the PHA must use the withheld housing assistance payments to make payments for the period that payments were withheld.
(v) The PHA must state in its Administrative Plan the maximum amount of time it will withhold payments before abating payments and the number of days after which the PHA will either terminate the PBV HAP contract or remove the unit from the HAP contract as a result of the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract. If the PHA terminates the PBV HAP contract or removes the unit from the HAP contract as a result of the owner's failure to correct the deficiencies, the PHA must provide any affected family tenant-based assistance as provided in § 983.206(b).
(vi) The owner may not terminate the tenancy of a family because of the withholding or abatement of assistance payments. During any period the assistance is abated under the NLT option, the family may terminate the tenancy by notifying the owner and the PHA, and the PHA must provide the family tenant-based assistance. In the case of an in-place family, the family may also choose to terminate the tenancy during the withholding period following the 30-day cure period, and the PHA must offer the family either another assisted unit in the PBV project that fully complies with HQS or tenant-based assistance.
(3)
(i) After the PHA determines the project meets the definition of existing housing in accordance with paragraph (a) of this section, the PHA may execute the HAP contract for the project if the project has been inspected in the
(ii) The PHA notifies all families (any eligible in-place family (§ 983.251(d)) or any family referred from the PBV waiting list being offered a contract unit) that will occupy a contract unit before the PHA conducts the HQS inspection that the alternative inspection option is in effect for the project. The PHA must provide each family with the PHA list of HQS deficiencies that are considered life-threatening as part of this notification. A family on the waiting list may decline to accept an offered unit due to unit conditions and retain its place on the PBV waiting list.
(iii) The PHA must conduct an HQS inspection within 30 days of the proposal or project selection date. If the family reports a deficiency to the PHA prior to the PHA's inspection, the PHA must inspect the unit within the time period required under paragraph (f) of this section or within 30 days of the effective date of the HAP contract, whichever time period ends first.
(iv) The PHA may not commence housing assistance payments to the owner until the PHA has inspected all the units under the HAP contract and determined they meet HQS.
(v) If the PHA inspection finds that any contract unit contains HQS deficiencies, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected in all contract units. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract or the PBV lease effective dates, whichever is later.
(vi) The PHA establishes in the Administrative Plan the maximum amount of time it will withhold payments if the owner does not correct the deficiencies within the required cure period before abating payments and the date by which the PHA will either remove the unit from the HAP contract or terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract. If the PHA terminates the PBV HAP contract or removes the unit from the HAP contract as a result of the owner's failure to correct the deficiencies, the PHA must provide any affected family tenant-based assistance as provided in § 983.206(b) of this title.
(vii) If the owner fails to make the repairs within the applicable time periods, the PHA must abate the payments for the non-compliant units, while continuing to withhold payments for the HQS compliant units until all the units meet HQS or the unit removal or contract termination occurs. If the deficiencies are corrected, the PHA must use the withheld housing assistance payments to make payments for the period that payments were withheld.
(viii) The owner may not terminate the tenancy of a family because of the withholding or abatement of assistance payments. During the abatement period, a family may terminate the tenancy by notifying the owner, and the PHA must provide the family tenant-based assistance. If the PHA terminates the PBV HAP contract or removes the unit from the HAP contract as a result of the owner's failure to correct the deficiencies, the PHA must provide any affected family tenant-based assistance as provided in § 983.206(b) of this title.
(4)
(i) If the owner agrees to both the NLT option and the alternative inspection option, then the PHA notifies all families (any eligible in-place family (§ 983.251(d)) or any family referred from the PBV waiting list that will occupy the unit before the PHA conducts the HQS inspection) that both the NLT option and the alternative inspection option will be used for the family's unit. As part of this notification, the PHA must provide the family with the PHA's list of HQS deficiencies that are considered life-threatening. A family on the waiting list may decline to move into a unit due to unit conditions and retain its place on the PBV waiting list. Following inspection (see paragraph (c)(4)(ii) of this section), the PHA must provide any family referred from the PBV waiting list that will occupy a unit with non-life-threatening deficiencies a list of the non-life-threatening deficiencies identified by the initial HQS inspection and an explanation of the maximum amount of time the PHA will withhold HAP before abating assistance if the owner does not complete the repairs within 30 days. The PHA must also inform the family that if the family accepts the unit and the owner fails to make the repairs within the cure period, which may not exceed 180 days from the effective date of the HAP contract, the PHA will remove the unit from the HAP contract, and the family will be issued a voucher to move to another unit in order to receive voucher assistance. The family referred from the waiting list may choose to decline the unit and remain on the PBV waiting list.
(ii) The PHA executes the HAP contract with the owner on the basis of the alternative inspection. The PHA must conduct an HQS inspection within 30 days after the proposal or project selection date. If the family reports a deficiency to the PHA during this interim period, the PHA must inspect the unit within the time period required under paragraph (f) of this section or within 30 days of the proposal or project selection date, whichever time period ends first.
(iii) The PHA may not make housing assistance payments to the owner until the PHA has inspected all the assisted units.
(iv) If none of the units have any life-threatening deficiencies, the PHA commences payments and makes retroactive payments to the effective date of the HAP contract or the PBV lease effective dates, whichever is later, for all the assisted units. For any unit that failed the PHA's HQS inspection but has no life-threatening deficiencies, the owner must correct the deficiencies within no more than 30 days from the effective date of the HAP contract. If the owner fails to correct the deficiencies within the 30-day cure period, the PHA must withhold the housing assistance payments for that unit until the owner makes the repairs and the PHA verifies the correction. Once the unit is in compliance with HQS, the PHA must use the withheld housing assistance payments to make payments for the period that payments were withheld.
(v) If any units have life-threatening deficiencies, the PHA may not commence making housing assistance payments to the owner for any units until all the HQS deficiencies (life-threatening and non-life-threatening) have been corrected. The PHA must not refer families from the PBV waiting list
(vi) The owner may not terminate the tenancy of the family because of the withholding or abatement of assistance payments. During the period the assistance is abated, a family may terminate the tenancy by notifying the owner, and the PHA must provide the family tenant-based assistance. If the PHA terminates the PBV HAP contract or removes the unit from the HAP contract as a result of the owner's failure to correct the deficiencies, the PHA must provide any affected family with tenant-based assistance as provided in § 983.206(b) of this title. The PHA must establish in its Administrative Plan:
(A) The maximum amount of time it will withhold payments if the owner fails to correct the deficiencies within the required cure period before abating payments; and
(B) The number of days after which the PHA will terminate the HAP contract or remove the unit from the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(d)
(e)
(2) If more than 20 percent of the sample of inspected contract units in a building fail the initial inspection, then the PHA must reinspect 100 percent of the contract units in the building.
(3) A PHA may also use alternative inspections to meet the requirements for periodic inspections in this paragraph (e), subject to the procedures and requirements specified in 24 CFR 982.406(b), (c), (d), and (g).
(f)
(i)
(ii)
(iii)
(2)
(3)
(g)
(2) The independent entity must furnish a copy of each inspection report to the PHA.
(3) The PHA must take all necessary actions in response to inspection reports from the independent entity, including exercise of contractual remedies for violation of the HAP contract by the PHA owner.
(h)
(i)
This subpart applies to development activity, as defined in § 983.3, under the PBV program.
(a)
(1) Placing a newly constructed or rehabilitated project under a HAP contract; or
(2) For a rehabilitated project that will undergo development activity after HAP contract execution, completing the requirements of the rider in accordance with § 983.157.
(b)
(a)
(b)
(2) When a subsidy layering review is required, it must occur before a PHA attaches assistance to a project. Specifically, the PHA may not execute an Agreement or HAP contract with an owner until HUD or a housing credit agency approved by HUD has conducted any required subsidy layering review and determined that the PBV assistance is in accordance with HUD subsidy layering requirements.
(3) A further subsidy layering review is not required if HUD's designee has conducted a review in accordance with HUD's PBV subsidy layering review guidelines and that review included a review of PBV assistance.
(4) The owner must disclose to the PHA any change to the information provided for purposes of the subsidy layering review, including the amount of assistance or number of units to be developed, that occurs after the subsidy layering review has been conducted and before all contract units are placed under the HAP contract, in accordance with HUD requirements. A subsidy layering review may be required to determine if such a change would result in excess public assistance to the project, as required by HUD through notification in the
(5) The HAP contract must contain the owner's certification that the project has not received and will not receive (before or during the term of the HAP contract) any public assistance for acquisition, development, or operation of the housing other than assistance disclosed in the subsidy layering review in accordance with HUD requirements, unless the owner discloses additional assistance in accordance with HUD requirements. A subsidy layering review is required for newly constructed or rehabilitated housing under a HAP contract that receives additional assistance, as described in § 983.11(d).
(6) Existing housing is exempt from subsidy layering requirements.
(c)
(2) In the case of development involving nine or more contract units (whether or not completed in stages):
(i) The owner and the owner's contractors and subcontractors must pay Davis-Bacon wages to laborers and mechanics employed in development of the housing; and
(ii) The owner and the owner's contractors and subcontractors must comply with the Contract Work Hours and Safety Standards Act, Department of Labor regulations in 29 CFR part 5, and other applicable Federal labor relations laws and regulations. The PHA must monitor compliance with labor standards.
(3) For any project to which labor standards apply, the PHA's written notice to the party that submitted the selected proposal or board resolution approving project-basing of assistance at the specific project, as applicable per § 983.51(f), must state that any construction contracts must incorporate a Davis-Bacon contract clause and the current applicable prevailing wage determination.
(d)
(e)
(f)
(i) The location of the new construction or substantial rehabilitation makes installation of broadband infrastructure infeasible;
(ii) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or
(iii) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible.
(2) A description of any required work item resulting from this requirement must be included in the Agreement (if
(g)
(2) An owner must disclose any possible conflict of interest that would be a violation of the Agreement (if applicable), the HAP contract, or HUD regulations, in accordance with § 982.161 of this title.
(a)
(b)
(c)
(d)
(1) In the case of new construction, development activity begins with excavation or site preparation (including clearing of the land).
(2) In the case of rehabilitation, development activity begins with the physical commencement of rehabilitation activity on the housing.
(e)
(1) The site;
(2) The location of contract units on site;
(3) The number of contract units by area (square footage) and number of bedrooms and bathrooms;
(4) The services, maintenance, or equipment to be supplied by the owner without charges in addition to the rent to owner;
(5) The utilities available to the contract units, including a specification of utility services to be paid by the owner (without charges in addition to rent) and utility services to be paid by the tenant;
(6) A description of any required work item necessary to comply with the accessibility requirements of § 983.153(e);
(7) A description of any required work item if the requirement at § 983.153(f) to install broadband infrastructure applies;
(8) Estimated initial rents to owner for the contract units;
(9) A description of the work to be performed under the Agreement:
(i) For rehabilitation, the work description must include the rehabilitation work write-up and, where determined necessary by the PHA, specifications and plans (see paragraph (g) of this section for additional requirements that apply under the option for development activity after HAP contract at 983.157); and
(ii) For new construction, the work description must include the working drawings and specifications;
(10) The deadline for completion of the work to be performed under the Agreement; and
(11) Any requirements the PHA elects to establish in addition to HQS for design, architecture, or quality. The PHA must specify the conditions under which it will require additional housing quality requirements in the Administrative Plan.
(f)
(1) In its Administrative Plan, the PHA must explain the circumstances (if any) under which the PHA will enter a PBV HAP contract for newly constructed or rehabilitated housing without first entering into an Agreement and under which the PHA will enter into an Agreement after construction or rehabilitation that complied with applicable requirements of § 983.153 has commenced.
(2) The following conditions apply:
(i) The owner of the project must be able to document its compliance with all applicable requirements of § 983.153 from the date of proposal submission (for housing subject to competitive selection) or from the date of the PHA's board resolution approving the project-basing of assistance at the project (for housing excepted from competitive selection);
(ii) For housing subject to competitive selection, the PHA must confirm prior to the proposal selection date that the owner has complied with all applicable requirements of § 983.153 from the date of proposal submission. For housing excepted from competitive selection, the PHA must confirm prior to executing the Agreement (if applicable) or HAP contract that the owner has complied with all applicable requirements of § 983.153 from the date of the PHA's board resolution approving the project-basing of assistance at the project; and
(iii) The PHA must comply with the notice requirement of § 983.153(c)(3).
(a)
(b)
(a)
(b)
(1) For units developed pursuant to § 983.152(a)(1) which will not undergo development activity after HAP contract execution per § 983.157, submit the HAP contract for execution by the owner and execute the HAP contract;
(2) For rehabilitated housing projects for which development activity has commenced prior to HAP contract execution, but which will undergo development activity after HAP contract execution under § 983.157(b), submit the HAP contract for execution by the owner and execute the HAP contract;
(3) For development activity conducted after HAP contract execution, amend the HAP contract rider to designate the completed units as available for occupancy (§ 983.157(f)(1)(ii)) or, if the owner has completed all development activity as provided in the rider, amend the HAP contract to terminate the rider (§ 983.157(d)); or
(4) For units that underwent substantial improvement in order to be added to the HAP contract, amend the HAP contract to add the units to the HAP contract (§ 983.207(d)).
(c)
(d)
(g)
(h)
(1) Prior to execution of the Agreement, the PHA must establish a separate legal entity to serve as the owner. That separate legal entity must execute the Agreement with the PHA. The separate legal entity must have the legal capacity to lease units and must be one of the following:
(i) A non-profit affiliate or instrumentality of the PHA;
(ii) A limited liability corporation;
(iii) A limited partnership;
(iv) A corporation; or
(v) Any other legally acceptable entity recognized under State law.
(2) The PHA signs the HUD-prescribed PHA-owned agreement certification covering a PHA-owned unit, instead of executing the Agreement for the PHA-owned unit. By signing the PHA-owned agreement certification, the PHA certifies that it will fulfill all the required program responsibilities of the private owner under the Agreement, and that it will also fulfill all of the program responsibilities required of the PHA for the PHA-owned unit.
(i) The PHA-owned agreement certification serves as the equivalent of the Agreement, and subjects the PHA, as owner, to all of the requirements of the Agreement contained in parts 982 and 983. Where the PHA has elected to use the PHA-owned agreement certification, all references to the Agreement throughout parts 982 and 983 must be interpreted to be references to the PHA-owned agreement certification.
(ii) The PHA may not use the PHA-owned agreement certification if the PHA-owned PBV project is owned by a separate legal entity from the PHA (
(a)
(2) In its Administrative Plan, the PHA must explain the circumstances (if any) under which the PHA will enter a PBV HAP contract for rehabilitated housing that allows for development activity on contract units. The Administrative Plan may provide for execution of HAP contracts in accordance with this section prior to commencement of development activity, following commencement of development activity, or both. When the PHA uses the competitive selection method at § 983.51(b)(1), the PHA's policy must be disclosed in the request for proposals.
(b)
(1) For rehabilitation undertaken under an Agreement, the development activity must have complied with the Agreement executed pursuant to § 983.154, including completion of any work items and completion and acceptance of any units which were to be completed under the Agreement under §§ 983.155 and 983.156; or
(2) For rehabilitation undertaken without an Agreement pursuant to § 983.154(f):
(i) The owner of the project must be able to document its compliance with all applicable requirements of § 983.153 from the date of proposal submission (for housing subject to competitive selection) or from the date of the PHA's board resolution approving the project-basing of assistance at the project (for housing excepted from competitive selection); and
(ii) For housing subject to competitive selection, the PHA must confirm prior to the proposal selection date that the owner has complied with all applicable requirements of § 983.153 from the date of proposal submission. For housing excepted from competitive selection, the PHA must confirm prior to executing the HAP contract that the owner has complied with all applicable requirements of § 983.153 from the date of the PHA's board resolution approving the project-basing of assistance at the project.
(c)
(1) The applicable requirement of § 983.56(d) (environmental review) has been met;
(2) If applicable, the subsidy layering review has been completed, in accordance with § 983.153(b)(2);
(3) If applicable, the PHA has determined that development activity that has commenced met the requirements of paragraph (b) of this section;
(4) The PHA has conducted an inspection (see § 983.103(b)(2)) of all units that the owner proposes to make available for occupancy by an assisted family at the beginning of the HAP contract term and the PHA has determined that at least one of those proposed contract units, including items and components within the primary and secondary means of egress, common features, and systems equipment as described by 24 CFR 5.703(a)(2), fully complies with HQS. The PHA may make the determination of compliance with HQS regardless of whether the HQS-compliant unit is expected to undergo rehabilitation. The owner may make repairs to correct HQS deficiencies identified during the PHA inspection as part of the development activity that occurs prior to HAP contract execution (see paragraph (b) of this section) to make the unit available for occupancy at the beginning of the HAP contract term. The PHA must establish in its Administrative Plan the amount of time that may elapse between the inspection and the execution of the HAP contract; and
(5) Occupants (if any) of proposed PBV units that were not inspected pursuant to paragraph (c)(4) of this section or that do not fully comply with HQS have moved and such units are vacant. These units must be identified as unavailable for occupancy in accordance with paragraph (e)(5)(ii) of this section. Any inspected unit that does not fully comply with HQS must undergo development activity, followed by inspection under § 983.156(a), prior to being designated for occupancy under paragraph (f)(1)(ii) of this section.
(6) Occupants (if any) who do not accept PBV assistance have moved and such units are vacant.
(7) The PHA may decline to place proposed PBV units that do not meet the criteria in paragraphs (c)(5) or (6) of this section on the HAP contract in order to execute the HAP contract before the units have been vacated. The PHA may add the units to the HAP contract once the units are vacant in accordance with § 983.207, except that the inspection requirement of § 983.207 does not apply if the unit will initially be categorized as unavailable for occupancy as provided in paragraph (e)(5)(ii) of this section.
(d)
(e)
(1) A description of any required work item necessary to comply with the accessibility requirements of § 983.153(e);
(2) A description of any required work item if the requirement at § 983.153(f) to install broadband infrastructure applies;
(3) A description of the work to be performed under the rider, including the rehabilitation work write-up and, where determined necessary by the PHA, specifications and plans;
(4) Any requirements the PHA elects to establish in addition to HQS for design, architecture, or quality. The PHA must specify the conditions under which it will require additional housing quality requirements in the Administrative Plan.
(5) The development status of each specific contract unit. Specifically:
(i) The rider must list each unit that is available for occupancy by an assisted family at the time the unit is placed on the HAP contract. Each contract unit that fully complies with HQS in accordance with the PHA determination
(ii) The rider must list each unit that is unavailable for occupancy at the time the unit is placed on the HAP contract. Each contract unit that has not been inspected in accordance with paragraph (c)(4) of this section or that has been inspected and did not fully comply with HQS must be initially categorized as unavailable for occupancy. The owner must promptly notify the PHA of any change in the status of each unit throughout the period of development activity, in the form and manner required by the PHA's Administrative Plan; and
(6) The deadline for completion of the work to be performed under the rider, which must be no more than five years from the date the HAP contract is effective (the five-year maximum includes any extensions granted by the PHA).
(f)
(1) In the case of additions or substitutions of units, the provisions of § 983.207 apply, except:
(i) The PHA and owner must also amend the rider to update the information described in paragraph (e)(5) of this section;
(ii) The units to be added must not undergo repairs or renovation prior to amending the PBV HAP contract to add the unit; and
(iii) Addition of a unit is prohibited while the rider is in effect if such addition will increase the number of contract units from eight or fewer units to nine or more units.
(2) The PHA and owner may only execute an addendum amending the items in paragraphs (e)(1)-(4) of this section affecting a unit prior to the PHA accepting the completed unit.
(g)
(1) The PHA must select families as provided in § 983.251 for PBV assistance in a contract unit that is available for occupancy. Upon PHA acceptance of a completed unit (see § 983.156(b)(3)) that is vacant, the PHA may either select a family from the waiting list for PBV assistance in the newly completed unit or offer to transfer a family assisted in a different contract unit to the newly completed unit as described in paragraph (g)(6)(iii) of this section.
(2) The PHA may refer a family for occupancy of a contract unit only if the unit fully complies with HQS as determined by the PHA inspection.
(3) The PHA must provide a notice to the family upon selection explaining:
(i) The expected nature and duration of the development activity at the project;
(ii) That if the family accepts the unit and the owner fails to complete the development activity in accordance with applicable requirements, the PHA may terminate the HAP contract, in which case the family will be issued a tenant-based voucher and may be able to remain in the project with tenant-based assistance (see § 983.206(b));
(iii) If development activity is expected to occur in the family's unit per paragraph (e)(5) of this section, that the family may be required to vacate the unit temporarily or with continued voucher assistance;
(iv) That the family may choose to decline the unit and remain on the waiting list; and
(v) If applicable, in the case of an eligible in-place family, that the family may choose not to accept PBV assistance in the unit.
(4) The PHA must conduct periodic and other inspections on occupied contract units in accordance with the requirements of § 983.103(e) and (f) and must vigorously enforce the owner's obligation to maintain contract units occupied by an assisted family in accordance with the requirements of § 983.208.
(5) The PHA makes payments to the owner for occupied units as provided in § 983.351.
(6) When an owner will undertake development activity in a unit currently occupied by an assisted family as provided in paragraph (e)(5) of this section, the requirements of this paragraph (g)(6) govern where the family will live during the rehabilitation. For purposes of this paragraph, all references to the HQS applicable to the unit include items and components within the primary and secondary means of egress, common features, and systems equipment as described by 24 CFR 5.703(a)(2).
(i) The owner must complete the development activity without the family vacating the unit if the PHA reasonably expects that the owner can complete the development activity in a manner that:
(A) Does not result in life-threatening deficiencies;
(B) Does not result in any other deficiencies under the HQS that are not corrected within 30 days; and
(C) Is mutually agreeable to the owner and the family;
(ii) If the conditions for in-place development activity in paragraph (g)(6)(i) of this section cannot be achieved, the owner must temporarily relocate the family to complete the development activity if:
(A) The PHA reasonably expects that the owner can complete the relocation and development activity within a single calendar month (beginning no sooner than the first day of a month and ending no later than the last day of the same month); and
(B) The family can be relocated to a location and in a manner mutually agreeable to the owner and the family; and
(iii) If the conditions for in-place development activity in paragraph (g)(6)(i) of this section and temporary relocation in paragraph (g)(6)(ii) of this section cannot be achieved, the following protocol for lease termination and relocation applies:
(A) If there are contract units within the project that are designated as available for occupancy and that are vacant or expected to become vacant at the time of the planned lease termination, the PHA must refer the family to the owner for occupancy of an appropriate-size contract unit. If the family accepts the offered unit, the owner must provide the family with a reasonable time to move to the offered unit, must pay the family's reasonable moving expenses, must execute a lease with the family for the offered unit to be effective at the time of the family's move, and must terminate the lease for
(B) If no other contract unit within the project is available for the family to lease during the period of development activity, the PHA must issue the family a tenant-based voucher. However, the PHA is not required to issue the family a voucher if the PHA has offered the family an alternative housing option (
(C) If the family moves from the project in order for the owner to undertake development activity in the family's unit, the PHA must offer the family the option to return to the project with PBV assistance, if the family is eligible for PBV assistance, following completion of development activity at the project. The PHA, or owner in the case of an owner-maintained waiting list, must place the family on the PBV waiting list with an absolute selection preference for occupancy in the project; and
(D) If the family moves from the project in order for the owner to undertake development activity in the family's unit, the PHA must not refer any family for occupancy of the unit until after rehabilitation of the unit and PHA acceptance of the completed unit (see § 983.156(b)(3)).
(h)
(1) If the owner has not completed the development activity by the deadline specified in the rider, which includes any extensions granted by the PHA, (see paragraph (e)(6) of this section), the PHA may grant an additional period for compliance to allow the owner more time to complete the development activity. The granting of any such period must be consistent with the PHA's Administrative Plan and must not exceed 180 days. If the owner has not completed the development activity following the period for compliance, the PHA must terminate the contract. In addition to termination, the PHA may exercise any of its other rights or remedies under the HAP contract. At HUD's sole discretion, HUD may approve a PHA's request for an extension of the period for compliance beyond 180 days. In determining whether to approve the PHA request, HUD will consider appropriate factors, including any extenuating circumstances that contributed to the delay.
(2) The owner's failure to comply with the development requirements of § 983.153 constitutes a breach of the HAP contract (see § 983.206(c)(2)). In the event that the owner's failure constituted only a de minimis error in the owner's compliance with the development requirements of § 983.153, the PHA may decide to take an action other than termination of the HAP contract. In all other cases, the PHA must terminate the HAP contract, in addition to any other rights and remedies the PHA chooses to exercise under the HAP contract.
(i)
(a)
The revisions and addition read as follows:
(f) Features provided to comply with program accessibility requirements of Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8, the Fair Housing Act, and the Americans with Disabilities Act, as applicable;
(h) The number of contract units under the increased program cap (as described in § 983.6(d)) or excepted from the project cap (as described in § 983.54(c)) which will be set aside for occupancy by families who qualify for such a unit;
(j) Whether the PHA has elected not to reduce rents below the initial rent to owner in accordance with 24 CFR 983.302(c)(2).
(a)
(b)
(c)
(d)
(e)
(1) Prior to execution of the HAP contract, the PHA must establish a separate legal entity to serve as the owner. That separate legal entity must execute the HAP contract with the PHA. The separate legal entity must have the legal capacity to lease units and must be one of the following:
(i) A non-profit affiliate or instrumentality of the PHA;
(ii) A limited liability corporation;
(iii) A limited partnership;
(iv) A corporation; or
(v) Any other legally acceptable entity recognized under State law.
(2) The PHA signs the HUD-prescribed PHA-owned certification covering a PHA-owned unit instead of executing the HAP contract for the PHA-owned unit. By signing the PHA-owned certification, the PHA certifies that it will fulfill all the required program responsibilities of the private owner under the PBV HAP contract, and that it will also fulfill all of the program responsibilities required of the PHA for the PHA-owned unit.
(i) The PHA-owned certification serves as the equivalent of the HAP contract, and subjects the PHA, as owner, to all of the requirements of the HAP contract contained in parts 982 and 983. Where the PHA has elected to use the PHA-owned certification, all references to the HAP contract throughout parts 982 and 983 must be interpreted to be references to the PHA-owned certification.
(ii) The PHA must obtain the services of an independent entity to perform the required PHA functions identified in § 983.57(b) before signing the PHA-owned certification.
(iii) The PHA may not use the PHA-owned certification if the PHA-owned PBV project is owned by a separate legal entity from the PHA (
(a)
(b)
(1) Each extension executed must have a term that does not exceed 20 years;
(2) At no time may the total remaining term of the HAP contract, with extensions, exceed 40 years;
(3) Before agreeing to an extension, the PHA must determine that the extension is appropriate to continue providing affordable housing for low-income families or to expand housing opportunities; and
(4) Each extension must be on the form and subject to the conditions prescribed by HUD at the time of the extension.
(a)
(2) Not less than one year before termination of a PBV HAP contract, the owner must notify the PHA and assisted tenants of the termination.
(3) The term “termination” for applicability of this notice requirement means the expiration of the HAP contract, termination of the HAP contract by agreement of PHA and owner per paragraph (e) of this section, or an owner's refusal to renew the HAP contract.
(4) If an owner fails to provide the required notice, the owner must permit the tenants in assisted units to remain in their units for the required notice period with no increase in the tenant portion of their rent, and with no eviction as a result of an owner's inability to collect an increased tenant portion of rent.
(5) An owner and PHA may agree to extend the terminating contract for a period of time sufficient to provide tenants with the required notice, under such terms as HUD may require.
(b)
(1) The unit must comply with HUD's HQS;
(2) The PHA must determine or have determined that the rent for the unit is reasonable;
(3) The family must pay its required share of the rent and the amount, if any, by which the unit rent (including the amount allowed for tenant-based utilities) exceeds the applicable payment standard (the limitation at 24 CFR 982.508 regarding maximum family share at initial occupancy shall not apply); and
(4) The owner may not refuse to initially lease a unit in the project to a family that elects to use their tenant-based assistance to remain in the same project, except where the owner will use the unit for a purpose other than a residential rental unit. The owner may not later terminate the tenancy of such a family, except for the following grounds:
(i) The grounds in 24 CFR 982.310 of this title, except paragraphs 24 CFR 982.310(d)(1)(iii) and (iv);
(ii) The owner's desire to use the unit for a purpose other than a residential rental unit; and
(iii) The owner's desire to renovate the unit, subject to the following:
(A) The owner must consider whether a reasonable alternative to terminating the lease exists. If a reasonable alternative exists, the owner must not terminate the lease. The owner must consider the following alternatives:
(
(
(B) If the owner terminates the lease for renovation, the owner must make every reasonable effort to make available and lease the family another unit within the project that meets the tenant-based voucher program requirements; and
(C) If no other unit within the project is available for the family to lease during the renovation period or the family chooses to move from the project during the renovation period, the owner must make every reasonable effort to make available and lease the family a unit within the project upon completion of renovations.
(c)
(i) Consistent with the policies in the PHA's Administrative Plan, the PHA has the option of terminating a PBV HAP contract based on “insufficient funding” only if:
(A) The PHA determines in accordance with HUD requirements that it lacks sufficient HAP funding (including HAP reserves) to continue to make housing assistance payments for all voucher units currently under a HAP contract;
(B) The PHA has taken cost-saving measures specified by HUD;
(C) The PHA notifies HUD of its determination and provides the information required by HUD; and
(D) HUD determines that the PHA lacks sufficient funding and notifies the PHA it may terminate HAP contracts as a result.
(2) If the PHA determines that the owner has breached the HAP contract, the PHA may exercise any of its rights or remedies under the HAP contract, including but not limited to contract termination. The provisions of § 983.208 apply for HAP contract breaches involving failure to comply with HQS. For any other contract termination due to breach, paragraph (b) of this section on provision of tenant-based assistance applies.
(d)
(e)
(a)
(b)
(1) Added units that qualify for an exclusion from the program cap (as described in § 983.59) or an exception to or exclusion from the project cap (as described in § 983.54(c) and § 983.59, respectively) will not count toward such cap(s).
(2) The anniversary and expiration dates of the HAP contract for the additional units must be the same as the anniversary and expiration dates of the HAP contract term for the PBV units originally placed under HAP contract.
(3) The added unit may be vacant or, subject to the requirements of paragraph (c) of this section, it may be occupied.
(4) The unit may undergo repairs or renovation prior to amending the PBV HAP contract to add the unit, as provided in paragraph (d) of this section.
(5) The added unit must have existed at the time described in paragraph (e) of this section.
(c)
(1) The family occupying the unit must be eligible for assistance per §§ 983.53(a)(3) and 983.251(a);
(2) The unit must be appropriate for the size of the family occupying the unit under the PHA's subsidy standards;
(3) The family must be selected from the waiting list in accordance with the applicable selection policies; and
(4) The unit may be occupied by a family who was assisted with a tenant-based voucher immediately prior to the unit being placed on the PBV HAP contract. The tenant-based HAP contract for the unit must terminate before the unit may be placed under the PBV HAP contract. The family occupying the unit is not a new admission to the voucher program. The option described in this paragraph (c)(4) is subject to the following conditions:
(i) If the family is in the initial term of the tenant-based lease, the family agreed to mutually terminate the tenant-based lease with the owner and enter into a PBV lease.
(ii) If the initial term of the tenant-based lease has passed or the end of that term coincides with the time at which the unit will be placed on the PBV HAP contract, upon the owner's decision not to renew the tenant-based lease or to terminate the tenant-based lease in accordance with 24 CFR 982.308 or 982.310, respectively, the family agreed to relinquish the tenant-based voucher and enter into a PBV lease.
(d)
(1) The substantial improvement must not proceed prior to the first two years of the effective date of the HAP contract, except in extraordinary circumstances (
(2) The substantial improvement is subject to the Federal equal employment opportunity requirements of Executive Orders 11246 as amended (3 CFR, 1964-1965 Comp., p. 339), 11625 (3 CFR, 1971-1975 Comp., p. 616), 12432 (3 CFR, 1983 Comp., p. 198), and 12138 (3 CFR, 1977 Comp., p. 393).
(3) As applicable, the design and construction requirements of the Fair Housing Act and implementing regulations at 24 CFR 100.205; the accessibility requirements of Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8, including 8.22 and 8.23; and Title II of the Americans with Disabilities Act (42 U.S.C. 12131-12134) and implementing regulations at 28 CFR part 35, including §§ 35.150 and 35.151, apply to substantial improvement.
(4) Any substantial improvement that constitutes substantial rehabilitation as defined by 24 CFR 5.100 of a building with more than four rental units and where the proposal or project selection date or the start of the substantial improvement while under a HAP contract is after January 19, 2017, must include installation of broadband infrastructure, as this term is defined in 24 CFR 5.100, except where the owner determines and documents the determination that:
(i) The location of the substantial rehabilitation makes installation of broadband infrastructure infeasible;
(ii) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or
(iii) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible.
(5) An owner or project principal who is on the U.S. General Services Administration list of parties excluded from Federal procurement and non-procurement programs, or who is debarred, suspended subject to a limited denial of participation, or otherwise excluded under 2 CFR part 2424, may not participate in substantial improvement. The HAP contract must include a certification by the owner that the owner and other project principals (including the officers and principal members, shareholders, investors, and other parties having a substantial interest in the project) are not on such list and are not debarred, suspended subject to a limited denial of participation, or otherwise excluded under 2 CFR part 2424.
(6) An owner must disclose any possible conflict of interest that would be a violation of the HAP contract or HUD regulations, in accordance with § 982.161 of this title.
(7) The requirements for additional assistance after HAP contract at § 983.11(d) apply.
(8) Section 983.155, Completion of work, applies.
(9) Paragraphs (a), (b)(4), and (d) of § 983.156, PHA acceptance of completed units, apply.
(e)
(1) The units to be added or substituted existed at the time of HAP contract execution;
(2) In the case of a project completed in stages, the units to be added or substituted existed at the time of PHA acceptance of the last completed unit(s) per § 983.156(c); or
(3) A unit, office space, or common area within the interior of a building containing contract units existed at the time described in paragraph (e)(1) or (2) of this section, as applicable, and is reconfigured without impacting the building envelope, subject to paragraph (d) of this section, into one or more units to be added or substituted.
(f)
(g)
(h)
(a) Owner maintenance and operation. (1) The owner must maintain and operate the contract units and premises in accordance with the HQS, including performance of ordinary and extraordinary maintenance.
(2) The owner must provide all the services, maintenance, equipment, and utilities specified in the HAP contract with the PHA and in the lease with each assisted family.
(3) At the discretion of the PHA, the HAP contract may also require continuing owner compliance during the HAP contract term with additional housing quality requirements specified by the PHA (in addition to, but not in place of, compliance with HUD's HQS). Such additional requirements may be designed to assure continued compliance with any design, architecture, or quality requirement specified by the PHA (§ 983.204(c)). The PHA must specify the conditions under which it will require additional housing quality requirements in the Administrative Plan.
(b)
(2) The unit is in noncompliance with HQS if:
(i) The PHA or other inspector authorized by the State or local government determines the unit has HQS deficiencies based upon an inspection;
(ii) The agency or inspector notifies the owner in writing of the unit HQS deficiencies; and
(iii) The unit HQS deficiencies are not remedied within the following timeframes:
(A) For life-threatening deficiencies, the owner must correct the deficiency within 24 hours of notification.
(B) For other deficiencies, the owner must correct the deficiency within 30 calendar days of notification (or any reasonable PHA-approved extension).
(3) In the case of an HQS deficiency that the PHA determines is caused by the tenant, any member of the household, or any guest or other person under the tenant's control, other than any damage resulting from ordinary use, the PHA may waive the owner's responsibility to remedy the violation. Housing assistance payments to the owner may not be withheld or abated if the owner responsibility has been waived. However, the PHA may terminate assistance to a family because of an HQS breach beyond damage resulting from ordinary use caused by any member of the household or any guest or other person under the tenant's control, which may result in removing the unit from the HAP contract.
(4) In the case of an HQS deficiency that is caused by fire, natural disaster, or similar extraordinary circumstances, the PHA may permit the owner to undertake substantial improvement in accordance with § 983.212. However, so long as the contract unit with deficiencies is occupied, the PHA must withhold or abate housing assistance payments and remove units from or terminate the HAP contract as described in this section.
(5) In the case of a project that is undergoing development activity after HAP contract execution per § 983.157, the remedies of paragraph (d) of this section do not apply to units designated as unavailable for occupancy during the period of development activity in accordance with the rider. However, in the case of any contract unit with deficiencies that is occupied, the PHA must withhold or abate housing assistance payments and remove units from or terminate the HAP contract as described in this section.
(c)
(i) The family fails to pay for any utilities that the owner is not required to pay for, but which are to be paid by the tenant;
(ii) The family fails to provide and maintain any appliances that the owner is not required to provide, but which are to be provided by the tenant; or
(iii) Any member of the household or guest damages the dwelling unit or premises (damages beyond ordinary wear and tear).
(2) If the PHA has waived the owner's responsibility to remedy the violation in accordance with paragraph (b)(3) of this section, the following applies:
(i) If the HQS breach caused by the family is life-threatening, the family must take all steps permissible under the lease and State and local law to ensure the deficiency is corrected within 24 hours of notification.
(ii) For other family-caused deficiencies, the family must take all steps permissible under the lease and State and local law to ensure the deficiency is corrected within 30 calendar days of notification (or any PHA-approved extension).
(3) If the family has caused a breach of the HQS, the PHA must take prompt and vigorous action to enforce the family obligations. The PHA may terminate assistance for the family in accordance with 24 CFR 982.552.
(d)
(1) A PHA may withhold HAP for an individual unit that has HQS deficiencies once the PHA has notified the owner in writing of the deficiencies. If the unit is brought into compliance during the applicable cure period (within 24 hours from notification for life-threatening deficiencies and within 30 days from notification (or other reasonable period established by the PHA for non-life-threatening deficiencies), the PHA:
(i) Must resume assistance payments; and
(ii) Must provide assistance payments to cover the time period for which the assistance payments were withheld.
(2)(i) The PHA must abate the HAP, including amounts that had been withheld, for the PBV unit with deficiencies if the owner fails to make the repairs within the applicable cure period (within 24 hours from notification for life-threatening deficiencies and within 30 days from notification (or other reasonable period established by the PHA) for non-life-threatening deficiencies).
(ii) The PHA may choose to abate payments for all units covered by the HAP contract due to a contract unit's noncompliance with the HQS, even if some of the contract units continue to meet HQS.
(iii) If a PHA abates the HAP for a unit, the PHA must notify the family and the owner that it is abating payments and that if the unit with deficiencies does not meet HQS within 60 days after the determination of noncompliance (or a reasonable longer period established by the PHA), the PHA will either terminate the HAP
(3) An owner may not terminate the tenancy of any family due to the withholding or abatement of assistance. During the period that assistance is abated, the family may terminate the tenancy by notifying the owner. The PHA must promptly issue the family a tenant-based voucher to move.
(4) If the owner makes the repairs and the unit complies with HQS within 60 days (or a reasonable longer period established by the PHA) of the notice of abatement, the PHA must recommence payments to the owner if the unit is still occupied by an assisted family. The PHA does not make any payments for the unit to the owner for the period of time that the payments were abated.
(5) If the owner fails to make the repairs within 60 days (or a reasonable longer period established by the PHA) of the notice of abatement, the PHA must either remove the unit from the HAP contract or terminate the HAP contract in its entirety. The PHA must issue the family whose unit will be removed or all families residing in contract units, if the PHA is terminating the HAP contract, a tenant-based voucher to move at least 30 days prior to the removal of the unit from the HAP contract or termination of the HAP contract. A family may elect to remain in the project in accordance with § 983.206(b) if the project contains a unit that meets the requirements of that section, with priority given to families who will remain in the same unit if there are insufficient units available to accommodate all families that wish to remain.
(6)(i) The PHA must give any family residing in a unit that is either removed from the HAP contract or for which the HAP contract is terminated under this paragraph (d) due to a failure to correct HQS deficiencies at least 90 days or a longer period as the PHA determines is reasonably necessary following the termination of the HAP contract or removal of the unit from the HAP contract to lease a unit with tenant-based assistance.
(ii) If the family is unable to lease a new unit within the period provided by the PHA under paragraph (d)(6)(i) of this section and the PHA owns or operates public housing, the PHA must offer, and, if accepted, provide the family a selection preference for an appropriate-size public housing unit that first becomes available for occupancy after the time period expires.
(iii) PHAs may assist families relocating under this paragraph (d) in finding a new unit, including using up to 2 months of the withheld and abated assistance payments for costs directly associated with relocating to a new unit, including security deposits, temporary housing costs, or other reasonable moving costs as determined by the PHA based on their locality. PHAs must assist families with disabilities in locating available accessible units in accordance with 24 CFR 8.28(a)(3). If the PHA uses the withheld and abated assistance payments to assist with the family's relocation costs, the PHA must provide security deposit assistance to the family as necessary. If the family receives security deposit assistance from the PHA for the new unit, the PHA may require the family to remit the security deposit returned by the owner of the new unit at such time that the lease is terminated, up to the amount of the security deposit assistance provided by the PHA for that unit. The PHA must include in its Administrative Plan the policies it will implement for this provision.
(e)
(f)
(a) The owner is maintaining the premises and all contract units in accordance with HUD's HQS under the requirements of this part 983.
(c) Each contract unit for which the owner is receiving housing assistance payments is leased to an eligible family referred by the PHA or selected from the owner-maintained waiting list in accordance with § 983.251, and the lease is in accordance with the HAP contract and HUD requirements.
(d) To the best of the owner's knowledge, the members of the family reside in each contract unit for which the owner is receiving housing assistance payments, and the unit is the family's only residence, except as provided in §§ 983.157(g)(6)(ii) and 983.212(a)(3)(ii).
(e) The owner (including a principal or other interested party) is not the spouse, parent, child, grandparent, grandchild, sister, or brother of any member of a family residing in a contract unit unless needed as a reasonable accommodation under Section 504, the Fair Housing Act, or the Americans with Disabilities Act (ADA), for a household member who is a person with disabilities.
(a)
(b)
(c)
(a)
(1) The PHA may approve the substantial improvement only if one of the following conditions apply:
(i) The unit has been damaged by fire or natural disaster, or other extraordinary circumstances exist which require a unit previously compliant with HQS to urgently undergo substantial improvement. For this purpose, “extraordinary circumstances” are unforeseen events that are not the fault of the owner. The PHA may provide approval for substantial improvement resulting from the damage or extraordinary circumstances described in this paragraph (a)(1)(i) after the owner submits the request.
(ii) The owner requests to engage in substantial improvement that will commence following the first two years of the effective date of the HAP contract. The PHA may provide approval for substantial improvement occurring as described in this paragraph (a)(1)(ii) after the owner submits the request, but no earlier than twenty-one months after the effective date of the HAP contract.
(2) The owner's request must include a description of the substantial improvement proposed to be undertaken and the length of time, if any, the owner anticipates that the unit, including items and components within the primary and secondary means of egress, common features, and systems equipment as described by 24 CFR 5.703(a)(2), will not meet HQS. The PHA must not approve as substantial improvement, under this section, an owner's request to demolish a building containing contract units and newly construct replacement units (see requirements for contract termination at § 983.206 and requirements for newly constructed housing in this part 983).
(3) If the unit is occupied and will not meet HQS during any part of the period of the substantial improvement, the owner's request must include a description of the owner's plan to house the family during the period the unit will not meet HQS. The PHA must not approve the substantial improvement unless the owner's plan complies with one of the following requirements:
(i) The owner must complete the substantial improvement without the family vacating the unit if the PHA reasonably expects that the owner can complete the substantial improvement in a manner that:
(A) Does not result in life-threatening deficiencies;
(B) Does not result in any other deficiencies under the HQS that are not corrected within 30 days; and
(C) Is mutually agreeable to the owner and the family;
(ii) If the conditions for in-place substantial improvement in paragraph (a)(3)(i) of this section cannot be achieved, the owner must temporarily relocate the family to complete the substantial improvement if:
(A) The PHA reasonably expects that the owner can complete the relocation and substantial improvement within a single calendar month (beginning no sooner than the first day of a month and ending no later than the last day of the same month); and
(B) The family can be relocated to a location and in a manner mutually agreeable to the owner and the family; and
(iii) If the conditions for in-place substantial improvement in paragraph (a)(3)(i) of this section and temporary relocation in paragraph (a)(3)(ii) of this section cannot be achieved, the following protocol for lease termination and relocation applies:
(A) If there are contract units within the project will meet HQS during the period of substantial improvement and that are vacant or expected to become vacant at the time of the planned lease termination, the PHA must refer the family to the owner for occupancy of an appropriate-size contract unit. If the family accepts the offered unit, the owner must provide the family with a reasonable time to move to the offered unit, must pay the family's reasonable moving expenses, must execute a lease with the family for the offered unit to be effective at the time of the family's move, and must terminate the lease for the family's original unit at the time of the family's move. The owner must terminate the family's lease if the family rejects the offered unit; however, the PHA must first offer the family a different unit or tenant-based assistance under paragraph (a)(3)(iii)(B) of this section if needed as a reasonable accommodation under Section 504, the Fair Housing Act, or the Americans with Disabilities Act (ADA), for a household member who is a person with disabilities. The PHA must consider other family requests for a different unit or tenant-based assistance under paragraph (a)(3)(iii)(B) of this section;
(B) If no other contract unit within the project is available for the family to lease during the period of substantial improvement, the PHA must issue the family a tenant-based voucher. However, the PHA is not required to issue the family a voucher if the PHA has offered the family an alternative housing option (
(C) If the family moves from the project during the period of substantial improvement, the PHA must offer the family the option to return to the project with PBV assistance, if the family is eligible for PBV assistance, following completion of substantial improvement at the project. The PHA, or owner in the case of an absolute selection preference for occupancy in the project.
(4) The PHA must abate housing assistance payments for a unit beginning at the time the unit has any deficiency under HUD's HQS during the period of substantial improvement. The timing for the PHA to begin withholding and abatement specified in § 983.208(d) does not apply to deficiencies occurring during the period of substantial improvement. When all deficiencies in the unit are corrected, the PHA must recommence payments to the owner if the unit is still occupied by an assisted family, subject to paragraphs (a)(5) and
(5) The terms of the PHA approval must be recorded in an addendum to the HAP contract. The PHA may choose to temporarily remove vacant units from the PBV HAP contract during the time the units will not meet HQS during the substantial improvement. If the PHA temporarily removes a unit, the PHA reinstates the unit in accordance with § 983.207(b). Owner failure to complete the substantial improvement as approved shall be a breach of the HAP contract and the PHA may exercise any of its rights or remedies under the HAP contract, including but not limited to contract termination pursuant to § 983.206(c)(2).
(b)
(2) As applicable, the design and construction requirements of the Fair Housing Act and implementing regulations at 24 CFR 100.205; the accessibility requirements of Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8, including 8.22 and 8.23; and Title II of the Americans with Disabilities Act (42 U.S.C. 12131-12134) and implementing regulations at 28 CFR part 35, including §§ 35.150 and 35.151, apply to substantial improvement undertaken on units that are currently under a HAP contract.
(3) Any substantial improvement undertaken on units that are currently under a HAP contract that constitutes substantial rehabilitation as defined by 24 CFR 5.100 of a building with more than four rental units and where the proposal or project selection date or the start of the substantial improvement while under a HAP contract is after January 19, 2017, must include installation of broadband infrastructure, as this term is defined in 24 CFR 5.100, except where the owner determines and documents the determination that:
(i) The location of the substantial rehabilitation makes installation of broadband infrastructure infeasible;
(ii) The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden; or
(iii) The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible.
(4) An owner or project principal who is on the U.S. General Services Administration list of parties excluded from Federal procurement and non-procurement programs, or who is debarred, suspended subject to a limited denial of participation, or otherwise excluded under 2 CFR part 2424, may not participate in substantial improvement undertaken on units subject to a HAP contract. The HAP contract must include a certification by the owner that the owner and other project principals (including the officers and principal members, shareholders, investors, and other parties having a substantial interest in the project) are not on such list and are not debarred, suspended subject to a limited denial of participation, or otherwise excluded under 2 CFR part 2424.
(5) An owner must disclose any possible conflict of interest that would be a violation of the HAP contract or HUD regulations, in accordance with § 982.161 of this title.
(6) The requirements for additional assistance after HAP contract at § 983.11(d) apply to substantial improvement undertaken on units that are currently under a HAP contract.
(7) Section 983.155, Completion of work, applies to substantial improvement undertaken on units that are currently under a HAP contract.
(8) Section 983.156(a), Inspection of units, and (d), PHA-owned units, apply to substantial improvement undertaken on units that are currently under a HAP contract.
(c)
(1) The proposed substantial improvement meets one of the conditions of paragraph (a)(1) of this section;
(2) The description of the substantial improvement does not include plans to demolish a building containing contract units and newly construct replacement units; and
(3) The plan to house each family during the period that family's unit will not meet HQS complies with the requirements of paragraph (a)(3).
(a) Who may receive PBV assistance? (1) The PHA may select families who are participants in the PHA's tenant-based voucher program and families who have applied for admission to the voucher program.
(2) Except for voucher participants (determined eligible at original admission to the voucher program), the PHA may only select families determined eligible for admission at commencement of PBV assistance, using information received and verified by the PHA within a period of 60 days before commencement of PBV assistance. For all families, the PHA must determine the total tenant payment for the family is less than the gross rent, such that the unit will be eligible for a monthly HAP.
(3) The protections for victims of domestic violence, dating violence, sexual assault, or stalking in 24 CFR part 5, subpart L, apply to admission to the project-based program.
(4) A PHA may not approve a tenancy if the owner (including a principal or other interested party) of a unit is the parent, child, grandparent, grandchild, sister, or brother of any member of the family, unless the PHA determines that approving the unit would provide reasonable accommodation under Section 504, the Fair Housing Act, or the Americans with Disabilities Act (ADA), for a household member who is a person with disabilities.
(b)
(2) If the in-place family is a tenant-based voucher participant, program eligibility is not re-determined. However, the PHA must determine that the total tenant payment for the family is less than the gross rent for the unit, such that the unit will be eligible for a
(3)(i) During the initial term of the lease under the tenant-based tenancy, an in-place tenant-based voucher family may agree, but is not required, to mutually terminate the lease with the owner and enter into a lease and tenancy under the PBV program. If the family chooses to continue the tenant-based assisted tenancy, the unit may not be added to the PBV HAP contract. The owner may not terminate the lease for other good cause during the initial term unless the owner is terminating the tenancy because of something the family did or failed to do in accordance with 24 CFR 982.310(d)(2). The owner is expressly prohibited from terminating the tenancy during the initial term of the lease based on the family's failure to accept the offer of a new lease or revision, or for a business or economic reason.
(ii) If, after the initial term, the owner chooses not to renew the lease or terminates the lease for other good cause (as defined in 24 CFR 982.310(d)) to end the tenant-based assisted tenancy, the family would be required to move with continued tenant-based assistance or relinquish the tenant-based voucher and enter into a new lease to receive PBV assistance in order to remain in the unit.
(4) Admission of in-place families is not subject to income-targeting under 24 CFR 982.201(b)(2)(i).
(c)
(2) The PHA must identify in the Administrative Plan which of the following options it will use to structure the waiting list for the PBV program:
(i) The PHA may use a separate, central, waiting list comprised of more than one, or all, PBV projects;
(ii) The PHA may use the same waiting list for both tenant-based assistance and some or all PBV projects; or
(iii) The PHA may use separate waiting lists for PBV units in individual projects or buildings (or for sets of such units). This option may be used in combination with the option in paragraph (c)(2)(i) or (ii) of this section. The PHA must specify the name of the PBV project in the Administrative Plan. The PHA may permit the owner to maintain such waiting lists (see paragraph (c)(7) of this section for more information).
(3) For any of the options under paragraph (c)(2) of this section, the PHA may establish in its Administrative Plan any preferences for occupancy of particular units including the name of the project(s) and the specific preferences that are to be used by project. Criteria for occupancy of units (
(4) The PHA may merge the waiting list for PBV assistance with the PHA waiting list for admission to another assisted housing program.
(5) Where applicable, the PHA may place families referred by the PBV owner on its PBV waiting list.
(6) If the PHA chooses to use a separate waiting list for admission to PBV units under paragraphs (c)(2)(i) and (iii) of this section, the PHA must offer to place applicants who are listed on the waiting list for tenant-based assistance on the waiting list for PBV assistance (including owner-maintained PBV waiting lists).
(7) PHAs using separate waiting lists for individual projects or buildings, as described in paragraph (c)(2)(iii) of this section, may establish in their Administrative Plan that owners will maintain such waiting lists. PHAs may choose to use owner-maintained PBV waiting lists for specific owners or projects. PHAs may permit an owner to maintain a single waiting list across multiple projects owned by the owner. Under an owner-maintained waiting list, the owner is responsible for carrying out responsibilities including, but not limited to, processing changes in applicant information, removing an applicant's name from the waiting list, opening and closing the waiting list. PHAs must identify in their Administrative Plans the name of the project(s), the oversight procedures the PHA will use to ensure owner-maintained waiting lists are administered properly and in accordance with program requirements, and the approval process of an owner's waiting list policy (including any preferences). Where a PHA allows for owner-maintained waiting lists, all the following apply:
(i) The owner must develop and submit a written owner waiting list policy to the PHA for approval. The owner waiting list policy must include policies and procedures concerning waiting list management and selection of applicants from the project's waiting list, including any admission preferences, procedures for removing applicant names from the waiting list, and procedures for closing and reopening the waiting list. The owner must receive approval from the PHA of its owner waiting list policy in accordance with the process established in the PHA's Administrative Plan. The owner's waiting list policy must be incorporated in the PHA's Administrative Plan.
(ii) The owner must receive approval from the PHA for any preferences that will be applicable to the project. The PHA will approve such preferences as part of its approval of the owner's waiting list policy. Each project may have a different set of preferences. Preferences must be consistent with the PHA Plan and listed in the owner's waiting list policy.
(iii) The owner is responsible for opening and closing the waiting list, including providing public notice when the owner opens the waiting list in accordance with 24 CFR 982.206. If the owner-maintained waiting list is open and additional applicants are needed to fill vacant units, the owner must give public notice in accordance with the requirements of 24 CFR 982.206 and the owner waiting list policy.
(iv) The applicant may apply directly at the project, or the applicant may request that the PHA refer the applicant to the owner for placement on the project's waiting list. The PHA must disclose to the applicant all the PBV projects available to the applicant, including the projects' contact information and other basic information about the project.
(v) Applicants already on the PHA's waiting list must be permitted to place their names on the project's waiting lists.
(vi) At the discretion of the PHA, the owner may make preliminary eligibility determinations for purposes of placing the family on the waiting list, and preference eligibility determinations. The PHA may choose to make this determination rather than delegating it to the owner.
(vii) If the PHA delegated the preliminary eligibility and preference determinations to the owner, the owner is responsible for notifying the family of the owner's determination not to place the applicant on the waiting list and a determination that the family is not eligible for a preference. In such a case, the owner is responsible to provide the notice at 24 CFR 982.554(a) of this title. The PHA is then responsible for conducting the informal review.
(viii) Once an owner selects the family from the waiting list, the owner refers the family to the PHA who then determines the family's final program eligibility. The owner may not offer a unit to the family until the PHA determines that the family is eligible for the program.
(ix) All HCV waiting list administration requirements that apply to the PBV program (24 CFR part 982, subpart E, other than 24 CFR 982.201(e), 982.202(b)(2), and 982.204(d)) apply to owner-maintained waiting lists.
(x) The PHA is responsible for oversight of owner-maintained waiting lists to ensure that they are administered properly and in accordance with program requirements, including but not limited to nondiscrimination and equal opportunity requirements under the authorities cited at 24 CFR 5.105(a). The owner is responsible for maintaining complete and accurate records as described in 24 CFR 982.158. The owner must give the PHA, HUD, and the Comptroller General full and free access to its offices and records concerning waiting list management, as described in 24 CFR 982.158(c). HUD may undertake investigation to determine whether the PHA or owner is in violation of authorities and, if unable to reach a voluntary resolution to correct the violation, take an enforcement action against either the owner or the PHA, or both.
(8) Not less than 75 percent of the families admitted to a PHA's tenant-based and project-based voucher programs during the PHA fiscal year from the PHA waiting list shall be extremely low-income families. The income-targeting requirements at 24 CFR 982.201(b)(2) apply to the total of admissions to the PHA's project-based voucher program and tenant-based voucher program during the PHA fiscal year from the PHA waiting list (including owner-maintained PBV waiting lists) for such programs.
(9) Families who require particular accessibility features for persons with disabilities must be selected first to occupy PBV units with such accessibility features (see 24 CFR 8.26, 8.27, and 100.202). Also see § 983.260. The PHA shall have some mechanism for referring to accessible PBV units a family that includes a person with a mobility or sensory impairment.
(d)
(1) The prohibition on granting preferences to persons with a specific disability at 24 CFR 982.207(b)(3) continues to apply.
(2) Families must not be required to accept the particular services offered at the project nor shall families be required to provide their own equivalent services if they decline the project's services.
(3) In advertising the project, the owner may advertise the project as offering services for a particular type of disability; however, the preference must be provided to all applicants who qualify for the voluntary services offered in conjunction with the assisted units.
(e)
(2) The impact (of a family's rejection of the offer or the owner's rejection of the family) on a family's position on the PBV waiting list will be determined as follows:
(i) If a central PBV waiting list is used, the PHA's Administrative Plan must address the number of offers a family may reject without good cause before the family is removed from the PBV waiting list and whether the owner's rejection will impact the family's place on the PBV waiting list.
(ii) If a project-specific PBV waiting list is used, the family's name is removed from the project's waiting list connected to the family's rejection of the offer without good cause or the owner's rejection of the family. The family's position on any other project-specific PBV waiting list is not affected.
(iii) The PHA must define “good cause” for purposes of paragraphs (e)(2)(i) and (ii) of this section in its Administrative Plan. The PHA's definition of good cause must include, at minimum, that:
(A) The family determines the unit is not accessible to a household member with a disability or otherwise does not meet the member's disability-related needs;
(B) The unit has HQS deficiencies;
(C) The family is unable to accept the offer due to circumstances beyond the family's control (such as hospitalization, temporary economic hardship, or natural disaster); and
(D) The family determines the unit presents a health or safety risk to a household member who is or has been a victim of domestic violence, dating violence, sexual assault, or stalking, as provided in part 5, subpart L of this title.
(3) None of the following actions may be taken against an applicant solely because the applicant has applied for, received, or refused an offer of PBV assistance:
(i) Refuse to list the applicant on the PHA waiting list for tenant-based assistance or any other available PBV waiting list. However, the PHA (or owner in the case of owner-maintained waiting lists) is not required to open a closed waiting list to place the family on that waiting list.
(ii) Deny any admission preference for which the applicant is currently qualified.
(iii) Change the applicant's place on the waiting list based on preference, date, and time of application, or other factors affecting selection from the waiting list.
(iv) Remove the applicant from the waiting list for tenant-based voucher assistance.
(a)
(1) The briefing must include information on the following subjects:
(i) A description of how the program works;
(ii) Family and owner responsibilities; and
(iii) Family right to move.
(2) The PHA must take appropriate steps to ensure effective communication in accordance with 24 CFR 8.6 and 28 CFR part 35, subpart E, and must provide information on the reasonable accommodation process.
(b)
(1) How the PHA determines the total tenant payment for a family;
(2) Family obligations under the program; and
(3) Information on Federal, State, and local equal opportunity laws, the contact information for the Section 504 coordinator, a copy of the housing discrimination complaint form, and information on how to request a reasonable accommodation or modification under Section 504, the Fair Housing Act, and the Americans with Disabilities Act;
(4) PHA subsidy standards, including when the PHA will consider granting exceptions to the standards as allowed by 24 CFR 982.402(b)(8), and when exceptions are required as a reasonable accommodation for a person with disabilities under Section 504, the Fair Housing Act, or the Americans with Disabilities Act; and
(5) Family right to move.
(c)
(d)
(a) * * *
(1) During the term of the HAP contract, the owner must lease contract units only to eligible families selected from the waiting list for the PBV program in accordance with § 983.251 of this part.
(3) An owner must promptly notify in writing any rejected applicant of the grounds for any rejection. The owner must provide a copy of such rejection notice to the PHA.
(a)
(i) If an owner-maintained waiting list is used, in accordance with § 983.251, the owner must promptly notify the PHA of any vacancy or expected vacancy in a contract unit and refer the family to the PHA for final eligibility determination. The PHA must make every reasonable effort to make such final eligibility determination within 30 calendar days.
(ii) If a PHA-maintained waiting list is used, in accordance with § 983.251, the owner must promptly notify the PHA of any vacancy or expected vacancy in a contract unit, and the PHA must, after receiving the owner notice, make every reasonable effort to promptly refer a sufficient number of families for the owner to fill such vacancies within 30 calendar days.
(2) The owner must lease vacant contract units only to families determined eligible by the PHA.
(b)
(a) * * *
(2) The PHA must conduct tenant screening of applicants in accordance with policies stated in the PHA Administrative Plan.
(c) * * *
(4) The PHA policy must be stated in the Administrative Plan and provide that the PHA will give the same types of information to all owners.
24 CFR 982.310 of this title applies with the exception that 24 CFR 982.310(d)(1)(iii) and (iv) does not apply to the PBV program. (In the PBV program, “good cause” does not include a business or economic reason or desire to use the unit for an individual, family, or non-residential rental purpose.) In addition, the owner may terminate the tenancy in accordance with the requirements related to lease terminations for development activity on units under a HAP contract as provided in § 983.157(g)(6)(iii) and for substantial improvement to units under a HAP contract as provided in § 983.212(a)(3)(iii). 24 CFR 5.858 through 5.861 on eviction for drug and alcohol abuse and 24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply to the PBV program.
The additions and revisions read as follows:
(a)
(b)
(c)
(d)
(e)
(a)
(2) If the PHA determines that a family is occupying a wrong-size unit, or a unit with accessibility features that the family does not require and the unit is needed by a family that requires the accessibility features (see 24 CFR 8.27), the PHA must:
(i) Within 30 days from the PHA's determination, notify the family and the owner of this determination; and
(ii) Within 60 days from the PHA's determination, offer the family continued housing assistance, pursuant to paragraph (b) of this section.
(b)
(i) PBV assistance in an appropriate-size unit (in the same project or in another project);
(ii) Other project-based housing assistance (
(iii) Tenant-based rental assistance under the voucher program; or
(iv) Other comparable tenant-based rental assistance.
(2) If no continued housing assistance as described in paragraph (b)(1) of this section is available, the PHA must remove the wrong-size or accessible unit from the HAP contract to make voucher assistance available to issue the family a tenant-based voucher. Section 983.206(b) does not apply to families issued a tenant-based voucher under the
(c)
(i) The PHA must terminate the housing assistance payments for a wrong-sized or accessible unit at the earlier of the expiration of the term of the family's voucher (including any extension granted by the PHA) or the date upon which the family vacates the unit.
(ii) If the family does not move out of the wrong-sized unit or accessible unit by the expiration date of the term of the family's voucher, the PHA must remove the unit from the HAP contract.
(2) If the PHA offers the family another form of continued housing assistance (other than tenant-based rental assistance under the voucher program), in accordance with paragraph (b)(1) of this section, the PHA must terminate the housing assistance payments for the wrong-sized or accessible unit and remove the unit from the HAP contract when:
(i) In the case of an offer by the PHA of PBV assistance or other project-based housing assistance in an appropriate-size unit, the family does not accept the offer and does not move out of the PBV unit within a reasonable time as determined by the PHA, not to exceed 90 days. The family may request and the PHA may grant one extension not to exceed up to an additional 90 days to accommodate the family's efforts to locate affordable, safe, and geographically proximate replacement housing.
(ii) In the case of an offer by the PHA of PBV assistance or other project-based housing assistance in an appropriate size unit, the family accepts the offer but does not move out of the PBV unit within a reasonable time as determined by the PHA, not to exceed 90 days.
(iii) In the case of an offer by the PHA of other comparable tenant-based rental assistance, the family either accepts or does not accept the offer but does not move out of the PBV unit within a reasonable time as determined by the PHA, not to exceed 90 days. The family may request and the PHA may grant one extension not to exceed up to an additional 90 days to accommodate the family's efforts to locate, affordable, safe, and geographically proximate replacement housing.
(d)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(a)
(b)
(2) The family must be selected from the waiting list for the PBV program
(3) Once the family vacates the unit, the unit must be made available to and occupied by a family that meets the applicable exception.
(4) The PHA must specify in its Administrative Plan which of the options below the PHA will take if a unit is no longer qualified for its excepted status or the increased program cap:
(i) Substitute the unit for another unit if it is possible to do so in accordance with § 983.207(a), so that the overall number of excepted units or units under the increased program cap in the project is not reduced. A PHA may, in conjunction with such substitution, add the original unit to the HAP contract if it is possible to do so in accordance with § 983.207(b), including that such addition does not cause the PHA to exceed the program cap or become non-compliant with the project cap.
(ii) Remove the unit from the PBV HAP contract. In conjunction with the removal, the PHA may provide the family with tenant-based assistance, if the family is eligible for tenant-based assistance. The family and the owner may agree to use the tenant-based voucher in the unit; otherwise, the family must move from the unit with the tenant-based voucher. If the family later vacates the unit, the PHA may add the unit to the PBV HAP contract in accordance with § 983.207.
(iii) Change the unit's status under the project cap or program cap, as applicable, provided that the change does not cause the PHA to exceed the program cap or become non-compliant with the project cap.
(c)
(2)
(3)
(i) A disabled or elderly member of the family must be eligible for one or more of the supportive services at the time the family first occupies the unit. The member of the family may choose not to participate in the services.
(ii) The PHA must state in its Administrative Plan whether it will allow a family that initially qualified for supportive housing for persons with disabilities or elderly persons to continue to reside in a unit, where through circumstances beyond the control of the family (
(4)
(d)
(2)
(3)
(i) A unit is excepted if any member of the family is eligible for one or more of the supportive services even if the family chooses not to participate in the services.
(ii) If any member of the family chooses to participate and successfully completes the supportive services, the unit continues to be excepted for as long as any member of the family resides in the unit, even if the members that continue to reside in the unit are ineligible during tenancy for all available supportive services.
(iii) The unit loses its excepted status only if the entire family becomes ineligible during the tenancy for all supportive services available to the family. This provision does not apply where any member of the family has successfully completed the supportive services under paragraph (c)(2) of this section.
(iv) A family cannot be terminated from the program or evicted from the unit because they become ineligible for all supportive services during the tenancy.
(4)
(e)
(1) A unit is excepted from the project cap or qualifies under the increased program cap, as applicable, if the unit is occupied by an eligible youth receiving FUP assistance.
(2) The youth must vacate the unit once the FUP assistance has expired. The unit loses its excepted status or no longer qualifies under the increased program cap, as applicable, if the youth does not move from the unit upon the expiration of the FUP assistance.
(b) * * *
(1) An amount determined by the PHA in accordance with the Administrative Plan not to exceed 110 percent of the applicable fair market rent (or the amount of any applicable exception payment standard) for the unit bedroom size minus any utility allowance;
(c) * * *
(2) * * *
(i) An amount determined by the PHA in accordance with the Administrative Plan, not to exceed the tax credit rent minus any utility allowance;
(f)
(2) When redetermining the rent to owner, the PHA shall use the most recently published FMR and the PHA utility allowance schedule in effect at the time of redetermination. At its discretion, the PHA may use the amounts in effect at any time during the 30-day period immediately before the redetermination date.
(3)(i) For PBV projects that are not located in a designated SAFMR area under 24 CFR 888.113(c)(1), or for PBV projects not located in a ZIP code where the PHA has opted in under 24 CFR 888.113(c)(3), any exception payment standard amount approved under 24 CFR 982.503(d)(2)-(4) applies for purposes of paragraphs (b)(1) and (c)(1)(iv) of this section. HUD will not approve a different payment standard amount for use in the PBV program.
(ii) For PBV projects that are located in a designated SAFMR area under 24 CFR 888.113(c)(1), or for PBV projects located in a ZIP code where the PHA has opted in under 24 CFR 888.113(c)(3), an exception payment standard amount approved under 24 CFR 982.503(d)(3)-(4) will apply for purposes of paragraphs (b)(1) and (c)(1)(iv) of this section only if the PHA has adopted a policy applying SAFMRs to its PBV program and met all other requirements in accordance with 24 CFR 888.113(h).
(4) HUD may establish a process allowing PHAs to adopt project-specific utility allowances by notification in the
(5) The PHA must continue to use the applicable utility allowance schedule for the purpose of determining the initial rent to owner and redetermining the rent to owner for contract units, as outlined in this 24 CFR 983.301, regardless of whether the PHA approves a higher utility allowance as a reasonable accommodation for a person with disabilities living in a contract unit (see 24 CFR 982.517(e)).
(g)
(a)
(1) When there is a 10 percent decrease in the published FMR;
(2) Upon the owner's request consistent with requirements established in the PHA's Administrative Plan. The Administrative Plan must specify any advance notice the owner must give the PHA and the form the request must take; or
(3) At the time of the automatic adjustment by an operating cost adjustment factor (OCAF) in accordance with paragraph (b)(3).
(b)
(2) A rent increase may occur through automatic adjustment by an operating cost adjustment factor (OCAF) or as the result of an owner request for such an increase. A rent increase as the result of an owner request must be determined by the PHA pursuant to § 983.301(b) or (c), as applicable. A rent increase through an adjustment by an OCAF is likewise subject to § 983.301(b) or (c), as applicable, except there is no rent request by the owner to take into account since the PHA redetermines the rent automatically under that option.
(3) By agreement of the parties, the HAP contract may provide for rent adjustments using an operating cost adjustment factor (OCAF) established by the Secretary pursuant to Section 524(c) of the Multifamily Assisted Housing Reform and Affordability Act of 1997 at each annual anniversary of the HAP contract. OCAFs are established by the Secretary and published annually in the
(i) The contract may require an additional increase up to an amount determined by the PHA pursuant to § 983.301(b) or (c), as applicable, if requested by the owner in writing, periodically during the term of the contract.
(ii) The contract shall require an additional increase up to an amount determined by the PHA pursuant to § 983.301(b) or (c), as applicable, at the point of contract extension, if requested by the owner in writing.
(4) If the HAP contract does not provide for automatic adjustment by an OCAF, then an owner who wishes to receive an increase in the rent to owner must request such an increase at the annual anniversary of the HAP contract by written notice to the PHA.
(5) The PHA must establish the length of the required notice period for any rent increase that requires a written request from the owner. The written request must be submitted as required by the PHA (
(6) The PHA may not approve and the owner may not receive any increase of rent to owner until and unless the owner has complied with all requirements of the HAP contract, including compliance with the HQS (except that HQS compliance is not required for purposes of this provision for units undergoing development activity that complies with § 983.157 or substantial improvement that complies with § 983.212). The owner may not receive any retroactive increase of rent for any period of noncompliance.
(c)
(2) At any time during the term of the HAP contract, the PHA may elect within the HAP contract to not reduce rents below the initial rent to owner. Where a PHA makes such an election, the rent to owner shall not be reduced below the initial rent to owner, except:
(i) To correct errors in calculations in accordance with HUD requirements;
(ii) If additional housing assistance has been combined with PBV assistance after the execution of the initial HAP contract and a rent decrease is required pursuant to § 983.153(b); or
(iii) If a decrease in rent to owner is required based on changes in the allocation of responsibility for utilities between the owner and the tenant.
(d)
(e)
(2) The annual anniversary of the HAP contract is the first day of the first calendar month after the end of the preceding contract year. The adjusted rent to owner amount applies for the period of 12 calendar months from the annual anniversary of the HAP contract.
(3) The annual anniversary of the HAP contract for contract units completed in stages must follow § 983.207(g).
The revisions and additions read as follows:
(b) * * *
(3) Whenever the HAP contract is amended to add a contract unit or substitute a different contract unit in the same building or project;
(4) Whenever the PHA accepts a completed unit after development activity that is conducted after HAP contract execution (see § 983.156(b)(3)); and
(c) * * *
(3) The reasonable rent determination must be based on the condition of the assisted unit at the time of the determination and not on anticipated future unit conditions.
(f)
(2) The independent entity must furnish a copy of the independent entity determination of reasonable rent for PHA-owned units to the PHA.
(b) * * *
(1) * * * The PHA must include in its Administrative Plan the PHA's policy on the conditions under which it will allow vacancy payments in a HAP contract, the duration of the payments, amount of vacancy payments it will make to an owner, and the required form and manner of requests for vacancy payments, in accordance with paragraph (b)(4) of this section.
(d) * * *
(2) The PHA must describe in its Administrative Plan its policies on paying the utility reimbursement directly to the family or directly to the utility supplier.
42 U.S.C. 1437f and 3535(d).
The revisions read as follows:
A PHA that expends less than its Federal award expenditure threshold in 2 CFR Subpart F, and whose Section 8 programs are not audited by an independent auditor (IA), will not be rated under the SEMAP indicators in paragraphs (a) through (g) of this section for which the annual IA audit report is a HUD verification method.
(b) * * *
(1) * * * (24 CFR 982.4, 24 CFR 982.54(d)(15), 982.158(f)(7), 982.507, and 983.303)
(c) * * *
(3) * * *
(i) * * *
(A) The PHA obtains third party verification, as appropriate, of reported family annual income, the value of assets, expenses related to deductions from annual income, and other factors that affect the determination of adjusted income, and uses the verified information in determining adjusted income, and/or documents tenant files to show why third party verification was not available;
(i) * * *
(1) This indicator shows whether the PHA has adopted payment standard schedule(s) in accordance with § 982.503.
(3) Rating:
(i) The PHA's voucher program payment standard schedule contains payment standards set in accordance with 24 CFR 982.503. 5 points.
(ii) The PHA's voucher program payment standard schedule contains payment standards that were not set in accordance with § 982.503. 0 points.
(k) * * *
(1) This indicator shows whether the PHA correctly calculates the family's
(2) HUD verification method: MTCS report—Shows percent of tenant rent and family's share of the rent to owner calculations that are incorrect based on data sent to HUD by the PHA on Forms HUD-50058. The MTCS data used for verification cover only voucher program tenancies, and do not include rent calculation discrepancies for manufactured home owner rentals of manufactured home spaces for proration of assistance under the noncitizen rule.
(l)
(2) HUD verification method: MTCS report—Shows percent of newly leased units where the beginning date of the assistance contract is before the date the unit passed the initial unit inspection or, if the PHA employed the PHA initial inspection option for non-life- threatening deficiencies or alternative inspections, the timing requirements for the applicable PHA initial inspection option.
(3) Rating:
(i) 98 to 100 percent of newly leased units passed HQS inspection within the time period required. 5 points.
(ii) Fewer than 98 percent of newly leased units passed HQS inspection within the time period required. 0 points.
(m)
(3) Rating:
(i) Fewer than 5 percent of periodic HQS inspections of units under contract are more than 2 months overdue. 10 points.
(ii) 5 to 10 percent of all periodic HQS inspections of units under contract are more than 2 months overdue. 5 points.
(iii) More than 10 percent of all periodic HQS inspections of units under contract are more than 2 months overdue. 0 points.
(p) * * *
(1) This indicator shows whether voucher holders were successful in leasing units with voucher assistance. This indicator applies only to PHAs that established success rate payment standard amounts in accordance with § 982.503(f) prior to June 6, 2024.
(3) * * *
(i) * * *
(B) The proportion of families issued rental vouchers that became participants in the program during the six month period utilized to determine eligibility for success rate payment standards under § 982.503(f) plus 5 percentage points; and
25 U.S.C. 4101
Federal Trade Commission.
Final rule.
Pursuant to the Federal Trade Commission Act (“FTC Act”), the Federal Trade Commission (“Commission”) is issuing the Non-Compete Clause Rule (“the final rule”). The final rule provides that it is an unfair method of competition for persons to, among other things, enter into non-compete clauses (“non-competes”) with workers on or after the final rule's effective date. With respect to existing non-competes—
The final rule is effective September 4, 2024.
Benjamin Cady or Karuna Patel, Office of Policy Planning, 202-326-2939 (Cady), 202-326-2510 (Patel), Federal Trade Commission, 600 Pennsylvania Avenue NW, Mail Stop CC-6316, Washington, DC 20580.
The Commission proposed the Non-Compete Clause Rule on January 19, 2023 pursuant to sections 5 and 6(g) of the FTC Act.
The final rule provides that it is an unfair method of competition—and therefore a violation of section 5—for employers to,
With respect to existing non-competes,
The final rule contains separate provisions defining unfair methods of competition for the two subcategories of workers. Specifically, the final rule provides that, with respect to a worker other than a senior executive, it is an unfair method of competition for a person to enter into or attempt to enter into a non-compete clause; to enforce or attempt to enforce a non-compete clause; or to represent that the worker is subject to a non-compete clause.
The final rule provides that, with respect to a senior executive, it is an unfair method of competition for a person to enter into or attempt to enter into a non-compete clause; to enforce or attempt to enforce a non-compete clause entered into after the effective date; or to represent that the senior executive is subject to a non-compete clause, where the non-compete clause was entered into after the effective date.
The final rule defines “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (2) operating a business in the United States after the conclusion of the employment that includes the term or condition.”
The final rule defines “worker” as “a natural person who works or who previously worked, whether paid or unpaid, without regard to the worker's title or the worker's status under any other State or Federal laws, including, but not limited to, whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or a sole proprietor who provides a service to a person.”
The final rule does not apply to non-competes entered into by a person pursuant to a bona fide sale of a business entity.
The final rule does not limit or affect enforcement of State laws that restrict non-competes where the State laws do not conflict with the final rule, but it preempts State laws that conflict with the final rule.
The purpose of this rulemaking is to address conduct that harms fair competition. Concern about non-competes dates back centuries, and the evidence of harms has increased substantially in recent years. However, the existing case-by-case and State-by-State approaches to non-competes have proven insufficient to address the tendency of non-competes to harm competitive conditions in labor, product, and service markets.
The ability of employers
Furthermore, as “contract[s] . . . in restraint of trade,”
Concerns about non-competes have increased substantially in recent years in light of empirical research showing that they tend to harm competitive conditions in labor, product, and service markets. Changes in State laws governing non-competes
Alongside this large body of empirical work, news reports revealed that employers subject even middle-income and low-wage workers to non-competes on a widespread basis.
Yet despite the mounting empirical and qualitative evidence confirming these harms and the efforts of many States to ban them, non-competes remain prevalent in the U.S. economy. Based on the available evidence, the Commission estimates that approximately one in five American workers—or approximately 30 million workers—is subject to a non-compete.
As concern about the harmful effects of non-competes increased, the Commission began exploring the potential for Federal rulemaking on non-competes. In 2018 and 2019, the Commission held several hearings on twenty-first century competition and consumer protection issues, including “the use of non-competition agreements
In 2021, the Commission initiated investigations into the use of non-competes. In 2023, the Commission secured final consent orders settling charges that certain firms engaged in an unfair method of competition in violation of section 5 because their use of non-competes tended to impede rivals' access to the restricted employees' labor, harming workers, consumers, and competitive conditions.
The Commission also secured a final consent order settling charges that another firm violated section 5 by using non-competes with its employees.
Based on the feedback obtained from years of extensive public outreach and fact-gathering, in January 2023, the Commission published a notice of proposed rulemaking (NPRM) concerning non-competes.
In response to the NPRM, the Commission received over 26,000 public comments.
Among these comments, over 25,000 expressed support for the Commission's proposal to categorically ban non-competes. Among the public commenters were thousands of workers who described how non-competes prevented them from taking a better job or starting a competing business, as well as numerous small businesses who struggled to hire talented workers. Commenters stated that non-competes have suppressed their wages, harmed working conditions, negatively affected their quality of life, reduced the quality of the product or service their company provided, prevented their business from growing and thriving, and created a climate of fear that deters competitive activity. The following examples are illustrative of the comments the Commission received:
• I currently work in sales for an asphalt company in Michigan. The company had me sign a two year non-compete agreement to not work for any other asphalt company within 50 miles if I decide to resign. After two years with the company I have been disheartened at how poorly customers are being treated and how often product quality is sub-par. I would love to start my own business because I see this as an opportunity to provide a better service at a lower cost. However, the non-compete agreement stands in the way even though there are no trade secrets and too many customers in this market.
• [I] signed a non-compete clause for power-washing out of duress. My boss said that if I didn't sign before the end of the week, not to come in the next week. . . . I'd like to start my own business but I would have to find another job and wait 5 years. All I know is power-washing and these business owners all want me to sign a non-compete clause. It's one big circle of wealthy business owners keeping the little man down. Essentially, non-compete clauses limit an employee's opportunity to excel in whatever skill or trade they're familiar with. In the land of the free, we should be free to start a business not limited by greedy business owners.
• In October 2020, I started working as a bartender at a company called [REDACTED] for $10 an hour. On my first day, I
• I am a physician in a rural underserved area of Appalachia. . . . “[N]on-compete” clauses have become ubiquitous in the healthcare industry. With hospital systems merging, providers with aggressive non compete clauses must abandon the community that they serve if they chose to leave their employer. . . . Healthcare providers feel trapped in their current employment situation, leading to significant burnout that can shorten their career longevity. Many are forced to retire early or take a prolonged pause in their career when they have no other recourse to combat their employer.
• I am a practicing physician who signed an employment contract containing a noncompete agreement in 2012, entering into this agreement with an organization that no longer exists. My original employer merged with, and was made subsidiary to, a new organization that is run under religious principles in conflict with my own. . . . I would have never signed such an agreement with my new employer, yet I am bound to this organization under threat of legal coercion. To be clear, the forced compromise of my religious principles does direct harm to me. My only recourse to this coercion is to give up medical practice anywhere covered by my current medical license, which is injurious to the patients in my care, and to myself.
• I am the owner of a small-midsize freight brokerage, and non-competes of large brokerages have time and time again constrained talent from my business. Countless employees of [a] mega brokerage . . . have left and applied for our company and we must turn them away. These are skilled brokers that are serving the market and their clients well due to THEIR skillsets. . . . These non-competes affect not just me but the clients they work with as these skilled brokers are forced out of the entire logistics market for an entire year and possibly a lifetime when they pick up a new career in a different field because of these aggressive non-competes. . . .
• I was laid off from my company in 2008 due to the economy, not to any fault of my own. However, when I was offered a job at another company, my former company threatened them and my offer was rescinded. I was unable to find gainful employment for months, despite opportunities in my field, and had to utilize unemployment when I otherwise would not have needed it. To find work, I ultimately had to switch fields, start part time somewhere, and just continue to work my way up. All of this because I was laid off to no fault of my own.
• I was terminated by a large hospital organization suddenly with a thriving, full Pediatric practice. . . . My lawyer and I believe the non-compete does not apply in my circumstances and that the noncompete is overly broad, restrictive and harmful to the public (my patients). I started seeing my patients mostly gratuitously in their homes so they would not go without the care they wanted and needed . . . The judge awarded the order and I was told I cannot talk to patients on the phone, text patients, zoom visits or provide any pediatric care within my non-compete area. Patients are angry and panicked. I'm worried every day about my patients and how I can continue to care for them. . . . Patients have a right to choose and keep their doctor. The trust built between a patient and his doctor is crucial to keeping a patient healthy. It's not a relationship that can or should be replaced. . . . Patients should always come first and that is not happening.
• When I first graduated veterinary school I signed a noncompete clause that was for 7 years. I tried to negotiate it to a more reasonable time period but the employer wouldn't budge. There weren't many job openings for new graduates at the time and I had student loans to pay back so I signed it. . . . I moved back home to a small town and took a job that required a 10-radial-mile, 2-year noncompete (this is currently considered “reasonable/standard” in my industry). Unfortunately since it's a rural area the 10 miles blocked me out of the locations of all other veterinary clinics in the county and I had to commute an hour each way to work in the next metropolitan area. This put a lot of stress on my family since I have young children. Some days I didn't even get to see them when they were awake.
• I work for a large electronic health records company . . . that is known for hiring staff right out of college, myself included. I was impressed with their starting salary and well-advertised benefits, so I was quick to accept their offer. After accepting their offer, I was surprised to receive a contract outlining a strict non-compete agreement . . . I feel disappointed that this information was not made apparent to me prior to my acceptance of the position, and now I feel stuck in a job that I've quickly discovered is not a good long-term fit for me. I am certain that many other recent graduates often find themselves in a similar position—they accept shiny offers from a workplace, not knowing whether the company and position will be the right fit for them, and find themselves trapped by such contracts as mine.
• Non competes are awful. I am being sued right now for going into business on my own in Boston, Massachusetts, by my former employer who says I signed a non-compete in 2003, 20 years ago. . . . I am fighting them in court. Hopefully I will prevail. . . . [The] corporation I worked for is a billion-dollar corporation. And they just keep trying scare tactics to make me back down. They went as far as trying to get a preliminary injunction ordered against me. And the judge refused but I still have to spend $1,000 an hour to defend myself.
• I have been working in the field of multi-media in the DC/Baltimore region since the early 2000s. . . . I was 26 when I first became employed, and at that time a requirement was that I sign a non-compete agreement. . . . This means I can't be an entrepreneur- which kills any opportunities for me to grow something of my own- which could potentially provide jobs for others in the future. So what this non-compete does is basically enables businesses to be small monopolies. I could literally have a new lease on my career if non competes were abolished. As of now, when I think of working someplace else I have to consider changing careers altogether.
• A former employer had me sign a non-compete when I started employment at an internship in college. It was a part-time position of 20 hours of work as an electrical engineer, while I finished university. After university, I worked for this employer another 4 years full time, but then found a better job in another state. It was not a competitor, but a customer of my former employer. My former employer waited till the day after my 4-week notice to tell me that I had signed a non-compete agreement and that it [barred] me from working for any competitor, customer or any potential customer up to 5 years after leaving the company with no geographic limitations. This was effectively the entire semi-conductor industry and put my entire career at risk.
• Non-competes serve little more purpose than to codify and entrench inefficiencies. I have seen this firsthand in the context of a sophisticated management consulting environment where company owners provided ever less support in terms of contributing to projects or even to sales of new business while still feeling secure through agreements that substantially limited anyone from working in the relevant industry for two years on a global basis after leaving. . . . The reality is that there are innumerable retention mechanisms (such as good working conditions, compensation, culture, management, growth trajectory and/or strategy) that can contribute to loyal employees without the need for non-competes.
The Commission has undertaken careful review of the public comments
Based on its own data analysis, studies published by economists, and the comment record, the Commission finds that non-competes are in widespread use throughout the economy and pervasive across industries and demographic groups, albeit with some differences in the magnitude of the prevalence based on industries and demographics. The Commission estimates that approximately one in five American workers—or approximately 30 million workers—is subject to a non-compete.
As described in Part II.F, the inquiry as to whether conduct is an unfair method of competition under section 5 focuses on the nature and tendency of the conduct, not whether or to what degree the conduct caused actual harm.
A 2014 survey of workers finds that 18% of respondents work under a non-compete and 38% of respondents have worked under one at some point in their lives.
Furthermore, a survey of workers conducted in 2017 estimates that 24.2% of workers are subject to a non-compete.
Additionally, a 2017 survey of business establishments with 50 or more employees estimates that 49% of such establishments use non-competes for at least some of their employees, and 32% of such establishments use non-competes for all of their employees.
Other estimates of non-compete use cover subsets of the U.S. labor force. One 2022 study is based on National Longitudinal Survey of Youth (NLSY) data.
Non-competes are pervasive across occupations. For example, a survey of independent hair salon owners finds that 30% of hair stylists worked under a non-compete in 2015.
In addition, commenters presented survey data on the prevalence of non-competes in various occupations and industries. The Commission does not rely on these surveys to support its finding that non-competes are in widespread use throughout the economy. Because the Commission lacked access to a detailed description of the methodology for these surveys (unlike for the surveys described previously), the Commission cannot evaluate how credible their research designs are. However, they generally confirm the Commission's finding that non-competes are in widespread use throughout the economy and pervasive across industries and demographic groups.
For example, commenters reported that 33% of practitioners in the applied behavioral analysis field reported being subject to a non-compete,
Several trade organizations included information in their comments about the percentage of their members that use non-competes for at least some of their workers, based on surveys of their membership. For the National Association of Wholesaler-Distributors, this figure was 80%;
Several commenters misrepresented the Commission's finding related to prevalence as based on “a single study from 2021” (Starr, Prescott, and Bishara, 2021), which relied on survey data from 2014. The Commission's finding is not based on a single study. The NLSY study reaches similar conclusions about the prevalence of non-competes across the economy,
Another commenter argued that individuals may misunderstand contracts that they have signed, leading them to mistakenly believe they are bound by a non-compete. The Commission does not find this to be a plausible explanation for the high numbers of workers, businesses, and trade associations that report that non-competes are prevalent.
The Commission appreciates the additional estimates provided by commenters. The comments broadly corroborate the Commission's finding that non-competes are used across the workforce, with some heterogeneity in the magnitude of the prevalence. The
The FTC Act was enacted in 1914.
The term “`unfair methods of competition' . . . was an expression new in the law” when it first appeared in the FTC Act.
By design, the new phrase “unfair methods of competition” did “not `admit of precise definition.' ”
Congress further expanded the Commission's jurisdiction over time. Congress extended the Commission's authority in 1938 by adding the further prohibition on “unfair or deceptive acts or practices.”
Congress gave careful thought to the structure of the FTC as an independent agency entrusted with this considerable responsibility. The Commission would consist of five members, no more than three of whom could be part of the same political party, who would serve for terms of seven years.
The FTC Act today reflects a careful balance from Congress. Congress has directed the Commission to proceed
Alongside section 5, Congress adopted section 6(g) of the Act, in which it authorized the Commission to “make rules and regulations for the purpose of carrying out the provisions of” the FTC Act, which include the Act's prohibition of unfair methods of competition.
The Commission has exercised its authority under section 6(g) to promulgate legislative rules on many occasions stretching back more than half a century. Between 1963 and 1978,
Some of these rules attracted significant attention. For instance, the Commission began the rulemaking process to require warnings on cigarette packages just one week after the Surgeon General's “landmark report” that determined smoking is a health hazard,
In
Following such rulemakings and the D.C. Circuit's confirmation of the Commission's rulemaking power in
Instead, the enacted section 18 confirmed the Commission's authority to make rules under section 6(g). The law expressly preserved “any authority of the Commission to prescribe rules (including interpretive rules), and general statements of policy, with respect to unfair methods of competition in or affecting commerce.”
Congress again confirmed the Commission's authority to promulgate rules regulating unfair methods of competition under section 6(g) when it enacted section 22 of the FTC Act as part of the Federal Trade Commission Improvements Act of 1980.
Both the 1975 and 1980 amendments to the FTC Act thus indicate that Congress understood the Commission possessed rulemaking power under section 6(g) and chose to leave that authority in place.
The Commission received many comments supporting, discussing, or questioning its authority to promulgate the final rule. Numerous commenters supported that the Commission has such authority, including, among others, legal scholars and businesses.
Commenters questioning the Commission's authority typically advanced one of three arguments. First, some commenters claimed the FTC Act does not grant the Commission authority to promulgate the rule. Second, some commenters contended that the validity of non-competes is a major question that Congress has not given the Commission the authority to address. And third, some commenters argued that Congress had impermissibly delegated to the Commission authority to promulgate nationwide rules governing methods of competition. A smaller number of comments asserted other, miscellaneous reasons the Commission allegedly lacked authority to promulgate the rule. The Commission has considered these comments and disagrees for the reasons explained below.
The Commission received numerous comments claiming that it lacks authority under the FTC Act to promulgate rules prohibiting unfair methods of competition. The Commission disagrees. Congress expressly granted the Commission authority to promulgate such rules in the original FTC Act of 1914, Congress enacted legislation in 1975 expressly preserving that authority,
The Commission is not persuaded by commenters' arguments in opposition to its authority. For instance, some commenters argued that Congress's choice to exclude certain industries from the Commission's jurisdiction indicates that Congress did not intend to give the Commission power to pass rules that affect commerce across the national economy.
Other commenters argued that the Commission is relying on vague or ancillary provisions for its authority and invoked the familiar refrain that Congress “does not . . . hide elephants in mouseholes.”
Additional commenters cited select legislative history from the 1914 FTC Act to suggest the Commission lacks authority to promulgate rules regulating competition.
Statements from the enactment of the 1975 Magnuson Moss Act, which added section 18 to the FTC Act, confirm the Commission's authority to promulgate rules under section 6(g). That legislative history reveals Congress in 1975 made a considered decision to reject an effort to overturn the D.C. Circuit's interpretation of the FTC Act and instead confirmed that section 6(g) authorizes the Commission to promulgate legislative rules concerning unfair methods of competition.
In short, neither the legislative history of the FTC Act, nor any of the other arguments commenters raised about the Commission's rulemaking authority overcome the plain meaning of the Act or Congress's ratification of the Commission's power to make rules preventing unfair methods of competition, as discussed in Part II.B.
The Commission acknowledges that individual members of the Commission have, at times, disclaimed the Commission's authority to promulgate rules regulating unfair methods of competition.
Many commenters assert that the Commission lacks the authority to adopt the final rule based on the major questions doctrine. That doctrine, as the Supreme Court recently explained in
The agency authority underlying this final rule rests on firm historical footing. There is nothing novel about the Commission's assertion of authority to promulgate legislative rules under section 6(g).
Nor does the substance of the rule represent any departure from the Commission's past practices. Since its establishment in 1914, the Commission has had the authority to determine whether given practices constitute unfair methods of competition. Rather than trying to define all the many and varied practices that are unfair, Congress empowered the Commission to respond to changing market conditions and to bring specialized expertise to bear when making unfairness determinations.
Additionally, non-competes have already been the subject of FTC scrutiny and enforcement actions, so subjecting them to rulemaking is a more incremental—and thus less significant—step than it would be for an agency to wade into an area not currently subject to its enforcement authority. And the present rulemaking is consistent with both Congress's intent for the Commission and the Commission's prior practice. Congress “empowered and directed” the Commission “to prevent persons, partnerships, or corporations” within the Commission's jurisdiction “from using unfair methods of competition in or affecting commerce.”
Congress itself recognized that the Commission's authority will sometimes affect firms across the economy. Indeed, addressing unfair methods of competition and unfair and deceptive practices across industries (other than the industries, activities, or entities Congress expressly exempted) is the core of the Commission's mandate—and the Commission has long pursued that mandate through both rulemaking
Even if the final rule does present a major question, the final rule passes muster because the FTC Act provides clear authorization for the Commission's action. In cases involving major questions, courts expect Congress to “speak clearly” if it wishes to assign the disputed power.
Some commenters also objected that Congress violated the non-delegation doctrine by empowering the Commission to promulgate rules regulating unfair methods of competition. The Commission disagrees. The non-delegation doctrine provides that “Congress generally cannot delegate its legislative power to another Branch.”
Here, Congress “declared unlawful” any “unfair methods of competition in or affecting commerce” and “empowered and directed” the Commission “to prevent” entities within its jurisdiction “from using unfair methods of competition.”
Were there any doubt, the Supreme Court has laid it to rest in
The Commission recognizes that
For these reasons, the Commission concludes that its authority to promulgate rules regulating unfair methods of competition is not an impermissible delegation of legislative authority.
Finally, a handful of comments raised other, miscellaneous arguments contending that the Commission lacks authority to promulgate the rule. The Commission has reviewed and considered these comments and concludes they do not undercut the Commission's authority to promulgate the final rule.
The Commission received several comments about the Commerce Clause. That clause allows Congress “to regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.”
Relatedly, one commenter objected that the rule would violate the Tenth Amendment, which provides that “[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
Some commenters objected that the rule infringes on the right to contract. One of these commenters acknowledged that the Constitution's Contracts Clause does not apply to the Federal government.
One commenter argued that the proposed rule was unconstitutionally vague. This commenter's objection focused on the proposed provision governing
Some commenters also contended that the Commission has not complied with the Administrative Procedure Act (“APA”).
The Commission's jurisdiction derives from the FTC Act. Employers that are outside the Commission's jurisdiction under the FTC Act are not subject to the final rule. The Commission clarifies in the definition of person in § 910.1, that the rule applies only to those within the Commission's jurisdiction. Some commenters sought a more detailed accounting of the
Certain entities that would otherwise be subject to the final rule may fall outside the FTC's jurisdiction under the FTC Act. The FTC Act exempts certain entities or activities from the Commission's enforcement jurisdiction, which otherwise applies to “persons, partnerships, or corporations.”
In response, the Commission explains that the final rule extends to covered persons that are within the Commission's jurisdiction. The Commission does not believe restating or further specifying each jurisdictional limit in the final rule's text is necessary; the FTC Act defines the limits of the Commission's jurisdiction and those limits govern this rule. Moreover, the Commission cannot here provide guidance that applies to every fact and circumstance. Whether an entity falls under the Commission's jurisdiction can be a fact-specific determination. An attempt by the Commission to capture all potential interpretations of the laws governing exclusions from the FTC Act may create confusion rather than clarity. In response to commenters who asked the Commission to affirm that the final rule does not bind agencies that regulate firms outside the Commission's jurisdiction under the FTC Act, the Commission affirms that the Commission applies the final rule only to entities that are covered by the FTC Act.
A State government agency commenter suggested that the Commission explicitly exempt State and local governments from the rule. The commenter pointed to conflicts-of-interest policies used by some State agencies to preclude former employees from working on related projects or jobs in the private sector, which the commenter stated do not implicate the policy concerns the FTC seeks to address in the rule. The commenter also noted the complexity of when the Commission's jurisdiction might extend to State and local governments. The Commission clarifies in the definition of “person” in § 910.1 that the final rule applies only to a legal entity within the Commission's jurisdiction. The Commission also explains in Part III.E that the definition of “person” is coextensive with the Commission's authority to issue civil investigative demands. Nothing in this rule changes the extent of the Commission's jurisdiction over State and local governments. The Commission declines to specify all circumstances under which a governmental entity or quasi-governmental entity would or would not be subject to the Commission's jurisdiction and, thus, this final rule. In any event, with respect to the government ethics policies referenced by the commenter, to the extent the commenter is referring to traditional “cooling off” policies that preclude former government employees from working on discrete, specific projects that fell within the scope of their former official governmental position to address ethical concerns, such policies would not meet the definition of “non-compete clause” in § 910.1 because they do not prohibit, penalize or function to prevent a worker from switching jobs or starting a new business.
Commenters from the healthcare industry argued that the Commission should restate, clarify, interpret, or limit the reach of its authority under the FTC Act specifically for the healthcare industry. They pointed to the prevalence of healthcare organizations registered under section 501(c) of the Internal Revenue Code claiming tax-exempt status as nonprofits. Commenters contended that these organizations are categorically outside the Commission's authority under the FTC Act. In fact, under existing law, these organizations are not categorically beyond the Commission's jurisdiction. To dispel this misunderstanding, the Commission summarizes the existing law pertaining to its jurisdiction over non-profits.
Business and trade industry commenters from the healthcare industry, including, for example, hospitals, physician practices, and surgery centers, focused on whether the Commission has jurisdiction over nonprofit organizations registered under section 501(c)(3) of the Internal Revenue Code in light of the FTC Act's definition of “corporation.” Section 501(c)(3) exempts from taxation certain religious, charitable, scientific, educational, and other corporations, “no part of the net earnings of which inure[] to the benefit of any private shareholder or individual.”
The final rule applies to the full scope of the Commission's jurisdiction. Many of the comments about nonprofits erroneously assume that the FTC's jurisdiction does not capture any entity claiming tax-exempt status as a nonprofit. Given these comments, the Commission summarizes Commission precedent and judicial decisions construing the scope of the Commission's jurisdiction as it relates to entities that claim tax-exempt status as nonprofits and to other entities that may or may not be organized to carry on business for their own profit or the profit of their members.
Congress empowered the Commission to “prevent persons, partnerships, or corporations” from engaging in unfair methods of competition.
The Commission stresses, however, that both judicial decisions and Commission precedent recognize that not all entities claiming tax-exempt status as nonprofits fall outside the Commission's jurisdiction. As the Eighth Circuit has explained, “Congress took pains in drafting § 4 [15 U.S.C. 44] to authorize the Commission to regulate so-called nonprofit corporations, associations and all other entities if they are in fact profit-making enterprises.”
Merely claiming tax-exempt status in tax filings is not dispositive. At the same time, if the Internal Revenue Service (“IRS”) concludes that an entity does not qualify for tax-exempt status, such a finding would be meaningful to the Commission's analysis of whether the same entity is a corporation under the FTC Act. Administrative proceedings and judicial decisions involving the Commission or the IRS
These examples are illustrative. As has been the case for decades, under Commission precedent and judicial
In section 5 of the FTC Act, “unfair methods of competition in or affecting commerce” are “declared unlawful.”
Indicia of unfairness include the extent to which the conduct may be coercive, exploitative, collusive, abusive, deceptive, predatory, or involve the use of economic power of a similar nature.
The second prong, whether conduct tends to negatively affect competitive conditions, focuses on the nature and tendency of the conduct. It does not turn on whether the conduct directly caused actual harm in the specific instance at issue and therefore does not require a detailed economic analysis or current anticompetitive effects.
The Commission weighs the two elements—indicia of unfairness and tendency to negatively affect competitive conditions—on a sliding scale. Where the indicia of unfairness are clear, conduct may be an unfair method of competition with only a limited showing of a tendency to negatively affect competitive conditions.
In many cases the Commission (and courts) have held conduct to constitute an unfair method of competition by pointing to clear indicia of unfairness, including coercive or exploitative conduct, without conducting a detailed economic analysis of its effects. In
In other cases, the Commission (and courts) have held exclusionary or restrictive conduct was an unfair method of competition based on evidence of the conduct's tendency to negatively affect competitive conditions without focusing on the indicia of unfairness, including whether the conduct is coercive or exploitative. But an evidentiary showing or detailed economic analysis that such conduct generated actual anticompetitive effects or would do so in the future still was not required. For example, in
Respondents in unfair method of competition cases sometimes assert purported justifications as an affirmative defense. Some courts have declined to consider justifications altogether. However, where defendants raise justifications as an affirmative defense, the Commission and courts have consistently held that pecuniary benefit to the party responsible for the conduct in question is not cognizable as a justification.
Section 910.1 sets forth definitions of several terms used in the final rule.
The Commission adopts the definition of “business entity” as proposed.
The Commission proposed to define “business entity” as “a partnership, corporation, association, limited liability company, or other legal entity, or a division or subsidiary thereof.”
The Commission explained in the NPRM that it proposed including divisions and subsidiaries in the definition of “business entity” to apply the sale-of-a-business exception where a person is selling a division or subsidiary of a business entity.
Two commenters specifically addressed the definition of business entity. One commenter suggested a new definition using a functional test that the commenter asserted would prevent employers from structuring their businesses as several smaller legal entities in order to fall within the sale-of-a-business exception. Another commenter also suggested that the definition be amended to explicitly include “general partnerships” and trusts.
The Commission adopts the definition of “business entity” as proposed. The Commission declines to adopt a functional test for the definition of “business entity.” As described in greater detail in Part V.A, the sale-of-a-business exception in the final rule does not contain a 25% ownership threshold, so employers will not have an incentive to structure their businesses as several smaller legal entities in order to fall within the sale-of-a-business exception. The Commission also believes replacing the current bright-line definition of “business entity” with a functional test would make it more difficult for workers and employers to know whether a given non-compete is enforceable in the context of the sale of a business. The Commission concludes adding the terms “general partnerships” and “trusts” to the definition is unnecessary, because the phrase “other legal entity” already includes those entity types.
The Commission proposed to define “employment” as “work for an employer, as the term employer is defined in § 910.1(c).”
While commenters generally did not address the proposed definition of “employment,” many commenters expressed concern that the proposed definition of “employer” would exclude workers hired by one entity to work for another, such as workers hired through a staffing agency. To avoid excluding such workers, and consistent with the Commission's intent to cover workers irrespective of whether they are classified as in an “employer-employee” relationship under other State and Federal laws, the final rule defines “employment” as “work for a person” and makes corresponding changes to the definition of “employer,” described in Part III.C. This definition of “employment” better clarifies that an employment relationship exists, for purposes of the final rule, regardless of whether an employment relationship exists under another law, such as a Federal or State labor law.
The Commission proposed to define employer as a “person, as defined in 15 U.S.C. 57b-1(a)(6) [section 20 of the FTC Act], that hires or contracts with a worker to work for the person.”
Several commenters expressed support for the proposed definition of “employer.” A few commenters suggested changes to the definition of “employer” to maximize the final rule's coverage and close potential loopholes. Worker and employer advocates noted the proposed definition appeared to exclude certain persons who are commonly understood to be a worker's employer because it assumed that a worker's employer is the same legal entity that hired or contracted with the worker. These commenters contended the proposed definition would not cover arrangements such as when a worker is employed through a contractual relationship with a professional employer organization or staffing agency; under a short-term “loan-out arrangement,” during which a worker hired by one employer may work for another employer; under contract with a parent, subsidiary, or affiliate of the business who hired them; or by persons or entities who share common control over the worker's work. A few of these commenters also stated that the proposed definition creates a loophole allowing evasion of the rule through third-party hiring. Most commenters that addressed this issue suggested listing one or more such arrangements in the definition of “employer” to
One worker advocacy group argued the term “hires or contracts” in the proposed definition of “employer” is in tension with the Commission's stated intent to broadly cover all workers, including externs, interns, and volunteers. This commenter suggested the definition of “employer” incorporate language from the Fair Labor Standards Act (“FLSA”) definition of “employ,” which includes to “suffer or permit to work.”
One industry trade organization argued that, to minimize inconsistencies with the FLSA, the Commission should incorporate the FLSA's definition of “employer.”
After considering the comments, the Commission has revised the definitions of “non-compete clause” and “worker” as described in Parts III.D and III.G. These revisions make the definition of “employer” unnecessary, so the Commission is not finalizing a definition of “employer.”
These revisions clarify that the final rule covers all workers regardless of whether they work for the same person that hired or contracted with them to work. As explained in Part III.D, in the definition of “non-compete clause,” the Commission has revised the phrase “contractual term between an employer and a worker” to read “term or condition of employment” and has revised the phrase “after the conclusion of the worker's employment with the employer” to read “after the conclusion of the employment that includes the term or condition.” Furthermore, as explained in Part III.G, in the definition of “worker,” the Commission has revised the phrase “a natural person who works, whether paid or unpaid, for an employer” to read “a natural person who works or who previously worked, whether paid or unpaid.”
The Commission is adopting this more general language, rather than listing the exact kinds of contractual arrangements and entities (
Based on the comments received, the Commission adopts a slightly modified definition of “non-compete clause” in § 910.1. Section 910.1 defines a “non-compete clause” as a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (A) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (B) operating a business in the United States after the conclusion of the employment that includes the term or condition. Section 910.1 further provides that, for purposes of the final rule, “term or condition of employment “includes, but is not limited to, a contractual term or workplace policy, whether written or oral.” Similar to the proposed rule, the final rule applies to terms and conditions that expressly prohibit a worker from seeking or accepting other work or starting a business after their employment ends, as well as agreements that penalize or effectively prevent a worker from doing the same.
The Commission's proposed definition of “non-compete clause” consisted of proposed § 910.1(b)(1) and (b)(2). Proposed § 910.1(b)(1) would have defined “non-compete clause” as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker's employment with the employer.” Proposed § 910.1(b)(2) would have provided that the definition in proposed § 910.1(b)(1) includes “a contractual term that is a
The Commission explained that the proposed definition of non-compete clause would be limited to non-competes between employers and workers and would not apply to other types of non-competes, for example, non-competes between two businesses.
In the NPRM, the Commission noted that, rather than expressly prohibiting a worker from competing against their employer, some non-competes require workers to pay damages if they compete against their employer. The Commission explained that courts generally view these contractual terms as non-competes and that proposed § 910.1(b)(1) encompassed them.
The Commission also expressed concern that workplace policies—for example, a term in an employee handbook stating that workers are prohibited from working for certain types of firms or in certain fields after their employment ends—could have the same effects as a contractual non-compete even if they are not enforceable, because workers may believe they are bound by the policy. The Commission sought comment on whether the term “non-compete clause” should expressly include a provision in a workplace policy.
The Commission stated that proposed § 910.1(b)(1) was a generally accepted definition of non-compete clause that covers both express non-competes and terms purporting to bind a worker that have the same functional effect as non-competes.
Proposed § 910.1(b)(2) accordingly sought to clarify that the definition in proposed § 910.1(b)(1) includes contractual terms that are
Most of the comments on the definition of “non-compete clause” addressed whether, and under what circumstances, the rule should apply to functional non-competes.
In contrast, many commenters who generally opposed the NPRM stated that proposed § 910.1(b)(2) was overinclusive. Many such commenters also asserted the definition was vague and could lead to confusion and significant litigation. Several comments suggested clarifications, such as including additional examples of functional non-competes; creating safe harbors for certain restrictive employment covenants; replacing proposed § 910.1(b)(2) with a standard based on antitrust law's “quick look” test;
At least one commenter argued that proposed § 910.1(b)(2) should be removed because it was redundant, as the proposed definition of non-compete clause in proposed § 910.1(b)(1) already captured any term that prevents an employee from seeking alternative employment, without regard to how the term is labeled. Some commenters who generally supported the NPRM also expressed concern that ambiguity in proposed § 910.1(b)(2) could enable employers to intimidate workers by suggesting that restrictive employment agreements used to evade a final rule are not non-competes under the functional test. Other commenters who generally supported the rule asked for greater specificity in proposed § 910.1(b)(2) to prevent adverse judicial interpretations that could undermine the effectiveness of the rule.
Many commenters addressed issues specific to other types of restrictive employment agreements, including NDAs (also sometimes referred to as confidentiality agreements), TRAPs, non-solicitation agreements, and garden leave and severance agreements.
With respect to NDAs, some commenters stated that the Commission rightly identified overbroad NDAs as a potential method of evasion of the rule and supported the Commission's recognition of overbroad NDAs as functional non-competes. In contrast, some commenters contended that by covering functional non-competes, the proposed rule would limit their ability to use NDAs. Some commenters argued that providing that overbroad NDAs may be functional non-competes would be inconsistent with the proposed rule's separate preliminary finding that NDAs are less restrictive alternatives to non-competes. Similarly, some commenters contended that a functional test may frustrate employers' ability to use NDAs to protect legitimate trade secrets or to enjoin a former worker employed with a competitor under the Defend Trade Secrets Act of 2016, in part because they would be concerned about potential legal liability. Some commenters contended that the example of an overbroad NDA in proposed § 910.1(b)(2) would discourage the use of NDAs, including the use of narrowly tailored NDAs, and undermine confidence in their enforceability. Some commenters stated that reference to cases, including
Other commenters addressed the proposed definition's application to TRAPs, which are agreements in which the worker agrees to pay the employer for purported training expenses if the worker leaves their job before a certain date. Several commenters asked the Commission to ban all forms of TRAPs. These commenters argued that employers are increasingly adopting TRAPs and that abusive TRAPs are pervasive throughout the economy. Some commenters asserted millions of workers are likely bound by TRAPs. Commenters stated TRAPs may impose penalties that are disproportionate to the value of training workers received or require the worker to pay alleged training expenses for on-the-job training. Some commenters contended TRAPs may be even more harmful than non-competes, because while non-competes prohibit or prevent workers from seeking or accepting other work or starting a business after they leave their job, TRAPs can prevent workers from leaving their job for any reason.
Some commenters expressed concern that the example in proposed § 910.1(b)(2)(ii) of a TRAP that was a functional non-compete was too narrow, and that the Commission should not imply that TRAPs with penalties that
At least one commenter urged the Commission to treat as functional non-competes other employment terms similar to TRAPs such as equipment loans, where employers provide employees with a loan to purchase equipment that the worker needs in order to perform their job, and damages provisions containing open-ended costs related to the employee's departure—including hiring and training replacements or vague harms such as reputational damages, loss of good will or lost profits. In contrast, some commenters argued that TRAPs should be excluded from coverage under proposed § 910.1(b)(2) because they are not unfair or anti-competitive.
Regarding non-solicitation agreements—which prohibit a worker from soliciting former clients or customers of the employer—a few commenters expressed concern that overbroad non-solicitation agreements may be permitted because they were not listed in the regulatory text for proposed § 910.1(b)(2) as examples of functional non-competes (although the Commission described them in the preamble to the proposed rule as restrictive employment agreements that may fall within the definition of non-compete clause if they restrain such an unusually large scope of activity that they are
Some comments addressed no-hire clauses, which bar former workers from hiring their former colleagues. One employment lawyer stated that these are less restrictive than non-compete clauses. Other commenters stated that no-hire clauses can still limit careers or make it hard for new businesses to find staff. Some commenters expressed concerns with no-business or non-dealing clauses, which bar former workers from doing business with former clients or customers even if the clients or customers sought them out. These commenters stated such agreements limit the options of clients and customers.
Many commenters raised questions about forfeiture-for-competition clauses, which they stated are often a component of deferred compensation arrangements for executives. Commenters stated that deferred compensation plans often include forfeiture clauses, or contingencies on receiving the promised compensation, to incentivize their recipients to act in ways that benefit the employer. These commenters stated that agreements not to compete for a period of time after employment ends are a common feature of forfeiture clauses. Some commenters stated that such forfeiture-for-competition clauses are non-competes and have the same negative effects as non-competes because they are contingent on competition—they require workers to give up bonus pay or other post-employment benefits if they work for a competing employer or start a competing business, and they keep other employers from being able to hire those workers. Other commenters stated forfeiture-for-competition clauses are a common and important component of deferred compensation arrangements for highly compensated employees and senior executives.
Many commenters also addressed the application of the rule to garden leave agreements. In using the term “garden leave,” commenters seemed to be referring to a number of different types of agreements. Some commenters referred to garden leave agreements as those in which, before a worker left their job, they remained employed and received full pay for a specified period of time but their access to co-workers and company facilities was restricted. In contrast, other commenters considered “garden leave” an arrangement to make payments to a worker after their employment concluded. Commenters used different terminology to refer to these kinds of agreements, including severance pay, partial pay, and full pay akin to administrative leave, in exchange for an agreement not to compete. Some commenters argued it is coercive for a worker to sign a non-compete in exchange for severance pay and argued garden leave arrangements are non-competes because they limit a worker's options to work for a competitor. Some commenters asked the Commission to adopt a durational limit for garden leave. At least one commenter also urged the Commission to clarify that an employer cannot unilaterally terminate garden leave.
Other commenters requested clarification that garden leave was not a non-compete on the basis that garden leave does not create a legal obligation on the part of the worker to refrain from competing. Some commenters requested a specific exclusion for garden-leave arrangements. They argued that by forcing employers to pay workers, garden leave would reduce the overuse of non-competes. One talent industry commenter argued that the rule should expressly allow for “fee tails,” which require talent agents to pay a portion of future commissions to former employers.
After considering the comments, the Commission has slightly modified the definition of non-compete clause to clarify its scope. In the final rule, § 910.1 defines “non-compete clause” as a term or condition of employment that either “prohibits” a worker from, “penalizes” a worker for, or “functions to prevent” a worker from (A) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (B) operating a business in the United States after the conclusion of the employment that includes the term or condition.
Pursuant to the term “prohibits,” the definition applies to terms and conditions that expressly prohibit a worker from seeking or accepting other work or starting a business after their employment ends. Examples of such agreements would be a contractual term between a national sandwich shop chain and its workers stating that, for two years after the worker leaves their job, they cannot work for another sandwich shop within three miles of any of the chain's locations,
Pursuant to the term “penalizes,” the definition also applies to terms and conditions that require a worker to pay a penalty for seeking or accepting other work or starting a business after their employment ends. One example of such a term is a term providing that, for two years after the worker's employment ends, the worker may not engage in any business within a certain geographic area that competes with the employer unless the worker pays the employer liquidated damages of $50,000.
Another example of a term that “penalizes” a worker, under § 910.1, is an agreement that extinguishes a person's obligation to provide promised compensation or to pay benefits as a result of a worker seeking or accepting other work or starting a business after they leave their job. One example of such an agreement is a forfeiture-for-competition clause, which, similar to the agreement with liquidated damages described previously, imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship, expressly conditioned on the employee seeking or accepting other work or starting a business after their employment ends. An additional example of a term that “penalizes” a worker under § 910.1 is a severance arrangement in which the worker is paid only if they refrain from competing. The Commission also notes that a payment to a prospective competitor to stay out of the market may also violate the antitrust laws even if it is not a non-compete under this rule.
The common thread that makes each of these types of agreements non-compete clauses, whether they “prohibit” or “penalize” a worker, is that on their face, they are triggered where a worker seeks to work for another person or start a business after they leave their job—
Pursuant to the term “functions to prevent,” the definition of non-compete clause also applies to terms and conditions that restrain such a large scope of activity that they function to prevent a worker from seeking or accepting other work or starting a new business after their employment ends, although they are not expressly triggered by these specific undertakings. This prong of the definition does not categorically prohibit other types of restrictive employment agreements, for example, NDAs, TRAPs, and non-solicitation agreements. These types of agreements do not by their terms prohibit a worker from or penalize a worker for seeking or accepting other work or starting a business after they leave their job, and in many instances may not have that functional effect, either. However, the term “functions to prevent” clarifies that, if an employer adopts a term or condition that is so broad or onerous that it has the same functional effect as a term or condition prohibiting or penalizing a worker from seeking or accepting other work or starting a business after their employment ends, such a term is a non-compete clause under the final rule.
In response to the comments alleging that covering “de facto” or “functional” non-competes is overinclusive or vague, the Commission notes that the definition's three prongs—“prohibit,” “penalize,” and “function to prevent”—are consistent with the current legal landscape governing whether a particular agreement is a non-compete. In addition to generally accepted definitions of non-competes encompassing the “prohibits” prong of the definition, terms that “penalize” workers for seeking or accepting other work or starting a business after they leave their job (for example, by requiring them to pay liquidated damages) are typically considered non-competes under State law.
In response to the comments alleging the Commission failed to cite evidence that functional non-competes harm competition, the Commission disagrees. This final rule is based on a robust evidentiary record that includes significant empirical evidence and thousands of public comments, as well as the Commission's longstanding expertise in evaluating competition issues. Based on this record, the Commission finds that non-competes are restrictive and exclusionary conduct that tends to negatively affect competitive conditions in labor markets and markets for products and services.
While many commenters requested the Commission state expressly in the final rule whether various specific restrictive employment agreements satisfy the definition of non-compete clause, the Commission declines to adopt a definition that attempts to capture or carve out every edge case. Rather, the final rule focuses on providing a clear, understandable, and generally applicable definition of non-compete clause that reflects the need for case-by-case consideration of whether certain restrictive covenants rise to the level of being functional non-competes—which is fully consonant with the legal landscape employers generally face today. The Commission nevertheless here responds to comments regarding the restrictive clauses that commenters contended should be expressly addressed in the final rule.
As noted in this Part III.D, restrictive employment agreements other than non-competes—such as NDAs, non-solicitation agreements, and TRAPs—do not by their terms or necessarily in their effect prevent a worker from seeking or accepting work with a person or operating a business after the worker leaves their job. For example, a garden-variety NDA in which the worker agrees not to disclose certain confidential information to a competitor would not prevent a worker from seeking work with a competitor or from accepting such work after the worker leaves their job. Put another way, an NDA would not be a non-compete under § 910.1 where the NDA's prohibitions on disclosure do not apply to information that (1) arises from the worker's general training, knowledge, skill or experience, gained on the job or otherwise; or (2) is readily ascertainable to other employers or the general public.
However, NDAs may be non-competes under the “functions to prevent” prong of the definition where they span such a large scope of information that they function to prevent workers from seeking or accepting other work or starting a business after they leave their job. Examples of such an agreement may include an NDA that bars a worker from disclosing, in a future job, any information that is “usable in” or “relates to” the industry in which they work.
Under the final rule's definition of non-compete clause, the same inquiry applies to non-solicitation agreements. Non-solicitation agreements are generally not non-compete clauses under the final rule because, while they restrict who a worker may contact after they leave their job, they do not by their terms or necessarily in their effect prevent a worker from seeking or accepting other work or starting a business. However, non-solicitation agreements can satisfy the definition of non-compete clause in § 910.1 where they function to prevent a worker from seeking or accepting other work or starting a business after their employment ends. Whether a non-solicitation agreement—or a no-hire agreement or a no-business agreement, both of which were referenced by commenters, as discussed previously—meets this threshold is a fact-specific inquiry. The Commission further notes that—like all the restrictive employment agreements described in this Part III.D—non-solicitation agreements, no-hire, and no-business agreements are subject to section 5's prohibition of unfair methods of competition, irrespective of whether they are covered by the final rule.
Depending on the facts and circumstances, a TRAP can also function to prevent a worker from working for another firm or starting a business. For example, one commenter cited a TRAP that required entry-level workers at an IT staffing agency who were earning minimum wage or nothing at all during their training periods to pay over $20,000 if they failed to complete a certain number of billable hours.
In response to the comments, the Commission declines at this time to either categorically prohibit all TRAPs related to leaving employment, or to exempt such provisions altogether. The Commission agrees with comments raising substantial concerns about the
The Commission notes that clauses requiring repayment of a bonus when a worker leaves their job would not be non-competes under § 910.1 where they do not penalize or function to prevent a worker from seeking or accepting work with a person or operating a business after the worker leaves their job. For example, a provision requiring the repayment of a bonus if the worker leaves before a certain period of time would not be a non-compete under § 910.1 where the repayment amount is no more than the bonus that was received, and the agreement is not tied to who the worker can work for, or their ability to start a business, after they leave their job. Similarly, a term or condition under which a worker loses accrued sick leave when their employment ends would not function to prevent a worker from seeking or accepting work with a person or operating a business after the worker leaves their job.
With respect to garden leave agreements, as noted previously, commenters used the term “garden leave” to refer to a wide variety of agreements. The Commission declines to opine on how the definition of non-compete clause in § 910.1 would apply in every potential factual scenario. However, the Commission notes that an agreement whereby the worker is still employed and receiving the same total annual compensation and benefits on a
The Commission declines a commenter's request to replace the term “prevent” with “restrains” or “limits.” Commenters generally did not express concern about the term “prevent” and the Commission is concerned that different language could greatly expand the scope of the definition and reduce its clarity.
The Commission also declines to adopt alternative
The Commission agrees with the commenter who stated that proposed § 910.1(b)(2) was redundant because proposed § 910.1(b)(1) was already a functional definition. In the final rule, the Commission has revised the text of the definition of non-compete clause to address confusion among commenters about whether proposed § 910.1(b)(2) clarified the definition or extended it.
In response to the commenters requesting that the Commission clarify the circumstances under which the definition would apply to various other types of restrictive employment agreements, the Commission declines at this time to enumerate every circumstance that may arise. As noted, a restrictive employment covenant may be a non-compete clause under § 910.1 if it expressly prohibits a worker from, or penalizes a worker for, seeking or accepting other work or starting a business, or if it does not do so expressly but is so broad or onerous in scope that it functionally has the same effect of preventing a worker from doing the same.
The Commission received several comments expressing concern about whether the final rule would apply to non-competes that restrict work outside the U.S. In response, the final rule's definition of non-compete clause clarifies that it applies only to work in the U.S. or operating a business in the U.S.
Some commenters raised concerns about the cross-border movement of workers. A research center commenter asserted there is a global shortage of science and technology workers and stated that the final rule's adoption could exacerbate the U.S. shortage by allowing other countries to more easily poach U.S. workers. An academic commenter argued that banning non-competes might deter foreign investors from sending workers to the U.S. if the final rule would invalidate their non-competes.
Some commenters argued that legal systems in the People's Republic of China or other jurisdictions provide insufficient protection for U.S. companies' trade secrets, confidential information, or patent rights, and contended employers need non-competes as
Two commenters highlighted the domestic semiconductor industry and the CHIPS Act of 2022, arguing the Chinese government seeks to acquire IP related to semiconductors and semiconductor experts with relevant knowledge and information. Those comments expressed concern that a ban on non-competes would damage the semiconductor industry, which relies on skilled workers and trade secrets, by weakening trade secrets protection and disincentivizing investment. Another commenter argued the proposed rule would undermine export controls designed to prevent foreign countries from acquiring U.S. technology and knowledge by allowing workers to move to foreign competitors. One commenter argued the proposed rule conflicts with an October 2022 Bureau of Industry and Security (“BIS”) export control rulemaking, stating that the rulemaking limits worker mobility in certain industries from the U.S. to the People's Republic of China. Another commenter suggested the proposed rule would violate the World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which requires that persons “shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent . . . .”
Some of these commenters made recommendations for the final rule. A law firm suggested that the final rule prevent evasion by barring employers from selecting the law of non-U.S. jurisdictions to govern employment contracts with U.S.-based workers. A trade association requested that the final rule cover only agreements subject to the law of a U.S. State. An academic commenter suggested revisions to the text of the proposed rule to ensure the final rule applies only within the U.S. The commenter also recommended stating that a non-compete restricting work outside the U.S. is not a
In response to commenters' concerns, in this final rule the Commission adopts changes to the definition of “non-compete clause” that expressly limit the definition of non-compete to terms or conditions that prevent workers from seeking or accepting work in the U.S. or operating a business in the U.S. The final rule does not apply to non-competes if they restrict only work outside the U.S. or starting a business outside the U.S.
This revision clarifies for stakeholders the scope of the final rule and confirms it does not prohibit employers from using non-competes that restrict work outside the U.S., in compliance with those jurisdictions' own laws. The Commission understands that, as a commenter noted, some companies operating or competing globally already draft non-competes that comply with the laws of multiple jurisdictions and, thus, amending their non-competes to reflect this application of the final rule would not pose a significant challenge for those entities.
The Commission's revision clarifying the final rule's application to work or starting a business only in the U.S. also addresses the concerns from some commenters about key U.S. workers and technology flowing overseas, because the final rule does not ban non-competes that restrict workers from working or starting a business outside the U.S. It also clarifies that the final rule would not invalidate non-competes entered into by foreign companies with foreign workers unless they restrict a worker's ability to work or start a business inside the U.S. Other questions about the final rule's application to cross-border or non-U.S. employment are also addressed by the Foreign Trade Antitrust Improvements Act, codified at 15 U.S.C. 45(a)(3).
The Commission agrees with the academic commenter that, for non-competes that apply outside the U.S., the law of the relevant jurisdiction should govern any issue other than restricting work or starting a business in the U.S. However, the Commission declines to adopt a balancing test for non-competes restricting a worker's ability to work or start a business outside the U.S., as a bright-line rule that applies only to work or starting a business in the U.S. is more administrable. In addition, the Commission declines to add language in the final rule stating that it does not apply to overseas employers or to non-competes not subject to U.S. State law. The final rule may apply to overseas employers if the non-compete purports to restrict work or starting a business in the U.S. and the reviewing court applies U.S. law.
The empirical evidence cited in the NPRM focused on the U.S., primarily consisting of studies based on the effects of changes in State laws in the U.S. The comments provided limited evidence on non-competes and trade secret protection outside the U.S., leaving many issues and most jurisdictions unaddressed. The Commission also notes, as one commenter did, that legal information and data from some jurisdictions may not be fully accurate because not all court decisions are public. On the current record, the Commission cannot reach conclusions on whether other jurisdictions have sufficient alternatives to non-competes, the scope of any potential risk, and many of the other issues raised. As a result, the Commission limits application of the final rule to work in the U.S., where the Commission has ample evidence on non-competes' negative effects.
One commenter argued the rule conflicts with BIS's October 2022 export control rulemaking, which restricts the ability of U.S. persons to support development or production at certain semiconductor facilities in the People's Republic of China without a license from BIS.
With respect to the commenter that stated that the final rule should include
While most commenters focused on the proposed definition's application to functional non-competes or international application, some commenters addressed other issues relating to the proposed definition. Several commenters stated that the definition should cover workplace policies or handbooks, to minimize confusion and make clear that employers are prohibited from including non-competes in workplace policies or handbooks, even if such clauses are unenforceable because they are not formal binding contracts. Some commenters stated that such policies or handbooks can affect a worker's decision to leave their job to work with a competitor or start their own businesses. Others stated the same about oral agreements. One commenter stated that the definition should not cover workplace policies because they apply only during, not after, employment.
A few commenters said the Commission should state explicitly in the definition of “non-compete clause” that restrictions on concurrent employment, such as prohibitions on “moonlighting” with competitors, are excluded. Other commenters urged the Commission to expand the definition to include restraints on concurrent employment because workers often need to take additional jobs during economic downturns, and low-wage workers generally need to take on additional jobs.
An organized labor commenter argued that no-raid agreements, which the commenter described as agreements between labor organizations not to attempt to organize workers already under representation by another union, should be exempted from the definition. An industry trade organization asked the Commission to clarify whether the definition would apply to non-competes in agreements between motor carriers and brokers in the trucking industry. In addition, a few commenters stated that proposed § 910.1(b)(1) was too broad or potentially ambiguous without pointing to any specific features of the definition.
To address the concerns raised by commenters about workplace policies and handbooks, the definition of non-compete clause in § 910.1 uses the phrase “a term or condition of employment” instead of “contractual term.” The definition further clarifies that term or condition of employment includes “a contractual term or workplace policy, whether written or oral.” The Commission finds that employers have used restrictions in handbooks, workplace policies, or other vehicles that are not formal written contracts to successfully prevent workers from seeking or accepting other employment or starting a new business. The Commission finds, consistent with the views expressed by commenters, that such restrictions in handbooks, workplace policies, or other such vehicles have the same tendency to negatively affect competitive conditions as a formal binding contract term. To provide that such conduct is covered by the definition of non-compete clause, this language clarifies that the definition of non-compete clause is not limited to clauses in written, legally enforceable contracts and applies to all forms a non-compete might take, including workplace policies or handbooks and informal contracts. Given the comments expressing concern about oral representations, the Commission clarifies in the definition of non-compete clause that clauses that purport to bind a worker are covered, whether written or oral, and provides in § 910.2(a)(1) and (2) that it is an unfair method of competition to make representations that a worker is subject to a non-compete. (However, as explained in Part V.C, such representations are not prohibited where the person has a good-faith basis to believe that the final rule is inapplicable.)
The Commission declines to extend the reach of the final rule to restraints on concurrent employment. Although several commenters raised this issue, the evidentiary record before the Commission at this time principally relates to post-employment restraints, not concurrent-employment restraints. The fact that the Commission is not covering concurrent-employment restraints in this final rule does not represent a finding or determination as to whether these terms are beneficial or harmful to competition. The Commission relatedly clarifies that fixed-duration employment contracts,
While the final rule does not extend to restraints on concurrent employment, the Commission has made a technical edit to the definition of non-compete to clarify how it relates to seeking and accepting employment. Proposed § 910.1(b) defined non-compete clause as a contractual term that “prevents the worker from seeking or accepting employment with a person . . . after the conclusion of the worker's employment with the employer.” Because, as a technical matter, non-competes can also prevent workers from seeking or accepting future employment with another person before their work for their previous employer has concluded, the Commission has clarified the relevant language to read “that prevents a worker from seeking or accepting work in the United States with a different person
In addition, in response to comments expressing concern about evasion of the rule through third-party hiring,
With respect to the comment about union no-raid agreements, the Commission notes that the definition would apply only to the extent the agreement is a “term or condition of employment” and only if the agreement “prevents a worker from seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or
With respect to the comment asking whether the definition would apply to non-competes in agreements between motor carriers and brokers in the trucking industry, the Commission notes as a general matter that the definition would not apply to non-competes between businesses, but the Commission declines to opine on specific factual circumstances.
The proposed rule did not separately define the term “person.” Instead, proposed § 910.1(c)—the proposed definition of “employer”—stated that an employer “means a person, as defined in 15 U.S.C. 57b-1(a)(6), that hires or contracts with a worker to work for the person.” The statutory provision cross-referenced in proposed § 910.1(c) is section 20(a)(6) of the FTC Act, which defines “person” for purposes of the Commission's authority to issue civil investigative demands. Section 20(a)(6) defines “person” as “any natural person, partnership, corporation, association, or other legal entity, including any person acting under color or authority of State law.” No comments were received concerning the use of “person” in proposed § 910.1(c).
As explained in Part III.C, the Commission has removed the defined term “employer” from the regulatory text of the final rule. However, the regulatory text still uses the term “person.” For example, § 910.2(a)(1) prohibits a “person” from, among other things, entering into a non-compete clause. As a result, the Commission has adopted a separate definition of the term “person.” Section 910.1 defines “person” as “any natural person, partnership, corporation, association, or other legal entity within the Commission's jurisdiction, including any person acting under color or authority of State law.” This text consists of the proposed definition from section 20(a)(6), plus the phrase “within the Commission's jurisdiction,” which clarifies that only persons within the Commission's jurisdiction are subject to the final rule.
With respect to existing non-competes,
Section 910.1 defines the term “senior executive” as well as related terms. Because the Commission's rationale for the final rule's differential treatment of senior executives provides important context for these definitions, the Commission describes these definitions in Part IV.C.4.
In the NPRM, the Commission proposed to define “worker” in proposed § 910.1(f) as “a natural person who works, whether paid or unpaid, for an employer.”
In the NPRM, the Commission explained it intended the term “worker” to include not only employees, but also individuals classified as independent contractors, as well as other kinds of workers.
The Commission stated in the NPRM that it was concerned that if the rule were to define workers as “employees” according to, for example, the FLSA definition, employers may misclassify employees as independent contractors to evade the rule's requirements.
Proposed § 910.1(f) also stated the term worker “does not include a franchisee in the context of a franchisee-franchisor relationship.”
Proposed § 910.1(f) further clarified, however, that the term worker “includes a natural person who works for the franchisee or franchisor,” and that “non-competes between franchisors and franchisees remain subject to [F]ederal antitrust law as well as all other applicable law.”
Several commenters stated that they agreed with the proposed definition of “worker” because it applies to all workers without regard to their classification. Many of these
On the other hand, several commenters suggested removing bona fide independent contractors and sole proprietors from the definition of “worker.” Two industry groups contended that there is a lack of data regarding the prevalence and effects of non-competes among independent contractors as opposed to other kinds of workers and that, as a legal matter, the evidence is insufficient to justify including independent contractors as “workers” under the rule. A few industry organizations also contended that, because they have more control over their work and generally work for more than one employer, independent contractors have greater bargaining power than other workers. One academic commenter suggested that non-competes between employers and independent contractors are more akin to agreements between businesses than agreements between employers and workers. A few of these industry organizations also contended that non-competes are justified because independent contractors provide services outside the scope of their employers' expertise and thus have greater access to sensitive information than other workers. Other industry organizations contended that small businesses employ more independent contractors than their larger rivals. These commenters stated that, to protect small businesses from being impacted disproportionately by the rule, the definition of “worker” should exclude independent contractors. Finally, a few industry trade organizations and an academic commenter stated that independent contractors should be excluded from coverage under the rule to avoid “free riding,” in which a contractor working for one firm can use that firm's assets—like tools or databases—to benefit another firm.
Several commenters suggested changes to the definition of “worker” to maximize the rule's coverage and close potential loopholes. One worker advocacy group noted that, combined with the proposed definition of “employer,” the proposed definition of “worker”—a natural person who works “for an employer”—appeared to exclude workers who work for a person other than the person who hired or contracted with them to work. The commenter noted that workers are often employed indirectly—by way of a contractual relationship with a staffing agency, an affiliate of their common-law employer, or some entity other than their common-law employer—and that non-competes are often imposed on workers by the non-hiring party. In order to ensure these workers are covered by the rule, the commenter suggested that the definition of “worker” should also cover a person who works “directly or indirectly” for an employer and that the definition specifically include “a person who works for the employer under an arrangement with a professional employer organization, statutory employer, wholly owned entity of which the person is the sole or principal employee or service provider, loan-out arrangement or similar arrangement.”
The same commenter also argued that employers often impose non-competes on workers who own a portion of the business while not applying the same restriction to outside investors who do not work for the company, and that such worker-owner non-competes should be treated as employment-related non-competes. In order to ensure these workers are covered by the rule, the commenter suggested that “worker” should also include “a person who holds direct or indirect equity or other interest in the employer and who provides services to or for the benefit of the employer.” Another commenter suggested that, for clarity, “worker” should specifically exclude a “substantial owner, member or partner” as defined in the sale-of-business exception.
Several State attorneys general, local government commenters, academic commenters, and a worker advocacy group warned that categorically excluding franchisees from the definition of “worker” would lead employers to misclassify workers as franchisees to evade the rule's requirements. Some commenters suggested incorporating the “ABC” test—a common law test designed to determine whether a worker is an employee based on fact-specific conditions—into the definition of “worker” to prevent evasion.
Some commenters requested that the Commission revise the definition of “worker” to exclude or include certain workers from coverage under the rule. These comments are addressed in Part IV.C (comments requesting an exclusion for senior executives) and in Part V.D (comments requesting exclusions for other categories of workers).
After considering the comments, the Commission revised the definition of “worker” in three ways to clarify that the term covers all current and former workers, regardless of which entity hired or contracted with them to work, and regardless of a worker's title or status under any other applicable law.
First, the Commission added “or who previously worked” to the basic definition of “worker” as “a natural person who works.” This revision is designed to clarify that former workers are considered “workers” under the final rule, such as where an employer is required to notify a former worker that their non-compete is no longer enforceable.
Second, the Commission removed “for an employer” from the definition. This revision is designed to ensure that the final rule covers workers who are hired by one party but work for another, closing the unintended loophole identified by commenters regarding third-party hiring.
Third, the Commission added “without regard to the worker's title or the worker's status under any other State or Federal laws” prior to the list of examples of different categories of workers that the definition covers. This change is designed to make more explicit that the term “worker” includes all workers regardless of their titles, status under other laws, or the details of the contractual relationship with their employer.
The Commission has made two additional changes to the definition for clarity. First, the Commission has revised the phrase “individual classified as an independent contractor” to “independent contractor.” Second, the Commission has added “a natural person who works for a franchisee or
The Commission declines to specify that a “worker” includes an owner who provides services to or for the benefit of their business because the definition already encompasses the same.
The Commission is not persuaded by commenters' arguments that independent contractors or sole proprietors are inherently different from other kinds of workers with respect to non-competes, and therefore declines to exclude them from the definition of “worker.” Commenters did not present persuasive evidence that non-competes that apply to independent contractors or sole proprietors tend to negatively affect competitive conditions to a lesser degree—or are restrictive, exclusionary, exploitative, or coercive to a lesser degree—than non-competes that apply to other workers. As noted by commenters who supported including independent contractors, non-competes' tendency to negatively affect competitive conditions by restricting workers' ability to change jobs or start businesses is not contingent on whether the worker is an employee or an independent contractor. While some commenters contended that independent contractors have more independence and more access to intellectual property than other workers, commenters did not provide evidence that this is the case. Moreover, even were this to be true, it would not justify an exclusion, because the Commission generally declines to exclude workers based on their access to intellectual capital or their independence for the reasons explained in Part V.D.
Furthermore, whether a worker is an employee or an independent contractor does not impact employers' ability to exploit imbalances of bargaining power or limit employers' ability to use less restrictive alternatives to non-competes to protect their intellectual property. While commenters who supported excluding independent contractors contended that independent contractors have more bargaining power than other workers, this contention is not backed by evidence. While some economists hypothesize that, theoretically, independent contractors may have more bargaining power vis-à-vis employers than employees do, they do not provide empirical evidence to support that assertion. Furthermore, as described by a report from the Treasury Department that was based on an extensive literature review, independent contractors may have less bargaining power than employees in many respects.
The Commission is also not persuaded that non-competes are necessary to prevent “free riding” by independent contractors who use one firm's assets to benefit another. The final rule prohibits agreements that restrain a worker from working after the scope of employment has ended and does not prohibit agreements which prevent a worker from working for two firms simultaneously. In addition, any “free riding” may be addressed through less restrictive means, including through agreements prohibiting an independent contractor from using assets provided by one firm to benefit another.
Nor is the Commission persuaded that small businesses will be disproportionately harmed by a rule which prohibits non-competes for independent contractors. Commenters did not provide evidence to support their assertion that small businesses employ more independent contractors than larger ones.
The Commission agrees with the commenters who contended that excluding independent contractors may have the effect of excluding misclassified workers, who may be among the most vulnerable to exploitation and coercion. The recent overview by the U.S. Department of Labor (“DOL”) of the evidence on misclassification led it to conclude that although the prevalence of misclassification of employees as independent contractors is unclear, there is evidence that it is nonetheless “substantial” and has a disproportionate effect on workers who are people of color or immigrants because of the disparity in occupations most affected by misclassification, which include jobs in construction, trucking, delivery, home care, agriculture, personal care, ride-hailing services, and janitorial and building services.
Because there is no reason to believe non-competes that apply to independent contractors or sole proprietors tend to negatively affect competitive conditions to a lesser degree, or are restrictive, exclusionary, exploitative, or coercive to a lesser degree, than non-competes that apply to employees—and in light of substantial evidence of widespread employee misclassification—the Commission declines to exclude independent contractors from the definition of “worker.” For this reason, the Commission also declines to incorporate the “ABC” test or other tests designed to differentiate between independent contractors and employees.
In the NPRM, the Commission proposed to categorically ban employers from using non-competes with all workers, including existing agreements. However, the Commission sought comment on whether it should adopt different standards for non-competes with senior executives, and, if so, how it should define senior executives.
The final rule provides that it is an unfair method of competition—and therefore a violation of section 5—for employers to,
Specifically, with respect to workers who are not senior executives, the Commission determines that it is an unfair method of competition for a person to enter into or attempt to enter into a non-compete clause; enforce or attempt to enforce a non-compete clause; or represent to the worker that the worker is subject to a non-compete clause.
• The use of non-competes is restrictive and exclusionary conduct that tends to negatively affect competitive conditions in labor markets.
• The use of non-competes is restrictive and exclusionary conduct that tends to negatively affect competitive conditions in product and service markets.
• The use of non-competes is exploitative and coercive conduct that tends to negatively affect competitive conditions in labor markets.
• The use of non-competes is exploitative and coercive conduct that tends to negatively affect competitive conditions in product and service markets.
In contrast, with respect to senior executives, the Commission determines that it is an unfair method of competition for a person to enter into or attempt to enter into a non-compete clause; enforce or attempt to enforce a non-compete clause entered into after the effective date; or represent that the senior executive is subject to a non-compete clause, where the non-compete clause was entered into after the effective date. The Commission does not find that non-competes with senior executives are exploitative and coercive. With respect to senior executives, the Commission finds that non-competes are unfair methods of competition in two independent ways:
• The use of non-competes is restrictive and exclusionary conduct that tends to negatively affect competitive conditions in product and service markets.
• The use of non-competes is restrictive and exclusionary conduct that tends to negatively affect competitive conditions in labor markets.
The final rule allows existing non-competes with senior executives to remain in force. Because the harm of these non-competes is principally that they tend to negatively affect competitive conditions (rather than exploiting or coercing the executives themselves), and due to practical concerns with extinguishing existing non-competes for such executives, the final rule prohibits employers only from entering into or enforcing new non-competes with senior executives.
Parts IV.B and IV.C set forth the findings that provide the basis for the Commission's determinations that the foregoing practices are unfair methods of competition under section 5 for these two categories of workers, respectively.
Before turning to the basis for its findings, the Commission describes the analytical framework it has applied in assessing the empirical evidence on non-competes. In the NPRM, the Commission discussed the existing empirical literature on non-competes and its assessment of those studies, including its preliminary view of which studies were more robust and thus should be given more weight.
The Commission notes that the methodologies of empirical studies on the effects of non-competes vary widely. In this final rule, based on the Commission's longstanding expertise assessing empirical evidence relating to the effects of various practices on competition, the Commission gives more weight to studies with methodologies that it finds are more likely to yield accurate, reliable, and precise results. In evaluating studies, the Commission utilized the following five principles that reflect best practices in the economic literature.
First, the Commission gives more weight to studies examining the effects of a change in legal status or a change in the enforceability of non-competes, and less weight to studies that simply compare differences between workers who are subject to non-competes and those who are not. Studies that look at what happens before and after a change in State law that affects the enforceability of non-competes provide a reliable way to study the effects of the change. This is especially true when only the enforceability of non-competes changes, and not other factors affecting firms and workers. If other substantial changes do not also occur around the same time, this study design often allows the researcher to infer that the change caused the effects—since the likelihood that confounding variables are driving the effects or outcomes is minimal.
In contrast, other studies of the use of non-competes compare a sample of workers who are subject to non-competes with a sample of workers who are not subject to non-competes. The shortcoming of these studies is that they cannot easily differentiate between correlation and causation. For example, if such a study shows that workers with non-competes earn more, there could be many confounding reasons for this result. For example, employers may be more likely to enter into non-competes with workers who earn more. In contrast, a study showing that workers' earnings increase or decrease when non-
Second, the Commission gives more weight to studies examining the effects of changes in non-compete enforceability and less weight to studies that simply compare economic outcomes between States where non-competes are more enforceable and States where non-competes are less enforceable. This latter category of studies is known as “cross-sectional studies of enforceability.” Like studies based on the use of non-competes, these cross-sectional studies of enforceability cannot easily differentiate between correlation and causation. This is because differences between States that are unrelated to non-competes and their enforceability can easily pollute comparisons. For example, non-competes are less enforceable in California than in Mississippi, and the cost of living is higher in California than in Mississippi. However, the difference in the cost of living is likely to be due to underlying differences between the economies and geographies of the two States, rather than being attributable to non-competes. In contrast, studies examining how changes in enforceability of non-competes affect various outcomes—studies that look at what happens within States before and after a change in State law that affects the enforceability of non-competes—allow researchers to infer that the change caused the effects.
Despite having this limitation, the Commission believes that cross-sectional studies of enforceability are still superior to the “use” studies described under the first principle. This is because although comparisons of different States may have unreliable results due to confounding variables—depending on which States are compared—“use” studies are inherently unreliable due to confounding effects. For example, because employers enter into non-competes more often with highly paid workers, all “use” studies related to worker earnings are inherently unreliable, although studies that utilize data on the use of non-competes but employ a design that plausibly identifies a causal effect may be less unreliable.
Third, the Commission gives more weight to studies assessing changes in the enforceability of non-competes in multiple States. This reduces the possibility that the observed change in economic outcomes was driven by an idiosyncratic factor unique to a particular State. For example, assume State X changed its laws to make non-competes less enforceable, and new business formation subsequently increased compared with other States. However, around the same time it changed its non-compete law, State X also enacted legislation to provide attractive tax incentives to entrepreneurs. It would be difficult to isolate the effect of the change in non-compete law from the effect of the tax law change. For this reason, the Commission gives more weight to studies that analyze the effects of multiple changes in enforceability. For example, if a study shows that, compared with other States that did not change their non-compete laws, new business formation rose not only in State X, but also in several other States that changed their laws to make non-competes less enforceable, the Commission would be more confident inferring that changes in non-compete law caused these effects.
Fourth, the Commission gives more weight to studies that use sophisticated, nuanced measures of enforceability, such as non-binary measures of non-compete enforceability that capture multiple dimensions of non-compete enforceability. This fourth guiding principle ensures accuracy and granularity in the measurement of non-compete enforceability.
A variety of different factors affect the enforceability of non-competes from State to State, including (among others) the permissible geographic scope and duration of non-competes and how high the employer's burden of proof is to establish that a non-compete is enforceable. Given the different factors involved, the overall level of non-compete enforceability from State to State falls along a spectrum; it is not as simple as whether non-competes are enforceable or not. Thus, scales which use binary measures miss nuance between States. This is true for enforceability overall (
Fifth, the Commission gives more weight to studies in which the outcome studied by the researchers is the same as the outcome the Commission is interested in or is an effective proxy for the outcome the Commission is interested in. It gives less weight to studies that use ineffective proxies. For example, some outcomes are relatively easy to study. There is extensive data on workers' earnings at the State level, so researchers can simply use this data to study how changes in non-compete enforceability affect workers' earnings in a State. Other outcomes, however, may be more challenging to quantify directly, and thus researchers may use proxies for understanding the effect they are studying. For example, there is no single metric that measures innovation in the economy. For this reason, to learn about how non-competes affect innovation, a researcher might study the effect of changes in non-compete enforceability on the number of patents issued in the State as a proxy for innovation. However, proxies can sometimes be ineffective or inapt. For example, a study that analyzes the effect of non-compete enforceability on the number of patents issued is generally a weaker proxy for innovation than a study that also takes into account the quality of patents issued. For this reason, the Commission gives more weight to studies that measure the exact outcome of interest or studies that use effective proxies.
While these five guiding principles are important indicators of the relative strength of empirical studies evaluated by the Commission for the purpose of this final rule, the Commission's assessment of empirical studies was holistic and relied on its economic expertise. In addition to the guiding principles described in this Part IV.A.2, the Commission's holistic, expert assessment of the empirical evidence also included considering characteristics of studies important in any context, such as data quality, statistical precision, and other factors.
In some instances, the Commission cites studies beyond those discussed in the NPRM. The Commission cites such studies only where they check or confirm analyses discussed in the NPRM, or where the Commission is responding to comments raising them. The Commission's findings do not rest on these studies, however, and they are not necessary to support its findings.
The Commission now turns to the basis for its findings that non-competes with workers other than senior executives are an unfair method of competition. As explained in Part II.F, under section 5, the Commission assesses two elements: (1) whether the conduct is a method of competition, as opposed to a condition of the marketplace, and (2) whether it is unfair, meaning that it goes beyond competition on the merits. The latter inquiry has two components: (a) whether the conduct has indicia of unfairness, and (b) whether the conduct tends to negatively affect competitive conditions. These two components are weighed according to a sliding scale.
Non-competes with workers other than senior executives satisfy all the elements of the section 5 inquiry.
The Commission finds that the empirical research described in this Part IV.B supports findings related to workers other than senior executives.
With respect to the first element, whether the conduct is a method of competition, the Commission preliminarily found in the NPRM that non-competes are a method of competition under section 5 because they are specific conduct undertaken by an actor in a marketplace, as opposed to merely a condition of the marketplace.
The Commission finds that non-competes are facially unfair conduct under section 5 because they are restrictive and exclusionary. The Commission further finds that non-competes are facially unfair under section 5 because they are exploitative and coercive.
Under section 5, indicia of unfairness may be present where conduct is restrictive or exclusionary, provided that the conduct also tends to negatively affect competitive conditions.
The restrictive nature of non-competes is evident from their name and function: non-competes restrict competitive activity. They do so by restricting a worker's ability to seek or accept other work or start a business after the worker leaves their job, and by restricting competitors from hiring that worker. Because non-competes facially restrict competitive activity, courts have long held they are restraints of trade and proper subjects for scrutiny under the antitrust laws.
The restrictions that non-competes impose on workers are often substantial. Non-competes can severely restrict a worker's ability to compete against a former employer. For most workers, the most natural alternative employment options are jobs in the same geographic area and in the same field. These are the very jobs that non-competes typically prevent workers from taking. Furthermore, for most workers, the most practical entrepreneurship option is starting a business in the same field. This is the very opportunity that non-competes typically prevent workers from pursuing. Moreover, the record before the Commission reflects that non-competes are often so broad as to force a worker to sit out of the labor market altogether.
In the NPRM, the Commission used the term “restrictive” to encompass both restrictive and exclusionary conduct.
For the foregoing reasons, the Commission finds that the use of non-competes with workers other than senior executives is facially unfair under section 5 because it is conduct that is restrictive or exclusionary.
Conduct may violate section 5 where it is exploitative or coercive and tends to negatively affect competitive conditions.
In the NPRM, the Commission preliminarily found that non-competes with workers other than senior executives were exploitative and coercive because in imposing them on workers, employers take advantage of their unequal bargaining power.
The Commission received an outpouring of comments on the question of whether non-competes were exploitative or coercive. Thousands of workers described non-competes as pernicious forces in their lives that took advantage of their lack of bargaining power and forced them to make choices detrimental to their finances, their careers, and their families. Above all, the predominant themes that emerged from the comments were powerlessness and fear.
Thousands of workers reported feeling powerless to avoid non-competes, either because the worker needed the job or because non-competes were pervasive in the worker's field. Hundreds of workers reported non-competes were unilaterally imposed on them. Workers overwhelmingly reported that they did not bargain over non-competes, did not receive compensation for non-competes, and were not represented by counsel in connection with non-competes, with only rare exceptions.
And hundreds of workers reported that even where they wanted a job with better pay or working conditions, or to strike out on their own, the fear of litigation from a deep-pocketed employer or the fear of being without work prevented them from doing so. Hundreds of workers described how this fear coerced them into remaining in jobs with poor conditions or pay, including dangerous or toxic work environments; into leaving an industry or profession that they invested, trained, studied, or were experienced in, damaging or derailing their careers; into moving away from their home, uprooting or separating their families; or into enduring long-distance commutes, which made it harder to care for and spend precious time with their loved ones. Many workers described how this fear hung above them even if they thought the non-compete was overbroad and probably unenforceable under State law, because having to defend a lawsuit from an employer for any length of time would devastate their finances.
Based on the entirety of the record, for the following reasons, the Commission finds non-competes with workers other than senior executives are exploitative and coercive because they are unilaterally imposed by a party with superior bargaining power, typically without meaningful negotiation or compensation, and because they trap workers in worse jobs or otherwise force workers to bear significant harms and costs.
The Commission finds that employers almost always unilaterally impose non-competes, exploiting their superior bargaining power to impose—without any meaningful negotiation or compensation—significant restrictions on workers' abilities to leave for better jobs or to engage in competitive activity.
The Commission finds that employers have significantly more bargaining power than workers. Most workers, especially workers other than senior executives, depend on income from their jobs to get by—to pay their rent or mortgage, pay their bills, and put food on the table. The loss of a job or a job opportunity can severely damage workers' finances and is far more likely to have serious financial consequences for a worker than the loss of a worker or a job candidate would have for most employers.
The Treasury Department, in a report based on an extensive literature review, finds that firms generally have considerable labor market power.
As the report notes, some of these factors are inherent in the firm-worker relationship. The report states that workers are at an informational disadvantage relative to firms, often not knowing what other workers earn or the competitive wages for their labor.
In addition to factors inherent to the employer-worker relationship, the report concludes that firms use a wide range of practices to restrain competition for workers, including sharing wage information and conspiring to fix wages with other firms; agreeing not to hire other firms' workers; and adopting non-competes, mandatory arbitration agreements, and overbroad NDAs.
The Commission finds that employers are able to exploit their considerable labor market power—and indeed routinely do so—with respect to non-competes imposed on workers other than senior executives. Employers are repeat players likely to have greater experience and skill at bargaining than individual workers in the context of negotiating employment terms such as non-competes.
The comment record provides strong support for the Commission's finding that non-competes are coercive and exploitative because they are typically unilaterally imposed by employers on workers other than senior executives. Illustrative examples of the comments the Commission received include the following:
• I am a practicing OB/GYN physician in Shreveport, LA. . . . I was put into a non-negotiable, vague non-compete with NO expiration date. . . . I needed a job. I was in a large amount of debt with accumulating interest during my four years of residency with a minimal salary. Honestly, I could not afford an attorney. So naively I trusted that the people that had been training me for the past 4 years would not take advantage of me in a contract. I did not have the ability to seek advice on “how” to negotiate a contract with my mentors since my mentors were the ones who wrote the contract.
• As [a] physician who recently negotiated a new contract, I support FTC changes to the non-compete rules. . . . All three institutions [I considered working for] had unreasonable and onerous non-competes. Essentially making it impossible to get another job in the entire state of NJ—not just a few mile radius but two thirds of the state. . . . Non-competes are never negotiable even when hiring a lawyer to review and negotiate the contract. Hospitals refused to negotiate on the majority of the contract citing it is [an] across the board provision that cannot be altered.
• I'm a worker that has had to consider whether to take a job that requires signing a no-compete agreement . . . . Several times in my career, after weeks of interviewing and salary negotiation, I've found myself facing a required no-compete agreement that would drastically limit my future career options and negotiating power. Several times I've accepted these agreements because I had already turned down competing offers and found myself with limited options.
• I'm a project manager at an Interior Design & Home Staging company in Manhattan; we're the largest staging company on the East Coast. After I accepted my job offer and went in to file paperwork, I was very briefly walked through what this non-compete means (the details were not made entirely clear; I believe they left it intentionally murky) and it was buried deep in the new employee rules and regulations packet I needed to read and sign at my onboarding. I personally am very against these agreements because, as mine states, I cannot work with “a competing staging company” or for any of the clients of my current company. Again, we're the largest staging firm on the east coast and have a lot of clients (we do over 100 stagings per year). Essentially, I am completely shut out of working in the industry in NYC as there are only a handful of other staging companies that can pay me a living wage to do so.
• You might say that we might be able to negotiate out of a non-compete in our contract, but that is simply not true. In my hospital, I was already established, owning a house and having kids in school in a spouse in a career when the Hospital came forward and sit on my next contract renewal that I had no choice, but to sign a noncompete. They had me over a barrel. At my next contract negotiation, I try to negotiate out of the noncompete, with less salary or less benefits, and it was a nonstarter. There is zero tolerance for negotiating out of the noncompete.
• At the end of 2018, as a Manager at a small business (150 employees) in a niche technology industry, I was offered shares in our company as we were acquired by a Private Equity firm. . . . I worked with a company-provided attorney on an Employment Agreement. This agreement offered a 6-month severance with a 1-year non-compete period, which I negotiated down to a 6-month non-compete to match the severance period. Later that month, I was sent an additional, previously unseen 120-page Share Agreement that governed how I would vest the shares I had earned. I didn't realize it at the time, but buried toward the end of this document was another non-compete that had a much longer timeframe dictated—1 year from when I no longer held any shares. As it would potentially take up to 6 years for the company to sell again, that meant an incredibly long and indefinite sounding time period. I was given only one business day to review this agreement, and was sent a signature packet the following day. I honestly thought I was signing my Employment Agreement negotiated with a company attorney, not the share agreement that neither myself nor the attorney had reviewed, and which I had only received the day prior.
• Desperate to obtain an entry level job in the Accounting field in which I am currently obtaining my Associate's degree, I was presented with an offer of employment and a non-compete agreement contract to sign. Because I needed to pay rent, I signed it.
• On the first day of my husband's employment, without prior notice, an extensive 2 year non-compete clause was put in his employment contract and while it was noted within the clause he could seek counsel, when you are in the middle of your first day of work it's not practical. In addition, for most people, if it is your first experience with a non-compete, you likely do not have the funds to pay a $750 per hour lawyer to advise and negotiate on your behalf, nor realize the possible long-term consequences.
Many commenters agreed with the Commission's preliminarily finding that employers generally have considerable labor market power. Even commenters opposing the NPRM did not generally dispute the notion that there is unequal bargaining power between employers and workers. Many workers stated that non-competes are pervasive in their industry, meaning they could not find a job without one. Many commenters stated that high wages or skills do not automatically translate into more bargaining power or sufficiently mitigate the harms from non-competes, especially in concentrated markets or markets where so many employers use non-competes that workers effectively have no choice but to sign them. Commenters also said that underrepresented groups may have even less bargaining power to negotiate non-competes and are less likely to have the resources for litigation, which could have an increased deterrent effect on worker mobility.
Hundreds of commenters stated that workers are rarely, if ever, able to negotiate their non-competes because non-competes are typically presented in a take-it-or-leave-it fashion. These comments spanned both lower-wage workers and workers in high-wage industries.
Confirming the research described in this Part IV.B.2.b.i, many workers—including highly paid and highly skilled workers—stated that they did not receive notice that they would be required to sign a non-compete until after accepting a job offer. Some workers said they were told of the non-compete after accepting the job but before starting work. Many workers who described when they were notified of a non-compete said it was on their first day of work or even later. Many workers stated that they were required to sign their non-compete after a merger or acquisition—
Many workers also stated that non-competes are often hidden or obscured. Several workers said their non-compete was buried in other paperwork or confusingly worded or vague. Some commenters stated that their employer refused to allow them to have a copy of their non-compete. Many workers said their employers gave them misleading or incorrect information about the terms or enforcement of non-competes. Each of the above categories included not only workers from low-wage industries, but also workers from high-wage industries. While these practices appear to be commonplace, based on the comments, the Commission also notes that even workers who knew about non-competes before accepting the job offer—and who did not report being misled about the non-compete—did not report bargaining or negotiating over it.
Only a small number of workers reported any negotiating over non-competes. For example, a sales worker said they were able to negotiate a non-compete, though that worker still supported the proposed rule. A surgeon group stated hospitals were willing to negotiate over non-competes, but that hospitals use the non-competes as a negotiating tactic to drive down surgeon salaries.
Few workers who submitted comments reported being compensated for signing a non-compete. Among those workers who did report receiving compensation, most still said they considered their non-competes to be exploitative or coercive. For example, some workers said they were laid off and then required to sign a non-compete as a condition for receiving severance. A few workers said their employer had threatened to withhold their commissions and/or pay on departure if they did not sign a non-compete. One worker reported never receiving the compensation associated with a non-compete, because they were terminated two months after signing.
In addition, the Commission finds that employers frequently impose non-competes even when they are unenforceable under State law. An economist suggested that non-competes may be used in States in which they are unenforceable because the employer hopes the State's policy might change, or the employer might be able to forum-shop to apply the law of another jurisdiction more favorable to non-competes. Some commenters stated that firms may remind workers they are subject to a non-compete upon departure even when those non-competes are unenforceable because they hope that workers and competitors will abide by them.
These comments that employers often use unenforceable non-competes are supported by research finding that employers frequently use non-competes even when they are unenforceable under State law.
A far smaller number of commenters—a group that included many businesses and trade organizations, and very few workers—argued that non-competes were not exploitative or coercive. An industry organization said non-competes are understandable to a layperson with respect to their geographic scope, time in effect, and industry to which they apply, while an alternative trade secret case would be more complex. But even if workers understand the basic terms of non-competes, that does not alter the Commission's core concern that non-competes are exploitative and coercive because they take advantage of unequal bargaining power between employers and workers and force workers to stay in jobs they want to leave or otherwise bear significant harms or costs. It also does not alter the Commission's concern that non-competes tend to negatively affect competitive conditions. Moreover, the Commission notes that the available evidence indicates that many workers are not aware of the applicable law governing non-competes or their rights under those laws.
A few commenters stated that unequal bargaining power does not constitute an unfair method of competition. In response, the Commission notes that it does not find that unequal bargaining power itself is an unfair method of competition; rather, unequal bargaining power informs its analysis of exploitation and coercion.
The comment record indicates that while some highly paid workers may seek the assistance of counsel when negotiating non-competes, many do not. Commenters did not present studies or other quantitative evidence that undermines the finding in Starr, Prescott, & Bishara that less than 8% of workers seek assistance of counsel in connection with non-competes.
Overall, the comments provide strong support for the Commission's finding that, with respect to workers other than senior executives, employers almost always unilaterally impose non-competes—exploiting their superior bargaining power to significantly restrict workers' abilities to leave for better jobs or engage in competitive activity.
The Commission finds that non-competes are exploitative and coercive because they force workers to either stay in jobs they want to leave or bear other significant harms and costs, such as leaving the workforce or their field for a period of time; relocating out of their area; or violating the non-compete and facing the risk of expensive and protracted litigation. In addition, the Commission finds non-competes exert a powerful
The comment record provides strong support for this finding. Many workers submitted comments supportive of the Commission's preliminary finding that non-competes coerce workers into remaining in their current jobs. Many workers reported staying in their jobs because they feared harm to their careers if they were forced out of their field; feared having to relocate or endure a lengthy commute due to a non-compete; or feared their non-competes would cause them to be unemployed if they left. Several workers reported they were unable to take a specific desired job because of a non-compete. Many workers recounted how non-competes trapped them in jobs with poor working conditions or where they were subject to illegal conduct, including sexual harassment.
Illustrative examples of the comments the Commission received include the following:
• I am a journalist who has been forced to move across the country three times, and leave my field entirely for one year, in order to comply with stringent non-compete agreements. . . . In [one] situation, I was stuck working for abusive management who fostered a toxic and abusive workplace, and I had to work there for more than a year until I could find a job in another city entirely because they had threatened to sue me under the non-compete if I left and worked for another local station. . . . [E]ven if these clauses are unenforceable, as we've all heard before, who can afford the legal representation to go up against a corporation and their lawyers when the lawsuit threat comes? My life would have been very different if I weren't trapped by non-competes at points in my career.
• As a veterinarian I support the elimination of non-compete agreements. In our profession they still are overwhelmingly the normal expectation with contracts. . . . [C]ompanies use the fear of litigation to enforce them. As veterinary medicine very quickly becomes more corporate owned, basically they pit us as a singular employee against large corporations that have substantial means both financially and legally. No reasonable employee wants to take on that battle or even can financially take on that battle. So regardless if the clauses are `unenforceable' they are enforced via intimidation. . . . When [my] job was a terrible fit and my boss ultimately ended up `not renewing my contract' I was still left with a noncompete. This basically eliminated my ability to work within a reasonable distance of our home. I ended up commuting an hour and 15 minutes one way for 10 months until my husband, myself, and my very young child were able to move closer to my new job. While it was likely legally unreasonable in nature, I did not have the resources financially to even consider the legal battle that would have had to happen for reconsideration and I desperately needed an income to continue to pay the student debt that comes with being a young doctor. Furthermore I had a baby that needed my focus as well.
• I was fired unjustly 11/2021 for declining the Covid vaccine. My medical and religious exemptions were both denied. In addition to this, I was required by my former employer contract to abide by the two-year 10 mile restrictive covenant. This greatly hindered my ability to find employment, and I was out of work for approximately three months. I could only find part-time work for a fraction of my former salary. Had I not had the noncompete clause, I could have found a full-time job almost immediately.
• Unfortunately, the average dental school graduate has nearly $300,000 in student loan debt, and most new dentists are unable to make their practice-ownership dreams a reality immediately after residency. Thus, we rely on entry-level associate dentist positions to gain experience, pay off debt, and become fiscally/professionally prepared to become practice owners. Much to my dismay, upon interviewing for my first associate dentist position, I quickly realized how non-competes are being used in the dental profession to prevent vulnerable young dentists like myself from taking the next step in our careers. . . . Although dental associate positions come with relatively high compensation, it doesn't make this issue any less problematic.
• My daughter had an inter-state non-compete enforced as a minimum wage medical scribe. Originally she was working with a medical scribe company in Indiana prior to Covid. Due to COVID and graduating from college she then moved to our home in Oregon. She applied for a medical scribe job in Oregon with a company that did not provide any scribe services in Indiana. But her original scribe company had 1 “office” they were providing scribe services to in Salem, Oregon. My daughter had applied with the local scribe company to provide services but when examined further found that her original scribe company from Indiana was going to enforce a $5000 non-compete buy-out fee on her to provide the services in Salem, Oregon that were within the sphere of restriction for her “new” local scribe opportunity.
Many commenters explained that non-competes forced them to relocate and described the toll the relocation took on their families. Other commenters stated that their families have been forced to live apart, or they had been separated from elderly relatives, due to a non-compete forcing the relocation of one of the family members. Many commenters described how long commutes undertaken to avoid non-competes increased transportation costs and caused the worker to lose precious time with their families.
The comment record bolsters the Commission's finding that employers wield non-competes to coerce and exploit workers into refraining from competitive activity even where non-competes are unenforceable. Many workers explained that they—and others in their industry—abided by non-competes, even where they believed the non-compete was overbroad and likely unenforceable. According to a law firm specializing in executive compensation, even workers who can afford counsel may be unwilling to mount a long and uncertain legal battle to challenge a non-compete. The firm said employers almost always have deeper pockets and more access to counsel than individual workers, making workers more reluctant to litigate. Commenters further stated that employers may be able to deduct litigation costs as a business expense, giving them the wherewithal to enforce their non-competes.
Many workers with non-competes stated that they feared legal action from their employer or enormous legal fees if they left their current job, and most of those workers said they could not afford litigation. Workers also stated that they are reluctant to engage in litigation against an employer because it would harm their reputation in their industry.
Many workers reported being threatened with litigation over a non-
Commenters asserted that employers have several advantages in litigation, further increasing the risk of challenging a non-compete. A commenter said even an extremely overbroad non-compete may be enforceable because a court can modify it to reduce its scope or duration. An employment attorney said employers who use overbroad non-competes to stifle competition suffer few if any negative consequences for doing so. The employment attorney further said that most employers do well even in a legal regime that nominally disfavors non-competes, due to the chilling effect of the threat of litigation. One researcher cited in the NPRM stated that non-competes have a powerful chilling effect because State laws generally do not prohibit employers from requiring employees to sign overbroad non-competes. Accordingly, the researcher recommended that non-competes be banned rather than restricted in scope, thereby preventing the possibility of lawsuits (and the threat thereof).
No commenters submitted studies or empirical evidence to contradict or otherwise call into question the research cited in the NPRM finding employers frequently use non-competes even when they are unenforceable under State law. Many commenters said they perceived non-competes to be a tool used to intimidate workers, and others specifically said they had been intimidated when their employers took legal action against other workers who left. These comments spanned workers in both lower-wage and high-wage industries.
The comments reflected that fields with high compensation levels were not immune from coercion and exploitation, and that, to the contrary, specialization can increase employers' ability to coerce and exploit workers. For example, some commenters said highly trained and/or specialized workers face heightened challenges in finding a job that does not violate a non-compete without relocating or become entirely unemployable, given the smaller number of such specialized jobs available. One commenter said that many workers are compensated highly because they are in a small field or have a niche skillset, meaning non-competes significantly limit their ability to find another job in their field. Some commenters in professions requiring advanced education also submitted comments stating that significant student loan debt decreased their bargaining power or increased the financial risk of attempting to change jobs. An employment law firm stated that highly paid or highly skilled workers in roles that are not limited to a single industry or business, such as finance or human resources, are more likely to be able to find employment in another industry, while those with training and expertise in a particular industry or type of business are at a greater risk of unemployment. Some medical organizations and others pointed out that non-competes can be particularly exploitative and coercive for professions such as physicians that require State licenses, credentials, and insurance, making relocation even more difficult.
A far smaller number of commenters claimed non-competes are not exploitative or coercive and do not trap workers in jobs or force workers to bear significant harms or costs. Several commenters argued that, because non-competes are often not exploitative and coercive at the time of contracting, they are also not exploitative and coercive at the time workers seek to leave their jobs. According to these commenters, to the extent a non-compete is bargained for and fairly compensated, that same non-compete does not become exploitative and coercive at the time of departure. In response, the Commission notes that commenters overwhelmingly reported workers rarely bargain in connection with, or receive compensation for, non-competes,
Some business and business association commenters contended that workers with higher earnings can more easily forgo wages to wait out non-competes, and thus do not feel forced to stay in their jobs. These commenters also argued that non-competes for these workers are often tied to equity or severance, which the worker can choose to forego if they want to compete. These comments are contrary to the extensive comment record indicating that even workers with higher earnings cannot afford to forgo compensation and feel forced to stay in jobs they want to leave due to non-competes. To the extent any such individual workers bargained for or received compensation for a non-compete, the Commission still finds that such non-competes are unfair methods of competition for the independent reason that they are restrictive and exclusionary conduct that tends to negatively affect competitive conditions.
Overall, the comments provide strong support for the Commission's finding that non-competes are exploitative and coercive because they trap workers in jobs or force them to bear significant harms and costs.
For the foregoing reasons, the Commission finds that non-competes with workers other than senior executives are exploitative and coercive and thus facially unfair under section 5.
Based on the Commission's expertise and after careful review of the rulemaking record, including the empirical research and the public comments, the Commission finds that non-competes tend to negatively affect competitive conditions in labor markets for the reasons explained in this Part IV.B.3.a. (As explained in Part IV.B.3.b, the Commission further finds that non-competes tend to negatively affect competitive conditions in markets for products and services.)
As explained in Part II.F, the legal standard for an unfair method of competition under section 5 requires only a tendency to negatively affect competitive conditions. The inquiry does not turn on whether the conduct directly caused actual harm in a specific instance. Here, the tendency of non-competes to impair competition is clear from their nature and function. In any event, the evidence confirms that non-competes do in fact have a negative effect on competitive conditions.
The Commission turns now to the significant evidence of harm to competition in labor markets from non-competes, including evidence of suppressed labor mobility, suppressed earnings, and reduced job quality.
The Commission finds that non-competes tend to negatively affect competitive conditions in labor markets by inhibiting efficient matching between workers and employers.
Labor markets function by matching workers and employers. In a competitive labor market, workers compete for jobs by offering their skills and time (
Thus, a key component of a competitive labor market is voluntary labor mobility. Choice—the ability of market participants to satisfy their preferences where possible—facilitates competition. In the labor market, voluntary labor mobility reflects both the choices or preferences of workers and that of rival competitors.
However, non-competes introduce a major friction that tends to impair the competitive functioning of labor markets. Non-competes inhibit the efficient matching between workers and employers via the competitive process because, even if a competing employer offers a better job and the worker wants to accept that better job, the non-compete will prevent the worker from accepting it if the new job is within the scope of the non-compete (or if the worker is unsure or afraid it may be). Meanwhile, the employer who would like to hire the worker is prevented from competing to attract that talent. The result is less competition among employers for the worker's services and less competition among workers for available jobs. Since the worker is prevented from taking many jobs that would otherwise be available, the worker may decide not to look for a job at all. Or the worker may enter the labor market but take a job in which they are less productive, such as when a non-compete forces a worker to leave their field of expertise and training.
In this way, non-competes frustrate competitive processes in labor markets. In competitive markets, the “unrestrained interaction of competitive forces” yields a variety of benefits such as lower prices for consumers, better wages and working conditions for workers, and higher quality products.
The Commission notes that the actual effect of any one individual non-compete on the overall level of competition in a particular labor market may be marginal or impossible to discern statistically. However, as explained in Part I.B.2, non-competes are prevalent across the U.S. labor force. The empirical literature and other record evidence discussed in this section reflect that non-competes, in the aggregate, negatively affect competitive conditions in labor markets—resulting in harm not only to workers subject to non-competes and the employers seeking to hire them, but also workers and employers who lack non-competes.
The Commission finds that evidence of the effects of non-competes on workers' labor mobility and earnings is sufficient to support its finding that non-competes tend to negatively affect competitive conditions in labor markets.
The Commission's findings relating to labor mobility and earnings are principally based on the empirical evidence described in Parts IV.B.3.a.i and ii. However, the comments provide strong qualitative evidence that bolsters these findings. Furthermore, the Commission notes that the legal standard for an unfair method of competition under section 5 requires only a tendency to negatively affect competitive conditions; empirical evidence of actual harm is not necessary to establish that conduct is an unfair method of competition. In the case of non-competes, however, there is extensive empirical evidence, as well as extensive corroborating public comments, that non-competes negatively affect competitive conditions in labor markets.
The Commission finds that non-competes tend to negatively affect competitive conditions in labor markets by suppressing labor mobility, which inhibits efficient matching between workers and employers. The evidence indicates that non-competes reduce labor mobility. Several empirical studies find that non-competes limit the movement of workers between firms and reduce the pool of labor available to existing employers and potential entrants.
In the NPRM, the Commission described the empirical research on non-competes and labor mobility.
Several empirical studies find that non-competes reduce labor mobility. Some of these studies analyze the effects of non-competes on labor mobility across the labor force.
A study by Johnson, Lavetti, and Lipsitz examined the impact on labor mobility of all legal changes in the enforceability of non-competes from 1991 to 2014 across the entire labor force.
Evan Starr's study comparing workers in occupations that use non-competes at a high versus low rate finds that a State moving from mean enforceability to no enforceability would cause a decrease in employee tenure for workers in high-use occupations of 8.2%, compared with those in low-use occupations. Tenure in this study serves as a proxy for mobility, since tenure is the absence of prior mobility.
Starr, Prescott, and Bishara's study of non-compete use likewise finds that having a non-compete was associated with a 35% decrease in the likelihood that a worker would leave for a competitor.
Other studies analyze how non-competes affect the labor mobility of specific populations of workers. A study by Jessica Jeffers finds that decreases in non-compete enforceability were associated with a substantial increase in departure rates of workers, especially for other employers in the same industry.
In addition, two recent studies examined subgroups of the population that were affected by State law changes and find major effects on those populations' labor force mobility. Balasubramanian et al., in 2022, focused on Hawaii's ban of non-competes for high-tech workers and find that the ban increased mobility by 12.5%.
The Commission's finding that non-competes suppress labor mobility is principally based on the empirical evidence described in this Part IV.B.3.a.i. However, the comments provide strong qualitative evidence that bolsters this finding.
Many commenters agreed with the Commission's preliminary finding that non-competes suppress labor mobility and stated that this reduction in labor mobility leads to less labor market competition and poorer wages and working conditions.
In response to the NPRM's discussion of this literature, some commenters questioned the adequacy of the studies. For example, one commenter stated that the available research is either limited to specific sectors of the economy, limited geographically, or limited by small sample sizes. Some commenters claimed the empirical research lacked appropriate counterfactuals.
The Commission acknowledges that some of the studies focus on specific industries or specific geographies, and that the studies vary in the methodologies the authors rely on. These arguments do not undermine the utility of the studies, particularly given that they all find that non-competes reduce labor mobility. Moreover, the Commission finds that each of the studies discussed in this Part IV.B.3.a.i conduct their analyses against appropriate counterfactuals. And while there may be some variation in the magnitude of the effect on mobility among industries, several of the empirical studies find economy-wide effects. That evidence shows that non-competes restrict the movement of workers to a significant degree.
Additionally, the record is replete with examples of commenters who recounted personal stories that accord with the empirical literature. The Commission received comments from several thousand individual workers stating that their mobility is or has been restricted by a non-compete. While some commenters who opposed the proposed rule disputed that non-competes prevent workers from finding other jobs in their industry, the Commission finds the weight of the evidence clearly demonstrates a significant effect on labor mobility.
The Commission further notes that many commenters' submissions substantiated its finding that non-competes can have an
Some commenters who generally opposed the rule questioned the virtue of labor mobility, arguing that when colleagues leave, remaining workers can experience increased workloads or harm to their employer. However, this comment ignores the benefits that will also accrue from those same firms having more ready access to incoming potential colleagues as well. The Commission also notes that unfair conduct cannot be justified on the basis that it provides the firm undertaking the conduct with pecuniary benefits.
Some commenters argued labor mobility has generally been increasing in the U.S. labor market. Setting aside whether this is true, it is not probative of whether the practice of using non-competes reduces labor mobility or negatively affects labor market competition.
For these reasons, the empirical evidence that non-competes suppress labor mobility supports the Commission's finding that non-competes tend to negatively affect competitive conditions in labor markets.
The Commission finds that non-competes suppress workers' earnings as a result, in part, of decreased labor mobility, supporting the Commission's finding that non-competes tend to negatively affect competitive conditions in labor markets. As the NPRM explained, many studies find increased enforceability of non-competes reduces earnings for workers across the labor market generally; for specific types of workers; and even for workers not subject to non-competes.
A study conducted by Johnson, Lavetti, and Lipsitz finds that non-competes limit workers' ability to leverage favorable labor markets to receive greater pay.
The same study also finds that non-competes increase racial and gender wage gaps by disproportionately suppressing the wages of women and non-White workers. While the study estimates that earnings of White men would increase substantially if a nationwide ban on non-competes is enacted, the comparable earnings increase for workers in other demographic groups would be up to twice as large, depending on the characteristics of the group.
Furthermore, a study conducted by Evan Starr estimates that earnings fall by about 4% where a State shifts its policy from non-enforcement of non-competes to a higher level of enforceability.
Two additional studies analyze effects of non-competes on earnings for specific populations of workers. A study conducted by Lipsitz and Starr focuses on a natural experiment in Oregon, where non-competes were banned for hourly workers with relatively low earnings. The study estimates that when Oregon stopped enforcing non-competes for hourly workers, their wages increased by 2-3% relative to workers in States that did not experience legal changes. The study also finds a greater effect (4.6%) on workers in occupations that used non-competes at a relatively high rate.
A study by Balasubramanian et al. focuses on a natural experiment in Hawaii, which banned non-competes for high-tech workers in 2015. The study finds earnings of new hires increased by about 4% after the ban, relative to earnings in other States without bans.
In addition to this research, which shows that increased enforceability of
The Johnson, Lavetti, and Lipsitz study, in a separate analysis, isolates the impact of a State's enforceability policy on workers not directly affected by that policy to demonstrate that non-competes affect not just the workers subject to non-competes, but the broader labor market as well. The study finds that increases in non-compete enforceability in one State have negative impacts on workers' earnings in bordering States, and that the effects are nearly as large as the effects in the State in which enforceability changed (but taper off as the distance to the bordering State increases).
The second of these studies, a study conducted by Starr, Frake, and Agarwal, analyzed workers without non-competes who worked in States and industries in which non-competes were used at a high rate.
The authors show that the reduction in earnings (and in labor mobility) is due to a reduction in the rate of job offers. Individuals in State/industry combinations that use non-competes at a high rate do not receive job offers as frequently as individuals in State/industry combinations in which non-competes are not frequently used.
Given some methodological limitations of this study, the Commission views it as supporting the other evidence that non-competes have negative spillover effects on earnings for workers without non-competes and reduce labor mobility. Namely, the research design relies on cross-sectional differences in enforceability of non-competes. Although this study also examines the use of non-competes, it does not compare individuals who are bound by non-competes to individuals who are not. Instead, it examines the rate of use across industries and States, and therefore avoids the statistical biases inherent in studies which compare individuals with and without non-competes. The authors also employ tests to increase confidence in the causal interpretation of these results, but they cannot conclusively rule out explanations outside of the scope of their data.
Several additional studies examine the association between non-compete use—rather than enforceability—and earnings. For the reasons described in Part IV.A.2, the Commission finds that these studies are less credible in measuring how non-competes affect earnings, and accordingly the Commission gives these studies minimal weight.
In one such study, Starr, Prescott, and Bishara examine survey results and find that non-compete use is associated with 6.6% to 11% higher earnings.
Because these studies merely reflect correlation and are unlikely to reflect causation, the Commission gives them little weight. The NPRM noted that the Lavetti, Simon, and White physician study partially mitigates this methodological flaw by comparing earnings effects in a high- versus a low-enforceability State (Illinois versus California). However, at best, this comparison is a cross-sectional comparison with a minimally small number of States being compared. The study does not consider changes in non-compete enforceability over time. Therefore, it is impossible to disentangle underlying differences in those two States from the effects of non-compete enforceability. The Commission accordingly gives this study, like the other studies reliant on comparisons of populations using non-competes and not using non-competes, little weight, though the shortcoming is slightly mitigated in the case of this study. While this study is specific to physicians, the Commission nonetheless finds that studies employing stronger methodologies (especially studies of
The Commission's finding that non-competes suppress earnings is principally based on the empirical evidence described in this Part IV.B.3.a.ii. However, the comments provide strong qualitative evidence that bolsters this finding.
The Commission received thousands of comments from workers describing how non-competes suppressed their earnings. These commenters spanned a wide variety of industries, hailed from across the U.S., and recounted a common experience: a non-compete prevented them from earning more. Illustrative examples of these comments include the following:
• I worked at a TV station. A corporation owned us and forced me to sign a yearly non-compete in order to remain in my position. After a few years, I was offered a management job with a much bigger title and much more money. . . . However, the corporation that owned us wouldn't even talk about letting me out of the non-compete. They wouldn't even discuss a settlement. They totally refused to allow me to pursue a much higher salary and a much higher position, no matter what was offered. I was forced to choose between staying in my current job, and not being able to improve my job or money, or being unemployed for 6 months.
• I have been subject to a non-compete for 11 years in aggregate as a physician. Because of my non-compete, I am unable to take a position with another organization without having to drive much farther outside of my non-compete stipulated geographic restrictions (which would add to the time that I am away from my family, and costs more in fuel and vehicle maintenance). Because of my non-compete, I haven't had a raise in 6 years, because I can't negotiate with my employer because I have no bargaining position to negotiate from if I don't have options of alternate employment within the restrictions of my non-compete.
• I recently received two job offers with better compensation, but I had my non-compete reviewed by an attorney and learned that it would open myself up to a significant lawsuit and potential fines. I most likely have to sit out a year and either work completely outside my field where I have advanced degrees or not work at all. Since I am the primary breadwinner, this is not financially possible for my family, so I have to stick with my current employer who has not given me a pay increase in 2 years.
• I am a Certified Nurse Practitioner and signed [a non-compete]. I live in Minnesota and would be required to travel one hour one way in order to fulfill [the] agreement. . . . My employer increased my responsibilities (on-call hours added) without additional pay using vague language in my binding agreement. I would have to hire a lawyer and spend thousands of dollars to file a lawsuit to get the agreement releasing me. . . . My employer took advantage of my binding agreement and did not increase my [Relative Value Unit] rate in 5 years for my or other Nurse Practitioners in our organization.
• I was just starting out in my career when I finally got a part time job in my field of geology. Unfortunately, it didn't last long and I was let go. But because of a non compete agreement I had to sign I couldn't take another job in my field even though I had a good lead on one. Instead I had to take a job as a waitress making less than minimum wage.
• I work for an IT company, low-level employee just above minimum wage, and I had to sign one of these to get the job even though I don't know any knowledge above what someone could learn in 10 or 15 hours on YouTube, yet I still had to sign this which makes it so I can't compete . . . if they offered me better pay.
• I began working for my employer 10 years ago as a very young and inexperienced single mother. I desperately needed a job that could pay more than minimum wage, and I eagerly accepted my position and non-compete status. I have now been working at almost the same rate of pay (as raises are not readily given to us regardless of recessions or cost of living increases)—for a DECADE. My children are approaching college age, and I will absolutely need a higher income to help fund their educations.
• I am in the laboratory medicine field and was laid off from a job as an implementation rep for an instrument vendor. Other companies were the competition, and I was held to a non-compete. This caused me to go from a six figure salary with great benefits back to the hospital making barely 60k as a single mother with twins and no emergency fund saved! I later went into the UV disinfection field and developed a tremendous amount of knowledge regarding minimizing the spread of infections in hospitals (pre-covid). After 5 years, I was laid off and prevented from continuing in this niche field that I had spent so much time developing a skillset and statistics within. I was only given a 2 week severance (along with a reminder of legal action if I worked for the competition). Companies use this as a bully tactic!
In addition to receiving thousands of comments recounting personal stories of non-competes stymieing the commenters' ability to get a better-paying job or a raise, many commenters also described how, over the long term, non-competes can lower wages and diminish career prospects for workers forced to sit out of the market or start over in a new field. The Commission also received numerous comments stating that non-competes exacerbate wage gaps based on gender and race, including by decreasing entrepreneurship and wages to a greater extent for women and people of color and by giving firms more power to engage in wage discrimination.
With respect to the empirical literature, numerous commenters agreed that there is a wealth of empirical evidence to support the Commission's preliminary finding that, by inhibiting efficient matching between workers and employers, the use of non-competes is harming workers by suppressing their earnings. In addition to the literature discussed in the NPRM and in this final rule, some commenters pointed to a 2016 report from the Treasury Department that examines the correlation between non-compete enforceability and both earnings and earnings growth at the State level. The Treasury report finds that a one-standard-deviation increase in State-level enforceability of non-competes is correlated with 1.38% to 1.86% lower earnings, which can be found in both lower earnings upon starting a job and lower earnings growth.
Some commenters opposing the rule argued that studies of non-compete use, including the studies described in this Part IV.B.3.a.ii, show a positive association between non-compete use and earnings, especially when early notice of non-competes is provided,
Some commenters opposing the rule stated that the most comprehensive study of the earnings effects of non-competes (the Johnson, Lavetti, and Lipsitz study described in this Part IV.B.3.a.ii) examines only relatively incremental changes in laws governing the enforceability of non-competes (
That said, in the regulatory impact analysis, the Commission does not extrapolate from the incremental changes observed in these studies with respect to earnings effects.
A commenter argued that the Johnson, Lavetti, and Lipsitz dataset is outdated because it examines enforceability between 1991 and 2014. In response, the Commission finds that while the enforceability measures contained in that dataset do not perfectly reflect current enforceability due to changes in State law in the intervening several years, the measures still reflect the impacts of non-compete enforceability on economic outcomes, and likely still have strong predictive power.
Some commenters opposing the rule asserted that the overall competitiveness of U.S. labor markets undermines the argument that workers suffer from non-competes. In response, the Commission notes that a range of factors have weakened competition in labor markets.
Some commenters opposing the rule pointed to academic writings, including a summary of the research by an FTC economist writing in his personal capacity in 2019, stating that there was limited evidence on the effects of such clauses. The Commission finds that these writings are generally outdated and disagrees with them. As the various explanations of the empirical research in Parts IV.B and IV.C illustrate, much of the strongest evidence on the effects of non-competes has been published in recent years. The Commission notes further that Evan Starr, one expert who voiced concerns over the state of the evidence in the past, submitted a comment that was broadly supportive of the interpretation of the evidence in the NPRM and of the proposed rule.
Other comments opposing the rule stated that the heterogeneity of the impact of a non-compete ban on earnings undermined the Commission's preliminary finding regarding the effects of non-competes on earnings. These commenters asked whether the population-wide average effects noted in certain studies apply across the workforce or only to certain individuals (
In response to these comments, the Commission finds that, while estimates of the magnitude of the effect of non-competes on earnings vary to some extent across groups of workers, the effects are directionally and qualitatively similar across groups. For example, while Balasubramanian et al. do not report a table with average earnings for workers in their study, workers in the high tech jobs studied tend to be relatively highly paid, and the study finds non-competes suppress these workers' earnings.
Additionally, Johnson, Lavetti, and Lipsitz's study of workers across the economy shows that, while college-educated workers and workers in occupations and industries in which non-competes are used at a high rate experience relatively larger adverse effects on their earnings from non-compete enforceability, the estimated effect of increased enforceability on other workers is still negative (albeit statistically insignificant in this study).
A commenter that opposed the NPRM asserted that a categorical ban could decrease wages for highly paid workers, arguing that such workers could negotiate higher wages in exchange for the non-compete that they would lose with a ban. This speculative assertion is belied by the comment record, which indicates that the highly paid, highly skilled workers who are not senior
Similarly, commenters opposing the rule questioned whether earnings effects merely result from firms hiring different types of workers after changes in non-compete enforceability (for example, workers with different levels of experience or education). In response to these comments, the Commission first notes that the studies find adverse impacts across the labor force. Therefore, even if a different mix of types of workers were hired due to non-compete enforceability, the evidence shows workers' wages are suppressed across the labor force when non-competes are more enforceable. Additionally, the Commission notes that the study by Lipsitz and Starr compares the earnings growth of individual workers before and after the legal change in Oregon, showing that earnings growth increased after the non-compete ban. This provides some evidence that the effects observed in the literature are not simply due to substitution, since individual workers' earnings trajectories would not be changed if all the effects were simply due to firms substituting one type of worker for another.
Some commenters opposing the rule asserted that enforceability indices are likely measured with substantial error. These commenters argue that the indices are based on qualitative analyses of State laws and not data on how frequently non-competes are actually enforced or the results of these enforcement cases. The Commission finds the enforceability indices are sufficiently reliable, because they are generated through careful analysis of State law that takes into account variation in legal enforceability along multiple dimensions.
Some commenters opposing the rule asserted that Hawaii's prohibition of non-competes in the technology industry may not have covered the workers claimed (in particular, omitting workers in the broadcast industry).
The Commission finds the study of Hawaii's non-compete ban to be informative, despite these limitations. First, any workers omitted from coverage by the statute, but considered as affected in the study, would lead to a phenomenon known as “attenuation bias,” which causes estimated effects to underestimate the true impact.
Some commenters opposing the rule argued that the impact of Oregon banning non-competes for low-wage workers may have been limited because the law did not affect existing non-competes; because non-competes were already disfavored in Oregon before the law change; and because the law included multiple carve-outs. Commenters also argued the negative effects on earnings found in Oregon may have been confounded by the Great Recession.
The Commission finds that those concerns are not a compelling reason to discard the study. The study carefully examines multiple comparisons of workers within Oregon and across States. The results therefore cannot be explained by a differential response of Oregon to the Great Recession, a differential response of hourly workers to the Great Recession, or even a differential response of hourly workers in Oregon to the Great Recession. The Commission also does not believe that the study is undermined because the law did not affect existing non-competes and included multiple carve-outs, or because non-competes were disfavored in Oregon before the law changed. These factors likely mitigated the magnitude of the law's negative effect on earnings, rather than exaggerating it.
Some commenters opposing the rule argued that Johnson, Lavetti, and Lipsitz
Some healthcare businesses and trade organizations opposing the rule argued that, without non-competes, physician shortages would increase physicians' wages beyond what the commenters view as fair. The commenters provided no empirical evidence to support these assertions, and the Commission is unaware of any such evidence. Contrary to commenters' claim that the rule would increase physicians' earnings beyond a “fair” level, the weight of the evidence indicates that the final rule
One commenter opposing the rule criticized the analysis in the Johnson, Lavetti, and Lipsitz study, suggesting that data on where individuals live are not necessarily indicative of where individuals work, and that identified spillover effects may simply be due to cross-border commuters. The Commission disagrees, because, as noted, the study considers whether the workers are subject to enforceable non-competes based on their work location.
A commenter also argued that if the absence of non-competes helped workers, one would expect California, North Dakota, and Oklahoma to have the highest median incomes among all the States. The Commission believes this expectation is inapt. Given the evidence that non-competes suppress workers' earnings, earnings in California, North Dakota, and Oklahoma are likely higher than they would be if non-competes were enforceable, but there is no reason to expect they would necessarily be higher than all other States.
One commenter opposing the rule asserted that the Commission's citation of one study in the NPRM was insufficient to show that non-competes are directly tied to discriminatory behavior by employers, or that non-competes worsen racial or gender wage gaps. The Commission does not rest its finding in this final rule that non-competes tend to negatively affect competitive conditions on findings of increased discriminatory behavior or exacerbation of gender and wage gaps. The Commission merely notes that there are two empirical studies—described under “Evidence of suppressed earnings”—that find that non-competes do, in fact, exacerbate earnings gaps.
One commenter opposing the rule stated that closing racial and gender wage gaps may harm racial minorities and women if their wages were to fall in absolute terms. Another commenter argued that the proposed rule would reduce capital investment and output, which would decrease White male workers' wages. In response, the Commission notes that the study by Johnson, Lavetti, and Lipsitz shows that the impact of a decrease in non-compete enforceability on earnings is positive for workers in each of these groups.
The empirical evidence makes clear that, by restricting a worker's ability to leave their current job to work for a competitor or to start a competing business, non-competes reduce workers' earnings, supporting the Commission's finding that non-competes tend to negatively affect competitive conditions in labor markets.
In the NPRM, the Commission recognized that non-competes may also negatively affect working conditions,
In response, thousands of workers with non-competes described how, by frustrating these competitive processes, non-competes prevent them from escaping poor working conditions or demanding better working conditions. Based on the large number of comments the Commission received on this issue and the wide variety of negative and severe impacts commenters described, the Commission finds that, in addition to suppressing earnings, non-competes negatively affect working conditions for a significant number of workers.
The Commission finds that the effects of non-competes on labor mobility and workers' earnings are sufficient, standing alone, to support its finding that non-competes with workers other than senior executives tend to negatively affect competitive conditions in labor markets. However, the Commission believes its finding that non-competes are an unfair method of competition is further bolstered by this strong qualitative evidence related to non-competes degrading working conditions.
Numerous workers and worker advocacy organizations described how non-competes compel workers to endure jobs with poor working conditions. Illustrative examples of these comments include the following:
• In March 2018, I was fired from a job in local news for refusing to go into an unsafe situation. I'd recently received a letter from a man threatening to kidnap me. When my boss decided he would still send me out alone in the field, I fought him on it, lost, and was terminated. Three weeks later, I found out I was pregnant. Unable to work in my field because of a noncompete enforced even AFTER I was terminated, I had no choice but to apply for WIC and government assistance, and work at a retail job making half my previous salary. I wanted to work. I wanted money to support my child. I wanted money to move closer to home, to escape a domestic violence situation. My noncompete kept me in a horrible spot, and nearly cost me my life.
• I started my first job as a Nurse Practitioner in 2019. All positions I interviewed for required a non-compete. . . . In my case, I work for an employer that is hostile, discriminated against me during pregnancy and maternity leave and has raised his voice at me in meetings. He told me I was lucky to even have a job after becoming pregnant. I learned after starting at the practice that he has shown this pattern before with previous employees. I say this because all of these above-mentioned reasons are why I have the right to want to quit my job and move on. I desperately want to leave and start another job but I can't because of the non compete. I feel like a prisoner to my job. I feel depressed in my work conditions and I feel like I have no way out.
• I'm a barber and violated a non-compete about 6 months ago. . . . I worked for my previous employer for two years in a toxic environment. I told my employer how work was affecting my home life on more than one occasion and she did nothing. . . . How was I to know that I would be working in a toxic environment when I applied? So ultimately, I decided in order to be happy and make a living wage, I'd have no choice but to violate my non-compete. She came after me in no time flat. Now I'm paying legal fees and at risk of going to court and losing my job for 6 more months. . . . [I]f I'm working in poor working conditions, I should be able to work where I please. For two years, my job and employer affected my mental health. I chose to take anti-depressants after things got bad at work, upped my dosage twice as work
• I am a commissioned employee in the mortgage world, and I had a non-compete with my former company in Ohio. Near the end of my time at this company, they merged with another company and put the new company in charge of the sales staff. It was miserable. We started having issues, even with having basic supplies, and it went from just harming me to harming my ability to get business complete, which harms the consumer. I left and I was sued for a three year period. . . . I really do not feel that [non-competes] should be allowed. You are stuck at employers and they can treat you in any manner that they please because they know that they can make your life a living hell if you leave them.
• Like many new graduates in the medical field, I signed on with a company that made numerous empty promises. . . . What I was not prepared for, was the company's strategic increase in facilities in which I was to perform services under this contract. In the short span of 2 years, I did neurophysiological monitoring for 24 facilities . . . . When working conditions fell apart regardless of my requests for adequate sleep following 36 hours straight of working on call at my designated stroke hospital, time for meals or breaks within 18+ hour work days, and a reasonable travel distance within the area the company demanded I relocate to, I was met with threats from HR regarding my non-compete if I were to leave. . . . Working conditions became so intense, I was placed on migraine medications at the recommendations of my doctor and required three separate trips in the ER for medical conditions related to stress, inability to eat or drink while tied within tens of hours long surgeries . . . . Again I was met with threats from HR and now their legal team.
Many commenters stated that non-competes harm working conditions for lower-wage workers. However, there were many commenters in higher-wage jobs who also stated that non-competes harmed their working conditions. For example, numerous physicians explained that they were trapped in jobs with poor working conditions because of non-competes. Many of these physicians described how non-competes accelerate burnout in their profession by making it harder for workers to escape bad working conditions or demand better working conditions. Many commenters recounted how they left poor work environments but non-competes harmed them by forcing them to leave their field, move out of the area where they lived, or spend time and money defending themselves from legal action. Many commenters argued that prohibiting non-competes would increase workers' bargaining power and in turn incentivize employers to provide better work environments.
Workers in both high-wage and low-wage professions, as well as worker advocacy groups, stated that by diminishing workers' competitive alternatives, non-competes keep workers trapped in jobs where they experience dangerous, abusive, or toxic conditions; discrimination; sexual harassment; and other forms of harassment. These commenters also described how non-competes trap some workers in jobs where their employer commits wage and hour violations, such as wage theft, as employers that use non-competes can insulate themselves from the free and fair functioning of competitive markets and are thus more likely to be able to steal worker wages with impunity. Several commenters said they were unable to receive benefits because a non-compete rendered them unable to switch to a job with better benefits or rendered them unable to leave their job when their employer took their benefits away. A professional membership network for survivors of human trafficking explained that traffickers masquerading as legitimate businesses use non-competes to prevent trafficking victims from leaving.
Some workers and advocacy organizations stated that non-competes increase the potential for harm from retaliation. These commenters stated that restricting a worker's employment opportunities makes it even harder for workers to find new jobs after experiencing retaliation. These commenters argued that this discourages workers from reporting fraud, harassment, discrimination, or labor violations. A labor union commented that, by making it harder for workers to find new jobs, non-competes can deter unionization and chill activities protected by the National Labor Relations Act, including activities to address unsafe, unfair, or unsatisfactory working conditions. According to a trade organization of attorneys, whistleblower protections may come too late for a fired whistleblower who cannot obtain another job because of a non-compete. Several commenters provided survey or case evidence showing that workers who report sexual harassment, wage theft, or poor working conditions are frequently retaliated against, including by being fired.
Many workers described how, by limiting their ability to get out of harmful workplace environments, non-competes contributed to stress-related physical and mental health problems. Many commenters, particularly in the healthcare profession, stated that suicide is a major problem in their profession and described non-competes as one of the stressors, because non-competes make it harder to leave jobs with unsustainable demands, leaving workers feeling trapped.
While thousands of commenters described, often in personal terms, how non-competes have negatively affected their working conditions, the Commission received few comments from workers or worker advocates stating that non-competes improved working conditions. The few comments received stated that workers who remain with an employer can be harmed by departing and competing colleagues, via increased workloads or harm to their employer.
Taken together, these comments provide strong qualitative evidence that non-competes degrade working conditions, which supports the Commission's finding that non-competes tend to negatively affect competition in labor markets.
Based on the Commission's expertise and after careful review of the rulemaking record, including the empirical research and the public comments, the Commission finds that non-competes tend to negatively affect competitive conditions in markets for products and services by inhibiting new business formation and innovation.
New businesses are formed when new firms are founded by entrepreneurs or spun off from existing firms. New business formation increases competition by reducing concentration, bringing new ideas to market, and forcing incumbent firms to respond to new firms' ideas instead of stagnating. New businesses disproportionately create new jobs and are, as a group, more resilient to economic
Non-competes, however, tend to negatively affect competitive conditions in product and service markets by inhibiting new business formation in two ways. First, since many new businesses are formed by workers who leave their jobs to start firms in the same industry, non-competes reduce the number of new businesses that are formed in the first place.
Innovation refers to the process by which new ideas result in new products or services or improvements to existing products or services. Innovation may directly improve economic outcomes by increasing product quality or decreasing prices, and innovation by one firm may also prompt other firms to compete and improve their own products and services. However, non-competes tend to negatively affect competitive conditions in product and service markets by inhibiting innovation.
Non-competes tend to reduce innovation in three ways. First, non-competes prevent workers from starting businesses in which they can pursue innovative new ideas.
As described in Parts IV.B.3.b.i and ii, the Commission finds that the effects of non-competes on new business formation and innovation are sufficient to support its finding that non-competes tend to negatively affect competitive conditions in product and service markets. In addition, as described in Parts IV.B.3.b.iii and iv, the Commission believes this finding is further bolstered by evidence that non-competes increase concentration and consumer prices, as well as evidence that non-competes reduce product quality.
The Commission's findings relating to new business formation and innovation are principally based on the empirical evidence described in Parts IV.B.3.b.i and ii. However, the comments provide strong qualitative evidence that bolsters these findings. Furthermore, the Commission notes that the legal standard for an unfair method of competition under section 5 requires only a tendency to negatively affect competitive conditions; empirical evidence of actual harm is not necessary to establish that conduct is an unfair method of competition. In the case of non-competes, however, there is extensive empirical evidence, as well as extensive corroborating public comments, that non-competes negatively affect competitive conditions in product and service markets.
The Commission finds that non-competes tend to negatively affect competitive conditions in product and service markets by inhibiting new business formation. The weight of the empirical evidence establishes that when non-competes become more enforceable, the rate of new business formation (
Several empirical studies assess the effects of non-competes on the rate of new business formation. A study conducted by Jessica Jeffers examines several State law changes in the technology sector and the professional, scientific, and technical services sector and finds a decline in new firm entry when non-competes become more enforceable. Jeffers finds that as non-competes became more enforceable, the entry rate of new firms decreases substantially.
Another study, conducted by Matt Marx, examines the impact of several changes in non-compete enforceability between 1991 and 2014 on new business formation, and likewise finds a negative effect of non-competes on new business formation.
In addition, Johnson, Lipsitz, and Pei analyze the extent to which non-compete enforceability affects the rate of firm entry in high-tech industries. They find that an average increase in non-compete enforceability decreases the establishment entry rate by 3.2%.
In addition, a study conducted by Can and Fossen indicates that decreases in enforceability of non-competes in Utah and Massachusetts increased entrepreneurship among low-wage workers.
Furthermore, a study conducted by Benjamin Glasner focused on high-tech industries finds that technology workers increased entrepreneurial activity in Hawaii after non-competes were restricted, but finds no effect on entrepreneurial activity from Oregon's restriction on non-competes with low-wage workers.
Additionally, a study conducted by Starr, Balasubramanian, and Sakakibara analyzes the effect of non-compete enforceability on spinouts (
In addition, a study by Salomé Baslandze shows that non-competes reduce new business formation, finding that greater non-compete enforceability inhibits entry by spinouts founded by former employees of existing firms.
Finally, in a 2011 study, Samila and Sorenson find that when non-competes are more enforceable, rates of entrepreneurship, patenting, and employment growth slow. They find that an increase in venture capital funding creates three times as many new firms where non-competes are unenforceable, compared to where non-competes are enforceable.
The Commission gives minimal weight to two additional studies. One of these estimates the job creation rate at startups increased by 7.8% when Michigan increased non-compete enforceability.
The other study finds mixed effects of non-compete enforceability on the entry of businesses into Florida. The study examines a legal change in Florida which made non-competes more enforceable. The authors find larger businesses entered the State more frequently (by 8.5%) but smaller businesses entered less frequently (by 5.6%) following the change.
Additional research analyzes the effects of non-competes on the number of jobs created by new businesses.
In addition to analyzing the rate of firm entry in high-tech industries, Johnson, Lipsitz, and Pei analyzes the number of jobs created at newly founded firms in innovative industries.
A study by Starr, Balasubramanian, and Sakakibara finds that increases in non-compete enforceability decreased average per-firm employment at new firms.
The Commission's finding that non-competes inhibit new business formation is principally based on the empirical evidence described in this Part IV.B.3.b.i. However, the comments provide strong qualitative evidence that bolsters this finding.
Hundreds of commenters agreed with the Commission's preliminary finding that non-competes reduce new business formation. Illustrative examples of comments the Commission received include the following:
• I am a hairstylist . . . and have been with the company for 11 years. Our work conditions have changed drastically over the years and Covid has really sent us on a sharp decline. It is not the same salon I signed on to work for. That being said, a few coworkers want to open a salon and take some of us with them to bring back the caliber of service we want to give our clients. Our non-compete contracts state that we can't work within 30 miles of this salon. We didn't expect that standards would drop so low and they would raise prices so high that we lost so many clients. . . . We have all had enough of the toxic environment and need to be free of this unfair contract.
• I am a veterinarian that has had to suffer under non-compete clauses my entire career. I have had to sell my home and relocate several times including moving out of State due to non-compete clauses. I'm currently stuck in a [non-compete covering a] 30 mile radius of all 4 practices of a group of hospitals I work for. This basically keeps me from working in an enormous area. I had to sign it due to circumstances out of my control and they took advantage of my situation. I recently tried to start my own business, not related to the type of practice that I have the non-compete clause with, and had to abandon the idea because I couldn't get funding without my current employer releasing me from the contract or by relocating again out of the huge area of non-compete.
• We own a small family practice in urban Wisconsin. I previously was employed by a large healthcare organization and burned out. When I left to star[t] my own business, I was restricted from working close by, by a non-compete. I spent $24,000 [in] legal fees challenging this successfully. . . . Now as a business owner for 5 years, we have the opportunity to hire some physician assistants who have been terminated without cause from my prior employer. I am unable to do so because they also had to sign non-competes. I have seen many disgruntled patients who have delayed care because of this.
• I am aesthetic nurse practitioner wanting to start my own business but I am tied to a 2 year 10 mile non compete. I was basically obligated to sign the non-compete when I needed to reduce my hours to finish my master's degree (that I paid for and they wanted me to get). I feel forced to stay at a job that is not paying me what I am worth.
• I am a licensed social worker with a non-compete which is hindering my employment options. . . . I would like to start my own business as the mental health facility I work for is not supportive of mental health. This rule would be a great benefit for mental health professionals and those seeking quality mental health services.
• As a recently graduated physician, I wanted to start my own practice and become a small business owner. However, I also needed a source of income to start out and wanted to work part time at a local hospital for income and benefits. However, due to a non-compete clause in their contracts, I could not start my own business and practice in the same city if I was to work with them. This hindered my ability to work as much as I wanted (ended up having to work as an independent contractor for significantly less
• Mr. Z had worked for a company for over 15 years installing windshields in vehicles. He was a lower-level employee making $18.50 an hour and did not learn any trade secrets or confidential information. After years of working for the company the employer refused to raise his wages despite his experience, so he decided to start his own business. Shortly after giving notice and beginning his new endeavor, he received a letter from his previous employer informing him that he was in breach of his non-compete agreement and the employer would enforce it if he continued with his business plan.
• Non-competes have prohibited me from making a living as a fitness and wellness professional to such an extent, that it hurt me economically. I opened up my own business that was different than my previous employer, even though it was different and I told him I was going to focus on a different area in wellness, my previous employer sued me. I ended up having to hire an attorney to defend myself and when it was all said and done, I spent close to 12,000 in fees and penalties.
• Non compete agreements are detrimental to the average worker, preventing them from pursuing better paying job offers or from starting their own business in the same industry. I am directly affected by a non-compete clause I had signed as part of a job acceptance. I am now forming my own business in the same industry as my employer, and cannot do business within a 50-mile radius of my employer. That radius covers the hometown I live in. Even though we are in the same industry, we have very different target markets.
As these comment excerpts reflect, many potential entrepreneurs wrote to the Commission to describe how they wanted to strike out on their own, but a non-compete preventing them from doing so. These comments indicate that non-competes have deprived communities of homegrown businesses—with respect to everything ranging from tech companies, to hair salons, to physician practices, and many more types of firms. This deprives markets of competing firms that can reduce concentration—which in turn has benefits for lowering prices and raising the quality of products and services, and increasing innovation in bringing new ideas to market—as well as depriving communities of opportunities for new job creation.
Even where entrepreneurs were able to start businesses, they explained how non-competes prevented them from hiring talented workers and made it harder for their nascent businesses to grow and thrive. Many other commenters described personal experiences in which their newly formed businesses were threatened by litigation costs related to non-competes. Other commenters stated that the threat of litigation related to non-competes increases the risk and cost of starting a new business, particularly if that business intends to compete against a large incumbent firm. One commenter stated that incumbent firms can use non-compete litigation as a mechanism to chill startup formation where startups lack the resources to contest a non-compete.
Numerous small businesses and organizations representing small businesses submitted comments expressing support for the proposed rule and describing how it would help small business owners. These commenters contend that categorically prohibiting non-competes will empower small businesses by providing them with new access to critical talent and will drive small business creation as entrepreneurial employees will be free to compete against their former employers. Many small businesses also argued that non-competes can hinder small business formation and can keep small businesses from growing once they are formed. The extensive comments the Commission received from small businesses are also addressed in Part XI.C.
Some small businesses said they spent tens or hundreds of thousands of dollars defending themselves from non-compete lawsuits. A one-person surveying firm said it has to regularly turn down work because of the former employer's threat to sue over a non-compete. A small, five-worker firm said it was sued by a billion-dollar company for violating a non-compete despite the fact that the firm waited out the non-compete period and did not use proprietary information or pursue the former employer's customers; it fears the legal fees will force it out of business. A legal aid organization relayed the story of a client, a self-employed beauty worker who was unable to provide their service during a non-compete lawsuit despite working outside the non-compete geographic radius. The CEO of one small transport and logistics company said a ban would remove a tool used mostly by the largest companies in each industry to maintain their market dominance, as small competitors cannot match their legal budgets. Further, many workers said they would open their own business if non-competes were banned.
Many small businesses shared their experiences of how non-competes have made hiring more difficult. For example, a small physician practice said non-competes made it difficult to compete with larger practices to attract and retain physicians. A small business and a medical association said small businesses could not afford a lawsuit when hiring workers. An IT startup tried to hire an executive who had retired from a large firm, but the large firm sued the startup to enforce what the startup said was an unenforceable non-compete. According to the startup, because a lawsuit would have cost up to $200,000, it was forced to settle and could not work with numerous potential clients, and its growth was significantly slowed. It stated that it continues to turn away many potential hires to avoid being sued over non-competes.
Other commenters raised additional issues relevant to hiring. According to one technology startup organization, the inability to assemble the right team is a major reason startups fail, and small businesses lose opportunities because they must avoid hiring workers who are subject to even unenforceable non-competes. That organization also said startups currently face legal and time costs from navigating the patchwork and complexity of State non-compete laws, especially when trying to determine if a potential hire's non-compete is enforceable; the time and expense of navigating this landscape will thus often cause the startups to forego that hire. That organization said some non-competes prevent experienced workers from counseling, advising, or investing in startups, and such mentoring can double a startup's survival rate.
Several self-identified entrepreneurs commented that because of their non-competes, they feared not being able to operate, build, or expand their business. Numerous workers reported that they wanted to or planned to start their own business, but their non-compete made them too afraid to do so. A public policy organization referenced the Census Bureau's Annual Business Survey to argue that a majority of business owners and an even higher majority of Black business owners view starting their own business as the best avenue for their ideas, and that non-competes may prevent these potential entrepreneurs' ideas from coming to market.
Several commenters stated that non-competes make it harder for new businesses to hire workers with relevant
In contrast, several commenters opposed to the rule argued that non-competes promote new business formation by protecting small and new firms' investments, knowledge, and workers from appropriation by dominant firms poaching their employees. Commenters also theorized that, while non-competes directly inhibit employee spinoffs, they may encourage businesses to enter the market by enhancing their ability to protect their investments. As described in Part IV.D.2, the Commission finds that firms have viable alternatives for protecting these investments that burden competition to a less significant degree than non-competes. The Commission further notes that these commenters did not provide evidence to support their assertions.
In addition, when assessing how non-competes affect new business formation, the Commission believes it is important to consider the net impact. It is possible that the effects described by these commenters and the effects described by the Commission earlier in this Part IV.B.3.b.i can be occurring at the same time. That is, a non-compete might in some instances be protecting a firm's investments in a manner that is productivity-enhancing holding all else equal. But even that same non-compete can—and certainly non-competes in the aggregate do—inhibit new business formation by prohibiting workers from starting new businesses and by locking up talented workers, preventing the worker from efficiently matching with the job that is the highest and best use of their talents. What the empirical evidence shows is that non-competes reduce new business formation, overall and on net, indicating that the tendency of non-competes to inhibit new business formation more than counteracts any tendency of non-competes to promote new business formation.
Other commenters said non-competes protect firms' value and assets for sale in future acquisitions, which they said drives seed capital investment in start-ups. An investment industry organization commented that private-equity financing, particularly for early-stage companies, often includes non-competes and is used to support growth, in turn increasing competition. In response, the Commission notes that these commenters provided no empirical evidence that decreases in non-compete enforceability have affected seed capital investment and private-equity financing. Moreover, the Commission notes that there is no indication that small businesses or early-stage companies in States that have banned or limited non-competes have been unable to obtain financing. To the contrary, California, where non-competes are unenforceable, has a thriving start-up culture.
Other commenters addressed empirical research related to new business formation. Some commenters similarly argued that research on the average quality of employee spinouts due to changes in non-compete enforceability may imply negative effects of the rule (
In response to these comments, the Commission notes commenters primarily referenced Starr, Balasubramanian, & Sakakibara
Commenters also argued that non-competes may have different effects on different types of workers—for example, across different industries, occupations, or levels of pay—and that these differences may affect the impacts of non-competes on new business formation. In response, the Commission notes that the studies show negative effects across a range of industries and are directionally consistent, even if they do not provide results for all subgroups.
Commenters asserted that non-competes may affect job creation through several different mechanisms. The Commission agrees and finds that, regardless of the specific mechanism, the weight of the evidence indicates that non-competes inhibit job creation.
Commenters opposing the rule also questioned the usefulness of studies of Michigan's law change, given that existing non-competes remained enforceable under the Michigan law; they state that as a result, it would take longer for effects from the law to be realized. As noted under “Evidence of inhibited new business formation,” the Commission gives minimal weight to this study, but for other reasons.
In an ex parte communication entered into the record, the author of the study of the Michigan law change expressed concern over the Commission's interpretation of the study.
Some commenters who opposed the rule also addressed the evidence relating to non-competes and job creation, although these commenters generally did not focus on job creation related to new businesses specifically. Some of these commenters asserted that the studies addressed in the NPRM indicated that non-competes are associated with a greater number of jobs available and increased rates of job creation, rather than decreased rates of job creation. Some asserted that the evidence on job creation is mixed and that the issue is understudied. In the NPRM, the Commission stated that the evidence relating to the effects of non-competes on job creation was inconclusive. However, in the final rule,
The Commission finds that non-competes tend to negatively affect competitive conditions in product and service markets by inhibiting innovation. Three highly reliable empirical studies find that non-competes reduce innovation.
One such study, a study by Zhaozhao He, finds that the value of patents, relative to the assets of the firm, increases by about 31% when non-compete enforceability decreases.
A second study, by Johnson, Lipsitz, and Pei, finds that increased enforceability of non-competes decreases the rate of “breakthrough” innovations and innovations which make up the most cited patents. This study lends weight to the finding that non-competes harm both the quantity and the quality of innovation.
Johnson, Lipsitz, and Pei also show that State-level changes in non-compete policy do not simply reallocate innovative activity across State lines, which would result in no change in innovation at the national level. Instead, they find that decreasing non-compete enforceability, even in one State, increases innovative activity nationally.
A third study, by Rockall and Reinmuth, finds that non-competes have a significant negative impact on innovation. They further find that this effect is not driven solely by the entry of new businesses. Their work suggests a potentially central role for knowledge spillovers, which are hampered when worker mobility is diminished. The study uses many changes to non-compete enforceability quantified on a continuous basis and considers several metrics which represent the quantity and quality of patenting, in order to accurately capture the relationship between non-competes and innovation.
The Commission places the greatest weight on the foregoing three studies, in which factors unrelated to the legal changes at issue are less likely to drive the results. There are additional studies that relate to non-competes and innovation, but the Commission gives them less weight.
A study by Samila and Sorenson finds that venture capital induced less patenting by 6.6 percentage points when non-competes are enforceable.
A study by Clemens Mueller does not estimate the overall impact of non-compete policy on innovation, but instead focuses on career detours of inventors.
Coombs and Taylor examine the impact of non-compete enforceability on innovation. They find that research
Two additional studies address firm strategies related to innovation. However, the Commission gives them little weight because the outcomes studied do not inform how non-competes would affect the overall level of innovation in the economy. The first, by Raffaele Conti, uses two changes in non-compete enforceability (in Texas and Florida), and indicates that firms engage in riskier strategies with respect to research and development (“R&D”) when non-compete enforceability is greater.
The Commission's finding that non-competes inhibit innovation is principally based on the empirical evidence described in this Part IV.B.3.b.ii. However, the comments provide strong qualitative evidence that bolsters this finding.
Several academics and economic research groups, among other commenters, agreed with the Commission's preliminary finding that non-competes inhibit innovation. Commenters argued that non-competes reduce knowledge flow and collaboration, force workers to leave their field of expertise, and discourage within-industry spinouts that promote innovation. Many commenters stated that banning non-competes would make it easier for workers to pursue innovative ideas and to hire the best talent to help develop those ideas. Illustrative examples of comments the Commission received include the following:
• I am a geneticist at Stanford University, and I am co-founding a biotech startup that aims to discover new cancer immunotherapies. Many of the most talented geneticists, immunologists, cancer biologists, and other scientists with unique and valuable skillsets for drug development are bound by non-competes that prevent them from leaving jobs at big pharma companies to join biotech startups like mine. The result is artificial scarcity in the market for top scientific talent—a phenomenon that precludes healthy competition between industry incumbents and new entrants. Given that much of our country's most cutting-edge translational research happens within biotech startups, and given that many of the most successful drugs on the market originate in biotech startups, non-competes in pharma and biotech prevent the most talented scientists from working on the most innovative science and obstruct the development of new treatments and cures for human disease—leaving our society worse off.
• As a practicing Physician for over thirty years, and one who trained fellows in pain management, who followed many of their students' careers, I was able to see the detriments of unfair Non-Compete clauses in their contracts. Often a physician would take a job, and if it did not work out, the restrictions were so severe, that they would need to move to a new geographic location in order to be employed. . . . Other scenarios exist as well. Where large institutions can block scientific discovery of their research physicians from moving to other institutions which may be better able to support their research, potentially blocking the promotion of scientific discovery.
• I am an engineer in the orthopedic space. I have an idea for a truly innovative foot and ankle plating system that I believe could become the standard of care for fracture fixation and foot deformity correction. It could save 10-15 minutes of operating room time per surgery, which studies show carries a cost of $1000 (times millions of surgeries annually). It does not directly compete with my former employer's product, but I have to wait a year to start engaging surgeons about it because of a very broad non-compete, for a product that does not even compete.
• I currently work as a mid-level technical employee at a company that enforces long (a year or longer) noncompetes. . . . After working for larger companies for a few years after college, many of my friends started their own companies. Some succeeded massively and some didn't but what was common among most of them was that the companies they started were somewhat related to what they were working on before. They either saw a gap in the industry while working for a larger company, or had a bold idea in their domains that they wanted to quit their jobs and try executing it. All this risk taking has in turn resulted in innovation, more competition, and hundreds of jobs. This would not have been possible if these people were under non-compete agreements from their previous employers. In fact, many of my friends who are currently working for companies that have non-competes have personally told me that they want to try a different approach than the current incumbents in their industry, but they simply can't take this risk because of the long non-competes they are under. Note that non-competes are even more consequential for workers of relatively less experience because sitting out for 1 year while only having 3 to 4 years of experience is a lot more detrimental to one's career when compared to an individual with 20 years of experience. Given that younger workers are more willing to take risks and try new ideas, the impact of non-competes on innovation is far worse than many think.
• I am an engineer who has worked on software and hardware in several domains, including the semiconductor industry. I perceive non-competes to not only be detrimental to free trade but also to be detrimental to American innovation and manufacturing. If the United States is serious about supporting the growth of the semiconductor industry in the U.S., it must ensure that semiconductor companies inside the United States truly act to benefit American innovation. . . . The FTC would act prudently to ban such agreements.
• I am a physician. I have worked for public entities for my entire career. I have worked under non-competes for my entire career. The result of these non-compete clauses is that myself and my colleagues keep our imagination and creativity locked away. We see novel applications of pharmaceuticals and medical devices which our leadership
A research organization said a ban on non-competes would increase the value workers realize from creativity and inventiveness, though it also asserted that non-competes can incentivize firms to create and share information. Some workers commented that they had innovative ideas or research that their employer was unwilling to pursue, but the worker could not leave to pursue their ideas elsewhere. A commenter also argued that captive workforces can stifle competition for workers and for clients or patients that leads to innovation. According to several commenters, trapping workers in jobs can also lead to decreased productivity and so-called “quiet quitting.”
Some commenters contended that California's ban on non-competes helped Silicon Valley and other industries in California thrive. For example, a public policy organization pointed to industry clusters where studies have identified job hopping, which may otherwise be prohibited by non-competes, as the primary mechanism of knowledge diffusion and argued that restricting non-competes for knowledge workers would improve the U.S.'s competitiveness. Other commenters questioned whether non-competes played a role in Silicon Valley's growth. In response, the Commission notes that it does not attribute California's success in the technology industry to its non-compete laws. The Commission merely notes (in Part IV.D) that the technology industry is highly dependent on protecting trade secrets and that it has thrived in California despite the inability of employers to enforce non-competes, suggesting that employers have less restrictive alternatives for protecting trade secrets.
Other commenters opposing the rule argued that non-competes may promote innovation by encouraging firms to make productivity-enhancing investments and by decreasing the risk of workers leaving. These commenters stated that non-competes protect firms' investments in workers, R&D, intellectual capital, and innovation. The Commission does not believe that non-competes are needed to protect valuable firm investments. As described in Part IV.D.2, the Commission finds that firms have less restrictive alternatives that protect these investments adequately while burdening competition to a less significant degree.
In addition, when assessing how non-competes affect innovation, the Commission believes it is important to consider the net impact. It is possible that the effects described by these commenters and the effects described by the Commission earlier in this Part IV.B.3.b.ii can be occurring at the same time. That is, a non-compete might in some instances be protecting a firm's investments in a manner that is productivity-enhancing holding all else equal. But even that same non-compete can—and certainly non-competes in the aggregate do—inhibit innovation by preventing workers from starting new businesses in which they can pursue innovative ideas; inhibiting efficient matching between workers and firms; and reducing the movement of workers between firms. What the empirical evidence shows is that non-competes reduce innovation, overall and on net, indicating that the tendency of non-competes to inhibit innovation more than counteracts any tendency of non-competes to promote innovation.
The Commission addresses the available evidence on the relationship between non-competes and firm investment in Part IV.D.1.
A business commenter contended that worker mobility does not necessarily improve innovation since the new firm may be unable or unwilling to use the worker's knowledge or ideas, or the new start-up may fail and leave consumers with less innovative products and services. In response, the Commission notes that it is certainly possible that some workers switch jobs to firms that are unable or unwilling to use their knowledge or ideas, or to startups that may fail. However, the fact that the empirical evidence shows that reduced non-compete enforceability increases innovation suggests that these effects are outweighed by workers who can switch jobs to firms that make better use of their talents, or to startups that thrive and bring innovative new products to market.
Other commenters stated that non-competes promote the sharing of ideas and information within firms and incentivize risk-taking. The Commission is not aware of evidence that non-competes promote the sharing of ideas within firms specifically, but in any event the Commission explains in Part IV.D.2 that trade secrets and NDAs provide less restrictive means than non-competes for protecting confidential information. With respect to risk-taking, the Commission notes that the Conti study finds that firms engage in riskier R&D strategies when non-compete enforceability is greater, but it is not clear whether these riskier R&D strategies translate into increased innovation.
Commenters also argued that non-competes may have different effects on different types of workers—for example, across different industries, occupations, or levels of pay—and that these differences may affect the impacts of non-competes on innovation. In response, the Commission notes that the most methodologically robust studies show negative effects across a range of industries and are directionally consistent, even if they do not provide results for all subgroups.
A research organization argued that non-competes decrease the likelihood that innovative technologies are developed outside the U.S. and that non-competes promote economic growth, competitiveness, and national security. The Commission is not aware of any reliable evidence of the effects of non-competes on whether innovative technologies are developed outside the U.S. However, the weight of the empirical evidence indicates that non-competes reduce the amount of innovation occurring within the U.S.
Some commenters noted that innovation hubs have emerged in States that enforce non-competes. In response, the Commission notes that it does not find that it is impossible for innovation hubs to emerge where non-competes are enforceable. Instead, the Commission finds that, overall, non-competes inhibit innovation.
One commenter performed an empirical exercise in which he correlated Global Innovation Index rankings of innovation clusters with the enforceability of non-competes in each location. The commenter found that only one of the top five clusters bans non-competes, and only three others in the top 100 ban non-competes. The
Some commenters argued that the empirical research cited in the NPRM has mixed results. These commenters point to the study by Xiao (2022) showing that non-competes increase exploitative innovation (innovation that incrementally extends firms' existing capabilities), but not explorative innovation (innovation that extends the scope of firms' capabilities). In response, the Commission notes that, within this particular study, the net impact of non-competes on innovation was unclear. But the Commission does not believe the evidence overall is mixed, given that the three empirical studies of the effects of non-competes on innovation that use the most reliable empirical methods all find that non-competes reduce innovation.
Some commenters claimed that two studies cited in the NPRM—the Xiao and Conti studies—had findings that were omitted or misinterpreted: first, the Xiao finding that non-compete enforceability increases the rate of new discoveries of medical devices due to increases in the rate of exploitative innovation but not explorative innovation); and second, the Conti finding that greater non-compete enforceability leads to riskier innovation, which these commenters assert is a positive outcome.
A commenter asserted that the He study is insufficient evidence to support a finding, and that the study examines the effects of non-compete enforceability on the value of patents, which the commenter asserts misses other aspects of innovation. In response, the Commission believes that the He study is methodologically robust and that, while no single metric can capture all aspects of innovation, the value of patents is a meaningful proxy. The Commission also notes that the effects observed in the He study are considerable, as the study finds that the value of patents, relative to the assets of the firm, increases by about 31% when non-compete enforceability decreases. In addition, the Commission notes that the comment record provides substantial qualitative support in line with the empirical findings. Furthermore, additional research, published since the release of the NPRM, helps confirm the Commission's finding regarding the effect of non-competes on innovation. As described under “Evidence of inhibited innovation,” this evidence moves beyond assessing the impact of non-competes on the value of patents or the number of patents to identify the quality of new innovation, as well as the mechanisms underlying these effects.
Many commenters referred to a law review article, which was also submitted as a comment itself, that critiques the literature on non-competes and innovation.
Second, the authors argue that a given non-compete may be governed by the laws of a State other than the State where the worker lives, which undermines the reliability of studies analyzing the effects of non-compete enforceability. The authors argue that cross-border enforcement of non-competes may be a difficult issue to properly address in empirical work and has not been accounted for in the work to date. In response, the Commission notes that if the State law that applied to a given non-compete were totally random—for example, if a non-compete in Oregon was no more likely to be governed by Oregon's law than any other State's law—we would expect to observe no effects on economic outcomes (such as earnings, innovation, and new business formation) from changes in State law. Instead, the empirical research shows that changes in State law have clear impacts on economic outcomes in particular States. This indicates that enough non-competes within a particular State are subject to that State's law for changes in that State's law to affect economic outcomes in that State.
Third, the authors argue that there is a lack of data on the use of non-competes and that such data are needed to completely assess the effects of non-competes. Although there is not comprehensive data on individual workers' employment agreements, the Commission believes the studies that examine changes in enforceability do so based on sufficient data to be reliable and are otherwise methodologically sound. These studies are also highly probative with respect to the effects of the final rule because what they are examining—how changes in the enforceability of non-competes affect various outcomes—matches closely with what the final rule does. The Commission also notes that there is considerable data regarding the prevalence of non-competes, which it discussed in Part I.B.2.
Fourth, the article argues that some studies of non-competes have small sample sizes, which may lead to measurement error. In response to concerns about small sample sizes, the Commission notes that the most recent studies use a greater breadth of variation in the legal environment surrounding non-competes, overcoming this obstacle. Fifth, the article expresses concern about certain studies that are based on legal changes in Michigan. The Commission takes this critique into account throughout this final rule and notes it when discussing the applicable studies that examine legal changes in Michigan, including under “Evidence of inhibited innovation.”
In an ex parte communication included in the public record, the author of one of the studies of innovation stated that studies which examine multiple legal changes may be biased, since affected parties may anticipate the legal change and adjust their behavior prior to the date that the legal change is made. The author stated that examination of the legal change in Michigan was therefore preferable, since it was “inadvertent” and therefore not
As described in Parts IV.B.3.b.i and ii, the Commission finds that non-competes tend to negatively affect competitive conditions in product and service markets by inhibiting new business formation and innovation, and have in fact done so. The Commission finds that these effects, standing alone, are sufficient to support its finding that non-competes tend to negatively affect competitive conditions in product and service markets.
However, the Commission notes that there is also evidence that non-competes increase industrial concentration more broadly, which in turn tends to raise consumer prices. The empirical literature on these effects is less developed than the empirical work documenting declines in new business formation and innovation; specifically, the empirical evidence on consumer prices relates only to healthcare markets (though the evidence on concentration spans all industries in the economy). For this reason, the Commission does not rest its finding that non-competes tend to negatively affect competitive conditions in product and service markets on a finding that non-competes increase concentration and consumer prices. However, there are several reliable studies finding that non-competes increase concentration and/or consumer prices, bolstering the Commission's finding that non-competes tend to negatively affect competitive conditions in product and service markets.
The Commission finds that non-competes reduce new business formation.
Non-competes may also affect prices in a variety of ways. By suppressing workers' earnings, non-competes decrease firms' costs, which firms may theoretically pass through to consumers in the form of lower prices. However, non-competes may also have several countervailing effects that would tend to increase prices. First, non-competes may increase concentration, which could lead to less competition between firms on price, and therefore higher prices for consumers. Second, by inhibiting efficient matching between workers and firms, non-competes may reduce the productivity of a firm's workforce, which may lead to higher prices. Third, by inhibiting innovation, non-competes may hinder the development of lower-cost products or more efficient manufacturing processes.
One study, by Hausman and Lavetti, focuses on physician markets. The study finds that as the enforceability of non-competes increases, these markets become more concentrated, and prices for consumers for physician services increase. The study finds that while non-competes allow physician practices to allocate clients more efficiently across physicians, this comes at the cost of greater concentration and higher consumer prices. This study examines several changes in non-compete enforceability measured continuously. The authors note that, in theory, if decreased non-compete enforceability decreases earnings, then the fall in prices may simply be due to pass-through of labor costs. However, empirical research shows that decreased non-compete enforceability increases earnings (as discussed in Part IV.B.3.a.ii). Even if that were not the case, Hausman and Lavetti show that labor cost pass-through cannot explain their findings.
Another study, by Lipsitz and Tremblay, examines all industries in the economy and shows empirically that increased enforceability of non-competes at the State level increases concentration.
If the general causal link governing the relationship between enforceability of non-competes, concentration, and consumer prices acts similarly to that identified in the study by Hausman and Lavetti, then it is plausible that increases in concentration identified by Lipsitz and Tremblay would lead to higher prices in a broader set of industries than healthcare. Lipsitz and Tremblay use several changes in non-compete enforceability measured in a continuous fashion, but do not measure the impact on consumer prices or welfare. The Commission therefore finds the study's conclusion that non-competes increase concentration highly robust, but the study is not itself direct empirical evidence of a relationship between non-competes and prices.
Two additional studies assess the effects of non-competes on concentration and prices. However, the Commission gives these studies little weight.
A study of physician non-competes by Lavetti, Simon, and White finds that prices charged by physicians with non-competes are similar to those charged by physicians without non-competes.
A study by Younge, Tong, and Fleming finds that non-competes contribute to economic concentration because non-compete enforceability increases the rate of mergers and acquisitions.
Several commenters addressed the question of whether non-competes affect concentration and consumer prices. Some commenters asserted that the rule would lower consumer prices by improving matches between employers and workers, increasing productivity. Commenters also argued that locking up talent, particularly in specialized markets, prevents entrepreneurship and new business formation and can thus contribute to increased concentration.
Some commenters opposing the NPRM claimed that banning non-competes could increase concentration. These commenters argued that larger firms could discourage companies from expanding into new and underserved markets by poaching, or threatening to poach, their key employees, leading to increased costs that could force some firms out of business. These commenters also argued that non-competes protect small businesses from dominant consolidators, as high recruitment, retention, and other costs may induce small businesses to sell or larger businesses may hire away their workers. A medical trade organization stated that without non-competes, independent practices might not be able to afford to hire and thus may be unable to grow or compete.
While these commenters theorize that prohibiting non-competes would increase concentration, the Commission notes that the available evidence indicates that non-competes increase concentration, rather than reducing it. The Commission further notes that these theories are inconsistent with the robust empirical literature finding that non-competes reduce new business formation, as well as with the hundreds of comments from small businesses, including physician practices, recounting how non-competes stymied their ability to enter markets or grow because they make it harder to hire talent.
Several commenters claimed that prohibiting non-competes would increase worker earnings and increase transaction costs related to hiring, which firms would pass through to consumers in the form of higher prices. However, the only study of how non-competes affect prices—the Hausman and Lavetti study—finds that decreased non-compete enforceability
An insurance company stated that insurance premiums would increase if the rule allows non-profit hospitals to dominate the hospital market and have more leverage in network negotiations. These commenters do not provide any empirical evidence to support this assertion. Moreover, for the reasons described in Part V.D.5, the Commission disagrees that the ability to use non-competes will provide a material competitive advantage to non-profit hospitals. Another commenter stated that if non-competes are prohibited, physicians will leave States with lower market reimbursement rates for those with higher rates, increasing healthcare costs and shortages. Commenters did not cite any empirical evidence that supports this hypothetical assertion that the final rule would increase healthcare costs or shortages due to physicians leaving States with lower reimbursement rates, and the Commission is aware of none. However, the Commission notes that it received many comments from doctors, nurses, and other healthcare professionals asserting that non-competes worsen healthcare shortages.
Some commenters stated that non-competes may improve access to physicians due to non-compete-led consolidation or more efficient patient-sharing within practices, and that Hausman and Lavetti's study is unable to quantify these benefits. In response, the Commission notes that there is no empirical literature bearing out this theory, and that the commenters overwhelmingly stated that non-competes decrease patients' access to the physicians of their choice, increase healthcare shortages, and negatively affect the quality of health care.
The negative effects of non-competes on competition may also degrade product and service quality and consumer choice. Competition encourages firms to expand their product offerings and innovate in ways that lead to new and better products and services.
Such effects are less readily quantifiable than the other negative effects of non-competes on product and service markets—
The large number of comments the Commission received on this issue, the wide variety of impacts commenters describe, and the fact that the impacts commenters describe are overwhelmingly negative, indicate that non-competes reduce product quality and consumer choice, further bolstering the Commission's finding that non-competes tend to negatively affect competitive conditions in product and service markets.
The commenters who addressed the effects of non-competes on product quality and consumer choice primarily discussed the healthcare industry. The majority of these comments focused on how non-competes harm patient care. Hundreds of physicians and other commenters in the healthcare industry stated that non-competes negatively affect physicians' ability to provide quality care and limit patient access to care, including emergency care. Many of these commenters stated that non-competes restrict physicians from leaving practices and increase the risk of retaliation if physicians object to the practices' operations, poor care or services, workload demands, or corporate interference with their clinical judgment. Other commenters from the healthcare industry said that, like other industries, non-competes bar competitors from the market and prevent providers from moving to or starting competing firms, thus limiting access to care and patient choice. Physicians and physician organizations said non-competes contribute to burnout and job dissatisfaction, and said burnout negatively impacts patient care.
In addition, physicians and physician organizations stated that, to escape non-competes, physicians often leave the area, and that this severs many physician/patient relationships. These commenters stated that non-competes therefore cause patients to lose the knowledge, trust, and compatibility that comes with long-established relationships. These commenters also said that strong physician/patient relationships and continuity of care improve health outcomes, particularly for complex, chronic conditions or patients who need multiple surgeries. These commenters described how patients who lose their physicians to non-competes either travel long distances to see that physician, switch physicians, or lose access entirely if no other physicians are available. One physician argued that taking away a patient's ability to choose their provider violates the Patients' Bill of Rights.
One medical society cited a 2022 survey of Louisiana surgeons in which 64.4% of the surgeons believed non-competes force patients to drive long distances to maintain continuity of care, and 76.7% believed they force surgeons to abandon their patients if they seek new employment.
• As a primary care physician I truly hope to see [the rule] move forward. I recently left my position at one company and for a year commuted an hour to be outside of my non-compete radius. I recently returned to my community and discovered I have more patients than I can count who simply didn't get care for over a year because they didn't want to find a new [primary care physician] but also couldn't make the hour drive to see me at my new location. The commute was annoying for me, but ultimately the only ones truly hurt were patients. Let's stop hurting our patients by restricting their ability to see their physicians.
• My practice has operated since the 1990s in Danville, Kentucky. We are the only cardiology practice that has been present and has worked tirelessly to serve this rural community. The practice was a private practice originally. Unfortunately, just as most cardiac practices throughout the country have had to, our practice had to come under the control of these hospital systems to maintain its viability. . . . The CEO and the administration . . . have squeezed us out and forced us to leave the area with the employment contract non-compete in place. . . . I have spent the last 6 months hugging patients, medical staff, nursing who are stricken by the fact that we are being pushed out. Patients desperately ask me how they can maintain care if they have to travel up to an hour to see their doctors with this change. They worry how they can pay for the steep gas prices to see their doctors. . . . They are truly concerned for the health of their families. All the while all I can do is tell them that my non-compete does not allow me, their cardiologist for the past decade, to give them any advice on how to maintain their care.
• As a Physician, I had a non compete clause in my contract that extended two counties wide (100 square miles). . . . [W]hen I would not sign a contract amendment regarding pay that was very unfavorable and nebulous I was called in and summarily dismissed `no cause.' Because of that I had to work out of state and my patients were instantly without a physician. The community did not have enough physicians to be able to care for the patients who now had no medical provider. During COVID this lack of access to healthcare for patients most certainly led to increased unnecessary illness and death. . . . Patients are suffering with access to healthcare, and physician shortages are being exacerbated because every time a physician has to leave because of a non compete clause they start hiring and credentialing all over again and it can take months for them to be able to work again.
• Being a therapist, non-competes are extremely scary when it comes to patient care. Some include date ranges in which we cannot communicate with our patients, some of whom have severe trauma histories or suicidal ideations. If a clinician changes companies but is unable to continue meeting a patient, who is at fault if there is an injury or death? . . . Some non-competes include mileage in which a clinician cannot create their own company or rent out an office within a certain radius—how is this a safe practice? How can clients continue to work on their mental health and desire to stay alive if they have to change clinicians due to a noncompete clause?
• Due to mistreatment and to escape workplace toxicity, one of my colleagues left our practice in compliance to our non-compete conditions, even though they caused great hardship. I, too, wanted to leave, but could not because doing so would have harmed my family's well being. What I witnessed in the aftermath was unconscionable. There was a void in patient care and months later, there still is a void. Not only was this physician required to move quite a distance from the practice, he was forbidden to even inform his patients that he was leaving. The practice in turn, did not inform the patients, and when asked, just informed them that he was no longer with the practice. Consequently, wait times to treat cancers doubled and now have tripled.
• I would like to open a new clinic in my town, but my noncompete would disallow that from happening immediately. Furthermore, I worry that my patients that need medical care wouldn't be able to access it at my current clinic because the providers
• As a veterinarian, I can personally assure the FTC that such restrictions have caused both death and permanent disability of pets. . . . In nearly every scenario I have heard of, the veterinary business that requires and enforces non-compete clauses is underserving the pet-owning public. This is the current situation for veterinary medicine on a national level. Hospitals are so overwhelmed that they are not accepting new patients, turning away emergency cases, and imposing extremely long (several months or more) waiting lists for appointments and/or scheduled procedures. If a hospital cannot accommodate the patients who require veterinary care, that hospital is not able to compete with the existing demand for services. . . . Is it fair for pet owners who cannot get their pets in to see a veterinarian (even on emergency situations) to have the veterinary hospitals who refuse to see their pets remove other options for care via non-compete clauses? These clauses are being blatantly abused by certain large veterinary businesses so that these organizations can maintain a pool of potential patients (on waiting lists) to draw from. Unfortunately, many of these dogs and cats die while waiting to be seen. At least in my profession, the non-compete concept has reached an epitome of unethical conduct. In addition, economic growth has been stunted due to self-serving greedy people in power. Please get rid of this horrible clause and lets make sure pets and their owners get what they need, when they need it.
Some hospital associations argued that a study of physician markets
Some medical practices argued that within-group referrals allow physicians to coordinate care plans and simplify logistics, and that non-competes protect the stability of those care teams to patients' benefit. Some industry associations and hospitals argued that non-competes improve patient choice and continuity of care because they stop physicians from leaving a health provider, benefiting patients who cannot follow the provider due to geographic or insurance limitations. One physician association said physicians leaving jobs can be costly to patients, who must transfer records and reevaluate insurance coverage.
The Commission notes that the vast majority of comments from physicians and other stakeholders in the healthcare industry assert that non-competes result in worse patient care. The Commission further notes that the American Medical Association discourages the use of non-competes because they “can disrupt continuity of care, and may limit access to care.”
A related issue frequently raised in the comments is the impact non-competes have on healthcare shortages. According to many commenters, non-competes contribute to shortages by preventing physicians from moving to areas where their skills and specialties are needed; forcing physicians out of such areas; or forcing them out of practice entirely due to contractual restrictions or burnout. Such shortages, according to these commenters, decrease access to care, increase wait times, lead to canceled procedures, and decrease the quality of care. Many commenters stated that these effects of non-competes are particularly acute in rural, underserved, and less affluent areas that already have difficulty attracting healthcare professionals. Some commenters argued that provider shortages can, in combination with non-competes, create monopolies.
A smaller number of commenters from the healthcare industry argued that non-competes alleviate healthcare shortages and prevent hospital or facility closures by keeping physicians from leaving underserved areas and reducing fluctuations in labor costs. Some of these commenters asserted that a ban on non-competes would upend healthcare labor markets, thereby exacerbating healthcare workforce shortages, especially in rural and underserved areas. A medical society argued that non-competes can allow groups to meet contractual obligations to hospitals, as physicians leaving can prevent the group from ensuring safe care. As the Commission notes, there are not reliable empirical studies of these effects, and these commenters do not provide any. However, the Commission notes that the rule will increase labor mobility generally, which makes it easier for firms to hire qualified workers.
Commenters in a variety of industries beyond healthcare markets also provided a wide range of examples of how non-competes diminish the quality of goods and services, including preventing businesses from hiring experienced staff and creating worker shortages. Commenters stated that, where firms in a market use non-competes, it can be difficult for other firms to remain in the market, and consumers thus lose the freedom to choose providers. Several comments pointed favorably to the American Bar Association's longstanding ban on non-competes for most lawyers to protect clients' freedom to choose their lawyer, in contrast with other highly paid and highly skilled professions such as physicians and their patients or clients.
Commenters from outside the healthcare industry mainly focused on how non-competes increase concentration within industries, which reduces firms' incentive to innovate and results in consumers having fewer choices. Other commenters described how non-competes lock highly talented workers out of their fields or force them into jobs where they are less productive, depriving the marketplace of the products and services they would have developed. Illustrative examples of these comments include the following:
• As a software developer who often works under contracts containing sections stipulating non-compete agreements, I have observed first hand how they can harm the economy by bolstering monopolies, such as in sectors where clientele only have a single choice for meeting their engineering needs. Often, these clients have no other options and are forced to meet whatever arbitrary price point is set by the leading (sole)
• As an aspiring tree care professional, non-compete agreements prevent me from switching employers/companies to access better work conditions or opportunities. No tree service company has ever invested in me. I learned to climb and saw while working for Federal agencies (USDA and NPS), and also through self-education and practice on my own. I believe that non-compete agreements have adversely limited competition in the tree service industry. This hurts employees who could do better if they were free to change their place of employment, and it hurts consumers who have fewer tree service providers to choose from.
• I worked in a business supplying technology and materiel considered critical for national defense. I was labeled an expert in the field by my DoD customers and commended multiple times for solving logistical and technical problems with protective equipment during the previous two wars. I lead development contracts from the DoD to advance the state-of-the-art in warfighter protection, which set multiple records for figures of merit within my business, and which our program manager volunteered was the most exciting technology she had ever managed. When my business decided to discontinue that technology and transfer me, my noncompete agreement prevented me from continuing to support the DoD. I was removed from consideration at another firm in the third round of interviews because of my noncompete agreement—again, for a technology my business had decided to not pursue and had transferred me out of. So, instead of having the opportunity to advance my career into management in the service of protecting warfighters, I had to exit that industry and move laterally, into a different industry that cannot value 20 years of my expertise, and which will not further the defense of my country. If the FTC had nationalized a prohibition on noncompete clauses two years ago, this would not have happened, and I would have had the opportunity to advance my career, improve my family's economic fortune, and continue to contribute to our nation's defense.
Overall, the Commission believes that the large number of comments it received on the issue of product quality and consumer choice and the wide variety of overwhelmingly negative impacts commenters describe further bolsters the Commission's finding that non-competes tend to negatively affect competitive conditions in product and service markets.
Based on the totality of the evidence, including its review of the empirical literature, its review of the full comment record, and its expertise in identifying practices that harm competition, the Commission adopts § 910.2(a)(1), which defines unfair methods of competition related to non-competes with respect to workers other than senior executives. Section 910.2(a)(1) provides that, with respect to a worker other than a senior executive, it is an unfair method of competition for a person to enter into or attempt to enter into a non-compete clause; enforce or attempt to enforce a non-compete clause; or represent that the worker is subject to a non-compete clause.
Part IV.A sets forth the Commission's determination that the foregoing practices are unfair methods of competition under section 5, and Parts IV.B.1 through IV.B.3 explain the findings that provide the basis for this determination. In this Part IV.B.4, the Commission explains the three prongs of § 910.2(a)(1) and addresses comments on proposed § 910.2(a).
Proposed § 910.2(a) would have provided that it is an unfair method of competition for an employer to, among other things, “enter into or attempt to enter into a non-compete clause with a worker.” The Commission adopts this same language in the final rule in § 910.2(a)(1)(i). As a result, the final rule prohibits persons from entering into or attempting to enter into non-competes with workers other than senior executives as of the effective date. (Section 910.2(a)(2)(i) separately prohibits persons from entering into or attempting to enter into non-competes with senior executives as of the effective date.)
A business commenter requested that the Commission remove “attempt to enter into” from § 910.2(a) on the basis that it may encourage workers to sue employers for contractual provisions that have no practical effect on the worker or which are not finalized in any employment agreement. The Commission disagrees that conduct that would be covered by the attempt provision—such as presenting the worker with a non-compete, even if the employer and worker do not ultimately execute the non-compete—has no practical effect on the worker. The Commission is concerned that such attempts to enter into non-competes still have
The Commission accordingly finalizes the language as proposed.
Proposed § 910.2(a) would have provided that it is an unfair method of competition for an employer to, among other things, “maintain with a worker a non-compete clause.” In addition, proposed § 910.2(b)(1) would have provided that, to comply with this prohibition on maintaining a non-compete, an employer that entered into a non-compete with a worker prior to the compliance date must “rescind the non-compete no later than the compliance date.”
As elaborated in Part IV.E, the Commission has decided not to finalize a rescission requirement. As a result, the Commission also removes “maintain” from the text of § 910.2(a), to avoid any ambiguity about whether the final rule contains a rescission requirement. Instead of a rescission requirement, the final rule focuses more narrowly on the future enforcement of existing non-competes with workers other than senior executives. It provides that, with respect to a worker other than a senior executive, it is an unfair method of competition for a person to enforce or attempt to enforce a non-compete clause. An employer attempts to enforce a non-compete where, for example, it takes steps toward initiating legal action to enforce the non-compete, even if the court does not enter a final order enforcing the non-compete.
For workers other than senior executives, this prohibition on enforcing a non-compete applies to all non-competes, but affects only enforcement or attempted enforcement conduct taken after the effective date of the rule. In so doing, the Commission reduces the burden on employers by eliminating the need to take steps to formally rescind provisions of existing contracts, instead simply requiring that employers refrain from enforcing or attempting to enforce in the future (after the effective date) non-competes that are rendered unenforceable by this provision of the rule.
As explained in Part IV.C, the Commission in the final rule does not prohibit the future enforcement or attempted enforcement of existing non-
Second, for workers other than senior executives, existing non-competes not only impose acute, ongoing harms to competition, they also impose such harms on individual workers by restricting them from engaging in competitive activity by seeking or accepting work or starting their own business after their employment ends. As described in Part IV.B.2.b, the Commission received thousands of comments from workers that described non-competes as pernicious forces in their lives that forced them to make choices that were detrimental to their finances, their careers, and their families. These concerns are less present for senior executives, who are far more likely than other workers to have negotiated their non-compete and received compensation in return, thereby mitigating this kind of acute, ongoing harm.
Third, because the Commission finds that non-competes with workers other than senior executives generally are not bargained for and such workers generally do not receive meaningful, if any, compensation for non-competes, the practical considerations that are present with respect to existing non-competes for senior executives (discussed in Part IV.C.3) are far less likely to be present for other workers. For these reasons, the Commission concludes that, consistent with the proposed rule, existing non-competes with workers other than senior executives should not remain in force after the effective date.
Several commenters argued that the Commission should allow all existing non-competes to remain in effect. Some of these commenters argued that the rule would upset bargained-for agreements. Commenters asserted that workers who received benefits in exchange for agreeing to non-competes would receive a windfall if such clauses cannot be maintained and are no longer enforceable. A few of these commenters also argued that invalidating existing non-compete agreements will upset workers' economic interests because they will lose out on enhanced compensation that they have received or expect to receive in exchange for their non-competes. Some commenters contended that invalidating existing non-competes would be especially harmful to workers' interests in non-competes tied to particularly large amounts of compensation, complex compensation arrangements, or unique forms of compensation such as equity grants. Relatedly, some commenters expressed concern that the NPRM did not explain whether employers could recoup benefits already paid in exchange for non-competes. A few commenters suggested that they have given workers confidential and trade secret information in exchange for the worker agreeing to a non-compete that may no longer be enforceable.
The Commission is not persuaded by comments arguing that the rule would upset existing bargained-for agreements. As noted in Part IV.B and Part IV.C, the Commission finds that workers who are not senior executives are unlikely to negotiate non-competes or to receive compensation for them. Moreover, the Commission has also determined that non-competes with senior executives that predate the effective date may be enforced,
Other commenters argued that employers relied on the expectation of a non-compete when deciding how much to invest in training their workers or the extent to which they share trade secrets with their workers. In response, the Commission notes that firms that are concerned about retention have tools other than non-competes for retaining workers, including fixed-duration employment contracts (
The Commission is not persuaded by commenters who contended that invalidating existing non-competes would disturb employer expectations with respect to sharing trade secrets or other commercially sensitive information. As explained in Part IV.D.2, the Commission finds that employers have adequate alternatives to non-competes to protect these interests, including trade secret law and NDAs, and that these alternatives do not impose the same burden on competition as non-competes. Some commenters contended that employers may not have adequate alternatives in place for existing non-competes and that former workers may not agree to new NDAs. But the Commission finds that it is rare for an employer who entered into a non-compete agreement as a means of protecting trade secrets or commercially sensitive information to have not also entered into an NDA with the worker.
Some commenters contended that invalidating existing non-competes would enable new employers to “free ride” off former employers' investments in training. The Commission addresses comments about “free riding” and training investments in Part IV.D.2.
Several comments argued that a final rule should not invalidate existing non-competes because the economic impact is too unpredictable. These commenters maintained that the number of individual employment contracts that would be invalidated means that the economic impact would be exceptionally widespread, and likely impossible to accurately predict. In response, the Commission notes that it
Proposed § 910.2(a) would have provided that it is an unfair method of competition for an employer to, among other things, “represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.” The Commission adopts the same language in the final rule. Pursuant to § 910.2(a)(1)(iii), it is an unfair method of competition for an employer to represent that a worker other than a senior executive is subject to a non-compete clause. The “good faith” language remains in the final rule but, for clarity, it has been moved to § 910.3, which contains exceptions to the final rule.
Under this “representation” prong, the final rule prohibits an employer from, among other things, threatening to enforce a non-compete against the worker; advising the worker that, due to a non-compete, they should not pursue a particular job opportunity; or telling the worker that the worker is subject to a non-compete. The Commission believes that this prohibition on representation is important because workers often lack knowledge of whether employers may enforce non-competes.
In addition, threats to litigate against a worker—even where the worker is aware of the Commission's rule and believes the non-compete is unenforceable—may deter the worker from seeking or accepting work or starting their own business. As explained in Part IV.B.2.b.ii, many commenters—including highly paid workers—explained in their comments that they believed their non-compete was unenforceable, but they nevertheless refrained from seeking or accepting work or starting their own business because they could not afford to litigate against their employer for any length of time. For this reason, the Commission believes it is important for the final rule to prohibit employers not only from enforcing or attempting to enforce non-competes against workers other than senior executives, but also threatening to do so.
A commenter suggested limiting the “representation” prong to instances where the employer has no good-faith basis to believe the non-compete is valid “under local or State law,” even if the non-compete is invalid under the final rule. The Commission does not adopt this approach because representing to workers that they are subject to a non-compete, where the rule provides that the non-compete is unenforceable, would mislead the worker and would tend to deter them from competing against the employer by seeking or accepting work or starting a business.
In the NPRM, the Commission proposed to prohibit non-competes—including non-competes entered into before the effective date—with all workers.
In the final rule, the Commission does not find that senior executives—specifically, highly paid workers with the highest levels of authority in an organization—are exploited or coerced in connection with non-competes, and it describes the record on this issue in Part IV.C.1. The Commission does, however, find that non-competes with senior executives are an unfair method of competition, based on the totality of the evidence, including its review of the empirical literature, its review of the full comment record, and its expertise in identifying practices that impair competitive conditions in the economy. Specifically, the Commission finds that such non-competes are restrictive and exclusionary conduct that tends to negatively affect competitive conditions in product and service markets and labor markets. Indeed, non-competes with senior executives may tend to negatively affect competitive conditions in product and service markets to an even greater degree than non-competes with other workers, given the outsized role senior executives play in forming new businesses and setting the strategic direction of firms with respect to innovation. The Commission explains the basis for these findings in Part IV.C.2.
Because non-competes with senior executives are not exploitative or coercive, however, this subset of workers is less likely to be subject to the kind of acute, ongoing harms currently being suffered by other workers subject to existing non-competes. In addition, commenters raised credible concerns about the practical impacts of extinguishing existing non-competes for senior executives. For these reasons, as described in Part IV.C.3, the Commission allows existing non-competes with senior executives to remain in force—unlike existing non-competes with all other workers, which employers may not enforce after the effective date.
In Part IV.C.4, the Commission explains the final rule's definition of “senior executive” and the related definitions it is adopting.
Finally, in Part IV.C.5, the Commission explains the regulatory text it is adopting in § 910.2(a)(2), which defines unfair methods of competition related to non-competes with senior executives.
The Commission stated in the NPRM that its preliminary finding that non-competes are exploitative and coercive did not apply to senior executives. The Commission stated that non-competes with senior executives are unlikely to be exploitative or coercive at the time of contracting, because senior executives are likely to negotiate the terms of their employment and may often do so with the assistance of counsel.
Based on the totality of the record, including the many comments submitted on these questions, the Commission finds that senior executives—specifically, highly paid workers with the highest levels of authority in an organization—are substantially less likely than other workers to be exploited or coerced in connection with non-competes. For these reasons, the Commission does not find that non-competes with senior executives are exploitative or coercive.
There is little empirical evidence on the question of whether non-competes with senior executives are exploitative or coercive. A 2006 study of non-competes with CEOs finds that many of these workers negotiated a severance period as long or longer than their non-compete period, making it easier to sit out of the market.
The comment record on whether senior executives experience exploitation and coercion in relation to their non-competes is mixed. Many commenters asserted that, because some senior executives negotiate their non-competes with the assistance of expert counsel, they are likely to have bargained for a higher wage or more generous severance package in exchange for agreeing to the non-compete, and thus their non-competes are not exploitative or coercive. Several commenters stated that senior executives frequently negotiate non-competes for valuable consideration and/or typically agree to non-competes only in exchange for compensation. Some senior executives said they were not exploited or coerced in connection with non-competes.
The Commission notes that a relatively small number of self-identified senior executives submitted comments in their personal capacity. While the Commission did receive some comments from self-identified senior executives suggesting that their non-competes were exploitative and coercive, such comments were far less common than for other workers. However, some senior executives did report experiencing similar issues of exploitation and coercion. Several senior executives said that their non-competes were required and non-negotiable. Multiple senior executives described their own non-competes as “one-sided” in favor of the employer. Some senior executives said they were not given consideration for the non-compete, and even some who said they received consideration still said their non-competes were exploitative and coercive. For example, some senior executives said they: (1) were required to sign a non-compete under threat of losing their job or their earned compensation; (2) were forced into a stock share buyout that included a non-compete; or (3) could obtain long-term compensation only if they signed a non-compete. Two advocacy groups stated that many senior executives may lack power to avoid non-competes and that employers still hold most of the leverage in employment negotiations, even with respect to senior executives. An employment law firm stated that in its experience, it had not seen higher compensation for senior executives and other highly paid workers in jurisdictions where non-competes were allowed, and that employers rarely provide compensation for non-competes. The firm said that senior executives and other highly paid workers are more likely to receive severance payments, but such payments are paid only in some cases. It said that even when paid, the severance payments often do not fully compensate for what a senior executive could have otherwise earned during the non-compete period.
Furthermore, several self-identified senior executives said they felt unable to leave their company because of their non-competes. Many of these commenters said they feared being unemployed. Some senior executives said they feared or could not afford litigation, while two senior executives said that they could not afford to fight non-competes they believed were unenforceable. Several self-identified senior executives, having spent their careers in one industry, said they were forced to sit out of the market for long periods, forgoing earnings and the ability to work. Others reported struggling to find a job and suffering
One law firm specializing in executive compensation said many senior executives may have achieved top roles at companies because they have spent decades in the same industry and would struggle to find work with firms other than competitors. Another law firm said senior executives blocked from an industry could lose their long-cultivated reputation in the industry and, as a result, time out of an industry could harm their careers. Worker advocacy organizations and a law firm said senior executives tend to be relatively older and, as older workers are forced out of the job market, they are likely to be losing out on increasingly scarce employment opportunities relative to their younger counterparts. Another advocacy group argued that the Commission did not provide sufficient evidence to support its preliminary finding that non-competes are not exploitative and coercive for senior executives. A few commenters suggested that senior executives from historically marginalized groups may be paid less and have less bargaining power than other senior executives.
Critically, the Commission received an outpouring of comments indicating that highly paid workers who are
In addition, the Commission believes it is appropriate to conclude that lower-earning workers, regardless of their job title or function in an organization, are more likely to be exploited or coerced in connection with non-competes. As noted, many workers classified as “top executives” make under $100,000. Commenters did not self-report their income, so the Commission cannot definitively determine that the self-identified senior executives who reported exploitation and coercion are lower-wage senior executives. Because of their incomes, however, lower-wage senior executives are likely subject to many of the same exploitative and coercive factors that affect other workers, such as the inability to afford a non-compete lawsuit, forgo work for a lengthy period, leave the field, or relocate.
However, having considered the comments and the available empirical evidence on this question, the Commission does not find that non-competes with highly paid workers who are also senior executives are likely to be exploitative or coercive. The Commission stresses that it is not affirmatively finding that such non-competes can never be exploitative or coercive. The Commission has simply determined the record before it is insufficient to support such a finding at this time.
While the Commission does not find that non-competes with senior executives are exploitative and coercive, the Commission determines that these non-competes are nonetheless unfair methods of competition, for the reasons described herein.
To determine whether conduct is an unfair method of competition under section 5, the Commission assesses two elements: (1) whether the conduct is a method of competition, as opposed to a condition of the marketplace and (2) whether it is unfair, meaning that it goes beyond competition on the merits. The latter inquiry has two components: (a) whether the conduct has indicia of unfairness and (b) whether the conduct tends to negatively affect competitive conditions. These two components are weighed according to a sliding scale.
Non-competes with senior executives satisfy all the elements of the section 5 inquiry. As described in Part IV.C.2.a, these non-competes are methods of competition. As described in Part IV.C.2.b, these non-competes are facially unfair conduct because they are restrictive and exclusionary. And as described in Part IV.C.2.c, these non-competes tend to negatively affect competitive conditions in product and service markets and in labor markets. Because the Commission finds that non-competes with senior executives are unfair methods of competition, the Commission declines to exclude them from the final rule. However, as described in Part IV.C.3, the final rule allows existing non-competes with senior executives to remain in effect, due to the considerations described therein.
With respect to the first element—whether conduct is a method of competition—the Commission finds that non-competes with senior executives are a method of competition for the same reasons as non-competes with other workers.
In Part IV.B.2.a, the Commission finds that non-competes with workers other than senior executives are facially unfair conduct because they are restrictive and exclusionary. The Commission finds that non-competes with senior executives are facially unfair conduct for the same reasons.
Like non-competes for all other workers, the restrictive nature of non-competes with senior executives is evident from their name and function: non-competes restrict competitive activity. They prevent senior executives from seeking or accepting other work or starting a business after leaving their job. And like non-competes for all other workers, non-competes with senior executives are exclusionary because they impair the opportunities of rivals. Where a worker is subject to a non-compete, the ability of a rival firm to hire that worker is impaired. In addition, where many workers in a market are subject to non-competes, the ability of firms to expand into that market, or entrepreneurs to start new businesses in that market, is impaired. While non-competes may impair the opportunities of rivals in all labor markets, non-competes for senior executives are especially pernicious in this regard. Senior executives are relatively few in number, are bound by non-competes at high rates,
Because senior executives are often compensated in return for their promise not to compete, some commenters argue that non-competes with senior executives are not unfair methods of competition. However, agreements can present concerns under the antitrust laws even when both parties benefit. Here, non-competes with senior executives are not unfair methods of competition under section 5 because they are unfair to the individual executive, but because they tend to negatively impact competitive conditions—
The Commission finds non-competes with senior executives tend to negatively affect competitive conditions in product and service markets and in labor markets. As explained in Part II.F, the legal standard for an unfair method of competition under section 5 requires only a tendency to negatively affect competitive conditions. The inquiry does not turn on whether the conduct directly caused actual harm in a specific instance. Here, the tendency of non-competes to impair competition is obvious from their nature and function, as it is for non-competes with workers who are not senior executives. And even if this tendency were not facially obvious, the evidence confirms that non-competes with senior executives do in fact negatively affect competitive conditions.
In the NPRM, the Commission stated that non-competes with senior executives may harm competition in product and service markets in unique ways.
Based on the Commission's expertise and after careful review of the rulemaking record, including the empirical research and the public comments, the Commission finds that non-competes with senior executives tend to negatively affect competitive conditions in markets for products and services, inhibiting new business formation and innovation.
In Part IV.B.3.b, the Commission described the extensive empirical evidence indicating that non-competes inhibit new business formation and innovation. The Commission's finding in Part IV.B.3.b that non-competes inhibit new business formation and innovation does not examine non-competes with senior executives specifically. However, the Commission finds that non-competes with senior executives inhibit new business formation and innovation at least as much as non-competes with other workers and likely to a greater extent, given the outsized role of senior executives in forming new businesses, serving on new businesses' executive teams, and setting the strategic direction of businesses with respect to innovation.
Specifically, non-competes with senior executives tend to negatively affect competitive conditions in product and service markets in three ways. First, non-competes with senior executives inhibit new business formation. In Part IV.B.3.b.i, the Commission finds that non-competes with workers other than senior executives inhibit new business formation. The Commission finds that non-competes with senior executives inhibit new business formation as much as non-competes with other workers and likely to a greater extent, due to the important role senior executives play in new business formation.
Senior executives are particularly well-positioned to form new businesses because of their strategic expertise and business acumen; knowledge of multiple facets of their industries; experience making policy decisions for businesses; and ability to secure financing. Senior executives are also often crucial to the formation of startups, because startups often begin by
Second, non-competes with senior executives inhibit innovation. In Part IV.B.3.b.ii, the Commission finds that non-competes with workers other than senior executives inhibit innovation. The Commission finds that non-competes with senior executives inhibit innovation at least as much as non-competes with other workers and likely to a greater extent, because senior executives play a crucial role in setting the strategic direction of firms with respect to innovation.
Non-competes with senior executives inhibit innovation by impeding efficient matching between workers and firms. As described in Part IV.B.3.a, labor markets function by matching workers and employers. The same is true for senior executives. Executives compete for roles at firms, and firms compete to attract (often highly sought-after) executives; executives choose the role that best meets their objectives, and firms choose the executive who best meets theirs. Non-competes impede this competitive process by blocking executives from pursuing new opportunities (
By inhibiting efficient matching between firms and executives, non-competes frustrate the ability of firms to hire executives who can best maximize the firm's capacity for innovation. Senior executives play an important role in advancing innovation at firms.
Research shows that labor mobility among senior executives may tend to foster innovation. Empirical research finds that executives with shorter job tenures tend to engage in more innovation than those who are longer tenured at firms.
Furthermore, empirical research shows that better matching among executives and firms drives productivity as well as innovation. When firms and executives have a higher quality match, the firm as a whole is more productive.
In theory, firms that seek to hire an executive could just pay the executive's employer (or former employer) to escape the non-compete. However, research by Liyan Shi describes how non-competes with senior executives force firms to make inefficiently high buyout payments. Shi ultimately concludes that “imposing a complete ban on noncompete clauses would be close to implementing the social optimum.”
Shi explains that firms and executives jointly create market power by entering into non-competes and excluding rivals from hiring experienced labor in a competitive labor market. The existence of a non-compete forces rivals to make an inefficiently high buyout payment, where the inefficiency arises due to the market power of the incumbent firm created by the non-compete. Rival firms must either make these payments, which therefore lead to deadweight economic loss, or forgo the payment—and, consequently, the ability to hire a talented executive (and perhaps the ability to enter the market at all, for potential new firms).
Shi notes that such a mechanism could be tempered by the ability of a labor market to provide viable alternative workers for new or competing businesses. However, when a particular type of labor is somewhat scarce, when on-the-job experience matters significantly, or when frictions prevent workers from moving to new jobs—all of which tend to be the case for senior executives—there is no way for the market to fill the gap created by non-competes.
Some of the evidence in this study arises from analysis of non-compete use coupled with non-compete enforceability. Other evidence in the study, including the finding that a ban on non-competes is close to optimal, relies not on use at the individual level, but on prevalence of non-competes across a labor market. The latter approach does not rely, therefore, on comparing individuals with and without non-competes, and is therefore not subject to the estimation bias that leads the Commission to give less weight to evidence based on the use of non-competes.
Many commenters stated that non-competes with senior executives reduce new business formation and innovation, confirming the Commission's findings. Several senior executives recounted personal experiences in which a non-compete prevented them from starting a business. A tech executive stated that they knew many tech executives who would have left their roles to start within-industry spinoffs if not for their non-competes. A senior executive stated that they had planned to start a small business that would not have harmed the former employer but had signed a non-compete that prevented them from doing so. A former executive stated that they were sued after starting a new business despite confirming with the CEO of their former employer that doing so would not violate the non-compete. Another senior executive said their non-compete prevented them from taking a job at a smaller, more innovative company in their industry. Some commenters warned that permitting non-competes for senior executives would reinforce dominant positions for industry incumbents who can foreclose new entrants from access to critical talent and expertise. An advocate for startups stated that small businesses significantly benefit from mentorship from experienced founders, which can be inhibited by non-competes.
Other commenters argued that the Commission should exclude senior executives from coverage under the final rule because doing so would benefit competition in product and service markets. These commenters generally stated that non-competes may promote innovation by encouraging firms to make productivity-enhancing investments, such as investments in developing trade secrets. The Commission does not believe that non-competes are needed to protect valuable firm investments. As discussed in Part IV.D, the Commission finds that employers have less restrictive alternatives for protecting valuable investments and that these alternatives are available for senior executives as well as for other workers.
In addition, when assessing how non-competes with senior executives affect competition in product and service markets, the Commission believes it is important to consider the net impact. It is possible that the effects described by these commenters and the effects described by the Commission earlier in this Part IV.C.2.c.i can be occurring at the same time. That is, a non-compete with a senior executive might in some instances be protecting a firm's investments in a manner that is productivity-enhancing, holding all else equal. At the same time, however, that same non-compete may restrict the executive's ability to start a new business after leaving the firm. And even that same non-compete can—and certainly non-competes in the aggregate do—prevent the most efficient match between senior executives and the firms that can make the highest and best use of their talents, and decrease knowledge flow between firms, which limits the cross-pollination of innovative ideas. What the empirical evidence shows is that overall,
A commenter—referencing the Shi study—argued that banning buyout clauses in non-competes would enhance economic efficiency relative to banning non-competes altogether. Other commenters, including Shi, the author of the study, disagreed with this claim.
Some commenters disputed the Commission's legal rationale for prohibiting non-competes with senior executives. One comment stated that the NPRM did not cite any case law where a non-compete for a senior executive violated antitrust law and argued that there is no widespread case law to support a
Another commenter stated that the NPRM did not satisfy the standard for finding a tendency to negatively affect competitive conditions for senior executives as set forth in the Commission's section 5 Policy Statement.
The Commission finds that non-competes for senior executives are an unfair method of competition under section 5 for all the reasons described in this Part IV.C.2. The Commission states the applicable legal standard under section 5 in Part II.F, which is consistent with the standard set forth in the Policy Statement. As noted in Part
The effects of non-competes with senior executives on product and service markets are the primary reason why the Commission finds that non-competes with senior executives are an unfair method of competition. However, non-competes also tend to negatively affect competitive conditions in labor markets.
In Part IV.B.3.a, the Commission describes extensive empirical evidence that non-competes reduce labor mobility and worker earnings. The Commission's finding in Part IV.B.3.a that non-competes suppress labor mobility and earnings does not examine non-competes with senior executives specifically. However, the evidence cited by the Commission is also probative with respect to non-competes with senior executives.
Non-competes reduce labor mobility for senior executives for the same reasons they reduce labor mobility for other workers—they directly restrict workers from seeking or accepting other work or starting a business after they leave their job. In Part IV.B.3.a.i, the Commission cites empirical evidence that non-competes reduce labor mobility. This evidence shows that non-competes reduce labor mobility for all subgroups of workers that have been studied, including inventors, high-tech workers, low-wage workers, and workers across the labor force. The impact of non-competes on labor mobility is direct, since non-competes directly prohibit certain types of mobility. Therefore, the Commission finds the non-competes restrict the labor mobility of senior executives as well.
This finding is supported by Mark Garmaise's study of the relationship between non-compete enforceability and the labor mobility and earnings of executives.
Furthermore, by inhibiting efficient matching between executives and firms—through a similar mechanism as for all other workers
As described in Part IV.B.3.a.ii, the empirical research indicates that non-competes suppress wages for a wide range of subgroups of workers across the spectrum of income and job function, including workers who are not subject to non-competes. Importantly, an empirical study that does focus on senior executives finds that non-competes suppress earnings of senior executives. The Garmaise study finds that decreased enforceability of non-competes increases executives' earnings by 12.7%.
As noted in Part IV.C.1, many senior executives negotiate valuable consideration for non-competes. However, the evidence suggests that non-competes still have a net negative effect on senior executives' earnings, because the suppression of earnings through reduced labor market competition more than cancels out the compensation that some of these executives individually receive for their non-competes.
A second study, by Kini, Williams, and Yin,
Many commenters addressed negative effects of non-competes with senior executives on competition in labor markets. Non-competes, these commenters stated, can negatively affect a senior executive's career when they leave their field or sit out of the workforce for a period, causing their skills and knowledge (particularly in fast-paced fields) to stagnate and affecting their reputations. Like other workers, some senior executives said their non-compete limited their options and earnings in their specialized field.
Other commenters argued the Commission should exclude senior executives from the rule because they earn more compensation, including higher wages, for non-competes than they would gain under the final rule. Many of these commenters argued that because senior executives have bargaining power, any findings on decreased wages would not apply to them. Some employers stated they compensated their senior executives for non-competes. Some industry organizations stated that some additional compensation and bonuses might not be offered if non-competes are banned. One business stated the compensation it pays executives takes their non-competes into account. Another business stated it provides severance benefits in exchange for non-competes that fully compensate the executive for the duration of the non-compete.
In response to these comments, the Commission notes the Garmaise study indicates that non-competes have a net negative effect on earnings for senior executives in the aggregate because they suppress competition, even if individual senior executives receive some amount of compensation for their personal non-compete. Garmaise's analysis accounts for any compensation the executive receives for the non-compete.
An industry trade organization stated that non-competes create job opportunities for executives and other highly skilled workers, rather than restricting them, because, without non-competes to protect confidential information, employers will often be reluctant to expand their executive teams. The Commission notes this assertion is unsupported by empirical evidence, and the Commission finds that firms have less restrictive alternatives for protecting confidential information.
An investment industry organization stated that the Commission cannot assume senior executives will be equally or more effective at new firms compared to their old firms. In response, the Commission notes that voluntary labor mobility—for senior executives and all workers—typically reflects a mutually beneficial outcome. To the extent a firm is willing to pay more to attract a particular worker to come work for them, it is typically because the firm places a higher value on the worker's productivity than the worker's current employer. In addition, the Commission notes that many commenters stated that non-competes often force senior executives to sit out of the workforce, causing them to lose valuable knowledge and skills. In general, senior executives are more likely to be effective when they can remain in the industry in which they have experience and expertise, rather than starting over in a new industry because of a non-compete.
An industry trade organization stated that the Commission's assertion that wages are reduced across the labor market is inconsistent with the NPRM's preliminary finding that non-competes are not coercive or exploitative for senior executives, because when more issues are left for negotiation, the job market is increasingly competitive, as workers can differentiate themselves through their terms and tailor their terms to each employer. The Commission does not believe these findings are in tension. Agreements do not need to be exploitative or coercive to inhibit efficient matching between workers and firms or to negatively affect competitive conditions. Furthermore, the Commission believes that executives have many other ways to differentiate themselves other than based on non-compete terms.
One commenter argued that the findings in the Kini, Williams, and Yin study should not be interpreted as representing a causal relationship. Upon further consideration, the Commission agrees with this comment and does not interpret this study causally, as described in this Part IV.C.2.c.ii.
For these reasons, the Commission finds that non-competes with senior executives are an unfair method of competition. As a result, the Commission declines to exclude senior executives from the final rule altogether.
The final rule prohibits employers from, among other things, entering into or enforcing new non-competes with senior executives—
The Commission believes the evidence could provide a basis for prohibiting employers from enforcing existing non-competes with senior executives, as the final rule does for all other workers, given the tendency of such agreements to negatively affect competitive conditions.
Numerous businesses and trade associations argued that, if the final rule were to invalidate existing non-competes for senior executives, that would present practical challenges for employers, because many such non-competes were exchanged for substantial consideration. According to commenters, consideration exchanged for non-competes includes long-term incentive plans, bonuses, stock awards, options, or severance payments, among other arrangements.
Some commenters were concerned about a potential windfall for workers. They argued that if the non-compete portion of the contract were rescinded or otherwise invalidated, the worker may be left with any benefits already received in exchange for the non-compete, such as equity or bonuses, and could also compete. An industry association stated that some of its members' workers have already received thousands or hundreds of thousands of dollars in additional compensation alongside non-competes, though it was unclear what each worker received. Some business associations said businesses do not have a clear way to recover those payments or benefits. A commenter asked whether a worker who forfeited equity for competing could get the equity back or if executives who were compensated by their new
The Commission views the problem as more complex than these commenters suggest. First, the empirical evidence and comments illustrate that in many cases, non-competes are currently trapping workers, including senior executives, in their jobs, meaning the employer is getting not only the benefit of trapping that individual worker, but also the benefit of non-competition.
In addition, most workers subject to a non-compete are subject to other restrictive covenants,
The Commission also notes that, to the extent equity was provided as consideration, owning a share in the prior employer may induce workers not to risk lowering the value of that equity by competing. However, the concern about workers seeking already-forfeited compensation is misplaced, as the final rule will not impact workers who forfeited compensation for competing under a then-valid non-compete.
Overall, however, where an employer has provided meaningful consideration in exchange for a non-compete, the comments indicate that being unable to enforce that non-compete may complicate that exchange in a way that would be difficult to value and untangle. These difficult practical assessments indicate that the final rule should contain a limited, easily administrable exception for existing non-competes with senior executives, who are considerably more likely than other workers to have negotiated non-competes and received substantial consideration in return.
In addition, an employment attorney suggested that employers may suspend any mid-stream benefits and terminate unvested options and stock and cancel bonuses. One commenter suggested employers may seek refunds from workers, which could create uncertainty. Similarly, an industry association said senior workers who signed a non-compete as part of a severance agreement might see their severance payments taken away, as employers would need to decide whether to continue paying despite the elimination of non-competes or, to the extent they legally can, attempt to renegotiate any outstanding severance agreements. Finally, a business said executives in the middle of their contracts might need to renegotiate those contracts. The Commission shares these concerns about the practicalities of untangling non-competes that are more likely to have been bargained for. Senior executives who engaged in a fair bargaining process may have obtained significant consideration and planned accordingly, as have their employers. While employers' ability to stop payments or claw back consideration is uncertain, any efforts to do so could be disruptive.
Other commenters stated that they believed rescission could result in litigation against workers. An employment lawyer said litigation was difficult to predict but that there could be litigation seeking declarations from courts on how the rule impacts existing contracts. A group of commenters stated that rescinding or invalidating agreements would lead to increased litigation against workers who received the benefit of the bargain but were no longer bound by a non-compete in exchange, and that such litigation would seek to nullify severance agreements, employment agreements, clawback agreements, and others.
One business said the NPRM was silent on how to address specially taxed arrangements, but the business did not provide additional details on any such arrangements. A law firm said workers who received consideration in a prior year would have paid taxes on it and would now need to amend their prior tax return to get a refund if they have to pay back that consideration, while employers might have to amend their return to reflect the loss of a deduction. That law firm also said some executives and other workers use and plan for non-competes to reduce their “golden parachute” tax burden.
Finally, an accountant explained that valuations of senior executive non-competes are conducted during many merger and acquisition transactions. Similarly, an industry association said acquisition prices may include the value of non-competes that ensure the buyer retains certain talent, so if non-competes were rescinded or invalidated the buyer would lose the value of what they paid for with no way to recoup the costs. The commenter stated that the bargained-for value of such sales may decrease if existing senior executive non-competes cannot be enforced. The exemption for existing non-competes addresses this concern. Moreover, this concern does not exist for future transactions in any event, since they would not account for non-competes that have been banned.
In response to the foregoing comments, the Commission finds it plausible that rendering existing non-competes with senior executives enforceable could create some of these practical implementation challenges. The Commission accordingly elects to exclude existing non-competes with senior executives from the rule, reducing the burden of implementation of the final rule.
The Commission also understands that some of these practical concerns could arise for workers other than senior executives if they received substantial consideration in exchange for a non-compete. However, the evidence indicates that any such agreements with workers other than senior executives are very rare, and that such workers are more likely to experience exploitation and coercion in connection with non-competes. Therefore, allowing only existing non-competes with senior executives to remain in force will significantly reduce these practical concerns for employers. In contrast, a wider exemption for all existing agreements would leave in place a large number of non-competes that tend to harm competitive conditions, including a large number of exploitative and coercive non-competes for which no meaningful consideration was received.
Some commenters suggested the Commission exempt from the final rule non-competes in exchange for which the worker received consideration. One business asked for an exception to the final rule for paid non-competes, asserting that such an exception would allow workers to receive guaranteed payments while accessing information and training and would allow workers to start their own businesses after the non-compete period. Another business recommended allowing non-competes that provide severance equal to a worker's salary for the non-compete period. An employment attorney suggested an exception from the rule for non-competes that are part of a severance agreement or where the
The Commission declines to adopt an exception for non-competes in exchange for which the worker received consideration (whether under an existing or future non-compete). The fact that a worker received compensation for a non-compete does not mean the worker received fair compensation,
Finally, the Commission concludes that allowing existing non-competes for senior executives to remain in effect is appropriate despite the significant negative effects of such non-competes on competition described in Part IV.C.2. The Commission took into consideration that non-competes with senior executives are less likely to be causing ongoing harm to individuals by preventing them from seeking or accepting other work or starting their own business, because such non-competes were likely to have been negotiated or exchanged for consideration. In addition, the negative effects of these non-competes on competitive conditions will subside over time as these non-competes expire.
As noted earlier, the Commission did not define the term “senior executive” in the NPRM. Instead, the Commission requested comment on how the term should be defined.
This definition is relevant because, as explained in Part IV.C.2, the basis for the Commission's findings that non-competes with senior executives are unfair methods of competition differs in some ways from the evidence and rationales underpinning its findings that non-competes with other workers are unfair methods of competition. Furthermore, as explained in Part IV.C.3, the final rule allows existing non-competes with senior executives to remain in force, while prohibiting employers from enforcing existing non-competes with other workers after the effective date.
The Commission defines “senior executives” based on an earnings test and a job duties test. In general, the term “senior executives” refers to workers earning more than $151,164
The NPRM requested comment on how to define senior executives while providing sufficient clarity to employers and workers.
Many commenters suggested combining a compensation threshold with a job duties test. For example, one business supported excepting workers who met a combination of tests based on a compensation threshold, FLSA exemption status, and access to trade secrets. A law firm suggested the final rule should account for both pay, exempting only low-wage hourly workers, and job duties in determining an exception. One commenter suggested defining “senior executive” based on total compensation, job title, and job duties. Though the Commission does not adopt these specific duties and wage combinations, the Commission agrees that a combined approach is necessary.
The Commission has determined that the definition of “senior executive” should include both a compensation threshold and job duties test, similar to
The two-part test isolates the workers most likely to have bargaining power to negotiate meaningful consideration for a non-compete and least likely to experience exploitation and coercion in connection with non-competes. A compensation threshold ensures that stakeholders do not need to spend time assessing the job duties of workers below the threshold—minimizing the amount of detailed analysis stakeholders must undertake. A compensation threshold also helps ensure that workers who work in positions with “senior executive” classifications but likely lack meaningful bargaining power due to their relatively low incomes and who likely did not receive meaningful consideration for a non-compete are excluded from the definition. The job duties test ensures that the definition identifies the individuals most likely to have bespoke, negotiated agreements—those with the highest level of authority over the organization—while also ensuring that high-earning workers who are not senior executives, who likely experience exploitation and coercion from non-competes and do not generally bargain over them, are not captured by the definition.
Clarity from a compensation threshold is essential, as without clarity workers and employers would often be uncertain about a non-compete's enforceability (absent adjudication), and such uncertainty often fosters
While there may be some workers other than senior executives as defined here who may have bargained for consideration for a non-compete, the benefits to workers and employers of a clear and administrable definition outweigh the risk that some bargained-for non-competes are invalidated. In Part IV, the Commission finds even bargained-for non-competes tend to negatively affect competitive conditions. The Commission finds that the need to avoid an overinclusive exception that increases those harms to competitive conditions outweighs the risk that in rare instances private parties with non-competes other than with senior executives may need to restructure their employment agreements to utilize less restrictive alternatives that burden competition to a lesser degree.
Many commenters sought an exception for senior executives and/or highly paid and highly skilled workers based on justifications such as access to trade secrets or confidential information, rather than compensation thresholds. Some argued that compensation thresholds do not align with or allow individualized assessments of which workers meet a given justification such as access to confidential information. One law firm commented that a bright-line compensation threshold would eliminate non-competes for lower wage workers while allowing non-competes for what the commenter viewed as legitimate business purposes. Some commenters opposed an exception for senior executives because they believed “senior executive” would be too difficult to define. In Part V.D.2, the Commission explains why it is not adopting an exception for workers based on their access to trade secrets and other intellectual property. Further, in the Commission's view, eliminating the need for individualized assessments for most workers is the primary advantage of a compensation threshold, not a drawback (although the Commission declines to adopt a compensation threshold alone for reasons stated previously and in Part V.D.1). However, the evidence indicates that an exception for existing senior executive non-competes is appropriate, which the Commission defines here.
Commenters, both those supporting and opposing the rule, pointed out several issues with compensation thresholds standing alone. Some commenters were concerned a compensation threshold would exclude some workers, such as many physicians, from the final rule's benefits based on their income level. Two commenters said an exception would penalize the advancement of workers near a threshold and those workers may have to choose between higher wages or being free from a non-compete. Including the job duties tests alongside the compensation threshold mitigates the risk of such cliff effects, assuming they exist (which is far from clear).
Some commenters asserted a threshold would need to be updated for inflation, while one law firm commented that frequent updates would make the final rule more difficult to understand and implement. Commenters also pointed out the need to explain when the threshold would be measured. While adjusting for inflation could be important to ensure the final rule continues serving its intended function if the compensation threshold governed a total exemption from the rule (as these commenters assume), it is unnecessary to the final rule because the exception adopted applies only to existing non-competes (
Based on the considerations described in Part IV.C.4.a.i, the Commission adopts a two-pronged definition of “senior executive” in § 910.1. Under § 910.1, a senior executive is a worker who was in a policy-making position and who received from a person for the employment:
• Total annual compensation of at least $151,164 in the preceding year (under paragraph (2)(i)); or
• Total compensation of at least $151,164 when annualized if the worker was employed during only part of the preceding year (under paragraph (2)(ii)); or
• Total compensation of at least $151,164 when annualized in the preceding year prior to the worker's departure if the worker departed from employment prior to the preceding year and the worker is subject to a non-compete (under paragraph (2)(iii)).
Paragraph (2)(ii) applies to workers who were in a policy-making position during only part of the preceding year, which includes workers who were hired or who left a business entity within the preceding year as well as workers who were promoted to or demoted from a policy-making position in the preceding year. Paragraph (2)(iii) ensures that the exception applies to senior executives who departed from the employer more than one year before the effective date but are still subject to a non-compete (
To clarify the definition's compensation threshold, the final rule includes definitions of “total annual compensation” and “preceding year.” To clarify the job duties test, the final rule includes definitions of “policy-making position” as well as two additional terms that are in the definition of “policy-making position”: “officer” and “policy-making authority.” These definitions are described in Parts IV.C.4.b and IV.C.4.c.
Pursuant to § 910.1, the senior executive exception applies only to workers who received total annual compensation of at least $151,164 from a person for employment in a policy-making position in the most relevant preceding year. Section 910.1 further defines “total annual compensation” and “preceding year,” respectively. This threshold is based on the 85th percentile of earnings of full-time salaried workers nationally.
The Commission draws this line between more highly paid and less highly paid workers based on its assessment of which workers are more likely to experience exploitation and coercion and less likely to have engaged in bargaining in connection with non-competes and the need to implement a two-part test. As commenters noted, there is no single compensation threshold above which zero workers will have been coerced and exploited and below which zero workers will have been uncompensated for the non-compete that binds them. Based on the Commission's expertise and after careful review of the rulemaking record, including relevant data, the empirical research, and the public comments, the Commission concludes $151,164 in total annual compensation reflects a compensation threshold under which workers are likely to experience such exploitation and coercion and are less likely to have bargained for their non-competes, while providing employers a readily administrable line. With this line, market participants can easily know that workers below the line cannot be subject to non-competes, minimizing both
The Commission looked to several sources and suggestions from the comments in selecting a threshold. Numerous commenters suggested the Commission should look to the FLSA, and some specifically recommended the FLSA regulations' threshold for highly compensated employees.
Another Federal regulatory threshold for high wage workers noted by commenters also aligns with the 85th percentile of full-time salaried workers nationally in 2023 or approximately $150,000. In the retirement context, the IRS sets a threshold for highly compensated employees at $150,000 for 2023 and $155,000 for 2024.
The Commission analyzed occupational wage data to identify a threshold that would capture more highly paid senior executives, who are likely to have bespoke, negotiated non-competes. BLS's most recent wage data indicates that workers in the “chief executive” category have a median wage of $209,810.
The Commission also considered a lower wage threshold of approximately $100,000, which would be closer in range to the DOL highly compensated employee threshold of $107,432 that DOL adopted in 2019. According to 2022 BLS data, the median wage for “top executives” in the U.S. is $99,240.
Similarly, the Commission believes a $107,432 (or thereabouts) threshold would be overinclusive and individuals who likely do not have bespoke, negotiated non-competes—and who were likely to be exploited and coerced—could meet the threshold test. The $107,432 threshold was adopted based on earnings in 2018 and 2019. Adjusting for inflation, $107,432 in June 2019 is the equivalent of $130,158 in February 2024. Moreover, as noted previously, BLS data reflect that chief executives generally earn significantly more than $130,158. In contrast, occupations with a median wage below $151,164 but above $107,432 include: advertising, marketing, promotions, public relations, purchasing, and sales managers; financial managers; software developers; physician assistants; optometrists; nurse practitioners; and pharmacists.
Accordingly, the Commission adopts a threshold of $151,164. This threshold, combined with the duties test, reflects highly compensated individuals who are most likely to have the bespoke, complex non-competes that the Commission elects to leave undisturbed, and who the Commission finds are less likely to experience coercion and exploitation. This threshold also has significant administrability benefits, as it is calculated in accord with definitions used in FLSA compliance, with which employers are generally familiar. This alignment will yield efficiency benefits that reduce compliance burdens on employers.
After careful review, the Commission decided not to choose a threshold higher or lower in part because as the compensation threshold in the rule increased, fewer small businesses and firms in areas with lower wages and costs of living would have senior executives with non-competes who would qualify for the exception as compared to larger businesses. Similarly, the lower a threshold is, the more workers who live in areas with higher wages and costs of living would fall above the threshold.
The Commission also declines to adopt a locality adjustment. Some commenters said that a uniform national threshold could lead to geographic disparities because of the different cost of living and average incomes in different areas. Geographic disparities are difficult to resolve, as disparities often exist not just between States, but, for example, between urban and rural areas within a State. The Commission considered this factor in selecting the $151,164 threshold compared to other options. Tailoring a compensation threshold to every locality or even State or region would be burdensome and generate significant confusion for workers and employers. The Commission finds that the importance of a uniform threshold to avoid confusion and for administrability outweighs the drawbacks of any geographic disparities, particularly in light of comments from employers stating that the existing patchwork of State laws is burdensome to navigate. The Commission notes that neither DOL nor IRS have adopted thresholds for highly compensated individuals that vary geographically. Given the rise in remote work, applying geographic variation to employers and workers would also prove burdensome. Moreover, total annual compensation under § 910.1 includes traditional bonuses or compensation a senior executive might receive, such as a bonus tied to performance that is paid pursuant to any prior contract, agreement, or promise. The rule also allows for the entire amount of such bonuses to be credited to total annual compensation, thus, increasing the likelihood of capturing highly compensated policy-making individuals across the nation.
The Commission estimates that approximately 92% of workers will fall below this compensation threshold, ensuring that existing non-competes will be unenforceable for the vast majority of workers most likely to experience exploitation and coercion in connection with non-competes.
Section 910.1 provides that “total annual compensation” is based on the worker's earnings over the preceding year. It is based on DOL's regulation defining “total annual compensation” for highly compensated employees in 29 CFR 541.601(b)(1) and matches DOL's determination of what types of compensation can count towards total annual compensation for highly compensated employees.
Section 910.1, like DOL's definition, states that total annual compensation may include salary, commissions, nondiscretionary bonuses and other nondiscretionary compensation earned during that 52-week period. Nondiscretionary bonuses and compensation includes compensation paid pursuant to any prior contract, agreement, or promise, including performance bonuses the terms of which the worker knows and can expect.
This regulatory text makes one modification to the DOL approach to correspond to the final rule's purposes and the non-compete context. Based on comments received, the Commission decided not to adopt DOL's base salary requirement for highly compensated employees in its definition of compensation, which serves a different purpose than the definition adopted here. The 2019 DOL regulation requires that a portion of the worker's total annual compensation must be paid on a salary or fee basis in order to qualify as a highly compensated employee, to ensure that the worker receives at least a base salary and to guard against potential abuses.
The definitions of “senior executive” and “total annual compensation” in § 910.1 use the term “preceding year.” To provide clarity and facilitate compliance, the Commission defines the term “preceding year” in § 910.1 as a person's choice among the following time periods: the most recent 52-week year, the most recent calendar year, the most recent fiscal year, or the most recent anniversary of hire year. The term “preceding year” is drawn from DOL's FLSA regulations in 29 CFR 541.601(b)(4), which states that “[t]he employer may utilize any 52-week period as the year, such as a calendar year, a fiscal year, or an anniversary of hire year. If the employer does not identify some other year period in advance, the calendar year will apply.” Here, the Commission similarly gives employers flexibility to minimize compliance costs, as many employers may have compensation more readily available based on the last calendar year, their fiscal year, or the anniversary of a worker's hire as part of tax and other reporting requirements.
In seeking to exempt senior executives and highly paid workers from the rule altogether, commenters suggested several possible wage-related thresholds, including specific dollar thresholds (
As explained in Part V.D, the Commission declines to exempt workers from the rule altogether based on their earnings. With respect to defining the workers whose
One business recommended an exception for individuals in the top 10% income tier at their respective employers to exempt workers at start-ups that might not be able to compensate their workers at a high level but whose workers may still be exposed to trade secrets. Another proposed using Internal Revenue Code section 414(q), defining highly compensated employee as the highest paid 1% or 250 employees in the corporation. A percentage threshold, however, has significant practical issues including workers entering and exiting, earnings changes, and factoring in independent contractors, workers at subsidiaries, or workers at parent companies. It would also lead to disparities between large and small firms, as large firms could use non-competes for far more workers than could small firms.
Other commenters pointed to State laws setting a compensation threshold to support excluding highly paid workers from the final rule or suggested the Commission look to those States as an example. A public policy organization that supported a categorical ban said any threshold should be at least higher than $100,000, citing research on Washington's non-compete reforms that indicated employers did not value non-competes up to that threshold.
In NPRM, the Commission suggested that the final rule's definition of senior executive could be based on SEC Rule 3b-7.
Section 910.1 defines “policy-making position” as a business entity's president, chief executive officer or the equivalent, any other officer of a business entity who has policy-making authority, or any other natural person who has policy-making authority for the business entity similar to an officer with policy-making authority. The definition of “policy-making position” further states that an officer of a subsidiary or affiliate of a business entity that is part of a common enterprise who has policy-making authority for the common enterprise may be deemed to have a policy-making position for the business entity for purposes of this paragraph. Finally, the definition of “policy-making position” states that a natural person who does not have policy-making authority over a common enterprise may not be deemed to have a policy-making position even if the person has policy-making authority over a subsidiary or affiliate of a business entity that is part of the common enterprise.
Section 910.1 also defines terms used in the definition of “policy-making position.” Section 910.1 defines “officer” as a president, vice president, secretary, treasurer or principal financial officer, comptroller or principal accounting officer, and any natural person routinely performing corresponding functions with respect to any business entity whether incorporated or unincorporated. To account for differences in the way business entities may use and define job titles, the definition includes workers in equivalent roles. By incorporating this definition of “officer,” “senior executive” applies to workers at the highest levels of a business entity.
This definition is nearly verbatim of the SEC definition of “officer” in 17 CFR 240.3b-2. That term “officer” is used in SEC Rule 3b-7.
Section 910.1 defines “policy-making authority” as final authority to make policy decisions that control significant aspects of a business entity or a common enterprise. The definition further states that policy-making authority does not include authority limited to advising or exerting influence over such policy decisions or having final authority to make policy decisions for only a subsidiary of or affiliate of a common enterprise.
Accordingly, for a worker to be a senior executive, in addition to meeting the compensation threshold, the worker must be at the level of a president, chief executive officer or the equivalent, officer (defined in § 910.1), or in a position that has similar authority to a president or officer. Further, an officer or other qualifying person must have policy-making authority. Presidents, chief executive officers, and their equivalents are presumed to be senior executives (
For example, many executives in what is often called the “C-suite” will likely be senior executives if they are making decisions that have a significant impact on the business, such as important policies that affect most or all of the business. Partners in a business, such as physician partners of an independent physician practice, would also generally qualify as senior executives under the duties prong, assuming the partners have authority to make policy decisions about the business. The Commission notes that such partners would also likely fall under the sale of business exception in § 910.3 if the partner leaves the practice and sells their shares of the practice. In contrast, a physician who works within a hospital system but does not have policymaking authority over the organization as a whole would not qualify.
The Commission changed some aspects of SEC Rule 3b-7 to fit the context of this rulemaking. First, because § 910.2(a)(2) will extend to non-public companies, unlike SEC regulations, the final rule's definition of “policy-making position” does not include the phrase “any vice president of the registrant in charge of a principal business unit, division or function (such as sales, administration or finance)” in the definition of “executive officer.”
Second, SEC Rule 3b-7 uses the term “policy making function” as part of its definition of the types of job duties that could classify a person as an “executive officer.”
In defining this term, the Commission seeks to broadly align with the SEC's definition of “executive officer” while focusing on senior executives in a wider variety of entities, who are less likely to experience exploitation and coercion. As explained in Part IV.C.4.b with respect to the compensation threshold, there is no job duties test that will exclude every worker who experiences exploitation and coercion with respect to non-competes while including every worker who does not. Building on the SEC definition provides firms and workers with a more administrable definition that isolates workers at the most senior level of an organization.
To ensure that the final rule's job duties test for senior executives broadly aligns with the SEC definition, the Commission looked to case law interpreting that SEC definition. Few courts have interpreted SEC Rule 3b-7's “policy making function” language, though some courts view it as an officer test.
The Commission finds this case law instructive and thus defines “policy-making authority” in the final rule as “final authority to make policy decisions that control significant aspects of a business entity and does not include authority limited to advising or exerting influence over such policy decisions.” Adding this definition provides stakeholders with additional clarity as to what type of authority meets the definition of “senior executive” and prevents overbroad application of the definition. It expressly does not include workers who merely advise on or influence policy, as a wide range of workers in an organization can advise on or influence policy without being a senior executive.
In order to ensure that lower-level workers, whom the Commission finds likely experience exploitation and coercion, are not included in the definition of senior executive, policy-making authority is assessed based on the business as a whole, not a particular office, department, or other sublevel. It considers the authority a worker has to make policy decisions that control a significant aspect of a business entity without needing a higher-level worker's approval. For example, if the head of a marketing division in a manufacturing firm only makes policy decisions for the marketing division, and those decisions do not control significant aspects of the business (which would likely be decisions that impact the business outside the marketing division), that worker would not be considered a senior executive. Similarly, in the medical context, neither the head of a hospital's surgery practice nor a physician who runs an internal medical practice that is part of a hospital system would be senior executives, assuming they are decision-makers only for their particular division. The definition is limited to the workers with sufficient pay and authority such that they are more likely to have meaningful bargaining power and actually negotiated their non-competes.
For the same reason, the Commission added language to the definitions of “policy-making authority” and “policy-making position” to exclude from the definition of “senior executives” workers with policy-making authority over only a subsidiary or affiliate of a common enterprise who do not have policy-making authority over the common enterprise. One commenter argued that the proposed definition of “business entity” would allow firms to divide themselves into separate entities to evade the final rule. In addition to sharing this concern, the Commission is concerned that executives of subsidiaries or affiliates of a common enterprise
To be considered a “common enterprise” for the purposes of defining policy-making authority and policy-making position, the Commission looks beyond legal corporate entities to whether there is a common enterprise of “integrated business entities.”
The Commission has also substituted “business entity” in the definitions of “officer” and “policy-making position” where SEC Rule 3b-7 uses the word “registrant” and 17 CFR 240.3b-2 uses “organization,” because “registrant” has a specific meaning in the SEC context that is inapplicable to the wider array of business entities covered by this final rule and because “business entity” is defined in § 910.1 and is used throughout this final rule. The Commission substituted “natural person” where SEC Rule 3b-7 and 17 CFR 240.3b-2 use “person” because “person” is separately defined for purposes of this final rule in § 910.1.
Numerous commenters suggested basing a job duties test on the categories of occupations that are exempt from requirements under the FLSA. Some commenters suggested using only some of the exemptions such as executive employees,
One civic organization opposed applying any FLSA exemptions, stating that the FLSA provides numerous exemptions that do not relate to any non-compete policy considerations, and an exception or more lenient standards for FLSA-exempt workers would not solve the problems caused by non-competes. It opposed using the FLSA's executive, administrative, or professional exemptions, arguing that updates to the FLSA's salary threshold are often delayed and outdated, often falling below the poverty threshold, and the duties test serves as a loophole for wage and hour protections.
Commenters offered several reasons for adopting the FLSA exemptions: these categories are already well-established in Federal law; nonexempt workers under the FLSA tend not to have access to trade secrets or be able to take an employer's goodwill and are thus less likely to harm the employer; the exemptions would capture both wage and job duties tests; some States use a similar standard to the FLSA in their non-compete statutes; and the exemptions would ban non-competes for low-skilled workers for whom there are insufficient justifications for non-competes. An employment attorney also pushed back on the NPRM's concerns that the FLSA exemptions could enable misclassification,
The Commission does not adopt the FLSA exemptions for purposes of this final rule because it would exempt millions of non-competes that harm competition and workers. For example, the FLSA exempts most highly paid and highly skilled workers,
Numerous commenters urged the Commission not to ban non-competes for workers who have access to trade secrets and confidential information, often noting this justification is commonly used for highly paid and highly skilled workers, including senior executives. One comment expressly stated that this exception should apply regardless of earnings, though many
The Commission carefully considered several other proposed tests. The NPRM stated that the Commission could base the definition of senior executive on SEC Regulation S-K's definition of senior executives.
One commenter proposed adopting a definition similar to the tax code provision on “golden parachute payments.”
The Commission carefully considered each proposed definition and how it would operate in practice before selecting the two-part test. Elements of some of these proposals, such as strategy development or decision-making, are also similar to the job duties test the Commission is finalizing. The Commission believes that definitions based on job titles alone would be inadequate because, as one industry association commented, employers define job titles differently, and a title might not accurately reflect a worker's job duties. The other definitions proposed by commenters, such as the provision on golden parachute payments, would generally require a more fact-intensive analysis than the job duties test the Commission is adopting. Market participants would need to conduct the analysis for more workers, including workers who are exploited and coerced by non-competes. A more fact-intensive analysis would require more resources for litigation and is thus likely to have
As explained in this Part, the Commission pairs a relatively easy-to-apply job duties test with a compensation threshold to maximize administrability and clarity while identifying those senior executives most likely to have bargained for non-competes. In addition, proposals to except partners, shareholders, and similar groups are likely covered by the sale of business exception if they sell their share of the business upon leaving.
Based on the totality of the evidence, including its review of the empirical literature, its review of the full comment record, and its expertise in identifying practices that harm competition, the Commission adopts § 910.2(a)(2), which defines unfair methods of competition related to non-competes with respect to senior executives. Section 910.2(a)(2) provides that, with respect to a senior executive, it is an unfair method of competition for a person: (i) to enter into or attempt to enter into a non-compete clause; (ii) to enforce or attempt to enforce a non-compete clause entered into after the effective date; or (iii) to represent that the senior executive is subject to a non-compete clause, where the non-compete clause was entered into after the effective date. Part IV.A.1 sets forth the Commission's determination that the foregoing practices are unfair methods of competition under section 5, and Part IV.C.2 explains the findings that provide the basis for this determination.
Section 910.2(a)(2) uses similar language as § 910.2(a)(1); however, there are two key differences. First, the prohibition in § 910.2(a)(2)(ii) on enforcing or attempting to enforce a non-compete applies only to non-competes entered into after the effective date. Second, the prohibition in § 910.2(a)(2)(iii) on representing that a senior executive is subject to a non-compete applies only where the non-compete was entered into after the effective date. Sections 910.2(a)(2)(ii) and (iii) include this language because, for the reasons described in Part IV.C.3, the Commission has determined not to prohibit existing non-competes with senior executives—
Otherwise, the explanation of the three prongs of § 910.2(a)(1) in Part IV.B.4—relating to issues such as, for example, what “attempt to enter into” and “attempt to enforce” mean, and what conduct the “representation” prong applies to—is applicable to the corresponding language in § 910.2(a)(2). The good-faith exception in § 910.3 is also applicable to the relevant prohibitions with respect to senior executives and is explained in Part V.C.
For the reasons described in Parts IV.B and IV.C, the Commission determines that certain practices related to non-competes are unfair methods of competition under section 5. In this Part IV.D, the Commission finds the claimed justifications for non-competes do not alter the Commission's determination that non-competes are an unfair method of competition.
As noted in Part II.F, some courts have declined to consider justifications altogether and the Commission and courts have consistently held that pecuniary benefit to the party responsible for the conduct in question
In the NPRM, the Commission considered the commonly cited business justifications for non-competes and preliminarily found they did not alter the Commission's determination that non-competes are an unfair method of competition.
Claimed business justifications for non-competes relate to increasing employers' incentives to make productive investments, such as investments in worker human capital (worker training), client and customer attraction and retention, or in creating or sharing trade secrets or other confidential information with workers. According to these asserted justifications, without non-competes, employment relationships are subject to an investment hold-up problem. Investment hold-up would occur where an employer—faced with the possibility that a worker may depart after receiving some sort of valuable investment or obtaining valuable information—opts not to make that investment in the first place, thereby decreasing the firm's productivity and overall social welfare. For example, according to this claimed justification, an employer may be more reticent to make capital investments or invest in workers' human capital by training its workers if it knows the worker may depart for or may establish a competing firm. Similarly, commenters argued that employers may decrease investments or experience harm if a worker takes a trade secret or other confidential information to a competitor.
Courts have cited these justifications when upholding non-competes under State common law and in cases challenging non-competes under the Sherman Act.
There is some empirical evidence that non-competes increase investment in human capital of workers, capital investment, and R&D investment. However, the Commission also finds that there are alternatives that burden competition to a lesser degree,
As explained in the NPRM, a study by Evan Starr finds that moving from mean non-compete enforceability to no non-compete enforceability would decrease the number of workers receiving training by 14.7% in occupations that use non-competes at a high rate (relative to a control group of occupations that use non-competes at a low rate).
Firm-sponsored training is the type of investment in human capital that non-competes are often theorized to protect, as the firm may be unwilling to make an unprotected investment. However, the study does not distinguish between core training,
Additionally, the Starr study uses data on the use of non-competes, comparing high- and low-use occupations, rather than changes in enforceability; however, the study does not examine differences between individuals who are bound by non-
The second study, by Jessica Jeffers, finds knowledge-intensive firms invest substantially less in capital equipment following decreases in the enforceability of non-competes, though the effect is much more muted (and statistically insignificant) when considering all industries.
Jeffers finds that there are likely two mechanisms driving these effects: first, that firms may be more likely to invest in capital when they train their workers because worker training and capital expenditure are complementary (
Two studies published after the release of the NPRM also assess the effects of non-competes on firm investments. A study by Johnson, Lipsitz, and Pei revisits the form of the regressions used by Jeffers. The authors find that greater non-compete enforceability increases R&D expenditure.
Similarly, a study by Liyan Shi examines the relationship between non-compete enforceability, the use of non-competes among executives, and firm investment.
As the NPRM described, there are also two studies examining the impact of non-compete use (as opposed to non-compete enforceability) on investment. However, these studies simply compare differences between samples of workers that do and do not use non-competes, a methodology the Commission gives less weight to.
As the Commission stated in the NPRM, it gives these two studies (the 2021 Starr, Prescott, and Bishara studies and the 2021 Johnson and Lipsitz studies) minimal weight, because they do not necessarily represent causal relationships, a point recognized by the authors of both of these studies.
One additional study, by Younge and Marx, finds that the value of publicly traded firms increased by 9% due to an increase in non-compete enforceability.
As the Commission stated in the NPRM, it is unaware of any evidence of a relationship between the enforceability of non-competes and the rate at which companies invest in creating or sharing trade secrets.
In the NPRM, the Commission preliminarily found that employers have alternatives to non-competes for protecting valuable investments.
The Commission stated that trade secret law—a form of intellectual property law that protects confidential business information—already provides significant legal protections for an employer's trade secrets.
The Commission also noted that in three States—California, North Dakota, and Oklahoma—employers generally cannot enforce non-competes, so they must protect their investments using one or more of these less restrictive alternatives.
Based on the totality of the evidence, including its review of the empirical literature, its review of the full comment record, and its expertise in identifying practices that harm competition, the Commission in this final rule finds that the asserted business justifications for non-competes do not alter the Commission's determination that non-competes are an unfair method of competition. Employers have alternatives to non-competes for protecting valuable investments that burden competition to a less significant degree. Rather than restraining a broad scope of beneficial competitive activity—by barring workers altogether from leaving work with the employer or starting a business and by barring competing employers and businesses from hiring those workers—these alternatives are much more narrowly tailored to limit impacts on competitive conditions.
For the protection of trade secrets and other confidential information, these alternatives include enforcement of intellectual property rights under trade secret and patent law, NDAs, and invention assignment agreements. Employers also have alternative mechanisms to protect their investments in worker human capital, including fixed duration contracts, and competing on the merits to retain workers by providing better pay and working conditions.
The experiences of certain States in banning non-competes bolster this conclusion. Non-competes have been void in California, North Dakota, and Oklahoma since the 1800s.
The Commission finds that the economic success in these three States of industries that are highly dependent on highly trained workers, trade secrets, and other confidential information illustrates that non-competes are not necessary to protect employers' legitimate interests in trained workers or securing their intellectual property and confidential information. These alternatives are available to employers and viable both with respect to senior executives and to workers other than senior executives. The Commission addresses these alternatives in this Part IV.D.2.b and summarizes and responds to the comments on these alternatives in Part IV.D.2.c.
The Commission finds that trade secret law provides employers with a viable, well-established means of protecting investments in trade secrets, without the need to resort to the use of non-competes with their attendant harms to competition. Trade secret law is a form of intellectual property law that is specifically focused on providing employers with the ability to protect their investments in trade secrets.
Forty-seven States and DC have adopted the Uniform Trade Secrets Act (“UTSA”).
In addition, in 2016, Congress enacted the Defend Trade Secrets Act of 2016 (“DTSA”), which established a civil cause of action under Federal law for trade secret misappropriation.
Trade secret theft is also a Federal crime. The Economic Espionage Act of 1996 (“EEA”) makes it a Federal crime to steal a trade secret for either (1) the benefit of a foreign entity (“economic espionage”) or (2) the economic benefit of anyone other than the owner (“theft of trade secrets”).
Under the UTSA, DTSA, and EEA, the term “trade secret” is defined expansively and includes a wide range of confidential information.
The use of trade secret law burdens competition to a lesser degree than the use of non-competes. Trade secret law provides firms with a viable means of redressing trade secret misappropriation—and deterring trade secret misappropriation by workers—without blocking beneficial competitive activity, such as workers switching to jobs in which they can be more productive or starting their own businesses.
NDAs provide employers with another well-established, viable means for protecting valuable investments.
Appropriately tailored NDAs burden competition to a lesser degree than non-competes. Such NDAs may prevent workers from disclosing or using certain information, but they generally do not prevent workers from seeking or accepting other work, or starting their own business, after their employment ends. As the Tenth Circuit has stated, workers subject to NDAs, unlike workers subject to non-competes, “remain free to work for whomever they wish, wherever they wish, and at whatever they wish,” subject only to the terms that prohibit them from disclosing or using certain information.
The Commission finds that employers have additional well-established means of protecting valuable investments in addition to trade secret law and NDAs. For the protection of trade secrets and other confidential information, the Commission finds that these additional means include patent law and invention assignment agreements. Patent law provides inventors with the right, for a certain period of time, to exclude others from making, using, offering for sale, or selling an invention or importing it into the U.S.
Employers can further protect their property interests in these forms of intellectual property through appropriately tailored invention assignment agreements. These are agreements that give the employer certain rights to inventions created by the employee during their employment with a firm.
With respect to investments in worker human capital, the Commission finds that these less restrictive alternatives include fixed duration contracts and competing on the merits to retain workers. If an employer wants to prevent a worker from leaving right after receiving valuable training, the employer can sign the worker to an employment contract with a fixed duration. An employer can establish a term that is long enough for the employer to recoup its human capital investment, without restricting who the worker can work for, or their ability to start a business, after their employment ends. In doing so, the employer makes a commitment to the worker and vice versa.
Finally, instead of using non-competes to lock in workers, the Commission finds that employers that wish to retain their workers can also compete on the merits for the worker's labor services—
Many commenters agreed with the Commission's preliminary finding that employers have less restrictive alternatives to non-competes. These commenters asserted that trade secret law, combined with NDAs, creates a powerful deterrent to post-employment disclosures of trade secrets and confidential information, and that these tools adequately protect valuable investments in the absence of non-competes. The Commission agrees with these commenters. Other commenters asserted that the alternatives to non-competes identified in the NPRM are inadequate for protecting employer investments. The Commission summarizes and responds to the comments it received on less restrictive alternatives in this Part IV.D.2.c.
Several commenters who generally supported the proposed rule stated that trade secret law and NDAs offer meaningful enforcement advantages to employers compared with non-competes. A few commenters stated that, unlike non-competes, trade secret law and NDAs are broadly enforceable in all fifty States. A few commenters stated that, while monetary penalties for breaching non-competes are ordinarily difficult to obtain, employers can obtain substantial monetary recovery for trade secret law and NDA violations. The Commission agrees with these comments.
Several commenters stated that the scope of trade secret law is limited in various respects. Several commenters stated, for example, that customer lists, pricing, and bid development information are typically excluded from the definition of “trade secret” under the DTSA and the law of many States.
Some commenters argued that other tools under intellectual property law, such as patent and trademark law, are inadequate to protect employers' investments. These commenters misinterpret the Commission's findings. The Commission did not find in the NPRM, nor does it find in this final rule, that patent law standing alone or trademark law standing alone provide employers benefits equal to the benefits they may reap from an unfair method of competition, namely the use of non-competes. Rather, the Commission finds that patent law can be used, together with the other tools the Commission cites, including NDAs and fixed-term employment contracts, to protect legitimate investments in intellectual property and worker human capital investment and therefore that these tools, taken together, are viable alternatives to non-competes.
A number of commenters stated that there are enforceability disadvantages to trade secret law and NDAs compared to non-competes. Several commenters stated that trade secret law and NDAs are inadequate to protect employer investments prophylactically because employers can enforce them only after the trade secrets or other confidential information have already been disclosed. These commenters stated that trade secrets and confidential information can be highly valuable, and its value could be destroyed as soon as a worker discloses such information to a competing employer. Additionally, some commenters argued that trade secret law and NDAs are inadequate to protect employers' investments because enforcement outcomes for trade secrets and NDAs are less predictable and certain than with non-competes. Some comments suggested that this purported clarity of non-competes benefits workers, arguing that non-competes offer bright lines workers can follow to ensure against unintended violations. Other commenters assert that non-competes themselves are not necessarily effective as a prophylactic remedy, because it is often unclear whether a particular non-compete is enforceable, and non-competes are difficult to enforce in many jurisdictions. A few commenters stated that prophylactic remedies are already available under trade secret law in almost half of U.S. States where the doctrine of inevitable disclosure is recognized, while other commenters were concerned that not all States recognize the doctrine. Other commenters argued the inevitable disclosure doctrine may be worse for workers, and one commenter argued that the final rule would increase the use of the inevitable disclosure doctrine and thus reduce worker mobility.
Some commenters stated that prophylactic remedies are necessary to adequately protect trade secrets and confidential information because workers can exploit their former employers' trade secrets and confidential information without ever disclosing the information themselves, thus leaving aggrieved employers with no recourse under trade secret law or an NDA. Specifically, these commenters argued that when workers take new roles, they will inevitably use their knowledge of former employers' confidential information. For example, where a worker has experience with attempts and failures to develop new ideas or products with a former employer, they will likely use this knowledge to prevent a new employer from making similar mistakes, thus free riding off the former employer's development efforts, costs, and time. A commenter argued that preventing non-competes from restricting this type of misappropriation would discourage investment and harm innovation in the long run.
The Commission believes that what some commenters describe as the “prophylactic” benefits of non-competes—that an employer can block a worker from taking another job, without respect to any alleged misconduct—is also the source of their overbreadth because it enables employers to restrict competition in both labor markets and product and service markets, as detailed in Parts IV.B and IV.C. That employers prefer to wield non-competes as a blunt instrument on top of or in lieu of the specific legal tools designed to protect legitimate investments in intellectual property and other investments cannot justify an unfair method of competition. The Commission also disagrees that banning non-competes would discourage investment and would harm innovation in the long run. As discussed in Part IV.B.3.b.ii, the Commission finds that the weight of the evidence indicates that non-competes reduce innovation by preventing workers from starting businesses in which they can pursue innovative new ideas; inhibiting efficient matching between workers and firms (making it less likely that workers match with firms that can maximize their talent and productivity); and decreasing the cross-pollination of ideas.
Additionally, the Commission notes that non-compete agreements themselves cannot be said to provide ironclad “prophylactic” protections against disclosure of trade secrets and other confidential information. As other commenters point out, in the absence of this rule, it is often unclear whether and to what extent a specific non-compete is enforceable, and they are difficult to enforce in many jurisdictions. Moreover, non-competes do not prevent the worker from disclosing trade secrets or confidential information after the end of the non-compete period or outside of the clause's geographic restriction. The Commission also notes that, as a few commenters stated, prophylactic remedies are already available under trade secret law in almost half of U.S. States where the doctrine of inevitable disclosure is recognized.
Several commenters argued that detecting and proving violations of NDAs and trade secret law is more
Some commenters contended that higher burdens for establishing violations of trade secret and IP laws will harm employer incentives to share trade secrets with workers and to invest in valuable skills training. The Commission is not persuaded that higher evidentiary burdens render trade secret law and NDAs inadequate for protecting employers' valuable investments. Heightened standards are a valuable mechanism to filter out overbroad restrictions on beneficial competitive activity. The comment record is replete with examples of workers bound by non-competes who lacked knowledge of trade secrets or whose employment with a competitor never threatened their previous employer's investments. To the extent trade secret law and NDAs require higher evidentiary showings, that makes these alternatives more tailored tools for protecting employers' valuable investments without unduly restricting a worker from engaging in competitive activity.
Some commenters argued that, without non-competes, employers would limit access to valuable trade secrets within the workplace because trade secret law requires employers to show reasonable efforts to maintain the secrecy of an alleged trade secret to prove a violation, and that reduced rates of intrafirm trade secrets sharing will ultimately harm innovation as well as workers. In response, the Commission notes that the empirical evidence indicates otherwise: when non-competes are more enforceable, the overall level of innovation decreases.
Several commenters argued that the Commission should not find that employers have adequate alternatives to protecting their valuable investments because there is a lack of empirical evidence specifically showing that trade secret law and NDAs are effective for the purpose of protecting trade secrets and confidential information. In response, the Commission notes that trade secret law is a body of law that is specifically designed to protect the interests being asserted; employers consistently bring cases under this body of law; and a preference among firms for a blunter instrument for protecting trade secrets and confidential information cannot justify an unfair method of competition that imposes significant negative externalities on workers, other firms, consumers, and the economy.
A few commenters disputed the NPRM's contention that the rate at which employers pursue trade secrets litigation is evidence of the viability of trade secret law as a means for redressing trade secret theft or protecting confidential information, in part because those employers were not necessarily relying exclusively on trade secret law. The Commission does not assert that these data, alone, conclusively establish trade secret law is a perfect vehicle for redressing trade secret theft. Rather, the data show trade secret litigation is more than a mere theoretical possibility—it is an avenue many companies choose to redress trade secret theft and indeed it is the body of law designed and developed for this very purpose. Accordingly, the Commission believes that the fact that many companies bring claims under the well-established body of State and Federal law on trade secrets is relevant evidence that trade secret law provides a viable means for redressing trade secret theft.
Some commenters suggested a higher volume of trade secrets litigation in California may reflect a higher rate of trade secret disclosure due to the State's policy against enforcing non-competes. However, these commenters did not
Many commenters agreed with the Commission's preliminary conclusion that the economic success in California, North Dakota, and Oklahoma of industries highly dependent on trade secrets and other confidential information illustrates that companies have viable alternatives to non-competes for protecting valuable investments. In contrast, a few commenters argued that the Commission mischaracterized California's non-compete ban because they claim that California permits non-competes to protect trade secrets, citing dicta from the 1965 California Supreme Court case
Another commenter argued that California's experience does not necessarily demonstrate anything about the effect of banning non-competes because California employers impose non-competes at rates comparable to other States. In response, the Commission notes that while Starr, Prescott, and Bishara state that workers are covered by non-competes at “roughly the same rate” in States where non-competes are unenforceable and enforceable,
A commenter argued that the Commission misattributes California's success in the technology industry and North Dakota's and Oklahoma's success in the energy industry to their non-compete laws, rather than the presence of top universities and venture capital firms in the State (in the case of California) or of abundant natural resources in the State (in the case of North Dakota and Oklahoma). The Commission believes that this commenter mischaracterizes its analysis. The Commission does not attribute California's success in the technology industry and North Dakota's and Oklahoma's success in the energy industry to their non-compete laws. The Commission merely notes that these industries are highly dependent on protecting trade secrets and having highly trained workers, and that these industries have thrived in these States despite the inability of employers to enforce non-competes.
One commenter argued that there are no alternatives that adequately protect employers' legitimate interests because other restrictive employment agreements do not sweep as broadly as non-competes. In this Part IV.D, the Commission concludes that less restrictive alternatives such as trade secret law, IP law, and NDAs are adequate to protect trade secrets and other confidential information even where they do not sweep as broadly as non-competes. Indeed, the Commission believes that non-competes are overbroad with respect to protecting trade secrets and other confidential information, because they enable employers to restrict a wide swath of beneficial competitive activity without respect to any alleged misconduct. That employers prefer to wield non-competes as a blunt instrument on top of or in lieu of the specific legal tools designed to protect legitimate investments in intellectual property and other investments cannot justify an unfair method of competition.
Several commenters addressed the evidence concerning the effects of non-competes on human capital investment and other investment. Several commenters asserted that, even if non-competes increased human capital investment, they still left workers worse off because they suppressed workers' mobility and wages overall. Workers and worker advocates also argued that workers lose the value of their skills and human capital investment when non-competes force them to sit out of the workforce, and non-competes can decrease their incentive to engage in human capital investment since they cannot capitalize on their skills and knowledge. These commenters stated that many workers, particularly highly skilled workers, have had some form of education prior to working for their employer, diminishing any potential need for non-competes to protect the employers' human capital investment. For example, many physicians pointed out that they had to go through medical school, residency, internships, and/or fellowships—significant investments that they made, not their employers.
Some commenters questioned the link between increased human capital investment and non-compete enforcement, arguing that employer human capital investment will still be provided without non-competes. Other commenters also stated that prohibiting non-competes would make it easier for firms to hire trained workers, because it would be easier for them to switch jobs. More generally, one advocacy organization said that employers frequently make investments that do not work out and should not place the risk of that investment onto their workers. A commenter who discussed physician non-competes argued that investment-based justifications for non-competes overestimate the value added by employers while failing to recognize the value physicians bring to employers.
Some businesses and trade organizations argued that employers invest significant time and money into training workers who lack the specific skills needed for the job. These commenters stated that, without non-competes, employers risk the worker taking that investment to a competitor. Some commenters state that this risk is
In response, the Commission notes that, as described in Part IV.D.2.b.iii, firms have less restrictive alternatives for protecting human capital investments, including fixed-duration contracts and competing on the merits for the worker's labor services through better pay, benefits, or working conditions. Through these means, employers can retain workers without restricting who they can work for, or their ability to start a business, after their employment ends. The Commission also notes that these commenters often inaccurately describe the increased labor mobility afforded by the final rule as a one-way street. While it will be easier under the final rule for workers to switch jobs and work for a competitor, it will also be easier for firms to hire talented workers, since those workers are not subject to non-competes. In general, firms will benefit from access to a wider pool of labor, because the rule eliminates the friction non-competes impose on the free functioning of competition in labor markets. Whether this will be a net benefit to a particular firm, or not, will depend on the firm's ability to compete for workers on the merits to attract and retain talent.
A group of healthcare policy researchers stated that the investment justifications offered by corporate owners of physician practices are misleading since the true value of the investment in the practice is the book of business and referrals. These researchers suggested that non-competes are used to circumvent laws that prohibit payment for physician referrals. The Commission notes that this comment aligns with a statement by researcher Kurt Lavetti at the Commission's 2020 forum on non-competes. Lavetti stated that patient referrals are a valuable asset, but buying or selling those referrals is illegal, so non-competes are a secondary method of protecting that asset.
Commenters also stated that non-competes protect investments other than in human capital, capital expenditures, and R&D, including recruiting and hiring, providing client and customer service, facilities, marketing, and technology, among others. The Commission is unaware of any empirical evidence showing that non-competes increase these types of investments, and commenters did not provide any. In general, however, firms can protect investments in trade secrets and confidential information, and investments in workers, through the less restrictive alternatives described in Part IV.D.2.b.
Two trade organizations stated that prohibiting non-competes could cause businesses to lose staff, and that losing staff could cause them to reduce investments that may be based on staffing assumptions. These commenters did not provide empirical evidence to support these arguments. The Commission also notes that firms would not necessarily lose workers because of the final rule. As described previously, some firms may lose workers because it will be easier for workers to leave for better opportunities, while some firms may gain workers by attracting workers from other firms. Additionally, firms can retain workers by competing on the merits for their labor services—
Commenters asserted that Starr, Prescott, and Bishara
A few commenters stated non-competes protect against the “disclosure” of general trade knowledge and skills, while the less restrictive alternatives cited in the NPRM do not. Relatedly, some commenters argued prohibiting non-competes and broadly enabling workers to take general trade knowledge and skills to competitors will mean that their new employers will free ride off investments the former employers made in their human capital, which will discourage future investment in human capital. The Commission does not believe preventing workers from using their general trade knowledge and skills, including their gains in trade knowledge and skills through experience with a particular employer, is a legally cognizable or legitimate justification for non-competes. Under State common law, preventing a worker from using their general knowledge and skills with another employer is not a legitimate interest that can justify a non-compete.
One commenter asserted trade secret law and NDAs are inadequate to protect employers' goodwill, while another commenter asserted these tools are inadequate to protect investments in relationships with clients. Regarding whether trade secret law and NDAs are adequate to protect employers' client relationships, the Commission interprets this to refer to employers' concern that a client will follow a worker to a competitor. The Commission believes that employers have alternatives for protecting these investments, including fixed-duration contracts (in the case of goodwill), NDAs (in the case of client lists), and competing on the merits to retain workers and/or clients. Firms can seek to protect client relationships by offering superior service and value—through the free and fair functioning of competition. These more narrowly
A commenter argued the final rule may implicate the ability of Federal contractors to provide letters of commitment, which are often required by government agencies and require contractors to identify key personnel who will work on an awarded contract, sometimes for years in the future. In response, the Commission notes that contractors have alternatives to non-competes to retain key personnel, including by using fixed-term employment contracts or providing the key personnel a better job than competitors.
A commenter stated that fixed-duration employment contracts are not necessarily effective at protecting human capital investments because employers may not know at the time of hiring when they will be providing training to a worker. This commenter also stated that improving the pay, benefits, and working conditions of workers is not necessarily an effective means for protecting human capital investments. In response, the Commission notes employers may enter into fixed-duration employment contracts with their workers at any time, not just at the outset of the employment relationship. It further notes competing to retain a trained worker will not work in every instance, but it is an important option available to employers and the provision of training can itself be a competitive differentiator for an employer.
A commenter also asserted California has the highest cost of living and, if this is attributable to the absence of non-competes, the proposed rule could risk increasing the cost of living nationwide. The commenter did not provide evidence to support the existence of an inverse relationship between non-compete enforceability and cost of living, and the Commission is aware of no such evidence. The Commission thus does not believe that there is a basis to conclude the final rule would increase the cost of living nationwide.
Commenters offered the same justifications for non-competes with senior executives: that they increase employers' incentive to make productive investments. However, many commenters argued senior executives are more likely than other workers to have knowledge of trade secrets and other competitively sensitive information or to have customer relationships and thus non-competes for senior executives are necessary, and other tools such as trade secret law and NDAs are not viable alternatives.
In response, the Commission finds that these tools—trade secret law, NDAs, patents, and invention assignment agreements—provide viable means of protecting valuable investments against disclosure by senior executives, just as they do for all other workers. Commenters do not identify any reasons why senior executives are uniquely situated with respect to these less restrictive alternatives—
Some commenters argued non-competes with executives and high-wage workers promote competition because they encourage innovation in businesses by providing investors with more confidence that executives will not share trade secrets with competitors, decreasing competition. An industry organization asserted that non-competes allow executives to share ideas and business decisions with other workers within the business and collaborate to make strategic decisions. A commenter stated that an executive leaving to start a competing product could also delay the timeline for both the former employer's product and the competing product. As noted previously, the Commission does not believe there is reliable empirical data on the relationship between non-competes and disclosure of confidential information, but employers have alternatives to protect such information. Further, the empirical evidence shows non-competes overall inhibit innovation on the output side; therefore, to the extent any of these effects are occurring, they are more than outweighed by the negative effects of non-competes on innovation.
According to some commenters, an executive moving to a competitor could unfairly advantage the competitor and irreparably harm the former employer. In response, the Commission notes that there is nothing inherently unfair about an executive moving to a competitor, particularly if this results from competition on the merits (such as the competitor paying more or otherwise making a more attractive offer). If companies seek to retain their executives, they have other means for doing so—such as increasing the executives' compensation or entering fixed-duration contracts—that do not impose significant negative externalities on other workers and on consumers, as non-competes do.
Some commenters also said senior executives may have more client, business partner, and customer relationships than other employees and may contribute substantially to a firm's goodwill. The Commission believes that employers have alternatives for protecting goodwill and client/customer relationships. For example, if a firm wants to keep a worker from departing and taking goodwill or clients or customers with them, it can enter a fixed-duration contract with the worker, otherwise seek to retain the worker through competition on the merits, or seek to retain the client/customer through competition on the merits.
An accountant with experience analyzing executive non-competes for business valuations said such valuations are calculated based on the potential harm if the executive violated the non-compete. In addition, some commenters argued non-competes for senior executives and other important workers increase the value of firms in mergers and acquisitions because they ensure such valuable workers stay after the sale. An investment industry organization said investors seek to ensure the right workers who know the business stay and run the newly acquired business. In addition, that organization said some institutional investors may require contracts retaining key workers.
In response, the Commission notes that valuation of senior executive non-competes in such contexts is part of the reason the Commission is allowing such existing senior executive non-competes to remain in force.
Some industry organizations said non-competes increase employer investment in management and leadership training for executives. An investment industry organization said non-competes allow senior executives to access training and experience for their own benefit and the benefit of investors in the firm. In response, the Commission notes that employers have alternative mechanisms to protect their investments in worker training, including fixed-duration contracts and improved compensation.
Some commenters argued that non-competes may improve executive performance, as some executives have non-competes tied to deferred compensation and other future benefits, which encourages long-term value creation by incentivizing executives to focus on long-term rather than short-term gains. A law firm said that forfeiture-for-competition clauses are an important component of deferred compensation agreements, and deferred compensation incentivizes long-term value-building and penalizes, via reduction or forfeiture, harm to the business, which the commenter said includes working for a competitor. The commenter claimed that if forfeiture-for-competition clauses are banned, firms would shift some of the deferred compensation to more short-term awards, which would in turn increase risk-taking and decrease overall wealth accumulation. The commenter cited a review by the Federal Reserve after the 2008 financial crisis which found that deferred compensation can mitigate executive risk-taking activities.
In response, the Commission recognizes that many existing deferred compensation contracts may have been negotiated to include non-competes or forfeiture-for-competition clauses that may not be easily separated, and the final rule allows existing senior executive non-competes to remain in force.
Some commenters argued that forfeiture-for-competition clauses, which are sometimes attached to deferred compensation arrangements, were also justified. Some commenters contended that workers subject to forfeiture-for-competition clauses who choose to work for a competitor are likely to be compensated by the competitor for whom they will be working. Separately, a law firm and an investment industry organization stated that it would be unfair for companies to continue making deferred compensation or other payments to former workers who now work for a competitor if forfeiture-for-competition clauses were banned. A law firm also stated that forfeiture-for-competition clauses allow senior executives to retire without losing their deferred compensation, which in turn clears a path for younger workers to move up, while protecting senior executives' retirement benefits. In response, the Commission notes that pre-existing agreements for senior executives are not banned under the final rule.
Some commenters stated that the study by Kini, Williams, and Yin, discussed in the NPRM with respect to senior executive earnings,
One commenter said that a ban on non-competes may encourage U.S. companies to relocate their executive teams outside the U.S. in order to continue using non-competes. The
Based on the totality of the evidence, including its review of the empirical literature, its review of the full comment record, and its expertise in identifying practices that harm competition, the Commission in this final rule finds that the claimed business justifications for non-competes do not justify the harms from non-competes—for either senior executives or for workers other than senior executives, whether considered together or separately—because the evidence indicates that increasing enforceability of non-competes has a net negative impact along a variety of measures. Whether the benefits from a practice outweigh the harms is not necessarily an element of section 5,
Not all the harms from non-competes are readily susceptible to monetization.
In addition to the evidence showing that non-competes reduce earnings for workers across the labor force, there is also evidence that non-competes reduce earnings specifically for workers who are not subject to non-competes.
The available evidence also indicates non-competes negatively affect competition in product and service markets. The weight of the evidence indicates non-competes have a negative impact on new business formation and innovation.
In the Commission's view, the asserted benefits from non-competes do not justify their harms. Even if the businesses using non-competes benefit, pecuniary benefits to the party undertaking the unfair method of competition are not a sufficient justification under section 5.
Moreover, the Commission is also not aware of any evidence that these potential benefits of non-competes lead to reduced prices. Indeed, the only empirical study of the effects of non-competes on consumer prices—in the health care sector—finds increased prices as the enforceability of non-competes increases.
Furthermore, there is no evidence that, in the three States in which non-competes are generally void, the inability to enforce non-competes has materially harmed employers, consumers, innovation (or economic conditions more generally), or workers. As a result, the Commission finds that the asserted benefits from non-competes do not justify the harms they cause.
The Commission finds that the harms from non-competes are clearly not justified by the purported benefits, regardless of whether one considers senior executives or workers other than senior executives together or separately. In this Part IV.D.3, the Commission explains why, for workers overall, the asserted benefits from non-competes do not justify the harms they cause. This is at least as true for senior executives as for other workers. As described in Part IV.C.2.c.i, non-competes with senior executives tend to negatively affect competitive conditions in product and service markets at least as much as non-competes with other workers—and likely to a greater extent—given the outsized role of senior executives in forming new businesses, serving on new
Commenters focused on the question of whether employers have adequate alternatives to non-competes and the analysis of costs and benefits of the proposed rule in the preliminary regulatory impact analysis, rather than the balancing analysis discussed in this Part IV.D.3 specifically. These comments are addressed in Part IV.D.2 and in Part X, respectively.
The Commission proposed to require employers to rescind (
The final rule adopts the notice requirement—for workers who are not senior executives—with minor revisions to facilitate compliance and to improve the likelihood of workers being meaningfully informed. The revisions include an option for employers to make the notice more accessible to workers who speak a language other than English. The final rule also simplifies compliance and ensures that workers have prompt notice that their non-competes are no longer in force by requiring employers to provide notice by the effective date, rather than 45 days thereafter.
Proposed § 910.2(b)(1) would have required employers to rescind existing non-competes with all workers. Proposed § 910.2(b)(2) would have required employers that rescinded non-competes to provide notice to the affected workers that their non-compete is no longer in effect and may not be enforced.
As proposed, § 910.2(b)(2) had three subparagraphs that imposed various requirements related to the notice. Proposed § 910.2(b)(2)(i) stated that an employer that rescinds a non-compete pursuant to § 910.2(b)(1) must provide notice in an individualized communication to the worker that the worker's non-compete is no longer in effect and may not be enforced. The Commission stated in the NPRM that an employer could not satisfy the notice requirement by, for example, posting a notice at the employer's workplace.
Proposed § 910.2(b)(2)(ii) stated that the employer must provide the notice to both current workers and former workers when the employer has the former worker's contact information readily available. To ease the burden of compliance, proposed § 910.2(b)(2)(iii) provided model language that would satisfy the notice requirement. Proposed § 910.2(b)(2)(iii) and § 910.2(b)(3) provided a safe harbor for employers using the model language, while also permitting an employer to use different language, provided that the language communicates to the worker that the worker's non-compete is no longer in effect and may not be enforced.
In the NPRM, the Commission stated that the purpose of the proposed notice requirement was to ensure that workers are informed that their existing non-competes are no longer in effect. The Commission cited evidence indicating that many workers are not aware of the applicable law governing non-competes or their rights under those laws, and stated that it was therefore concerned that, absent a notice requirement, workers may not know that their non-competes are no longer enforceable as of the effective date.
The Commission has eliminated the proposed rule's requirement that employers rescind (
The Commission has also eliminated the proposed rescission requirement in response to comments expressing confusion about the requirement and concern about its practical implications. Some comments interpreted the proposed rescission requirement to mean that the worker and employer must be returned to their original positions (
The Commission does not intend for the final rule to have such effect and has omitted the rescission requirement proposed in the NPRM. The Commission also adopts § 910.3(b), which provides an exception for causes of action that accrued before the effective date, to be clear that the final rule does not render any existing non-competes unenforceable or invalid from the date of their origin. Instead, it is an unfair method of competition to enforce
Commenters also argued that a rescission requirement would be impermissibly retroactive, present due process concerns, and/or constitute an impermissible taking under the Fifth Amendment. The Commission responds to these comments in Part V.B.
Numerous commenters opposed the proposed rescission requirement based on perceived challenges presented by proposed § 910.1(b)(2), which addressed
While the final rule does not require rescission (
Several commenters emphasized the importance of notice, especially for former workers who may be actively refraining from competitive activity (in compliance with a non-compete), and who may continue to do so if they are not informed that their non-compete is no longer in effect. One commenter highlighted the importance of notice, because a non-compete may be coercive regardless of its enforceability. Many commenters emphasized the need for clear and concise language in the notices, including in languages other than English. One commenter asked the Commission to use concrete, lay-friendly terms to help reduce workers' fears of being sued. A commenter that recommended notice in languages other than English suggested that such a requirement apply to medium and large businesses with a threshold percentage of workers (such as 10%) who primarily speak a language other than English.
Commenters also suggested changes in notice procedures to improve the chances of workers receiving and understanding the notice. One commenter stated that text messages should not qualify as a primary means of individual notice because they are too casual, may be automatically deleted, and the sender may not be identifiable. However, in this commenter's view, text messages could be a secondary form of notice. Some commenters suggested that in addition to individual notice, the final rule should require an employer to post a copy of the notice in the workplace and/or online.
A number of commenters asserted that the requirement for employers to provide notice to former workers when “the employer has the worker's contact information readily available” was confusing or burdensome. A commenter stated that employers do not update former employees' contact information, so such information is likely incomplete and might be inaccurate. One commenter asserted that a requirement to provide notice within 45 days of the effective date is too difficult for small businesses. Another commenter suggested that the final rule should require contacting only former workers who left the firm two years or less before the effective date, unless the non-compete has elapsed.
The Commission finalizes the proposed rule's notice requirement largely as proposed, with minor revisions to facilitate compliance, reduce burdens on employers, and improve accessibility for non-English speakers.
The Commission finalizes a notice requirement because the available evidence indicates that many workers are not aware of the applicable law governing non-competes or their rights under those laws, or are unable to enforce their rights—and are chilled from engaging in competitive activity as a result. The evidence shows that even when employers impose non-competes that are unenforceable under State law, many workers believe they are bound by them (or are otherwise unable to enforce their rights to be free of non-competes).
A notice requirement helps address this concern by informing individual workers, to the extent possible, that after the effective date the employer will not enforce any non-compete against the worker. The Commission believes that prompt and clear notice to workers other than senior executives that non-competes are no longer enforceable is essential to furthering the purposes of the final rule—to allow workers to seek or accept another job or to leave to start and run a business, and to allow other employers to compete freely for workers. Indeed, the Commission has refined the model language to make it shorter and clearer than the proposed model language.
While the proposed rule would have required employers to provide the notice no later than 45 days after the compliance date, the final rule requires notice no later than the effective date (
In addition, while the model language in the proposed rule used the phrase “the non-compete clause in your contract is no longer in effect,”
Furthermore, requiring notice by the effective date simplifies the final rule and allows its benefits to begin sooner. In response to commenters that contended that they need more time to provide workers notice, the Commission believes that providing notice should not be time-consuming, even for small businesses, particularly given that the final rule provides model language, allows use of the worker's last known contact information for notice, allows digital notice, and (unlike in the proposed rule) categorically exempts an employer who has no such information from the notice requirement. Moreover, as described in Part IV.B.2.b.ii, non-competes trap workers in jobs or force them to bear other significant harms or costs—even where workers believe the non-compete is unenforceable. Given the limited burdens associated with providing notice only to workers whose last known contact information is on file and employers' option to simply copy and paste the safe harbor model notice, as well as the known and currently ongoing acute harms of non-competes (including their
In response to comments expressing concern that the NPRM's “individualized communication” requirement was unclear or burdensome, the Commission has removed that language. Instead, the final rule ensures each worker will receive notice while specifying several permissible methods for providing the notice, which furthers compliance certainty while giving employers a range of options and an efficient means of complying. By allowing a number of formats for such communications, including digital formats, employers are more likely to be able to contact workers rapidly, individually, and have flexibility to do so at low cost. Accordingly, § 910.2(b)(2) of the final rule allows for notice by text message, by email, as well as paper notice by hand or by mail to the worker's last known street address. The final rule gives employers flexibility to choose among these methods. In responses to the concerns expressed by the commenter about text messages, the Commission believes that text messages should be a permissible method for providing the notice because they are widely used, delivered quickly, low-cost for employers, and an effective means of communication for workers who do not have email accounts.
In response to comments contending that notice to former workers is too burdensome or difficult, the Commission believes that providing notice to former workers is critical because former workers may be refraining from competitive activity because they believe they are subject to a non-compete. The Commission disagrees that providing notice to former workers will be burdensome. The Commission believes that most employers have contact information for former workers who may be subject to non-competes.
In response to comments contending that notice to former workers is too burdensome or difficult, the Commission believes that providing notice to former workers is critical because former workers may be refraining from competitive activity because they believe they are subject to a non-compete. In light of the comments about the proposed “readily available” contact information standard, the Commission in this final rule does not adopt that language and instead requires that the notice must be on paper delivered by hand to the worker, or by mail at the worker's last known personal street address, or by email at an email address belonging to the worker, including the worker's current work email address or last known personal email address, or by text message at a mobile telephone number belonging to the worker. The Commission agrees with commenters that stated that most employers have such contact information for both present and former workers. For those rare cases in which
The Commission agrees with comments that notices in other languages spoken by workers would help achieve the goal of informing workers that their non-competes are no longer enforceable and help employers to comply with the final rule. However, to avoid imposing a burden of translation on employers, § 910.2(b)(6) makes it optional to provide notices in languages other than English. The Commission encourages employers to provide this notice to workers who speak languages other than English. To facilitate the provision of notices in other languages, the final rule provides a model notice in English and links to translations of other languages that are commonly spoken in U.S. homes, including Spanish, Chinese, Arabic, Vietnamese, Tagalog, and Korean.
In the NPRM, the Commission proposed an exception for certain non-competes between the seller and the buyer of a business that applied only to a substantial owner, member, or partner, defined as an owner, member, or partner with at least 25% ownership interest in the business entity being sold. Based on comments, the Commission adopts an exception for the bona fide sale of a business without requiring that the seller have at least a 25% ownership interest.
Proposed § 910.3 allowed non-competes where the restricted party is “a person who is selling a business entity or otherwise disposing of all of the person's ownership interest in the business entity, or . . . selling all or substantially all of a business entity's operating assets,” and is also “a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete.”
The Commission stated in the NPRM that its proposal to exempt from the rule non-competes between the seller and the buyer of a business did not reflect a finding that such non-competes are beneficial to competition.
A few commenters suggested eliminating the proposed exception. These commenters contended that non-competes between the seller and the buyer of a business may still be exploitative and coercive, particularly in the case of small business owners in transactions with larger, better-resourced corporations. However, most commenters who addressed the issue supported an exception that would allow certain non-competes between the seller and the buyer of a business. These commenters agreed with the NPRM that State common law generally applies less-intensive scrutiny to non-competes ancillary to the sale of a business and that every State statute banning non-competes has an exception which allows some or all non-competes between the seller and the buyer of a business. Most of the commenters who supported some form of exception for non-competes between the seller and the buyer of a business contended that they are necessary to protect the value of the sale by ensuring the effective transfer of the business's goodwill. According to these commenters, a buyer will be less willing to pay for a business if they cannot obtain assurance that they will be protected from future competition by the seller, and so a failure to exempt related non-competes may chill acquisitions. Commenters stated that sellers of a business have more bargaining power than workers do and generally receive a portion of the sales price, making exploitation and coercion less likely. They also noted that non-competes between the seller and the buyer of a business remain subject to State limitations on scope, duration, and reasonableness.
Some commenters supported the proposed 25% ownership threshold. However, most commenters who otherwise supported the exception stated that the proposed 25% ownership threshold is too high. They argued that the 25% threshold does not account for the reality of most transactions, in which owners with less than 25% interest in a business may have significant goodwill and receive significant proceeds from a sale. Some commenters focused on the tax costs of the threshold, pointing to IRS provisions that currently allow taxpayers to deduct from their taxable income the portion of the sales price made in exchange for non-competes. Others argued that the 25% threshold would disincentivize equity-based consideration. To avoid these harms, these commenters suggested a variety of other thresholds, including the 5% ownership threshold used in SEC regulations.
A few commenters argued that the proposed 25% threshold would preempt the laws of California and other States which ban non-competes except in the sale of a business, none of which require that the seller have a substantial ownership stake. They pointed to cases in which California courts applied the exception and allowed enforcement of non-competes against shareholders holding as little as a 3% ownership interest. In light of these statutes, some of these commenters urged the Commission to adopt an exception for
Some commenters urged the Commission to adopt a case-by-case assessment of business sales based on State law, such as a “totality of the circumstances” or “reasonableness” test. Others proposed replacing the ownership-based exception with an exception for founders, key workers with IP access, and/or those with goodwill. At least one commenter asked the Commission to use a bright-line rule rather than a functional or definitional test that would require adjudication and interpretation by courts.
Some commenters presented empirical evidence to justify a lower ownership threshold. A few commenters pointed to data suggesting that more than 96% of CEOs of the 3,000 largest publicly traded companies own less than 25% of their company. One commenter pointed to data suggesting that the average duration of a startup's life from fundraising to acquisition is 6.1 years, arguing that it is unlikely for venture-capital backed businesses to operate and grow for that period of time without accepting funding that dilutes founders' and key employees' equity stake in the business. Other commenters supporting a lower threshold provided anecdotal evidence that businesses cede large shares to financial backers, resulting in many owner-operators holding significantly less than a 25% share in their business.
Finally, some commenters focused on eliminating potential loopholes to the proposed exception. Some commenters expressed concern that employers may set up sham transactions with wholly owned subsidiaries in order to impose non-competes that would otherwise be prohibited under the rule, urging the Commission to clarify that the exception applies only to bona fide transfers to an independent third party. Some commenters contended that firms may use “springing” non-competes (in which a worker must agree at the time of hiring to a non-compete in the event of some future sale) and repurchase rights, mandatory stock redemption programs, or similar stock-transfer schemes (pursuant to which a worker may be required to sell their shares if a certain event occurs) to impose non-competes on their workers which would otherwise be prohibited. They urged the Commission to address those instances specifically, including by defining the exception by the percentage of total equity value received in liquid proceeds at the time of the relevant transaction.
The Commission adopts a sale of business exception for substantially the same reasons articulated in the NPRM. However, in response to comments concerning the ownership percentage threshold, the Commission modifies § 910.3(a) so that it no longer includes the proposed requirement that the restricted party be “a substantial owner of, or substantial member or substantial partner in, the business entity” to fall under the exception. The Commission otherwise adopts this provision largely as proposed. To address commenters' concerns that employers will use sham transactions, stock-transfer schemes or other mechanisms designed to evade the rule, § 910.3(a) requires that, to fall under the exemption, a non-compete must be entered into pursuant to a bona fide sale.
The Commission reiterates that § 910.3(a) does not reflect a finding that non-competes between the seller and the buyer of a business are beneficial to competition or that they are not restrictive and exclusionary or exploitative and coercive. Indeed, the Commission acknowledges that some non-competes between the seller and buyer of a business may be exploitative and coercive due to an imbalance in bargaining power and/or may tend to harm competitive conditions. However, commenters did not present empirical research on the prevalence of non-competes between the seller and the buyer of a business or on the aggregate economic effects of applying additional legal restrictions to non-competes between the seller and buyer of a business. The Commission's decision to adopt § 910.3(a) reflects the view of the Commission and most commenters that, compared to non-competes arising solely out of an employment relationship, non-competes between the sellers and buyers of businesses may implicate unique interests and have unique effects that this rulemaking record does not address.
The proposed requirement that an excepted non-compete bind only a “substantial” owner, member or partner of the business entity being sold was designed to allow those non-competes between the seller and the buyer of a business which are critical to effectively transfer goodwill while prohibiting those which are more likely to be exploitative and coercive due to an imbalance of bargaining power between the seller and the buyer. However, commenters persuasively argued that the proposed 25% ownership threshold was too high because it failed to reflect the relatively low ownership interest held by many owners, members, and partners with significant goodwill in their business. The Commission declines to maintain the “substantial” interest requirement with a lower percentage threshold for the same reason.
The Commission also declines to adopt a threshold of $1 million, $250,000, or some other dollar limit on the proceeds received by the seller. On the current record, these thresholds were not sufficiently correlated to sellers' goodwill or bargaining power for a broadly generalizable approach. The Commission declines to adopt a “totality of the circumstances” or “reasonableness” test in the text of § 910.3(a) because they would provide little meaningful guidance to buyers and sellers and would be difficult to administer. For the same reasons, the Commission declines to replace the ownership-based exception with an exception for founders, key workers, workers with access to intellectual property, and/or workers with goodwill. Furthermore, non-competes allowed under the exception will continue to be governed by State law, which generally requires a showing that a non-compete is necessary to protect the value of the business being sold, as well as Federal antitrust law.
Finally, the Commission agrees with commenters' concerns about the risks that firms may abuse the exception through sham transactions with wholly owned subsidiaries, “springing” non-competes, repurchase rights, mandatory stock redemption programs, or similar evasion schemes. The Commission adds the term “bona fide” and makes changes clarifying that any excepted non-compete must be made “pursuant to a bona fide sale” to ensure that such schemes are prohibited under the rule. A bona fide sale is one made in good faith as opposed to, for example, a transaction whose sole purpose is to evade the final rule.
The Commission declines to specifically delineate each kind of sales transaction which is not a bona fide sale under the exception to avoid the appearance that any arrangement not listed is allowed under the exception. Courts have effectively identified and prohibited such schemes pursuant to State statutes prohibiting non-competes.
Proposed § 910.2(a) would have prohibited employers from maintaining an existing non-compete with a worker. The proposed rule also would have required employers to rescind existing non-competes.
As described in Part IV.C.5, the Commission adopts a modified § 910.2(a) under which existing non-competes for workers who are not senior executives are no longer enforceable. The Commission adds an exception in § 910.3(b) in response to comments raising concerns related to retroactivity. Section 910.3(b) specifies that the final rule does not apply if a cause of action related to a non-compete provision accrued prior to the effective date. This includes, for example, where an employer alleges that a worker accepted employment in breach of a non-compete if the alleged breach occurred prior to the effective date. This provision responds to concerns that the final rule would apply retroactively by extinguishing or impairing vested rights acquired under existing law prior to the effective date.
A number of commenters asserted that applying the final rule to prohibit the enforcement of existing non-competes would render the final rule impermissibly retroactive. The Commission disagrees. A rule “does not operate `retrospectively' merely because it is applied in a case arising from conduct antedating the [rule's] enactment, or upsets expectations based in prior law.”
The final rule is not impermissibly retroactive because it does not impose any legal consequences on conduct predating the effective date. The Commission is not creating any new obligations, imposing any new duties, or attaching any new disabilities for past conduct.
This final rule is analogous to the FCC rulemaking upheld in
In
In the Commission's view, these significant benefits justify any burdens of applying the final rule to the future enforcement of pre-existing agreements with workers other than senior executives. Having balanced the burdens and benefits of so applying the final rule, the Commission has satisfied its obligation to consider the secondary retroactivity effects of the final rule. Moreover, the Commission notes that non-competes were already subject to case-by-case adjudication under section 5.
The Commission also disagrees with commenters who contended that applying the final rule to non-competes entered into before the effective date would violate the Fifth Amendment by effecting a taking without due compensation. Some comments interpreted the proposed rescission requirement to mean that the worker and employer must be returned to their original positions (
The Takings Clause provides that “private property” shall not “be taken for public use, without just compensation.”
Under the
The character of the governmental action here also counsels against viewing the final rule as a taking. “A `taking' may more readily be found when the interference with property can be characterized as a physical invasion by government . . . than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.”
Finally, the final rule does not upset investment-backed expectations to the extent necessary to constitute a taking. Even in States that prohibit some or all non-competes, employers make many investments in workers that they would continue to make regardless of their ability to use non-competes, such as training, or that would be protected by other mechanisms, such as reasonable NDAs, trade secret law, and/or fixed term contracts. In other words, non-competes are not a prerequisite to employers' productivity and output, in large part because (as described in Part IV.D) employers have reasonable alternatives to protecting the investments they make. The Commission has also lessened the economic burden of the final rule by creating an exception for situations where a cause of action accrued before the effective date.
Similarly, the Commission disagrees with commenters who argued that applying the final rule to existing non-competes would present due process concerns. Assuming that these due process concerns are independent of other constitutional concerns like the alleged retroactive application of the final rule,
The Commission adds an exception in § 910.3(c) in an abundance of caution to ensure the final rule does not infringe on activity that is protected by the First Amendment
As described in Parts IV.B.4 and IV.C.5, the final rule includes a prohibition on enforcing or attempting to enforce non-competes in both § 910.2(a)(1) and (2). Under the
As explained in Parts IV.B.4 and IV.C.5, the Commission adopts a prohibition on “representing” that a worker is subject to a non-compete in §§ 910.2(a)(1)(iii) and 910.2(a)(2)(iii). In § 910.3(c), the Commission incorporates a “good-faith” exception that applies to the prohibition on “representing” the worker is subject to a non-compete. Taken together, these provisions of the final rule prohibit an employer from representing to a worker that the worker is subject to a non-compete unless the employer has a good-faith basis to believe the worker is subject to an enforceable non-compete.
The Supreme Court has held “there can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public about lawful activity.”
In the NPRM, the Commission stated that an employer would have no good faith basis to believe that a worker is subject to an enforceable non-compete “where the validity of the rule . . . has been adjudicated and upheld.” Some commenters stated that legal challenges to the final rule will create uncertainty and unpredictability related to compliance. The Commission believes the foregoing statement in the NPRM would contribute to this confusion and does not adopt it in this final rule. The Commission clarifies that the absence of a judicial ruling on the validity of the final rule does not create a good-faith basis for non-compliance. If the rule is in effect, employers must comply.
In the NPRM, the Commission preliminarily concluded that applying the rule uniformly to all employers and workers would advance the proposed
The vast majority of commenters supported the Commission's proposal to ban non-competes categorically for all workers.
Commenters also supported the rule with perspectives specific to particular industries. In response to the Commission's request for comment on the issue, some commenters argued that the Commission should further expand the rule to cover non-competes between franchisors and franchisees.
Other commenters argued the Commission should differentiate among workers and employers along different parameters. They stated that workers with higher earnings, higher skills, specific job titles, or access to specific types of information should be excluded. Some stated that particular industries should be excluded wholesale, including all workers in an industry regardless of their job duties, while some stated that only certain workers in particular industries should be excluded.
In adopting the final rule, the Commission considered each request for exclusion from or expansion of coverage under the final rule and concludes that the use of covered non-competes is an unfair method of competition. The Commission also concludes that applying the final rule as adopted in part 910 to the full extent of the Commission's jurisdiction with respect to covered workers advances the final rule's objectives to a greater degree than differentiating among workers. In response to,
In this Part V.D, the Commission addresses comments related to differentiation or exclusion of certain workers, employers, or industries. Comments related to expanding or limiting the definition of worker or employer are addressed in Parts III.C and III.G. Comments related to the Commission's jurisdiction and exclusions from the Commission's jurisdiction in the FTC Act are addressed in Part II.E. Comments related to the prevalence of non-competes within and across industries are addressed in Part I.B.2.
Overall, the Commission is committed to stopping unlawful conduct related to the use of certain non-competes to the full extent of its authority and jurisdiction. The Commission finds every use of a non-compete covered by the final rule to be an unfair method of competition under section 5 of the FTC Act for the reasons in Parts IV.B and IV.C. The use of an unfair method of competition cannot be justified on the basis that it provides a firm with pecuniary benefits.
Many commenters sought an exception for highly paid or highly skilled workers, often alongside requests for an exception for senior executives, while many others asked the Commission to keep these workers within the scope of the final rule. Commenters seeking an exception argued that highly paid and highly skilled workers in particular did not experience exploitation and coercion and were more likely to have access to confidential information or client or customer relationships, along with the other justifications for non-competes discussed in Part IV.D. Commenters' specific arguments on the evidence concerning highly paid or highly skilled workers are considered in the relevant subsections of Part IV.B. Many commenters proposed using a compensation threshold to differentiate highly paid workers and senior executives, discussed in IV.C.4.b. Other commenters suggested an exception based on the FLSA exemptions or the worker's level of access to confidential information, discussed in Parts IV.C.4. and V.D.2.
The Commission finds that non-competes have a tendency to negatively affect competitive conditions in labor markets and product and service markets, including non-competes binding highly paid and highly skilled workers. The evidence shows that, among the other effects described in Part IV.B, non-competes for highly paid and highly skilled workers suppress wages for these workers,
Some commenters suggested excluding workers with access to trade secrets, confidential business information, or other intellectual capital. Commenters contended these workers are uniquely situated because of their access to valuable employer information. Many commenters responded to these arguments and disagreed with them. Some commenters stated that employers overstate the proportion of workers who have access to such information. Commenters also stated that employers exaggerate the amount or quality of information that should be appropriately considered a trade secret, confidential business information, or other intellectual capital, and therefore exaggerate the purported cost to the firm of not being able to use non-competes. Commenters also stated that employers have alternatives to non-competes that generate less harm to competition, to workers, to the economy, and to rival firms, including NDAs and fixed-term employment contracts.
The Commission declines to adopt an exclusion based on workers' access to trade secrets, confidential business information, or other intellectual capital because it finds such an exclusion would be unnecessary, unjustified, unworkable, and prone to evasion. The Commission finds the use of non-competes to be an unfair method of competition and addresses claimed justifications related to trade secrets, confidential business information, or other intellectual capital in Part IV.D. The Commission finds that protecting trade secrets, confidential information, and other intellectual capital is an insufficient justification for non-competes because employers have less restrictive alternatives for protecting such information. Moreover, if the Commission were to exempt workers with access to confidential information, employers could argue that most or all workers fall under the exception, requiring workers to engage in complex and fact-specific litigation over the protected status of the underlying information. As explained in Part IX.C, such case-by-case adjudication of the enforceability of non-competes has an
Some businesses and organizations argued that specific industries should be exempt from the final rule. The Commission carefully considered these comments and declines to adopt any industry-based exceptions. The Commission notes that while some commenters characterized purported justifications for an exclusion from the final rule as unique to a particular industry, the purported justifications were in fact the same as the those addressed in Part IV.D, namely, the need to protect investments in labor, trade secrets, confidential business information, or other intellectual capital. The Commission addresses those arguments in full in Part IV.D, but in this Part V.C.3 further discusses examples of comments seeking industry-based exceptions.
Some commenters in client- or sales-based industries, including real estate and insurance, argued they are unique and should be excluded from any rule. A real estate commenter argued that job switching by real estate employees is similar to the sale of a business where the goodwill and book of business generated by the departing employee must remain with the business. A timeshare industry commenter claimed the industry had unique features justifying the use of non-competes with highly paid workers, such as the cost of marketing and cultivation of relationships to bring in and maintain customers as well as the need to protect proprietary targets and strategies for resort development, due in part to the limited number of available resort contracts. A commenter representing insurance marketing organizations (IMOs), which serve as facilitators between insurance carriers, agents, and consumers similarly argued for an exclusion, citing client goodwill, purported trade secrets in sales methods, sales leads, unique compensation structures, and company analyses, and consumer harm from potential agent misconduct if the agent moves to a new IMO and changes the consumer's policy. Some businesses stated that non-competes rarely impact a worker's ability to find other work in their industry, sometimes because the new employer “buys out” the non-compete.
The majority of commenters from the real estate and insurance industry workers and small, independent insurance agencies, supported a comprehensive ban. These comments painted a picture consistent with the Commission's findings in Part IV.B regarding indicia of unfairness, including facial unfairness, and the tendency of non-competes to negatively affect competitive conditions in the labor and product and service markets. A worker from the real estate industry stated that non-competes are standard in the industry for all workers, regardless of their position in a company. Commenters stated that they were asked to sign after starting their job, with one worker stating that they faced the option of either signing the non-compete or leaving and losing future commissions for work they had done. Workers noted that they were terminated without cause and still required to comply with a non-compete, and that they had no bargaining power for promotion or wage increases. The following examples are illustrative of the comments the Commission received:
• As an aspiring entrepreneur in the real estate space, I am in a relatively small market where one company dominates. I recently ended my employment with them. They use non-competes to restrict competition and trap employees. The abolition of non-competes is paramount as small towns/cities grow. . . .
• I signed a non-compete after working at a Real Estate Brokerage for several months. I
• I am a business owner and have had 40 independent contractors under my business at my peak. They were all under non-compete, and if I could go back, I would eliminate the non-compete. It doesn't help the employee or contractor, and it doesn't help the business either. It spurs an unhealthy work environment. Clogs up the judicial system with frivolous cases where they try and scare people from earning a living. . . . I 100% support this ban, and it should go into effect immediately.
Commenters stated that non-competes are standard in the insurance industry and that the industry is facing significant consolidation, fueled in part by private equity firms. These commenters argued that workers in the insurance industry are prohibited from seeking jobs with higher pay and better benefits in their specialty. Commenters stated that they were not able to negotiate better conditions at their current job and that employers can change the employment terms at will, so workers face reduced commissions and pay while still being held to a non-compete. Commenters stated that insurance agents are highly trained and specialized, and non-competes force them to leave their specialty and start over in a new specialty for less pay. Commenters also argued that non-competes thwart consumer choice because insurance agents create relationships with their customers, and customers lose the ability to choose the same agent if the agent is bound by a non-compete. Commenters also noted that standard employment agreements in the insurance industry require workers to pay their own costs to defend against noncompete litigation even if the worker is successful in the challenge such that even if a worker does not violate the terms of a noncompete, or the noncompete is not enforceable, workers who change jobs or start a new agency are often faced with significant legal bills. Commenters noted that although independent licensing agents are meant to be able to contract with multiple insurance companies, they are heavily restricted by non-competes, creating regional monopolies. The following examples are illustrative of the comments the Commission received:
• As a captive “Independent Contractor” for a large insurance company, this rule would be a lifeline should I decide to pursue an independent agent opportunity. The insurance company I represent, has gradually cut commissions over the past few years . . . that makes it extremely uncompetitive compared to peers. There is absolutely no reason why I should be held prisoner and not be able to pursue far more favorable, and beneficial opportunities, for both myself and my family.
• Ideally I would like to start my own insurance agency but am currently prevented from doing so due to a non-compete clause. We are already somewhat limited in employment opportunities here in rural West Texas . . . . I'm finding it difficult to find a path to provide for my family during the two year period [of the non-compete], and therefore am considering scrapping the new business idea and remaining at my current job. . . . In a sense, I feel trapped at my current job, and ultimately I feel hobbled from achieving my full potential as a future small business owner.
The Commission declines to adopt an exclusion for client- or sales-based industries such as real estate and insurance. The use of non-competes is an unfair method of competition and the purported justifications raised by commenters do not change the Commission's finding. The Commission also notes that, to the extent commenters seeking an exception are referencing different restrictive covenants, including some garden variety non-solicitation agreements, which do not prohibit or function to prevent a worker from switching jobs or starting a new business as described in Part III.D, the final rule does not apply to them. Thus, the Commission focuses on commenters' purported need for an exclusion based on non-competes alone.
In response to commenters arguing that information and techniques related to sales, including strategy on developing business, is confidential or proprietary and that workers' ability to move to another job or start a business would thus harm them, the Commission notes that any specific information or truly proprietary techniques can be protected by much less restrictive alternatives, such as trade secret law and NDAs. For example, proprietary targets and strategies for timeshares or unique compensation structures or company analyses cited by IMOs can be otherwise protected. Moreover, companies can compete on the merits to retain their customers by offering better products and services. Requiring workers to leave the industry or the workforce is an overbroad restriction that tends to negatively affect—and actually harms—competition with attendant harm to workers and rivals, as outlined in Part IV.B.
With respect to commenter arguments that non-competes are needed to protect specialization related to particular products and skills related to sales, as the Commission finds in Part IV.D, preventing workers from using their general trade knowledge and skills, including their gains in the same through experience with a particular employer, is not a legally cognizable justification for non-competes. That a real estate, insurance, or any other sales agent inherently learns skills and gains knowledge in the performance of their job, becoming a more effective salesperson over time, is not itself a cognizable justification for preventing the worker from re-entering the labor market as a worker or business owner. Employers' efforts to use non-competes to prevent workers from using general trade knowledge and skills is an unfair method of competition under section 5 because it is an attempt to avoid competition on the merits.
The Commission disagrees with commenters arguing that a worker leaving a sales position is akin to the sale of a business. Unlike the seller of a business, a worker is in an unequal bargaining position and does not receive compensation when leaving the firm. The fact that a worker generates goodwill for an employer is not a cognizable justification for non-competes. First, it not clear that the employer would lose goodwill associated with their business if a particular worker leaves. Moreover, commenters do not specify the extent to which their legitimate investment in the worker—separate from employing the
Some commenters representing industries with apprenticeships or that require training as a part of employment, such as real estate appraisers, plumbers, and veterinarians, argued their industry should be excluded from the final rule. These commenters contended that a significant investment is needed to make workers productive in their industries and that they need to use non-competes to protect that investment. Each commenter cited an apprenticeship or training period during which they are not able to bill or must bill a lower amount for a worker's labor.
Worker commenters from these industries stated that non-competes leave them unable to launch or progress in their career because non-competes tie them to their first employer. Some appraiser commenters noted that, while their share of the appraisal fee rises to some extent after completing their apprenticeship, they cannot negotiate higher shares of the fee or other better working conditions because of non-competes. A union commenter representing plumbers noted that plumbers with non-competes are not able to accept better offers of employment, with better pay and benefits, including union positions. Other worker commenters mentioned geographic overbreadth and excessively long non-competes of two years. Many veterinarian commenters supported the proposed rule, stating that non-competes artificially held down their compensation and did not allow them to start new practices in areas where the need for more veterinary services is great, with some commenters stating that this contributed to consolidation.
The Commission declines to exclude industries, such as real estate appraisal, plumbing, and veterinary medicine, in which an industry must purportedly invest in significant training or apprenticeship of workers before the employer considers them to be productive. The Commission finds that these employers have less restrictive alternatives—namely fixed duration contracts—to protect their investment in worker training. A return on investment in the training does not require that the worker be unable to work for a period after leaving employment. Moreover, employers stand to benefit from the final rule through having access to a broader labor supply—including incoming experienced workers—with fewer frictions in matching with the best worker for the job.
Some commenters representing financial services companies opposed the rule, arguing non-competes are necessary for the industry and their industry is unique because non-competes have been used for decades, while numerous firms have entered the market, workers are mobile, and there is no evidence of blocked or curbed entry, lack of access to talent, lower innovation, or other negative impacts in that market. These commenters mention that mobility and access to talent is possible because new employers often “buy out” a worker's non-compete to hire a worker who may be otherwise bound by a non-compete. Several commenters also contend that non-competes are especially vital to firms that focus on securities or commodities trading because disclosure of commercially sensitive information to competitors can be extremely damaging to their former employers' profitability.
Commenters identified three studies which they contend suggest that non-competes improve worker productivity. First, commenters identified two studies on the Broker Protocol, an agreement among financial advisory firms which ostensibly limited the use of NDAs, non-solicitation agreements, and non-competes simultaneously. One study by Gurun, Stoffman, and Yonker finds that firms that joined the Protocol experienced higher rates of employee misconduct and earned increased fees.
A commenter representing a large group of public equity investors supported the rule, stating that a comprehensive ban would create an inclusive labor market, which is integral to long-term corporate value and a dynamic, innovative, and equitable economy. Financial services worker commenters also supported the rule, citing to their failure to be paid for their skills over time, the threat of litigation in seeking new employment, and the overbroad nature of non-competes in the industry. The following example is illustrative of the comments the Commission received:
• I am a female finance professional with strong qualifications and experience. I am subject to an extremely long and comprehensive non compete contract which I was induced to sign at a young age. I have been offered many positions at other firms who would be more willing to provide me with leadership opportunities and a path to further advancement, but I am unable to consider them and I am essentially trapped at my firm. . . .
The Commission declines to exclude financial services companies over which it has jurisdiction from the final rule. The Commission finds in Part IV.C that non-competes are restrictive, exclusionary, and also exploitative and coercive for higher wage and highly skilled workers, including workers in finance. The Commission also finds in Part IV.B and IV.C that non-competes tend to negatively affect competitive conditions in labor market through reduced labor mobility and in the product and services market through reduced innovation and new business formation. Evidence that new employers sometimes buy out non-competes also suggests that such clauses harm competition by raising the cost to compete and creating deadweight economic loss for the new employer.
The empirical evidence provided by commenters arguing for differentiation
Some commenters opposing the rule stated that investment in on-air talent would be considerably reduced without non-competes. Commenters argued that on-air talent becomes well-known because of employers' investment and reputation and that employers must be able to use non-competes to protect this investment. The Commission also received a number of comments from and on behalf of on-air talent. Those commenters stated that non-competes are ubiquitous for on-air talent, that they are often localized geographically, that they suppress compensation, and that they force workers seeking a better match to move out of their localities. The following example is illustrative of the comments the Commission received:
• I am a professional broadcast journalist subject to a non-compete agreement with every employment contract I have ever signed, which is the industry standard. I understand the need for contractual agreements with on-air talent and some off-air talent, but non-compete agreements have historically offered nothing to employees besides restricting where they work, and how much money they are able to earn . . . [while] knowing that employees would have to completely relocate if they wanted to seek or accept another opportunity.
The Commission declines to exclude on-air talent from the final rule. The Commission finds the use of non-compete agreements is an unfair method of competition as outlined in Part IV.B, and commenters do not provide evidence that a purported reduction in investment in on-air talent would be so great as to overcome that finding. Specifically, the success of on-air talent is a combination of the employer's investment and the talent of the worker, both of which benefit the employer. As noted in Part IV.D, other less restrictive alternatives, including fixed duration contracts and competing on the merits to retain the talent, allow employers to make a return on their own investments. Moreover, as stated in Part II.F, firms may not justify unfair methods of competition based on pecuniary benefit to themselves. Employers in this context do not establish that there are societal benefits from their investment in on-air talent, but only that the firms benefited.
A commenter representing companies who provide skilled workers in construction stated that the Commission should exclude the industry from the rule because non-competes are necessary to the industry's success. The commenter states that non-competes are necessary for investment in innovation and productivity in the industry. The comment cites to three studies. Two of the studies find a general reduction in productivity in construction and conclude,
Bldg. and Fire Rsch. Lab., NIST Special Publication 110 (September 2009).
The evidence cited by this commenter is exclusively about broad trends in productivity in the industry, and what may impact those trends. None of the studies explicitly examines non-competes, and they do not support inferences on the effects of non-competes in this particular industry. Indeed, the Commission finds that the final rule addresses issues raised by the commenter. For example, the commenter notes that productivity in the industry has been broadly declining for years. Notably, this downward trend exists with non-competes in use in the industry. The Commission notes that, under its analysis of the effect of the final rule, productivity will benefit because the final rule frees up labor and allows for greater innovation. The NIST study raises “skilled labor availability” as the very first factor that affects productivity. The Commission finds in Part IV that non-competes suppress labor mobility and the Commission believes the final rule will result in firms having access to workers who are a better, more productive fit. The McKinsey & Company report notes that changes in the industry will require adaptation by firms. The Commission believes the final rule will facilitate this adaptation by sharing non-confidential know-how across firms through increased mobility of workers. The rule may also help mitigate, and certainly will not exacerbate, concerns over increased concentration in the industry raised in the McKinsey & Company report, as the Commission finds that non-competes inhibit new business formation in Part IV.B.3.b.i. Moreover, the Commission believes non-competes may increase concentration, as discussed in Part IV.B.3.b.iii.
Additionally, the Commission finds that less restrictive alternatives, including appropriately tailored NDAs and non-solicitation agreements, are sufficient to address disclosure of confidential information and concerns related to client business. With respect to concerns that the construction industry as a whole is suffering from under-investment in capital and that the final rule may further disincentivize capital investment, as the Commission finds in Part IV.B.3.b.i, non-competes inhibit new business formation. The increase in new business formation from the final rule will bring new capital to bear in the industry. The Commission addresses the empirical literature and comments related to capital investment in detail Part IV.D.1. The Commission notes here that it is not clear any purported capital investment associated with non-competes is entirely beneficial because it may be the result of firms over-investing in capital because they do not face competition on the merits. Even if there is some net decrease in capital investment due to the final rule, commenters provide no reason to believe it would be a material amount.
The Commission explained in the NPRM that some entities that would otherwise be employers may not be subject to the final rule to the extent they are exempted from coverage under the FTC Act.
The Commission declines to rescind the proposal or otherwise refrain from promulgating a rule simply because the rule would not cover firms outside the Commission's jurisdiction. As an initial matter, jurisdictional limits are not unique to the Commission. All agencies have limits on their jurisdiction—many of which do not neatly map to all competitors in a particular market. Moreover, as explained in Parts IV and X, the final rule will have substantial benefits notwithstanding the FTC Act's jurisdictional limits, including increases in worker earnings, new firm formation, competition, innovation, and a decrease in health care prices (and potentially other prices). Furthermore, the Commission finds the risk of material disparate impact in markets where some but not all employers are covered by the final rule is minimal and, in any event, the final rule's overall benefits justify any such potential impact. As commenters acknowledged, excluded employers already compete with covered employers in the same markets. That is, coverage under the FTC Act—whether an employer is subject to the FTC Act and enforcement by the FTC—differs across a range of topics and long predates this final rule, which does not materially alter the status quo in that respect. Moreover, even in the absence of the rule, firms within the jurisdiction of the FTC Act are already subject to potential FTC enforcement against unfair methods of competition, including against non-competes, while firms outside the FTC's jurisdiction are not. The final rule does not alter that basic landscape.
At least one financial services industry commenter stated that national banks are outside of the Commission's jurisdiction and argued the final rule should exclude bank holding companies, subsidiaries, and other affiliates of Federally regulated banks to avoid disparate treatment of workers employed by different affiliates within the same organization, and because those entities are already heavily regulated. The Commission declines to exclude bank holding companies, subsidiaries, and other affiliates of Federally regulated banks that fall within the Commission's jurisdiction. While these institutions may be highly regulated, and depending on the corporate structure non-competes may be allowed for some workers but not others, the Commission finds that neither factor justifies excluding them from the final rule. If Federally regulated banks are concerned about disparate treatment of workers employed by their own different affiliates, they have the option to stop using non-competes across all their affiliates.
A corporation wholly owned by an Indian tribe asserted that the Commission should exclude Indian tribes and their wholly owned business entities from the definition of “employer.” The commenter asserted that the FTC Act does not explicitly grant jurisdiction over Indian tribes and their corporate arms. The commenter further argued that critical tribal revenue will be lost if tribal businesses' ability to retain skilled workers is impacted. The Commission declines to categorically exclude tribes or tribal businesses from coverage under the final rule. The FTC Act is a law of general applicability that applies to Indians, Indian Tribes, and tribal businesses.
Many commenters representing healthcare organizations and industry trade associations stated the Commission should exclude some or all of the healthcare industry from the rule because they believe it is uniquely situated in various ways. The Commission declines to adopt an exception specifically for the healthcare industry. The Commission is not persuaded that the healthcare industry is uniquely situated in a way that justifies an exemption from the final rule. The Commission finds use of non-competes to be an unfair method of competition that tends to negatively affect labor and product and services markets, including in this vital industry; the Commission also specifically finds that non-competes increase healthcare costs. Moreover, the Commission is unconvinced that prohibiting the use of non-competes in the healthcare industry will have the claimed negative effects.
Many business and trade industry commenters from the healthcare industry seeking an exception,
Based on the assumption that entities claiming tax-exempt status as nonprofits and publicly owned healthcare organizations would be exempt, many industry commenters contended that for-profit healthcare organizations must be also exempted from the rule as a matter of equal treatment. Commenters cited data from the American Hospital Association (AHA) indicating that as many as 58% of all U.S. hospital systems claim tax-exempt status as nonprofits, 24% are for-profit hospitals, and 19% are State and local government hospitals. One commenter cited AHA data indicating that 78.8% of for-profit hospitals are located in the same Hospital Referral Region (HRR) as at least one entity that claims tax-exempt status as a nonprofit. Many commenters argued that for-profit entities and entities that claim nonprofit status compete for patients, physician and non-physician staff, and market share. These commenters contended that a rule covering only for-profit healthcare entities will distort the market in favor of entities claiming tax-exempt status as nonprofits, which would continue using non-competes. One commenter identifying as an entity claiming nonprofit tax-exempt status argued that such entities need to rely on non-competes to compete with for-profit competitors because, unlike for-profit health systems, they invest significantly in specialized training and mentorship, and offer a guaranteed minimum salary to recent graduates.
Some commenters contended that favoring entities claiming tax-exempt status as nonprofits would have negative effects. Some commenters argued that disparate coverage under the rule may exacerbate consolidation in the healthcare industry by advantaging entities that claim tax-exempt status as nonprofits. They stated that increased consolidation would reduce the available supply of skilled labor for for-profit hospitals, increasing labor costs and contributing to higher prices paid by patients. Commenters noted a trend in physicians increasingly leaving private practice to work at large hospital groups claiming tax-exempt status as nonprofits, which, they contended, may continue to lock those physicians up using non-competes. Industry commenters also argued that insurance premiums will rise more than they would absent the rule because of the greater market power and resulting leverage of entities that claim tax-exempt status as nonprofits in provider network negotiations. One manufacturing industry association commenter argued that the burden of rising premiums will be passed on to manufacturers who provide health insurance to their employees.
Commenters also argued that a rule covering for-profit healthcare providers would cause independent, physician-owned practices, and small community practices to suffer a competitive disadvantage compared to larger entities that claim tax-exempt status as nonprofits and public hospital groups, reducing the number of these practices and interrupting continuity of care for their patients. Commenters stated that such practices will suffer these consequences acutely in States or localities that are particularly saturated with entities that claim tax-exempt status as nonprofits or exempt State or local hospitals, and cited New York and Mississippi as examples. A commenter claimed that public hospitals regulated by the Commission will incur losses because of their reduced ability to hire and retain physicians that perform profitable procedures. One commenter cited a 1996 Commission study to contend that, all else equal, hospitals that claim tax-exempt status as nonprofits set higher prices when they have more market power. A business commenter contended that, given what they considered a large-scale exemption of certain physician employers from the Commission's jurisdiction, the States are more appropriate regulators of non-competes between physicians and employers. Other commenters claimed that the Commission must further study the consequences of differential treatment.
Conversely, many commenters vociferously opposed exempting entities that claim tax-exempt status as nonprofits from coverage under the final rule. Several commenters contended that, in practice, many entities that claim tax-exempt status as nonprofits are in fact “organized to carry on business for [their] own profit or that of [their] members” such that they are “corporations” under the FTC Act. These commenters cited reports by investigative journalists to contend that some hospitals claiming tax-exempt status as nonprofits have excess revenue and operate like for-profit entities. A few commenters stated that consolidation in the healthcare industry is largely driven by entities that claim tax-exempt status as nonprofits as opposed to their for-profit competitors, which are sometimes forced to consolidate to compete with the larger hospital groups that claim tax-exempt status as nonprofits. Commenters also contended that many hospitals claiming tax-exempt status as nonprofits use self-serving interpretations of the IRS's “community benefit” standard to fulfill requirements for tax exemption, suggesting that the best way to address unfairness and consolidation in the healthcare industry is to strictly enforce the IRS's standards and to remove the tax-exempt status of organizations that do not comply. An academic commenter argued that the distinction between for-profit hospitals and nonprofit hospitals has become less clear over time, and that the Commission should presumptively treat hospitals claiming nonprofit tax-exempt status as operating for profit unless they can establish that they fall outside of the Commission's jurisdiction.
The Commission also received many comments about coverage of the health care sector generally under the rule. Some commenters urged the Commission to ensure that health care workers, including doctors and physicians, were covered by the final rule. Several commenters stated that eliminating non-competes would allow doctors wishing to change jobs to stay in the same geographic area, fostering patient choice and improving continuity of care. Other commenters urged the Commission to create an exception for health care workers. Some argued that the evidence does not support the Commission's conclusion that non-competes depress earnings in health care. Other reasons commenters cited in support of an exception included concerns about continuity and quality of care for patients, the increased costs for employers of health care workers, physicians' negotiating power with their employers, and the effect on incentives for employers to train their health care workers.
Thousands of healthcare workers submitted comments supporting a ban on non-competes. Worker commenters
Additionally, commenters stated the hardship patients have suffered because of non-competes when, for example, their physician was required to move out of their area to work for a different employer. The Commission highlights some of these comments in Part IV.B.2.b.ii and includes two further illustrative comments here:
• As a patient, non compete clauses are affecting mine and my [family's] ability to receive medical care. Our pediatrician left a practice and we aren't able to be informed where they are going. When we find out, it is an hour away [because] of the non compete. And when we look for other [doctors] closer they aren't accepting new patients. So for an entire year we are driving 2 [hours] round trip to see our pediatrician until they can move back to a local medical group. The non compete clause is not just affecting the life of the [doctor], but is also impacting many of us who rely on their services.
• As a family physician this has caused much grief and obstructs my desire to work and provide care for underserved populations. I am a NHSC scholarship recipient and due to non compete clauses was unable to continue working in the town I served due to its rurality. This created a maternity desert in the region I served. Now in a more metropolitan area, there has been an exodus of physicians in the area due to non compete clauses that has caused worsening access to primary care, specialty services, including behavioral health and substance use disorder treatment.
A number of physician group commenters stated that nonprofit healthcare organizations regularly impose non-competes on physicians, and that the impact of the rule would be limited if nonprofits are not required to comply. Some physician group commenters urged the Commission to work with other agencies to fill in gaps in applying the rule based on the Commission's jurisdiction, citing the importance of banning non-competes as widely as possible because of the harms they impose on physicians and patients irrespective of employer status. Specifically, commenters suggested that the Commission use its antitrust and referral authority to aggressively monitor nonprofit organizations for antitrust violations, to collaborate with other Federal agencies, including the IRS, and to provide incentives and guidance to States, which can enact measures to ensure that a prohibition on non-competes is implemented comprehensively. One commenter also noted that a ban would bring scrutiny to non-competes and would likely intensify pressure to eliminate them. A few commenters also contended that entities claiming tax-exempt status as nonprofits are subject to the Commission's jurisdiction as “persons” under the FTC Act.
After carefully considering commenters' arguments, the Commission declines to exempt for-profit healthcare employers or to exempt the healthcare industry altogether.
First, as described in Part IV, the Commission finds that certain uses of non-competes are an unfair method of competition. The use of unfair methods of competition cannot be justified on the basis that it provides a firm with pecuniary benefits to help them compete with other firms that use similar tactics.
Second, the Commission disagrees with commenters' contention that all hospitals and healthcare entities claiming tax-exempt status as nonprofits necessarily fall outside the Commission's jurisdiction and, thus, the final rule's purview. As explained in Part II.E.2, a corporation's “tax-exempt status is certainly one factor to be considered,” but that status is not coterminous with the FTC's jurisdiction and therefore “does not obviate the relevance of further inquiry into a [corporation's] operations and goals.”
Relatedly, in response to commenters' concern that large numbers of healthcare workers will not benefit from the final rule because they work for entities that the final rule does not cover, the Commission notes many workers at hospitals, including those that claims tax-exempt status as a nonprofit or government-owned hospital, contract with or otherwise work for a for-profit entity, such as a staffing agency or physician group. Although some of these individuals may work at an excluded hospital, the final rule applies to their employer—the staffing agency or for-profit physician group—because it is covered by the final rule.
The Commission disagrees with commenters stating the ability to use non-competes will provide a material competitive advantage to entities claiming tax-exempt status as nonprofit or publicly owned entities that are beyond the Commission's jurisdiction. To the contrary, those entities outside FTC jurisdiction that continue to deploy non-competes may be at a self-inflicted disadvantage in their ability to recruit workers, even if they derive some short-term benefit from trapping current workers in their employment. Furthermore, commenters' concern that for-profit healthcare entities will be at a competitive disadvantage is based on the false premise that entities outside the jurisdiction of the FTC will not be otherwise regulated or scrutinized with respect to the use of non-competes. States currently regulate non-competes by statute, regulation, and common law. According to the AHA data cited by commenters, over 12% (398/3,113) of nonprofit hospitals and 13% of government hospitals (187/1,409) are in States that ban non-competes for all employers. In any event, even if true, arguments that for-profit and other covered entities could suffer competitive harm by not being able to employ an unfair method of competition would not change the Commission's finding that use of certain non-competes is an unfair method of competition, as further discussed in Part IV.
While the Commission shares commenters' concerns about consolidation in healthcare, it disagrees with commenters' contention that the purported competitive disadvantage to for-profit entities stemming from the final rule would exacerbate this problem. As some commenters stated, the Commission notes that hospitals claiming tax-exempt status as nonprofits are under increasing public scrutiny. Public and private studies and reports reveal that some such hospitals are operating to maximize profits, paying multi-million-dollar salaries to executives, deploying aggressive collection tactics with low-income patients, and spending less on community benefits than they receive in tax exemptions.
Commenters provide no empirical evidence, and the Commission is unaware of any such evidence, to support the theory that prohibiting non-competes would increase consolidation or raise prices. To the contrary, as elaborated in Parts IV.B.3.a and IV.B.3.b, the empirical literature suggests, and the Commission finds, that the final rule will increase competition and efficiency in healthcare markets, as workers at for-profit healthcare entities will be able to spin off new practices or work for different employers where their productivity is greater. This is true even if the Commission does not reach some portion of healthcare entities. While the Commission's prior research may indicate, as one commenter suggested, that nonprofit hospitals set higher prices when they have more market power, the Commission finds that the final rule is not likely to increase healthcare prices
Moreover, the Commission has other tools to address consolidation in healthcare markets and is committed to using them. The Clayton Act grants the Commission authority to enforce compliance with,
Finally, the Commission disagrees with commenters that stated the Commission must further study the final rule's effect on healthcare workers and entities. The Commission has specific, long-time expertise in the healthcare market as anticompetitive mergers and conduct in healthcare markets have long been a focus of FTC law enforcement, research, and advocacy.
The Commission proposed to exclude franchisees from the definition of “worker” and requested comment on whether and to what extent the rule should cover non-competes between franchisors and franchisees (“franchisor/franchisee non-competes”).
Many commenters requested that the final rule cover franchisor/franchisee non-competes. Numerous commenters contended the franchisee-franchisor relationship is closer to a relationship between a worker and an employer than a relationship between businesses. These commenters argued that franchisees are often individual business owners who, like workers, lack bargaining power to negotiate over non-competes. One commenter stated that the Commission acknowledged in the Franchise Rule that franchisees generally lack bargaining power.
Commenters seeking coverage of franchisor/franchisee non-competes also stated that these non-competes do not protect legitimate interests because franchisors generally do not entrust franchisees with trade secrets or details about their broader commercial strategy. These commenters stated that, even if franchisees do receive such information, franchisors have less restrictive alternatives for protecting it, including NDAs and trade secret law. Some commenters also stated that non-competes have anticompetitive effects because franchisors may degrade the quality of inputs or raise input prices without fearing that their existing franchisees will leave for a competitor.
Many franchisee commenters also stated their desire to compete after exiting their franchise relationships. Franchisees also stated that their non-competes harm their negotiating position in bargaining over franchise renewal terms. These franchisees stated that franchisors can impose higher royalty rates or other less favorable terms over time as the franchisees feel powerless to refuse or make effective counteroffers, due to their non-competes. Many franchisees asserted that their non-competes are overbroad because they restrain individual owners' spouses and other close relatives from competing in the same industry. Some franchisees stated that their non-competes include penalties for choosing
Other commenters, primarily franchisors and trade organizations, stated that franchisor/franchisee non-competes should be excluded from the final rule. Many of these commenters argued that franchisor/franchisee non-competes are more similar to restrictive covenants between businesses than non-competes between employers and workers. Some of these commenters argued that franchisor/franchisee non-competes are more justified than non-competes in the employment context because, unlike employment relationships, entering into a franchise agreement is completely voluntary. Some commenters argued that, unlike non-competes in the employment context, franchisor/franchisee non-competes are only entered into by individuals with access to substantial capital and who therefore always have the option of starting their own businesses.
Many of these commenters argued that prohibiting non-competes for franchisees would threaten to severely disrupt or destroy the franchise business model, and that this would harm franchisors and franchisees alike, as franchising offers a unique opportunity for working people to become entrepreneurs with established brands. Commenters asserted non-competes are critical to the franchise business model because they offer both franchisors and franchisees confidence that existing franchisees will likely stay with a brand and refrain from using a franchise's trade secrets to unfairly compete against the franchisor. Commenters also asserted that franchisees are often exposed to proprietary information through training manuals and operational support and that non-competes help protect this information. In addition, commenters contended franchisor/franchisee non-competes protect investments made by other franchisees and maintain a franchise's goodwill.
Commenters supporting the exclusion of franchisor/franchisee non-competes from the final rule also asserted that the Commission lacked an evidentiary basis for covering such non-competes. These commenters also claimed no State has prohibited non-competes for franchisees, and the Commission would therefore lack data from natural experiments to justify extending a final rule to the franchise context.
The Commission continues to believe that, as many commenters attested, franchisor/franchisee non-competes may in some cases present concerns under section 5 similar to the concerns presented by non-competes between employers and workers. The comments from franchisors, franchisees, and others provide the Commission with further information about non-competes in the context of the franchisor/franchisee relationship, but the evidentiary record before the Commission continues to relate primarily to non-competes that arise out of employment. Accordingly, the final rule does not cover franchisor/franchisee non-competes. Non-competes used in the context of franchisor/franchisee relationships remain subject to State common law and Federal and State antitrust laws, including section 5 of the FTC Act.
In proposed § 910.4, the Commission addressed State laws and preemption. Based on comments, the Commission adopts a modified provision clarifying and explaining that States may continue to enforce laws that restrict non-competes and do not conflict with the final rule, even if the scope of the State restrictions is narrower than the final rule.
The NPRM contained an express preemption provision, proposed § 910.4, that explained the proposed rule preempted State laws inconsistent with the rule and did not preempt State laws that offer greater protection than the rule. The NPRM explained that when a State law offers greater protection than the rule, employers would be able to comply with both the NPRM and the State law. Thus, the proposed rule would have established a regulatory floor, but not a ceiling. The NPRM provided two hypothetical examples, one of a State law that would be inconsistent with, and therefore preempted by, proposed § 910.2(a) and one that would not because it satisfied the savings clause by offering greater protection and was not inconsistent with proposed part 910.
Numerous commenters supported the preemption of inconsistent State laws. Some commenters asserted the Commission lacks the legal authority to preempt State laws, including State common law, on non-competes because Congress allegedly did not confer the necessary authority to the Commission or because of federalism principles. They argued there must be clear Congressional intent to preempt State laws relating to non-competes.
The Commission finds it has the authority to promulgate regulations that preempt inconsistent State laws under section 6(g), together with section 5, of the FTC Act. Even without an express preemption provision, Federal statutes and regulations preempt conflicting State laws. Under the Supreme Court's conflict preemption doctrine, a Federal statute or regulation impliedly preempts State laws when it is impossible for the regulated parties to comply with both the Federal and the State law, or when a State law is an obstacle to achieving the full purposes and objectives of the Federal law.
As discussed in Parts II.A, II.B, and II.C, the Commission has the authority to promulgate this final rule. Accordingly, the final rule preempts conflicting State laws. To provide a clear explanation of the Commission's intent and the scope of preemption effected by the final rule, the final rule includes an express preemption
Numerous commenters stated that variations in State laws chill worker mobility and expressed support for a uniform Federal standard. Some commenters explained that a preemption clause could bring clarity to the law's effect.
The U.S. Department of Justice commented that, due to the patchwork of State laws, a worker may be free to switch jobs in one jurisdiction but subject to a non-compete in another, creating uncertainty as to the non-compete's enforceability for both firms and workers.
Another commenter pointed out that most States have not passed statutes that ban or restrict non-competes, and that existing statutes cover different categories of workers and different wage levels, making it difficult for workers to know whether employers can enforce a particular non-compete. The commenter stated that variations in the legal authority of State attorneys general to take action on the public's behalf also limit the effectiveness of State restrictions on non-competes. A number of commenters explained that the difficulties arising from variations in State non-compete laws are exacerbated by the increase in remote and hybrid work, and workers who travel to work across State lines. Accordingly, many commenters favored a uniform Federal standard that would promote certainty for employers and workers. Even some commenters who generally opposed banning non-competes favored preemption to eliminate the patchwork of State laws that makes it difficult for workers to know the applicable law and encourages forum shopping by employers who want to bring suits in sympathetic jurisdictions.
Other commenters opposed preemption, asserting that State legislatures and courts are best situated to address non-competes and that the States have historically regulated this area. They contended States should be allowed to continue adjusting the scope of restrictions on non-competes including applicability to different types of workers, time span, and geographic scope.
The Commission finds that preemption of State laws, including State common law, that conflict with the final rule best mitigates the negative effects of the patchwork of State laws, including chilling worker mobility and undercutting competitive conditions in labor and product and services markets.
Moreover, as discussed in Part IX.C, preemption furthers a primary goal of the final rule: to provide a uniform, high level of protection for competition that is easy for both employers and workers to understand and makes it less likely that employers will subject workers to illegal non-competes or forum shop. Indeed, some commenters who otherwise opposed the proposed ban on non-competes regarded the patchwork itself burdensome to employers as well as workers and noted the rule would reduce burden by eliminating uncertainty and confusion caused by State law variations.
Some commenters strongly supported the NPRM but expressed concern that the preemption provision as proposed could undermine States' efforts to curb non-competes and would thereby undercut the final rule's effectiveness. These commenters stated that under one interpretation, proposed § 910.4 could preempt State laws that prohibit non-competes for workers earning less than a specified income because the law as a whole may not be deemed to provide greater protection than the final rule. In their view, such an interpretation would not further the final rule's goals, because States with income-based restrictions on non-competes rather than complete bans may offer covered workers protections against non-competes that the FTC's proposed rule would not provide, such as State enforcement, private rights of action, and certain financial penalties.
These commenters also asserted that in many cases, State agencies and residents could be better positioned to respond to unlawful non-compete use specific to a particular State, but they would be unable to do so and dependent on the Commission if their laws were fully preempted. To enable concurrent enforcement of State laws that restrict the use of non-competes, thereby increasing the enforcement resources devoted to the issue, they recommended a “savings clause” that would exempt from preemption State laws that provide workers with protections substantially similar to or greater than those afforded by the
Another commenter recommended including a narrow reverse preemption provision so that relevant State laws in States that enact the Uniform Restrictive Employment Agreement Act
Based on comments, the Commission has modified the final rule's preemption provision to clarify and explain that State laws that restrict non-competes and do not conflict with the final rule are not preempted. Section 910.4 also expressly references State common law, antitrust law, and consumer protection law, so that the intended scope of preemption is clear. State common law is expressly referenced because many States do not have a general non-compete statute, and the common law varies considerably.
Section 910.4(b) reflects the Commission's intent that States may continue to enforce in parallel laws that restrict non-competes and do not conflict with the final rule, even if the scope of the State restrictions is narrower than that of the final rule. That is, State laws cannot authorize non-competes that are prohibited under this final rule, but States may, for example, continue to pursue enforcement actions under their laws prohibiting non-competes even if the State laws prohibit a narrower subset of non-competes than this rule prohibits.
Accordingly, § 910.4(a) states that the final rule will not be construed to annul, or exempt any person from complying with, any State statute, regulation, order, or interpretation applicable to a non-compete, including, but not limited to, State antitrust and consumer protection laws and State common law. Rather, the final rule supersedes such laws to the extent, and only to the extent, that such laws would otherwise permit or authorize a person to engage in conduct that is an unfair method of competition under § 910.2(a) or conflict with the notice requirement in § 910.2(b).
For example, § 910.4 makes clear that the final rule does not preempt State law enforcement where a State bans non-competes only for workers earning below a certain amount and thus has a ban that is narrower than the final rule. Thus, if a State's law bars non-competes only for workers who earn less than $150,000 per year, the final rule and the law are different in scope of protection but not directly inconsistent. The State may continue to enforce its ban for workers earning less than $150,000, but all non-competes covered by the final rule, regardless of a worker's earnings, remain an unfair method of competition under the final rule and are therefore unlawful.
In response to concerns raised by commenters and to further bolster the consistent use of State laws, the Commission expressly recognizes State authority and the existence of private rights of action arising under State laws that restrict non-competes or bar unfair methods of competition. This is set forth in § 910.4, now titled “Relation to State laws and preservation of State authority and private rights of action,” and is detailed in § 910.4(b). That section provides that unless a State law conflicts with the final rule and is superseded as described in § 910.4(a), part 910 does not limit or affect the authority of State attorneys general and other State agencies or the rights of a person to bring a claim or regulatory action arising under State laws, including State antitrust and consumer protection laws and State common law. Section 910.4(b) also explains that persons retain the right to bring a claim or regulatory action under State laws unless the laws conflict with the final rule and have been superseded as described in § 910.4(a).
These modifications are consistent with many commenters' recommendations and recognize State-based enforcement as a potent force that supplements Federal enforcement. In addition, the modifications, particularly those that explain § 910.4 does not exempt any person from complying with State laws, are intended to curb the use of preemption as a defense against State restrictions of non-competes.
The modifications also reflect the Commission's long history of working in concert with States and encouraging concurrent enforcement of State laws to pursue common goals. While the Commission recognizes this will leave some variation in the enforcement exposure covered persons face among States, that variation will be greatly reduced by the final rule, which sets a
The Commission stated in the NPRM that it may adopt a severability clause
Section 910.5 states that if any provision of the final rule is held to be invalid or unenforceable either facially, or as applied to any person or circumstance, or stayed pending further agency action, such invalidity shall not affect the application of the provision to other persons or circumstances or the validity or application of other provisions. Section 910.5 also states that if any provision or application of the final rule is held to be invalid or unenforceable, the provision or application shall be severable from the final rule and shall not affect the remainder thereof. This provision confirms the Commission's intent that the remainder of the final rule remain in effect in the event that a reviewing court stays or invalidates any provision, any part of any provision, or any application of the rule—including, for example, an aspect of the terms and conditions defined as non-competes, one or more of the particular restrictions on non-competes, or the standards for or application to one or more categories of workers.
The Commission finds that each of the provisions, parts of the provisions, and applications of the final rule operate independently and that the evidence and findings supporting each provision, part of each provision, and application of each provision stand independent of one another. In this final rule, the Commission determines that certain conduct is an unfair method of competition in Part IV.B and Part IV.C and differentiates between senior executives and workers who are not senior executives with respect to existing non-competes. The final rule distinguishes between the two in both the final rule's operation and in the bases for adopting the final rule. The difference in restrictions among different workers, and the distinct bases for adopting the restrictions, is described in detail in Parts IV.B and IV.C. The Commission also estimates the effect of excluding senior executives entirely from the rule in Part X.F.11 and finds that the benefits of covering only those workers who are not senior executives justify the costs.
The Commission promulgates each provision, part of each provision, and application of each provision as a valid exercise of its legal authority. Were any provision, part of any provision, or any application of any provision of the final rule stayed or held inapplicable to a particular category of workers, to particular conduct, or to particular circumstances, the Commission intends the remaining elements or applications of the final rule to prohibit a non-compete between covered persons and covered workers as an unfair method of competition.
In Parts IV.B and IV.C, the Commission finds that the use of non-competes is an unlawful unfair method of competition under section 5 of the FTC Act because it is restrictive and exclusionary conduct that tends to negatively affect competitive conditions in several independent ways. In support of its finding that the use of non-competes is an unlawful unfair method of competition for workers who are not senior executives, the Commission additionally finds that the use of non-competes is exploitative and coercive in Part IV.B.2.b.
The Commission relies principally on empirical evidence regarding the effects of changes in non-compete enforceability, both when finding in Part IV.B.3.a and Part IV.C.2.c.ii that the use of non-competes tends to negatively affect competitive conditions in labor markets, and when finding in Part IV.B.3.b and Part IV.C.2.c.i that the use of non-competes tends to negatively affect competitive conditions in product and service markets. The Commission further analyzes and quantifies these effects in Part X.F.6, including sensitivity analyses that compare the estimated effects of smaller changes in enforceability and larger changes in enforceability.
Based on this empirical evidence and analysis, the Commission believes that more limited application of the rule—which might result were a court to render the final rule inapplicable in some way—may be equivalent to smaller changes in the enforceability of non-competes in the empirical literature. As described in Part IV.B.3.a and IV.B.3.b, smaller changes in enforceability change the magnitude, but not the directional nature, of the labor market and product and service market effects.
In Part X, the Commission conducts a regulatory impact analysis for the final rule as applied to all workers, as applied to all workers other than senior executives, and as applied to senior executives. The Commission finds that the asserted benefits of the use of non-competes do not justify the harms from the use of non-competes for any category of workers. The Commission's findings and differential analysis demonstrate that the asserted benefits from the use of non-competes do not justify the harms from the use of non-competes for higher- or lower-wage earners, including, for example, lower-wage workers defined as workers whose total annual compensation is less than $151,164.
For instance, if, for any reason, a reviewing court were to stay or invalidate the final rule as applied to senior executives, the Commission would intend for the remainder of the final rule to apply to all workers other than senior executives. Likewise, if a reviewing court were to stay or invalidate the final rule to apply to workers other than senior executives, the Commission would intend for the remainder of the final rule to apply to senior executives. Additionally, if a reviewing court were to stay or invalidate the final rule as applied to some other subset of workers, the Commission would intend for the remainder of the final rule to apply to all but those workers. So, for example, if a reviewing court were to stay or invalidate the final rule as applied to workers other than lower-wage workers—defined as workers whose total annual compensation is less than $151,164—the Commission would intend for the remainder of the final rule to apply to those workers, and further notes the evidentiary record demonstrates that application of the rule to those remaining workers would be beneficial and achieve lawful objectives. In the same way, if a reviewing court were to stay or invalidate the provision of the final rule regarding enforcing an existing non-compete or the notice requirement, the Commission would intend for the remainder of the final rule to apply. As described in Part IX.C, although the Commission concludes that a national standard is most effective, a number of States currently apply different standards to different workers and States also apply a myriad of legal standards to non-competes generally. Accordingly, were a reviewing court to stay or invalidate a particular application of the final rule, a covered person could simply comply with the provisions, parts of provisions, or applications of the final rule that remain in effect.
The Commission's adoption of the final rule does not hinge on the same restrictions applying to all non-competes, on the final rule applying to all workers, or on joint adoption or operation of each provision. Accordingly, the Commission considers each of the provisions adopted in the final rule to be severable, both within each provision and from other provisions in part 910. In the event of a stay or invalidation of any provision, any part of any provision, or of any provision as it applies to certain conduct or workers, the Commission's intent is to otherwise preserve and enforce the final rule to the fullest possible extent.
The Commission adopts a uniform effective date of 120 days after publication of the final rule in the
In the NPRM the Commission proposed a compliance date of 180 days after publication of the final rule in the
The Commission also stated that it proposed to establish an effective date of 60 days after the final rule is published in the
Many worker commenters urged the Commission to act as quickly as possible to bring the final rule into force, citing the current acute, ongoing harms to their earnings, mobility, quality of life, and other significant impacts and noting the final rule's potential for immediate relief if their non-compete was no longer in force. Representatives of many local governments from different States contended that the negative effects of non-competes and the anticipated benefits of the proposed rule justified allowing the Commission's rule to go into effect as soon as possible. Other commenters supported the compliance date as proposed or favored other measures to obtain the anticipated benefits of the final rule as soon as practicable. Another commenter contended that the 180-day compliance period was sufficient to allow businesses to ensure compliance and suggested that the Commission move the effective date back to the day or the day after the final rule is published.
Several commenters suggested the Commission adopt a longer compliance period of one year, 18 months, or two years. These commenters generally stated that businesses need more time to adjust their compensation packages, contracting practices, and employee policies to comply with the rule and to protect their intellectual property. At least one commenter also argued the Commission should adopt a two-year compliance period to allow courts sufficient time to hear and resolve challenges to the final rule. One commenter asserted that the compliance period would be especially burdensome for smaller business. Another industry commenter argued application of the rule should be phased in over time.
The Commission adopts a 120-day compliance period. As outlined in Parts IV.B and IV.C, based on both voluminous comments from the public as well as a significant body of empirical evidence, the Commission finds that the use of non-competes is coercive and exploitative for the vast majority of workers across different earnings levels and occupations and that for all workers it tends to negatively affect competitive conditions in labor markets and also tends to negatively affect competitive conditions in product and service markets—and that such actual harms are in fact currently ongoing. The Commission adopts a 120-
The Commission has taken several steps in the final rule to make compliance as simple as possible for employers. These steps make it practicable and reasonable to require compliance within 120 days. The final rule allows regulated entities to enforce existing non-competes with senior executives, who commenters contended are most likely to have complex compensation arrangements that include non-competes. Accordingly, there is no need for a lengthy compliance period, as the most complex existing arrangements are left in place. The Commission also eliminated the rescission requirement for all workers. Under the final rule, employers will not need to rescind (
Starting on the effective date of the final rule, employers will be prohibited from entering into new non-competes barred by this final rule and from enforcing non-competes that the employer entered into prior to that date with workers other than senior executives. Prior to the effective date employers will need to identify each of their workers with existing non-compete agreements and can assess which, if any, are senior executives and determine if they wish to maintain those non-competes. Employers will also need to assess and revise, if necessary, any employment policies or handbooks that purport to bind workers even after the effective date.
To the extent they have confidential business information, trade secrets, or other investments to protect with respect to a particular worker, employers will be able to assess their options to lawfully protect that information. However, new protections will be unnecessary in many cases, because, for example, 95.6% of workers subject to non-competes are already subject to an NDA.
The Commission also finds that the 120-day compliance period gives small businesses enough time to comply with the final rule. Although small businesses may have limited staff and funds compared to larger firms, they also have fewer workers, and the exclusion for existing non-competes for senior executives will relieve the compliance burden altogether for those small firms that use non-competes only with those workers. Moreover, the steps the Commission has taken to reduce the compliance burden of § 910.2(b) will further simplify and streamline compliance for small businesses.
The Commission has also determined it is not necessary to extend the compliance period to give courts time to adjudicate pending non-compete litigation because, as described in Part V.C.3, the Commission has adopted § 910.3(b), which provides that the final rule does not apply where a cause of action related to a non-compete arose prior to the effective date. The Commission also finds that a longer compliance period is not needed to hear and resolve challenges to the final rule, especially given the ability of a challenger to seek a preliminary injunction.
In sum, the Commission finds that due to modifications reducing covered entities' burden to comply with the final rule, a compliance period of 120 days is sufficient time to comply with the final rule. Given these changes the longer compliance period proposed in the NPRM is no longer warranted and would allow the use of certain non-competes that are an unfair method of competition—and their related harms and costs—to continue for longer than necessary. The substantial benefits to competition and to workers of the final rule taking effect as soon as possible outweigh any concerns about potential difficulties in meeting an earlier compliance date.
The Commission also adopts a 120-day effective date. The Commission concludes that it would ease the burden of implementation and reduce possible confusion by having a uniform date for when the final rule goes into effect and when compliance under the final rule is required. A 120-day effective date complies with the requirements of the Congressional Review Act that a “major rule” may not take effect fewer than 60 days after the rule is published in the
The Commission proposed to ban non-competes categorically, with a limited exception for non-competes entered into by a person who is selling a business entity. In the NPRM, the Commission discussed and sought comment on potential alternatives to the proposed categorical ban, including discrete alternatives that would implement a rebuttable presumption of unlawfulness or apply different standards to different categories of workers.
The Commission received many comments on these questions, as well as on the question of whether the Commission should issue a Federal standard for non-competes or continue relying on existing law and case-by-case litigation to address harms from non-
While preliminarily finding that a categorical ban would best achieve the proposed rule's objectives, the Commission nevertheless sought comment on the alternative of a rebuttable presumption, under which it would be presumptively unlawful for an employer to use a non-compete, but a non-compete would be permitted if the employer could meet a certain evidentiary burden or standard.
Most commenters that addressed this issue, including those both supporting and opposing the proposed rule, discouraged the Commission from including a rebuttable presumption in the final rule. These commenters contended that a rebuttable presumption would add complexity and uncertainty to the rule.
Supporters of the proposed rule asserted that a rebuttable presumption would undermine the rule's effectiveness, failing to deter employers from imposing non-competes while making litigation too uncertain and costly for most workers to pursue. Some of these commenters contended that a rebuttable presumption would also do little to reduce the chilling effects of non-competes. They argued that employers would continue to impose non-competes that are unlikely to survive a rebuttable presumption.
Many commenters critical of the proposed rule opposed a rebuttable presumption for essentially the same reasons they opposed the rule in general. They contended that, in States where non-competes are generally enforceable, a rebuttable presumption would inappropriately shift the burden of proof from workers to employers. Many of these commenters specifically opposed a rebuttable presumption that would use a test similar to antitrust law's “quick look” analysis, contending that the Commission's analysis of empirical research on non-competes cannot substitute for the lengthy experience courts usually have with a particular restraint before giving it quick-look treatment. A few commenters contended that a rebuttable presumption would increase litigation and raise employers' compliance costs by complicating the determination of whether a given non-compete is likely valid, requiring more lawyer involvement in drafting clauses and more reliance on courts to determine a non-compete's validity.
A few commenters supported a rebuttable presumption, arguing the Commission's proposed ban on non-competes was too blunt an instrument. Some also contended that a rebuttable presumption would offer a more flexible approach akin to the majority of State law approaches. At least one commenter stated a rebuttable presumption would make the final rule more likely to survive judicial review. A few commenters stated a rebuttable presumption would provide more protections than most State laws by allowing only non-competes that the commenter contended are not unfair to the worker, such as where highly paid workers agree to narrow non-competes in exchange for bargained-for consideration. One commenter argued a rebuttable presumption would enable the Commission to accrue more experience adjudicating non-competes and assessing their impact on competition.
Commenters advocating for a rebuttable presumption generally preferred a test focusing on one or more factors, including: the non-compete's geographic scope and duration; the presence and amount of any liquidated damages or penalty provision; whether the clause is narrowly tailored to prevent competition with actual competitors; the restrained worker's duties and income; and the availability of less restrictive alternatives. A few commenters supported a “preponderance” (as opposed to a “clear and convincing”) standard to permit as many non-competes as possible but acknowledged that such a rule may be so similar to the existing common law as to be redundant.
After carefully reviewing and considering the comments, the Commission concludes that a rule implementing a rebuttable presumption is not preferrable to the final rule as adopted. Based on the Commission's expertise, including careful review and consideration of the entire rulemaking record, the Commission finds that a rebuttable presumption would be less effective than the final rule for achieving the Commission's stated goals. A rebuttable presumption also presents administrability concerns that the final rule does not.
Overall, the comments reinforced the Commission's concerns that a rebuttable presumption would foster substantial uncertainty about the validity of a given non-compete and would do little to reduce the
The Commission also believes that, in important respects, a rebuttable presumption for non-competes is inconsistent with the Commission's findings in this final rule. As discussed in greater detail in Part IX.C, a rule that provides for case-by-case, individualized assessment of non-competes is unlikely to address the negative effects of non-competes on competition in the aggregate. In addition, by focusing on considerations specific to the worker and the employer, a rebuttable presumption is unlikely to address the external effects of non-competes (
The Commission recognizes there may be some benefits to a rebuttable presumption relative to the status quo. Because it puts the burden of proof on employers, a rebuttable resumption would be stricter than the current law in States where non-competes are allowed, and research suggests even a small decrease in enforceability would increase worker mobility, raise wages,
In the NPRM, the Commission also sought comment on four discrete alternatives to the proposed rule: Alternative #1 (categorical ban below some threshold, rebuttable presumption above); Alternative #2 (categorical ban below some threshold, no requirements above); Alternative #3 (rebuttable presumption for all workers); and Alternative #4 (rebuttable presumption below some threshold, no requirements above).
As explained in Part IX.A.1, the Commission finds a rebuttable presumption would be ineffective in addressing the harms to competitive conditions caused by non-competes. For the same reasons, the Commission declines to adopt Alternatives #1, #3, and #4, all of which contemplated a rebuttable presumption for some or all workers.
While the vast majority of commenters supported the Commission's proposal to ban non-competes categorically for all workers, a number of commenters suggested that the Commission permit non-competes with senior executives (or other highly skilled or highly paid workers) and other workers. The Commission addresses these comments in Part IV.C and V.D.1, where it finds that such non-competes tend to negatively affect competitive conditions in labor markets and in product and service markets, and that non-competes are also exploitative and coercive for workers other than senior executives. For these reasons, the Commission declines to adopt Alternative #2, which contemplated imposing no requirements on workers above a certain wage or other threshold.
In the NPRM, the Commission sought comment on the potential alternative of adopting disclosure requirements related to non-competes.
In general, commenters stated they agreed with the Commission's preliminary view that, while there may be some benefits to a disclosure rule, it would not achieve the objectives of the rule. Workers and worker advocacy groups stated that non-competes are often presented to workers on their first day on the job, or after they accept an employment offer. Although these commenters generally supported a comprehensive ban, they noted that if the Commission did not pursue a ban, a disclosure requirement may help improve workers' awareness of non-competes before accepting an offer. On the other hand, these commenters contended that a disclosure rule would do little to reduce the prevalence of non-competes, because workers have little choice but to accept non-competes, which are typically presented as “take-it-or-leave-it” terms and are ubiquitous in many fields.
Many trade organizations, advocacy groups, and academics who were generally supportive of the rule stated that a disclosure rule would fail to mitigate the competitive harms caused by non-competes in the aggregate. While acknowledging a disclosure rule may ameliorate some problems related to worker awareness of non-competes, these commenters contended that non-competes are unfair and coercive because employees generally lack adequate bargaining power to refuse to sign or bargain over non-competes even when they are presented at the time of an employment offer, and that a disclosure rule would therefore not have the effect of making non-competes less unfair or coercive. A few commenters opposed a disclosure rule generally but urged the Commission to adopt a disclosure requirement for any non-competes permitted by the final rule, including for any non-competes entered into by a person who is selling a business.
On the other hand, some trade organizations, advocacy groups, and businesses that generally opposed the rule advocated for the Commission to adopt a disclosure rule in lieu of the proposed categorical ban. These commenters contended that a disclosure rule would substantially mitigate the unfairness of non-competes that are entered into without adequate notice to the worker without drastically altering the legal status quo, thereby maintaining the protections for trade secrets, training expenditures, and intellectual property they contend that non-competes provide. They stated that eight States and the District of Columbia have statutory notice requirements for non-competes.
Most of the commenters who supported a disclosure rule also argued that rather than demonstrating that non-competes tend to negatively affect competitive conditions, the available evidence merely demonstrates opportunistic behavior by employers (such as presenting non-competes only after prospective workers have taken hard-to-reverse steps towards accepting employment) and workers (such as seeking to be excused from a non-compete after recognizing its impact on future job prospects). These commenters asserted that a disclosure rule would be better suited to address these types of opportunistic behaviors than a categorical ban.
Some commenters based their support for a disclosure rule on their contention that workers have sufficient bargaining power to negotiate over non-competes when they are provided with notice of them. One such commenter pointed to the cited research by Starr, Prescott, and Bishara finding that disclosure of non-competes to workers prior to acceptance of a job offer may increase earnings, increase rates of training, and increase job satisfaction.
A few commenters contended a disclosure rule may be more likely to withstand judicial review because the Commission could promulgate a disclosure rule in this context under its UDAP authority pursuant to the Magnuson-Moss Act. In addition, a few commenters requested the Commission adopt timing rules for when the disclosure must be provided, such as by requiring that employers disclose a non-compete in the job advertisement, at the time of the job offer, or at least five business days prior to the worker's deadline to sign an employment agreement.
The Commission declines to adopt a disclosure rule.
The Commission also finds that a disclosure requirement would not be as effective as a categorical ban in addressing the exploitation and coercion of workers through non-competes. As described in Part IV.B.2.b.i, there is a significant imbalance in bargaining power between employers and most workers, which is particularly acute in the context of negotiating employment terms such as non-competes. And, as many comments from workers and worker advocacy groups attest, non-competes are often included in standard-form contracts and offered on a take-it-or-leave-it basis.
The Commission gives the findings of the Starr, Prescott, and Bishara study on the impacts of disclosure little weight because the study reflects only correlation, not causation, with respect to the effects of a disclosure rule (similar to the “use” studies the Commission gives little weight to, as described in Part IV.A.2). The study merely compares a set of workers whose firms disclosed the non-compete and workers whose firms did not, and any correlation may thus be attributable to confounding factors. This comparison—similar to comparisons of workers with and without non-competes—may be polluted by differences between firms that opt to disclose non-competes and those that do not, or differences between workers who are the beneficiaries of disclosure versus those who are not.
One commenter stated that the Starr, Prescott, and Bishara study suggests that a disclosure rule would decrease the number of workers who assume a non-compete with which they are presented is non-negotiable. The study suggests that the potential effects of a disclosure rule in this respect would be, at best, limited.
A disclosure rule may address some deceptive or misleading practices in connection with non-competes. However, considering that a disclosure rule is not likely to significantly reduce the negative competitive impacts of non-competes on labor markets and on product and service markets, this benefit is significantly outweighed by the limitations of a disclosure rule.
The Commission further concludes that a disclosure rule is not necessary for non-competes in the context of sales of a business entity. As described in Part V.A, persons selling a business entity tend to have bargaining power in the context of the transaction, and the Commission is unaware of evidence that deceptive and misleading practices in connection with non-competes (such as waiting to disclose a non-compete until after the job offer) are common with respect to business sales.
In the NPRM, the Commission sought comment on a reporting rule as a potential alternative to the proposed rule.
The Commission stated in the NPRM that it did not believe a reporting rule would achieve the objectives of the proposed rule. The Commission stated that merely requiring employers to report their non-competes to the Commission would not meaningfully reduce the prevalence of non-competes and would therefore fail to reduce the negative effects non-competes have on competitive conditions in labor markets and product and service markets.
Most commenters addressing this topic agreed with the Commission's preliminary view that a reporting rule would not achieve the goals of the proposed rule. At least one business opposed any reporting requirement due to the cost of compliance and to avoid exposing any confidential information contained in employment agreements. At the same time, some commenters stated that a reporting rule may assist enforcement and provide quantitative data sets to measure compliance, while recognizing that such benefits would lose significance if the Commission were to adopt the proposed rule. One commenter suggested that, to improve the effectiveness of any reporting rule, any such rule should include a provision stating that any non-competes which were not properly disclosed to State and Federal authorities are null and void.
The Commission declines to adopt a reporting rule. A reporting rule would impose recurring compliance costs on employers, compared with the proposed rule, which largely imposes one-time costs. At the same time, a reporting rule would be inadequate to address the negative effects of non-competes on competitive conditions in labor markets and product and service markets, or the Commission's concerns about exploitation and coercion through the use of non-competes, since it would allow for the continued use of non-competes.
In addition to those alternatives listed in the NPRM, a few commenters suggested adopting an alternative rule that allows non-competes but sets a limitation on their geographic scope and/or duration. Some commenters suggested a geographic limit of five, ten, or thirty miles and/or a temporal limit of six months or one, two, or three years, while others suggested a fact-specific requirement that the geographic scope or duration of a non-compete be “reasonable.” Many of these commenters cited State laws that take a similar approach.
A few commenters opposed this alternative. One worker advocacy group argued that any bright-line limit may end up serving as a default, encouraging employers to impose non-competes of the maximum allowable scope or duration even if that limit is longer or broader than they otherwise would have imposed. At least one academic commenter argued that setting geographic scope or duration limitations on non-competes is unlikely to have a substantial impact, pointing to the continued prevalence of overly broad non-competes despite State laws designed to set upper limits on geographic scope and duration.
The Commission declines to adopt a standard providing that the geographic scope or duration of non-competes must be “reasonable.” The Commission is concerned a reasonableness standard would foster significant uncertainty among workers and businesses about the enforceability of non-competes, for the same reasons a rebuttable presumption would. In addition, as described in Part II.C.1 of the NPRM, all States where non-competes are enforceable currently apply a reasonableness standard, so a Federal reasonableness standard would not mitigate the negative effects of non-competes that are presently occurring.
The Commission also declines to adopt the alternative of imposing limits on the scope and duration of non-competes. Such a rule would be insufficient to address the negative effects of non-competes on competitive conditions in labor markets or products and services markets. Although a non-compete that lasts for a shorter duration or within a smaller geographic area curtails job mobility for the individual worker it binds to a lesser degree, it nonetheless curtails the worker's job mobility and the ability of competing employers to recruit and access talent. Non-competes limited in duration and scope still tend to inhibit efficient matching between workers and employers, with spillover effects on new business formation and innovation through the mechanisms described in Parts IV.B and IV.C. Furthermore, limitations on the scope and duration of non-competes would not address the spillover effects from non-competes on other workers and consumers. In short, even if a non-compete applies only to a relatively delimited location or time period, it still—by design—cuts off free and fair competition in labor and product and service markets.
In addition, most of the commenters who stated that they were exploited and coerced by non-competes did not do so on the basis that the non-compete was overbroad in scope or duration. Instead, most of the commenters who described the terms of their non-competes described limits on scope and duration that were within the bounds of what is typically permissible under State law.
Some commenters requested that the Commission adopt an alternative that would permit non-competes so long as the worker is compensated. Some commenters pointed to Massachusetts and Oregon law governing non-competes under which, for certain workers, non-competes may be enforced if,
The Commission declines to adopt a rule requiring compensation for non-competes. First, such a rule would not address the harms to competitive conditions that non-competes cause, which result in harm to other workers, to rivals of employers, and to consumers. The Commission finds in Parts IV.B.3.a.ii and IV.C.2.c.ii. that non-competes harm workers other than the workers who sign them, by reducing the number of job opportunities and thereby inhibiting efficient matching for all workers. The Commission further finds in Parts IV.B.3.b and IV.C.2.c.i that non-competes inhibit new business formation and innovation, which affects consumers. Therefore, even if a worker were fully compensated for a non-compete, the fact of that compensation would not redress these negative externalities. Second, this alternative would be ineffective or significantly less effective because of the
Some commenters suggested the possibility of combining two or more of the alternatives discussed in this Part IX
The Commission sought comment on whether a Federal standard for non-competes would promote certainty for employers and workers.
Many commenters expressed support for the NPRM because they viewed current laws as insufficient to protect all workers, rivals, or consumers, regardless of where they are located, from the negative effects of non-competes on competitive conditions in labor markets and markets for products and services. Numerous workers, businesses, and other commenters said the patchwork of State laws and confusion about those laws, particularly reasonableness tests, makes it difficult for workers and businesses to understand the law and in turn contributes to the use of unenforceable or overbroad non-competes and chills worker mobility. Several commenters also said that case-by-case adjudication and reasonableness tests make it difficult for parties to predict outcomes, which in turn raises litigation costs. Even some organizations opposed to the proposed rule or who supported a different policy believed that a Federal rule could be beneficial, such as to businesses operating in multiple jurisdictions.
In addition, according to commenters, case-by-case adjudication under State law cannot address the harms caused by non-competes through their use in the aggregate. Some commenters also asserted that the patchwork of State laws is complicated by remote and hybrid workers. Others argued that State laws are skewed in favor of employers or leave workers vulnerable to unreasonable agreements. Some argued that many workers, businesses, non-competes, and labor markets cross State lines, demonstrating the need for one standard. Several State Attorneys General also said that numerous complications arise when localities span more than one State and those States have different laws on non-competes; workers become confused and enforcement of non-competes can have spillover effects in another State.
In contrast, many commenters stated that case-by-case adjudication is preferable to a Federal rule because it allows individual facts to be considered. In addition, many commenters argued that existing State legislative and judicial decisions are sufficient to impose limitations on non-competes while recognizing legitimate business interests. Commenters also argued that States should be allowed to continue their natural experiments with non-competes; that non-competes historically have been and should remain an issue of State law; and that States are best suited to make policy judgments for their citizens.
Some commenters argued that unenforceable or overly broad non-competes are not a problem because courts can strike down or reform them. Some employers asserted that they specifically, or employers more generally, did not enter into unenforceable non-competes. Other commenters argued that employers did not use choice of law clauses to evade State laws, stating the clauses are the products of arms-length bargaining and provide certainty and predictability.
The Commission has the authority to make rules and regulations to carry out the FTC Act's prohibition on unfair methods of competition under sections 5 and 6(g) of the FTC Act as described in Parts II.A through II.C, and the Supreme Court has stated that agencies generally have discretion to choose between rulemaking and adjudication.
The prevalence of non-competes across the economy, described in Part I.B.2, and the scale of the harms they cause, described in Parts IV.B and IV.C, show that it is more efficient to address the harms to competition from non-competes via rulemaking compared to case-by-case adjudication. As the D.C. Circuit stated in ruling that the Commission had the authority to promulgate unfair methods of competition rules, “the availability of substantive rule-making gives any agency an invaluable resource-saving flexibility in carrying out its task of regulating parties subject to its statutory mandate.”
In addition, the principal harms from non-competes arise from their tendency to negatively affect competitive conditions in the aggregate. A single non-compete with a single worker may not do much to inhibit efficient matching between workers and employers across a labor market or suppress new business formation or innovation (and what effects it does have would be difficult to measure), but the Commission finds based on empirical evidence that the use of many non-competes across the labor market does have these aggregate net negative effects.
Finally, “utilizing rule-making procedures opens up the process of agency policy innovation to a broad range of criticism, advice and data that is ordinarily less likely to be forthcoming in adjudication.”
The Commission finds that case-by-case litigation alone is insufficient to address the harms to competition from non-competes due to the cost of litigation, which deters many workers from challenging non-competes, and the limited resources of public enforcement agencies. In addition, individual litigation is not well-suited to redress the negative externalities non-competes impose on other workers, other employers, consumers, and the economy from their use in the aggregate.
Many commenters addressed the shortcomings of individual litigation as a means for addressing the harms of non-competes. Numerous commenters noted that litigation is costly and many workers cannot afford to litigate their non-competes.
Commenters also noted some non-competes include liquidated damages clauses or fee-shifting provisions requiring the worker to pay the employer's attorney and other costs if the employer wins, further increasing the costs (and risks) of challenging a non-compete. In addition, commenters stated that litigation is time-consuming and could take as long or longer than the non-compete period. For example, one commenter shared a decision in the commenter's own case where the appellate court found the non-compete violated public policy by leaving an area with only one surgeon in a specialty—but reached that decision only after the two-year non-compete had already run its course.
Litigation can be even riskier if a court might reform a non-compete, which leaves the worker subject to some restrictions even if the initial non-compete was impermissibly broad. Several commenters cited a
For every covenant that finds its way to court, there are thousands which exercise an
If there is no penalty for drafting overbroad non-competes (as is true in most States),
Case-by-case litigation under other antitrust laws alone is also insufficient to address the harms from non-competes. Non-competes restrain trade and therefore are subject to the Sherman Act.
Case-by-case litigation by public enforcers, such as the Commission or State attorneys general, is a potential alternative or supplement to private litigation under other antitrust laws. But the ability of public enforcers to engage in effective case-by-case litigation related to non-competes, absent a rule, is limited.
As cited in Parts I.B. and II.C.2, the FTC has previously secured consent orders premised on the use of non-competes being an unfair method of competition under section 5, and the Commission has the authority to determine that non-competes are unfair methods of competition through adjudication. However, FTC resource constraints limit the potential effectiveness of enforcement of section 5 on a purely case-by-case basis. The Commission is an independent agency that works to promote fair and open markets and protect the entire American public from unfair and deceptive business practices. The Commission has fewer than 1,500 employees for its entire body of work related to this mission,
Similarly, several State Attorneys General commented that the multi-factor common law approaches to non-compete law result in piecemeal decisions that do not address the non-compete problem in a uniform manner.
The Commission estimates that there are approximately 30 million individual non-competes in the U.S.
The significant limitations on the ability of private and public litigants to challenge unlawful non-competes have practical implications. Courts cannot strike down an unenforceable non-compete that they never had the opportunity to review. Moreover, as detailed in Part IV.B.2.b, non-compete restrictions may still have significant
Furthermore, case-by-case litigation is insufficient to address negative externalities from non-competes (
Furthermore, because the significant harms of non-competes result from their aggregate use, they are unlikely to be captured by an assessment of an individual worker's non-compete or an individual firm's use of non-competes. This is true regardless of whether those non-competes are challenged under State non-compete laws or under other antitrust laws. It is likewise true regardless of whether non-competes are challenged by private litigants or public enforcers. Accordingly, the Commission finds that case-by-case litigation alone is insufficient to address the negative externalities of non-competes.
The Commission, by contrast, is well-positioned to evaluate non-competes holistically. The Commission is an expert agency and has used its expertise to assess the weight of the empirical evidence and comment record to evaluate the aggregate effects of non-competes. The Commission here implements a clear national standard through notice-and-comment rulemaking to protect competition, based on the evidence that the use of non-competes in the aggregate negatively affects competition and harms workers and consumers.
For all these reasons, the Commission finds that case-by-case litigation is not a viable alternative to the final rule.
The Commission appreciates that States have enacted legislation in recent years to ban or restrict non-competes and ameliorate their negative effects.
Many States have adopted statutory restrictions or compete bans on non-competes. Four States—California, Minnesota, North Dakota, and Oklahoma—have adopted statutes rendering non-competes void for nearly all workers.
State law also differs with respect to the steps courts take when they conclude that a non-compete is unenforceable as drafted. As noted in the NPRM, the majority of States have adopted the “reformation” or “equitable reform” doctrines, which allow courts to revise the text of an unenforceable non-compete to make it enforceable.
Because the enforceability of non-competes and courts' positions with respect to unenforceable non-competes vary from State to State, the question of which State's law applies in a legal dispute can determine the outcome of a non-compete case. Non-competes often contain choice-of-law provisions designating a particular State's law for resolution of any future dispute.
There is significant variation, however, in how courts apply choice of law rules in disputes over non-competes.
Choice of law provisions may also mean that workers lose their own State's protections. For example, workers from States where non-competes are banned commented that they faced enforcement of non-competes that selected the law of another State. This raises the concern that choice of law clauses can be used to evade State bans or restrictions by forum shopping.
Employers may also impose arbitration clauses, which require that legal disputes with the employer—including disputes related to non-competes—be resolved through binding arbitration rather than in court.
Numerous workers, businesses, and other commenters said the patchwork of State laws and confusion about those laws makes it difficult for workers and businesses to understand whether a particular non-compete would be enforceable. The lack of a clear national standard, and resulting confusion,
While the Commission has no doubt that many employers aim to ensure their contracts comply with applicable law, the empirical evidence indicates that at least some employers are using unenforceable non-competes, and some workers are turning down jobs where their non-competes are likely unenforceable. Some commenters referenced Starr, Prescott, and Bishara's finding that workers frequently cite non-competes as a factor in turning down job offers in both States that enforce non-competes and in those that do not.
Furthermore, the ability of States to address harms to their residents from non-competes is limited by spillover effects from other States. The economies of States are closely interconnected. Therefore, even where a State adopts a law that strictly regulates non-competes, such a law can be undermined by permissive non-compete laws in a nearby State.
Finally, several comments argued that State regulation of non-competes should continue by quoting Justice Brandeis's dissent in
Individual States' non-compete policies can cause spillover effects that negatively affect competitive conditions in other States. Individual States' non-compete policies can also affect the operation of legal regimes in other States. Choice of law provisions cause confusion for workers even in States where non-competes are unenforceable. There are incentives for some States to adopt extremely permissive non-compete policies to attract employers that favor non-competes, and potentially even to enable employers to “export” those permissive policies to other States through choice-of-law provisions.
The Commission has examined the economic impacts of the final rule as required by section 22 of the FTC Act (15 U.S.C. 57b-3). Section 22 directs the Commission to issue a final regulatory analysis that analyzes the projected benefits and any adverse economic effects and any other effects of the final rule. The final regulatory analysis must also summarize and assess any significant issues raised by comments submitted during the public comment period in response to the preliminary regulatory analysis.
Pursuant to section 22 of the FTC Act, the Commission issued a preliminary regulatory analysis of its proposed rule.
In the preliminary regulatory analysis, the Commission described the anticipated effects of the proposed rule and quantified the benefits and costs to the extent possible. For each benefit or cost quantified, the analysis identified the data sources relied upon and, where relevant, the quantitative assumptions made. The preliminary analysis measured the benefits and costs of the proposed rule against a baseline in which the Commission did not promulgate a rule regarding non-competes and included in the scope of the analysis the broadest set of economic actors possible. Several of the benefits and costs were quantifiable, but not monetizable—especially with respect to differentiating between transfers, benefits, and costs. The Commission preliminarily found that others were not quantifiable. The
The Commission preliminarily found substantial positive effects of the proposed rule: an increase in workers' earnings by $250-$296 billion annually (with some portion representing an economic transfer from firms to workers); an increase in new firm formation and competition; a reduction in health care prices (and prices in other markets may also fall); and an increase in innovation. The Commission noted that several of these benefits overlap (
The Commission preliminarily concluded that the substantial labor market and product and service market benefits of the proposed rule would exceed the costs. Furthermore, the Commission preliminarily found the benefits would persist over a substantially longer time horizon than most costs of compliance and contract updating.
Based on the comments received, the final regulatory analysis reflects greater quantification where possible and includes sensitivity analyses to reflect different assumptions, including assumptions commenters suggested. The final regulatory analysis concludes, consistent with the preliminary analysis, that the benefits of the final rule justify the costs.
Some commenters urged the Commission to quantify the costs and benefits to a greater degree. In the final analysis, the Commission incorporates greater quantification where possible. That some effects cannot be quantified or monetized does not, however, undermine the Commission's conclusion that the benefits justify the costs.
Some commenters focused on the methodology used to estimate earnings effects in the preliminary analysis, stating that extrapolating estimated effects on earnings based on linear predictions may result in incorrect estimates. These commenters stated that linear predictions might be particularly unreliable outside the range observed in the data. While as a general matter, linear extrapolation may not be appropriate in all circumstances, especially in the absence of data supporting such an approach, the Commission notes the linear effect of non-compete enforceability on earnings was statistically tested in the economic literature.
Nevertheless, to test and confirm the robustness of the conclusions drawn in the preliminary analysis from the linear approach, in this final analysis, the Commission uses several estimation approaches. For its primary analysis, the Commission adopts an approach that does not rely on extrapolation. Specifically, the Commission assumes that the historical average change
Some commenters alleged the proposed rule would increase inflation. Some commenters also stated the proposed rule would harm shareholders by decreasing corporate profits. In response, the Commission notes that the regulatory analysis attempts to quantify and monetize real costs and benefits of the final rule as opposed to nominal costs and benefits. Therefore, net benefits are benefits that represent increased economic efficiency resulting from the final rule rather than increases in the dollar value of output that may be due to inflation. Additionally, earnings increases are due, at least in part, to increased economic efficiency, which would likely lower prices. Accordingly, the Commission does not expect that prices will rise because of the rule. Indeed, empirical evidence shows that in physician clinics, prices fall with decreased non-compete enforceability.
Some commenters stated that certain costs may be missing from the preliminary analysis, including costs related to worker misconduct and litigation over the validity of the final rule. The Commission finds no evidence or compelling arguments directly linking non-competes to worker misconduct and therefore does not consider such costs.
Some commenters stated the rule may have beneficial tax ramifications for businesses and workers with non-competes that are no longer enforceable, including based on changes in amortization schedules. In response, the Commission notes that any tax savings under the final rule represent transfers from the government to firms that previously used non-competes. Significantly, the Commission is allowing existing non-competes with senior executives, who may be most likely to have non-competes with tax implications, to remain in effect. This will mitigate the need for tax-related administrative work. In response to comments on the tax ramifications of clawed back pay, the final rule does not encourage or require firms to “claw back” compensation and given the exclusion for senior executives' existing non-competes in the final rule, situations in which a firm would be in a position to consider clawing back pay are likely to be extremely limited, if any.
Some commenters stated workers may be harmed if firms claw back workers' earnings, if workers lose long-term incentive payments, retention bonuses, and severance payments, or if workers must pay for training out of pocket in response to the rule. First, in Parts IV.B.3.a.iiv and X.F.6.a, the Commission finds earnings increases overall associated with decreases in non-compete enforceability. With respect to existing non-competes, non-competes
Some commenters disagreed with the Commission's use of patenting activity as a proxy for innovation in the preliminary analysis, stating that the value of innovation may not be captured in patenting, in part because employers may use patents as a substitute for non-competes. First, the Commission agrees that innovation likely has value above and beyond patenting. That patenting does not capture the full value of innovation is not a basis for dismissing its value as a proxy altogether. Second, while it is theoretically possible firms may substitute from the use of non-competes to the use of patents to protect intellectual property, the empirical literature shows increases in innovation do not follow from the simple substitution of protections between non-competes and patents. Specifically, the empirical literature confirms the innovations prompted by decreased non-compete enforceability are qualitatively valuable, and—examining the relationship between non-compete enforceability and patenting for drugs and medical devices, where patenting is ubiquitous
Some commenters asserted the research related to investment in human capital does not distinguish between two different types of training: core training,
Some commenters stated that costs associated with rescinding existing non-competes and updating contractual practices may be greater than estimated in the NPRM and attributed the greater cost to the need for high-cost outside counsel. In response, the Commission finds it likely that many firms will not need to use costly outside counsel (or indeed, any counsel) to comply with the final rule. This is especially true since the final rule allows non-competes for senior executives to remain in effect, since it does not require rescission of any existing contracts, and since it provides a model safe harbor notice for other workers and makes other adjustments to simplify the notice process. In response to commenters stating that firms will need more time to implement than estimated in the NPRM, the Commission conducts an updated analysis in Part X.F.7.b. The Commission notes that the model language provided in the final rule and allowing employers to use the last known address, mail or electronic, will significantly simplify the notice process for employers. Additionally, the Commission performs two sensitivity analyses in Part X.F.7.b. The first assumes an attorney's time is more costly—it replaces the primary estimate of the average hourly productivity of an attorney ($134.62 per hour, based on BLS earnings data) with an estimated rate of the cost of outside counsel who is a tenth-year attorney ($483 per hour).
One commenter from the retail industry claimed the cost of implementing the proposed rule could
Some commenters stated that employers would need to spend substantial resources to litigate trade secret disputes and violations of post-employment restrictions other than non-competes. One commenter stated that the cost of a trade secret case may range from $550,000 to $7.4 million, depending on the monetary value of the trade secret claim. The Commission analyzes costs of litigation in Part X.F.7.c. The Commission agrees with commenters that trade secret litigation, and litigation over post-employment restrictions other than non-competes, may be costly. However, the Commission notes that no evidence exists to support the hypothesis that litigation on these fronts will increase because of the final rule. Indeed, recent evidence suggests that trade secret litigation does not increase following bans on non-competes.
Positing that firms will be reluctant to share trade secrets with workers under the rule, some commenters also stated that the costs of lessened sharing of trade secrets should be taken into account. Since no data exists on the effect of non-competes on the monetary value of shared trade secrets, the Commission does not quantify or monetize this effect. Moreover, there is no evidence that employers will lessen the extent to which they share trade secrets under the final rule, much less that any change would be material. As detailed in Part IV.D, employers have less restrictive alternatives to non-competes that mitigate these concerns.
Some commenters reference the Starr, Balasubramanian, and Sakakibara study
Some commenters asserted that, because of the positive effects of the proposed rule on labor mobility, firms may face greater costs associated with turnover (especially firms that currently use non-competes) due to the cost of finding a replacement, the cost of training a replacement, and the cost of lost productivity. Based on Pivateau (2011),
Some commenters offered additional empirical evidence not discussed in the NPRM that was not specific to the proposed regulatory analysis. The Commission responds to those comments in Part IV.
In the final regulatory analysis presented in Part X.F, the Commission updates its analyses based on the parameters of the final rule, comments received, supporting empirical evidence raised by commenters, changes in the status quo regarding regulation of non-competes, and reanalysis of evidence presented in the NPRM.
Under the final rule, existing non-competes with senior executives may remain in effect. While this change likely affects some costs and benefits associated with the final rule temporarily, the Commission does not specifically quantify or monetize those effects. The effect on persistent costs and benefits would be temporary, as senior executives will eventually move out of their jobs and retire or move into new jobs, to which the final rule will apply. The Commission notes throughout its analysis, however, how different estimates may be affected by this differential treatment of senior executives even if it cannot quantify the precise effect.
The Commission considered several effects of the final rule on economic outcomes: earnings, innovation, entrepreneurship, distributional effects on workers, investment in human capital, capital investment, legal and administrative costs, prices, labor mobility and turnover, and litigation costs.
The Commission describes the primary estimates of benefits, transfers, costs, and distributional effects associated with each of these outcomes in Table 1. Table 1 also reports whether the outcome for each effect is quantifiable or monetizable and
Present values are calculated using discount rates of 2%, 3%, and 7%.
The Commission finds that, even in the absence of a full monetization of all costs and benefits of the final rule, the final rule has substantial benefits that clearly justify the costs. While data limitations make it challenging to monetize all the expected effects of the final rule, the Commission believes it has quantified the effects of the final rule likely to be the most significant in magnitude, and thus, potentially drive whether and the extent to which the final rule is net beneficial. This includes both benefits and costs. Based on those quantifications, the Commission is able to make conservative assumptions, based on its expertise, under which the final rule would be net beneficial. In this context, by conservative assumption, the Commission means that it is presuming the benefits it quantifies to be relatively low in value for purposes of this analysis,
Specifically, the Commission finds that even if only 5.5% of the estimated $400-$488 billion increase in worker earnings represents increased productivity resulting from improved, more productive matches between workers and employers, the benefits will outweigh the costs. In Part X.F.6.a, the Commission explains that the economic literature does not provide a way to separate increased productivity from the total effect on earnings (
As discussed in Part IV.B.3.a, non-competes inhibit worker mobility, creating worse matches between workers and firms and decreasing workers' productivity and therefore their earnings. Non-competes also prevent firms from hiring talented and experienced workers; inhibit new business formation; and reduce the flow of innovative workers between firms, harming innovation. The final rule increases competition in labor markets by allowing workers to move more freely between jobs and increases competition in product and service markets by ensuring that firms are able to hire appropriate workers, that workers are able to create new entrepreneurial ventures, and that worker flow between firms enhances innovation.
The final rule addresses two primary economic problems. First, non-competes tend to harm competitive conditions in labor markets. Non-competes increase barriers to voluntary labor mobility and prevent firms from competing for workers' services, thus creating frictions and obstructing the functioning of labor markets. These frictions inhibit the formation of optimal and efficient matches in the labor market, resulting in diminished worker and firm productivity and in lower wages.
The second economic problem is that non-competes tend to harm competitive conditions in product and service markets. Non-competes create a barrier to new business formation and entrepreneurial growth, which negatively affects consumers by lessening competition in product and service markets. Non-competes also make it difficult for competitors to hire talented workers, which reduces these competitors' ability to effectively compete in the marketplace. Additionally, non-competes impede innovation by preventing the churn
The final rule provides that, with respect to a worker other than a senior executive, it is an unfair method of competition—and thus a violation of section 5 of the FTC Act—for a person to enter into or attempt to enter into a non-compete; enforce or attempt to enforce a non-compete; or represent that the worker is subject to a non-compete.
As described in Part II.E, some workers may not be subject to the final rule to the extent they are employed by an entity or in a capacity that is exempted from coverage under the FTC Act. The Commission estimates the fraction of the workforce who would be covered under the final rule (the “coverage rate”) by applying conservative assumptions to individual-level data on the characteristics of the workforce from the American Community Survey (ACS) for 2017 to 2021.
To estimate the coverage rate, workers are classified according to three criteria: (1) whether the individual is identified as working for the government; (2) whether the individual is identified as working for a non-profit organization; and (3) whether the individual works in an industry or in a capacity that is likely to be outside the jurisdiction of the FTC Act. Government employment consists of employment with local, State, and Federal governments, in addition to individuals on active duty in the U.S. Armed Forces or Commissioned Corps. Nonprofit status is self-reported by survey respondents. Industries are defined based on the North American Industry Classification System (NAICS).
Such a classification of workers is necessarily imperfect as the FTC's jurisdiction does not exclude all workers that may be identified in the data as government employees or map directly into the data on non-profit status or the NAICS classifications that are available within the ACS. For example, the FTC Act is likely to exempt some firms that are classified as non-profits but not others, as described in Part II.E. Also, in some instances, only a subset of a given NAICS category (and not the entire category) appeared likely to fall outside the jurisdiction of the FTC Act. When ambiguity arose, the Commission was overinclusive in excluding workers. For example, the Commission classified all nonprofits as outside the coverage of the final rule for the purposes of estimating the coverage rate. Moreover, in estimating the coverage rate, the Commission excluded entire industries in calculating the coverage rate when some subset of that industry appeared to be outside the Commission's jurisdiction. This over-inclusiveness has the effect of underestimating the coverage rate of the final rule, and thus the overall net effect of the final rule will be conservative.
Using data from the ACS and the assumptions detailed in Part X.F.4, the Commission estimates that the final rule is likely to cover 80% of the private U.S. workforce.
For regulatory analyses, the effects of the final rule are measured against a baseline representing conditions that would exist in the absence of the rule. The extent of the final rule's costs and benefits depends on the degree to which it will change the enforceability of non-competes relative to what it would be in the baseline. Currently, non-competes are broadly prohibited in four States:
Researchers have used various scoring systems to capture the enforceability of non-competes State by State over time. As described in Part IV.A.2, the Commission gives greatest weight to studies that measure enforceability granularly (
In the absence of the rule, the average State enforceability score—in States that do not broadly prohibit them—when measured on a scale of 0 (lowest enforceability) to 1 (highest enforceability), is 0.78. The final rule will result in State-level enforceability of non-competes falling from its level in the absence of the rule to zero (
The Commission notes in X.C that empirical studies show a linear extrapolation is appropriate for measuring earnings effects.
At the same time, the Commission notes that this may result in underestimating benefits of the final rule—the average magnitude change of 0.081 is much smaller than the average 0.78 change it would take for enforceability to reflect the final rule. To reflect this possibility, the final analysis includes sensitivity analyses which extrapolate beyond an average magnitude change. In these sensitivity
The Commission finds several benefits attributable to the final rule, as reflected in part by the effects of the rule on earnings and prices, and all the effects on output and innovation, as summarized in Table 1 in Part X.E.
The Commission finds labor markets will function more efficiently under the final rule, which will lead to an increase in earnings or earnings growth. Specifically, in this regulatory analysis, the Commission finds that the estimated ten-year present discounted value of increased worker earnings is $400-$488 billion. The final rule will result in additional earnings stemming from improvements in allocative efficiency due to more productive matching between businesses, which are economic benefits. In other words, the increase in worker mobility will allow employers to hire workers who are a better, more productive fit with the positions they are seeking to fill, which in turn will increase productivity overall. A portion of the additional earnings are transfers from firms to workers resulting from more plentiful employment options outside the firm,
The increase in worker earnings resulting from the final rule is calculated as follows:
The primary approach in this analysis is to estimate the percentage increase in earnings assuming that the effect of the final rule will be the same as the effect of an average magnitude change in non-compete enforceability, as discussed in Part X.F.5. The Commission estimates the percentage increase in workers' earnings to be 0.86%.
Multiplying the percentage effect (0.86%) by overall affected annual earnings ($6.2 trillion) results in an annual earnings effect of $53 billion. The ten-year effect on earnings, discounted separately by 2%, 3%, and 7%, is reported in the first row of Table 2.
This primary approach requires no extrapolation (
The first sensitivity analysis, hereafter referred to as the “full extrapolation” approach, calculates the effect on worker earnings in an identical fashion to the primary analysis but relies on an estimate of the percentage increase in worker earnings which extrapolates to the effect of a complete prohibition on the use of non-competes. This results in an effect on worker earnings equal to 3.2% (instead of 0.86% in the primary analysis).
The second sensitivity analysis, hereafter referred to as the “partial extrapolation” approach, uses the same formula as the other two analyses (% effect on earnings * total affected earnings) but is more conservative in its estimate of the percent effect on earnings than the full extrapolation estimate. The full extrapolation approach assumes that enforceability scores fall to zero. The partial extrapolation approach instead assumes that enforceability scores fall to the minimum observed enforceability score ignoring scores in States that broadly prohibit non-competes (a more moderate extrapolation). The minimum observed enforceability score excluding States that broadly prohibit non-competes is 0.53 (on a scale of zero to one), which is the enforceability score in New York.
Total affected earnings in each State are calculated by multiplying total earnings in that State (adjusted to 2023 dollars) by the estimated percentage of covered workers (80%). For example, in West Virginia, total earnings are estimated to be $0.24 trillion.
Next, the percent increase in earnings in each State is multiplied by total affected earnings in that State. In West Virginia, this results in an earnings increase of 0.64% * $0.24 trillion = $152 million. Finally, the earnings increases are added across States. The overall estimated effect is an annual increase in earnings of $161 billion. The ten-year effect, discounted at 2%, 3%, and 7%, is displayed in the third row of Table 2.
The estimated effects on earnings in Table 2 are based on estimates of the percentage change in earnings from a study in the empirical literature that aligns with the metrics outlined in Part IV.A.2. Another study in the literature estimates earnings effects using a comparison between workers in occupations that use non-competes at a high rate versus a low rate.
The Commission notes that, as discussed in Part X.E, earnings of senior executives who continue to work under non-competes are included in the calculations in this Part X.F.6.a. If the Commission were able to identify those senior executives, their omission from the calculations would decrease the earnings effect of the final rule, since the earnings effect for those senior executives (and others, because of spillovers) would be pushed further into the future, causing steeper discounting. However, while senior executives are paid relatively highly, there are relatively few of them: for example, based on BLS data on earnings by occupation, Chief Executives' earnings comprise just 0.5% of all earnings.
It is difficult to determine the extent to which the earnings effects represent transfers versus benefits. Transfers, in this context, refer to “a gain for one group and an equal-dollar-value loss for another group.”
To the extent a prohibition on non-competes leads to greater competition in the labor market and a more efficient allocation of labor by allowing workers to sort into their most productive
Several pieces of evidence support the Commission's finding that at least part of the increase in earnings represents a social benefit or net benefit to the economy, rather than just a transfer. As described in Part IV.B.3.a.ii, two studies have sought to estimate the external effect of non-compete use or enforceability: that is, the effect of use or enforceability on individuals other than those directly affected by non-compete use or enforceability.
One study directly estimates the external effect of a change in non-compete enforceability.
A second study demonstrates that when the use of non-competes by employers increases, wages decrease for workers who do not have non-competes but who work in the same State and industry. This study also finds that this effect is stronger where non-competes are more enforceable.
Overall, these studies suggest there are market-level dynamics governing the relationship between earnings and the enforceability of non-competes: specifically, restrictions on the enforceability of non-competes affect competition in labor markets by alleviating frictions and allowing for more productive matching. Changes in enforceability or use of non-competes have spillover effects on the earnings of those workers who should not be directly affected because they do not have non-competes or they work in nearby labor markets that did not experience changes in enforceability. If non-competes simply changed the relative bargaining power of workers and firms, without affecting market frictions or competition, then these patterns are less likely to be observed. Additionally, new business formation when non-competes are less enforceable (see Part IV.B.3.b.i for a discussion of the evidence) may create new productive opportunities for workers.
Due to the uncertainty related to earnings as transfers versus benefits, the Commission analyzes various scenarios that allocate the percent of the earnings effect to a benefit at different levels in Part X.F.10. This does not represent a finding that no part or only a small part of the effect on earnings is a benefit; rather, it is to ensure that the total estimated effect of the final rule is robust for the purposes of the regulatory impact analysis to the possibility that a small percentage of the effect on earnings represents a net benefit.
The Commission finds that an additional benefit of the rule would be to increase the annual count of new patents by 3,111-5,337 in the first year, rising to 31,110-53,372 in the tenth year. By alleviating barriers to knowledge-sharing that inhibit innovation, and by allowing workers greater opportunity to form innovative new businesses, the final rule will increase innovation. Studies have sought to directly quantify this effect, primarily focused on patenting activity. The Commission therefore considers the effect on patenting in support of its findings related to innovation. Lacking an estimate of the social value of a patent, the Commission does not monetize this benefit. The Commission also finds that the rule will reduce expenditure on R&D by $0 to $47 billion per year. In light of the increase in overall innovation, this reduction is a cost savings for firms, but may not reflect a market-level effect because it does not measure potential expenditure on R&D by new firms formed as a result of the final rule. The change in patenting due to the rule for each year is calculated as follows:
The Commission estimates the percentage increase in patenting to average 10.9%-18.7% annually over a ten-year period,
The results of the analysis, for the top and bottom end of the reported range of percentage increases in patenting, are displayed in Table 3.
As a sensitivity analysis, mirroring the analysis in Part X.F.6.a, the Commission assumes that enforceability scores in each State will fall to the lowest observed score among States which do not broadly prohibit non-competes. The Commission calculates the percentage change in patenting in each State by extrapolating the
The annual State-specific percentage changes are multiplied by the number of annual patents granted in each State.
The Commission is not aware of estimates that assess the overall social value of a patent and therefore the Commission does not monetize the estimated effects on innovative output. Estimates of the effect of a patent on a firm's value in the stock market exist in the empirical literature,
The Commission notes that patent counts may not perfectly proxy for innovation. However, by using citation-weighted patents, as well as other measures of quality, the study by Johnson, Lipsitz, and Pei shows that patent quality, not just patent quantity, increase when non-competes become less enforceable.
The second effect of the final rule associated with innovation is a possible change in spending on R&D. The change in R&D spending due to the final rule is calculated as follows:
The Commission estimates that the percentage reduction in spending is 0-8.1%, with the broad range reflecting disagreement in the empirical literature.
The Commission notes that, in light of the increases in innovation identified in this Part X.F.6.b, reductions in R&D spending represent a cost savings for firms. Put differently, reductions in R&D spending may cause commensurate reductions in innovative output. Insofar as reductions in R&D spending resulting from the rule could have countervailing effects on innovation, the estimated increase in innovative output represents the net effect, which would otherwise be even larger, if R&D spending were held constant.
Notably, empirical estimates of R&D spending are based on observed changes among incumbent firms and therefore may not reflect market-level effects. Decreased investment at the firm level (the level of estimation in the studies that report effects of enforceability on R&D spending) does not necessarily mean that investment would decrease at the market level, since new firms entering the market may contribute additional R&D spending not captured in the referenced studies. For these reasons, the Commission stops short of classifying the effect on R&D spending as a benefit of the final rule.
The Commission notes that, as discussed in Part X.E, the estimated effects on innovation do not take into account that some senior executives
Overall, the Commission finds that the final rule will significantly increase innovation. Furthermore, the increase in innovation may be accompanied by a decrease in spending on R&D that would, thus, be a cost saving to firms.
The Commission finds that consumer prices may fall under the final rule because of increased competition. The only empirical study of this effect concerns physician practice prices. Based on this study, the Commission estimates the ten-year present value reduction in spending for physician and clinical services from the decrease in prices is $74-$194 billion. The Commission finds some of the price effects may represent transfers from firms to consumers and some may represent benefits due to increased economic efficiency. Some of the benefits may overlap with benefits otherwise categorized, such as benefits related to innovation.
The decrease in prices for physician services because of the final rule is calculated as follows:
The Commission estimates the percentage decrease in prices for physician services to be 3.5%.
As a sensitivity analysis, mirroring the analysis in Part X.F.6.a, the Commission assumes that enforceability scores in each State will fall to the lowest observed score among States which do not broadly prohibit non-competes. The Commission calculates the percentage change in prices in each State by extrapolating the percentage decrease in prices to reflect the size of the change in that State's enforceability score. As noted in Part X.F.6.a, West Virginia's score would fall from 0.59 to 0.53 as a result of this analysis. The percentage decrease in prices in West Virginia would therefore be 2.5%.
The ten-year present discounted value of the spending decreases estimated by this analysis are presented in Table 4.
Several effects of the final rule, including changes in capital investment, new firm formation, and innovation, may possibly filter through to consumer prices. Prices, therefore, may act as a summary metric for the effects on consumers. The Commission notes, however, that prices are an imperfect measure for the effect on consumers. For example, increased innovation catalyzed by the final rule could result in quality increases in products, which might increase prices (all else equal), but nevertheless, consumers may be better off. New firm formation may result in a broader set of product offerings, even if prices are unaffected. Finally, some portion of this effect may represent a transfer from physician practices to consumers. For all these reasons, as well as to avoid double-counting (since prices may reflect changes in innovation, investment, market structure, wages, and other outcomes that are measured elsewhere), the Commission considers evidence on prices to be corroborating evidence, rather than a unique cost or benefit, though some portion of the total effect likely represents a standalone benefit of the rule. The Commission also notes increased competition brought about by the final rule will likely increase
To draw inferences to other industries, the Commission notes that if the relationship between non-compete enforceability and prices observed in healthcare markets holds in other industries, then under the final rule prices would likely decrease, and product and service quality would likely increase. Insofar as such effects may be driven by increases in competition, as discussed in Part IV.B.3.b.iii,
In many settings, it is possible that increases in worker earnings from restricting non-competes may increase consumer prices because of higher firms' costs.
The Commission notes that, as discussed in Part X.E, the estimates of the effect of the rule on prices do not separately account for the effect of senior executives who may continue to have non-competes under the rule. The Commission is unable to monetize or quantify these effects separately because there is no accounting in the applicable literature of why, nor to which groups of workers, the observed price effects occur. If such non-competes have a large impact, some of the effects estimated in this section may occur further in the future than described in this Part X.F.6.c.
The Commission finds costs associated with the final rule, including legal and administrative costs, and possibly costs related to investment in human capital and litigation, as summarized in Table 1 in Part X.E. The Commission notes the final analysis includes effects on investment in human capital and litigation costs in this Part X.F.7 discussing costs associated with the final rule, though it is not clear whether effects associated with investment in human capital are costs or benefits, and it is not clear whether litigation costs would rise or fall under the final rule.
The Commission estimates the ten-year present discounted value of the net effect of the final rule on investment in human capital (
There are two primary sources of uncertainty. The first pertains to the extent to which lost investment in human capital is “core” versus “advanced.” As discussed in Part IV.B.3.b.ii, when non-competes are enforceable, fewer workers will be available due to decreased labor mobility, including workers who would be a good skills match for a particular job, as well as workers moving to new industries to avoid triggering a potential non-compete clause violation. This may require retraining of workers forced into a new field that would not otherwise be necessary for an experienced worker within the same industry. The departure of experienced workers from the industry also means firms will be required to invest in the human capital of inexperienced workers who replace them. This type of investment in training to address a skills mismatch—which is referred to as the “core” training scenario—contrasts with what is referred to as the “advanced” training scenario, which is investment in training that builds upon the productivity of workers who may already be experienced in an industry. Insofar as reductions in investment in human capital due to the final rule represent reductions in core investment, the rule will save firms money and will additionally not require workers to forgo time spent producing goods and services to train. Therefore, such reductions would represent a benefit of the final rule. However, insofar as reductions in investment in human capital from the final rule represent reductions in advanced investment, there may be productivity losses for workers. The estimates in the literature do not allow the Commission to distinguish between the types of forgone human capital investment in the final analysis. This final analysis therefore separately estimates the effects assuming lost investment in human capital is core and assuming it is advanced.
The second source of uncertainty pertains to the specific estimates of the effect of non-compete enforceability on investment of human capital. Starr (2019) estimates the differential effect of non-compete enforceability on training in occupations which use non-competes at a high rate versus those that use non-competes at a low rate but does not estimate the absolute effect on investment across the workforce. Therefore, this final analysis separately estimates the effects on training under two different assumptions—that the increase in training due to greater non-compete enforceability affects all workers, or only workers in high-use occupations—to demonstrate how this uncertainty affects the estimates.
The Commission notes that some of the estimates described in this Part X.F.7 may overlap with estimates reported in other sections of the regulatory analysis. For example, if decreased enforceability of non-competes decreases investment in workers' human capital, and this decreased investment would be reflected in lower wages for workers, then the estimate of the wage increase resulting from the final rule will already account for the extent to which decreased investment decreases wages. That is, if investment were held constant, the earnings increase associated with the final rule may be even larger.
The first set of estimates assumes that all lost training is core. This results in estimated effects of the final rule that represent upper bounds on the benefits associated with the final rule's effect on investment in human capital. In these scenarios, the final rule will allow firms to hire experienced workers instead of needing to provide costly training to workers new to the industry or a position. The change in investment in core training brought about by the rule is calculated as follows:
The first component is additional output of workers resulting from less time spent on otherwise unnecessary training if they were better matched with firm and industry. The change in the output of workers from less time spent training because of the final rule is calculated as follows:
The Commission estimates the total number of affected workers as 101.1 million workers, assuming all workers are affected, and 45.3 million workers, assuming only workers in high-use occupations are affected.
The total additional output due to forgone training time is therefore calculated as $1.9 billion per year when all workers are assumed to be affected, or $0.8 billion per year when only workers in high-use occupations are assumed to be affected.
The second component of the economic effect calculated in the final analysis is reduced direct outlays on human capital investment—or the out-of-pocket cost to firms for training. The change in direct outlays on human capital investment resulting from the rule is calculated as follows:
Total direct outlays on human capital investment are estimated to be $105 billion in 2023 dollars.
This calculation results in annual cost savings of $1.6 billion, assuming the training rates of workers in all occupations are affected and $0.7 billion assuming the training rates of workers only in high-use occupations are affected. The ten-year present value effects of the final rule on investment in human capital, assuming that lost investment is core investment, discounted at 2%, 3%, and 7% and separately assuming effects on workers in all occupations versus just workers in occupations that use non-competes at a high rate, are presented in the first two rows of Table 5.
The second set of estimates of the effects on human capital investment in the final analysis assumes all training is advanced. The Commission begins with the same approach (calculated in Part X.F.7.a.i) to estimate the direct gain in output of workers and reduced direct outlays from foregone advanced human capital investment because such investment is costly for firms and results in decreased time spent on productive activities by workers, regardless of whether the investment is core or advanced. The major difference is that the Commission nets out an additional component which represents lost long-term productivity of workers caused by lost investment in their human capital. The Commission nets out this additional component based on the assumption that advanced human capital investment results in some increased long-term productivity in workers (because it assumes that firms would not otherwise make such a costly investment). This results in estimated effects of the final rule that represent upper bounds on the costs associated with changes in investment in human capital. Therefore, the estimated effect of the rule on advanced human capital investment is calculated as follows:
The first two components—additional output of workers due to less time spent training and reduced direct outlays on training—are calculated in Part X.F.7.a.i. The lost output of workers due to lost investment in their human
The Commission estimates the total number of affected workers as 101.1 million workers, assuming all workers are affected, and 45.3 million workers, assuming only workers in high-use occupations are affected.
In the first year, this yields a total estimate of lost output from lost investment in human capital of $1.5 billion or $0.7 billion (under the separate assumptions of all workers being affected and only high-use occupation workers being affected). Since the returns to advanced training persist to some extent over time, in the second year, returns to advanced training from the first year are assumed to depreciate by 20%,
Additionally, in the second year, a new round of advanced training is forgone. An additional $1.5 billion or $0.7 billion in lost output is therefore incurred in the second year under the final rule, and the depreciation calculations are again repeated for the new round of advanced training until year ten. New rounds of advanced training are forgone in each year through the tenth. Lost output from lost advanced training in the tenth year is therefore the sum of a depreciated return to training from each of the prior nine years plus lost output from lost training in the tenth year itself.
To arrive at estimates of overall lost productivity due to lost advanced training, lost productivity in each year (separately due to lost training in each prior year) is added together. Finally, lost productivity due to lost advanced training is subtracted from the two components calculated in Part X.F.7.a.i (additional output of workers from less time spent training and reduced direct outlays). The ten-year discounted effects of the final rule on investment in human capital, assuming lost investment is advanced training investment, discounted at 2%, 3%, and 7%, and separately assuming workers in all occupations versus just workers in occupations that use non-competes at a high rate, are presented in the last two rows of Table 5.
All values in billions of 2023 dollars. Negative values represent net cost estimates, while positive values represent net benefit estimates.
As discussed in Part X.E, the Commission notes that the estimates in this Part X.F do not account for senior executives who continue to work under non-competes under the rule. If the effects on training are due to effects on such senior executives, then the effects discussed herein would occur further into the future than discussed.
The Commission finds that firms with existing non-competes will have related legal and administrative compliance costs as a result of the final rule. The Commission quantifies and monetizes these costs and conducts related sensitivity analyses.
The Commission finds one-time legal costs related to firms' compliance with the final rule are estimated to total $2.1-$3.7 billion. The Commission estimates two main components of legal costs: (1) updating existing employment agreements or terms to ensure new hire employment terms comply with the final rule; and (2) advising employers about potential operational or contractual changes for workers who will no longer have enforceable non-competes. The latter includes determination of workers whose non-competes are no longer enforceable
For the first component, firms must consider what changes to their contractual practices are needed to ensure that incoming workers are not offered or subject to non-competes and what revisions to human resources materials and manuals are needed to ensure they are not misused on a forward-going basis. Firms may respond by removing specific non-compete language from standard contracts and human resources (H.R.) materials and manuals used for future employees. The second component involves strategic decisions and changes in response to the final rule. For example, firms may adjust other contractual provisions such as NDAs. This legal work is not mandated or required by the rule; it would be undertaken only by the subset of firms and workers for whom firms conclude that such alternatives would be desirable. Additionally, such adjustments are likely unnecessary for senior executives whose non-competes continue to be enforceable under the rule. Therefore, this component additionally involves identifying senior executives whose existing non-competes are unaffected. For any such legal work, firms may use in-house counsel or outside counsel.
Legal costs are therefore calculated as follows:
One component of the legal cost will be due to the modification of standard contracts to remove prohibited language regarding non-competes which is calculated as follows:
The Commission estimates that, on average, modifying standard contract language and H.R. materials and manuals would take the equivalent of one hour of a lawyer's time.
Another component of legal costs relates to any firm-level revision to their contractual practices, including identification of senior executives, which is calculated as follows:
The Commission estimates the average firm employs the equivalent of four to eight hours of a lawyer's time to update its contractual practices and determine which employees may fall under the final rule's exemption.
Under the assumption that the average firm that uses a non-compete employs the equivalent of four to eight hours of a lawyer's time, the total one-time expenditure on revising contractual practices would range from $1.6 billion (assuming four hours are necessary) to $3.1 billion (assuming eight hours are necessary).
Some commenters indicated that some firms may use outside counsel, which is more costly to firms, to remove non-competes from contracts of incoming workers and to update contractual practices. While commenters did not provide data to support this assertion, as a sensitivity analysis, the Commission replaces the estimate of the hourly earnings of a lawyer with an estimate of the cost of outside counsel ($483 per hour), conservatively overestimating costs by using the estimated rate of a tenth-year lawyer.
The Commission believes the exclusion of existing non-competes with senior executives could result in lower net legal costs than the Commission's estimate. First, for senior executives who currently work under a non-compete, firms will have a longer time period during which they may update
At the same time, when the final rule goes into effect, firms will need to identify senior executives whose existing non-competes are not covered by the final rule in order to determine which contractual practices they may need to update immediately. The Commission does not include a separate legal cost for identifying senior executives and estimates the range of attorney time for revising contractual practices under the final rule, which encompasses identifying senior executives, to be the same as the estimate for the proposed rule—4 to 8 hours. This is in part because the strategic considerations involved in revision of contractual practices will likely include such identification. Moreover, the Commission believes the identification of such workers will not be difficult or time consuming. Firms can use the compensation threshold to rule out the vast majority of workers from the exemption and the definition of senior executive in § 910.1 includes clear duties to determine whether any executives who meet the compensation threshold are senior executives under the final rule. It also provides that the CEO and/or president of a firm is a senior executive without the need to conduct any duties analysis.
Another reason the Commission does not add to its estimate of 4 to 8 hours to account for identification of senior executives is that excluding existing non-competes with senior executives would otherwise decrease this estimate, likely to a greater degree than the cost of identifying senior executives. As noted, a significant amount of time spent by attorneys as estimated in the NPRM was intended to account for revising contractual practices for more complex agreements. Commenters noted that employment terms with senior executives are often individualized so that attorney and firm time would be spent on their agreements regardless of whether a non-compete may be included. Since firms use non-competes for senior executives at a high rate,
Overall, the Commission acknowledges that there may be substantial heterogeneity in the costs for individual firms; however, these numbers may be overestimates. For firms whose costs of removing non-competes for incoming workers is greater, the work of ensuring that contracts comply with the law would overlap substantially with the costs of updating contractual practices.
The Commission finds the total one-time costs for implementing the notification requirement are estimated to be $94 million. These costs relate to the provision of notice to workers other than senior executives as required by § 910.2(b). Notably, firms may use the model notice language provided by the Commission, and the form of this model notice enables firms to choose to send the notice to workers regardless of whether they have non-competes as described in Part IV.E. The notice provision cost is calculated as follows:
The first component, digital notice provision costs, are calculated as follows:
The Commission estimates that 20 minutes (
Businesses may not have digital contact information for some workers. The cost of mailed notice provision would include the cost of postage and the cost of a human resource professional's time. Mailed notice provision costs are therefore calculated as follows:
The number of workers with non-competes receiving physical notice is the total number of covered workers (101.1 million; see Part X.F.7.a.i) times the percentage of workers who have non-competes (18.1%) times the percentage of workers who require mailed notice (assumed to be 66% of workers
The cost per worker is estimated as 5 cents for one printed page plus mailing cost of 70 cents plus one minute of an HR professional's time, at $63.70 per hour, for a total of $1.81 per notice. The overall cost of mailed notice provision is therefore estimated to be $22 million. The total cost of the notice provision is therefore $94 million.
Commenters stated that it may take two hours of a legal professional's time to provide notice. The Commission finds this estimated time to be a substantial overestimate and reiterates that this analysis incorporates a legal professional's time necessary to identify senior executives and to strategize updates to firm contractual practices into its estimate of legal costs in X.F.7.b.i. The model notice language alleviates the need for a legal professional's time and the Commission finds it unreasonable to assume such a notice would need to actually be sent by a legal professional. While firms may opt to use original language drafted by an attorney to notify workers, the Commission notes that the model language satisfies the notification requirement and therefore does not include the cost of original language as a regulatory cost estimate in the final analysis. However, under these assumptions, the cost of providing the notice is estimated at $5.2 billion.
The Commission notes that communication is conducted at the establishment level and time costs do not vary based on the number of existing senior executives with non-competes that the final rule does not cover. While establishments with only senior executives with non-competes would not incur any notification costs because the final rule does not cover existing non-competes with senior executives, without an estimate of the percentage of firms for which this is true, the Commission conservatively assumes that all establishments estimated to use non-competes engage in this notification.
Legal and administrative costs are summarized in Table 6. The Commission notes that, since all costs are assumed to be borne in the first year, there is no discounting applied and therefore only one estimate for each analysis is presented.
Theoretically, under the final rule, certain litigation costs may fall. Litigation related to non-competes may decrease because the final rule creates bright line rules, reducing uncertainty about the enforceability of non-competes. On the other hand, litigation costs may rise if firms turn to litigation to protect trade secrets and if that litigation is more expensive than enforcing (or threatening to enforce) non-competes, and/or if firms elect to litigate over what constitutes a non-compete.
The Commission finds there are plausible but directionally opposite theoretical outcomes for the different types of litigation that may be affected by the final rule. In fact, some recent evidence suggests trade secret litigation falls as a result of bans on non-competes taking effect.
As discussed in Part X.F.6.a, some portion of the earnings effect associated with the final rule represents a transfer: while workers may earn more with greater productivity resulting from the rule, some of their earnings increase may result from enhanced bargaining power, which constitutes a transfer from firms to workers.
Similarly, some portion of the price effects associated with the final rule represents a transfer: while consumers may achieve greater surplus with increased competition, the price decrease itself is partially a transfer from firms to consumers.
The Commission finds several distributional effects associated with the final rule, including those associated with firm expansion and formation, distributional effects on workers, and labor mobility, as summarized in Table 1 in Part X.E.
When non-competes are prohibited, new firms may enter the market but incumbent firms may opt to invest less in capital, leaving the overall effect on total capital investment unclear. Similarly, while new firms may enter the market, it is theoretically possible that incumbent firms may exit the market without the ability to use non-competes (though no evidence of this
Empirical evidence has studied parts, but not all, of the contrasting effects on capital investment and new firm formation. Studies have examined effects of non-competes on capital investment by large, publicly traded firms, who are likely incumbents.
It is thus not possible to measure the benefit and costs of the full economy-wide effects on firm expansion and formation. The calculations that may be performed using available data will necessarily omit components of the tradeoff. The final analysis therefore quantifies the effects that the literature has examined but does not monetize those effects.
Research finds that capital investment for incumbent firms at the firm level may decrease under the final rule for the economy as a whole, though effects for high-tech industries may be positive, negative, or close to zero. The Commission notes that the capital investment discussed in this Part X.F.9 relates to tangible capital, does not reflect capital investment by newly-formed firms, and is distinct from R&D spending, which is discussed in Part X.F.6.b.
One estimate of the overall effect of non-compete enforceability on capital investment by incumbent firms, which some commenters pointed to, is estimated with substantial uncertainty and is statistically indistinguishable from zero (
The Commission notes two additional estimates specific to high-tech or knowledge firms: a decline in capital investment among incumbent publicly-traded firms of 34%-39% (an estimate which corresponds to the estimate of a decline of 7.9% when all publicly traded firms are examined),
The Commission reiterates that any change in investment at the firm level does not necessarily mean investment would change at the market level, since increased firm entry may also increase the employed capital stock and investment in that capital stock, which may offset any possible decreases in investment for incumbent firms. These potential positive offsetting effects are not captured in the estimates herein.
Research finds that new firm formation increases by 2.7% across the economy due to decreases in non-compete enforceability.
The benefits associated with new firm entry may include added surplus for consumers (
Overall, the Commission finds that the rule will likely result in a 2.7% increase in new firm formation and is unable to quantify the net effects of this on the productive capacity of the economy. Benefits from new firm entry and possible costs from decreased capital investment may offset each other but the degree to which this happens is not quantifiable. The effect of the final rule on firm expansion and formation likely results in productive capacity shifting from incumbent firms to new firms. Consistent with findings in Part IV.B.3.b.iii, productive capacity shifting from incumbent to new firms may decrease concentration, possibly contributing to decreases in prices, as discussed in Part X.F.6.c.
The Commission finds that the final rule may reduce gender and racial earnings gaps, may especially encourage entrepreneurship among women, and may mitigate legal uncertainty for workers, especially relatively low-paid workers.
Specifically, the Commission finds gender and racial wage gaps may close significantly under a nationwide prohibition on non-competes, according to economic estimates.
The Commission finds the rule may be especially helpful for relatively low-paid workers, for whom access to legal services may be prohibitively expensive. Workers generally may not be willing to file lawsuits against deep-pocketed employers to challenge their non-competes, even if they predict a high probability of success. The Commission finds that the bright-line prohibition in the final rule, which the Commission could enforce, may mitigate uncertainty for workers.
The Commission finds the overall effect of the final rule on turnover costs due to increased labor mobility is ambiguous and represents a distributional effect of the rule. The Commission finds turnover costs for firms seeking new workers may fall with a greater availability of experienced labor. For firms losing workers newly freed from non-competes, the Commission estimates the effect of the final rule to be $131 per worker with a non-compete. The Commission therefore finds the effect on turnover costs represents a distributional effect of the final rule because it costs firms that use non-competes to constrain workers and benefits firms that do not.
To calculate the potential $131 increase in turnover costs for workers whose non-competes are no longer enforceable after the rule, this final analysis calculates:
The Commission estimates the baseline turnover rate,
The annual estimated increase in turnover costs per worker with a non-compete is $131.
The Commission notes the actual costs of turnover to businesses may be substantially lower under the final rule than this estimate reflects. This is because the specific components of turnover costs—finding a replacement, training, and productivity—are likely to be affected by the final rule. An increased availability of experienced workers results when non-competes no longer constrain those workers, and finding replacements will be less costly to firms. Additionally, training should not be counted in the costs of turnover presented in this Part X.F.9.c, since it is separately accounted for in Part X.F.7.a, but is nevertheless included in the 25% estimate used to arrive at the estimate of $131 per worker with a non-compete, since there is no reliable way to remove training costs from that estimate; it is thus double-counted. Finally, because the Commission finds increased labor mobility will likely increase worker productivity due to better matching between workers and firms, the cost of lost productivity will be lower. The cost of lost productivity will also be lessened because the pool of workers available to firms may be more talented or experienced, since such workers would no longer be bound by non-competes (relative to new entrants to the workforce, who are not experienced and also are not bound by non-competes). This would allow firms to recruit workers who are more likely to be highly productive upon entry at a new job.
The Commission reiterates its finding that the costs of turnover for many firms may diminish due to a more plentiful supply of available labor. Without estimates of the effect of the final rule on the cost of recruiting a worker, the net effect of the final rule on turnover costs is not quantified.
The Commission believes it has quantified the effects of the final rule that are likely to be the most significant in magnitude, but data limitations make it challenging to monetize all the expected effects of the final rule,
The analysis in this Part X.F.10 calculates the sum of the monetizable costs of the rule, separately under the assumption that lost investment in human capital is core training (in which case monetizable costs are direct
If the Commission assumes the decrease in human capital investment is a decrease in core training, the final rule results in net benefits without monetizing or counting any positive effects on the economy from earnings or innovation. The savings or benefit to the economy from reduced core training would be greater than the combined monetized costs of the final rule in X.F.7.b. In other words, even if the benefit to the economy from earnings and innovation were assumed to be zero (an implausible and extremely conservative assumption), the final rule would be net beneficial under the assumption that estimates of reduced training reflect better matching of workers and firms and therefore a reduced need to provide workers with core training.
Under the assumption that lost human capital investment is advanced, the Commission calculates values of the social value of a patent and the benefit percentage of the earnings effect that would fully offset the net monetizable costs of the final rule.
Under the assumption that lost human capital investment is core, the sum of the present discounted value of direct compliance costs and the cost of contractual updating (the monetizable costs of the rule), using a 3% discount rate, is $3.7 billion. In this case, the final rule is net beneficial even ignoring the benefits associated with innovation and earnings. This is because the net monetized cost ($3.7 billion) is less than the monetized benefit associated with investment in human capital ($31 billion or $13.9 billion, when all occupations are assumed to be affected versus just high-use occupations, respectively). The net monetizable benefit of the final rule—even ignoring benefits associated with innovation and earnings—is therefore $27.3 billion or $10.2 billion, respectively.
In this Part X.F.10.b, the Commission calculates the net monetizable costs and benefits of the final rule assuming that lost human capital investment is advanced training, and under varying assumptions about the values of the two monetization parameters identified (the social value of a patent and the percentage of the earnings effect that represents a benefit). Then, the Commission calculates break-even points: values for the monetization parameters which would fully offset the net monetizable costs of the final rule.
Break even points are calculated by finding the values of the social value of a patent and the benefit percent of the earnings increase such that:
As calculated in Part X.F.7, assuming a 3% discount rate, the net cost associated with investment in human capital is $39.0 billion.
The estimated earnings increase of the final rule over ten years, discounted at 3% is $468 billion. The estimated effect of the rule on innovation (using the low end of the primary estimate) ranges from an additional 3,111 patents per year to 31,110 patents per year, increasing as time goes on.
The Commission presents estimates that demonstrate break-even points by making an assumption for the value of one of the two monetization parameters, and calculating the value of the other which implies equal monetized costs and benefits. Based on estimates of the private value of a patent, the Commission separately assumes that the social value of a patent is $94,886, $234,399, $5,865,833, or $32,459,680.
No studies have assessed what percentage of the earnings effect of non-compete enforceability is a benefit versus a transfer. The Commission separately assumes that the percentage is equal to 0%, 5%, 10%, and 25%.
The computed breakeven points are reported in Table 7, under the assumption that lost investment in human capital is advanced. Panel A reports necessary benefit percentages, under each of the four assumed social values of a patent, that would cause the rule to result in zero net monetized benefit. A reported value of 0% indicates that the assumed value of a patent itself covers the net monetized costs of the final rule. Panel B reports the necessary social value of a patent, under each of the four assumed benefit percentages, that would cause the rule to result in zero net monetized benefit. A reported value of $0 indicates that the benefits associated with earnings cover the net monetized costs of the final rule on their own.
Panel A shows that, even assuming a value of patenting ($94,886) that is substantially lower than the estimates in the economic literature, only 5.5% of the earnings effect must be an economic benefit (as opposed to a transfer) for the benefits associated with innovation and earnings to outweigh the monetized costs of the rule. Panel B shows that, even if no part of the earnings effect of the final rule reflects an economic benefit (which the Commission finds to be unlikely, in light of the evidence discussed in Part IV.B.3.a.ii), the social value of a patent would need to be only $297,144 in order to cover the monetized costs of the rule—well within the range of (private) values of a patent found in the literature.
The Commission additionally notes that Table 7 omits other benefits of the rule. The estimated benefits do not include the benefits arising from decreased consumer prices or increased workforce output. The estimates also omit possible changes in litigation costs associated with the rule. The Commission finds it likely that the omitted benefits substantially exceed the omitted costs, and additionally reiterates that the estimated values in Table 7 assume that lost investment in human capital is fully advanced. Therefore, the Commission views the values reported in Table 7 as conservative estimates of the breakeven points of the rule under those scenarios.
The Commission elects to provide an analysis of the effects of an alternative with more limited coverage. Specifically, the Commission provides an analysis of a rule that would cover—and therefore ban—non-competes with all workers except senior executives. As compared to the final rule, under this alternative, it would not be an unfair method of competition to enter into non-competes with senior executives after the effective date. The Commission finds that excluding all non-competes with senior executives from coverage under the rule (as opposed to the final rule, which excludes only existing non-competes with senior executives) would diminish both costs and benefits, but would still result in substantial benefits on net.
Several costs and benefits may be affected if senior executives are excluded from coverage by the final rule. The Commission now discusses each of those costs and benefits relative to the final rule.
The Commission finds that some benefits related to labor market competition and workers' earnings would be lost if senior executives were entirely excluded from the final rule. This is especially true because those workers have high earnings, meaning that a given percentage increase in their earnings yields a greater overall effect compared with relatively lower earning individuals. However, those workers make up a small portion of the workforce—approximately 0.75% of the workforce, based on data from the American Community Survey.
The Commission is unable to quantify the lost benefits related to innovation if senior executives were excluded from coverage under the final rule but finds their exclusion would diminish the innovation benefits of the final rule. Senior executives are involved in determination of the strategic path of the firm and its execution, which likely has a substantial effect on innovation. The Commission cannot quantify what percentage of the innovation effect is due to senior executives versus other workers, though it is likely shared by both groups.
The Commission finds that benefits related to consumer prices would fall significantly if senior executives were excluded from coverage. By increasing competition, increases in new firm formation and increased ability to hire talented workers may be key drivers of the effect of the final rule on consumer prices. As discussed in Part IV.C, senior executives have the knowledge and skills necessary to found new firms, or to be key members of other firms. Therefore, if senior executives are excluded from the final rule, some benefits associated with new firm foundation and innovation would be lost, though the exact proportion cannot be estimated. The Commission notes that benefits associated with lower prices through increased competition might also be lost but cannot be quantified.
Turning to costs, the Commission finds that costs associated with investment in human capital may fall if senior executives were excluded from the rule. The productivity of senior executives may benefit from investment in their human capital.
The Commission finds that the direct costs of compliance with the final rule may be partially affected if senior executives were categorically excluded. The final rule allows employers to enforce existing non-competes for senior executives, so there are no notice and re-negotiation costs for senior executives. However, in this scenario, costs associated with ensuring incoming
Finally, the Commission finds exclusion of senior executives may reduce litigation costs from the final rule, though the overall effect is unclear. Senior executives are highly likely to have access to sensitive business information. To the extent costs associated with trade secret litigation or litigation over other restrictive covenants increase under the final rule, though no evidence supports this possibility, then exclusion of senior executives may substantially reduce these costs. Litigation related to whether a worker meets the definition of a senior executive may also increase if senior executives are categorically excluded.
Overall, excluding senior executives from the final rule would substantially reduce the benefits of the rule—especially those associated with new firm formation, innovation, and prices—but would also likely reduce costs, especially those associated with investment in human capital and updating contractual practices. The Commission finds that the benefits of a rule excluding senior executives would justify the costs of such a rule.
Now, the Commission turns to an analysis of the benefits and costs that remain if senior executives are excluded from the rule.
The Commission finds there would be substantial benefits to labor market competition and workers' earnings even if senior executives were categorically excluded. The evidence on earnings discussed in Part IV.B.3.a.ii does not exclude senior executives, but based on the percentage of the population that represents senior executives, the evidence largely pertains to workers other than senior executives. Therefore, while studies focused on senior executives (largely) do not apply, studies of the entire workforce mostly reflect the effects of non-competes on other workers. In addition to the broader evidence on earnings discussed in Part IV.B.3.a.ii, one study analyzes a population exclusively comprised of hourly workers, nearly all of whom are highly likely not to be senior executives, supporting the finding that even with senior executives excluded from a rule, there would be substantial benefits to labor market competition and workers' earnings.
The Commission is unable to quantify to what extent the estimated effects on innovation are driven by senior executives versus other workers, but still finds that a final rule excluding these senior executives would result in substantial benefits to innovation. First, there is evidence that productivity of inventors decreases when they take career detours because of non-competes.
The Commission finds that a rule excluding senior executives would still yield substantial benefits with respect to consumer prices. Many entrepreneurs were not formerly senior executives, meaning that encouraging entrepreneurship among workers who are not senior executives by prohibiting non-competes will yield more business formation. That business formation increases competition, which may lead to lower prices. Additionally, firms will not be foreclosed access to talent (which is likely important across the spectrum of workers, though evidence only specifically exists for senior executives), which may also lead to lower prices. In the absence of empirical evidence demonstrating which workers' non-competes affect consumer prices, the Commission cannot estimate how much of the effect is due to coverage of which workers.
The Commission finds that a rule excluding senior executives would result in decreased levels of investment in workers' human capital. The empirical literature has not separately assessed the effect of non-competes on investment in human capital for senior executives versus other workers, though the study finding that training decreases with greater non-compete enforceability includes both workers who are and are not senior executives. The Commission therefore believes that some or much of any cost or benefit of the rule from changing investment in human capital would pertain to workers who are not senior executives. However, the Commission notes that, as discussed in Part X.F.7.a, if lost training under the rule is lost “core” (as opposed to “advanced”) training, then the final rule will cause a cost
The Commission finds that the direct costs of compliance with the final rule may be partially diminished if senior executives were excluded. First, the Commission reiterates that notice is not required for senior executives under the final rule. Therefore, that component of the direct costs of compliance would not be affected. However, even with those senior executives excluded, costs associated with ensuring incoming workers' contracts do not have non-competes would still be present. Insofar as senior executives' contracts may be more complex than other workers' contracts, this cost may be substantially diminished, however. Similarly, with respect to the costs of updating contractual practices, as noted by commenters, these costs may be substantially greater for the contracts of senior executives due to the complexity of their contracts and the sensitivity of the information they possess. Therefore, while some costs associated with updating contractual practices would survive if senior executives were excluded, their exclusion may reduce costs associated with the rule disproportionately to their (relatively low) share of the workforce.
Finally, some litigation costs may still be present if senior executives are excluded. Litigation costs associated with non-competes would still likely fall for workers other than senior executives due to the bright-line coverage in the rule. Costs associated with litigation other than non-compete litigation may rise if firms turn to those methods, though no evidence suggests they will.
Overall, a rule that excludes senior executives will likely result in
The Regulatory Flexibility Act (“RFA”), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, requires an agency to provide an Initial Regulatory Flexibility Analysis (“IRFA”) and Final Regulatory Flexibility Analysis (“FRFA”) of any final rule subject to notice-and-comment requirements, unless the agency head certifies that the regulatory action will not have a significant economic impact on a substantial number of small entities.
The Commission thereafter received over 26,000 public comments, many of which identified themselves as being from small businesses, industry associations that represent small businesses, and workers at small businesses.
Specifically, based on the Commission's expertise and after careful review and consideration of the entire rulemaking record—including empirical research on how non-competes affect competition and over 26,000 public comments—the Commission adopts this final rule, including with changes relative to the proposal to reduce compliance burdens on small business and other entities. For example, the Commission allows existing non-competes with senior executives to remain in force,
Although small entities across all industrial classes—
The Commission describes the reasons for the final rule in Parts IV.B and IV.C.
The Commission describes the objectives and legal basis for the final rule in Part IV.B and IV.C and the legal authority for the final rule in Part II.
Numerous small businesses and small business owners generally supported the proposed rule and shared two primary reasons, among others, that the rule may uniquely benefit small business owners. First, because non-competes are expressly designed to prevent workers from starting new businesses within the industry and geographic market that worker is experienced in, commenters said non-competes prevent new business formation and threaten new small businesses. Thus, consistent with the empirical evidence,
Many comments from small businesses align with the findings in Part IV.B.3.b.i, namely that non-competes inhibit new business formation. A vast majority of such new businesses will be small businesses. For example, Kang and Fleming find that when Florida made non-competes more enforceable, larger businesses entered the State and increased employment while small businesses entered less frequently, and employment for them did not change.
Some commenters cited the Small Business Majority's polling data on non-competes. The survey finds that 67% of small businesses that currently use non-competes support the proposed ban
Small businesses stated non-competes hindered their small business, including through costly lawsuits from former employers. Many commenters said non-competes were preventing them from starting a business.
Many small businesses commented that non-competes prevented them from hiring the right talent and harmed their businesses, often because small businesses could not afford a lawsuit or even the legal costs of determining whether a non-compete with a perspective employee was unenforceable.
Commenters made several other arguments in favor of the rule covering small businesses. Several commenters pointed out that small businesses have not struggled to thrive in States where non-competes have long been prohibited, including California, Oklahoma, and North Dakota. A startup organization agreed with data cited in the NPRM indicating non-competes disproportionately reduce entrepreneurship for women, and argued that disproportionate financial challenges for women mean women entrepreneurs have fewer resources to withstand other harms from non-competes, including lack of access to talent.
As the Commission explained in Parts IV.B.3.b and IV.C.2.c, the weight of the empirical evidence supports the conclusion that non-competes inhibit new business formation and foreclose small and other businesses from accessing the talent they need to grow and succeed. Most new businesses are small, and non-competes are expressly designed to prevent workers from starting new businesses in the fields they know best. The Commission appreciates the small businesses and entrepreneurs who shared their experiences in the comments. These comments and the many comments discussed in Parts IV.B.2 and IV.B.3 from small businesses align with and bolster the empirical evidence. The comments illustrate the real-world impacts of non-competes on entrepreneurs and would-be entrepreneurs, both before and after formation of a business. Moreover, the labor market effects—including reducing labor mobility and artificially suppressing wages and job quality—are not different or mitigated when a worker works for a small business rather than a large one. Studies finding harm from non-competes examined both large and small businesses, and the Commission believes that small businesses' use of non-competes causes the same harms set forth in Parts IV.B and IV.C, including harm to other small businesses.
Based on these and other comments, the Commission believes that many small businesses are blocked from hiring workers that could help their business grow and have fewer resources than larger businesses to evaluate the risk of hiring a worker subject to a non-compete, to pay to “release” a worker they want to hire from a non-compete, such as a forfeiture-for-competition clause, and defend themselves from a non-compete suit.
In response to the comments on small business successes in States where non-competes are banned, the Commission notes that it recognizes that there are many successful small businesses in States that ban non-competes, but is not aware of any empirical evidence considering success rates of small businesses based on enforceability of non-competes.
In response to the comment discussing startups in the aerospace industry, the Commission notes that the conclusions of the commenter align with the empirical evidence that the most successful startups are within-industry spinoffs.
As explained in Part IV.C, the Commission adopts a partial exception in § 910.2(a)(2) for senior executives under which their existing non-competes—non-competes entered into before the effective date—are not covered by the final rule. Employers cannot, however, enter into new non-competes with senior executives as of the effective date. The evidence and comments describing the importance of freeing senior executives from non-competes with respect to founding and supporting new and small businesses contributed to the Commission's decision to ban future non-competes for senior executives instead of excepting senior executives entirely from the final rule. The Commission is aware that existing non-competes with senior executives will reduce some of the benefits for new and small businesses as fewer senior executives will be free to join or found those businesses beginning on September 4, 2024. However, senior executives are a small, narrowly defined group, meaning there will still be numerous experienced workers freed from non-competes that can found or support small businesses, and senior executive non-competes will eventually become phased out. In addition, the Commission expects small businesses to receive the other anticipated benefits of the final rule.
Some small businesses and industry groups stated they believe a ban on non-competes would harm small businesses. Several commenters requested an exception for small businesses or certain types of small businesses, such as independent medical practices. The Commission addresses these comments in this Part XI.C.2 and addresses direct potential costs in Part XI.E. The Commission appreciates the small businesses and entrepreneurs who shared their experiences in the comments.
Commenters raised concerns that eliminating non-competes for all businesses would allow larger businesses and incumbents to easily hire away talent from smaller competitors and startups. Other small businesses said they had been harmed in the past by former workers competing against them, including by recruiting clients and other workers, or by large competitors hiring their workers. Similarly, some industry associations and small businesses said non-competes protect independent businesses, including medical practices, from dominant consolidators, as high recruitment, retention, and other costs may induce small businesses to sell their business to consolidators. Relatedly, some healthcare organizations argued a ban that does not cover nonprofit hospitals and health systems would provide those large nonprofits with an unfair advantage over independent medical practices.
Some small businesses offered the same justifications as other businesses for using non-competes but emphasized the heightened potential damage to smaller businesses less able to bear costs, including being forced to close or sell.
One industry organization stated more generally that protecting information is a high priority for emerging growth companies. Some small businesses
Small businesses also stated they use non-competes to protect investments, including in training, to prevent workers from taking clients or customers, and to increase retention and stability. For example, some small businesses shared that they started using non-competes after workers they had trained extensively went to a larger competitor or started their own business. One small business organization stated the proposed requirement to relate “costs incurred” to TRAPs would be harder for small businesses who are more likely to train on the job. A physician practice stated a partner leaving for a hospital would destabilize and increase costs for the practice, but a non-compete that is bought out helps practices afford those extra costs or otherwise prevents destabilization.
Commenters provided additional reasons small businesses use non-competes. A business stated that they could not afford to pay workers as much as larger businesses, so will be unable to find workers. A small business association stated that banning non-competes would exacerbate the labor shortage for small businesses by decreasing investment in training, when there are already insufficient qualified applicants. A commenter stated that the NPRM did not provide any examples of small businesses using non-competes in an unfair way. SBA Advocacy also stated that some small business employment contracts compensate workers for non-competes. One business stated small businesses may not be able to afford to fight larger businesses using borderline
A banking association stated new businesses that cannot protect their business would be less able to attract capital than more established businesses, while a community bank similarly said it may be unable to lend to small businesses that cannot protect their workers, customers, and proprietary information with non-competes. A small business stated that NDAs and non-solicitation clauses were too difficult to enforce, as it was told by judges that in order to win a non-solicitation suit against a former worker who purportedly took clients, the business would need to subpoena its own former clients to testify, which would damage the business's reputation.
A physician said they were able to start an independent practice while complying with a non-compete and hire others in compliance with their non-competes. One small business said they were able to work out solutions when hiring a worker subject to a non-compete to avoid violating it.
SBA Advocacy relayed the concern of one 8(a)
A small Federal contractor stated that larger companies could poach workers who are skilled and/or who are already cleared by the government to work on projects from small businesses, potentially putting them out of business, and would damage contractors' ability to provide stability to the agencies.
Some commenters expressed concern that the proposed 25% threshold
Finally, SBA Advocacy encouraged the Commission to adopt an approach addressing the different concerns of small entities and consider, analyze, and tailor alternatives to the size and type of entity to minimize adverse impacts to small entities.
First and foremost, the Commission finds, based on its expertise, the empirical evidence, and the record before it, that non-competes tend to negatively affect competitive conditions in both labor and product and service markets, including by inhibiting new business formation.
The Commission has assessed the evidence on protection of trade secrets and proprietary information in Part IV.D and finds that businesses have sufficient, less restrictive alternatives to protect such information. These options, such as NDAs, protection under trade secrets law, and importantly, competing
Additionally, the Commission is unaware of any evidence that small businesses in States where non-competes are less enforceable are more likely to experience trade secret misappropriation, or evidence that small businesses are at a distinct disadvantage in these States. Finally, the Commission notes that despite claims that using non-competes to protect trade secrets supports innovation, the empirical evidence shows increased enforceability of non-competes on net in the aggregate harms innovation. Again, the Commission considers the overall effect on all business, including small businesses, and finds that the final rule will not reduce innovation by small business.
In response to the comments that businesses would limit sharing confidential information with their workers or that a small business's inability to protect confidential information would cause new businesses to fail, the Commission notes that use of less restrictive alternatives, including, for example, NDAs, fixed term contracts, and worker retention policies, would allow small businesses to maintain the same or near same level of protection for the confidential information they might share and want to protect. Accordingly, to the extent it is productive for a small business to protect such information or share it with a worker, the firm would adopt these alternatives and be able to continue to operate with the same or similar use of confidential information. Moreover, the Commission is not aware of any empirical evidence supporting the conclusion that firms would share less confidential information or be less able to protect it. In fact, the evidence shows that both within-industry and non-within industry spinouts are better quality, on average, when non-competes are less enforceable, which reinforces the conclusion that small businesses do not rely on non-competes to thrive.
In Parts IV.D.1 and X.F.7.a, the Commission examines the evidence on human capital investment and other investment and finds uncertainty regarding whether the effects on training and other investment will be benefits or costs under the final rule. The Commission distinguishes between core training and advanced training, finding that businesses may be able to spend less on core training under the final rule to the extent businesses are able to better match workers with their needs. The Commission similarly finds that new business formation under the final rule could result in an increase in overall capital investment or serve to offset any decreased capital investment in incumbent firms. As noted in comments from small businesses, non-competes limit their ability to hire experienced, productive workers. While it may be true in some cases that large businesses will be able to “poach” workers from smaller business, smaller businesses would also be better able to hire talent from large (or other) businesses under the final rule. In fact, theoretically, the final rule would be more beneficial to smaller businesses because they would no longer be hamstrung by the threat of non-compete litigation by large firms when hiring experienced workers from those firms. To the extent large firms can afford to pay out a worker non-compete or to litigate or threaten litigation to secure talent they want from a small firm, a ban on non-competes will better level the playing field between small and large firms competing for talent. While as stated by one commenter, some small businesses may be successful if they are able to use non-competes, the empirical evidence supports the conclusion that new business formation will increase overall under the final rule, and the Commission is not aware of any evidence of small business closure patterns. Businesses also have other alternatives to retain workers.
In response to comments that argued non-competes were needed to promote stability and worker retention, the Commission notes there is no evidence that stability and worker retention are economically productive in and of themselves. The overall evidence on the harms from non-competes demonstrates that retention of workers through non-competes has considerable costs to both labor markets and product and service markets. Importantly, businesses also have other, less restrictive alternatives—that do not tend to negatively affect competitive conditions—to retain workers as discussed in this Part and in Part IV.D.2. In response to the comment that small businesses will be less likely to afford retaining workers than large businesses that can pay more, the Commission notes that increases in innovation are likely to make small businesses more productive and successful, allowing them to better compete with their larger competitors. Moreover, the Commission notes that, in addition to those retention alternatives, many workers commented that their non-competes prevented them from seeking jobs with better working
Many of the comments from small businesses, as well as from other commenters, appear to confuse non-competes with other types of agreements, such as non-solicitation agreements or NDAs, and argue that non-competes are needed to prevent former workers from taking the employer's customers or clients or disclosing confidential information. The final rule does not ban non-solicitation clauses unless they meet the definition of non-compete clause.
In response to comments that small businesses are more reliant on independent contractors and without non-competes independent contractors might have access to confidential information for multiple competitors, the Commission first notes that the final rule does not prohibit agreements preventing a worker from working for two firms simultaneously.
In response to comments that banks might decrease lending without non-competes, the Commission notes that there is no indication that small businesses in States that have banned or limited non-competes have been unable to obtain financing and commenters provide no related evidence. Again, small businesses will have less restrictive alternatives as a means of protecting confidential information. Moreover, with respect to new business formation, workers seeking to start their own businesses will be able to reassure banks that their business will not face the threat of litigation or a court enjoining them from continuing with their business because of a non-compete.
In response to SBA Advocacy's comment on compensation for non-competes, the Commission considered this issue in Part IV.C. and decided to allow existing non-competes with senior executives, which the Commission finds are most likely to have involved consideration, to remain in force.
In response to the comment on the 8(a) business development program, the Commission notes that there are likely program participants in States where non-competes are banned or partially banned and, thus, are not able to use non-competes. Moreover, the program aims to help firms owned and controlled by socially and economically disadvantaged individuals with various supports and assistance to improve their success in securing government contracts. There is no basis to believe such assistance hinges on these small businesses being able to use non-competes with their workers. Like other firms, program participants have viable, less restrictive alternatives that do not tend to negatively affect competitive conditions. The evidence presented in this Part shows that on the whole, small businesses—including 8(a) participants—are expected to benefit from the ban on non-competes by, for example, having a larger pool of talent from which to hire workers.
In response to the comment that large businesses may use borderline
In response to comments on the proposed sale of business threshold, as explained in Part V.A, the Commission is eliminating the 25% threshold, meaning more small businesses will be able to utilize non-competes for more owners when they are selling their business. While individual businesses might see decreased value in a sale from being unable to use non-competes for workers, any decrease is justified by the net aggregate benefits of freeing labor markets and product and service markets from non-competes. Again, pecuniary benefits to a firm engaged in an anticompetitive practice is not a cognizable defense.
In response to the proposed definitions of “small business,” first, as explained in Part X.H, the Commission declines to create an exception for small businesses. Second, the SBA already defines “small business” based on size standards set forth in 13 CFR 121.201, and agencies are prohibited from deviating from this definition without following the procedures set out in 13 CFR 121.903.
In response to the comments arguing that the Commission's jurisdiction does not extend to tax-exempt nonprofit hospitals and healthcare organizations and that the final rule would, thus, give large nonprofits an unfair advantage over small practices, the Commission addresses this question in Parts II.E.2 and V.D.4. In response to the comment on difficulties in using TRAPs under the proposed rule, the Commission notes the final rule does not ban TRAPs, but covers terms and conditions of employment that meet the definition of non-compete clause as delineated in § 910.1 and described in Part III.D.
The commenter asserting that the final rule would exacerbate a labor shortage for small businesses did not provide evidence to support this claim. The Commission, however, finds that a ban on non-competes will increase labor mobility and enable skilled workers who are currently trapped by non-competes to work for others in the industry.
Finally, the Commission notes that numerous workers at small businesses have shared how non-competes have harmed them.
The Commission has carefully considered all of SBA Advocacy's and other stakeholders' comments, including those requesting a small business exception. The Commission has made the following changes, which the Commission believes will benefit small entities: adding an exception for existing senior executive non-competes; amending the notice requirement to ease compliance; and eliminating the sale of
The Commission received and carefully reviewed the comment from the SBA.
The final rule will impact all small businesses, across all industry classes, that use non-competes. It may also impact some small businesses that do not use non-competes but are impacted by other businesses' use of non-competes. The Commission does not expect that there are classes of businesses which will face disproportionate impacts from the final rule.
For the vast majority of industries, there is no nationwide granular data regarding the percentage of firms that use non-competes, which would facilitate calculating the number of small entities in a given industry using non-competes. Because of this data limitation and given the relatively stable percentage of firms using non-competes across the size distribution,
The Commission sought comments on all aspects of the IRFA, including the description and estimated number of small entities to which the rule would apply. A business association claimed the IRFA estimated the number of small businesses solely based on one incomplete study, the Colvin and Shierholz study, which it argued counted only firms with no union members who said all employees signed non-competes, risking significantly undercounting the number of impacted businesses. This comment misreads the study. The cited statement explained that when tabulating the share of businesses where all employees sign non-competes, the study counted only firms with no union members as it did not have information on whether union members signed non-competes.
To comply with the final rule, small entities must do three things. First, to comply with §§ 910.2(a)(1)(i) and 910.2(a)(2)(i), which state it is an unfair method of competition to enter into a non-compete with a worker, small entities can no longer enter into new non-competes with incoming workers, including senior executives. This may include revising human resources materials and manuals and template or form contracts to ensure they are not misused on a forward-going basis, and making strategic decisions regarding workers' employment terms. Second, to comply with § 910.2(a)(1)(ii) and (iii), small entities cannot enforce (or make misrepresentations about) existing non-competes for workers other than senior executives after the effective date. That is, businesses must refrain from suing or threatening to sue workers other than senior executives regarding a non-compete after the effective date; but formal contract rescission is not required. Third, businesses must provide notice to workers other than senior executives that the worker's non-compete will not be enforced against the worker. The Commission provides a safe harbor notice that must be provided only to workers with known contact information. These foregoing steps entail some potential legal and administrative costs.
As calculated in Parts X.D.1.a and X.D.2.a, the Commission estimates the legal and administrative costs would
As described in greater detail in Part X.F.7.a, the Commission also finds that firm investment in human capital may increase or decrease under the final rule, depending on the type of training affected. Given the evidence available, the Commission is unable to fully monetize the estimates of firm investment in human capital. It concludes, however, that even in the absence of a full monetization of all costs and benefits of the final rule, the final rule has substantial benefits that clearly justify the costs.
To ensure that incoming workers' contracts do not include non-competes and that they fully comply with the final rule, firms may employ in-house counsel, outside counsel, or human resource specialists (depending on the complexity of the relevant non-compete). For many firms, this process would likely be straightforward (
For each establishment of each firm, estimated direct compliance costs total $21.23 + $134.62 = $155.85, plus $1.81 per worker with a non-compete.
Some business commenters have indicated that they may add or expand the scope of NDAs or other contractual provisions. This legal work is not mandated or required by the rule; it would be undertaken only by the subset of firms and workers for whom firms conclude that such alternatives would be desirable. Additionally, such adjustments are likely unnecessary for senior executives whose non-competes continue to be enforceable under the final rule. Therefore, this component additionally involves identifying senior executives whose existing non-competes are unaffected. For any such legal work, firms may use in-house counsel or outside counsel. To do so, firms may use in-house counsel or outside counsel to revise current contracts or enter into new, different contracts with workers.
The Commission is not aware of empirical evidence on how much it costs firms to revise their contractual practices when they can no longer use non-competes, and commenters did not provide evidence on costs. However, there is evidence indicating that firms that use non-competes are already using other types of restrictive employment provisions. Balasubramanian et al. find that 95.6% of workers with non-competes are also subject to an NDA, 97.5% of workers with non-competes are also subject to a non-solicitation agreement, NDA, or a non-recruitment agreement, and that 74.7% of workers with non-competes are also subject to all three other types of provisions.
Among the approximately one half of firms that use non-competes,
The Commission further emphasizes this estimate is an average across all employers that would be covered by the final rule. There is likely substantial heterogeneity in the amount of time firms would use to revise contractual practices; very large firms that use non-competes extensively would likely incur greater costs.
Under the assumption that the average firm that uses a non-compete employs the equivalent of four to eight hours of a lawyer's time, this analysis calculates the total expenditure on updating contractual practices to range from $134.62*4*2.59 million = $1.4 billion to $134.62*8*2.59 million = $2.8 billion. Note that this assumes decisions regarding protection of sensitive information and contract updating are
For each affected small business, the estimated cost of updating contractual practices is $134.62*4 = $538.48 to $134.62*8 = $1,076.96.
To reduce compliance costs and increase compliance certainty, § 910.2(b)(5) provides that an employer complies with the notice requirement in § 910.2(b)(1) where it provides notice to a worker pursuant to § 910.2(b)(4). Furthermore, § 910.2(b)(4) includes model language that constitutes notice to the worker that the worker's non-compete is no longer in effect. The Commission estimates that composing and sending this message in a digital format to all of a firm's workers and applicable former workers for whom digital contact information is available would take 20 minutes of a human resources specialist's time.
Each small firm must additionally mail notice to workers with non-competes for whom a physical address is available, but digital contact information is not. The cost per notice is estimated as 5 cents for one printed page plus mailing cost of 70 cents plus one minute of an HR professional's time, at $63.70 per hour, for a total of $1.81 per notice. Given an estimated count of affected workers with non-competes at small businesses of 584,843,
The IRFA explained the Commission's preliminary assessment of the direct compliance costs for employers, both for rescinding non-competes for workers who are already employed as well as the costs of an attorney to ensure contracts for incoming workers do not have non-competes.
In support of the proposed rule, one employment law firm said there are no significant recurring compliance costs to the final rule that would create an undue burden for small employers compared to larger employers. The Commission agrees. The final rule is designed to require only a one-time action and no recurring compliance requirements in order to minimize compliance costs for employers. A technology startup organization said the rule would save small businesses significant legal costs from the complex legal analysis currently necessary when trying to hire a worker subject to a non-compete, particularly when trying to assess the patchwork of State laws, “reasonableness” tests, and choice-of-law issues, which startups have few resources to pay.
Some commenters raised concerns about the preliminary assessment of direct compliance costs, primarily concerning unsubstantiated costs of consulting with counsel. Some commenters said small businesses would need to consult with outside counsel to ensure they properly comply with the final rule, though they did not explain why. Another business association said most small businesses do not have the organizational development required to issue the notice and would need to hire outside counsel. A group of industry associations said the estimated costs of $317.68 to $563.84 were not realistic and did not reflect the cost of discussions with outside counsel on its existing agreements and contracts and its contract negotiation practices, but the comment did not provide information to support a different estimate. Some commenters argued that small businesses lacking internal counsel or employment lawyers on retainer would face substantial unplanned expenses when seeking outside counsel on whether other restrictive covenants violated the proposed
First, in response to the proposed rule's Preliminary Regulatory Impact Analysis, commenters discussed that the estimated compliance costs and costs of contractual updating may underestimate true costs for the broader business community and provided alternative estimates of the time employers might spend complying with the rule and updating contractual practices, as well as the charged rates of outside counsel. These comments are addressed in the sensitivity analyses presented in Part X.F.7. The Commission has also updated the estimated legal costs in this Part. Commenters also argued that small businesses would face greater costs associated with the use of outside counsel but did not quantify those costs for small businesses. Again, the Commission provides a sensitivity analysis reflecting the cost of experienced outside counsel for all firms in Part X.F.7.b.i. Moreover, as the Commission notes, the estimate reflects significant heterogeneity, so that it is likely that some firms will simply be able to remove the paper or electronic copy of the non-compete from their website or workplace manual—requiring no attorney time—while others, like the commenter, may spend more time consulting with counsel.
Second, in response to these and other comments and as explained in Part III.D, the definition of non-compete clause has been revised to reduce confusion and give employers and workers a clearer understanding of what is prohibited, which will in turn reduce compliance costs. Third, the FRFA includes updated compliance costs to reflect any remaining need to assess contracts under § 910.2(a). Fourth, the Commission has made the notice
The estimated compliance costs do not directly include any costs or savings from the senior executive exception, because the number of workers the exception might apply to is such a small portion of workers overall that any effect is
Many commenters also stated there are other indirect costs. SBA Advocacy suggested that the IRFA did not account for additional potential costs, including the costs of services, including higher legal fees to protect information, potential increased training, hiring and retention costs, and process changes.
Another business organization said costs to small businesses are not limited to updating contractual agreements, mentioning the use of non-competes to protect assets and investments. A law firm suggested that trade secrets litigation often costs unspecified millions in attorney and expert fees and investigations costs. A business association commented that the rule would likely trigger additional litigation costs for trade secret protection and satisfying standards for injunctive relief, as well as unspecified additional costs related to lost business relationships and ideas. The business association cited an article from the biotech industry as saying a ban will force biotech companies to find other ways to protect themselves, likely through increased trade secret litigation, and recognizing that non-competes are critical to startups in the industry.
Two comments requested that the Commission publish a supplemental IRFA to account for the rule's potential impact.
The Commission notes that agencies are generally not required to consider indirect costs, though it is considered a best practice.
Even if commenters' unsupported assertions that trade secret litigation and NDA enforcement may be more costly for businesses, including small businesses, are correct, such costs are justified by the benefits of the rule and in any event pecuniary benefits to a firm from an anticompetitive practice are not a cognizable justification.
The comment citing an article on the biotech industry overstates the article's statements. The article said the existing increase in trade secrets litigation was likely to continue if the rule were adopted, did not cite any evidence for this prediction other than that non-competes are often used to protect trade secrets, and noted that companies may also use NDAs or restrict access to sensitive information.
The commenter asking the Commission to consider small business valuation changes did not provide any potential estimates of such a cost, nor did the commenter demonstrate that such costs exist. It is unclear whether this commenter was referring to the value of non-competes for owners or for workers, but some such non-competes may fall within the exceptions for existing senior executive non-competes or for owners in a sale of business.
In response to the requests for a supplemental IRFA, one is not required by law, and this FRFA responds to all comments on the IRFA. A supplemental IRFA would not provide the public with additional relevant information that the IRFA did not.
The RFA requires that agencies include a description of the steps the agency has taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes, 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.
In Part IX, the Commission discusses significant alternatives to the final rule. Part IX also includes an assessment determining that each of the significant alternatives would not accomplish the objectives of the final rule. The Commission did incorporate some of the alternatives proposed in the NPRM and in comments into the final rule, namely the exception for existing senior executive non-competes, simplifying notice requirements, eliminating rescission requirements, and eliminating the 25% threshold for the sale of business exception. In addition, the Commission's analysis of benefits and costs in Part X includes an assessment of the benefits and costs of excluding senior executives. The Commission notes that it has designed the final rule to minimize compliance costs for all businesses and that the final rule does not include any reporting requirements. As stated in Part X.F.7.b, the Commission estimates that direct compliance costs and the costs of updating contractual practices would result in costs of $538.48 to $1,076.96 for each firm. As previously noted, the Commission does not believe the final rule imposes a significant economic impact on a substantial number of small entities. The Commission has also described how the final rule will benefit and increase the number of small businesses.
After careful consideration, the Commission is not creating an exception for small entities or different regulatory requirements for small entities. The final rule provides that for workers other than senior executives, it is an unfair method of competition for a person to enter into or attempt to enter into a non-compete, enforce or attempt to enforce a non-compete, or represent that the worker is subject to a non-compete.
The Commission is not delaying the effective date of the final for small entities. Under § 910.6, the final rule is effective 120 days after publication in the
Under the Paperwork Reduction Act of 1995 (“PRA”),
In the NPRM, the Commission stated that it believed the proposed rule would contain a disclosure requirement that would constitute a collection of information requiring OMB approval under the PRA. The Commission stated that this disclosure requirement was proposed § 910.2(b)(2), which would have required employers to provide notice to a worker with an existing non-compete—
The Commission stated that the proposed rule would impose only
The Commission sought comment on all aspects of its PRA analysis, including (1) whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information would have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of these information collections on respondents.
No commenters specifically addressed the PRA analysis in the NPRM. However, the Commission received extensive comments on its Preliminary Regulatory Impact Analysis and Initial Regulatory Flexibility Act Analysis, and many of these commenters addressed the Commission's estimates related to the cost of compliance. These comments are summarized in Parts X (the Commission's Final Regulatory Analysis) and XI (the Commission's Final Regulatory Flexibility Act Analysis). The Commission also received comments on the proposed notice requirement itself. These comments are summarized in Part IV.E.
The Commission finalizes the proposed rule's notice requirement largely as proposed, with some adjustments to even further ease compliance. In the final rule, § 910.2(a)(1)(ii) prohibits employers from enforcing existing non-competes—
Pursuant to § 910.2(b)(2), the notice must (i) identify the person who entered into the non-compete with the worker and (ii) be on paper delivered by hand to the worker, or by mail at the worker's last known personal street address, or by email at an email address belonging to the worker, including the worker's current work email address or last known personal email address, or by text message at a mobile telephone number belonging to the worker.
Section 910.2(b)(3) provides an exception to the notice requirement in § 910.2(b)(1) where the person that would otherwise be required to provide the notice has no record of a street address, email address, or mobile telephone number.
Section 910.2(b)(4) provides model language that employers may use to comply with the notice requirement. Section 910.2(b)(5) states that an employer presumptively complies with the notice requirement in § 910.2(b)(1) where the employer provides a notice to the worker pursuant to § 910.2(b)(4). And § 910.2(b)(6) allows but does not require employers, in addition to providing the required notice in English, to provide the notice in another language (or languages). Section 910.2(b)(6) also permits employers to use any Commission-provided translation of the model language in § 910.2(b)(4).
The notice requirement has changed in two important respects from the proposed rule. First, employers are no longer required to provide the notice to senior executives with existing non-competes. Second, as long as employers provide the notice in English, they are permitted to provide the notice in a language other than English. However, neither of these changes significantly affects the burden of complying with the notice. Senior executives are only 0.75% of workers, so the cost savings to employers of not needing to provide the notice to senior executives are minimal. No employer is required to provide the notice in a different language, so the rule does not require employers to incur any compliance costs for doing so.
The Commission estimates that composing and sending the notice in a digital format to workers for whom digital contact information is available would take 20 minutes of a human resources specialist's time. According to BLS, the median wage for a human resources specialist in 2022 was $31.85 per hour in 2023 dollars.
Businesses may not have digital contact information for workers. The number of workers with non-competes who must therefore receive physical notice is the total number of covered workers (101.1 million; see Part X.F.7.a.i) times the percentage of workers who have non-competes (18.1%) times the percentage of workers who require mailed notice (assumed to be 66% of workers
As the Commission stated in the proposed rule, the Commission anticipates that covered employers already have in place existing systems to communicate with and provide employment-related disclosures to workers. While the final rule requires a one-time disclosure to some workers, the Commission anticipates this one-time disclosure will not require substantial investments in new systems or other non-labor costs. Moreover, many establishments are likely to provide the disclosure electronically, further reducing total costs.
Pursuant to the Congressional Review Act (5 U.S.C. 801
Antitrust.
15 U.S.C. 45 and 46(g).
As used in this part:
(1) A term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from:
(i) Seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or
(ii) Operating a business in the United States after the conclusion of the employment that includes the term or condition.
(2) For the purposes of this part, term or condition of employment includes, but is not limited to, a contractual term or workplace policy, whether written or oral.
(1) Was in a policy-making position; and
(2) Received from a person for the employment:
(i) Total annual compensation of at least $151,164 in the preceding year; or
(ii) Total compensation of at least $151,164 when annualized if the worker was employed during only part of the preceding year; or
(iii) Total compensation of at least $151,164 when annualized in the preceding year prior to the worker's departure if the worker departed from employment prior to the preceding year and the worker is subject to a non-compete clause.
(a)
(i) To enter into or attempt to enter into a non-compete clause;
(ii) To enforce or attempt to enforce a non-compete clause; or
(iii) To represent that the worker is subject to a non-compete clause.
(2)
(i) To enter into or attempt to enter into a non-compete clause;
(ii) To enforce or attempt to enforce a non-compete clause entered into after the effective date; or
(iii) To represent that the senior executive is subject to a non-compete clause, where the non-compete clause was entered into after the effective date.
(b)
(2)
(i) Identify the person who entered into the non-compete clause with the worker;
(ii) Be on paper delivered by hand to the worker, or by mail at the worker's last known personal street address, or by email at an email address belonging to the worker, including the worker's current work email address or last known personal email address, or by text message at a mobile telephone number belonging to the worker.
(3)
(4)
(5)
(6)
(a)
(b)
(c)
(a) This part will not be construed to annul, or exempt any person from complying with any State statute,
(b) Except with respect to laws superseded under paragraph (a) of this section, no provision of this part shall be construed as altering, limiting, or affecting the authority of a State attorney general or any other regulatory or enforcement agency or entity or the rights of a person to bring a claim or regulatory action arising under any State statute, regulation, order, or interpretation, including, but not limited to, State antitrust and consumer protection laws and State common law.
If any provision of this part is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action, the provision shall be construed so as to continue to give the maximum effect to the provision permitted by law and such invalidity shall not affect the application of the provision to other persons or circumstances or the validity or application of other provisions. If any provision or application of this part is held to be invalid or unenforceable, the provision or application shall be severable from this part and shall not affect the remainder thereof.
This part is effective September 4, 2024.
By direction of the Commission, Commissioners Holyoak and Ferguson dissenting.
Environmental Protection Agency (EPA).
Final rule.
This action finalizes amendments to the national emission standards for hazardous air pollutants (NESHAP) for the Coal- and Oil-Fired Electric Utility Steam Generating Units (EGUs) source category. These final amendments are the result of the EPA's review of the 2020 Residual Risk and Technology Review (RTR). The changes, which were proposed under the technology review in April 2023, include amending the filterable particulate matter (fPM) surrogate emission standard for non-mercury metal hazardous air pollutants (HAP) for existing coal-fired EGUs, the fPM emission standard compliance demonstration requirements, and the mercury (Hg) emission standard for lignite-fired EGUs. Additionally, the EPA is finalizing a change to the definition of “startup.” The EPA did not propose, and is not finalizing, any changes to the 2020 Residual Risk Review.
This final rule is effective on July 8, 2024. The incorporation by reference of certain material listed in the rule was approved by the Director of the Federal Register as of April 16, 2012.
The U.S. Environmental Protection Agency (EPA) has established a docket for this action under Docket ID No. EPA-HQ-OAR-2018-0794. All documents in the docket are listed on the
For questions about this final action contact Sarah Benish, Sector Policies and Programs Division (D243-01), Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, P.O. Box 12055, Research Triangle Park, North Carolina 27711; telephone number: (919) 541-5620; and email address:
Exposure to hazardous air pollutants (“HAP,” sometimes known as toxic air pollution, including Hg, chromium, arsenic, and lead) can cause a range of adverse health effects including harming people's central nervous system; damage to their kidneys; and cancer. These adverse effects can be particularly acute for communities living near sources of HAP. Recognizing the dangers posed by HAP, Congress enacted Clean Air Act (CAA) section 112. Under CAA section 112, the EPA is required to set standards based on maximum achievable control technology (known as “MACT” standards) for major sources
On January 20, 2021, President Biden signed Executive Order 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis” (86 FR 7037; January 25, 2021). The executive order, among other things, instructed the EPA to review the 2020 final rule titled
The EPA reviewed both parts of the 2020 Final Action. The results of the EPA's review of the first part, finding it is appropriate and necessary to regulate EGUs under CAA section 112, were proposed on February 9, 2022 (87 FR 7624) (2022 Proposal) and finalized on March 6, 2023 (88 FR 13956). In the 2022 Proposal, the EPA also solicited information on the performance and cost of new or improved technologies that control HAP emissions, improved methods of operation, and risk-related information to further inform the EPA's review of the second part, the 2020 MATS RTR. The EPA proposed amendments to the RTR on April 24, 2023 (88 FR 24854) (2023 Proposal) and this action finalizes those amendments and presents the final results of the EPA's review of the MATS RTR.
Coal- and oil-fired EGUs remain one of the largest domestic emitters of Hg and many other HAP, including many of the non-Hg HAP metals—including lead, arsenic, chromium, nickel, and cadmium—and hydrogen chloride (HCl). Exposure to these HAP, at certain levels and duration, is associated with a variety of adverse health effects. In the 2012 MATS Final Rule, the EPA established numerical standards for Hg, non-Hg HAP metals, and acid gas HAP emissions from coal- and oil-fired EGUs. The EPA also established work practice standards for emissions of organic HAP. To address emissions of non-Hg HAP
Pursuant to CAA section 112(d)(6), the EPA reviewed developments in the costs of control technologies, and the effectiveness of those technologies, as well as the costs of meeting a fPM emission standard that is more stringent than 0.030 lb/MMBtu and the other statutory factors. Based on that review, the EPA is finalizing, as proposed, a revised non-Hg HAP metal surrogate fPM emission standard for all existing coal-fired EGUs of 0.010 lb/MMBtu. This strengthened standard will ensure that the entire fleet of coal-fired EGUs is performing at the fPM pollution control levels currently achieved by the vast majority of regulated units. The EPA further concludes that it is the lowest level currently compatible with the use of PM CEMS for demonstrating compliance.
Relatedly, the EPA is also finalizing a revision to the requirements for demonstrating compliance with the revised fPM emission standard. Currently, affected EGUs that do not qualify for the low emitting EGU (LEE) program for fPM
Based on comments received during the public comment period, the EPA is not removing, but instead revising the alternative emission limits for the individual non-Hg HAP metals such as lead, arsenic, chromium, nickel, and cadmium and for the total non-Hg HAP metals proportional to the finalized fPM emission limit of 0.010 lb/MMBtu.
The EPA is also finalizing, as proposed, a more protective Hg emission standard for existing lignite-fired EGUs, requiring that such lignite-fired EGUs meet the same Hg emission standard as EGUs firing other types of coal (
The EPA did not propose and is not finalizing modifications to the HCl emission standard (nor the alternative sulfur dioxide (SO
In establishing the final standards, as discussed in detail in sections IV., V., VI., and VII. of this preamble, the EPA considered the statutory direction and factors laid out by Congress in CAA section 112. Separately, pursuant to Executive Order 12866 and Executive Order 14904, the EPA prepared an analysis of the potential costs and benefits associated with this action. This analysis,
In accordance with Executive Order 12866 and 14094, the EPA prepared a Regulatory Impact Analysis (RIA). The RIA presents estimates of the emission, cost, and benefit impacts of this final rulemaking for the 2028 to 2037 period; those estimates are summarized in this section.
The power industry's compliance costs are represented in the RIA as the projected change in electric power generation costs between the baseline and final rule scenarios. The quantified emission estimates presented in the RIA include changes in pollutants directly covered by this rule, such as Hg and non-Hg HAP metals, and changes in other pollutants emitted from the power sector due to the compliance actions projected under this final rule. The cumulative projected national-level emissions reductions over the 2028 to 2037 period under the finalized requirements are presented in table 1. The supporting details for these estimates can be found in the RIA.
The EPA expects that emission reductions under the final rulemaking will result in reduced exposure to Hg and non-Hg HAP metals. The EPA also projects health benefits due to improvements in particulate matter with a diameter of 2.5 micrometers or less (PM
The EPA estimates negative net monetized benefits of this rule (see table 2 below). However, the benefit estimates informing this result represent only a partial accounting of the potential benefits of this final rule. Several categories of human welfare and climate benefits are unmonetized and are thus not directly reflected in the quantified net benefit estimates (see section IX.B. in this preamble and section 4 of the RIA for more details). In particular, estimating the economic benefits of reduced exposure to HAP generally has proven difficult for a number of reasons: it is difficult to undertake epidemiologic studies that have sufficient power to quantify the risks associated with HAP exposures experienced by U.S. populations on a daily basis; data used to estimate exposures in critical microenvironments are limited; and there remains insufficient economic research to support valuation of HAP benefits made even more challenging by the wide array of HAP and possible HAP effects.
The present value (PV) and equivalent annual value (EAV) of costs, benefits, and net benefits of this rulemaking over the 2028 to 2037 period in 2019 dollars are shown in table 2. In this table, results are presented using a 2 percent discount rate. Results under other discount rates and supporting details for the estimates can be found in the RIA.
The EPA notes that analysis of such impacts is distinct from the determinations finalized in this action under CAA section 112, which are based on the statutory factors the EPA discusses in section II.A. and sections IV. through VII. below.
In addition to being available in the docket, an electronic copy of this final action will also be available on the internet. Following signature by the EPA Administrator, the EPA will post a copy of this final action at:
Additional information is available on the RTR website at
Under CAA section 307(b)(1), judicial review of this final action is available only by filing a petition for review in the United States Court of Appeals for the District of Columbia Circuit (the Court) by July 8, 2024. Under CAA section 307(b)(2), the requirements established by this final rule may not be challenged separately in any civil or criminal proceedings brought by the EPA to enforce the requirements.
Section 307(d)(7)(B) of the CAA further provides that only an objection to a rule or procedure that was raised with reasonable specificity during the period for public comment (including any public hearing) may be raised during judicial review. This section also provides a mechanism for the EPA to reconsider the rule if the person raising an objection can demonstrate to the Administrator that it was impracticable to raise such objection within the period for public comment or if the grounds for such objection arose after the period for public comment (but within the time specified for judicial review) and if such objection is of central relevance to the outcome of the rule. Any person seeking to make such a demonstration should submit a Petition for Reconsideration to the Office of the Administrator, U.S. EPA, Room 3000, WJC South Building, 1200 Pennsylvania Ave., NW, Washington, DC 20460, with a copy to both the person(s) listed in the preceding
The statutory authority for this action is provided by sections 112 and 301 of the CAA, as amended (42 U.S.C. 7401
In the first stage of the CAA section 112 standard-setting process, the EPA promulgates technology-based standards under CAA section 112(d) for categories of sources identified as emitting one or more of the HAP listed in CAA section 112(b). Sources of HAP emissions are either major sources or area sources, and CAA section 112 establishes different requirements for major source standards and area source standards. “Major sources” are those that emit or have the potential to emit 10 tons per year (tpy) or more of a single HAP or 25 tpy or more of any combination of HAP. All other sources are “area sources.” For major sources, CAA section 112(d)(2) provides that the technology-based NESHAP must reflect “
For categories of major sources and any area source categories subject to MACT standards, the next stage in standard-setting focuses on identifying and addressing any remaining (
Concurrent with that review, and then at least every 8 years thereafter, CAA section 112(d)(6) requires the EPA to review standards promulgated under CAA section 112 and revise them “as necessary (taking into account developments in practices, processes, and control technologies).”
In this action, the EPA is finalizing amendments to the MACT standards based on two independent sources of authority: (1) its review of the 2020 Final Action's risk and technology review pursuant to the EPA's statutory authority under CAA section 112, and (2) the EPA's inherent authority to reconsider previous decisions and to revise, replace, or repeal a decision to the extent permitted by law and supported by a reasoned explanation.
In addition to the text of the specific subsections of CAA section 112 discussed above, the statutory structure and legislative history of CAA section 112 further support the EPA's authority to take this action. Throughout CAA section 112 and its legislative history, Congress made clear its intent to quickly secure large reductions in the volume of HAP emissions from stationary sources based on technological developments in control technologies because of its recognition of the hazards to public health and the environment that result from exposure to such emissions. CAA section 112 and its legislative history also reveal Congress's understanding that fully characterizing the risks posed by HAP emissions was exceedingly difficult. Thus, Congress purposefully replaced a regime that required the EPA to make an assessment of risk in the first instance, with one in which Congress determined risk existed and directed the EPA to make swift and substantial reductions based upon the most stringent standards technology could achieve.
Specifically, in 1990, Congress radically transformed section 112 of the CAA and its treatment of HAP through the Clean Air Act Amendments, by
In enacting the 1990 Amendments with respect to the control of HAP, Congress noted that “[p]ollutants controlled under [section 112] tend to be less widespread than those regulated [under other sections of the CAA], but are often associated with more serious health impacts, such as cancer, neurological disorders, and reproductive dysfunctions.”
In setting the standards, CAA section 112(d) requires the EPA to establish technology-based standards that achieve the “maximum degree of reduction,” “including a prohibition on such emissions where achievable.” CAA section 112(d)(2). Congress specified that the maximum degree of reduction must be at least as stringent as the average level of control achieved in practice by the best performing sources in the category or subcategory based on emissions data available to the EPA at the time of promulgation. This technology-based approach enabled the EPA to swiftly set standards for source categories without determining the risk or cost in each specific case, as the EPA had done prior to the 1990 Amendments. In other words, this approach to regulation quickly required that all major sources and many area sources of HAP meet an emission standard consistent with the top performers in each category, which had the effect of obtaining immediate reductions in the volume of HAP emissions from stationary sources. The statutory requirement that sources obtain levels of emission limitation that have actually been achieved by existing sources, instead of levels that could theoretically be achieved, inherently reflects a built-in cost consideration.
Further, after determining the minimum stringency level of control, or MACT floor, CAA section 112(d)(2) directs the EPA to “require the maximum degree of reduction in emissions of the hazardous air pollutants subject to this section (including a prohibition on such emissions, where achievable)” that the EPA determines are achievable after considering the cost of achieving such standards and any non-air-quality health and environmental impacts and energy requirements of additional control. In doing so, the statute further specifies in CAA section 112(d)(2) that the EPA should consider requiring sources to apply measures that, among other things, “reduce the volume of, or eliminate emissions of, such pollutants . . . ” (CAA section 112(d)(2)(A)), “enclose systems or processes to eliminate emissions” (CAA section 112(d)(2)(B)), and “collect, capture, or treat such pollutants when released . . . ” (CAA section 112(d)(2)(C)). The 1990 Amendments also built in a regular review of new technologies and a one-time review of risks that remain after imposition of MACT standards. CAA section 112(d)(6) requires the EPA to evaluate every NESHAP no less often than every 8 years to determine whether additional control is necessary after taking into consideration “developments in practices, processes, and control technologies,” separate from its obligation to review residual risk. CAA section 112(f) requires the EPA to ensure within 8 years of promulgating a NESHAP that the risks are acceptable and that the MACT standards provide an ample margin of safety.
The statutory requirement to establish technology-based standards under CAA section 112 eliminated the requirement for the EPA to identify hazards to public health and the environment in order to justify regulation of HAP emissions from stationary sources, reflecting Congress's judgment that such emissions are inherently dangerous. See S. Rep. No. 101-228, at 148 (“The MACT standards are based on the performance of technology, and not on the health and environmental effects of the [HAP].”). The technology review required in CAA section 112(d)(6) further mandates that the EPA continually reassess standards to determine if additional reductions can be obtained, without evaluating the specific risk associated with the HAP emissions that would be reduced. Notably, Congress required the EPA to conduct the CAA section 112(d)(6) review of what additional reductions may be obtained based on new technology even after the EPA has conducted the one-time CAA section 112(f)(2) risk review and determined that the existing standard will protect the public with an ample margin of safety. The two requirements are distinct, and both are mandatory.
The EPA promulgated the Coal- and Oil-Fired EGU NESHAP (commonly referred to as MATS) on February 16, 2012 (77 FR 9304) (2012 MATS Final Rule). The standards are codified at 40 CFR part 63, subpart UUUUU. The coal- and oil-fired electric utility industry consists of facilities that burn coal or oil located at both major and area sources of HAP emissions. An existing affected source is the collection of coal- or oil-fired EGUs in a subcategory within a single contiguous area and under common control. A new affected source is each coal- or oil-fired EGU for which construction or reconstruction began
For coal-fired EGUs, the 2012 MATS Final Rule established standards to limit emissions of Hg, acid gas HAP (
For oil-fired EGUs, the 2012 MATS Final Rule established standards to limit emissions of HCl and HF, total HAP metals (
MATS includes standards for existing and new EGUs for eight subcategories: three for coal-fired EGUs, one for IGCC EGUs, one for solid oil-derived fuel-fired EGUs (
Coal- and oil-fired EGUs are a significant source of numerous HAP that are associated with adverse effects to human health and the environment, including Hg, HF, HCl, selenium, arsenic, chromium, cobalt, nickel, hydrogen cyanide, beryllium, and cadmium emissions. Hg is a persistent and bioaccumulative toxic metal that, once released from power plants into the ambient air, can be readily transported and deposited to soil and aquatic environments where it is transformed by microbial action into methylmercury.
Of particular concern is chronic prenatal exposure via maternal consumption of foods containing methylmercury. Elevated exposure has been associated with developmental neurotoxicity and manifests as poor performance on neurobehavioral tests, particularly on tests of attention, fine motor function, language, verbal memory, and visual-spatial ability. Evidence also suggests potential for adverse effects on the cardiovascular system, adult nervous system, and immune system, as well as potential for causing cancer. Because the impacts of the neurodevelopmental effects of methylmercury are greatest during periods of rapid brain development, developing fetuses, infants, and young children are particularly vulnerable. Children born to populations with high fish consumption (
Along with the human health hazards associated with methylmercury, it is well-established that birds and mammals are also exposed to methylmercury through fish consumption (Mercury Study). At higher levels of exposure, the harmful effects of methylmercury include slower growth and development, reduced reproduction, and premature mortality. The effects of methylmercury on wildlife are variable across species but have been observed in the environment for numerous avian species and mammals including polar bears, river otters, and panthers.
EGUs are also the largest source of HCl, HF, and selenium emissions, and are a major source of metallic HAP emissions including arsenic, chromium, nickel, cobalt, and others. Exposure to these HAP, depending on exposure duration and levels of exposures, is associated with a variety of adverse health effects. These adverse health effects may include chronic health disorders (
While exposure to HAP is associated with a variety of adverse effects, quantifying the economic value of these impacts remains challenging. Epidemiologic studies, which report a central estimate of population-level risk, are generally used in an air pollution benefits assessment to estimate the number of attributable cases of events. Exposure to HAP is typically more uneven and more highly concentrated among a smaller number of individuals than exposure to criteria pollutants.
For the reasons noted above, epidemiologic studies do not generally exist for HAP. Instead, the EPA tends to rely on experimental animal studies to identify the range of effects which may be associated with a particular HAP exposure. Human controlled clinical studies are often limited due to ethical barriers (
Finally, estimating the economic value of HAP is made challenging by the human health endpoints affected. For example, though EPA can quantify the number and economic value of HAP-attributable deaths resulting from cancer, it is difficult to monetize the value of reducing an individual's potential cancer risk attributable to a lifetime of HAP exposure. An alternative approach of conducting willingness to pay studies specifically on risk reduction may be possible, but such studies have not yet been pursued.
As required by CAA section 112(f)(2), the EPA conducted the residual risk review (2020 Residual Risk Review) in 2020, 8 years after promulgating the 2012 MATS Final Rule, and presented the results of the review, along with our decisions regarding risk acceptability, ample margin of safety, and adverse environmental effects, in the 2020 Final Action. The results of the risk assessment are presented briefly in table 3 of this document, and in more detail in the document titled
Pursuant to CAA section 112(d)(6), the EPA conducted a technology review (2020 Technology Review) in the 2020 Final Action, which focused on identifying and evaluating developments in practices, processes, and control technologies for the emission sources in the source category that occurred since the 2012 MATS Final Rule was promulgated. Control technologies typically used to minimize emissions of pollutants that have numeric emission limits under the 2012 MATS Final Rule include electrostatic precipitators (ESPs) and fabric filters (FFs) for control of fPM as a surrogate for non-Hg HAP metals; wet scrubbers, dry scrubbers, and dry sorbent injection for control of acid gases (SO
After conducting the 2020 Technology Review, the EPA did not identify developments in practices, processes, or
Pursuant to CAA section 112(d)(6), the EPA conducted a review of the 2020 Technology Review and presented the results of this review, along with our proposed decisions, in the 2023 Proposal. The results of the technology review are presented briefly below in this preamble. More detail on the proposed technology review is in the memorandum
Based on the results of the technology review, the EPA proposed to lower the fPM standard, the surrogate for non-Hg HAP metals, for coal-fired EGUs from 0.030 lb/MMBtu to 0.010 lb/MMBtu. The Agency solicited comment on the control technology effectiveness and cost assumptions used in the proposed rule, as well as on a more stringent fPM limit of 0.006 lb/MMBtu or lower. Additionally, the Agency proposed to require the use of PM CEMS for all coal-fired, oil-fired, and IGCC EGUs for demonstrating compliance with the fPM standard. As the Agency proposed to require PM CEMS for compliance demonstration, we also proposed to remove the LEE option, a program based on infrequent stack testing, for fPM and non-Hg HAP metals. As EGUs would be required to demonstrate compliance with PM CEMS, the Agency also proposed to remove the alternate emission standards for non-Hg HAP metals and total HAP metals, because almost all regulated sources have chosen to demonstrate compliance with the non-Hg HAP metal standards by demonstrating compliance with the surrogate fPM standard, and solicited comment on prorated metal limits (adjusted proportionally according to the level of the final fPM standard), should the Agency not finalize the removal of the non-Hg HAP metals limits.
The Agency also proposed to lower the Hg emission standard for lignite-fired EGUs from 4.0 lb/TBtu to 1.2 lb/TBtu and solicited comment on the performance of Hg controls and on cost and effectiveness of control strategies to meet more stringent Hg standards. Lastly, the EPA did not identify new developments in control technologies or improved methods of operation that would warrant revisions to the Hg emission standards for non-lignite EGUs, for the organic HAP work practice standards, for the acid gas standards, or for standards for oil-fired EGUs. Therefore, the Agency did not propose changes to these standards in the 2023 Proposal but did solicit comment on the EPA's proposed findings that no revisions were warranted and on the appropriateness of the existing standards.
Additionally, the EPA proposed to remove one of the two options for defining the startup period for MATS-affected EGUs.
In the 2023 Proposal, the EPA determined not to reopen the 2020 Residual Risk Review, and accordingly did not propose any revisions to that review. As the EPA explained in the proposal, the EPA found in the 2020 RTR that risks from the Coal- and Oil-Fired EGU source category due to emissions of air toxics are acceptable and that the existing NESHAP provides an ample margin of safety to protect public health. As noted in the proposal, the EPA also acknowledges that it received a petition for reconsideration from environmental organizations that, in relevant part, sought the EPA's reconsideration of certain aspects of the 2020 Residual Risk Review. The EPA granted in part the environmental organizations' petition which sought the EPA's review of startup and shutdown provisions in the 2023 Proposal, 88 FR 24885, and the EPA continues to review and will respond to other aspects of the petition in a separate action.
This action finalizes the EPA's determinations pursuant to the RTR provisions of CAA section 112 for the Coal- and Oil-Fired EGU source category and amends the Coal- and Oil-Fired EGU NESHAP based on those determinations. This action also finalizes changes to the definition of startup for this rule. This final rule includes changes to the 2023 Proposal after consideration of comments received during the public comment period described in sections IV., V., VI., and VII. of this preamble.
We determined that there are developments in practices, processes, and control technologies that warrant revisions to the MACT standards for this source category. Therefore, to satisfy the requirements of CAA section 112(d)(6), we are revising the MACT standards by revising the fPM limit for existing coal-fired EGUs from 0.030 lb/MMBtu to 0.010 lb/MMBtu and requiring the use of PM CEMS for coal and oil-fired EGUs to demonstrate compliance with the revised fPM standard, as proposed. We are also finalizing, as proposed, a Hg limit for lignite-fired EGUs of 1.2 lb/TBtu, which aligns with the existing Hg limit that has been in effect for other coal-fired EGUs since 2012. This revised Hg limit for lignite-fired EGUs is more stringent than the limit of 4.0 lb/TBtu that was finalized for such units in the 2012 MATS Final Rule. The rationale for these changes is discussed in more detail in sections IV. and V. below.
Based on comments received during the public comment period, the EPA is not finalizing the proposed removal of the non-Hg HAP metals limits for existing coal-fired EGUs (see section V.). Additionally, this final rule is requiring the use of PM CEMS for compliance demonstration for coal- and oil-fired EGUs (excluding EGUs in the limited-use liquid oil-fired subcategory), but not for IGCC EGUs (see section VI.).
Because this final rule includes revisions to the emissions standards for fPM as a surrogate for non-Hg HAP metals for existing coal-fired EGUs, the fPM emission standard compliance demonstration requirements, the Hg emission standard for lignite-fired EGUs, and the definition of “startup,” the EPA intends each portion of this rule to be severable from each other as it is multifaceted and addresses several distinct aspects of MATS for independent reasons. This includes the revised emission standard for fPM as a surrogate for non-Hg HAP metals and the fPM compliance demonstration requirement to utilize PM CEMS. While the EPA considered the technical feasibility of PM CEMS in establishing the revised fPM standard, the EPA finds there are independent reasons for adopting each revision to the standards, and that each would continue to be workable without the other in the place.
The EPA intends that the various pieces of this package be considered independent of each other. For example, the EPA notes that our judgments regarding developments in fPM control technology for the revised fPM standard as a surrogate for non-Hg HAP metals largely reflect that the fleet was reporting fPM emission rates well below the current standard and with lower costs than estimated during promulgation of the 2012 MATS Final Rule; while our judgments regarding the ability for lignite-fired EGUs to meet the same standard for Hg emissions as other coal- and oil-fired EGUs rest on a separate analysis specific to lignite-fired units. Thus, the revised fPM surrogate emissions standard is feasible and appropriate even absent the revised Hg standard for lignite-fired units, and vice versa. Similarly, the EPA is finalizing changes to the fPM compliance demonstration requirement based on the technology's ability to provide increased transparency for owners and operators, regulators, and the public; and the EPA is finalizing changes to the startup definition based on considerations raised by environmental groups in petitions for reconsideration. Both of these actions are independent from the EPA's revisions to the fPM surrogate standard, and the Hg standard for lignite-fired units. Accordingly, the EPA finds that each set of standards is severable from each other set of standards.
Finally, the EPA finds that implementation of each set of standards, compliance demonstration requirements, and revisions to the startup definition are independent. That is, a source can abide by any one of these individual requirements without abiding by any others. Thus, the EPA's overall approach to this source category continues to be fully implementable even in the absence of any one or more of the elements included in this final rule.
Thus, the EPA has independently considered and adopted each portion of this final rule (including the revised fPM emission standard as a surrogate for non-Hg HAP metals, the fPM compliance demonstration requirement, the revised Hg emission standard for lignite-fired units, and the revised startup definition) and each is severable should there be judicial review. If a court were to invalidate any one of these elements of the final rule, the EPA intends the remainder of this action to remain effective. Importantly, the EPA designed the different elements of this final rule to function sensibly and independently. Further, the supporting bases for each element of the final rule reflect the Agency's judgment that the element is independently justified and appropriate, and that each element can function independently even if one or more other parts of the rule has been set aside.
The EPA is finalizing, as proposed, the removal of the work practice standards of paragraph (2) of the definition of “startup” in 40 CFR 63.10042. Under the first option, startup ends when any of the steam from the boiler is used to generate electricity for sale over the grid or for any other purpose (including on-site use). Under the second option, startup ends 4 hours after the EGU generates electricity that is sold or used for any other purpose (including on-site use), or 4 hours after the EGU makes useful thermal energy (such as heat or steam) for industrial, commercial, heating, or cooling purposes, whichever is earlier. The final rule requires that all EGUs use the work practice standards in paragraph (1) of the definition of “startup,” which is already being used by the majority of EGUs.
The revisions to the MACT standards being promulgated in this action are effective on July 8, 2024. The compliance date for affected coal-fired sources to comply with the revised fPM limit of 0.010 lb/MMBtu and for lignite-fired sources to meet the lower Hg limit of 1.2 lb/TBtu is 3 years after the effective date of the final rule. The Agency believes this timeline is as expeditious as practicable considering the potential need for some sources to upgrade or replace pollution controls. As discussed elsewhere in this preamble, we are adding a requirement that compliance with the fPM limit be demonstrated using PM CEMS. Based on comments received during the comment period and our understanding of suppliers of PM CEMS, the EPA is finalizing the requirement that affected sources use PM CEMS for compliance demonstration by 3 years after the effective date of the final rule. The compliance date for existing affected sources to comply with amendments pertaining to the startup definition is 180 days after the effective date of the final rule, as few EGUs are affected, and changes needed to comply with paragraph (1) of startup are achievable by all EGUs at little to no additional expenditures. All affected facilities remain subject to the current requirements of 40 CFR part 63, subpart UUUUU, until the applicable compliance date of the amended rule.
The EPA has considered the concerns raised by commenters that these compliance deadlines could affect electric reliability and concluded that given the flexibilities detailed further in this section, the requirements of the final rule for existing sources can be met without adversely impacting electric reliability. In particular, the EPA notes the flexibility of permitting authorities to allow, if warranted, a fourth year for compliance under CAA section 112(i)(3)(B). This flexibility, if needed, would address many of the concerns that commenters raised. Furthermore, in the event that an isolated, localized concern were to emerge that could not be addressed solely through the 1-year extension under CAA section 112(i)(3), the CAA provides additional flexibilities to bring sources into compliance while maintaining reliability.
The EPA notes that similar concerns regarding reliability were raised about the 2012 MATS Final Rule—a rule that projected the need for significantly greater installation of controls and other capital investments than this current revision. In the 2012 MATS Final Rule, the EPA emphasized that most units should be able to comply with the requirements of the final rule within 3 years. However, the EPA also made it clear that permitting authorities have the authority to grant a 1-year compliance extension where necessary, in a range of situations described in the 2012 MATS Final Rule preamble.
In this section, the EPA provides descriptions of what we proposed, what we are finalizing, our rationale for the final decisions and amendments, and a summary of key comments and responses related to the emission standard for fPM, non-Hg HAP metals, and the compliance demonstration options. For all comments not discussed in this preamble, comment summaries and the EPA's responses can be found in the comment summary and response document
Based on its review, the EPA is finalizing a revised non-Hg HAP metal surrogate fPM emission standard for all existing coal-fired EGUs of 0.010 lb/MMBtu and is requiring that all coal- and oil-fired EGUs demonstrate compliance with the revised fPM emission standard by using PM CEMS. The revised fPM standard will ensure that the entire fleet of coal-fired EGUs achieves performance levels that are consistent with those of the vast majority of regulated units operating today—
The EPA proposed to lower the fPM limit, a surrogate for total non-Hg HAP metals, for coal-fired EGUs from 0.030 lb/MMBtu to 0.010 lb/MMBtu. The EPA further solicited comment on an emission standard of 0.006 lb/MMBtu or lower. The EPA did not propose any changes to the fPM emission standard for oil-fired EGUs or for IGCC units. The EPA also proposed to remove the total and individual non-Hg HAP metals emission limits. The EPA also solicited comment on adjusting the total and individual non-Hg HAP metals emission limits proportionally to the revised fPM limit rather than eliminating the limits altogether.
The EPA proposed to require that all coal- and oil-fired EGUs (IGCC units are discussed in section VI.) use PM CEMS to demonstrate compliance with the fPM emission limit. The EPA also proposed to remove the option of demonstrating compliance using infrequent stack testing and the LEE program (where stack testing occurs quarterly for 3 years, then every third year thereafter) for both PM and non-Hg HAP metals.
Commenters provided both supportive and opposing arguments for issues regarding the fPM limit that were presented in the proposed review of the 2020 Technology Review. Comments received on the proposed fPM limit for coal-fired EGUs, along with additional analyses, did not change the Agency's conclusions that were presented in the 2023 Proposal, and, therefore, the Agency is finalizing the 0.010 lb/MMBtu fPM emission limit for existing coal-fired EGUs, as proposed.
Additionally, commenters urged the Agency to retain the option of complying with individual non-Hg HAP metal (
Comments received on the compliance demonstration options for coal- and oil-fired EGUs also did not change the results of the technology review, therefore the Agency is finalizing the use of PM CEMS for compliance demonstration purposes and removing the fPM and non-Hg HAP metals LEE options for all coal-fired EGUs and for oil-fired EGUs (except those in the limited use liquid oil-fired EGU subcategory). The Agency received comments that some PM CEMS that are currently correlated for the 0.030 lb/MMBtu fPM emission limit may experience some difficulties should re-correlation be necessary at a lower fPM standard. Based on these comments and on additional review of PM CEMS test reports, as mentioned in sections IV.C.2. and IV.D.2., the Agency has made minor technical revisions to shift the basis of correlation testing from sampling a minimum volume per run to collecting a minimum mass or minimum sample volume per run and has adjusted the quality assurance (QA) criterion otherwise associated with the new emission limit. These changes will enable PM CEMS to be properly certified for use in demonstrating compliance with the lower fPM standard with a high degree of accuracy and reliability.
The updated PM analysis, detailed in the memorandum
Some commenters asserted that, even using the EPA's cost-effectiveness figures, the proposed 0.010 lb/MMBtu limit is not cost-effective. These commenters stated that the EPA's proposal to revise the fPM standard to 0.010 lb/MMBtu based on a cost-effectiveness estimate of up to $14.7 million per ton of total non-Hg HAP metals removed (equivalent to $44,900 per ton of fPM removed) is inconsistent with the EPA's prior actions because the cost-effectiveness estimate is substantially higher than estimates the Agency has previously found to be not cost-effective. They further said that, in the past, the EPA has decided against revising fPM standards based on cost-effectiveness estimates substantially lower than the cost-effectiveness estimates here. They said that the EPA should follow these precedents and acknowledge that $12.2 to $14.7 million per ton of non-Hg HAP metals reduced is not cost-effective. They argued that the Agency should not finalize the proposed standard of 0.010 lb/MMBtu for that reason. Further, these commenters argued that the alternative, more stringent limit of 0.006 lb/MMBtu is even less cost-effective at $25.6 million per ton of non-Hg HAP metals reduced, so it should not be considered either.
The commenters provided the following examples of previous rulemakings where EPA found controls to not be cost-effective:
• In the Petroleum Refinery Sector technology review,
• In the Iron Ore Processing technology review,
• In the Integrated Iron and Steel Manufacturing Facilities technology review,
• In the Portland Cement Manufacturing beyond-the-floor analysis,
In contrast, other commenters focused on the EPA's estimated cost-effective estimates for fPM (which is a surrogate for non-Hg HAP metals) and argued that
Additionally, some commenters cited
Regarding the comments that the EPA underestimated costs to an extent that undermines the EPA's overall cost-effectiveness assumptions, the EPA disagrees that the Agency underestimated the typical costs of ESP rebuilds. The commenters provided cost examples from only two facilities to support their assertions regarding the costs of ESP rebuilds. The costs provided for one of those facilities, Labadie, were not the costs associated with an ESP rebuild, but instead were the costs associated with the full replacement of an ESP. The commenter stated that, “Ameren retrofitted the entire ESP trains on two units in 2014/2015. On each of these units two of the three original existing ESPs had to be abandoned and one of the existing ESPs was retrofitted with new power supplies and flue gas flow modifications. A new state-of-the-art ESP was added to each unit to supplement the retrofitted ESPs.” An ESP replacement is different from an ESP rebuild, and therefore the costs of an ESP replacement do not inform the costs of an ESP rebuild. The ESP rebuild cost provided for the other facility, Petersburg, was less than the EPA's final assumption regarding the typical cost of an ESP rebuild on a capacity-weighted average basis. Neither of these examples provided by the commenter demonstrate that the EPA underestimated costs. For these reasons, the EPA disagrees with these commenters. Additionally, the EPA disagrees with these commenters that the Agency must add a compliance margin in its cost assumptions. As described above, the Agency does not prescribe specifically how an EGU must be controlled or how it must be operated, and the choice of overcompliance is at the sole discretion of the owners and operators.
Generally, the EPA agrees with commenters that cost effectiveness,
Similarly, in the other rulemakings these commenters pointed to, where the EPA found similar cost-effectiveness values to those that the EPA identified for the revised fPM standard here, there are distinct aspects of those rulemakings and industries that distinguish those prior actions from this rulemaking. In the 2015 Petroleum Refineries rulemaking, the EPA considered the cost effectiveness of developments at only two facilities to decide whether to deploy a standard across the much wider industry.
There are also unique attributes of the power sector that the EPA finds support the finalization of revised standards for fPM and non-Hg HAP metals despite the relatively high cost-effectiveness values of this rulemaking as compared to other CAA section 112 rulemakings. As the EPA has demonstrated throughout this record, there are hundreds of EGUs regulated under MATS with well-performing control equipment that are already reporting emission rates below the revised standards, whereas only a handful of facilities with largely outdated or underperforming controls are emitting significantly more than their peers. That means that the communities located near these handful of facilities may experience exposure to higher levels of toxic metal emissions than communities located near similarly sized well-controlled plants. This is what the revised standards seek to remedy, and as discussed throughout this record, this goal is consistent with the EPA's authority under CAA section 112(d)(6) and the purpose of CAA section 112 more generally.
U.S. EGUs are a major source of HAP metals emissions including arsenic, beryllium, cadmium, chromium, cobalt, lead, nickel, manganese, and selenium. Some HAP metals emitted by U.S. EGUs are known to be persistent and bioaccumulative and others have the potential to cause cancer. Exposure to these HAP metals, depending on exposure duration and levels of exposures, is associated with a variety of adverse health effects. These adverse health effects may include chronic health disorders (
EGUs projected to be impacted by the revised fPM standards represent a small fraction of the total number of the coal-fired EGUs (11 percent for the 0.010 lb/MMBtu fPM limit). In addition, many regulated facilities are electing to retire
While some commenters stated that meeting an even lower emission limit of 0.006 lb/MMBtu is technologically feasible using currently available controls, the Agency declines to finalize this limit primarily due to the technological limitations of PM CEMS at this lower emission limit (as discussed in more detail in sections IV.C.2. and IV.D.2. below). Additionally, the EPA considered the higher costs associated with a more stringent standard as compared to the final standard presented in section IV.D.1.
Finally, as mentioned in the Response to Comments document, the EPA finds that use of PM CEMS, which provide continuous feedback with respect to fPM variability, in lieu of quarterly fPM emissions testing, will render moot the commenter's suggestion that margin of compliance has not been taken into account.
Other commenters agreed with the EPA's “two-pronged” interpretation that CAA section 112(d)(6) provides authorities to the EPA that are distinct from the EPA's risk-based authorities under CAA section 112(f)(2). These commenters said that if the criteria under CAA section 112(d)(6) are met, the EPA must update the standards to reflect new developments independent of the risk assessment process under CAA section 112(f)(2). They said the technology-based review conducted under CAA section 112(d)(6) need not account for any information learned during the residual risk review under CAA section 112(f)(2) unless that information pertains to statutory factors under CAA section 112(d)(6), such as costs. They concluded that CAA section 112(d)(6) requires the EPA to promulgate the maximum HAP reductions possible where achievable at reasonable cost and is separate from the EPA's residual risk analysis.
The language and structure of CAA section 112, along with its legislative history, further underscores the independent nature of these two provisions.
Nevertheless, it is possible that some EGU owners may conclude that retiring a particular EGU and replacing it with new capacity is a more economic option from the perspective of the unit's customers and/or owners than making investments in new emissions controls at the unit. The EPA understands that before implementing such a retirement decision, the unit's owner will follow the processes put in place by the relevant regional transmission organization (RTO), balancing authority, or state regulator to protect electric system reliability. These processes typically include analysis of the potential impacts of the proposed EGU retirement on electrical system reliability, identification of options for mitigating any identified adverse impacts, and, in some cases, temporary provision of additional revenues to support the EGU's continued operation until longer-term mitigation measures can be put in place. No commenter stated that this rule would somehow authorize any EGU owner to unilaterally retire a unit without following these processes, yet some commenters nevertheless assume without any rationale that is how multiple EGU owners would proceed, in violation of their obligations to RTOs, balancing authorities, or state regulators relating to the provision of reliable electric service.
In addition, the Agency has granted the maximum time allowed for compliance under CAA section 112(i)(3) of 3 years, and individual facilities may seek, if warranted, an additional 1-year extension of the compliance date from their permitting authority pursuant to CAA section 112(i)(3)(B). The construction of any additional pollution control technology that EGUs might install for compliance with this rule can be completed within this time and will not require significant outages beyond what is regularly scheduled for typical maintenance. Facilities may also obtain, if warranted, an emergency order from the Department of Energy pursuant to section 202(c) of the Federal Power Act (16 U.S.C. 824a(c)) that would allow the facility to temporarily operate notwithstanding environmental limits when the Secretary of Energy determines doing so is necessary to address a shortage of electric energy or other electric reliability emergency.
Further, despite the comments asserting concerns over electric system reliability, no commenter cited a single instance where implementation of an EPA program caused an adverse reliability impact. Indeed, similar claims made in the context of the EPA's prior CAA rulemakings have not been borne out in reality. For example, in the stay litigation over the Cross-State Air Pollution Rule (CSAPR), claims were made that allowing the rule to go into effect would compromise reliability. Yet in the 2012 ozone season starting just over 4 months after the rule was stayed, EGUs covered by CSAPR collectively emitted below the overall program budgets that the rule would have imposed in that year if the rule had been allowed to take effect, with most individual states emitting below their respective state budgets. Similarly, in the litigation over the 2015 Clean Power Plan, assertions that the rule would threaten electric system reliability were made by some utilities or their representatives, yet even though the Supreme Court stayed the rule in 2016, the industry achieved the rule's emission reduction targets years ahead of schedule without the rule ever going into effect.
The EPA notes that similar concerns regarding reliability were raised about the 2012 MATS Final Rule—a rule that projected the need for significantly greater installation of controls and other capital investments than this current revision.
Commenters claimed that creating a subcategory for units facing near-term retirements that harmonizes the retirement dates with other rulemakings would greatly assist companies with moving forward on retirement plans without running the risk of being forced to retire early, which could create reliability concerns or, in the alternative, forced to deliberate whether to install controls and delaying retirement to recoup investments in the controls. Commenters also suggested that EGUs with limited continued operation be allowed to continue to perform quarterly stack testing to demonstrate compliance with the fPM limitations (rather than having to install PM CEMS). Commenters suggested that imposing different standards on these subcategories should continue the status quo for these units until retirement. Commenters claimed that it would make no sense for the EPA to require an EGU slated to retire in the near term to expend substantial resources on controls in the interim since these sources are very unlikely to find it viable to construct significant control upgrades for a revised standard that would become effective in mid-2027, only 5 years before the unit's permanent retirement. Commenters further noted if the EPA does not establish such a subcategory or take other action to ensure these units are not negatively impacted by the rulemaking, the retirement of some units could be accelerated due to the costs of installing a PM CEMS and the need to rebuild or upgrade an existing ESP or install a FF to supplement an existing ESP. Commenters stated that the EPA cannot ignore the need for a coordinated retirement of thermal generating capacity while new generation sources come online to avoid detrimental impacts to grid reliability.
Commenters suggested that if the EPA decides to proceed with finalizing the revised standards in the 2023 Proposal, the Agency should create a subcategory for coal-fired EGUs that elect by the compliance date of the revised standards (
Opposing commenters urged the EPA to retain all current options for demonstrating compliance with non-Hg HAP metal standards, including quarterly PM and metals testing, LEE, and PM CPMS. These commenters said removing these compliance flexibility options goes beyond the scope of the RTR and does not address why the reasons these options were originally included in MATS are no longer valid. Commenters said they have previously raised concerns about PM CEMS that the EPA has avoided by stating that CEMS are not the only compliance method for PM. They stated that previously, the EPA has determined these compliance methods were both adequate and frequent enough to demonstrate compliance.
Further, as described in the
The Agency acknowledges the commenters' suggestions that EGU owners or operators may find that using beta gauge PM CEMS is most appropriate for the lower fPM emission limit in the rule; such suggestions are consistent with the Agency's view, as expressed in 88 FR 24872. However, the Agency believes other approaches, including spiking, can also ease correlation testing for PM CEMS. Moreover, the Agency anticipates that the new fPM limit will increase demand for, and perhaps spur increased production of, beta gauge PM CEMS.
The EPA is finalizing a lower fPM emission standard of 0.010 lb/MMBtu for coal-fired EGUs, as a surrogate for non-Hg HAP metals, and the use of PM CEMS for compliance demonstration purposes for coal- and oil-fired EGUs (with the exception of limited-use liquid oil-fired EGUs) based on developments in the performance of sources within the category since the EPA finalized MATS and the advantages conferred by using CEMS for compliance. As described in the 2023 Proposal, non-Hg HAP metals are predominately a component of fPM, and control of fPM results in concomitant reduction of non-Hg HAP metals (with the exception of Se, which may be present in the filterable fraction or in the condensable fraction as the acid gas, SeO
The EPA's conclusions with regard to the fPM standard and requirement to use PM CEMS for compliance demonstration are closely related, both in terms of CAA section 112(d)(6)'s direction for the EPA to reduce HAP emissions based on developments in practices, processes, and control technologies, and in terms of technical compatibility.
In the 2023 Proposal, the Agency proposed a lower fPM emission standard for coal-fired EGUs as a surrogate for non-Hg HAP metals based on developments in practices, processes, and control technologies pursuant to CAA section 112(d)(6), including the EPA's assessment of the differing performance of sources within the category and updated information about the cost of controls. As described in the 2023 Proposal, non-Hg HAP metals are predominately a component of fPM, and control of fPM results in reduction of non-Hg HAP metals (with the exception of Se, which may be present in the filterable fraction or in the condensable fraction as the acid gas, SeO
In conducting this technology review, the EPA found important developments that informed its proposal. First, from reviewing historical information contained in WebFIRE,
To examine potential revisions, the EPA evaluated fPM compliance data for the coal-fired fleet and evaluated the control efficiency and costs of PM controls to achieve a lower fPM standard. Based on comments received on the 2023 Proposal, the EPA reviewed additional fPM compliance data for 62 EGUs at 33 facilities (see 2024 Technical Memo and attachments for detailed information). The review of additional fPM compliance data showed that more EGUs had previously demonstrated an ability to meet a lower fPM rate, as shown in figure 4 of the 2024 Technical Memo. Compared to the 2023 Proposal where 91 percent of existing capacity demonstrated an ability to meet 0.010 lb/MMBtu, the updated analysis showed that 93 percent are demonstrating the ability to meet 0.010 lb/MMBtu with existing controls. The EPA received comments on the cost assumptions for upgrading PM controls and found that the costs estimated at proposal were not only too high, but that the cost effectiveness of PM upgrades was also underestimated (
The EPA is finalizing the fPM emission limit of 0.010 lb/MMBtu with adjusted QA criteria, based on developments since 2012, for the reasons described in this final rule and in the 2023 Proposal as the lowest achievable fPM limit that allows for the use of PM CEMS for compliance demonstration purposes. First, this level of control ensures that the highest emitters bring their performance to a level where the vast majority of the fleet is already performing. For example, as described above, the majority of the existing coal-fired fleet subject to this final rule has previously demonstrated an ability to comply with the lower 0.010 lb/MMBtu fPM limit at least 99 percent of the time during one quarter, in addition to meeting the lower fPM limit on average across all quarters assessed. The Agency estimates that only 33 EGUs are currently operating above this revised limit. Compared to some of the best performing EGUs, the 33 EGUs requiring additional PM control upgrades or maintenance are more likely to have an ESP instead of a FF and to demonstrate compliance using intermittent stack testing. In addition, most of these EGUs have operated at a higher level of utilization than the coal-fired fleet on average.
Second, as discussed in section II.A.2. above, Congress updated CAA section 112 in the 1990 Clean Air Act Amendments to achieve significant reductions in HAP emissions, which it recognized are particularly harmful pollutants, and implemented a regime under which Congress directed the EPA to make swift and substantial reductions to HAP based upon the most stringent standards technology could achieve. This is evidenced by Congress's charge to the EPA to “require the maximum degree of reduction in emissions of hazardous air pollutants (including a prohibition on such emissions),” that is achievable accounting for “the cost of achieving such emission reduction, and any non-air quality health and environmental impacts and energy requirements. . . .” CAA section 112(d)(2). Further, by creating separate and distinct requirements for the EPA to consider updates to CAA section 112 pursuant to both technology review under CAA section 112(d)(6) and residual risk review under CAA section 112(f)(2), Congress anticipated that the EPA would strengthen standards pursuant to technology reviews “as necessary (taking into account developments in practices, processes, and control technologies),” CAA section 112(d)(6), even after the EPA concluded there was an ample margin of safety based on the risks that the EPA can quantify.
Accordingly, the EPA finds that bringing this small number of units to the performance levels of the rest of the fleet serves Congress's mandate to the EPA in CAA section 112(d)(6) to continually consider developments “that create opportunities to do even better.”
The fleet has been able to “over comply” with the existing fPM standard due to the very high PM control effectiveness of well-performing ESPs and FFs, often exceeding 99.9 percent. But the performance of a minority of units lags well behind the vast majority of the fleet. As indicated by the two highest fPM rates,
The Northern Cheyenne Reservation is 20 miles from the Colstrip facility and the Tribe exercised its authority in 1977 to require additional air pollution controls on the new Colstrip units (Colstrip 3 and 4, the same EGUs still operating today), recognizing the area as a Class I airshed under the CAA. According to comments submitted by the Northern Cheyenne Tribe, their tribal members—both those living on the Reservation and those living in the nearby community of Colstrip—have been disproportionally impacted by exposure to HAP emissions from the Colstrip facility.
The EPA believes a fPM emission limit of 0.010 lb/MMBtu appropriately takes into consideration the costs of controls. The EPA evaluated the costs to improve current PM control systems and the cost to install better performing PM controls (
The EPA has updated its costs analyses for this final rule based on comments received and additional data review, which is described in more detail in the 2024 Technical Memo available in the docket. In response to commenters stating that the use of the lowest quarter's 99th percentile, or the lowest achievable fPM rate, is not indicative of overall EGU operation and emission performance, the EPA added a review of average fPM rates. In these updated analyses, both the lowest quarter's 99th percentile and the average fPM rate must be below the potential fPM limit for the EPA to assume no additional upgrades are needed to meet a revised limit. If an EGU has previously demonstrated an ability to meet a potential lower fPM limit, but the average fPM rate is greater than the potential limit, the analysis for the final rule has been updated to assume increased bag replacement frequency (for units with FFs) or operation and maintenance costing $100,000/year (2022$). This additional cost represents increased vigilance in maintaining ESP performance and includes technician labor to monitor performance of the ESP and to periodically make typical repairs (
Additionally, the Agency received comments that the PM upgrade costs estimated at proposal were too high on a dollar per ton basis and these costs have been updated and are provided in the 2024 Technical Memo. Specifically, commenters demonstrated that the observed percent reductions in fPM attributable to ESP upgrades were significantly greater than the percent reductions that the EPA had assumed for the proposed rule. Additionally, commenters demonstrated that ESP performance guarantees for coal-fired utility boilers were much lower than the EPA was aware of at proposal. These updates, as well as improving our methodology which increases the number of EGUs estimated to need PM upgrades, slightly lower the dollar per ton estimates from what was presented in the 2023 Proposal.
The EPA considers costs in various ways, depending on the rule and affected sector. For example, the EPA has considered, in previous CAA section 112 rulemakings, cost effectiveness, the total capital costs of proposed measures, annual costs, and costs compared to total revenues (
Further, the EPA finds that costs for facilities to meet the revised fPM emission limit represent a small fraction of typical capital and total expenditures for the power sector. In the 2022 Proposal (reaffirming the appropriate and necessary finding), the EPA evaluated the compliance costs that were projected in the 2012 MATS Final Rule relative to the typical annual revenues, capital expenditures, and total (capital and production) expenditures.
In this final rule, the EPA finds that costs of the final fPM standard are reasonable, and that the revised fPM standard appropriately balances the EPA's obligation under CAA section 112 to achieve the maximum degree of emission reductions considering statutory factors, including costs. Further, the EPA finds that its consideration of costs is consistent with D.C. Circuit precedent, which has found that CAA section 112(d)(2) expressly authorizes cost consideration in other aspects of the standard-setting process, such as CAA section 112(d)(6),
As discussed in section IV.C.1. in response to comments regarding the relatively higher dollar per ton cost effectiveness of the final fPM standard, the EPA finds that in the context of this industry and this rulemaking, the updated standards are an appropriate exercise of the EPA's standard setting authority pursuant to the CAA section 112(d)(6) technology review. As commenters rightly note, the EPA routinely considers the cost effectiveness of potential standards where it can consider costs under CAA section 112,
The power sector also operates differently than other industries regulated under CAA section 112.
As demonstrated in the proposal, the power sector, as a whole, is achieving fPM emission rates that are well below the 0.030 lb/MMBtu standard from the 2012 Final MATS Rule, with the exception of a few outlier facilities. The EPA estimates that only one facility (out of the 151 evaluated coal-fired facilities), which does not have the most modern PM pollution controls and has been unable to demonstrate an ability to meet a lower fPM limit, will be required to install the most-costly upgrade to meet the revised standards, which significantly drives up the cost of this final rule. However, the higher costs for one facility to install demonstrated improvements to its control technology should not prevent the EPA from establishing achievable standards for the sector under the EPA's CAA section 112(d)(6) authority. Instead, the EPA finds that it is consistent with its CAA section 112(d)(6) authority to consider the performance of the industry at large. The average fPM emissions of the industry demonstrate the technical feasibility of higher emitting facilities to meet the new standard and shows there are proven technologies that if installed at these units will allow them to significantly lower fPM and non-Hg HAP metals emissions.
In this rulemaking, the EPA also determined not to finalize a more stringent standard for fPM emissions, such as a limit of 0.006 lb/MMBtu or lower, which the EPA took comment on in the 2023 Proposal. The EPA declines to finalize an emission standard of 0.006 lb/MMBtu or lower primarily due to technical limitations in using PM CEMS for compliance demonstration purposes described in the next section. The EPA has determined that a fPM emission standard of 0.010 lb/MMBtu is the lowest that would also allow the use of PM CEMS for compliance demonstration. Additionally, the EPA also considered the overall higher costs associated with a more stringent standard as compared to the final standard, which the EPA considered under the technology review.
Additionally, compliance with a fPM emission limit of 0.006 lb/MMBtu could only be demonstrated using periodic stack testing that would require test run durations longer than 4 hours
The EPA also determined not to finalize a fPM standard of 0.015 lb/MMBtu, which the EPA took comment on in the 2023 Proposal, because the EPA determined that a standard of 0.010 lb/MMBtu is appropriate for the reasons discussed above.
In this rule, the EPA is also reaching a different conclusion from the 2020 Technology Review with respect to the fPM emission standard and requirements to utilize PM CEMS. As discussed in section II.D. above, the 2020 Technology Review did not consider developments in the cost and effectiveness of proven technologies to control fPM as a surrogate for non-Hg HAP metals emissions, nor did the EPA evaluate the current performance of emission reduction control equipment and strategies at existing MATS-affected EGUs. In this rulemaking, in which the EPA reviewed the findings of the 2020 Technology Review, the Agency determined there are important developments regarding the emissions performance of the coal-fired EGU fleet, and the costs of achieving that performance that are appropriate for the EPA to consider under its CAA section 112(d)(6) authority, and which are the basis for the revised emissions standards the EPA is promulgating through this final rule.
The 2012 MATS Final Rule contains emission limits for both individual and total non-Hg HAP metals (
Commenters urged the EPA to retain the non-Hg HAP metals limits, arguing it is incongruous for the EPA to eliminate the measure for the pollutants that are the subject of regulation under CAA section 112(d)(6), notwithstanding the fact that the fPM limit serves as a more easily measurable surrogate for these HAP metals. Additionally, some commenters stated that the inability to monitor HAP metals directly will significantly impair the EPA's ability to revise emission standards in the future.
After considering comments, the EPA determined to promulgate revised total and individual non-Hg HAP metals emission limits for coal-fired EGUs that are lowered proportionally to the revised fPM standard. Just as this rule requires owners or operators to demonstrate continuous compliance with fPM limits, owners or operators who choose to demonstrate compliance with these alternative limits will need to utilize approaches that can measure non-Hg HAP metals on a continuous basis—meaning that intermittent emissions testing using Reference Method 29 will not be a suitable approach. Owners or operators may petition the Administrator to utilize an alternative test method that relies on continuous monitoring (
In the 2023 Proposal, the EPA proposed to require that coal- and oil-fired EGUs utilize PM CEMS to demonstrate compliance with the fPM standard used as a surrogate for non-Hg HAP metals. The EPA proposed the requirement for PM CEMS based on its assessment of costs of PM CEMS versus stack testing, and the many other benefits of using PM CEMS including increased transparency and accelerated identification of anomalous emissions. In particular, the EPA noted the ability for PM CEMS to provide continuous feedback on control device and plant operations and to provide EGU owners and operators, regulatory authorities, and members of nearby communities with continuous assurance of compliance with emissions limits as an important benefit. Further, the EPA explained in the 2023 Proposal that PM CEMS are currently in use by approximately one-third of the coal-fired fleet, and that PM CEMS can provide low-level measurements of fPM from existing EGUs.
After considering comments and conducting further analysis,
From the EPA's review of PM CEMS, the Agency determined that a fPM standard of 0.010 lb/MMBtu with adjusted QA criteria—used to verify consistent correlation of CEMS data initially and over time—is the lowest fPM emission limit possible at this time with use of PM CEMS.
At proposal, the EPA estimated that the EUAC of PM CEMS was $60,100 (88 FR 24873). Based on comments the EPA received on the costs and capabilities of PM CEMS and additional analysis the EPA conducted, the EPA determined that the revised EUAC of PM CEMS is higher than estimated at proposal. The EPA now estimates that the EUAC of non-beta gauge PM CEMS is $72,325, which is 17 percent less than what was estimated for the 2012 MATS Final Rule. That amount is somewhat greater than the revised estimated costs of infrequent emission testing (generally quarterly)—the revised average estimated costs of such infrequent emissions testing using EPA Method 5I
In choosing a compliance demonstration requirement, the EPA considers multiple factors, including
As described in the
Use of PM CEMS can provide EGU owners or operators with an increased ability to detect and correct potential problems before degradation of emission control equipment, reduction or cessation of electricity production, or exceedances of regulatory emission standards. As mentioned in the
In deciding whether to finalize the proposal to use PM CEMS as the only compliance demonstration method for non-IGCC coal- and oil-fired EGUs, the Agency assessed the costs and benefits afforded by requiring use of only PM CEMS as compared to continuing the current compliance demonstration flexibilities (
The continuous monitoring of fPM required in this rule provides several benefits which are not quantified in this rule, including greater certainty, accuracy, transparency, and granularity in fPM emissions information than exists today. Continuous measurement of emissions accounts for changes to processes and fuels, fluctuations in load, operations of pollution controls, and equipment malfunctions. By measuring emissions across all operations, power plant operators and regulators can use the data to ensure controls are operating properly and to assess compliance with relevant standards. Because CEMS enable power plant operators to quickly identify and correct problems with pollution control devices, it is possible that continuous monitoring could lead to lower fPM emissions for periods of time between otherwise required intermittent testing, currently up to 3 years for some units.
To illustrate the potentially substantial differences in fPM emissions between intermittent and continuous monitoring, the EPA analyzed emissions at several EGUs for which both intermittent and continuous monitoring data are available. This analysis is provided in the 2024 Technical Memo, available in the rulemaking docket. For example, one 585-MW bituminous-fired EGU, with a cold-side ESP for PM control, has achieved LEE status for fPM and is currently required to demonstrate compliance with an emission standard of 0.015 lb/MMBtu using intermittent stack testing every 3 years. In the most recent LEE compliance report, submitted on February 25, 2021, the unit submitted the result of an intermittent stack test with an emission rate of 0.0017 lb/MMBtu. In the subsequent 36 months over which this unit is currently not subject to any further compliance testing, continuous monitoring demonstrates that the fPM emission rate increased substantially. At one point, the continuously monitored 30-day rolling average emissions rate
The potential reduction in fPM and non-Hg HAP metals emission resulting from the information provided by continuous monitoring coupled with corrective actions by plant operators could be sizeable over the total capacity that the EPA estimates would install PM CEMS under this rule (nearly 82 GW). Furthermore, the potential reduction in non-Hg HAP metal emissions would likely reduce exposures to people living in proximity to the coal-fired EGUs potentially impacted by the amended fPM standards. The EPA has found that populations living near coal-fired EGUs have a higher percentage of people living below two times the poverty level than the national average.
In addition to significant value of further pollution abatement, the CEMS data are transparent and accessible to regulators, stakeholders, and the public, fostering greater accountability. Transparency of EGU emissions as provided by PM CEMS, along with real-time assurance of compliance, has intrinsic value to the public and communities as well as instrumental value in holding sources accountable. This transparency is facilitated by a requirement for electronic reporting of fPM emissions data by the source to the EPA. This emissions data, once submitted, becomes accessible and downloadable—along with other operational and emissions data (
On balance, the Agency finds that the benefits of emissions transparency and the continuous information stream provided by PM CEMS coupled with the ability to quickly detect and correct problems outweigh the minor annual cost differential from quarterly stack testing. The EPA is finalizing, as proposed, the use of PM CEMS to demonstrate compliance with the fPM emission standards for coal- and oil-fired EGUs (excluding IGCC units and limited-use liquid-oil-fired EGUs).
More information on the proposed technology review can be found in the 2023 Technical Memo (Document ID No. EPA-HQ-OAR-2018-0794-5789), in the preamble for the 2023 Proposal (88 FR 24854), and the 2024 Technical Memo, available in the docket. For the reasons discussed above, pursuant to CAA section 112(d)(6), the EPA is finalizing, as proposed, the use of PM CEMS (with adjusted QA criteria as a result of review of comments) for the compliance demonstration of the fPM emission standard (as a surrogate for non-Hg HAP metal) for coal- and oil-fired EGUs, and the removal of the fPM and non-Hg HAP metals LEE provisions.
In the 2012 MATS Final Rule, the EPA finalized a Hg emission standard of 4.0E-06 lb/MMBtu (4.0 lb/TBtu) for a subcategory of existing lignite-fired EGUs.
As explained in the 2023 Proposal, Hg emissions from the power sector have declined since promulgation of the 2012 MATS Final Rule with the installation of Hg-specific and other control technologies and as more coal-fired EGUs have retired or reduced utilization. The EPA estimated that 2021 Hg emissions from coal-fired EGUs were 3 tons (a 90 percent decrease compared to pre-MATS levels). However, units burning lignite (or permitted to burn lignite) accounted for a disproportionate amount of the total Hg emissions in 2021. As shown in table 5 in the 2023 Proposal (88 FR 24876), 16 of the top 20 Hg-emitting EGUs in 2021 were lignite-fired EGUs. Overall, lignite-fired EGUs were responsible for almost 30 percent of all Hg emitted from coal-fired EGUs in 2021, while generating about 7 percent of total 2021 megawatt-hours. Lignite accounted for 8 percent of total U.S. coal production in 2021.
Prior to the 2023 Proposal, the EPA assembled information on developments in Hg emission rates and installed controls at lignite-fired EGUs from operational and emissions information that is provided routinely to the EPA for demonstration of compliance with MATS and from information provided to the EIA. In addition, the EPA's final decisions were informed by information that was submitted as part of a CAA section 114 information survey (2022 ICR). The EPA also revisited information that was used in establishing the emission standards in the 2012 Final MATS Rule and considered information that was submitted during the public comment period for the 2023 Proposal. From that information, the EPA determined, as explained in the 2023 Proposal, that there are available cost-effective control technologies and improved methods of operation that would allow existing lignite-fired EGUs to achieve a more stringent Hg emission standard. As such, the EPA proposed a revised Hg emission standard for existing EGUs firing lignite (
The outcome of the technology review for the Hg standard for existing lignite-fired EGUs has not changed since the 2023 Proposal. However, in response to comments, the EPA expanded its review to consider additional coal compositional data and the impact of sulfur trioxide (SO
The Agency received both supportive and critical comments on the proposed revision to the Hg emission standard for existing lignite-fired EGUs. Some commenters agreed with the EPA's decision to not propose revisions to the Hg emission standards for non-lignite-fired EGUs, while others disagreed. Significant comments are summarized below, and the Agency's responses are provided.
Some commenters recommended that the EPA revise the Hg limits to levels that are much more stringent than existing or proposed standards for both EGUs firing non-lignite coals and those firing lignite. They claimed that more stringent Hg emission standards are supported by developments in practices, processes, and control technologies. They pointed to a 2021 report by Andover Technology Partners, which details advances in control technologies that support more stringent Hg standards for all coal-fired EGUs.
In a related context, in
In the 2023 LEE demonstration compliance report, Twin Oaks unit 1 was described as a fluidized bed boiler that combusts lignite and is equipped with fluidized bed limestone (FBL) injection for SO
Similarly, Red Hills units 1 and 2, located in Choctaw County, Mississippi,
The performance of Twin Oaks units 1 and 2 and Red Hills Generating Facility units 1 and 2 clearly demonstrate the achievability of the proposed 1.2 lb/TBtu emission standard by lignite-fired EGUs. However, even if there were no lignite-fired EGUs that are meeting (or have demonstrated an ability to meet) the more stringent Hg emission standard, that would not mean that the more stringent emission standard was not achievable. Most Hg control technologies are “dial up” technologies—for example, sorbents or chemical additives have injection rates that can be “dialed” up or down to achieve a desired Hg emission rate. In response to the EPA's 2022 CAA section 114 information request, some responding owners/operators indicated that sorbent injection rates were set to maintain a Hg emission rate below the 4.0 lb/TBtu emission limit. In some instances, operators of EGUs reported that they were not injecting any Hg sorbent and were able to meet the less stringent emission standard. Most units that are permitted to meet a Hg emission standard of 4.0 lb/TBtu have no reason to “over control” since doing so by injecting more sorbent would increase their operating costs. So, it is unsurprising that many units that are permitted to fire lignite have reported Hg emission rates between 3.0 and 4.0 lb/TBtu.
While most lignite-fired EGUs have no reason to “over control” beyond their permitted emission standard of 4.0 lb/TBtu, Twin Oaks units 1 and 2 do have such motivation. As mentioned earlier, those sources have achieved LEE status for Hg (by demonstrating a Hg PTE of less than 29 lb/yr) and they must conduct annual performance tests to show that the units continue to qualify. According to calculations provided in their annual LEE certification, to maintain LEE status, the units could emit no more than 1.79 lb/TBtu and maintain a PTE of less than 29 lb/TBtu. So, the facilities are motivated to over control beyond 1.79 lb/TBtu (which, as described earlier in this preamble, they have consistently done).
The EPA ultimately concluded that it is appropriate to continue to base the subcategory definition, at least in part, on whether the EGUs were “designed to burn and, in fact, did burn low rank-virgin coal” (
While, in the 2012 MATS Final Rule, the EPA based the lignite-fired EGU subcategory on the design and operation of the EGUs, the EPA did not attribute the observed differences in Hg emissions to any unique characteristic(s) of lignite. As the EPA clearly noted in the 2023 Proposal, there are, in fact, characteristics of lignite that make the control of Hg more challenging. These include the low natural halogen content, the high alkalinity of the fly ash, the sulfur content, the relatively higher Hg content, and the relatively higher variability of Hg content. However, as the EPA has explained, these characteristics that make the control of Hg more challenging are also found in non-lignite fuels. Subbituminous coals also have low natural halogen content and high fly ash alkalinity. Eastern and central bituminous coals also have high sulfur content. Bituminous and anthracitic waste coals (coal refuse) have very high and variable Hg content. EGUs firing any of these non-lignite coals have been subject to—and have demonstrated compliance with—the more stringent Hg emission standard of 1.2 lb/TBtu.
The EPA has found it appropriate to reverse the previous policy because the decision to subcategorize “units designed for low rank virgin coal” in the 2012 MATS Final Rule was based a determination that there were differences in Hg emissions from lignite-fired EGUs as compared to EGUs firing non-lignite coals. That perceived difference was based on an observation that there were no lignite-fired EGUs in the top performing 12 percent of EGUs for which the Agency had Hg emissions data and on an assumption that the perceived difference in emissions was somehow related to the design and operation of the EGU. The EPA is unaware of any distinguishing features of EGUs that were designed to burn lignite that would impact the emissions of Hg. Further, the EPA does not now view the fact that there were no lignite-fired EGUs in the population of the best-performing 12 percent of EGUs for which the Agency had Hg emissions data to represent a “difference in emissions.”
But, on re-examination of the data, the EPA has concluded that the Hg emissions from the 2010 ICR for the lignite-fired EGUs were not clearly distinctive from the Hg emissions from EGUs firing non-lignite coal. In setting the emission standards for the 2012 MATS Final Rule, the EPA had available and useable Hg emissions data from nearly 400 coal-fired EGUs (out of the 1,091 total coal-fired EGUs operating at that time). However, the EPA only had available and useable data from nine lignite-fired EGUs with reported floor Hg emissions ranging from 1.0 to 10.9 lb/TBtu. But these were not outlier emission rates. EGUs firing bituminous coal reported Hg emissions as high as 30.0 lb/TBtu; and those firing subbituminous coal reported Hg emissions as high as 9.2 lb/TBtu.
In the 2023 Proposal, the EPA proposed to determine that there are developments in available control technologies and methods of operation that would allow lignite-fired EGUs to meet a more stringent Hg emission standard of 1.2 lb/TBtu—the same Hg emission standard that must be met by coal-fired EGUs firing non-lignite coals (
In this final rule, the EPA is also reaching a different conclusion from the 2020 Technology Review with respect to the Hg emission standard for lignite-fired EGUs. As discussed in section II.D. above, the 2020 Technology Review did not evaluate the current performance of emission reduction control equipment and strategies at existing lignite-fired EGUs. Nor did the 2020 Technology Review specifically address the discrepancy between Hg emitted from lignite-fired EGUs and non-lignite coal-fired EGUs or consider the improved performance of injected sorbents or chemical additives, or the development of SO
For analyses supporting the proposal, the EPA assumed “Hg Inlet” levels (
To support the development of the NESHAP for the Coal- and Oil-Fired EGU source category, the Agency conducted a 2-year data collection effort which was initiated in 1998 and completed in 2000 (1998 ICR). The ICR had three main components: (1) identifying all coal-fired units owned and operated by publicly owned utility companies, federal power agencies, rural electric cooperatives, and investor-owned utility generating companies; (2) obtaining accurate information on the amount of Hg contained in the as-fired coal used by each electric utility steam generating unit with a capacity greater than 25 MW electric, as well as accurate information on the total amount of coal burned by each such unit; and (3) obtaining data by coal sampling and stack testing at selected units to characterize Hg reductions from representative unit configurations.
The ICR captured the origin of the coal burned, and thus provided a pathway for linking emission properties to coal basins. The 1998-2000 ICR resulted in more than 40,000 data points indicating the coal type, sulfur content, Hg content, ash content, chlorine content, and other characteristics of coal burned at coal-fired utility boilers greater than 25 MW.
Annual fuel characteristics and delivery data reported on EIA form 923 also provide continual data points on coal heat content, sulfur content, and geographic origin, which are used as a check against characteristics initially identified through the 1998 ICR.
For this final rule, the EPA re-evaluated the 1998 ICR data.
The analysis showed that lignite mined in North Dakota had a mean Hg content of 9.7 lb/TBtu, a median Hg content of 8.5 lb/TBtu, and a Hg content range of 2.2 to 62.1 lb/TBtu. Other characteristics of North Dakota lignite include an average heating value (dry basis) of 10,573 Btu/lb, an average sulfur content of 1.19 percent, an average ash content of 13.5 percent, and an average chlorine content of 133 parts per million (ppm). In response to comments on the 2023 Proposal, for analyses supporting this final action, the EPA has revised the assumed Hg content of lignite mined in North Dakota to 9.7 lb/TBtu versus the 7.81 lb/TBtu assumed in the 2023 Proposal.
Similarly, the analysis showed that lignite mined in Texas had a mean and median Hg content of 25.0 lb/TBtu and 23.8 lb/TBtu, respectively, and a Hg content range from 0.7 to 92.0 lb/TBtu. Other characteristics include an average heating value (dry basis) of 9,487 Btu/lb, an average sulfur content of 1.42 percent, an average ash content of 24.6 percent, and an average chlorine content of 233 ppm. In response to comments on the 2023 Proposal, for analyses supporting this final action, the EPA has revised the assumed Hg content of lignite mined in Texas to 25.0 lb/TBtu versus the range of 14.65 to 14.88 lb/TBtu that was assumed for the 2023 Proposal.
Lignite mined in Mississippi had the highest mean Hg content at 34.3 lb/TBtu and the second highest median Hg emissions rate, 30.1 lb/TBtu. The Hg content ranged from 3.6 to 91.2 lb/TBtu. Lignite from Mississippi had an average heating value (dry basis) of 5,049 Btu/lb and a sulfur content of 0.58 percent. In response to comments submitted on the 2023 Proposal, for analyses supporting this final action, the EPA assumed a Hg content of 34.3 lb/TBtu for lignite mined in Mississippi versus the 12.44 lb/TBtu assumed for the proposal.
The EPA 1998 ICR dataset did not contain information on lignite from Mississippi, which resulted in a smaller number of available data points (227 in Mississippi lignite versus 864 for North Dakota lignite and 943 for Texas lignite). Table 5 of this document more fully presents the characteristics of lignite from North Dakota, Texas, and Mississippi.
Coals mined in Kentucky, Pennsylvania, and Wyoming were also analyzed for comparison. The types of coal (all non-lignite) included bituminous, bituminous-high sulfur, bituminous-low sulfur, subbituminous, anthracite, waste anthracite, waste bituminous, and petroleum coke. Bituminous coal accounted for 92 percent of the data points from Kentucky and 75 percent of the data points from Pennsylvania. Subbituminous coal accounted for 96 percent of the data points from Wyoming.
Bituminous coals from Kentucky had a mean Hg emissions content of 7.2 lb/TBtu (ranging from 0.7 to 47.4 lb/TBtu), an average heating value (dry basis) of 13,216 Btu/lb, an average sulfur content of 1.43 percent, an average ash content of 10.69 percent, and an average chlorine content of 1,086 ppm.
Bituminous coals from Pennsylvania had a mean Hg emissions rate of 14.5 lb/TBtu (ranging from 0.1 to 86.7 lb/TBtu), an average heating value (dry basis) of 13,635 Btu/lb, an average sulfur content of 1.88 percent, an average ash content of 10.56 percent, and an average chlorine content of 1,050 ppm.
Subbituminous coals from Wyoming had a mean Hg rate of 5.8 lb/TBtu, an average heating value (dry basis) of 12,008 Btu/lb, an average sulfur content of 0.44 percent, an average ash content of 7.19 percent, and an average chlorine content of 127 ppm. Table 6 of this document shows the characteristics of bituminous coal from Kentucky and Pennsylvania and subbituminous coal from Wyoming.
Several commenters claimed that one of the factors that contributes to the challenge of controlling Hg emissions from EGUs firing lignite is the variability of the Hg content in lignite. However, as can be seen in table 5 and table 6 of this document, all coal types examined by the EPA contain a variable content of Hg. The compliance demonstration requirements in the 2012 MATS Final Rule were designed to accommodate the variability of Hg in coal by requiring compliance with the respective Hg emission standards over a 30-operating-day rolling average period. When examining the Hg emissions for EGUs firing on the various coal types (including those firing Wyoming subbituminous coal, which has the lowest mean and median Hg content and the narrowest range of Hg content), daily emissions often exceed the applicable emission standard (sometimes considerably). However, averaging emissions over a rolling 30-operating-day period effectively dampens the impacts of fuel Hg content
A similar effect can be seen with the 2022 daily and 30-operating-day rolling average Hg emissions from Leland Olds unit 1, an EGU firing North Dakota lignite, shown in figure 2 of this document.
As with the EGU firing subbituminous coal, the daily Hg emissions very often exceed the emission limit (in this case 4.0 lb/TBtu); however, the 30-operating-day rolling average is consistently below the applicable emission limit (the 2022 annual average emission rate for Leland Olds unit 1 is 2.3 lb/TBtu).
In the 2023 Proposal, the EPA explained that during combustion of coal, the Hg contained in the coal is volatilized and converted to Hg
This partitioning into various species of Hg has considerable influence on selection of Hg control approaches. In tables 5 and 6 of this document, the chlorine content of bituminous coals mined in Kentucky and Pennsylvania averaged 1,086 ppm and 1,050 ppm, respectively. In comparison, the average chlorine content of Wyoming subbituminous coal is 127 ppm; while the chlorine contents of lignite mined in North Dakota and Texas are 133 ppm and 232 ppm, respectively. In general, because of the presence of higher amounts of halogen (especially chlorine) in bituminous coals, most of the Hg in the flue gas from bituminous coal-fired boilers is in the form of Hg
While some bituminous coal-fired EGUs require the use of additional Hg-specific control technology, such as injection of a sorbent or chemical additive, to supplement the control that these units already achieve from criteria pollutant control equipment, these Hg-specific control technologies are often required as part of the Hg emission reduction strategy at EGUs that are firing subbituminous coal or lignite. As described above, the Hg in the flue gas for EGUs firing subbituminous coal or lignite tends to be in the nonreactive Hg
Some commenters noted that the EPA did not account for the impacts of the higher sulfur content of lignite as compared to that of subbituminous coal, and that such higher sulfur content leads to the presence of additional SO
During combustion, most of the sulfur in coal is oxidized into SO
Coal fly ash is typically classified as acidic (pH less than 7.0), mildly alkaline (pH greater than 7.0 to 9.0), or strongly alkaline (pH greater than 9.0). The pH of the fly ash is usually determined by the calcium/sulfur ratio and the amount of halogen. The ash from bituminous coals tends to be acidic due to the relatively higher sulfur and halogen content and the glassy (nonreactive) nature of the calcium present in the ash. Conversely, the ash from subbituminous coals and lignite tends to be more alkaline due to the lower amounts of sulfur and halogen and a more alkaline and reactive (non-glassy) form of calcium—and, as noted by commenters—the presence of sodium compounds in the ash. The natural alkalinity of the subbituminous and lignite fly ash may effectively neutralize the limited free halogen in the flue gas and prevent oxidation of the Hg
Still, as commenters correctly noted, the presence of SO
The AECOM patented SBS Injection
Other vendors also offer technologies to mitigate the impact of SO
Babcock & Wilcox (B&W) offers dry sorbent injection systems that remove SO
Cabot Norit Activated Carbon is the largest producer of powdered activated carbon worldwide.
Similarly, ADA-ES offers FastPAC
From the 2022 CAA section 114 information survey, most lignite-fired EGUs utilized a control strategy that included sorbent injection coupled with chemical additives (usually halogens). In the beyond-the-floor analysis in the 2012 MATS Final Rule, we noted that the results from various demonstration projects suggested that greater than 90 percent Hg control can be achieved at lignite-fired units using brominated activated carbon sorbents at an injection rate of 2.0 lb/MMacf (
To determine
In addition to cost effectiveness, the EPA finds that the revised Hg emission standard for lignite-fired units appropriately considers the costs of controls, both total costs and as a fraction of total revenues, along with other factors that the EPA analyzed pursuant to its CAA section 112(d)(6) authority. Similar to the revised fPM emission standard (as a surrogate for non-Hg HAP metals) discussed in section IV. of this preamble, the EPA anticipates that the total costs of controls (which consists of small annual incremental operating costs) to comply with the revised Hg emission standard will be a small fraction of the total revenues for the impacted lignite-fired units. The EPA expects that sources will be able to meet the revised emission standard using existing controls (
Despite the known differences in the quality and composition of the various coal types, the EPA can find no compelling reasons why EGUs that are firing lignite cannot meet the same emission limit as EGUs that are firing other types of coal (
The EPA did not propose any changes to the organic HAP work practice standards, acid gas standards, continental liquid oil-fired EGU standards, non-continental liquid oil-fired EGUs, limited-use oil-fired EGU standards, or standards for IGCC EGUs. The EPA proposed to require that IGCC EGUs use PM CEMS for compliance demonstration with their fPM standard.
The EPA did note in the 2023 Proposal that there have been several recent temporary and localized increases in oil combustion at continental liquid oil-fired EGUs during periods of extreme weather conditions, such as the 2023 polar vortex in New England. As such, the EPA solicited comment on whether the current definition of the limited-use liquid oil-fired subcategory remains appropriate or if, given the increased reliance on oil-fired generation during periods of extreme weather, a period other than the current 24-month period or a different threshold would be more appropriate for the current definition. The EPA also solicited comment on the appropriateness of including new HAP standards for EGUs subject to the limited use liquid oil-fired subcategory, as well as on the means of demonstrating compliance with the new HAP standards.
The technology review for the organic HAP work practice standards, acid gas standards, and standards for oil-fired EGUs has not changed from the proposal.
The proposed technology review with respect to the use of PM CEMS for compliance demonstration by IGCC EGUs has changed due to comments received on the very low fPM emission rates and on technical challenges with certifying PM CEMS on IGCC EGUs. Therefore, the Agency is not finalizing the required use of PM CEMS for compliance demonstration with the fPM emission standard at IGCC EGUs.
In addition, the Agency reviewed the performance of PM CEMS for compliance demonstration at oil-fired EGUs. Given the higher emission rates and limits from this subcategory of EGUs, the Agency did not find any of the correlation issues with the use of PM CEMS with oil-fired EGUs similar to those that were discussed earlier for coal-fired EGUs. Moreover, the benefits of PM CEMS use that were described earlier (
The Agency did not receive comments that led to any changes in the outcome of the technology review for other NESHAP requirements as presented in the 2023 Proposal. The Agency did not propose any changes for the current requirements for organic HAP work practice standards, acid gas standards, or standards for oil-fired EGUs and therefore no changes are being finalized.
The EPA is aware of two existing IGCC facilities that meet the definition of an IGCC EGU. The Edwardsport Power Station, located in Knox County, Indiana, includes two IGCC EGUs that had 2021 average capacity factors of approximately 85 percent and 67 percent. These EGUs have LEE qualification for PM, with most current test results of 0.0007 and 0.0003 lb/MMBtu, respectively. The Polk Power Station, located in Polk County, Florida, had a 2021 average capacity factor of approximately 70 percent but burned only natural gas in 2021 (
The EPA is not finalizing the required use of PM CEMS for compliance demonstration for IGCC EGUs due to technical limitations expressed by commenters. For example, commenters noted that due to differences in stack design, the only possible installation space for a PM CEMS on an IGCC facility is on a stack with elevated grating, exposing the instrument to the elements, which would impact the sensitivity and accuracy of a PM CEMS. Additionally, there are no PM control devices at an IGCC unit available for de-tuning, which is necessary for establishing a correlation curve under PS-11. The EPA has considered these comments and agrees with these noted challenges to the use of PM CEMS at IGCC EGUs and, for those reasons, the EPA is not finalizing the proposed requirement for IGCCs to use PM CEMS for compliance demonstration, thus IGCCs will continue to demonstrate compliance via fPM emissions testing. As a result of comments we received on coal-fired run durations and our consideration on those comments, along with the low levels of reported emissions, the EPA determined that owners or operators of IGCCs will need to ensure each run has a minimum sample volume of 2 dscm or a minimum mass collection of 3 milligrams. In addition, IGCC EGUs will continue to be able to obtain and maintain PM LEE status.
In the 2023 Proposal, the EPA proposed to remove the alternative work practice standards,
As described in the 2023 Proposal, the Agency proposed to remove paragraph (2) of the definition of “startup” as part of our obligation to address the remand on this issue. In addition, as the majority of EGUs currently rely on work practice standards under paragraph (1) of the definition of “startup,” we believe this change is achievable by all EGUs and would result in little to no additional expenditures, especially since the additional reporting and recordkeeping requirements associated with use of paragraph (2) would no longer apply. Lastly, the time period for engaging PM or non-Hg HAP metal controls after non-clean fuel use, as well as for full operation of PM or non-Hg HAP metal controls, is expected to be reduced when transitioning to paragraph (1), therefore increasing the duration in which pollution controls are employed and lowering emissions.
The EPA is finalizing the amendment to remove paragraph (2) from the definition of “startup” as proposed.
We received both supportive and adverse comments on the proposed removal of paragraph (2) of the definition of “startup.” The summarized comments and the EPA's responses are provided in the
Commenters stated that several facilities are currently required to use the 4-hour startup definition per federal consent decrees or state agreements. They said such a scenario provides clear justification for a limited exemption, as MATS compliance should not result in an EGU violating its consent decree. Commenters noted other scenarios where state permits have special conditions with exemptions from emission limits during ramp-up or ramp-down periods. They said many facilities alleviate high initial emissions by using alternate fuels to begin the combustion process, which has been demonstrated as a Best Management Practice and to lower emissions. Commenters noted that the permit modification process, let alone any physical or operational modifications to the facility, could take significantly longer than the 180-day compliance deadline, depending on public comments, meetings, or contested hearing requests made during the permit process.
Commenters stated the startup definition paragraph (2) has seen limited use due to the additional reporting requirements that the EPA imposed on sources that chose to use the definition, which they believe are unnecessary and should be removed from the rule. The commenters said that the analysis the EPA conducted during the startup/shutdown reconsideration in response to
Commenters stated that the EPA should consider allowing the use of diluent cap values from 40 CFR part 75. As these are limited under MATS, commenters noted that startup and shutdown variations are more pronounced than if diluent caps were to be allowed. They said that with a lower emissions limitation, the diluent cap would mathematically correct for calculation inaccuracies inherent in emission rate calculation immediately following startup. Commenters stated that relative accuracy test audits (RATA) must be conducted at greater than 50 percent load under 40 CFR part 60 and at normal operating load under 40 CFR part 75. They said that it is not reasonable to require facilities to certify their CEMS, including PM CEMS, at greater than 50 percent capacity and use it for compliance at less than 50 percent capacity. Commenters stated that startups have constantly changing flow and temperatures that do not allow compliance tests to be conducted during these periods.
Regarding consent decrees or state agreements for requirements other than those contained in this rule, while the rule lacks the ability to revise such agreements, the EPA recommends that EGU owners or operators contact the other parties to see what, if any, revisions could be made. Nonetheless, the Agency expects EGU source owners or operators to comply with the revised startup definition by the date specified in this rule. Given the concern expressed by the commenters for some sources, the Agency expects such source owners or operators to begin negotiations with other parties for other non-rule obligations to begin early enough to be completed prior to the compliance date specified in this rule.
The Agency disagrees with the commenters' suggestions that startup definition paragraph (2)'s reporting requirements were too strict to be used. That suggestion is not consistent with the number of commenters who claimed to need to use paragraph (2) of the startup definition, even though only 2.5 percent of EGUs currently rely on this startup definition. The Agency's experience is that almost all EGU source owners or operators have been able to adjust their unit operation such that adherence to startup definition paragraph (1) reduced, if not eliminated, the concern by some about use of startup definition paragraph (1). As mentioned earlier in this document, the better performers in the coal-fired EGU source category no longer need to have, or use, paragraph (2) of the startup definition after gaining experience with using paragraph (1).
The Agency disagrees with the commenter's suggestion that the diluent cap values allowed for use by 40 CFR part 75 be included in the rule, because diluent cap values are already allowed for use during startup and shutdown periods per 40 CFR 63.10007(f)(1). Note that while emission values are to be recorded and reported during startup and shutdown periods, they are not to be used in compliance calculations per 40 CFR 63.10020(e). In addition to diluent cap use during startup and shutdown periods, section 6.2.2.3 of appendix C to 40 CFR part 63, subpart UUUUU allows diluent cap use for PM CEMS during any periods when oxygen or CO
The EPA is finalizing the removal of paragraph (2) of the definition of “startup” in 40 CFR 63.10042 consistent with reasons described in the 2023 Proposal. As the majority of EGUs are already relying on the work practice standards in paragraph (1) of the startup definition, the EPA finds that such a change is achievable within the 180-day compliance timeline by all EGUs at little to no additional expenditure since the additional reporting and recordkeeping provisions under paragraph (2) were more expensive than paragraph (1). Additionally, the time period for engaging pollution controls for PM or non-Hg HAP metals is expected to be reduced when transitioning to paragraph (1), therefore increasing the duration in which pollution controls are employed and lowering emissions.
In
The EPA has also taken into account the numerous HAP-related benefits of the final rule in deciding to take this action. These benefits include not only the reduced exposure to Hg and non-Hg HAP metals, but also the additional transparency provided by PM CEMS for communities that live near sources of HAP, and the assurance PM CEMS will provide that the standards are being met on a continuous basis. As discussed in section II.B.2., and section IX.E. many of these important benefits are not able to be monetized. Although this rule will result in the reduction of HAP, including Hg, lead, arsenic, chromium, nickel, and cadmium, data limitations prevent the EPA from assigning monetary value to those reductions. In addition, there are several benefits associated with the use of PM CEMS which are not quantified in this rule.
While the Court's examination of CAA section 112(n)(a)(1) in
The following analyses of costs and benefits, and environmental, economic, and environmental justice impacts are presented for the purpose of providing the public with an understanding of the potential consequences of this final action. The EPA notes that analysis of such impacts is distinct from the determinations finalized in this action under CAA section 112, which are based on the statutory factors the EPA discussed in section II.A. and sections IV. through VII.
The EPA's obligation to conduct an analysis of the potential costs and benefits under Executive Order 12866, discussed in this section and section X.A., is distinct from its obligation in setting standards under CAA section 112 to take costs into account. As explained above, the EPA considered costs in multiple ways in choosing appropriate standards consistent with the requirements of CAA section 112. The benefit-cost analysis is performed to comply with Executive Order 12866. The EPA, however, did not rely on that analysis in choosing the appropriate standard here, consistent with the Agency's longstanding interpretation of the statute. As discussed at length in section II.B.2. above and in the EPA's 2023 final rulemaking finalizing the appropriate and necessary finding (88 FR 13956), historically there have been significant challenges in monetizing the benefits of HAP reduction. Important categories of benefits from reducing HAP cannot be monetized, making benefit-cost analysis ill-suited to the EPA's decision making on regulating HAP emissions under CAA section 112. Further, there are also unquantified emission reductions anticipated from installing PM CEMS, as discussed in section IX.E. For this reason, combined with Congress's recognition of the particular dangers posed by HAP and consequent direction to the EPA to reduce emissions of these pollutants to the “maximum degree,” the EPA does not at this time believe it is appropriate to rely on the results of the monetized benefit-cost analysis when setting the standards.
As noted in section X.A. below, the EPA projects that the net monetized benefits of this rule are negative. Many of the benefits of this rule discussed at length in this section and elsewhere in this record, however, were not monetized. This rule will result in the reduction of HAP, including Hg, lead, arsenic, chromium, nickel, and cadmium,
The EPA estimates that there are 314 coal-fired EGUs
The EPA estimated emission reductions under the final rule for the years 2028, 2030, and 2035 based upon IPM projections. The quantified emissions estimates were developed with the EPA's Power Sector Modeling Platform 2023 using IPM, a state-of-the-art, peer-reviewed dynamic, deterministic linear programming model of the contiguous U.S. electric power sector. IPM provides forecasts of least-cost capacity expansion, electricity dispatch, and emission control strategies while meeting electricity demand and various environmental, transmission, dispatch, and reliability constraints. IPM's least-cost dispatch
The quantified emission reduction estimates presented in the RIA include reductions in pollutants directly covered by this rule, such as Hg, and changes in other pollutants emitted from the power sector as a result of the compliance actions projected under this final rule. Table 8 of this document presents the projected emissions under the final rule. Note that, unlike the cost-effectiveness analysis presented in sections IV. and V. of this preamble, the projections presented in table 8 are incremental to a projected baseline which reflects future changes in the composition of the operational coal-fired EGU fleet that are projected to occur by 2035 as a result of factors affecting the power sector, such as the IRA, promulgated regulatory actions, or changes in economic conditions.
In addition to the projected emissions impacts presented in table 8, we also estimate that the final rule will reduce at least 7 tons of non-Hg HAP metals in 2028, 5 tons of non-Hg HAP metals in 2030, and 4 tons of non-Hg HAP metals in 2035. These reductions are composed of reductions in emissions of antimony, arsenic, beryllium, cadmium,
Importantly, the continuous monitoring of fPM required in this rule will likely induce additional emissions reductions that we are unable to quantify. Continuous measurements of emissions accounts for changes to processes and fuels, fluctuations in load, operations of pollution controls, and equipment malfunctions. By measuring emissions across all operations, power plant operators and regulators can use the data to ensure controls are operating properly and to assess compliance with relevant standards. Because CEMS enable power plant operators to quickly identify and correct problems with pollution control devices, it is possible that fPM emissions could be lower than they otherwise would have been for up to 3 months—or up to 3 years if testing less frequently under the LEE program—at a time. This potential reduction in fPM and non-Hg HAP metals emission resulting from the information provided by continuous monitoring coupled with corrective actions by plant operators could be sizeable over the existing coal-fired fleet and is not quantified in this rulemaking.
Section 3 of the RIA presents a detailed discussion of the emissions projections under the regulatory options as described in the RIA. Section 3 also describes the compliance actions that are projected to produce the emission reductions in table 8 of this preamble. Please see section IX.E. of this preamble and section 4 of the RIA for detailed discussions of the projected health, welfare, and climate benefits of these emission reductions.
The power industry's compliance costs are represented in this analysis as the change in electric power generation costs between the baseline and policy scenarios. In other words, these costs are an estimate of the increased power industry expenditures required to implement the final requirements of this rule. The compliance cost estimates were mainly developed using the EPA's Power Sector Modeling Platform 2023 using IPM. The incremental costs of the final rule's PM CEMS requirement were estimated outside of IPM and added to the IPM-based cost estimate presented here and in section 3 of the RIA.
We estimate the present value (PV) of the projected compliance costs over the 2028 to 2037 period, as well as estimate the equivalent annual value (EAV) of the flow of the compliance costs over this period. All dollars are in 2019 dollars. We estimate the PV and EAV using 2, 3, and 7 percent discount rates.
The PV of the compliance costs for the final rule, discounted at the 2 percent rate, is estimated to be about $860 million, with an EAV of about $96 million. At the 3 percent discount rate, the PV of the compliance costs of the final rule is estimated to be about $790 million, with an EAV of about $92 million. At the 7 percent discount rate, the PV of the compliance costs of the rule is estimated to be about $560 million, with an EAV of about $80 million.
We note that IPM provides the EPA's best estimate of the costs of the rules to the electricity sector and related energy sectors (
The Agency estimates that this rule will require additional fPM and/or Hg removal at less than 15 GW of operable capacity in 2028, which is about 14 percent of the total coal-fired EGU capacity projected to operate in that year. The units requiring additional fPM and/or Hg removal are projected to generate less than 2 percent of total generation in 2028. Moreover, the EPA does not project that any EGUs will retire in response to the standards promulgated in this final rule.
Consistent with the small share of EGUs required to reduce fPM and/or Hg emissions rates, this final action has limited energy market implications. There are limited impacts on energy prices projected to result from this final rule. On a national average basis,
The short-term estimates for employment needed to design, construct, and install the control equipment in the 3-year period before the compliance date are also provided using an approach that estimates employment impacts for the environmental protection sector based on projected changes from IPM on the number and scale of pollution controls and labor intensities in relevant sectors. Finally, some of the other types of employment impacts that will be ongoing are estimated using IPM outputs and labor intensities, as reported in section 5 of the RIA.
The RIA for this action analyzes the benefits associated with the projected emission reductions under this rule. This final rule is projected to reduce emissions of Hg and non-Hg HAP metals, as well as PM
Hg is a persistent, bioaccumulative toxic metal emitted from power plants that exists in three forms: gaseous elemental Hg, inorganic Hg compounds, and organic Hg compounds (
All forms of Hg are toxic, and each form exhibits different health effects. Acute (short-term) exposure to high levels of elemental Hg vapors results in central nervous system (CNS) effects such as tremors, mood changes, and slowed sensory and motor nerve function. Chronic (long-term) exposure to elemental Hg in humans also affects the CNS, with effects such as erethism (increased excitability), irritability, excessive shyness, and tremors. The major effect from chronic ingestion or inhalation of low levels of inorganic Hg is kidney damage.
Methylmercury is the most common organic Hg compound in the environment. Acute exposure of humans to very high levels of methylmercury results in profound CNS effects such as blindness and spastic quadriparesis. Chronic exposure to methylmercury, most commonly by consumption of fish from Hg contaminated waters, also affects the CNS with symptoms such as paresthesia (a sensation of pricking on the skin), blurred vision, malaise, speech difficulties, and constriction of the visual field. Ingestion of methylmercury can lead to significant developmental effects, such as IQ loss measured by performance on neurobehavioral tests, particularly on tests of attention, fine motor-function, language, and visual spatial ability. In addition, evidence in humans and animals suggests that methylmercury can have adverse effects on both the developing and the adult cardiovascular system, including fatal and non-fatal ischemic heart disease (IHD). Further, nephrotoxicity, immunotoxicity, reproductive effects (impaired fertility), and developmental effects have been observed with methylmercury exposure in animal studies.
The projected emissions reductions of Hg are expected to lower deposition of Hg into ecosystems and reduce U.S. EGU attributable bioaccumulation of methylmercury in wildlife, particularly for areas closer to the effected units subject to near-field deposition. Subsistence fishing is associated with vulnerable populations. Methylmercury exposure to subsistence fishers from lignite-fired units is below the current RfD for methylmercury neurodevelopmental toxicity. The EPA considers exposures at or below the RfD for methylmercury unlikely to be associated with appreciable risk of deleterious effects across the population. However, the RfD for methylmercury does not represent an exposure level corresponding to zero risk; moreover, the RfD does not represent a bright line above which individuals are at risk of adverse effects. Reductions in Hg emissions from lignite-fired facilities should further reduce exposure to methylmercury for subsistence fisher sub-populations located in the vicinity of these facilities, which are all located in North Dakota, Texas, and Mississippi.
In addition, U.S. EGUs are a major source of HAP metals emissions including selenium, arsenic, chromium, nickel, and cobalt, cadmium, beryllium, lead, and manganese. Some HAP metals emitted by U.S. EGUs are known to be persistent and bioaccumulative and others have the potential to cause cancer. Exposure to these HAP metals, depending on exposure duration and levels of exposures, is associated with a variety of adverse health effects. The emissions reductions projected under this final rule are expected to reduce human exposure to non-Hg HAP metals, including carcinogens.
Furthermore, there is the potential for reductions in Hg and non-Hg HAP metal emissions to enhance ecosystem services and improve ecological outcomes. The reductions will potentially lead to positive economic impacts although it is difficult to estimate these benefits and, consequently, they have not been included in the set of quantified benefits.
As explained in section IX.B., the continuous monitoring of fPM required in this rule may induce further reductions of fPM and non-Hg HAP metals than we project in the RIA for
The rule is also expected to reduce emissions of direct PM
The health effect endpoints, effect estimates, benefit unit values, and how they were selected, are described in the technical support document titled
Because of projected changes in dispatch under the final requirements, the rule is also projected to impact CO
Section 4.4 within the RIA for this final rulemaking provides an overview of the methodological updates incorporated into the SC-CO
The SC-CO
Table 10 of this document presents the estimated PV and EAV of the projected health and climate benefits across the regulatory options examined in the RIA in 2019 dollars discounted to 2023.
This final rule is projected to reduce PM
At a 3 percent discount rate, this final rule is expected to generate projected PV of monetized health benefits of $260 million, with an EAV of about $31 million discounted at 3 percent. Climate benefits remain discounted at 2 percent in this benefits analysis and are estimated to be about $130 million, with an EAV of about $14 million using the SC-CO
At a 7 percent discount rate, this final rule is expected to generate projected PV of monetized health benefits of $180 million, with an EAV of about $25 million discounted at 7 percent. Climate benefits remain discounted at 2 percent in this benefits analysis and are estimated to be about $130 million, with an EAV of about $14 million using the SC-CO
The benefits from reducing Hg and non-Hg HAP metals and from unquantified improvements in water quality were not monetized and are therefore not directly reflected in the monetized benefit-cost estimates associated with this rulemaking. Potential benefits from the increased transparency and accelerated identification of anomalous emission anticipated from requiring PM CEMS were also not monetized in this analysis and are therefore also not directly reflected in the monetized benefit-cost comparisons. We nonetheless consider these impacts in our evaluation of the net benefits of the rule and find that, if we were able to monetize these beneficial impacts, the final rule would have greater net benefits than shown in table 11 of this document.
For purposes of analyzing regulatory impacts, the EPA relies upon its June 2016 “Technical Guidance for Assessing Environmental Justice in Regulatory Analysis,” which provides recommendations that encourage analysts to conduct the highest quality analysis feasible, recognizing that data limitations, time, resource constraints, and analytical challenges will vary by media and circumstance. The Technical Guidance states that a regulatory action may involve potential EJ concerns if it could: (1) create new disproportionate impacts on communities with EJ concerns; (2) exacerbate existing disproportionate impacts on communities with EJ concerns; or (3) present opportunities to address existing disproportionate impacts on communities with EJ concerns through this action under development.
The EPA's EJ technical guidance states that “[t]he analysis of potential EJ concerns for regulatory actions should address three questions: (A) Are there potential EJ concerns associated with environmental stressors affected by the regulatory action for population groups of concern in the baseline? (B) Are there potential EJ concerns associated with environmental stressors affected by the regulatory action for population groups of concern for the regulatory option(s) under consideration? (C) For the regulatory option(s) under consideration, are potential EJ concerns created or mitigated compared to the baseline?”
The environmental justice analysis is presented for the purpose of providing the public with as full as possible an understanding of the potential impacts of this final action. The EPA notes that analysis of such impacts is distinct from the determinations finalized in this action under CAA section 112, which are based solely on the statutory factors the EPA is required to consider under that section. To address these questions in the EPA's first quantitative EJ analysis in the context of a MATS rule, the EPA developed a unique analytical approach that considers the purpose and specifics of this rulemaking, as well as the nature of known and potential disproportionate and adverse exposures and impacts. However, due to data limitations, it is possible that our analysis failed to identify disparities that may exist, such as potential EJ characteristics (
For this rule, we employ two types of analysis to respond to the previous three questions: proximity analyses and exposure analyses. Both types of analysis can inform whether there are potential EJ concerns in the baseline (question 1).
Exposure analysis results are provided in two formats: aggregated and distributional. The aggregated results provide an overview of potential ozone exposure differences across populations at the national- and state-levels, while the distributional results show detailed information about ozone concentration changes experienced by everyone within each population.
In section 6 of the RIA, we utilize the two types of analysis to address the three EJ questions by quantitatively evaluating: (1) the proximity of affected facilities to various local populations with potential EJ concerns (section 6.4); and (2) the potential for disproportionate ozone and PM
Baseline demographic proximity analyses can be relevant for identifying populations that may be exposed to local environmental stressors, such as local NO
As HAP exposure results generated as part of the 2020 Residual Risk Review were below both the presumptive acceptable cancer risk threshold and noncancer health benchmarks and this regulation should further reduce exposure to HAP, there are no “disproportionate and adverse effects” of potential EJ concern. Therefore, we did not perform a quantitative EJ assessment of HAP risk. However, the potential reduction in non-Hg HAP metal emissions would likely reduce exposures to people living nearby coal plants potentially impacted by the amended fPM standards.
This rule is also expected to reduce emissions of direct PM
The baseline analysis of ozone and PM
Question 3 asks whether potential EJ concerns will be created or mitigated as compared to the baseline. Due to the very small magnitude of differences across demographic population post-policy ozone and PM
Additional information about these statutes and Executive Orders can be found at
This action is a “significant regulatory action,” as defined under section 3(f)(1) of Executive Order 12866, as amended by Executive Order 14094. Accordingly, the EPA submitted this action to the Office of Management and Budget (OMB) for Executive Order 12866 review. Documentation of any changes made in response to the Executive Order 12866 review is available in the docket. The EPA prepared an analysis of the potential costs and benefits associated with this action. This analysis,
Table 11 of this document presents the estimated PV and EAV of the monetizable projected health benefits, climate benefits, compliance costs, and net benefits of the final rule in 2019 dollars discounted to 2023. The estimated monetized net benefits are the projected monetized benefits minus the projected monetized costs of the final rule.
Under Executive Order 12866, the EPA is directed to consider all of the costs and benefits of its actions, not just those that stem from the regulated pollutant. Accordingly, the projected monetized benefits of the final rule include health benefits associated with projected reductions in PM
As shown in table 11 of this document, this rule is projected to reduce PM
At a 3 percent discount rate, this rule is expected to generate projected PV of monetized health benefits of $260 million, with an EAV of about $31 million. Climate benefits remain discounted at 2 percent in this net benefits analysis. Thus, this final rule would generate a PV of monetized benefits of $390 million, with an EAV of $45 million discounted at a 3 percent rate. The PV of the projected compliance costs are $790 million, with an EAV of $92 million discounted at 3 percent. Combining the projected benefits with the projected compliance costs yields a net benefit PV estimate of −$400 million and an EAV of −$47 million.
At a 7 percent discount rate, this rule is expected to generate projected PV of monetized health benefits of $160 million, with an EAV of about $23 million. Climate benefits remain discounted at 2 percent in this net benefits analysis. Thus, this final rule would generate a PV of monetized benefits of $300 million, with an EAV of $39 million discounted at a 3 percent rate. The PV of the projected compliance costs are $560 million, with an EAV of $80 million discounted at 7 percent. Combining the projected benefits with the projected compliance costs yields a net benefit PV estimate of −$260 million and an EAV of −$41 million.
The potential benefits from reducing Hg and non-Hg HAP metals and potential improvements in water quality and availability were not monetized and are therefore not directly reflected in the monetized benefit-cost estimates associated with this final rule. Potential benefits from the increased transparency and accelerated identification of anomalous emission anticipated from requiring CEMS were also not monetized in this analysis and are therefore also not directly reflected in the monetized benefit-cost comparisons. We nonetheless consider these impacts in our evaluation of the net benefits of the rule and find, if we were able to quantify and monetize these beneficial impacts, the final rule would have greater net benefits than shown in table 11 of this preamble.
The information collection activities in this rule have been submitted for approval to the OMB under the PRA. The ICR document that the EPA prepared has been assigned EPA ICR number 2137-12. You can find a copy of the ICR in the docket for this rule, and it is briefly summarized here. The information collection requirements are not enforceable until OMB approves them. OMB has previously approved the information collection activities contained in the existing regulations and has assigned OMB control number 2060-0567.
The information collection activities in this rule include continuous emission monitoring, performance testing, notifications and periodic reports, recording information, monitoring and the maintenance of records. The information generated by these activities will be used by the EPA to ensure that affected facilities comply with the emission limits and other requirements. Records and reports are necessary to enable delegated authorities to identify affected facilities that may not be in compliance with the requirements. Based on reported information, delegated authorities will decide which units and what records or processes should be inspected. The recordkeeping requirements require only the specific information needed to determine compliance. These recordkeeping and reporting requirements are specifically authorized by CAA section 114 (42 U.S.C. 7414). The burden and cost estimates below represent the total burden and cost for the information collection requirements of the NESHAP for Coal- and Oil-Fired EGUs, not just the burden associated with the amendments in this final rule. The incremental cost associated with these amendments is $2.4 million per year.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for the EPA's regulations in 40 CFR are listed in 40 CFR part 9. When OMB approves this ICR, the Agency will announce that approval in the
The EPA certifies that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In the 2028 analysis year, the EPA identified 24 potentially affected small entities operating 45 units at 26 facilities, and of these 24, only one small entity may experience compliance cost increases greater than one percent of revenue under the final rule. Details of this analysis are presented in section 5 of the RIA, which is in the public docket.
This action does not contain an unfunded mandate of $100 million or more (adjusted for inflation) as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The costs involved in this action are estimated not to exceed $100 million or more (adjusted for inflation) in any one year.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.
This action does not have tribal implications as specified in Executive
Although this action does not have tribal implications as specified in Executive Order 13175, the EPA consulted with tribal officials during the development of this action. On September 1, 2022, the EPA sent a letter to all federally recognized Indian tribes initiating consultation to obtain input on this action. The EPA did not receive any requests for consultation from Indian tribes. The EPA also participated in the September 2022 National Tribal Air Association EPA Air Policy Update Call to solicit input on this action.
Executive Order 13045 directs Federal agencies to include an evaluation of the health and safety effects of the planned regulation on children in federal health and safety standards and explain why the regulation is preferable to potentially effective and reasonably feasible alternatives. This action is subject to Executive Order 13045 because it is a significant regulatory action under section 3(f)(1) of Executive Order 12866. Accordingly, we have evaluated the potential for environmental health or safety effects from exposure to HAP, ozone, and PM
This action is not a “significant energy action” because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. For 2028, the compliance year for the standards, the EPA does not project a significant change in retail electricity prices on average across the contiguous U.S., coal-fired electricity generation, natural gas-fired electricity generation, or utility power sector delivered natural gas prices. Details of the projected energy effects are presented in section 3 of the RIA, which is in the public docket.
The following standards appear in the amendatory text of this document and were previously approved for the locations in which they appear: ANSI/ASME PTC 19.10-1981, ASTM D6348-03(R2010), and ASTM D6784-16.
The EPA believes that the human health or environmental conditions that exist prior to this action result in or have the potential to result in disproportionate and adverse human health or environmental effects on communities with environmental justice concerns. For this rule, we employ the proximity demographic analysis and the PM
The EPA believes that this action is not likely to change existing disproportionate and adverse effects on communities with environmental justice concerns. Only the exposure analyses, which are based on future air quality modeling, can inform whether there will be potential EJ concerns after implementation of the final rule, and whether potential EJ concerns will be created or mitigated. We infer that baseline disparities in ozone and PM
The information supporting this Executive Order review is contained in section IX.F. of this preamble and in section 6, Environmental Justice Impacts of the RIA, which is in the public docket (EPA-HQ-OAR-2018-0794).
This action is subject to the CRA, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action meets the criteria set forth in 5 U.S.C. 804(2).
Environmental protection, Administrative practice and procedures, Air pollution control, Hazardous
For the reasons set forth in the preamble, 40 CFR part 63 is amended as follows:
42 U.S.C. 7401
(a) * * *
(2) Before July 6, 2027, you must meet each operating limit in Table 4 to this subpart that applies to your EGU.
The revisions and additions read as follows:
(c) * * *
(1) * * *
(i) For a coal-fired or solid oil-derived fuel-fired EGU or IGCC EGU, you may conduct initial performance testing in accordance with § 63.10005(h), to determine whether the EGU qualifies as a low emitting EGU (LEE) for one or more applicable emission limits, except as otherwise provided in paragraphs (c)(1)(i)(A) through (C) of this section:
(A) Except as provided in paragraph (c)(1)(i)(D) of this section, you may not pursue the LEE option if your coal-fired, IGCC, or solid oil-derived fuel-fired EGU is equipped with a main stack and a bypass stack or bypass duct configuration that allows the effluent to bypass any pollutant control device.
(C) On or after July 6, 2027, you may not pursue the LEE option for filterable PM, total non-Hg HAP metals, or individual non-Hg HAP metals for coal-fired and solid oil-derived fuel-fired EGUs.
(iv)(A) Before July 6, 2027, if your coal-fired or solid oil derived fuel-fired EGU does not qualify as a LEE for total non-mercury HAP metals, individual non-mercury HAP metals, or filterable particulate matter (PM), you must demonstrate compliance through an initial performance test and you must monitor continuous performance through either use of a particulate matter continuous parametric monitoring system (PM CPMS), a PM CEMS, or, for an existing EGU, compliance performance testing repeated quarterly.
(B) On and after July 6, 2027, you may not pursue or continue to use the LEE option for your coal-fired or solid oil derived fuel-fired EGU for filterable PM or for non-mercury HAP metals. You must demonstrate compliance through an initial performance test, and you must monitor continuous performance with the applicable filterable PM emissions limit through the use of a PM CEMS or HAP metals CMS.
(C) If your IGCC EGU does not qualify as a LEE for total non-mercury HAP metals, individual non-mercury HAP metals, or filterable PM, you must demonstrate compliance through an initial performance test and you must monitor continuous performance through either use of a PM CPMS, a PM CEMS, or, for an existing EGU, compliance performance testing repeated quarterly.
(2) * * *
(i) For an existing liquid oil-fired unit, you may conduct the performance testing in accordance with § 63.10005(h), to determine whether the unit qualifies as a LEE for one or more pollutants. For a qualifying LEE for Hg emissions limits, you must conduct a 30-day performance test using Method 30B at least once every 12 calendar months to demonstrate continued LEE status. For a qualifying LEE of any other applicable emissions limits, you must conduct a performance test at least once every 36 calendar months to demonstrate continued LEE status. On or after July 6, 2027, you may not pursue the LEE option for filterable PM, total non-Hg HAP metals, or individual non-Hg HAP metals.
(ii) Before July 6, 2027, if your liquid oil-fired unit does not qualify as a LEE for total HAP metals (including mercury), individual metals (including mercury), or filterable PM you must demonstrate compliance through an initial performance test and you must monitor continuous performance through either use of a PM CPMS, a PM CEMS, or, for an existing EGU, performance testing conducted quarterly. On and after July 6, 2027, you may not pursue or continue to use the LEE option for your liquid oil-fired EGU for filterable PM or for non-mercury HAP metals. You must demonstrate compliance through an initial performance test, and you must monitor continuous performance with the applicable filterable PM emissions limit through the use of a PM CEMS or HAP metals CMS.
(d) * * *
(5) * * *
(i) Installation of the CMS or sorbent trap monitoring system sampling probe or other interface at a measurement location relative to each affected process unit such that the measurement is representative of control of the exhaust emissions (
(m) Should you choose to rely on paragraph (2) of the definition of “startup” in § 63.10042 for your EGU (only allowed before January 2, 2025), on or before the date your EGU is subject to this subpart, you must install, verify, operate, maintain, and quality assure each monitoring system necessary for demonstrating compliance with the work practice standards for PM or non-mercury HAP metals controls during startup periods and shutdown periods required to comply with § 63.10020(e). On and after January 2, 2025 you will no longer be able to choose paragraph (2) of the “startup” definition in § 63.10042.
(a) * * *
(1) To demonstrate initial compliance with an applicable emissions limit in Table 1 or 2 to this subpart using stack testing, the initial performance test generally consists of three runs at specified process operating conditions using approved methods. Before July 6, 2027, if you are required to establish operating limits (see paragraph (d) of this section and Table 4 to this subpart), you must collect all applicable parametric data during the performance test period. On and after July 6, 2027, the requirements in Table 4 are not applicable, with the exception of IGCC units. Also, if you choose to comply with an electrical output-based emission limit, you must collect hourly electrical load data during the test period.
(b)
(c)
(d) * * *
(2) For affected coal-fired or solid oil-derived fuel-fired EGUs that demonstrate compliance with the applicable emission limits for total non-mercury HAP metals, individual non-mercury HAP metals, total HAP metals, individual HAP metals, or filterable PM listed in Table 1 or 2 to this subpart using initial performance testing and continuous monitoring with PM CPMS (with the exception of IGCC units, the use of PM CPMS is only allowed before July 6, 2027):
(h)
(1) An EGU may qualify for low emitting EGU (LEE) status for Hg, HCl, HF, filterable PM, total non-Hg HAP metals, or individual non-Hg HAP metals (or total HAP metals or individual HAP metals, for liquid oil-fired EGUs) if you collect performance test data that meet the requirements of this paragraph (h) with the exception that on or after July 6, 2027, you may not pursue the LEE option for filterable PM, total non-Hg HAP metals, or individual non-Hg HAP metals for any existing, new or reconstructed EGUs (this does not apply to IGCC units), and if those data demonstrate:
(a) For liquid oil-fired, solid oil-derived fuel-fired and coal-fired EGUs and IGCC units using PM CPMS before July 6, 2027 to monitor continuous performance with an applicable emission limit as provided for under § 63.10000(c), you must conduct all applicable performance tests according to Table 5 to this subpart and § 63.10007 at least every year. On or after July 6, 2027 you may not use PM CPMS to demonstrate compliance for liquid oil-fired, solid oil-derived fuel-fired and coal-fired EGUs. This prohibition against the use of PM CPMS does not apply to IGCC units.
(a) * * *
(3) For establishing operating limits with particulate matter continuous parametric monitoring system (PM CPMS) to demonstrate compliance with a PM or non-Hg metals emissions limit (the use of PM CPMS is only allowed before July 6, 2027 with the exception of IGCC units), operate the unit at maximum normal operating load conditions during the performance test period. Maximum normal operating load will be generally between 90 and 110 percent of design capacity but should be representative of site specific normal operations during each test run.
(c) If you choose the filterable PM method to comply with the PM emission limit and demonstrate continuous performance using a PM CPMS as provided for in § 63.10000(c), you must also establish an operating limit according to § 63.10011(b), § 63.10023, and Tables 4 and 6 to this subpart. Should you desire to have operating limits that correspond to loads other than maximum normal operating load, you must conduct testing at those other loads to determine the additional operating limits. On and after July 6, 2027, you must demonstrate continuous compliance with the applicable filterable PM emission standard through the use of a PM CEMS (with the exception that IGCC units are not required to use PM CEMS and may continue to use PM CPMS). Alternatively, you may demonstrate continuous compliance with the non-Hg metals emission standard if you request and receive approval for the use of a HAP metals CMS under § 63.7(f).
(a) Flue gases from the affected units under this subpart exhaust to the atmosphere through a variety of
(h) If you use a PM CPMS to demonstrate continuous compliance with an operating limit (only applicable before July 6, 2027 unless it is for an IGCC unit), you must install, calibrate, maintain, and operate the PM CPMS and record the output of the system as specified in paragraphs (h)(1) through (5) of this section.
(i) If you choose to comply with the PM filterable emissions limit in lieu of metal HAP limits (which on or after July 6, 2027 you may not use non-mercury metal HAP limits for compliance demonstrations for existing EGUs unless you request and receive approval for the use of a HAP metals CMS under § 63.7(f)), you may choose to install, certify, operate, and maintain a PM CEMS and record and report the output of the PM CEMS as specified in paragraphs (i)(1) through (8) of this section. With the exception of IGCC units, on or after July 6, 2027 owners/operators of existing EGUs must comply with filterable PM emissions limits in Table 2 of this subpart and demonstrate continuous compliance using a PM CEMS unless you request and receive approval for the use of a HAP metals CMS under § 63.7(f). Compliance with the applicable PM emissions limit in Table 1 or 2 to this subpart is determined on a 30-boiler operating day rolling average basis.
(j) You may choose to comply with the metal HAP emissions limits using CMS approved in accordance with § 63.7(f) as an alternative to the performance test method specified in this rule. If approved to use a HAP metals CMS, the compliance limit will be expressed as a 30-boiler operating day rolling average of the numerical emissions limit value applicable for your unit in tables 1 or 2. If approved, you may choose to install, certify, operate, and maintain a HAP metals CMS and record the output of the HAP metals CMS as specified in paragraphs (j)(1) through (5) of this section.
(1)(i) Install, calibrate, operate, and maintain your HAP metals CMS according to your CMS quality control program, as described in § 63.8(d)(2). The reportable measurement output from the HAP metals CMS must be expressed in units of the applicable emissions limit (
(ii) Operate and maintain your HAP metals CMS according to the procedures and criteria in your site specific performance evaluation and quality control program plan required in § 63.8(d).
(2) Collect HAP metals CMS hourly average output data for all boiler operating hours except as indicated in section (j)(4) of this section.
(3) Calculate the arithmetic 30-boiler operating day rolling average of all of the hourly average HAP metals CMS output data collected during all nonexempt boiler operating hours data.
(4) You must collect data using the HAP metals CMS at all times the process unit is operating and at the intervals specified in paragraph (a) of this section, except for required monitoring system quality assurance or quality control activities, and any scheduled maintenance as defined in your site-specific monitoring plan.
(i) You must use all the data collected during all boiler operating hours in assessing the compliance with your emission limit except:
(A) Any data collected during periods of monitoring system malfunctions and repairs associated with monitoring system malfunctions. You must report any monitoring system malfunctions as deviations in your compliance reports under 40 CFR 63.10031(c) or (g) (as applicable);
(B) Any data collected during periods when the monitoring system is out of control as specified in your site-specific monitoring plan, repairs associated with periods when the monitoring system is out of control, or required monitoring system quality assurance or quality control activities conducted during out-of-control periods. You must report any out of control periods as deviations in your compliance reports under 40 CFR 63.10031(c) or (g) (as applicable);
(C) Any data recorded during required monitoring system quality assurance or quality control activities that temporarily interrupt the measurement of emissions (
(D) Any data recorded during periods of startup or shutdown.
(ii) You must record and report the results of HAP metals CMS system performance audits, in accordance with 40 CFR 63.10031(k). You must also record and make available upon request the dates and duration of periods when the HAP metals CMS is out of control to completion of the corrective actions necessary to return the HAP metals CMS to operation consistent with your site-specific performance evaluation and quality control program plan.
(l) Should you choose to rely on paragraph (2) of the definition of “startup” in § 63.10042 for your EGU (only allowed before January 2, 2025), you must install, verify, operate, maintain, and quality assure each monitoring system necessary for demonstrating compliance with the PM or non-mercury metals work practice standards required to comply with § 63.10020(e). On and after January 2, 2025 you will no longer be able to choose paragraph (2) of the “startup” definition in § 63.10042 for your EGU.
(b) If you are subject to an operating limit in Table 4 to this subpart, you demonstrate initial compliance with HAP metals or filterable PM emission limit(s) through performance stack tests and you elect to use a PM CPMS to demonstrate continuous performance (with the exception of existing IGCC units, on or after July 6, 2027 you may not use PM CPMS for compliance demonstrations with the applicable filterable PM limits and the Table 4 p.m. CPMS operating limits do not apply), or if, for an IGCC unit, and you use quarterly stack testing for HCl and HF plus site-specific parameter monitoring to demonstrate continuous performance, you must also establish a site-specific operating limit, in accordance with § 63.10007 and Table 6 to this subpart. You may use only the parametric data recorded during successful performance tests (
(g) * * *
(3) You must report the emissions data recorded during startup and shutdown. If you are relying on paragraph (2) of the definition of startup in 40 CFR 63.10042 (only allowed before January 2, 2025), then for startup and shutdown incidents that occur on or prior to December 31, 2023, you must also report the applicable supplementary information in 40 CFR 63.10031(c)(5) in the semiannual compliance report. For startup and shutdown incidents that occur on or after January 1, 2024, you must provide the applicable information in 40 CFR 63.10031(c)(5)(ii) and 40 CFR 63.10020(e) quarterly, in PDF files, in accordance with 40 CFR 63.10031(i).
(4) If you choose to use paragraph (2) of the definition of “startup” in § 63.10042 (only allowed before January 2, 2025), and you find that you are unable to safely engage and operate your particulate matter (PM) control(s) within 1 hour of first firing of coal, residual oil, or solid oil-derived fuel, you may choose to rely on paragraph (1) of definition of “startup” in § 63.10042 or you may submit a request to use an alternative non-opacity emissions standard, as described below.
(e) Additional requirements during startup periods or shutdown periods if you choose to rely on paragraph (2) of the definition of “startup” in § 63.10042 for your EGU (only allowed before January 2, 2025).
(3) * * *
(i) Except for an EGU that uses PM CEMS or PM CPMS to demonstrate compliance with the PM emissions limit, or that has LEE status for filterable PM or total non-Hg HAP metals for non- liquid oil-fired EGUs (or HAP metals emissions for liquid oil-fired EGUs), or individual non-mercury metals CMS (except that unless it is for an IGCC unit, on or after July 6, 2027 you may not use PM CPMS for compliance demonstrations with the applicable filterable PM emissions limits, and you may not purse or continue to use the LEE option for filterable PM, total non-Hg HAP metals, or individual non-Hg HAP metals), you must:
(c) If you use PM CPMS data (only allowed before July 6, 2027 unless it is for an IGCC unit) to measure compliance with an operating limit in Table 4 to this subpart, you must record the PM CPMS output data for all periods when the process is operating and the PM CPMS is not out-of-control. You must demonstrate continuous compliance by using all quality-assured hourly average data collected by the PM CPMS for all operating hours to calculate the arithmetic average operating parameter in units of the operating limit (
Hpv
(i) Before January 2, 2025, if you are relying on paragraph 2 of the definition of startup in 40 CFR 63.10042, you must provide reports concerning activities and periods of startup and shutdown that occur on or prior to January 1, 2024, in accordance with 40 CFR 63.10031(c)(5), in your semiannual compliance report. For startup and shutdown incidents that occur on and after January 1, 2024, you must provide the applicable information referenced in 40 CFR 63.10031(c)(5)(ii) and 40 CFR 63.10020(e) quarterly, in PDF files, in accordance with 40 CFR 63.10031(i). On or after January 2, 2025 you may not use paragraph 2 of the definition of startup in 40 CFR 63.10042.
(a) * * *
(2) For each existing unit participating in the emissions averaging option that is equipped with PM CPMS, maintain the average parameter value at or below the operating limit established during the most recent performance test. On or after July 6, 2027 you may not use PM CPMS for filterable PM compliance demonstrations unless it is for an IGCC unit;
(3) For each existing unit participating in the emissions averaging option venting to a common stack configuration containing affected units from other subcategories, maintain the appropriate operating limit for each unit as specified in Table 4 to this subpart that applies. Since on or after July 6, 2027 you may not use PM CPMS, unless it is for an IGCC unit, for compliance demonstrations with the applicable filterable PM limits, the Table 4 p.m. CPMS operating limits do not apply.
The provisions of this section § 63.10023 are only applicable before July 6, 2027 unless it is for an IGCC unit. On or after July 6, 2027 you may not use PM CPMS, unless it is an IGCC unit, for demonstrating compliance with the filterable PM emissions limits of this subpart.
(e) * * *
(3) Identification of whether you plan to demonstrate compliance with each applicable emission limit through performance testing; fuel moisture analyses; performance testing with operating limits (
(8) Identification of whether you plan to rely on paragraph (1) or (2) of the definition of “startup” in § 63.10042. On or after January 2, 2025 you may not use paragraph (2) of the definition of startup in § 63.10042.
(i) Before January 2, 2025 should you choose to rely on paragraph (2) of the definition of “startup” in § 63.10042 for your EGU, you shall include a report that identifies:
(a) * * *
(4) Before July 6, 2027, if you elect to demonstrate continuous compliance using a PM CPMS, you must meet the electronic reporting requirements of appendix D to this subpart. Except for IGCC units, on or after July 6, 2027 you may not use PM CPMS for compliance demonstrations. Electronic reporting of the hourly PM CPMS output shall begin with the later of the first operating hour on or after January 1, 2024; or the first operating hour after completion of the initial performance stack test that establishes the operating limit for the PM CPMS.
(c) * * *
(5) Should you choose to rely on paragraph (2) of the definition of “startup” in § 63.10042 for your EGU (only allowed before January 2, 2025), for each instance of startup or shutdown you shall:
(f) * * *
(2) If, for a particular EGU or a group of EGUs serving a common stack, you have elected to demonstrate compliance using a PM CEMS, an approved HAP metals CMS, or a PM CPMS (on or after July 6, 2027 you may not use PM CPMS for compliance demonstrations, unless it is for an IGCC unit), you must submit quarterly PDF reports in accordance with paragraph (f)(6) of this section, which include all of the 30-boiler operating day rolling average emission rates derived from the CEMS data or the 30-boiler operating day rolling average responses derived from the PM CPMS data (as applicable). The quarterly reports are due within 60 days after the reporting periods ending on March 31st, June 30th, September 30th, and December 31st. Submission of these quarterly reports in PDF files shall end with the report that covers the fourth calendar quarter of 2023. Beginning with the first calendar quarter of 2024, the compliance averages shall no longer be reported separately, but shall be incorporated into the quarterly compliance reports described in paragraph (g) of this section. In addition to the compliance averages for PM CEMS, PM CPMS, and/or HAP metals CMS, the quarterly compliance reports described in paragraph (g) of this section must also include the 30- (or, if applicable 90-) boiler operating day rolling average emission rates for Hg, HCl, HF, and/or SO
(i) If you have elected to use paragraph (2) of the definition of “startup” in 40 CFR 63.10042 (only allowed before January 2, 2025), then, for startup and shutdown incidents that occur on or prior to December 31, 2023, you must include the information in 40 CFR 63.10031(c)(5) in the semiannual compliance report, in a PDF file. If you have elected to use paragraph (2) of the definition of “startup” in 40 CFR 63.10042, then, for startup and shutdown event(s) that occur on or after January 1, 2024, you must use the ECMPS Client Tool to submit the information in 40 CFR 63.10031(c)(5) and 40 CFR 63.10020(e) along with each quarterly compliance report, in a PDF file, starting with a report for the first calendar quarter of 2024. The applicable data elements in paragraphs (f)(6)(i) through (xii) of this section must be entered into ECMPS with each startup and shutdown report.
(k) If you elect to demonstrate compliance using a PM CPMS (on or after July 6, 2027 you may not demonstrate compliance with filterable PM emissions limits using a PM CPMS, unless it is for an IGCC unit) or an approved HAP metals CMS, you must submit quarterly reports of your QA/QC activities (
(a) You must keep records according to paragraphs (a)(1) and (2) of this section. If you are required to (or elect to) continuously monitor Hg and/or HCl and/or HF and/or PM emissions, or if you elect to use a PM CPMS (unless it is for an IGCC unit, you may only use PM CPMS before July 6, 2027), you must keep the records required under appendix A and/or appendix B and/or appendix C and/or appendix D to this subpart. If you elect to conduct periodic (
(f) * * *
(2) Should you choose to rely on paragraph (2) of the definition of “startup” in § 63.10042 for your EGU (on or after January 2, 2025 you may not use paragraph (2) of the definition of startup in § 63.10042), you must keep records of:
(1) The first-ever firing of fuel in a boiler for the purpose of producing
(2) Alternatively, prior to January 2, 2025, the period in which operation of an EGU is initiated for any purpose. Startup begins with either the firing of any fuel in an EGU for the purpose of producing electricity or useful thermal energy (such as heat or steam) for industrial, commercial, heating, or cooling purposes (other than the first-ever firing of fuel in a boiler following construction of the boiler) or for any other purpose after a shutdown event. Startup ends 4 hours after the EGU generates electricity that is sold or used for any other purpose (including on site use), or 4 hours after the EGU makes useful thermal energy (such as heat or steam) for industrial, commercial, heating, or cooling purposes (16 U.S.C. 796(18)(A) and 18 CFR 292.202(c)), whichever is earlier. Any fraction of an hour in which startup occurs constitutes a full hour of startup.
As stated in § 63.9991, you must comply with the following applicable emission limits:
As stated in § 63.9991, you must comply with the following applicable emission limits:
As stated in § 63.9991, you must comply with the following applicable work practice standards:
Before July 6, 2027, as stated in § 63.9991, you must comply with the applicable operating limits in table 4. However, on or after July 6, 2027 you may not use PM CPMS for compliance demonstrations, unless it is for an IGCC unit.
As stated in § 63.10007, you must comply with the following requirements for performance testing for existing, new or reconstructed affected sources:
Before July 6, 2027, as stated in § 63.10007, you must comply with the following requirements for establishing operating limits in table 6. However, on or after July 6, 2027 you may not use PM CPMS for compliance demonstrations, unless it is for an IGCC unit.
As stated in § 63.10021, you must show continuous compliance with the emission limitations for affected sources according to the following:
[In accordance with 40 CFR 63.10031, you must meet the following reporting requirements, as they apply to your compliance strategy]
The revisions and additions read as follows:
1.2
1.3
4.1
4.1.1 PM CEMS. You must certify your PM CEMS according to PS-11 in appendix B to part 60 of this chapter. A PM CEMS that has been installed and certified according to PS-11 as a result of another state or federal regulatory requirement or consent decree prior to the effective date of this subpart shall be considered certified for this subpart if you can demonstrate that your PM CEMS meets the acceptance criteria in PS-11 and Procedure 2 in appendix F to part 60 of this chapter.
4.1.1.1 Beginning on July 6, 2027, when determining if your PM CEMS meets the acceptance criteria in PS-11 and Procedure 2 the value of 0.015 lb/MMBtu is to be used in place of the applicable emission standard, or emission limit, in the calculations.
4.2 Recertification.
4.2.3 Beginning on July 6, 2027 you must use the value of 0.015 lb/MMBtu in place of the applicable emission standard, or emission limit, in the calculations when determining if your PM CEMS meets the acceptance criteria in PS-11 and Procedure 2.
5.1.1 Required QA Tests. Following initial certification, you must conduct periodic QA testing of each primary and (if applicable) redundant backup PM CEMS. The required QA tests and the criteria that must be met are found in Procedure 2 of appendix F to part 60 of this chapter
5.1.4 RCA and RRA Acceptability. The results of your RRA or RCA are considered acceptable provided that the criteria in section 10.4(5) of Procedure 2 in appendix F to part 60 of this chapter are met for an RCA or section 10.4(6) of Procedure 2 in appendix F to part 60 of this chapter are met for an RRA. However, beginning on July 6, 2027 a value of 0.015 lb/MMBtu is to be used in place of the applicable emission standard, or emission limit, when determining whether the RCA and RRA are acceptable.
On or after July 6, 2027 you may not use PM CPMS for compliance demonstrations with the applicable filterable PM emissions limits, unless it is for an IGCC unit.
Animal and Plant Health Inspection Service, USDA.
Final rule.
We are amending the user fee regulations associated with the agricultural quarantine and inspection (AQI) program. Specifically, we are adjusting the fees for certain AQI services that are provided in connection with certain commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international passengers arriving at ports in the customs territory of the United States or precleared or preinspected at a site outside the customs territory of the United States; adjusting the caps on prepaid fees associated with commercial trucks and commercial railroad cars; and removing certain fee exemptions that are no longer justifiable based upon pathway analyses of risk. We are also revising requirements pertaining to remittances and statements. Specifically, we will require monthly rather than quarterly remittances for the commercial aircraft fee, international air passenger fee, and international cruise passenger fee, clarify our requirements, and provide for electronic payments and statements. We are also including in the regulations information on agents responsible for ensuring compliance with paying the user fees and the requirement for entities to notify the Animal and Plant Health Inspection Service in the event they have a change in personnel responsible for fee payments. These changes are necessary to recover the costs of the current level of AQI activity, to account for actual and projected increases in the cost of doing business, to increase fee payer accountability, and to more accurately align fees with the costs associated with each fee service.
This rule is effective October 1, 2024, except for the removal of section § 354.3(e)(2)(iv), which is effective on April 1, 2025.
Mr. George Balady, Senior Regulatory Policy Specialist, PPQ, APHIS, 4700 River Road, Unit 36, Riverdale, MD 20737; (301) 851-2338;
Section 2509(a) of the Food, Agriculture, Conservation, and Trade (FACT) Act of 1990 (21 U.S.C. 136a) authorizes the Animal and Plant Health Inspection Service (APHIS) to prescribe and collect user fees for agricultural quarantine and inspection (AQI) services. Congress amended the FACT Act on April 4, 1996, and May 13, 2002.
The FACT Act, as amended, authorizes APHIS to prescribe and collect user fees for AQI services provided in connection with the arrival, at a port in the customs territory of the United States, of certain commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international passengers. According to the FACT Act, as amended, these user fees should be “sufficient” “to cover the cost of”:
• Providing AQI services “in connection with the arrival at a port in the customs territory of the United States” of the conveyances and the passengers listed above;
• Providing “preclearance or preinspection at a site outside the customs territory of the United States” to the conveyances and the passengers listed above; and
• Administering 21 U.S.C. 136a, concerning the “collection of fees for inspection services.”
In addition, the FACT Act, as amended, contains the following requirements:
• The amount of the fees shall be “commensurate with the costs of [AQI] services with respect to the class of persons or entities paying the fees.”
• The cost of AQI services “with respect to passengers as a class” shall “include the cost of related inspections of the aircraft or other vehicle.”
The user fees for the AQI activities described above are contained in 7 CFR 354.3, “User fees for certain international services.” APHIS' regulations regarding user fees relating to imports and exports, as well as overtime services, are found in 7 CFR part 354.
On August 11, 2023, we published in the
We also proposed to revise requirements pertaining to remittances and statements. Specifically, we proposed to require monthly rather than quarterly remittances for the commercial aircraft fee, international air passenger fee, and international cruise passenger fee, clarify our requirements, and provide for electronic payments and statements. We also proposed to include in the regulations information on agents responsible for ensuring compliance with paying the user fees and the requirement for entities to notify APHIS in the event they have a change in personnel responsible for fee payments.
We proposed these changes to recover the costs of the current level of AQI activity, to account for actual and projected increases in the cost of doing business, to increase fee payer accountability, and to more accurately align fees with the costs associated with each fee service.
We solicited comments concerning our proposal for 60 days ending October 10, 2023. We received 70 comments by that date. They were from airlines, shipping companies, treatment providers, industry associations, and private citizens. Eighteen commenters generally supported the proposed rule, while 15 generally opposed it. The remaining commenters, while commenting on the provisions of the
Based on the comments that we received, we have made the following modifications to the proposed rule in this final rule:
• We have lowered the fees for commercial vessels, commercial aircraft, and international air passengers based on our determination that, while aggregate cost was correct (the numerator for the fee rate), there were more instances in which AQI services were provided in these modes (the denominator for the fee rate) than we had initially calculated.
• We have established a commercial vessel fee specific to commercial vessels operating within the Great Lakes or in the region along the coastline from Alaska to Oregon, provided that certain conditions are met.
• We have decided not to revise our regulations governing the treatment monitoring fee at this time.
• We have decided not to specify the method by which airlines and cruise ships must refund passenger user fees assessed for trips not taken.
Several commenters who supported the proposed rule agreed with the proposed rule that additional personnel were needed at ports of entry to reduce workload on individual employees. One of these commenters stated that port personnel at certain ports of entry currently routinely must work overtime to conduct inspections.
As we stated in the proposed rule, the increased fees will provide for additional staffing at ports of entry.
One of these commenters also said that APHIS' regulations governing reimbursable overtime also needed to be updated.
Changes to APHIS' regulations governing reimbursable overtime are outside of the scope of this rulemaking. However, we do note that our user fee model did consider staffing at ports in order to address the staffing shortages highlighted by the commenter and reduce the need for individual employees to work overtime to conduct inspections. We discuss the staffing model at greater length below.
Several commenters, while supportive of the proposed rule, took the view that the regulations imposed a protective tariff on imports. Similarly, several other commenters stated that they were domestic producers who supported the proposal and construed the regulations as a mechanism to reduce import volume.
User fees are not tariffs, nor are they intended as a mechanism to reduce import volume. Although the AQI user fees pertain to international trade, user fees are a cost-recovery mechanism employed more broadly than just in the international trade context. They are a fee that a party charges to an entity receiving a service in order to recover the costs associated with providing the service. User fees are often imposed by a government, but not always. For example, a toll collected on a privately owned toll road would fit the definition of a user fee. As we highlighted in the preamble of the proposed rule (88 FR 54799, August 11, 2023), user fees are currently used throughout the Federal Government to recover the costs of many Federal services, both international and domestic.
Several domestic producers stated that the services funded by the fees are necessary in order to keep plant pests, noxious weeds, and pests and diseases of livestock from being introduced into or further disseminated within the United States. We agree. AQI services are essential to protect American agriculture and natural resources from the introduction or further dissemination of plant pests, noxious weeds, and pests and diseases of livestock. Furthermore, as we mentioned in the proposed rule, programs to control or eradicate pests once they become established in the United States can be costly for the Agency to administer.
One commenter construed the proposed rule to include a notice-based process by which the fees would be adjusted after October 1, 2028. We did not propose to establish a notice-based process to adjust the fees in the proposed rule. We did state in the proposed rule that we intend to initiate a separate rulemaking to propose notice-based adjustments to the fees to be implemented after October 1, 2028.
One commenter stated that the exact language of paragraph (a)(1)(A) of the FACT Act provides authority to recover the cost of AQI services provided to “an international passenger, commercial vessel, commercial aircraft, commercial truck, or railroad car,” while our proposed rule stated that it provided authority to recover the cost of services provided to commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international passengers. The commenter argued that the word “international” in the FACT Act could be read to apply to all the commercial means of conveyance listed, and not just passengers.
Insofar as the services are provided to the listed means of conveyance that are entering the United States from outside the United States, the services are provided to the listed means of conveyance that are operating “internationally” in the standard dictionary definition of that term. (Merriam-Webster's online dictionary, for example, defines “international” to mean, among other things, “of, relating to, or affecting two or more nations.”)
The same commenter stated that inspection of animals, animal products, plants, and plant products that enter the United States from Canada may violate trade agreements between the two countries. The commenter did not specify which trade agreements it considered to be violated.
APHIS is unaware of any trade agreement that precludes either the United States or Canada from conducting sanitary or phytosanitary inspection and quarantine services. To the contrary, the U.S.-Mexico-Canada Agreement, or USMCA, allows for inspection of imported commodities among the three nations.
Several commenters stated that our proposed implementation date of January 1, 2024, would be difficult or impossible for their businesses to absorb, and requested more time to allow for adequate budget planning and adjustment of contracts with customers. Two commenters suggested that, regardless of what fiscal year is chosen for implementation, the implementation date should be within the June to November timeframe to minimize disruption to service contracts for that year.
Because the publication of this final rule occurred after January 1, 2024, we have elected to set October 1, 2024, as our implementation date. In the proposed rule, this was the date that the second phase of the increased fees was scheduled to take effect. The October 1 date corresponds to the beginning of APHIS' fiscal year (FY), and it occurs within the June to November timeframe requested by the commenters. In general, on October 1, 2024, we will revise the fees to set them at the level specified in the proposed rule beginning on that date. That is, for most fee classes, we are starting at phase 2 of the
The same commenters who asked that the implementation date be within the June to November time frame asked for at least a 1-year delay in the implementation of this rulemaking to allow for budget planning.
As noted in the proposed rule, the AQI program ran an average deficit of over $166 million annually for FY 2017 through FY 2019. During the COVID-19 pandemic, decreased international travel further exacerbated these deficits, and the program had to rely on emergency appropriated supplemental funds to cover program costs. Even in a post-pandemic environment, current revenue projections indicate that the fees must be raised by the outset of FY 2025 to avoid possible disruptions to program delivery due to insufficient funds. Due to these exigencies, we cannot delay the implementation of the new fees for such a prolonged period. We note, however, that we have elected to have a later effective date of April 1, 2025, for the removal of a provision exempting commercial aircraft with 64 or fewer seats meeting certain conditions from paying the user fee for their mode of conveyance. We have determined that this later effective date can be implemented without disruption to program delivery.
Two commenters stated that the fee increases should be phased in over a 5-to-10-year period.
We note that we are phasing in the fee increases; the final fee increase will occur more than 4 years after the issuance of this final rule. A more prolonged phase-in schedule would adversely impact cost recovery and is not feasible to sustain program operations.
Commenters stated that the proposed increases are not warranted in the current inflation/recession prone environment and associated impacts to industry.
The fee increases are necessary to help achieve full cost recovery for the AQI services provided to the parties subject to the fees. AQI user fee-funded activities operated at a substantial deficit before the COVID-19 pandemic, and the pandemic exacerbated this deficit to the extent that emergency supplemental appropriations were needed to cover program costs. Moreover, APHIS notes that the AQI program is subject to the same inflationary pressures as other sectors of the economy. Costs associated with AQI personnel compensation and benefits, equipment and materials, rents, leases, utilities, contracts, and other direct and indirect costs have all increased since APHIS last adjusted the AQI user fees in December 2015. Since December 2015, the consumer price index for all urban consumers has increased over 30 percent,
Several commenters stated that instead of raising user fees, APHIS should find alternate funding sources (for example, appropriated funds) for AQI activities.
As we explained in the proposed rule, the FACT Act of 1990 was passed by Congress and signed by the President for the express purpose of the AQI program becoming self-funding through the prescription and collection of user fees. While emergency appropriated supplemental funds were provided during the COVID-19 pandemic to mitigate low balances in the accounts, Congress indicated in the appropriations bills that they were to address pandemic-related exigencies, and we cannot depend on appropriations to cover the cost of AQI activities on a routine and ongoing basis.
Many commenters asked accounting questions relating to how the fees were developed. We will address specific comments below by topic. In general, these questions are answered in the APHIS AQI cost model data that was cited in the proposed rule and made available on the APHIS website at:
Several commenters stated that APHIS should have discussed any cost-cutting measures we had identified or considered in addition to the proposed fee increases.
To address the current challenges, the AQI program has implemented ways to increase efficiency. These efficiencies reduced AQI program costs, and these cost savings were realized in the FY 2017 through FY 2019 period. As a result, the cost data that APHIS used to develop the AQI user fee rates in this rulemaking, and which serve as the “baseline,” include these program cost savings. The most significant way we have increased inspection efficiency is by using Risk Based Sampling (RBS). RBS is an advanced statistical approach that adapts to increase inspection rates of higher risk products and reduce inspection rates of proven lower risk products. Table 1 below shows the time savings for our trade and U.S. Customs and Border Protection (CBP) inspectors across all monitored pathways, without compromising agriculture safeguarding efforts. APHIS and CBP redirect this saved time to intensive activities with greater phytosanitary risk, such as physical inspections and regulated garbage monitoring.
The AQI program has identified other ways to increase efficiency in recent years. For example, CBP, through various initiatives, has increased its targeting efficiency rates to approximately 63 percent. In doing so, CBP deployed new approaches that significantly improved their ability to identify and inspect non-compliant material compared to random selection. APHIS and CBP have also facilitated more timely clearance of agricultural cargo by improving our processes to grant authority to inspectors and pest identifiers to make regulatory decisions at ports, rather than by national specialists in other locations. We also implemented advanced digital imaging to expedite pest identifications that in the past would have required physically shipping specimens, shaving days off of the pest identification process.
APHIS also increased its electronic capacity to process cargo. Of all the government agencies that set import requirements, APHIS had the greatest number of forms and documents required to clear cargo. APHIS joined CBP's Automated Commercial Environment single window initiative, making it easier for importers to electronically provide information critical for AQI clearance prior to importation, reducing expense and clearance time. Additionally, we have structured regulatory requirements into an advanced database, and automated permit issuance to reduce the processing time for most Plants and Plant Products permits from 5 to 7 days to 1 day or less. APHIS eFile issues up to 85 percent of the Plants and Plant Products permits to applicants in less than 1 minute.
Program and process efficiencies are just one aspect of the AQI program's efforts to become more effective and efficient at a lower cost. Personnel compensation and benefits are the single largest cost in the AQI program, and so effective use of personnel time is essential to keep costs down without compromising the mission. CBP found that their Agriculture Specialists were increasingly spending time on administrative activities, taking them away from core inspection and regulatory functions. To address this, CBP piloted using technicians (full performance level GS-08) to free Agriculture Specialists (full performance level GS-12) to spend more time on inspection-related activities. CBP's staffing and workload analysis found that adding one technician frees up 1.49 CBP Agriculture Specialists. The 731 Technicians in CBP's staffing plan free up the equivalent of 1,089 Agriculture Specialists, resulting in a cost savings of nearly $81 million per year.
Despite these efforts to increase efficiencies, anticipated AQI operational costs would far surpass AQI anticipated revenue unless the fees are raised in the manner specified in this final rule.
A commenter stated that APHIS should provide greater transparency for capital costs. The commenter expressed concerns over what was included in the capital costs, the allocation of those costs, and capital costs associated with non-AQI programs. The commenter stated that the proposed rule should have explained how capital costs were factored into fee calculations.
We disagree with the commenter. As we explained in the proposed rule, there is no reserve component in the fee rates in this proposed rule. Rather, the fee rates in the proposed rule were set at levels intended only to result in fee collections that cover the cost of providing agricultural quarantine and inspection services and the costs of administering the program, and personnel and capital planning cost components have been added to the cost model.
Capital costs include items such as facility design, development and maintenance costs; new information technology and equipment costs, and AQI program outreach expansion and
1. Design and construct two new plant inspection stations;
2. Design and construct a new multi-function laboratory and containment facility;
3. Upgrades and updates to the eFile system;
4. Beltsville facility infrastructure improvements;
5. Design and construct new plant pathogen diagnostic methods lab;
6. Design and construct new national plant germplasm greenhouse;
7. Design and construct new identification laboratory;
8. New Preclearance and Offshore Programs IT System;
9. Engage in an outreach campaign, Clean Clears Quicker, to emphasize the importance of regulatory compliance; and
10. Establish Federal oversight of the existing Don't Pack A Pest outreach campaign.
APHIS has treated capital costs as an overhead cost and allocated capital costs according to frontline Full Time Equivalent (FTE) hours because any capital projects would support the AQI program proportionately to frontline AQI FTEs. With respect to shared facilities, that is, facilities which house or support both AQI and non-AQI functions—the planned capital costs in the AQI activity-based cost model only include those costs attributable to the AQI program. Moreover, a portion of those costs are allocated to non-fee areas. Non-fee areas are those AQI activities for which there is no fee. The largest non-fee areas are privately owned vehicle (POV) and POV passenger clearance, and pedestrians. The AQI program allocates costs to non-fee areas for the express purpose of ensuring that the payers of AQI user fees do not pay for the costs associated with non-fee areas. Rollup reports associated with non-fee areas are available to the public on the APHIS website at
We note, additionally, that the commenter assumed that the AQI program is fully funded and staffed currently, which is not the case.
A commenter stated that they worked with CBP personnel who were underused at a port of entry, and questioned whether additional CBP staffing was warranted in light of their experience. While not directly challenging the validity of this claim, several other commenters asserted that, at other ports of entry, throughput is substantial and CBP employees often work overtime to ensure timely delivery of services. One commenter stated that some ports of entry only currently employ a single inspector to conduct AQI inspections.
Our data does not support the commenter's anecdotal experience that CBP personnel are underused. CBP's staffing models, which are addressed at greater length directly below, evaluated workload and throughputs at ports of entry throughout the United States. CBP's staffing models underscore that many ports of entry have workload demands that currently exceed regular FTE hours.
Several commenters noted that a significant amount of each fee would go to staffing. The commenters stated that it was not clear from the proposed rule how the additional staffing levels needed were arrived at, and how they would be used in providing AQI services.
Additional staffing costs were included in the AQI cost model at level 35 and level 451 for APHIS and level 452 for CBP; all cost objects with an identification code starting with “35” or “45” are additional staffing costs. We summarized CBP's additional staffing requirements by fee area in table 1 of the proposed rule, which we have reproduced as table 2 below.
CBP uses two statistical workload models to determine AQI staffing needs by environment. The Agriculture Specialist Resource Allocation Model
CBP's staffing models calculated additional personnel needs based on estimated throughput as calculated in light of actual workload, in order to ensure that bottlenecks do not occur in port operations. APHIS summarized its additional personnel needs by fee area in table 2 of the proposed rule, which we have reproduced as table 3 below. The bulk of additional APHIS personnel are field positions, including botany, entomology and plant pathology identifiers, veterinary medical officers, and plant health safeguarding specialists. Increased frontline staffing also requires additional support staff to accommodate additional workload in areas such as human resources, financial management, and employee training. Finally, some additional policy and operational personnel will also be needed to accommodate the additional throughput. Our data in tables 2 and 3 account for these factors.
A commenter noted that the proposed rule was based on cost data from FY 2017 through FY 2019 and asked how budget shortfalls or surpluses in FY 2013 through FY 2016 and FY 2020 through FY 2022 may have impacted the setting of the AQI user fees.
APHIS does not set AQI user fees based upon prior year shortfalls or surpluses. Under an activity-based costing methodology, APHIS uses actual program costs per fiscal year plus anticipated costs for capital planning and additional staffing allocated to each fee and non-fee area, then takes the total costs in each fee area and divides that total cost by the number of projected units (a unit being a commercial vessel, commercial truck, commercial railroad car, commercial aircraft, an international air or cruise passenger, or a treatment). The unit costs for 3 consecutive fiscal years are adjusted for inflation to today's dollars (in this rulemaking, June 2022), and then these adjusted unit costs are averaged. Finally, APHIS adjusted the average unit cost (that is, June 2022 dollars) for projected inflation, (that is, future dollars) for FY 2025 through FY 2028.
The same commenter stated that it appeared that cost data from FY 2014 through FY 2016 and FY 2020 through FY 2022 had a role in the proposed fees, although it was difficult to discern exactly to what degree.
APHIS did not use cost data from FY 2014 through FY 2016 for the proposed rule because we had newer cost data on which to rely. APHIS also did not use cost data for FY 2020 through FY 2022 because, as we suggested in the proposed rule, these fiscal years were not a period of normal operations.
A commenter stated that the proposed fees did not appear to follow the inflation rate since the fees were last updated. The commenter stated that, were the fees calculated in such a manner, they would be significantly lower than proposed.
The fees were not calculated solely by applying intervening inflation. APHIS used actual cost data for FY 2017 through FY 2019 by user class, future costs for planned capital expenditures, and additional staffing, and divided that by the number of users per fiscal year to arrive at a unit cost. We then adjusted those unit costs to June 2022 dollars, averaged the unit costs across the 3 fiscal years, and finally adjusted that average unit cost for projected inflation.
A commenter stated that all AQI user fees should be capped.
Capping all AQI user fees would undermine full cost recovery, one of the aims of the FACT Act. As we indicated in the proposed rule, while we cap fees for two AQI modes, prepaid commercial railroad cars and prepaid commercial truck crossings (transponder), this is due to their unique operational exigencies. For example, we pointed out that in the absence of a commercial truck transponder, CBP personnel would have to collect the fee at border crossings 11 million times annually, which is operationally untenable.
Several commenters suggested that APHIS should tier user fees based on the sanitary and phytosanitary risk presented by different modes of conveyance (
APHIS' current user fee structure does charge different fees based on the mode of conveyance. This is done to preclude cross-subsidization, and to ensure that the fees correlate to the AQI services that each mode receives.
We generally do not consider it possible to tier fees within a mode of conveyance. This is because it is not usually possible to assign a particular level of sanitary and phytosanitary risk, and corresponding AQI services, to a conveyance type that is unique to the type. To use an example within the commercial vessel mode, while agricultural cargo is often carried in containerized ships, certain types of agricultural cargo, such as citrus, bananas, and pineapples, are routinely shipped in break bulk shipments, in which the individual boxes are placed within a commercial vessel's cargo hull, rather than in containers. In both instances, CBP personnel need to offload and inspect the cargo for plant pests, noxious weeds, and overall compliance with APHIS' regulations. Likewise, a containerized ship may carry cargo with a low sanitary and phytosanitary risk during one shipment, and a higher sanitary and phytosanitary risk in a later shipment. The climates of different ports of export can be unique, and a vessel departing from one port of export during a particular shipment may face exposure risks to hitchhiking pests that it does not experience when departing from a different port. For a similar reason, the route chosen and the time of year during which the shipment takes place may also contribute to exposure risks.
In instances in which we have determined that the level of sanitary and phytosanitary risk is such that AQI services are not warranted for a particular conveyance type, we can and do exempt certain conveyance types from our user fees. For example, while we charge commercial railroad cars a user fee, the regulations have exempted and will continue to exempt locomotives and cabooses from the railroad car fee. Likewise, we do not charge a commercial vessel fee for vessels of less than 100 net tons.
Finally, we do note that CBP's staffing model accounts for sanitary and phytosanitary risk, so ports of entry that routinely inspect means of conveyance and cargo with a high phytosanitary and sanitary risk are assigned more personnel than ports of entry that do not.
Several commenters suggested that APHIS could establish different user fee tiers for methods of conveyance that carry agricultural cargo versus those that do not; while other commenters suggested a base fee, plus additional fees for extended service based on cargo carried.
The current method by which APHIS calculates the AQI user fees, in which aggregate costs of providing AQI services are divided by number of instances in which those services are provided, generally does not currently allow for such a distinction between conveyances carrying agricultural cargo and those that do not carry agricultural cargo. To that end, we note that sanitary and phytosanitary inspections are not only conducted of the cargo carried by a method of conveyance, but also the method of conveyance itself. We also note that non-agricultural cargo may present sanitary and phytosanitary risks; for example, gypsy moth (
As noted above, cargo is not the sole factor contributing to the sanitary and phytosanitary risk associated with a particular means of conveyance, and the AQI services required for that means of conveyance. Port of export, route, and time of year of the shipment may also all contribute to increased risk and extend the AQI services required. As a result, if we were to establish a base fee, with additional surcharges based on cargo carried, this would not take all these risk factors into consideration.
A commenter suggested that fees should be tiered based on handling volume at a particular port of entry.
The commenter provided no information regarding why handling volume, that is, the number of instances in which AQI services were provided at the port, should be considered indicative of the level of AQI services provided to individual arrivals and would provide a better basis for setting fees than the basis articulated in the proposed rule. A single, huge container shipment of cargo that has a significant sanitary or phytosanitary risk may take as long to inspect, if not longer, as several smaller shipments of low-risk cargo. We also note that variances throughout the year in handling volume at particular ports would require the fee rate to be dynamic, which would lead to unpredictability in terms of what fee would be assessed from arrival to arrival, as well as concomitant unpredictability in APHIS and CBP's revenue stream. It also could lead to staffing and resource allocation issues at ports of entry, particularly if owners and operators began to seek out ports with the lowest current fee.
A commenter asked how APHIS will monitor expenditures to ensure the increased fees are used appropriately.
APHIS employs multiple safeguards to ensure user fee funds are used appropriately. For example, from an operational perspective, APHIS maintains all AQI fees we collect in distinct accounts, carefully monitors the balances in these accounts, and only uses these funds to pay for our actual costs for providing these distinct services. In addition, APHIS will continue to maintain, evaluate, and ensure that our internal controls, which include our expenditure-related accounts and processes, are operating properly and in compliance with Office of Management and Budget (OMB) Circular A-123, Management's Responsibility for Enterprise Risk Management and Internal Control requirements. Examples of APHIS internal controls include verifications, reconciliations, authorizations and approvals, and supervisory control activities. APHIS also complies with Federal audit requirements which include audit of expenditure-related processes and accounts under the Chief Financial Officers Act of 1990 (CFO Act) (Pub. L. 101-576), as amended, the Government Management Reform Act of 1994 (GMRA) (Pub. L. 103-356), as amended, and the Federal Financial
A commenter stated that APHIS should amend the regulations to assess a penalty on airlines and cruise lines that is equivalent to the amount airlines and cruise lines have failed to lawfully remit to passengers.
APHIS has no statutory authority to assess such penalties, nor is this request within the scope of this rulemaking.
One commenter asked how airline passengers can assess that their fee was appropriately set by APHIS when they are greeted and inspected not by APHIS, but by CBP.
The Homeland Security Act of 2002 created the Department of Homeland Security and transferred the function for AQI clearance of international passengers and certain other AQI functions from APHIS to CBP.
Finally, several commenters requested that APHIS extend the comment period for the proposed rule.
One of these commenters posed a series of questions that, the commenter asserted, APHIS needed to respond to for the public to provide informed comments on the proposed rule. These included questions about whether there were budget shortfalls or surpluses in the years 2013-2016 and 2020-2022, if such shortfalls or surpluses were factored into the cost-benefit analysis for the rulemaking, and whether adjustments for inflation would have resulted in shortfalls or surpluses in the years 2016 to the present. The commenter also asked why the aircraft fee is increasing if the number of aircraft arrivals has not changed and if there was a breakdown of how APHIS estimated the costs of capital costs and staffing and how capital costs were allocated in airport or non-airport environments.
We disagree with the commenter that APHIS' responses to the commenter's questions were necessary to evaluate the merits of the proposed rule. APHIS provided all information necessary to evaluate the proposed rule to the public in the proposed rule itself and its supporting documentation. This included, for example, documentation regarding how the fee model was selected and why it was appropriate, the cost components that led to the proposed fees using that model, the rationale for revising particular fee caps, and the basis for our proposed removal of exemptions. We note that, between September 12, 2023, and September 18, 2023, APHIS hosted webinars for the industries affected by the rulemaking. During the webinars, we allowed for a question-and-answer period. We also recorded the webinars and made them publicly available on the APHIS website at
Two commenters who requested extension of the comment period stated that APHIS provided no information regarding how the fees were calculated.
We made comprehensive rollup reports for the cost components of each fee available as supplemental documents for the proposed rule. They were and are available on the APHIS website at
One commenter who requested extension of the comment period stated that APHIS provided no indication of how the fees would be used.
We disagree. The proposed rule discussed at length the direct and indirect costs associated with providing the AQI services funded by the user fees.
Commenters raised several issues concerning the Regulatory Impact Analysis that accompanied the proposed rule. These are addressed in the final Regulatory Impact Analysis that accompanies this final rule.
We proposed to revise some existing definitions and to add new ones to § 354.3(a). Specifically, we proposed to amend the definitions for
Additionally, for reasons that we discuss below under the section heading “Commercial Vessels,” we are adding two definitions to the regulations in this final rule, for the terms
The AQI program inspects, with some exceptions, commercial vessels of 100 net tons or more arriving at ports of entry into the customs territory of the United States. AQI user fees for inspection of commercial vessels are listed in § 354.3(b)(1). We proposed to increase the user fee per arrival.
We also proposed to eliminate the exemption for barges from Canada; the exemption is currently found in § 354.3(b)(2)(vi). As discussed in the pathway analysis that accompanied the proposed rule, we determined that barges entering the United States from Canada pose a phytosanitary risk similar to barges entering the United States from origins other than Canada and to other types of vessels entering from Canada. Barges from origins other than Canada and other types of vessels from Canada are not exempt from AQI user fees. Other vessels from Canada are required to pay user fees even when travelling the same routes and carrying the same cargo as exempt barges.
Finally, we proposed that the commercial vessel fee would also not apply to commercial cruise (passenger) vessels that carry passengers paying the international passenger fees under § 354.3(f), because the cost of inspecting the entirety of the vessel is included in the international cruise passenger fee. That broad proposed exemption would replace the existing limited exemption in § 354.3(b)(2)(i) for certain foreign passenger vessels. In this respect, the treatment of commercial vessels is
We received 28 comments on these proposed changes to the commercial vessel fee. All the commenters were generally opposed to the proposed changes.
Most commenters noted that we proposed to increase the commercial vessel fee from the current fee of $825 to $3,557.18 in 2028, which was a higher percent increase than any other fee.
Several of the commenters stated that they would support the fee if it was correlated to service received. The commenters asserted that the fees appeared higher than the level of AQI services they received at ports of entry.
As we discussed in the proposed rule, our revised cost model for the proposed fees was based on aggregate full-time equivalent (FTE) hours spent providing services, such as inspections, for a particular user fee class.
Similarly, a commenter suggested that APHIS should begin to analyze FTE hours worked by vessel type and revise the commercial vessel fee based on these findings before issuing a final rule to revise the commercial vessel fee.
As we noted above, vessel type is not necessarily a reliable indicator of the level of effort needed to provide AQI services. Cargo, port of departure, route, time of the year in which the shipment occurs, and port of arrival all play a contributing role to determining the sanitary and phytosanitary risk associated with the vessel and the commensurate level of services warranted. Because these can vary significantly from shipment to shipment, if we were to conduct such an assessment, it would be difficult to extrapolate generalized, defensible conclusions about different vessel types from our current data set, which is limited to aggregate hours worked providing AQI services for the commercial vessel user fee class as a whole and number of instances of providing those services. Our current data is therefore insufficiently granular to observe those variances. Moreover, as we mentioned in the proposed rule, cargo from commercial vessels is routinely offloaded into a joint holding area, and inspected en masse. We mention this in order to underscore that the assessment requested by the commenter would need to be conducted
One commenter stated that, based on data that the commenter obtained, APHIS had appeared to undercount the number of arrivals of commercial vessels. The commenter requested that APHIS use a data set from CBP that they considered to be more accurate in terms of characterizing arrivals.
APHIS used the same CBP data set as the commenter to calculate the commercial vessel fee. In reviewing the commenter's concerns, however, we realized that coastwise arrivals had been inadvertently filtered out of the data set. Coastwise arrivals refer to arrivals of the same vessel at a different port of entry, for which AQI services are provided; for example, a commercial vessel offloading cargo at the port of Philadelphia, then subsequently offloading at the port of Wilmington, Delaware, would be making coastwise arrivals. CBP's vessel arrival fee is set out in their regulations at 19 CFR 24.22(b). That fee is collected from vessels of 100 net tons or more for each arrival regardless of the number of arrivals taking place in the course of a single voyage, with a cap currently set at $5,955 per calendar year. Because AQI services are provided at each port of entry, an AQI user fee is charged for each coastwise arrival, though we do not have a cap on those fees. APHIS charges AQI user fees for each arrival because a sizable component of the fees is the inspection of the cargo, usually after it has been offloaded and is in a joint inspection area. Some vessels offload large volumes of cargo at multiple ports-of-entry during a single voyage. If the AQI vessel fee were charged on first arrival only, we would need to increase the fee even more to recover costs. We charge at each arrival to be more equitable to single port-of-entry arrivals versus multiple port-of-entry arrival voyages.
Accordingly, the proposed user fees should have been calculated by including coastwise arrivals within total arrivals. Total program costs, however, were accurate. When these costs are divided by the updated arrivals (including coastwise arrivals), the user fee is correspondingly lower; the numerator (costs) has not changed while the denominator (number of arrivals) has. Accordingly, in this final rule, the commercial vessel fee has been lowered as shown in table 4 below.
This discovery led APHIS to evaluate all other data sets in the proposed rule to ensure that all instances in which the fee had been assessed were accurate. We discovered that, for two other proposed fee increases, those for commercial aircraft and those for international air passengers, filtering had also occurred to remove inspections that occur during preclearance. We discuss this below, in the relevant sections of the preamble for those fees.
Several commenters opposed the fee increase because it would have a disproportionate impact on vessels that are not ultra large container vessels.
We acknowledge that the fees may often have a greater impact on smaller vessels than larger vessels, but we disagree that smaller vessels merit a lower fee just because they are smaller. Furthermore, we disagree that the existence of smaller vessels did not factor into the fee calculation. The commenters often stated as an assumption that ultra large container vessels necessitate more intensive AQI services than commercial vessels that are not ultra large container vessels. While this is sometimes the case, size of vessel is not the sole determinant of the level of AQI services warranted for a particular vessel. As we noted above, cargo, port of departure, route, time of the year in which the shipment occurs,
Summary tables 5 and 6 for commercial vessel fee calculation below show that APHIS used actual cost data for FY 2017 through FY 2019 for commercial vessels, future costs for planned capital expenditures, and additional staffing, divided by number of users per fiscal year to arrive at a unit cost. We then adjusted those unit costs to June 2022 dollars, averaged the unit costs across the 3 fiscal years, and finally adjusted that average unit cost for projected inflation. The discussion of fee rates relative to other costs of doing business was to illustrate relative economic impact of the fee, and not to serve as the basis for fee development.
We included the summary tables to be used as a quick reference regarding fee development. For more comprehensive cost data information please see the full rollup reports from the APHIS AQI activity-based cost model. As we explained above, these questions are answered in the APHIS AQI cost model data that was cited in the proposed rule and made available on the APHIS website at:
For October 1, 2024, October 1, 2025, October 1, 2026, fee rates, APHIS subtracted the January 1, 2024 rate from the October 1, 2027 rate, and divided by 4. This amount became the per phase increase. The per phase increase was then added to the previous phase amount until reaching the October 1, 2027 rate.
Notwithstanding the above discussion, we have determined that certain commercial vessels that operate within the Great Lakes, or in the region along the coastline between Alaska and Oregon, are uniquely situated and have created a new commercial vessel fee that is lower than that for other commercial vessels. This will provide a degree of regulatory relief for such vessels that is also aligned with the sanitary and phytosanitary risk that the vessels present. We discuss these changes below.
Several commenters stated that they operated barges or other shipping vessels within the Great Lakes, or in the region along the coastline between Alaska and Oregon. The commenters stated that they were uniquely situated and that assumptions that APHIS articulated in the proposed rule about
Several commenters stated that visual inspection of their vessels was often brief, and a few barge operators stated that CBP had never boarded their vessels. Several commenters also questioned whether the proposed fees significantly exceeded the level of AQI services provided to vessels within the Great Lakes and in the region along the coastline between Alaska and Oregon. Two commenters stated that, at face value, the fee levels appeared to be set significantly above the level of inspection services currently provided, which would be inconsistent with the FACT Act. Several operators stated that they seldom, if ever, carried agricultural cargo. Finally, the commenters stated that, because they operated solely within distinct geographical areas between the United States and Canada, they pose little to no phytosanitary risk. (As discussed in this document, the geographic area covered by the port of departure, the route, and the port of arrival all do contribute to the risk profile associated with a particular commercial vessel. However, they are not the sole factors; for example, the cargo carried may itself present a sanitary or phytosanitary risk.) To that end, several commenters stated that Great Lakes vessels often are too large to fit through the St. Lawrence seaway lock system and cannot leave the Great Lakes; one commenter stated that, even if they could leave the Great Lakes, many Great Lakes vessels are not certified by the United States Coast Guard to enter the ocean.
Commenters proposed multiple options to address these stated differences. One option proposed was to entirely exempt vessels operating within the Great Lakes or in the region along the coastline between Alaska and Oregon from the commercial vessel fee. This exemption would apply to all vessels operating within the regions, including container vessels, break bulk vessels, barges, and all other commercial vessels. A second option proposed was to retain the current exemption for certain Canadian barges. A third option proposed was to apply the fee only to vessels carrying agricultural cargo, and to exempt commercial vessels that did not carry agricultural cargo. A fourth option proposed was to retain the existing commercial vessel fee for vessels operating within the Great Lakes or in the region along the coastline between Alaska and Oregon, provided that the vessels were not currently exempt from paying the fee (
After reviewing the comments and available information, including data from CBP and the U.S. Army Corps of Engineers, as well as information maintained by the shipping industry in the regions themselves, we agree that the vessels operating within the Great Lakes, or in the region along the coastline between Alaska and Oregon, merit additional consideration. The commenters presented information that they operate in a distinct geographical area that they seldom depart from, and sometimes are not physically able to leave. They also presented information indicating that their departures and arrivals are often more frequent than those of other commercial vessels, and publicly available information indicates that the vessels often take the same or substantially similar routes per shipment and sometimes carry the same or substantially similar cargo per shipment. Based on the risk factors identified above, the risk from these vessels is often, although not always, more well defined. The port of departure, route, and port of arrival are often the same or substantially similar: Many vessels are running out and back trips across the Great Lakes or along the coastline between Alaska and Oregon, sometimes multiple times a week.
However, as we discuss below, we would not say that these vessels are always less risky. Cargo can be a significant risk factor. For example, several areas in Canada are quarantined for European cherry fruit fly. Cherries from such areas could present a phytosanitary risk and vessels carrying such cargo would likewise present a risk. For this reason, we disagree with the first option that proposed to exempt all such vessels entirely from the commercial vessel fee. We currently inspect the vessels for possible sanitary and phytosanitary risks, and such vessels can carry cargo with significant risks. This is true even if the cargo is not agricultural cargo; as noted above, gypsy moth or spongy moth (
Insofar as barge operators did not provide verifiable, supporting information that they only carry cargo with no sanitary or phytosanitary risk, and do not merit inspection of the vessel itself, and in light of our aim to achieve full cost recovery, we have decided not to retain the barge exemption, the second option proposed by commenters.
We also disagree with the fourth option to assess a per container surcharge; among other things, this option would incentivize the use of break bulk vessels, which do not carry containers, to carry agricultural products between Canada and the United States, because the vessels would be subject to a lower user fee. Because of their agricultural cargo, however, these vessels would still need an equivalent rate of phytosanitary inspection. Accordingly, over time, we consider it likely that this incentivization would compromise full cost recovery.
For a similar reason, we also cannot scale the fee based solely on ship size; a smaller ship containing break bulk agricultural products may pose a higher phytosanitary risk and thus require more intensive inspection services than a larger container ship containing no agricultural products or known host material for plant pests and noxious weeds. (That being said, as we mentioned previously in this document, commercial vessels of less than 100 net tons have been, and will continue to be, exempt from the commercial vessel fee.
We see merit in the fifth option, however. The commenters presented significant information suggesting that the commercial vessel fee, as proposed, may not be appropriate for or commensurate with the level of AQI services provided to them. This option would allow APHIS to account for the differences stated by the commenters, and allow APHIS to further assess the appropriate fee in a future rulemaking. In so doing, it would effectively keep the current fee for such vessels, with an allowance, adjustment for inflation, that the commenters suggested and that we agree is appropriate.
However, we do not think this solution can be applied unilaterally to all arrivals within the Great Lakes or in the region along the coastline between Alaska and Oregon, particularly if the vessel carries cargo that may present a significant sanitary or phytosanitary risk.
Accordingly, in this final rule, we are pursuing the fifth option, with appropriate modifications to address the foregoing considerations. Commercial vessels traveling solely between the United States and Canada and either within the Great Lakes or along the coastline between Alaska and Oregon (which we are terming “Cascadia” out of recognition of the Cascadian bioregion in which the coastline is located) would be assessed the following fee, provided that certain conditions, set forth below, are met: $837.51 in FY 2025, $850.03 in FY 2026, $862.54 in FY 2027, and $875.06 in FY 2028.
To qualify for the lower fee rate, a vessel must meet the following requirements:
• Is not carrying cargo originating from countries other than the United States or Canada.
• Is not carrying plants or plant products.
• Is not carrying animals or animal products.
• Is not carrying soil or quarry products from areas in Canada listed in 7 CFR 319.77-3 as being infested with gypsy moth. That section of the regulations governs the importation of gypsy moth host material.
• Is not carrying wood packaging material as defined under 7 CFR 319.40-1. In this section of the regulations, “wood packaging material” is defined as “Wood or wood products (excluding paper products) used in supporting, protecting or carrying a commodity (includes dunnage).”
All the above types of cargo may present a sanitary or phytosanitary risk, and, in instances in which a vessel carries such cargo, the level of AQI services provided to address this possible risk would merit the full commercial vessel fee.
To clarify to which vessels the reduced fee could apply, in this final rule, we are adding definitions for
We are defining
We are defining
• Alaska—Juneau;
• Alaska—Ketchikan;
• Alaska—Sitka;
• Alaska—Skagway;
• Alaska—Wrangell;
• Washington—Aberdeen;
• Washington—Anacortes (Puget Sound);
• Washington—Friday Harbor (Puget Sound);
• Washington—Longview;
• Washington—Port Angeles (Puget Sound);
• Washington—Seattle (Puget Sound);
• Washington—Tacoma (Puget Sound);
• Oregon—Astoria;
• Oregon—Coos Bay;
• Oregon—Newport; and
• Oregon—Portland.
Two commenters stated that they operated container vessels between New Jersey and Bermuda, with the majority of arrivals into the United States being unloaded containers that previously contained cargo. The commenters requested a lower fee for their vessels and similarly situated operators.
The commenters did not provide sufficient information to characterize their operation as uniquely situated or similarly situated to the Great Lakes and Cascadian vessels described above. To cite a few examples, it was not clear whether the containers ever contained agricultural cargo, and, if so, whether the empty containers were cleared of all agricultural debris before return to the United States. The commenters also did not mention whether the routes were direct, and what route was used. Based on the absence of information necessary to evaluate the commenter's claims, we cannot make the determination that a lower vessel fee is appropriate for the commenters operating container vessels between New Jersey and Bermuda. APHIS is, however, open to receiving additional information on this topic and would consider proposing a revision in the future.
Finally, one commenter encouraged APHIS to explore means for electronic remittance of the commercial vessel fee.
CBP collects the commercial vessel fee on APHIS' behalf and offers electronic remittance through its eCBP portal (
In summary, in response to comments, we have lowered the commercial vessel fee overall to account for coastwise arrivals and have created a separate commercial vessel fee for certain vessels operating within the Great Lakes or along the coast between Alaska and Oregon.
AQI user fees for inspection of commercial trucks entering the customs territory of the United States are listed in § 354.3(c)(1). The current fee had been set at $7.29 per truck arrival, with an option, under paragraph (c)(3), to prepay an amount 40 times the single-arrival fee to obtain a transponder. We proposed to adjust the fees in that paragraph and to set the corresponding prepaid (transponder) user fees at an amount 60 times the unrounded fee rates for each arrival. We further proposed to clarify that prepayments for purchases of transponders may be made at any time during a calendar year. The proposed rule did not provide, however, for prorating of the prepayment cost or allowing credit for individual crossings made prior to prepayment if the operator of the commercial truck elects to prepay during a calendar year. This is consistent with CBP's handling of their truck transponder fee in 19 CFR 24.22(c)(2), and we stated in the proposed rule that the intent of the proposed change was to better align our prepayment requirements with those of CBP.
We also proposed to add a sentence to paragraph (c)(1) stating that the AQI user fee would apply to all commercial trucks, regardless of what they are carrying, including empty trucks and truck cabs. This addition is already codified under the current definition of
We received two comments from one commenter on the proposed changes to the fees for commercial trucks.
In the supporting documentation that accompanied the proposed rule, we indicated that the data that we had obtained from the Department of Transportation (DOT) regarding freight volume per truck between the years 2006 and 2021 suggested a 79 percent increase in the number of tons per truck during that time. The commenter stated that this truck crossing and freight data did not completely match its own data and calculations. Specifically, the commenter indicated that its data indicated lower carrying capacity per truck in 2021 (9.63 tons) and an average of 22,376 more truck crossings per year between 2006 and 2016. Assuming truck crossings to be the denominator by which we determined average freight volume, the commenter stated that its data indicated that average freight volume was in fact lower in 2006 through 2016 than we had presented it to be. While the commenter conceded that carrying capacity per truck had increased between 2006 and 2021, the commenter stated that carrying capacity had not increased to the magnitude presented by APHIS, and that these discrepancies resulted in an overestimation of agricultural risk. The commenter stated that this overestimation of agricultural risk had resulted in CBP erroneously believing that additional personnel were needed to inspect commercial trucks, and that the fee would be lower were it adjusted to reflect actual freight volume.
The commenter did cite data that differs from the data APHIS cited in the supporting documentation that accompanied the proposed rule, and the data in that supporting documentation may have been in error. However, the data the commenter presented does not directly or indirectly impact how the fee was set. Neither the disputed numbers nor the supporting document itself served as the basis for the fee, nor the analysis of fee impacts in the initial economic analysis. The fee for this conveyance is not derived from the performance of the industry, nor did we use cargo capacity as a proxy for the level of effort needed to inspect trucks. As with the other fees, the commercial truck fee results from total AQI commercial truck program costs divided by the number of truck crossings for FY 2017 through FY 2019 to arrive at the base unit cost.
The commenter itself noted that both its data and APHIS' data reported the same number of truck crossings per year from 2017 to 2020. As noted above, the supporting document that the commenter disputed did not serve as a basis for the fee. It was intended only to indicate that the freight volume for commercial trucks had increased since 2006, a contention that the commenter did not dispute in principle, only in degree. The purpose of the supporting document is to contextualize the changes in the carrying capacity in the industry, as well as illustrate the relative size and impact that the fee might have on the conveyance as a whole. To that end, though, we do note that the commenter's data does suggest that commercial trucks may have lower cargo capacity than our supporting documentation suggested. We have evaluated the economic analysis that accompanies this final rule in light of that information but determined that its assumptions and conclusions still hold.
Additionally, this supporting document was not used as the basis for the additional CBP staffing needs. As indicated previously in this document, CBP's staffing models calculated additional personnel needs based on estimated throughput as calculated in light of actual workload, in order to ensure that bottlenecks do not occur in port operations.
The commenter also expressed concerns about the transponder cost increasing from 40 to 60 times the per arrival fee. The commenter asked how we would continue to incentivize transponder use.
As we stated in the proposed rule and the supporting document, APHIS determined that the average truck transponder is used 90 times per year, cross-referencing truck border-crossing data and truck transponder purchase data. Charging 60 times the per crossing fee is still a 33.3 percent discount, compared to average transponder use. We consider a 33.3 percent discount compared to average transponder use a sufficient incentive for transponder use.
The same commenter stated that, because the percentage of increase for the transponder fee would significantly surpass the percentage increase for the individual per-crossing fee, the transponder would no longer be incentivized, and commercial truck operators could abandon the transponder in favor of the single arrival fee.
The CBP Transponder system does not track the individual number of crossings per transponder; instead, it tracks the total number of crossings. Collections for single payer and transponder crossings are separate. The number of single payer crossings is determined by dividing single payer collections by the fee rate. Single payer crossings are subtracted from total crossings to determine transponder crossings. We determined average transponder crossings by dividing total transponder crossings by total transponders purchased (transponder collections divided by transponder fee). Given that APHIS found that the average transponder is used 90 times a year, charging 60 times the per crossing fee still significantly incentivizes the transponder over the per crossing fee for the average commercial truck operator, despite the differences in percent increase between the two fees. It is possible that some truck operators who make fewer than 60 crossings will decide to pay the per crossing fee as a result of this rulemaking; however, we do not foresee the transponder being generally abandoned in the manner suggested by the commenter.
We acknowledge that we proposed to raise both the per arrival commercial truck fee and the multiple that results in the transponder fee. Additionally, while we proposed to phase in the increases to the per arrival fee, we did not propose to phase in the increase to the multiple: We proposed that the multiple would immediately increase from 40 times to 60 times. To help facilitate transponder use in the first year of implementation of the revised fee, we will set the fee at a multiple of 50 times the individual crossing fee for the period between October 1, 2024 and September 30, 2025. We have revised the regulatory text accordingly.
The commenter stated that APHIS should work with our counterparts in Canada and Mexico to develop policies that will mitigate the risk of pest importation or other potential threats while reducing, exempting, or eliminating fees and other regulatory costs impacting North America trade.
APHIS works collaboratively with our colleagues in Canada and Mexico to develop harmonized polices to mitigate the risk of pest importation. For example, APHIS is the United States' representative to the North American Plant Protection Organization, or NAPPO, a regional plant protection organization. Created in 1976, NAPPO coordinates the efforts among the United States, Canada, and Mexico to
Additionally, outside of the auspices of NAPPO, APHIS works closely with our North American National Plant Protection Organization (NPPO) counterparts, the Canadian Food Inspection Agency (CFIA) and Mexico's Servicio Nacional de Sanidad, Inocuidad y Calidad Agroalimentaria, to harmonize our approaches to phytosanitary risk to the extent possible. Examples of this collaboration include the United States-Canada Greenhouse-Grown Plant Certification Program (GCP) and the Netherlands bulb preclearance program. The GCP has been active since 1996 and allows greenhouse-grown indoor houseplants and outdoor bedding plants to move between Canada and the United States using a certification label in lieu of a phytosanitary certificate (PC), provided the plants meet the phytosanitary import requirements of both Canada and the United States. The GCP certification label eliminates the cost of a PC for certified nurseries. For the Netherlands bulb preclearance program, APHIS and CFIA have harmonized our operational workplan for imports since 2008.
Finally, as discussed previously in this document, APHIS has pursued measures to improve efficiencies and reduce costs associated with the AQI program.
However, the commenter's assumption that North American trade presents little or no sanitary and phytosanitary risk that merits AQI services is incorrect; under APHIS' regulations in titles 7 and 9 of the Code of Federal Regulations, there are numerous restrictions on the importation of animals, animal products, plants, and plant products from Canada and Mexico.
We note also that North American trade is no longer exclusively North American; for example, APHIS is aware that 194 countries send United States-bound freight through Canada seaports, and then across the border via truck and rail. The increased risk posed by commodities arriving through our North American trading partners makes it necessary to increase our level of effort to safeguard United States agriculture. This increased effort requires additional personnel, equipment, and facilities and, therefore, incurs additional costs. The AQI program must adjust the fees to recover these costs. In short, the elimination or exemption of AQI user fees for North American trade would significantly adversely impact full cost recovery because we would still need to provide AQI services to address the sanitary and phytosanitary risks posed by such trade.
The commenter stated that the information and data provided by APHIS does not explain how the proposed fee increases were calculated based upon the various services performed by APHIS inspectors. The commenter expressed concern that APHIS did not calculate the proposed fees based upon the current and future needs of the agency, but rather upon what they assume motor carriers can afford according to operating cost data.
The summary tables for the commercial truck fee calculation (tables 7 and 8 below) show that APHIS used actual cost data for fiscal years 2017 through 2019 for commercial truck, future costs for planned capital expenditures, and additional staffing, divided by number of truck arrivals per fiscal year to arrive at a unit cost. We then adjusted those unit costs to June 2022 dollars, averaged the unit costs across the 3 fiscal years, and finally adjusted that average unit cost for projected inflation. The discussion of fee rates relative to other costs of doing business was to illustrate relative economic impact of the fee, and not to serve as the basis for fee development.
The summary tables are intended to be a quick reference regarding fee development. For more comprehensive cost data information please see the full rollup reports from the APHIS AQI activity-based cost model on the APHIS website at
For October 1, 2024, October 1, 2025, October 1, 2026, fee rates, APHIS subtracted the January 1, 2024 rate from the October 1, 2027 rate, and divided by 4. This amount became the per phase increase. The per phase increase was then added to the previous phase amount until reaching the October 1, 2027 rate.
In summary, in response to comments regarding the commercial truck fee, we have lowered the cost of a transponder to 50 times the per arrival fee for the period between October 1, 2024 and September 30, 2025. The fees are otherwise being finalized as proposed.
Fees for inspection of loaded commercial railroad cars arriving at land ports in the United States are listed in current § 354.3(d)(1). The current fee is $2 per loaded railroad car arrival, with an option to prepay an amount 20 times the single-arrival fee for all arrivals of a commercial railroad car during a calendar year. We proposed to increase the user fee per arrival and to set the corresponding prepaid user fees at an amount 48 times the AQI user fee for each arrival.
As noted above, the existing regulations in § 354.3(d)(1) refer to AQI fees for inspection of
We also proposed to revise paragraph (d)(4) to provide for submission of remittance not only by The Association of American Railroads (AAR), and the National Railroad Passenger Corporation (AMTRAK), as is the case in the current regulations, but by individual railroad companies as well. This revision would more closely align our requirements pertaining to railroad car user fees with those of CBP as set out in 19 CFR 24.22(d).
We received two comments from one commenter on the proposed changes to the fees for commercial railroad cars.
The commenter opposed the proposed fee increases in general and the increase to the prepaid railroad car fee in particular. The commenter noted that, in the economic analysis that accompanied the proposed rule, we indicated that the number of railroad car arrivals has remained relatively steady, averaging approximately 3.5 million from 2014 to 2022. The commenter questioned why the per arrival fee and prepaid fee would increase significantly if arrivals had not commensurately increased.
The per arrival fee was derived by dividing the actual programs costs plus planned capital expenditures and additional staffing costs (adjusted for inflation) associated with providing AQI services for railroad cars by the number of anticipated arrivals. Accordingly, an increase or decrease in the forecasted number of arrivals would not itself have caused the fee to change, if aggregate costs remained correlated with arrivals. However, as stated in the proposed rule, the main reason for the per arrival fee increase for commercial railroad cars is that what falls under the definition of a railroad car as set forth in CBP's regulations in 19 CFR 24.22(d)(1) is now much larger than what the current inspection fee is designed to cover. The fees were designed to cover inspection costs for a railroad car that is essentially a single box on wheels. The typical railroad car in use today, however, consists of a multi-unit chassis with double stacked containers on wheels. This, in turn, has increased the amount of cargo in general arriving into the United States by rail. In sum, although arrivals have remained relatively constant, costs have increased significantly due to the change in size of railroad cars.
With regard to the increased cost of the prepaid fee, as stated in the proposed rule, based upon analysis of collections and arrival data, the average railroad car arrives 48.32 times per year. A prepaid multiple of 48 brings us significantly closer to full cost recovery than the present multiple of 20 times the per arrival fee. APHIS notes, however, that the prepaid railroad car user fee is optional, and, as we noted in the proposed rule, very few railroad companies use the prepaid option. If an entity determines that paying per arrival fee is more advantageous, they may do so.
The commenter stated that it was not clear that the fee increases are directly linked to the need for more resources and staff to inspect railroad cars specifically. The commenter noted that while costs for staffing and capital resources are noted generally, it is not clear if those costs are based on deficits experienced by the agency due to railroad car inspection duties.
APHIS made available a high-level cost summary as a supporting document with the proposed rule,
For October 1, 2024, October 1, 2025, October 1, 2026, fee rates, APHIS subtracted the January 1, 2024 rate from the October 1, 2027 rate, and divided by 4. This amount became the per phase increase. The per phase increase was then added to the previous phase amount until reaching the October 1, 2027 rate.
The commenter stated that the proposed rule did not appear to consider the use of technology by APHIS to reduce inspection costs, in lieu of raising fees, though the commenter did not specify what kinds of technology APHIS might use to reduce inspection costs.
As we discussed above, the AQI program has made significant efforts to reduce program costs while maintaining a robust agricultural safeguarding program. APHIS also notes that the evaluation, procurement, maintenance, and upgrading of technology also carries a cost, as well as the cost of training personnel or the hiring of new personnel skilled in handling the technology.
In summary, we are finalizing the commercial railroad car fee as proposed.
APHIS inspects international commercial aircraft arriving at airports in the customs territory of the United
In addition to the proposed fee changes, we proposed to remove paragraph (e)(2)(iv) to eliminate the current fee exemption for aircraft with 64 or fewer seats.
We also proposed to require monthly, rather than quarterly, remittances for the commercial aircraft fee, clarify our remittance requirements, and provide for electronic payments and statements. We further proposed to include in the regulations information on agents responsible for ensuring compliance with paying the user fees and a requirement for entities to notify APHIS in the event they have a change in personnel responsible for fee payments.
We received five comments on these proposed changes. All the commenters were generally opposed to the proposed changes.
A commenter stated that we needed to disclose the number of aircraft inspected per inspector and number of plant pests or noxious weeds found during these inspections per day, month, or year, in order to validly assess the efficacy of the current inspections and the need for the fee increases.
The number of aircrafts inspected per inspector is materially irrelevant to evaluating the base costs for the proposed fee. In the AQI cost model used to set the proposed fee, we evaluated the aggregate time currently needed to conduct all commercial aircraft inspections, whether they were conducted by one inspector or multiple inspectors at a particular port of entry. We do note, however, that CBP's staffing model indicated that additional staff were needed to inspect aircraft and air cargo to match personnel to throughputs and workload.
As we discussed above, a host of factors can contribute to the sanitary and phytosanitary risk associated with a particular arrival. This includes the cargo, the country of departure, the route chosen, the port of entry, and the time of year when the shipment takes place. Furthermore, the sanitary and phytosanitary risk in foreign regions that ship to the United States is not static and past import history is not necessarily indicative of future trends. A disease or pest of concern not previously known to exist in the country could be introduced; climatic conditions for a particular season could be especially conducive to pest populations (this is becoming increasingly common due to the climatic volatility associated with climate change); industry downturns could reduce monitoring and suppression efforts at places of production; or regime change could downsize the foreign government's sanitary and phytosanitary efforts. Sometimes multiple factors can occur simultaneously.
It is important to note, however, that the introduction and establishment of plant pests within the United States has significant economic consequences both for APHIS and for the affected industries. As we discussed in the proposed rule, APHIS has spent more than $1.3 billion on the eradication and quarantine of wood, tree, and forest pests such as Asian Longhorn Beetle, Emerald Ash Borer, and Spotted Lantern Fly, in addition to the direct and indirect losses experienced by the affected industries themselves. Even plant pest outbreaks in a single State can prove quite costly: APHIS recently had to request $103.5 million in emergency funding to address the effects of fruit fly outbreaks in California.
The same commenter stated that the proposed rule appeared to state that APHIS uses the commercial aircraft fee and international passenger fee to cross-subsidize other fee areas. The commenter specifically cited the following from the preamble of the proposed rule: “Collections from the air sector (commercial aircraft and commercial air passenger) are a combined annual average of over 85 percent of total AQI collections. If this final rule is adopted as proposed, APHIS estimates that by FY 2028 the combined air sector would account for approximately 68 percent of total collections, assuming future arrivals match average arrivals for FY 2017 through FY 2019.” The commenter asserted that APHIS failed to explain the anticipated reduction in percentage of total collections paid by the air sector, and whether this indicates that the air sector industry overpaid in FY 2017 through FY 2019 and thus cross-subsidized other user fee areas.
As discussed in the proposed rule, APHIS updated its AQI cost model to allocate certain costs based upon the number of frontline FTE hours. In contrast, in the 2015 rulemaking, the cost model allocated those costs based upon the number of arrivals. Our updated model resulted in more accurate cost allocations based upon level of effort in each area, and the percentage of total collections associated with the air sector shifted accordingly. No cross-subsidization of other modes occurred between FY 2017 and FY 2019. Revenue from other fees will increase more than aircraft and air passenger fees, making the relative revenue from aircraft and air passengers a smaller percentage of total revenue. We disagree with the commenters' interpretation of our statements in the proposed rule.
A commenter stated that APHIS did not recognize fundamental changes since 2020 to CBP's customs clearance process, specifically for e-Commerce-driven parcel processing and de minimis (Entry Type 86) shipments.
APHIS did not propose to charge a fee for individual parcels. We note, however, that entry type has no bearing on sanitary or phytosanitary risk.
A commenter stated that international mail shipments already pay customs fees.
The customs fees mentioned by the commenter are unrelated to AQI services, but rather other customs services provided by CBP. International mail shipments pay specific Customs entry fees to CBP, but those are not for AQI inspections. APHIS does not charge an AQI user fee specifically for international mail shipments. Rather, those costs are allocated to the fee for commercial aircraft. While the AQI program is related to the customs entry process, funds collected by CBP through their various fees do not fund AQI activities. AQI cargo activities are funded through AQI user fees and not CBP fees.
A commenter stated that users were asked to accept the proposed fees at face value without any means to review how APHIS arrived at the proposed user fees outlined in the proposed rule.
We disagree. APHIS AQI has prioritized transparency in this rulemaking and gone to great lengths to make its data available. As we explained above, the APHIS AQI cost model data was cited in the proposed rule and made available on the APHIS website. We also referenced the data in the stakeholder webinars. We also provided the data and link via stakeholder announcement, and we further explained via a dedicated AQI cost model video and corresponding stakeholder announcement. APHIS web analytics showed an increase in AQI cost model data traffic following each of the above engagements. At least one stakeholder specifically referenced the data in their comment, making it clear the data was available and usable by stakeholders for the purpose of notice
For October 1, 2024, October 1, 2025, October 1, 2026, fee rates, APHIS subtracted the January 1, 2024 rate from the October 1, 2027 rate, and divided by 4. This amount became the per phase increase. The per phase increase was then added to the previous phase amount until reaching the October 1, 2027 rate.
A commenter stated that APHIS excluded data showing potential AQI program surpluses from 2016 to the present, if AQI fees had been adjusted for inflation in the 2015 rulemaking.
The 2015 rulemaking did not adjust the fees for inflation, and positing a counterfactual scenario in which it did is materially irrelevant to assessing the proposed fees. The fees in this proposed rule were based on actual costs for 3 fiscal years, plus capital planning and future staffing costs, all adjusted for inflation. The fees were developed using Activity Based Costing to support full cost recovery.
A commenter stated that the fee exemption for aircraft with 64 or fewer seats should remain because the commenter claimed that our study was predicated on a misunderstanding of the reason for the exemption. The commenter stated that, in the 1992 rule that had established the exemption, APHIS had cited two bases for the exemption to the fee. The first was that such aircraft required little to no phytosanitary inspection. The second was that such an exemption was predicated on the per-passenger cost differential that made it “difficult for small commuter airlines to compete with larger airlines for business.” The commenter further contended that our study had assumed that exempted aircraft had an increased exposure risk to plant pests since the 1992 exemption was established, without identifying the actual increased phytosanitary risk now associated with such aircraft, which the commenter stated could only be substantiated through pest detections on exempted aircraft. Finally, the commenter stated that if AQI services are not being provided for such exempted aircraft, removing the exemption would charge a user fee in the absence of services provided, and thus violate the FACT Act.
In 1991, when this fee exemption was first established it exempted aircraft with 30 or fewer seats which are not carrying cargo and are not equipped to offer inflight food service. We explained that we exempted those aircraft because we did not provide AQI services to the aircraft (56 FR 37483, August 7, 1991). In 1992, when we proposed to expand the fee exemption to aircraft with 64 or fewer seats, we explained that this was intended to exempt commuter aircraft that require little or no inspection from the per aircraft inspection fee (57 FR 56862, December 1, 1992). In other words, the initial exemption for aircraft with 30 or fewer seats was based on our determination that no AQI services were being provided for such aircraft, and the expansion to 64 or fewer seats was based on an assumption that such aircraft were commuter in nature and would not require such an inspection.
It is worth noting that the 1992 proposed rule did not also predicate the exemption on the per-passenger cost differential between small commuter airlines and larger airlines. The language cited by the commenter was articulated in the section of the preamble that evaluated the economic impacts of the rule pursuant to Executive Order 12291 (since rescinded) and the Regulatory Flexibility Act. We were characterizing the effects of the rulemaking on small entities, not articulating a basis for the rulemaking.
Now, 30 years after that rulemaking, CBP does in fact conduct inspections on aircraft with 64 or fewer seats. These inspections incur costs on the part of the AQI program. The FACT Act specifically authorizes us to prescribe and collect fees sufficient to cover the cost of providing AQI services in connection with the arrival of commercial aircraft at a port in the customs territory of the United States (21 U.S.C. 136a(a)(1)(A)).
To address whether such inspections are warranted, we re-evaluated the sanitary and phytosanitary risks posed by aircraft with 64 or fewer seats and the results of this pathway analysis indicated that aircraft with 64 or fewer seats do pose phytosanitary risk to the United States. Specifically, we found that the variety of aircraft origins worldwide (countries/airports) and destinations in the United States (States/airports) for aircraft with 64 or fewer seats was similar to or slightly higher than those of aircraft with 65 or more seats. For comparison and context, between FY 2016 and FY 2018, aircraft with 65 seats or more averaged 2,272 routes. With an average of 1,224 flight routes from calendar years 2016 to 2018, aircraft with 64 or fewer seats had many risks of exposure to hitchhiking pests, as well as many risks to expose pests to a large variety of environments in the United States. Exposure risk was used in order to characterize sanitary and phytosanitary risk because pest detections on commercial aircraft are not categorized based on whether the aircraft has 65 or more or 64 or fewer seats. In sum, while inspection may not have been necessary based on phytosanitary conditions in 1993, when we originally established the exemption, that is no longer the case today.
A commenter stated that our basis for removing the exemption was to create an additional funding stream for the AQI program.
Our basis for removing the exemption, as articulated in the proposed rule and its supporting documentation, and reiterated above, is to fulfill our agricultural safeguarding mandate and achieve full cost recovery. Our articulated assumptions for the exemption in 1991 and 1992, respectively, are no longer indicative of air travel conducted by planes with 64 or fewer seats, and the current operational dynamics of such travel carry a sanitary and phytosanitary risk that merits AQI services.
In light of the fact that small commercial aircraft have not previously been subject to the fee, APHIS believes that additional time is warranted to allow operators to come into compliance. Accordingly, APHIS is delaying the effective date for removal of the exemption for aircraft with 64 or fewer seats until April 1, 2025.
Two commenters stated that APHIS should not change from quarterly to monthly fee remittances, because it would increase the paperwork burden on airlines. Another commenter stated that monthly remittance would increase the burden on express carriers and would be out of step with other user fees they remit, which are almost all done quarterly.
We do not consider, and the commenters did not provide any evidence, that the revised remittance procedures to be more burdensome than the current procedures. Under the proposed rule, payments would be remitted on a monthly basis after a 90-day grace period—for example, January fees would be remitted to APHIS at the end of April, February fees at the end of May. Nonetheless, monthly remittance itself is necessary. Without the authority to prescribe and collect fees to maintain a reasonable balance in the AQI account, APHIS needs to move to a monthly remittance schedule to ensure smoother and more stable cash flow. In terms of paperwork burden, we expect a negligible difference between quarterly and monthly reporting, because the proposed rule does not change the information required for an individual month. For example, remittance reporting for the month of October is identical regardless of reporting only for October or whether issuing a quarterly report for October, November, and December of any given year.
In addition, we note that the revised procedures should make aspects of reconciliation and remittance easier, rather than harder. For example, the new monthly remittance schedule provides for a 90-day reconciliation period for each month, whereas the current quarterly remittance schedule provides a 90-day reconciliation period for the first month of the quarter, a 60-day reconciliation period for the second month of the quarter, and only a 30-day reconciliation period for the third month of the quarter.
Another commenter noted that our proposed rule required the use of remittance worksheets as part of remittance procedures. The commenter expressed opposition to the use of the remittance worksheet as burdensome.
Our intent in proposing to require the use of the worksheet was primarily as a service to regulated entities in order to facilitate remittance; as noted in the proposed rule, entities currently submit remittance in a variety of formats, and some entities submit more information than is necessary. We believed that use of the worksheet would facilitate remittance processes for regulated entities by making them more standardized and streamlined.
Given the comments received that stated that the worksheet could be more burdensome than the status quo, however, we are stating in this final rule that the remittance worksheet is not mandatory. Entities may elect to use it depending on whether or not they find it less burdensome than current remittance practices. However, APHIS again notes that while the worksheet is not mandatory, there is mandatory information that must be provided in remittance statements, and also notes that many entities provide information in their remittance statements that goes beyond APHIS' requirements. For those entities that choose to use existing
The same commenter stated that APHIS had not made the remittance worksheet available for review as part of the supporting documents for the proposed rule. Without viewing the worksheet, the commenter stated that they could not ascertain whether it would be less burdensome or more burdensome than the status quo. The commenter also stated that we had an obligation to make the worksheet available during the comment period in order for commenters to provide informed comments on the accuracy of the estimate of burden articulated in the Paperwork Reduction Act section of the proposed rule.
While it is true that APHIS omitted the worksheet from the specific suite of supporting documents associated with the proposed rule, the remittance worksheet has been available on the APHIS website at
Nonetheless, as previously stated, in this final rule, use of the remittance worksheet is not mandatory.
Finally, as noted above, in reviewing the data on which the proposed fee increases were based, we noticed that the total costs associated with commercial aircraft were accurate, but the denominator (number of commercial aircraft arrivals) was not accurate, and did not include precleared aircraft. APHIS has corrected this error, resulting in lower commercial aircraft fees than proposed. In this final rule, the commercial aircraft fees are as follows: $281.39 for FY 2025, $300.78 for FY 2026, $320.61 for FY 2027, and $340.90 for FY 2028. As noted above, we also are not requiring the use of a worksheet for the remittance of the fees.
AQI user fees for inspection of commercial air passengers are listed in § 354.3(f)(1). The current fee is $3.83 per arrival. We proposed to adjust the AQI user fee per arrival for commercial air passengers. The commercial air passenger fee will increase relative to the current fee.
Similarly, the AQI user fee for inspection of commercial cruise vessel passenger fee is also listed in § 354.3(f)(1). The current fee is $1.68 per arrival. We proposed to adjust the AQI user fee for inspection of commercial cruise passengers. The commercial cruise vessel passenger fee will decrease relative to the current fee. The change in the cruise passenger fee owes mainly to the change in allocation criteria from number of inspection events (passengers) to FTE hours.
We also proposed several clarifications in paragraph (f) of § 354.3 related to applicability, payment, and handling of international passenger user fees collected and remitted for trips not taken. In proposed paragraph (f)(1), we added language to clarify that infants, traveling with or without documents, whether in assigned seats or held in an adult passenger's lap, are subject to AQI user fees, as they are subject to the same inspection as other passengers. This harmonizes APHIS regulations with CBP regulations in 19 CFR 24.22(g), and CBP's definition of
In proposed changes to paragraphs (f)(5) and (6), we shortened the period for payment of international passenger fees and submission of remittance reports from quarterly to monthly, in order to recover the costs of inspecting international passengers in a timely manner, as discussed above with respect to the commercial aircraft fee. Also as discussed above in relation to paragraph (e) of § 354.3, operators would have 90 days to reconcile their books for each month. Airlines and cruise lines would remit passenger fees to APHIS on a monthly basis (12 times per year) versus the current quarterly basis (four times per year) and would have 90 days to reconcile their books for each month, as opposed to the current 31-day period after the close of the quarter. For example, under this final rule, remittance of fees collected in January of a given year would occur at the end of April of that year (90 days after the close of January); remittance of fees for February of a given year would occur at the end of May of that year; remittance of fees for October of a given year would occur at the end of January of the following year, etc.
We proposed to add new paragraphs (f)(5)(v) and (vi), which would cover the handling of international passenger AQI user fees collected and remitted for trips not taken. Proposed paragraph (f)(5)(v) stated that the entity issuing the ticket or travel document (
Proposed paragraph (f)(5)(vi) described the process for requesting a credit from APHIS for international passenger AQI user fees collected and remitted prior to refunding a ticket purchaser for an international passenger AQI user fee for a trip that was not taken. In such cases, the ticket issuing entity would have to submit a revised remittance worksheet or written statement. In keeping with other proposed changes to remittance timeframes, the revised remittance worksheet or written statement would be completed and filed for each month during which the ticket or travel document-issuing entity certifies that there was a decrease in the number of passengers and international passenger AQI user fees collected.
We received three comments about the proposed changes to the remittance procedures. The commenters generally opposed the proposed changes.
One commenter agreed with the intent of proposed paragraph (f)(5)(vi), which would allow airlines to request a credit from APHIS. The commenter stated that in such instances, AQI services are not actually provided, so a mechanism of recovering the remitted user fee for those services is warranted. The commenter also noted that the paragraph could be construed to mean that airlines must remit all fees collected to APHIS, and then only subsequently revise the remittance by requesting credit for flights not taken. The commenter stated that in instances when the flight is not taken and a refund occurs before an initial remittance of the fee is due to the Agency, airlines should be authorized to reconcile this in the initial remittance, rather than a subsequent revision.
The commenter strongly objected to proposed paragraph (f)(5)(v), however. In addition to citing numerous logistical obstacles with its implementation, the commenter stated that, in proposing to prescribe the method by which airlines must refund fees to passengers, APHIS had exceeded its statutory authority under the FACT Act.
After reviewing this comment, we acknowledge that the commenter raised points that merit further consideration. APHIS has therefore elected not to finalize paragraph (f)(5)(v).
We will retain the substance of paragraph (f)(5)(vi), though we have renumbered to paragraph (f)(5)(v). We have modified the proposed provisions of that paragraph in order to reflect the fact that the use of a remittance worksheet will be optional. Additionally, we clarify that the provision applies only in instances when an airline requests credit after it
Finally, based on a review of data, the fee for commercial air passengers will be lower than originally proposed. The total costs associated with commercial air passengers was accurate; however, the denominator, that is, the number of air passengers, did not include precleared air passengers at certain ports of departure. APHIS corrected this error, resulting in a lower air passenger fee than proposed. In this final rule, the fees are as follows: $3.71 in FY 2025, $3.84 in FY 2026, $3.98 in FY 2027, and $4.12 in FY 2028.
The summary tables for AQI International Air Passenger Fee Calculation (tables 15 and 16 below) show that APHIS used actual cost data for FY 2017 through FY 2019 international air passengers, future costs for planned capital expenditures and additional staffing, divided by number of international air passengers per fiscal year to arrive at a unit cost. APHIS adjusted those unit costs to June 2022 dollars, averaged the unit costs across the 3 fiscal years, and finally adjusted that average unit cost for projected inflation. The summary tables are intended to be a quick reference regarding fee development. For more comprehensive cost data information please see the full rollup reports from the APHIS AQI activity-based cost model available on the APHIS website at
For October 1, 2024, October 1, 2025, October 1, 2026, fee rates, APHIS subtracted the January 1, 2024 rate from the October 1, 2027 rate, and divided by 4. This amount became the per phase increase. The per phase increase was then added to the previous phase amount until reaching the October 1, 2027 rate.
We received no comments on the AQI cruise vessel passenger fee and are finalizing it as proposed.
The summary tables for AQI Cruise Vessel Passenger Fee Calculation (tables 17 and 18 below) show that APHIS used actual cost data for FY 2017 through FY 2019 by user class, future costs for planned capital expenditures and additional staffing, divided by number of users per fiscal year to arrive at a unit cost. APHIS adjusted those unit costs to June 2022 dollars, averaged the unit costs across the 3 fiscal years, and finally adjusted that average unit cost for projected inflation. The summary tables are intended to be a quick reference regarding fee development. For more comprehensive cost data information please see the full rollup reports from the APHIS AQI activity-based cost model available on the APHIS website at
For October 1, 2024, October 1, 2025, October 1, 2026, fee rates, APHIS subtracted the January 1, 2024 rate from the October 1, 2027 rate, and divided by 4. This amount became the per phase increase. The per phase increase was then added to the previous phase amount until reaching the October 1, 2027 rate.
AQI treatments are performed on some agricultural goods as a condition of entry, and additional treatments are performed when an actionable pest (
We received seven comments about the proposed changes to the treatment monitoring fee. The commenters generally opposed the proposed changes.
Commenters were generally opposed to this proposed change. They raised a number of concerns about moving to an hourly charge, including the magnitude of the fee increases for certain treatment types, uncertainty over how the hourly rate would be applied given nonuniform standards of service and if new efficiencies (
After reviewing the comments, we agree with the commenters that these issues merit further consideration before making changes to the AQI treatment monitoring fees. We have therefore decided not to proceed with amending § 354.3(h) at this time. We will address the restructuring of the AQI treatment monitoring fees in a future rulemaking. APHIS will keep the per-enclosure fee in place.
However, we received no comments, and are aware of no evidence, that treatment monitoring services are not subject to inflationary forces. Therefore, we are incorporating annual adjustments for projected inflation
To improve monitoring, compliance, and enforcement of this regulation, we proposed to add a new paragraph (j), which would contain records retention requirements related to AQI user fees. Proposed paragraph (j)(1) provided that entities responsible for collecting and paying the fees and their agents would be responsible for maintaining all records required under § 354.3, as well as legible copies of contracts and other agreements made between responsible persons and their agents. Under proposed paragraph (j)(2), all parties responsible for collecting and paying the fees would have to maintain sufficient documentation for APHIS, CBP, and authorized representatives to verify the accuracy of the fee collections and remittance worksheets or written statements. Such information would have to be made available for inspection upon APHIS and CBP's demand. Such documentation would be required to be maintained in the United States for a period of 5 years from the date of remittance calculation. Each entity covered by this proposed requirement would have to provide to APHIS and CBP the name, address, and telephone number of a responsible officer who is able to verify any statements or records required to be filed or maintained under this section and to promptly notify APHIS and CBP of any changes in the identifying information previously submitted. Currently, CBP conducts U.S. Government Accountability Office yellow book standard audits of the commercial aircraft fee and international air passenger fee on APHIS' and CBP's behalf. APHIS seeks to expand this arrangement to include audits of the AQI program's commercial railroad car fee and international cruise passenger fee.
Commenters stated that the proposed 5-year record retention period does not align with current airline industry practice and other Federal agency policies (
This change is being made to harmonize APHIS regulations with CBP's Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) fee regulations in 19 CFR 24.22(g)(7), which require a 5-year retention period. As we explained in the proposed rule, CBP audits the AQI aircraft and international air passenger fee collections on APHIS' behalf. CBP requires the 5-year-retention period because the statute of limitations for litigation purposes is 6 years. The 5-year-retention period gives us the time needed to state what is owed in the event of non-payment as well as time to bring legal action if necessary to collect. APHIS will implement these changes in this final rule.
We proposed to add a new § 354.3(k), “Severability,” to address the possibility that this final rule, or portions of this final rule, may be challenged in litigation. It is APHIS' intent that the individual sections of this final rule be severable from each other, and that if any sections or portions of the regulations are stayed or invalidated, the validity of the remainder of the sections shall not be affected and shall continue to be operative. We received no comments on this proposed addition and will implement it in this final rule.
Therefore, for the reasons given in the proposed rule and in this document, we are adopting the proposed rule as a final rule, with the changes discussed in this document.
This final rule has been determined to be significant under section 3(f)(1) of Executive Order 12866, as amended by Executive Order 14094, “Modernizing Regulatory Review,” and, therefore, has been reviewed by the Office of Management and Budget.
We have prepared an economic analysis for this rulemaking. The economic analysis provides a cost-benefit analysis, as required by Executive Orders 12866 and 13563, which direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. The economic analysis also provides a final regulatory flexibility analysis that examines the potential economic effects of this final rule on small entities, as required by the Regulatory Flexibility Act. The economic analysis is summarized below. Copies of the full analysis are available on the
The Food, Agriculture, Conservation and Trade (FACT) Act of 1990 (as amended) [21 U.S.C. 136a] authorizes the Secretary of Agriculture to prescribe and collect fees sufficient to cover the cost of providing agricultural quarantine and inspection services in connection with the arrival at a port in the customs territory of the United States, or the preclearance or pre-inspection at a site outside the customs territory of the United States, of an international passenger, commercial vessel, commercial aircraft, commercial truck, or commercial railroad car, and to cover the cost of administering the AQI program. The United States Department of Agriculture's (USDA's) Animal and Plant Health Inspection Service (APHIS) Plant Protection and Quarantine (PPQ) is responsible for developing and setting the Agricultural Quarantine and Inspection (AQI) user fee schedule, and related regulatory policy. Periodically, APHIS updates the schedule of rates paid by users via the rulemaking process. Due to a variety of factors, the current AQI fee schedule results in
APHIS is making a number of revisions to the regulations that govern the user fee rates, and related regulatory requirements for maritime vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international passengers on airlines and cruise ships. The revisions make adjustments to the cost model that is used to calculate the fees. Those revisions incorporate inflation into the user fees, including the fee for treatment monitoring.
This final rule will also eliminate an exemption from the commercial aircraft fee that currently applies to commercial aircraft with 64 or fewer seats that meet certain regulatory requirements; eliminate an exemption from the commercial vessel fee that currently applies to commercial barges operating between Canada and the United States that meet certain regulatory requirements; increase the “per arrival” multiple used to calculate the fee for a multiple-use transponder for commercial trucks; as well as increase the “per arrival” multiple used to calculate the prepaid railroad car fee and apply the fee to all arriving railroad cars.
APHIS has decided not to restructure the treatment fee in this final rule. Rather, we are retaining the per-enclosure treatment fee, while incorporating annual inflation adjustments for this fee. Additionally, based on comments received, APHIS has created a reduced user fee rate for commercial vessels operating solely between the United States and Canada and within either the Great Lakes or a region along the coastline between Alaska and Oregon, provided that the vessels meet certain requirements.
This final rule will also update remittance procedures to facilitate timely submission of fees. Finally, we have made editorial revisions in order to clarify intent in the regulations.
The Agricultural Quarantine and Inspection (AQI) Program implements a continuum of exclusion strategies and activities that mitigate the plant and animal health risks associated with the spread of pests and diseases due to global trade, international travel, or the smuggling of prohibited agricultural and related products. APHIS uses an Activity-Based Cost (ABC) Model to calculate the individual user fees. First, costs are allocated to a series of activities. Next, the costs assigned to those activities are allocated to the fee areas based on the level of effort associated with each fee area. For example, the costs associated with the cargo inspection activity (which include the costs of providing the service, as well as the administrative and overhead costs associated with providing the service) are allocated to the commercial vessel, truck, railroad car, and aircraft fees, based on the level of effort in each of those fee areas. This cost allocation approach avoids cross-subsidization (
When the cost of providing AQI services and the fees paid to fund these services do not align, adjustments are a necessary step in reaching the goal of full cost recovery. Services in the AQI program must be provided, but when the user fee is not covering the costs, the user of the service is not bearing the true cost of providing the service. This final rule will benefit the public by continuing to ensure that the fees received from users for providing necessary AQI services align with the expenditures associated with providing those services.
AQI services protect American agriculture and natural resources from sanitary and phytosanitary risks. The spread of invasive species harms domestic agricultural producers and damages the natural environment. Imported freight constitutes a major phytosanitary risk. The wide diversity of origins and commodities present multiple opportunities for pests to infest a product or wood packing material. AQI services are provided to mitigate such phytosanitary risks. To ensure that the expenditures on AQI services and the fees applied to those services align, adjustments to the fees are necessary. Those most likely to be impacted by this final rule are international air and sea passengers, businesses within the truck, rail, sea, and air transportation sectors, and providers of treatment services. While users of AQI services do incur costs in the form of user fees, these user fees enable the government to recover the costs of providing AQI services. However, the associated revenues do not currently align with the costs of providing these AQI services and administering the AQI program.
Individual importers or passengers may experience some financial burden from the establishment of or increase in user fees (or relief when a fee is reduced), but the AQI services are already being provided and thus are already counted as government costs. The revenue from user fees for services provided are intended to cover the expenditures for those services, a concept known as transfer payments. Examples of transfer payments include fees paid to government agencies for services provided by the agency. Federal regulations with transfer payments are assumed to have a one-to-one effect, balancing benefits and costs.
The fee schedule will better reflect the costs of AQI services provided to commercial vessels, commercial trucks, commercial railroad cars, commercial aircraft, and international air and sea passengers arriving at U.S. ports (table B).
The air passenger fee will increase from $3.83 to $4.12 in FY 2028. The total fee increase of $0.29 will be approximately a 7.6 percent increase from current fees, but only a 0.05 percent increase in the average price of an international round-trip airfare.
The commercial aircraft fee will increase from $225 to $340.90 per arrival in FY 2028. This increase of $115.90 will be about a 51.5 percent increase from the current fees. Between 2013 and 2019 the volume of imports into the United States by air increased by eight percent (82 million kg) and the value increased by 57 percent in constant dollars. Even after the 51.5 percent increase, the commercial aircraft fee is still the equivalent of 0.05 percent of the value of goods being imported by air. In terms of the cargo alone, the 2028 commercial aircraft fee rate under this rulemaking represents approximately $0.069 in dollars-per-kilogram imported by air generally. In addition, the commercial aircraft user fee constitutes a small portion of the expenses associated with commercial aircraft. And moreover, most international arrivals have passenger airfares as a primary revenue source. Even with the commercial aircraft fee increasing by $115.90 by 2028, the commercial aircraft user fee is equivalent to approximately five minutes of operating costs for aircraft.
The commercial aircraft user fee is not currently applied to the international arrivals of certain commercial aircraft with 64 or fewer seats. Commercial aircraft with 64 or fewer seats comprised approximately 10 percent of arriving international flights from 2016 to 2018. This final rule will result in the removal of this exemption.
In light of the fact that small commercial aircraft have not previously been subject to the fee, APHIS believes that additional time is warranted to allow operators to come into compliance. Accordingly, APHIS is delaying the effective date for removal of the exemption for aircraft with 64 or fewer seats until April 1, 2025.
The commercial aircraft fee is based on the average cost of clearing commercial aircraft and their cargo. The cost associated with any specific aircraft, whether small or large, also depends on a variety of other factors because the phytosanitary risk posed by a particular aircraft is based upon the country of origin, countries transited, type and volume of cargo, country of origin of the cargo, and environmental conditions at point of origin and final
Domestic flights are not subject to the commercial aircraft fee. For most operators of small commercial aircraft, domestic flights are the greatest portion of their operations and associated revenue. The removal of the exemption only affects international arrivals of aircraft with fewer than 65 seats. The commercial aircraft fee is not derived from the financial performance of the industry. Like all AQI user fees, this fee is based solely on the cost of providing AQI services for this mode of conveyance between FY 2017 and FY 2019, plus forecasted staffing and capital costs, adjusted for inflation. Because we do not have explicit data on the per-flight revenue, profit margins, and competitive landscape affecting international arrivals of commercial aircraft with 64 or fewer seats, we cannot make specific conclusions as to how the collection of this user fee will affect individual businesses. Approximately 7 percent of the flights of the top 5 small aircraft operators, and less than 5 percent of the flights of the top 10 operators, are international arrivals. This provides context for the scale of the collections and illustrates the impact that the fee might have on the affected entities.
The commercial vessel fee will increase from $825 to $3,139.06 by FY 2028. Some vessels operating in the Great Lakes or Cascadia areas will be eligible to pay a reduced commercial vessel fee. A variety of factors contributed to the commercial vessel fee increase. Among these were an increase in the cost of AQI services across the pathway, an expansion of the average ship cargo capacity, and an increase in the level of effort required to inspect the average vessel. Even with the commercial vessel fee increasing by up to 280 percent to $3,139.06 by FY 2028, the commercial vessel fee remains very small relative to other vessel operating expenses. It is equivalent to approximately 2 percent of a single day's fuel consumption for a moderately sized container ship.
From 2016 through 2018, an annual average of 1,405 commercial barges arrived from Canada into the United States, most of which are exempt from the current commercial vessel AQI fee. Vessel companies and ports facilitating the movement of currently exempted barge shipments from Canada and the United States will be affected. APHIS has concluded that barges from Canada that are currently exempted do pose a phytosanitary risk and require inspection and payment of the associated fee. Barges operating in the Great Lakes and Cascadia areas also require inspection and a payment of a fee. However, those meeting certain additional conditions will be eligible to pay a reduced fee, provided their cargo meets the requirements. The reduced fee represents approximately $.00025 per kilogram imported by barge. These fees are not derived from the financial performance of the industry. This information provides context for the scale of the collections and illustrates the impact that the fee might have on the affected entities. Because we do not have explicit data on international barge traffic revenue, profit margins, and the competitive landscape affecting arrivals of currently-exempt barges from Canada, we cannot make specific conclusions as to how the collection of this user fee will affect individual entities.
The commercial truck fee will increase from $7.29 to $15.55
The commercial railroad car fee will increase from $2 to $8.72 per arriving railroad car by 2028, a total increase of $6.72. Between 2013 and 2019, imports into the United States by rail remained relatively constant, but technology improvements have allowed for a reduction in the number of railroad cars assessed the commercial railroad car fee. Even after a total increase of approximately 337 percent, the commercial railroad car fee is approximately 0.029 percent of the value of goods being imported on by railroad car. The user fee in 2028 in dollars-per-kilogram for commercial railroad cars generally is approximately $0.0004. Limitations in the amount and nature of data available to the agency make it difficult to develop specific conclusions as to how these fee changes will affect international commercial railroad car arrivals overall. Like all AQI user fees, this fee is based solely on the cost of providing AQI services for this mode of conveyance between FY 2017 and FY 2019, plus forecasted staffing and capital costs, adjusted for inflation.
The international cruise vessel passenger fee will decline by 31 percent initially, and still be 21 percent lower than the current fee by 2028, an overall decline of $0.29 per passenger arrival. Limitations in the amount and nature of data available to the agency make it difficult to develop specific conclusions as to how small fee changes will affect international cruise passenger arrivals overall. However, a decrease of $0.29 in the fee represents less than a 0.02 percent decrease in the cost of a 7-day cruise.
APHIS monitors phytosanitary treatments to ensure that they are conducted as prescribed. APHIS proposed to shift the treatment monitoring fee to an hourly basis rather than a per-enclosure basis, and to make adjustments to the remittance practices for the treatment monitoring fee. Based on the comments received, we have decided not to make that structural revision to our AQI treatment monitoring fee or the remittance practices in this final rule. APHIS will keep the per-enclosure fee in place with annual adjustments for projected inflation, and the remittance practices will remain unchanged at this time.
APHIS estimates the total annualized cost of the paperwork and recordkeeping associated with this final rule to be $70,061. Reporting and recordkeeping requirements associated with this final rule are discussed under the heading “Paperwork Reduction Act.”
The Small Business Administration has set small-entity standards for the transportation sectors. Small entities make up between 92 percent and 99 percent of each of the regulated industries, though the size data do not distinguish between transportation firms that operate internationally and those firms that only operate within the United States. The impacts of this final rule are likely to be limited for all entities within the affected industries, including small entities. While most businesses that will be affected by this final rule are likely to be small, for the reasons discussed further in the Final Regulatory Flexibility Analysis, we believe that the changes set forth in this final rule satisfactorily accomplish the regulatory objectives while minimizing impact on small entities. The provisions of this final rule are consistent with ensuring a level of AQI services commensurate with that required to safeguard American agriculture and natural resources from sanitary and phytosanitary risks.
This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are inconsistent with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule.
This final rule has been reviewed in accordance with the requirements of Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments.” Executive Order 13175 requires Federal agencies to consult and coordinate with Tribes on a government-to-government basis on policies that have Tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes or on the distribution of power and responsibilities between the Federal Government and Indian Tribes.
The Puyallup Tribe has requested Tribal consultation regarding this final rule. APHIS will coordinate with the Office of Tribal Relations to ensure that meaningful consultation occurs.
Pursuant to subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996, also known as the Congressional Review Act (5 U.S.C. 801
In accordance with section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
New information collection requirements created by the regulations of this final rule include information collection, reporting, and recordkeeping requirements in the form of paper, electronic submissions, and information systems. In conjunction with the changes to provide for cost recovery for services, we have considered each change and their impact(s) on these burdens. These changes concern adjusting fee amounts, adjusting caps on certain prepaid fees, removing exemptions, and providing electronic payments and statement options. Estimates include additional respondents, responses, and burden estimates across all activities affected by this rule.
As described above, APHIS received several public comments on the proposed rule, and the following changes were made to the final rule:
• We have lowered the fees for commercial vessels, commercial aircraft, and international air passengers based on our determination that, while aggregate cost was correct (the numerator for the fee rate), there were more instances in which AQI services were provided in these modes (the denominator for the fee rate) than we had initially calculated.
• We have established a commercial vessel fee specific to commercial vessels operating within the Great Lakes or in the region along the coastline from Alaska to Oregon, provided that certain conditions are met.
• We have decided not to revise our regulations governing the treatment monitoring fee at this time.
• We have decided not to specify the method by which airlines and cruise ships must refund passenger user fees assessed for trips not taken.
With these changes, there are corresponding updates in the related recordkeeping burdens (Applications for Credit Account and Request for Services, User Fees for International Air Passengers—Remittance and Statements, and Fees for Conducting and Monitoring Treatments) between the proposed and final rules. There was no impact on burden assumptions between the proposed and final rules due to the first two bulleted items above. The estimated burden on commercial vessels, commercial aircraft, and international aircraft customers has not changed. In addition, the volumes of payers of the new commercial vessel fee
• The proposed rule assumed there would be 2,844 new treatments (1,190 heat treatments and 1,654 irradiation treatments) with an estimated 5 minutes per treatment burden yielding 237 respondent burden hours per year. With the removal of the treatment fee changes from the final rule, we reduced the burden estimate between the proposed and final rules accordingly.
• The proposed rule included a new billing process for treatment monitoring, and in the proposed rule, we assumed half of the approximate 50 treatment facilities would want to be billed. 25 facilities x 8.4 minutes per facility (the estimated time for a facility to complete an application for an account based on timed trials) = 3.5 respondent burden hours for treatment facilities to manage being billed. With the removal of the treatment fee changes from the final rule, we reduced the burden estimate between the proposed and final rules accordingly.
• The proposed rule included consequences for late payment of AQI treatment monitoring user fees and estimated there would be six treatment facilities incurring an increased time burden of 20 minutes per facility for an estimated increase in respondent burden of 2 hours. We removed these 2 hours from our estimated burden with the removal of the treatment fee changes from the final rule.
• The proposed rule included a reduction in the need for facilities to create new business procedures to hold fees in trust estimating it would save 50 treatment facilities 4.75 hours per year for a total of 237 reduction in respondent burden hours each year for individuals and 237 reduction in respondent burden hours each year for businesses. With the removal of the treatment fee changes from the final rule, the treatment facilities remain holding fee collections in trust. For this change between the proposed rule and final rule, we added 237 respondent burden hours into the total number of respondent burden hours between the proposed and final rules.
In addition, the decision not to specify the method by which airlines and cruise ships must refund passenger user fees assessed for trips not taken has also lowered the assumed burdens between the proposed rule and the final rule. The proposed rule assumed one third of the estimated 331 airlines would be required to submit revised remittance sheets each month.
With the changes to the final rule, the estimated number of respondents has decreased by 392, the estimated number of responses has decreased by 9,881, and the estimated burden has decreased by 781 hours.
The Animal and Plant Health Inspection Service is committed to compliance with the E-Government Act to promote the use of the internet and other information technologies, to provide increased opportunities for citizen access to Government information and services, and for other purposes. For information pertinent to E-Government Act compliance related to this final rule, please contact Mr. Joseph Moxey, APHIS' Paperwork Reduction Act Coordinator, at (301) 851-2533.
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104.4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, tribal governments, and the private sector. Under section 101 of the UMRA, APHIS generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of the UMRA generally requires APHIS to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective, or least burdensome alternative that achieves the objectives of the rule.
This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) that may result in expenditures by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.
APHIS has reviewed this rule in accordance with Executive Order 13132 regarding Federalism and has determined that it does not have “federalism implications.” The rule does not “have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.”
Exports, Government employees, Plant diseases and pests, Quarantine, Reporting and recordkeeping requirements, Travel and transportation expenses.
As discussed in the preamble, APHIS is amending 7 CFR part 354 as follows:
7 U.S.C. 7701-7772, 7781-7786, and 8301-8317; 21 U.S.C. 136 and 136a; 49 U.S.C. 80503; 7 CFR 2.22, 2.80, and 371.3.
(a)
(b)
(2) The following categories of commercial vessels are exempt from paying an AQI user fee:
(i) Commercial cruise vessels carrying passengers paying fees under paragraph (f) of this section;
(ii) Any vessel which, at the time of arrival, is being used solely as a tugboat;
(iii) Vessels used exclusively in the governmental service of the United States or a foreign government, including any agency or political subdivision of the United States or a foreign government, so long as the vessel is not carrying persons or merchandise for commercial purposes;
(iv) Vessels arriving in distress or to take on fuel, sea stores, or ship's stores;
(v) Tugboats towing vessels on the Great Lakes; and
(vi) Vessels returning to the United States after traveling to Canada solely to take on fuel.
(3) If not otherwise exempt from paying the fee, a vessel traveling solely between the United States and Canada and within the Great Lakes or Cascadia may pay the AQI user fee for each arrival as the fee is shown in table 2, provided that the vessel:
(i) Is not carrying cargo originating from countries other than the United States or Canada.
(ii) Is not carrying plants or plant products.
(iii) Is not carrying animals or animal products.
(iv) Is not carrying soil or quarry products from areas in Canada listed in § 319.77-3 of this chapter as being infested with gypsy moth.
(v) Is not carrying wood packaging material as defined under § 319.40-1 of this chapter.
(c)
(2)
(A) Vehicle make, model, and model year;
(B) Vehicle Identification Number (VIN);
(C) License numbers issued by State, Province, or country; and
(D) Owner's name and address.
(ii) Purchases of transponders may be made at any time during a calendar year; APHIS will not prorate for the portion of the calendar year already elapsed, nor refund single-crossing fees already paid.
(d)
(2)
(i) Any commercial railroad car that is part of a train whose journey originates and terminates in Canada, if:
(A) The commercial railroad car is part of the train when the train departs Canada; and
(B) No passengers board or disembark from the commercial railroad car, and no cargo is loaded or unloaded from the commercial railroad car, while the train is within the United States.
(ii) Any commercial railroad car that is part of a train whose journey originates and terminates in the United States, if:
(A) The commercial railroad car is part of the train when the train departs the United States; and
(B) No passengers board or disembark from the commercial railroad car, and no cargo is loaded or unloaded from the commercial railroad car, while the train is within any country other than the United States; and
(iii) Locomotives and cabooses.
(3)
(4)
(i) The number of commercial railroad cars entering the customs territory of the United States during the relevant period by railroad company;
(ii) The total monthly AQI user fees due from each railroad company; and
(iii) In the case of prepayments to cover all annual arrivals of certain railroad car(s) in accordance with paragraph (d)(3) of this section; include the number of railroad cars being prepaid for, railroad car number(s) covered by the prepayment and the calendar year to which the prepayment applies.
(iv) Railroad companies may include the written statement with their mailed payment as directed in this paragraph (d)(4). For all other payment types, the companies must email the written
(5)
(ii) If the owner, agent or person in charge of an individual railroad company intends to prepay for railroad car(s) for the entire calendar year, as specified in paragraph (d)(3) of this section, prepayment may be made at any time during a calendar year; APHIS will not prorate for the portion of the calendar year already elapsed, nor refund or credit per arrival fees already paid.
(iii) Written statements as described in paragraph (d)(4) of this section, are required to accompany all payments. Detailed payment instructions are located at
(6)
(ii) The agent or other responsible person for a payment remains the agent or responsible person until the railroad company notifies APHIS of a transfer of responsibility. The agent or responsible person must contact APHIS to initiate any transfer by contacting
(e)(1)
(2)
(i) [Reserved]
(ii) Any aircraft used exclusively in the governmental services of the United States or a foreign government, including any Agency or political subdivision of the United States or a foreign government, as long as the aircraft is not carrying persons or merchandise for commercial purposes;
(iii) Any aircraft making an emergency or forced landing when the original destination of the aircraft was a foreign port;
(iv) [Reserved]
(v) Any aircraft moving from the U.S. Virgin Islands to Puerto Rico; and
(vi) Any aircraft making an in-transit stop at a port of entry, during which the aircraft does not proceed through any portion of the Federal clearance process, such as inspection or clearance by APHIS or CBP, no cargo is removed from or placed on the aircraft, no passengers get on or off the aircraft, no crew members get on or off the aircraft, no food is placed on the aircraft, and no garbage is removed from the aircraft.
(3)
(ii) The carrier or their agent must provide a written statement each month stating the fees that are due for the month. Carriers or their agents must include a hard copy of the written statement with any mailed payment. For all other payment types, including for months with no fees collected, the carriers must email the written statement to
(iii) The written statement must include the following information:
(A) Name and address of the person making the payment;
(B) Calendar month covered by the payment;
(C) Amount being paid, or a written statement stating that no fees were collected.
(iv) All fee payments required under this section must be made in U.S. dollars. For all payment types accepted, please visit
(4)
(5)
(ii) Airlines will not be charged reimbursable overtime for inspection of cargo from an aircraft if:
(A) The aircraft is subject to the AQI user fee for arriving aircraft as prescribed by this section; and
(B) The cargo is inspected between 8 a.m. and 4:30 p.m., Monday through Friday; or
(C) The cargo is inspected concurrently with the aircraft.
(f)(1)
(2)
(i) Crew members onboard for purposes related to the operation of the vessel;
(ii) Crew members who are on duty on a commercial aircraft;
(iii) Airline employees, including “deadheading” crew members, who are traveling on official airline business;
(iv) Diplomats, except for U.S. diplomats, who can show that their names appear on the accreditation listing maintained by the U.S. Department of State. In lieu of the accreditation listing, an individual diplomat may present appropriate proof of diplomatic status to include possession of a diplomatic passport or visa, or diplomatic identification card issued by a foreign government;
(v) Passengers departing and returning to the United States without having touched a foreign port or place;
(vi) Passengers arriving on any commercial aircraft used exclusively in the governmental service of the United States or a foreign government, including any agency or political subdivision of the United States or a foreign government, so long as the aircraft is not carrying persons or merchandise for commercial purposes. Passengers on commercial aircraft under contract to the U.S. Department of Defense (DOD) are exempted if they have been precleared abroad under the joint DOD/APHIS Military Inspection Program;
(vii) Passengers arriving on an aircraft due to an emergency or forced landing when the original destination of the aircraft was a foreign port;
(viii) Passengers transiting the United States and not subject to inspection; and
(ix) Passengers moving from the U.S. Virgin Islands to Puerto Rico.
(3)
(i) When through tickets or travel documents are issued indicating travel to the customs territory of the United States that originates in any foreign country; and
(ii) When passengers arrive in the customs territory of the United States in transit from a foreign country and are inspected by APHIS or CBP.
(4)
(A) Tickets or travel documents must be marked by the person who collects the AQI user fee to indicate that the required AQI user fee has been collected from the passenger.
(B) If the AQI user fee applies to a passenger departing from the United States and if the passenger's tickets or travel documents were issued on or after May 13, 1991, but do not reflect collection of the AQI user fee at the time of issuance, then the carrier transporting the passenger from the United States must collect the AQI user fee upon departure.
(C) AQI user fees collected from international passengers pursuant to this paragraph (f) shall be held in trust for the United States by the person collecting such fees, by any person holding such fees, or by the person who is ultimately responsible for remittance of such fees to APHIS. AQI user fees collected from international passengers shall be accounted for separately and shall be regarded as trust funds held by the person possessing such fees as agents, for the beneficial interest of the United States. All such user fees held by any person shall be property in which the person holds only a possessory interest and not an equitable interest. As compensation for collecting, handling, and remitting the AQI user fees for international passengers, the person holding such user fees shall be entitled to any interest or other investment return earned on the user fees between the time of collection and the time the user fees are due to be remitted to APHIS under this section. Nothing in this section shall affect APHIS' right to collect interest for late remittance.
(ii) [Reserved]
(5)
(ii) The air or sea carrier, travel agent, tour wholesaler, or other party issuing a ticket or travel document must remit the passengers' fees to APHIS no later than 90 days after the close of the calendar month in which the ticket issuer collected the AQI user fees from the passengers. Late payments will be subject to interest, penalties, and a charge to cover the cost of processing and handling a delinquent claim as provided in the Debt Collection Act of 1982, as amended by the Debt Collection Improvement Act of 1996 (31 U.S.C. 3717).
(iii) All fee payments required under this section must be made in U.S. dollars. For payment types accepted please visit
(iv) The air or sea carrier, travel agent, tour wholesaler, or other party issuing a ticket or travel document must provide a written statement each month stating the passenger fees that are due for the month or stating that no payments are due. The air or sea carrier, travel agent, tour wholesaler, or other party issuing a ticket or travel document must include the written statement with their mailed payment. For all other payment types, they must email the written statement separately to
(A) Name and address of the person remitting payment;
(B) Calendar month covered by the payment; and
(C) Amount collected and remitted.
(v) Refunds by a remitter of AQI user fees collected in conjunction with unused tickets or travel documents shall be netted against the next subsequent remittance. The ticket or travel document-issuing entity must submit a revised written statement indicating the revised number of passengers and international passenger AQI user fees amount collected. The revised written statement must be completed and filed for each month during which the ticket or travel document-issuing entity certifies that there was a decrease in the number of passengers and international passenger AQI user fees collected.
(6)
(7)
(8)
(g)
(2) When the work necessary for the issuance of a certificate is performed by APHIS personnel on a Sunday or holiday, or at any other time outside the regular tour of duty of the APHIS personnel issuing the certificate, in addition to the applicable user fee, the recipient must pay the applicable overtime rate in accordance with § 354.1.
(3)(i) Each exporter who receives a certificate issued on behalf of APHIS by a designated State or county inspector must pay an administrative user fee, as shown in table 8. The administrative fee can be remitted by the exporter directly to APHIS through the Phytosanitary Certificate Issuance and Tracking System (PCIT), provided that the exporter has a PCIT account and submits the application for the export certificate through the PCIT. If the PCIT is not used, the State or county issuing the certificate is responsible for collecting the fee and remitting it monthly to the U.S. Bank, United States Department of Agriculture, APHIS, AQI, P.O. Box 979043, St. Louis, MO 63197-9000.
(ii) The AQI user fees for an export or reexport certificate for a commercial shipment are shown in table 9.
(iii) The AQI user fees for an export or reexport certificate for a low-value commercial shipment are shown in table 10. A commercial shipment is a low-value commercial shipment if the items being shipped are identical to those identified on the certificate; the shipment is accompanied by an invoice which states that the items being shipped are worth less than $1,250; and the shipper requests that the user fee charged be based on the low value of the shipment.
(iv) The AQI user fees for an export or reexport certificate for a noncommercial shipment are shown in table 11.
(v) The AQI user fees for replacing any certificate are shown in table 12.
(4) If a designated State inspector issues a certificate, the State where the certificate is issued may charge for inspection services provided in that State.
(5) Any State which wishes to charge a fee for services it provides to issue certificates must establish fees in accordance with one of the following guidelines:
(i)
(A) Estimate the annual number of certificates to be issued;
(B) Determine the total cost of issuing certificates by adding together
(C) Divide the cost of issuing certificates by the estimated number of certificates to be issued to obtain a “raw” fee. The State may round the “raw” fee up to the nearest quarter, if necessary for ease of calculation, collection, or billing; or
(ii)
(A) Estimate the annual number of hours taken to issue certificates by adding together delivery,
(B) Determine the total cost of issuing certificates by adding together delivery,
(C) Divide the cost of issuing certificates by the estimated number of hours taken to issue certificates to obtain a “cost-per-hour” fee. The State may round the “cost-per-hour” fee up to the nearest quarter, if necessary for ease of calculation, collection, or billing.
(6) For payment of any of the AQI user fees required in this paragraph (g), we will accept personal checks for amounts less than $100, and checks drawn on commercial accounts, cashier's checks, certified checks, traveler's checks, and money orders for any amount. All payments must be for the exact amount due.
(h)(1)
(2)
(ii) When AQI treatment services are provided by APHIS, APHIS will collect the AQI treatment fee applicable at the time the treatment is applied from the person receiving the services. Remittances must be made by check or money order, payable in United States dollars, through a United States bank, to “The Animal and Plant Health Inspection Service.”
(3)
(ii) [Reserved]
(4)
(ii) AQI treatment user fees must be remitted for receipt no later than 31 days after the close of the calendar quarter in which the AQI user fees were collected. Late payments will be subject to interest, penalty, and handling charges as provided in the Debt Collection Act of 1982, as amended by the Debt Collection Improvement Act of 1996 (31 U.S.C. 3717).
(iii) The remitter must mail with the remittance a written statement to USDA, APHIS, AQI, PO Box 979044, St. Louis, MO 63197-9000. The statement must include the following information:
(A) Name and address of the person remitting payment;
(B) Taxpayer identification number of the person remitting payment;
(C) Calendar quarter covered by the payment; and
(D) Amount collected and remitted.
(iv) Remittances must be made by check or money order, payable in United States dollars, through a United States bank, to “The Animal and Plant Health Inspection Service.”
(i)
(i)
(A) For unbilled fees, the user fee is unpaid 60 days after the date the pertinent regulatory provision indicates payment is due;
(B) For billed fees, the user fee is unpaid 60 days after date of bill;
(C) The person for whom the service is provided or the person requesting the service has not paid the late payment penalty charges, interest charges, or charges for the cost of processing and handling the delinquent bill on any delinquent APHIS user fee; or
(D) Payment has been dishonored.
(ii)
(iii)
(iv)
(A) For unbilled fees, the user fee is unpaid 90 days after date the pertinent regulatory provision indicates payment is due;
(B) For billed fees, the user fee is unpaid 90 days after date of bill;
(C) The person for whom the service is provided or the person requesting the service has not paid the late payment penalty charges, interest charges, or charges for the cost of processing and handling the delinquent bill on any delinquent APHIS user fee; or
(D) Payment has been dishonored.
(2)
(3)
(4)
(5)
(i)
(ii)
(iii)
(6)
(
(i) Records and reports required under this section, including written statements, if applicable; and
(ii) Legible copies of contracts (including amendments to contracts) between the responsible entity or their agents and agents that conduct activities subject to this part for the responsible entity, and copies of documents relating to agreements made without a written contract.
(2) Responsible entities or their agents must maintain sufficient documentation for APHIS, CBP, and representatives to verify the accuracy of the fee collections and, if applicable, written statements. Such information must be made available for inspection upon APHIS and CBP's demand. Such documentation shall be maintained in the United States for a period of 5 years from the date of remittance calculation, unless a longer retention period is determined to be needed by the Administrator. Each such affected entity shall provide to APHIS and CBP the name, address, and telephone number of a responsible officer who is able to verify any statements or records required to be filed or maintained under this section and shall promptly notify APHIS and CBP of any changes in the identifying information previously submitted.
(k)
Surface Transportation Board (the Board or STB).
Final rule.
The Board adopts new regulations that provide for the prescription of reciprocal switching agreements as a means to promote adequate rail service through access to an additional line haul carrier. Under the new regulations, eligibility for prescription of a reciprocal switching agreement will be determined in part using objective performance standards that address reliability in time of arrival, consistency in transit time, and reliability in providing first-mile and last-mile service. The Board will also consider, in determining whether to prescribe a reciprocal switching agreement, certain affirmative defenses and the practicability of a reciprocal switching agreement. To help implement the new regulations, the Board will require all Class I railroads to submit certain service data on an ongoing and standardized basis, which will be generalized and publicly accessible. Railroads will also be required to provide individualized, machine-readable service data to a customer upon a written request from that customer.
The rule will be effective on September 4, 2024.
Valerie Quinn at (202) 740-5567. If you require accommodation under the Americans with Disabilities Act, please call (202) 245-0245.
In a decision served on September 7, 2023, the Board issued a new notice of proposed rulemaking that would provide for the prescription of reciprocal switching agreements with emphasis on how to address inadequate rail service.
As discussed in the
The regulations as proposed in the
The proposed regulations would impose certain data requirements to aid in implementation of those regulations. In part, the proposed regulations would require a Class I carrier to provide to a customer, upon written request, that customer's own individualized service data. In addition, to ensure that the Board would have an informed view of service issues across the network, the proposed regulations would (1) make permanent the filing of certain data that is similar to the data the Board had collected on a temporary basis in
The Board solicited comments on the
The Board received many comments and replies from interested parties, including public officials, railroads, shippers, trade organizations, and others.
After reviewing the record, the Board is adopting a version of part 1145 that reflects certain modifications to the proposal in the
The Board is also clarifying issues concerning Class II and Class III rail carriers. Part 1145 pertains to shippers and receivers that have practical physical access to only one Class I rail carrier or its affiliated company. The affiliated company might be a Class II or Class III railroad. Part 1145 otherwise does not apply to Class II and Class III railroads.
As discussed in the
With respect to traffic that is or was moved under a transportation contract under 49 U.S.C. 10709, the Board explains that it will not prescribe a reciprocal switching agreement under part 1145 based on performance that occurs during the term of the contract. Concerning exempt commodities, the Board will not consider pre-revocation performance as the basis for a prescription under part 1145 but intends to prioritize petitions for partial revocation filed in furtherance of part 1145 cases in order to resolve expeditiously those petitions for partial revocation. The Board also intends to explore at a later date whether it should partially revoke exemptions on its own initiative to allow for reciprocal switching petitions, as is currently the case for the boxcar exemption.
These issues, as well as numerous others, are discussed below. After considering the record, the Board hereby adopts the proposed regulations, with modifications as indicated below, as part 1145 of its regulations.
Various entities have asked that the Board take additional steps in this proceeding such as adopting a fourth performance standard that would measure whether the incumbent carrier reasonably met the customer's local operational and service requirements, (PCA Comments 12;
Others seek more sweeping reform, including: expanding part 1145 to all bottleneck segments (Coal. Ass'ns Comments 8); overturning the “anti-competitive conduct” test in
The Board appreciates the Coalition Associations' efforts as well as the numerous additional suggestions from others about possible Board actions outside of this docket. However, the Board would like to gauge the effectiveness of this new rule before considering other ways to pursue the objectives of section 11102(c). As noted in the
The Board expects part 1145 to be a significant step in incentivizing Class I railroads through competition to achieve and maintain higher service levels on an ongoing basis. The objective and transparent standards, defenses, and definitions in this rule should also provide greater certainty
As discussed in the NPRM, part 1145 implements the Board's authority under 49 U.S.C. 11102(c) to prescribe reciprocal switching agreements when “practicable and in the public interest.”
Part 1145 is designed specifically to promote the provision of adequate rail service to terminal-area customers that have practical physical access to only one Class I rail carrier or affiliate.
The performance standards in part 1145, which can be easily understood by shippers and carriers, address three fundamental aspects of adequate rail service: reliable timing in the arrival of line-haul shipments, consistent shipment times, and on-time local pick-ups and deliveries. The standards are set at levels such that performance below the standards would not meet many shippers' (and carriers') service expectations.
Part 1145 will promote the provision of adequate rail service, not only to a successful petitioner, but on a broader network basis. By providing a clearer set of conditions and procedures for the Board to prescribe reciprocal switching agreements, part 1145 will create an incentive for rail carriers to provide adequate service to terminal-area customers that lack another rail option. Part 1145 will also reduce regulatory risk and burdens under section 11102(c) by (1) enhancing the predictability of regulatory outcomes, (2) enabling potential petitioners to evaluate the costs and potential benefits of seeking a prescription, and (3) helping to contain the time and cost of petitioning for a prescription.
Class I rail carriers claim that adoption of part 1145 would exceed the scope of the Board's legal authority. These carriers assert that, as a condition to prescribing a reciprocal switching agreement, the Board must undertake a case-by-case analysis that would be far more elaborate than what is called for under part 1145. According to carriers, the Board must find that: (1) the incumbent carrier consistently provides inadequate service to the petitioner; (2) the incumbent carrier failed to cure the inadequacy after being given notice and a reasonable opportunity to cure; (3) the inadequacy continues to exist at the time of the Board's prescription; (4) service to the petitioner is worse than service to other customers; (5) the petitioner has a compelling need for alternate rail service, as indicated by demonstrated harm to the petitioner's planning and business needs; (6) alternate service would not impose greater harm on other stakeholders; (7) the alternate service would be safe and practicable; and (8) the alternate service would actually remedy the inadequate service. (
In attempting to find a legal foundation for their approach, rail carriers look past the text of section 11102(c) to three cases in which the Board's predecessor, the Interstate Commerce Commission (ICC or Commission), applied the public interest standard:
Shippers respond that carriers' “compelling need” test misstates the law. According to NSSGA, the outcome in
Class I carriers assert, not only that the Board must undertake a detailed case-by-case investigation as described above, but that, as a condition to prescribing a reciprocal switching agreement, the Board must find that the petitioner lacks an adequate intermodal transportation option (i.e
On a separate tack, AAR asserts that part 1145 would inappropriately amount to direct regulation of the quality of rail service. AAR bases its assertion on the rule's use of defined performance standards. According to AAR, direct regulation of quality of service would contradict congressional policy to minimize the need for federal regulatory control over the rail transportation system. (AAR Comments 14-15.)
Finally, CPKC argues that the Board is precluded by the doctrine of legislative ratification from undertaking the approach taken in part 1145. Citing a statement in
Part 1145 reasonably implements the Board's authority to prescribe reciprocal switching agreements when practicable and in the public interest. Class I rail carriers' arguments to the contrary rest on a misinterpretation of the public interest standard in section 11102(c)—a misinterpretation that would effectively replace the statutory standard with a “compelling need” standard that, as interpreted by the carriers, would leave the Board little room to fashion its implementation of the public interest standard and the underlying congressional objectives according to the circumstances at hand. The carriers' generalized concerns about the prescription of reciprocal switching agreements are also misguided. Finally, because part 1145 is amply justified under the “practicable and in the public interest” standard, it is unnecessary to consider here whether part 1145 is also justified under the “competitive rail service” standard in section 11102(c), as some commenters have argued.
The public interest standard in section 11102(c) gives the Board broad discretion to determine when to prescribe reciprocal switching agreements. In other contexts in which Congress has used the public interest standard, the United States Supreme Court has described the standard as “expansive.”
In implementing the public interest standard in section 11102(c), the Board's discretion is to be guided by the policy objectives that Congress established through section 10101 (previously section 10101a) of the Act (the Rail Transportation Policy or RTP)).
Part 1145 advances the statutory goal of developing and continuing a sound rail transportation system. 49 U.S.C. 10101(4). Part 1145 does so by striking an appropriate balance between, on one hand, the shipping public's interest in securing better rail service and, on the other hand, the interest of rail carriers.
The design of part 1145 takes into account carriers' need to earn adequate revenues.
Part 1145 also gives reasonable effect to the statutory objectives of minimizing the need for federal regulation and of providing for efficient and fair regulatory proceedings.
In addition, as a condition to regulatory intervention under part 1145, there must be sufficient indications, in the form of the incumbent carrier's failure to meet a service-based performance standard and the absence of an affirmative defense or demonstration of undue impairment, that the introduction of an alternate rail carrier via an appropriately defined and scoped switching agreement prescription could be valuable in bringing about better rail service.
The elaborate, case-by-case approach that rail carriers advocate is not required by law and, at the same time, would undermine the policy goals that the Board seeks to advance here. In the carriers' view, as a condition to prescribing a reciprocal switching agreement, the Board would need (1) to compare the quality of service to the petitioner versus the quality of service to other customers, (2) to assess whether any differences in the quality of service were reasonable, (3) to identify the petitioner's business needs, (4) to identify the level of transportation service that would reasonably meet those needs, and (5) to determine which rail carrier could provide better service. (
The most glaring deficiency in carriers' argument is that nothing in the text of section 11102(c) suggests that the Board's discretion is limited to where the Board undertakes carriers' elaborate
Where something substantial is to be taken away from a carrier for the sole benefit of [the petitioners], and with no corresponding benefit to the carrier, as in this case, we are inclined to the view that some actual necessity or compelling reason must be shown before we can find such action in the public interest.
The circumstances that led the ICC to look for a compelling need in
Like carriers' reliance on
As with
The ICC's decision in
In contrast, the ICC did not make the findings that AAR asserts are necessary pre-conditions to prescription of a reciprocal switching agreement. The ICC did not examine whether customers had a compelling need for the prescription as evidenced by regulatory determinations that customers had experienced consistently inadequate service or that the inadequacy persisted. The ICC did not examine whether customers' businesses had been harmed by existing service and whether any such harm was proportionally greater than harm to other customers. Finally, the ICC did not examine whether an inadequacy in service would be cured by alternate rail service. If anything, part 1145 is more conservative than the ICC's approach in
While part 1147 is thus similar in some respects to the approach that AAR advocates here, part 1147 does not require several findings that AAR claims are required by statute. As examples, part 1147 does not require a finding of disproportionate harm to the petitioner or a finding that service to the petitioner is worse than service to other customers. But more importantly, as discussed above, none of part 1147, part 1144, and part 1145 seeks to define the absolute limits of the Board's discretion in implementing section 11102(c). The approach under each regulation is designed to address a specific concern; each approach reflects a particular prioritization or balancing of legislative objectives as reasonably appropriate to addressing the specific concern at hand.
All that remains of carriers' legal argument is an unremarkable statement in the legislative history that the “practicable and in the public interest” standard in section 11102(c) is “the same standard the Commission has applied for many years in considering whether to order the joint use of terminal facilities.”
Rail carriers' interpretation of the “same standard” language fails on another level. Carriers imply that Congress meant to equate the public interest standard with the “compelling need” that the ICC looked for in
Finally, even if a compelling need were required under the public interest standard in section 11102(c), a prescription under part 1145 would meet that standard. Part 1145 promotes adequate rail service both by introducing an alternate rail carrier via an appropriately defined and scoped reciprocal switching agreement when there have been sufficient indications of service issues (without the establishment of an affirmative defense or undue impairment) and by more broadly creating an incentive for rail carriers to provide adequate service. This approach—both for individual cases and at a broader systemic level—will help to mitigate the substantial harm that inadequate rail service imposes on the national economy.
Carriers erroneously assert that, as a condition to prescribing a reciprocal switching agreement, the Board must find that the petitioner lacks an adequate option via another mode of transportation. (
Here, there is no need either to find that the petitioner lacks an intermodal option or that the incumbent carrier holds or abused market power in serving the petitioner. To require those findings would be inconsistent with the specific concerns that the Board seeks to address through part 1145. The types of service-related problems that part 1145 seeks to address—insufficient reliability and excessive transit times—might reflect an abuse of market power vis-à-vis the petitioner but might also reflect broader management or operating decisions that are not well directed toward the development of a sound rail system. Part 1145 creates an incentive to avoid service issues, to the benefit of the rail system at large, by providing for the introduction of an alternate carrier in individual cases as would enable the shipper to choose a more efficient and responsive rail carrier.
CPKC's ratification argument—that, by not acting on legislative proposals after
Second, as relevant to part 1145, no reasonable inference can be drawn from legislative inaction on bills that were introduced after
Finally, it would be unreasonable to conclude that—through inaction, with no indication of legislative intent—Congress reversed its affirmative decision to grant the agency broad authority to prescribe reciprocal switching agreements. If anything, Congress' reenactment of the public interest standard in section 11102(c) confirms the agency's broad authority in this context.
Class I rail carriers suggest that the Board has failed to adequately support promulgation of part 1145. First, the carriers suggest that the Board must go farther than it does in analyzing the effects that the rule might bring about. Second, the carriers suggest that the levels of the performance standards in part 1145 are not adequately supported by record evidence. The following discussion addresses each argument in turn, explaining why each lacks merit.
AAR asserts that, under principles of reasoned decision making, the Board must assess the cumulative advantages and disadvantages of promulgating part 1145 and must find that the advantages outweigh the disadvantages, even if the Board would later consider advantages and disadvantages in applying the rule on a case-by-case basis. (
AAR then directs a broad challenge at any rule that provides for the prescription of reciprocal switching agreements, without regard to the specific provisions of that rule. (
Third, in AAR's view, sweeping switching requirements would undermine the use of differential pricing, which AAR characterizes as critical to the health of the rail network. (
While naming a litany of alleged disadvantages, AAR asserts that provision for the prescription of reciprocal switching agreements would provide no public benefit. AAR suggests that the only benefit would be any benefit that accrued to the successful petitioner and that this benefit would impose burdens on others—for example, by causing disruptions or inefficiencies in rail service on a system-wide basis. (
AAR suggests that the alleged disadvantages of promulgating part 1145 can to some extent be quantified. (
The Board has engaged in reasoned decision-making, and AAR's arguments to the contrary lack merit. First, AAR mischaracterizes the standard for reasoned decision-making that applies in the present context. Second, the disadvantages that AAR alleges in connection with promulgation of part 1145 do not reflect the actual regulation.
An agency engages in reasoned decision making under the Administrative Procedure Act, 5 U.S.C. 551-559, when the agency reaches a logical conclusion based on relevant factors.
AAR errs in suggesting that, under
AAR's reliance on the
The Board found that these conclusive presumptions would tend to make only certain types of shippers eligible for a prescription and, indeed, would result more or less automatically in prescriptions on behalf of those shippers.
In 2016, the Board rejected NITL's proposal, concluding that the proposal would unduly favor certain shippers. The Board decided, as part of the same decision, to propose a different approach to reciprocal switching—an approach that, rather than relying on conclusive presumptions, left the prescription of reciprocal switching agreements almost entirely to case-by-case basis evaluation.
The Board called for a particular type of analysis in considering NITL's proposal because, due to the nature of the proposal, it seemed likely that the proposal would have a discernible and predictable impact on rates and service. The Board did not call for a comparable analysis in considering the 2016 proposal, which left implementation almost entirely to the Board's discretion on a case-by-case basis. It would have been impractical, in that context, to attempt to predict the impact of the proposal on rates or service. Part 1145
The Board finds unpersuasive AAR's claim that promulgation of part 1145 would impose significant disadvantages. AAR's list of alleged disadvantages is notably directed at
Of particular note, a prescription under part 1145 would not “force” the incumbent carrier to relinquish the petitioner's shipment to another rail carrier. A prescription under part 1145 would merely establish the legal foundation for the petitioner's shipment to be transferred to the other rail carrier should the shipper elect to take service from that carrier. Whether a transfer actually occurred would be determined by the petitioner, who could choose between competitive options—the services of the incumbent railroad and those of the alternate carrier. Within this regulatory scheme, particularly in light of the numerous protections in the rule, a carrier that desires more certainty, for example with respect to its capital investment decisions, can ensure that it provides high level service, can negotiate suitable contracts when appropriate, and can otherwise work with its customers to avoid regulatory intervention under part 1145.
Nor will part 1145 result in “sweeping switching requirements,” given numerous limitations that are built into part 1145. First, under part 1145, the Board will prescribe a reciprocal switching agreement only on behalf of a shipper or receiver that is served by a single Class I rail carrier (or affiliate), only in a terminal area, and only after the incumbent carrier failed to meet one of three performance standards. Second, a prescription would not be available under part 1145 for movements that occur under valid transportation contracts or for movements of exempt commodities. As explained below, a shipper of an exempt commodity would need to obtain revocation of the exemption before obtaining prescription of a reciprocal switching agreement under part 1145.
Besides lacking a sufficient nexus to part 1145, AAR's list is flawed on another fundamental level. Underlying the list is a mischaracterization of the nature of reciprocal switching. Under the proper characterization, reciprocal switching is merely an incidental movement to the line-haul movement. When a customer chooses to rely on a reciprocal switching agreement, the incumbent carrier simply moves the customer's shipment to/from the alternate carrier's switching yard for the customer's terminal area rather than to/from the incumbent's yard for that terminal area. These types of movements are routine in the rail industry and are governed by applicable safety and related regulations. In addition, as described throughout this decision, part 1145 includes protections against infeasibility and undue operational impairment. Any change in fuel use or emissions would be minimal; shippers have incentives to select the route that is overall most efficient, which may often be the route that is most fuel efficient. (
The protections that are built into part 1145 also will allow carriers to raise concerns about investments and the ability to attract capital (
Finally, the Board disagrees that the introduction of an alternate rail carrier under this framework, especially when there are sufficient indications that sub-optimal service was provided, could substantially distort the market. (
Part 1145 relies on conservative performance standards—standards that are set below common service expectations and goals—as indicators of where it might be beneficial, consistent with the purposes of part 1145, to introduce an alternate rail carrier via an appropriately defined and scoped reciprocal switching agreement. As described in the
The Board's second point of reference in setting the levels of the performance standards is the evidence that the Board collected in 2022 and 2023 in reviewing the performance of Class I rail carriers. That evidence corroborates the service expectation levels that are suggested by customers. The Board began its recent service oversight during the early 2020s, when it was widely recognized that delays and other deficiencies in the transportation of freight were substantially impairing the national economy.
These concerns led the Board to establish a new docket,
The evidence that the Board collected reveals that Class I carriers' system-average performances varied significantly from time period to time period and from carrier to carrier during the early 2020s.
The same is true of the service consistency standard in part 1145. It is clear from the carriers' reports that a 20% increase in transit time can indicate the presence of significant service issues. In Docket No. EP 770 (Sub-No. 1), the Board required BNSF, CSXT, NSR, and UP to report a target system velocity for the period coming
This evidence is corroborated by testimony of shippers in Docket No. EP 770, which shows that shippers were complaining about drops in velocity of less than 20% during the early 2020s.
In all, record evidence indicates the conservative nature of the service consistency standard in part 1145, which reserves federal intervention for an increase in transit time of more than 20%. In the absence of a proven affirmative defense, such an increase in transit time provides sufficient indicia of service problems that are inconsistent with meeting customer and carrier expectations. In effect, such an increase points sufficiently to the potential value of introducing an additional line haul carrier.
To the extent that some commenters argue that the performance standards in part 1145 might be overinclusive,
According to Class I rail carriers, the levels of the performance standards in part 1145 are not adequately supported by record evidence. The carriers allege several errors in this respect. First, according to AAR, the levels of the standards were inappropriately derived from data in Docket No. EP 770 (Sub-No. 1) that shows system-average performance. According to AAR, system-average performance does not necessarily indicate the level of performance that constitutes adequate service over a given lane or at a given time. (AAR Comments 46-50;
Second, according to UP, it is inappropriate to rely on the data in Docket No. EP 770 (Sub-No. 1) because UP used one-week periods to measure its performance (
Third, according to UP, it is problematic to base the levels of the performance standards on the data in Docket No. EP 770 (Sub-No. 1) because the carriers did not necessarily report their performance in the same way that compliance with the performance standards in part 1145 will be measured. For example, UP considered itself to have succeeded in completing a line haul on time if UP met its original trip plan as adjusted to account for delays encountered en route. In contrast, under part 1145, a rail carrier will be considered to have succeeded only if it came within 24 hours of the original estimated time of arrival, without adjustment for delays encountered en route. UP implies that, due to how carriers reported their performance in Docket No. EP 770 (Sub-No. 1), the data there overstates actual performance as compared to how performance will be measured under part 1145. (UP Comments 6.)
Finally, in its attempt to show that the performance standards in part 1145 are not adequately supported, AAR conducted a study of transit times. AAR submitted the study in its reply comments, as a result of which other parties did not have the opportunity to comment on the study. The study was based on transit times for all movements over Class I rail carriers from 2020 to 2023, with some exclusions. (AAR Reply, R.V.S. Baranowski & Zebrowski at 5-6.) The study purported to show that a year-over-year decrease in velocity of 20% would capture about 53.9% of the movements in 2020, about 76.6% of the movements in 2021, about 82.5% of the movements during 2022, and about 65.5% of the movements during 2023. (
The Board rejects each of the foregoing arguments. First, contrary to carriers' suggestion, it is reasonable for system-average performance to inform the levels of the performance standards in part 1145. In the Board's experience, system-average performance is a strong indicator of the capability of the rail system to meet the public need for transportation service. While there is heterogeneity in lanes and traffic, and while variations can impact different geographies and businesses differently, the specific performance measurements under part 1145 largely factor in these differences. For example, the reliability standard in part 1145 is based on the estimated time of arrival that the carrier originally predicted. In setting the OETA, the carrier can account for the characteristics of the given lane (and, by extension, the characteristics of the shipper's traffic
A similar analysis applies to seasonal variations in rail service. For example, because a railroad can account for likely delays in setting OETA, service in one season is no more likely than service in another season to fail the reliability standard. In the case of an extreme weather-related event, that event could provide an affirmative defense to the extent that the event could not reasonably be predicted or mitigated. As for the fact that the system-wide data in Docket No. EP 770 (Sub-No. 1) included service to contract customers, the Board finds that detail to be irrelevant. In the Board's experience, most contracts do not establish standards for quality of service and, in any event, the EP 770 data does not establish whether carriers were providing service consistent with any contractual commitments that might have applied.
Second, contrary to UP's suggestion, it is reasonable to use system-average performance as reported for one-week periods as the basis for assessing performance over a 12-week period. The Board has accounted for any volatility that might have resulted from week-to-week reporting by using records of system-average performance over the course of several years and by relying heavily on customers' reasonable service expectations and carriers' performance targets.
Third, the “apples to oranges” problem that UP describes is both substantially overstated and ultimately irrelevant. As would be expected, in Docket No. EP 770 (Sub-No. 1), railroads that adjusted their original trip plans for delays that they encountered en route appeared to perform better than carriers that did not make those adjustments. The incremental difference between the two groups of rail carriers
Of equal importance are the details of the reliability standard in part 1145. A carrier would fail to meet the reliability standard only if, over a 12-week period, the carrier fell below 70% in meeting its OETA plus or minus 24 hours. The general range of the reliability standard recognizes that, in the ordinary course of rail service, a shipment might encounter a certain number of unanticipated delays en route. The specific percentage (70%) provides an additional cushion between ordinary service and the possibility of regulatory intervention, as suggested by the data that the Board collected in Docket No. EP 770 (Sub-No. 1)—data that was largely collected during the major service problems of the early 2020s. The Board reasonably expects that rail service in the ordinary course will be better than rail service during that period. The 24-hour grace period provides even more cushion. In effect, the reliability standard in part 1145 provides for regulatory intervention on a conservative basis. The 70% standard is not as conservative as the 60% standard that the Board inquired about in the
Finally, AAR's study of transit times does not persuade the Board that the performance standards in part 1145 would capture typical rail service. One of the glaring deficiencies in AAR's study is that it compared transit times from year to year during the early 2020s, when rail service was faltering and erratic. It would be unreasonable to conclude that increases in transit times during that period reflected variations in transit times that might be expected in the ordinary course of rail operations; if the Board were to accept AAR's study, the Board would implicitly and unreasonably conclude that the years that AAR used in its study provide the proper baseline for assessing changes in transit time.
As discussed in the
Using data that Class I carriers provided in Docket No. EP 770 (Sub-No. 1) as a reasonable starting point, the agency proposed a reliability standard of 60%, where a carrier would meet the standard if, over a period of 12 consecutive weeks, the carrier delivered at least 60% of the relevant shipments within 24 hours of the OETA.
CPKC questions whether OETA is a meaningful reference point. According to CPKC, nearly half of its shipments arrive a day or more after the OETA. CPKC claims that it is infeasible to try to provide a more accurate OETA because, according to CPKC, there are too many routine factors that contribute to variations from the company's original trip plan. (
Contrary to CPKC's suggestion, it is reasonable to use OETA data over a 12-week period to provide indicia of the overall reliability of a carrier's service for purposes of part 1145. Rail carriers bring their considerable expertise to the task of developing OETAs. Carriers typically study the factors that affect transit time over a lane, account for those factors through seasonal or other appropriate tolerances, and apply those tolerances in setting OETAs. CPKC, which is the only carrier to question use of OETA, has failed to convince the Board that the company cannot adopt a similar approach.
Many shipper organizations ask the Board to set the reliability standard (when based on a 24-hour grace period) at more than 60%. For example, the Coalition Associations ask the Board to set the percentage at 70%. (Coal. Ass'ns Comments 22.) They claim that the 70% threshold is attainable, is more consistent with Class I carriers' own expectations of the quality of service that they should provide, and better reflects the threshold at which poor service reliability has significant operational consequences for rail customers. (
LyondellBasell urges the Board to adopt the 70% standard proposed by the Coalition Associations. (LyondellBasell Comments 2.) It asserts that the higher standard is more in line with the level of service customers require to conduct their business. (
Other shipper groups ask the Board either to set the reliability standard at more than 70% at the outset or eventually to escalate the standard to above 70%. (DCPC Comments 6-8 (80% in year 1 and 90% in year 2); NGFA
Railroads oppose the 60% reliability standard as well as any other reliability standard, arguing that there is insufficient record evidence to support such a standard. Railroads otherwise do not comment on the level at which the reliability standard should be set. As explained in the Analytical Justification section above, however, the Board has sufficient justification for setting its standards based on credible evidence of reasonable service expectations and evidence that the Board has collected since 2022 in investigating the performance of Class I rail carriers. AAR adds that what a customer perceives as service that best meets its individual “needs and requirements” may run counter to the interests of other shippers and the health of the overall network that serves many shippers. (AAR Reply 39.) According to AAR, a standard that bypasses consideration of other shippers or the network as a whole—or the question whether a switch would remedy the shipper's service concerns—would not be consistent with the approach Congress directed. (
The Board will set the reliability standard at 70%.
[T]hat 60%, and indeed even 70%, represent far too low a bar for service reliability. Under the proposed rule, even those carriers who meet the standard with 60% nearly on-time performance would force some PRFBA members to shut down their plants and still others frantically to seek out alternative transport by truck. There are not enough trucks or truck drivers to keep up with that demand, to say nothing of the greater expense passed onto the consumer and drastically greater polluting emissions caused by trucking goods as compared with rail shipping. Moreover, for some PRFBA members, trucking goods simply is not an option altogether. Also, all PRFBA members suffer from the underutilization of their railcars whenever service is poor.
The Board specifically requested that shippers identify the point at which there are negative business impacts from poor reliability in rail service,
The 60% standard in the
A 70% standard is also consistent with railroads' stated, near-term performance goals as reported in Docket No. EP 770. As noted in the
While the current record supports a finding that a reliability standard of 70% is reasonable, the Board declines at this time to set the reliability standard at a higher level or to provide by rule for escalation of that standard as requested by some shipper interests. The Board concludes that the better course of action is to gain experience under the 70% standard and gauge the effectiveness of part 1145 before considering whether to raise the standard above 70%.
Several shipper groups ask that a petitioner be allowed to rely on less than 12 weeks of data. (EMA Comments 6 (six weeks); PRFBA Comments 7 (six weeks); GPI Comments 3 (eight weeks); GISCC Comments 5 (four to six weeks).) According to NSSGA, which requests a six-week period, 12 weeks of bad service would have a “devastating
The Board will use an observation period of 12 weeks as proposed in the
NSR recommends measuring performance under the reliability standard over quarters of the calendar year, rather than over a rolling 12-week period. According to NSR, using a rolling 12-week period would allow shippers to petition for a prescription based on performance that did not reflect the carrier's typical performance or indicate an ongoing service problem. (NSR Comments, V.S. Israel 3, 14;
AAR notes that the definition of OETA in the
The Board will not change the definition of OETA under part 1145. The demurrage OETA definition, while appropriate for part 1333's “minimum” informational purposes, does not meet the goals of this rulemaking. As noted by the Coalition Associations, to use the OETA that is based on the carrier's first movement of the shipment rather than tender of the bill of lading would not capture a carrier's delay in picking up a car that had been tendered for shipment. (Coal. Ass'ns Reply 29.) And, if the carrier failed the reliability standard due to the shipper's delay in releasing the car, that could be raised as an affirmative defense.
In the
CN asserts that this approach fails to account for cases in which the shipment arrived at the interchange but the receiving carrier is unable to accept the shipment. (CN Comments 48-49.) UP similarly asserts that a car should be deemed to be delivered upon “delivery in interchange.” According to UP, “delivery in interchange” occurs when a railroad moves the car past a designated automatic equipment identification reader or places the car on a designated interchange track, depending on the specific interchange that is involved. (UP Comments 7.) UP claims that a car can potentially sit on an interchange track for several days after delivery and before the subsequent carrier acknowledges receipt, when the matter is out of the delivering carrier's control. (
The Board will define “delivery” at the interchange using UP's proposal. Although the Board suggested that in case of a dispute about a gap at the interchange it would be guided by interchange rules,
For deliveries to a customer's facility, the Board proposed to define “delivery” as when a shipment either is actually placed at the designated destination or, in given circumstances, is constructively placed at a local yard that is convenient to the designated destination.
UP notes that for traffic it delivers to customer facilities, UP's Trip Plan Compliance (TPC) measure for manifest traffic measures compliance based on when the car is delivered to the customer facility, regardless of whether it spends time in constructive placement. (UP Comments 8.) For “order in” customers—customers who by prior agreement have UP hold cars in serving yards pending the recipient's request for delivery—UP “stops the clock” during the time a car spends in constructive placement for purposes of measuring TPC. (
The Board will retain its approach from the
The Board proposed to apply the reliability standard only to shipments that are moving in manifest service, not to unit trains.
A number of shipper groups ask the Board to include unit trains. (API Comments 3; AFPM Comments 9 n.15; NSSGA Comments 7;
The Coalition Associations recommend including unit trains and using a higher reliability standard (of 90%) for those trains. (Coal. Ass'ns Comments 31.) According to the Coalition Associations, a 90% standard would better reflect the nature of unit trains, which tend to go through few if any interchanges. (
The Board will not apply a reliability standard to unit trains for purposes of part 1145. Based on Board experience, while manifest traffic runs on scheduled trains, unit trains generally do not have schedules. They run at various, usually irregular times. And, although some railroads have trip plans based on the unique schedule for each unit train that are applied to each car on the train, CN, CSXT, and NSR do not currently produce trip plans for unit trains. (
One commenter asks the Board to apply the reliability standard to intercity passenger trains. (Ravnitzky Comments 1.) The performance of intercity passenger trains is beyond the scope of this proceeding. As proposed in the
The Coalition Associations suggest significant additions to the OETA + 24 hours model. They ask the Board to establish graduated reliability standards, where the standard would increase as the differential between the OETA and the time of delivery increased. Under the Coalition Associations' approach, the reliability standard would be set at 70% at OETA + 24 hours, 80% at OETA + 48 hours, and 90% at OETA + 72 hours. (Coal. Ass'ns Comments 4;
Others raise concerns that the reliability standard, when based on OETA + 24 hours, does not measure the severity of deficiencies in the carrier's performance. For example, CSXT suggests that, under the reliability standard, a delivery 25 hours after OETA would be treated the same as a delivery 25 days after OETA. (CSXT Comments 17-18.) NSR recommends replacing OETA + 24 hours with a standard that measures both whether a delay has occurred and the severity of delay. (NSR Comments, V.S. Israel 13.) NSR specifically recommends use of a service reliability ratio, which would measure by what percent of the actual duration of the shipment the carrier missed OETA + 24 hours. (
The Board will not at this time change the reliability standard to account for the severity of a delay. The Board appreciates that its approach does not distinguish between failed deliveries that are just past the 24-hour mark and cars that are many days past that mark, but the Board would like to gauge the effectiveness of its basic concept of OETA + 24 hours before considering changes or refinements to account for degrees of severity. And, if extremely late deliveries are frequent, that could result in the service consistency standard not being met. Part 1145 is also not the only course of action a shipper will be able to pursue. In the case of more egregious delays, the shipper could petition under part 1147 without waiting the 12 week-observation period provided by part 1145. Where appropriate, the shipper could also pursue a separate action based on the common carrier obligation.
The Coalition Associations ask the Board to clarify that shipments that arrive more than 24 hours early do not count as being delivered on time. The Coalition Associations suggest that this approach will remove any incentive for rail carriers to “game” the reliability standard by artificially inflating OETAs and note that early cars can cause congestion at a shipper's facility. (Coal. Ass'ns Comments 4, 29;
The Board will adopt the proposal and clarify that cars arriving more than 24 hours before the OETA will count against the carrier for purposes of the service reliability standard. While delivering cars excessively early could potentially disrupt a carrier's system, it remains a possibility that a carrier could seek to avoid failing the standard through such practices. The Board is also persuaded by the Coalition Associations' assertion that unexpected early deliveries can have significant economic and operational consequences for rail customers. (Coal. Ass'ns Comments 29.) When railcars arrive unexpectedly early at a rail customer's facility, they can cause congestion at the facility that can impair operations. (
AAR claims that constructive placement prevents the problems that early arrivals can cause for customers, (AAR Reply 46-47), but the Coalition Associations' complaint suggests that constructive placement is not solving the problems the shipper groups identify. In the Board's experience, railroads usually only begin constructive placement of cars to a spot-on-arrival customer once that shipper's facility is full of cars and no more cars can be actually placed.
While the Board did not specifically propose to cover early deliveries in the
CN raises concerns about the application of part 1145 to movements that cross into or out of the United States; CN suggests that part 1145 should apply only to movements that take place entirely within the United States. (CN Comments 49-50.) CN also argues that system-wide reporting should exclude cross-border traffic and notes that it only reported on domestic U.S. trains as part of its reporting for Docket No. EP 770 (Sub-No. 1). (
The Board will not exclude this traffic from either the service reliability standard or the service consistency standard. The Board's jurisdiction includes rail transportation “in the United States between a place in . . . the United States and another place in the United States through a foreign country; or . . . the United States and a place in a foreign country.” 49 U.S.C. 10501(a)(2)(E)-(F). As to cross-border traffic, the Board has jurisdiction to determine the reasonableness of a joint through rate covering international transportation in the United States and in a foreign country.
However, the Board will limit action under part 1145 to situations where there is a distinguishable movement in the United States, specifically when the carrier records receipt or delivery at or near the U.S. border (including where the shipment is transferred between affiliated rail carriers at that point).
In the
AAR raises various concerns about this approach, including that it (1) would not satisfy the “actual necessity or compelling reason” standard, (2) would undermine the Board's goal of predictability, (3) would present serious complexities to the Board, (4) would undermine carriers' abilities to plan and invest, and (5) would allow the petitioner to use reciprocal switching only for some of the lanes even though the Board had found that the reciprocal switching agreement would be “practical and efficient” only if it governed all of the lanes. (AAR Comments 66-69 (quoting
The proposal to allow prescriptions that cover multiple lanes has raised a number of questions, (
NSR asserts that the Board should modify the reliability standard to incorporate data on rail performance from competitive markets, which NSR asserts could include movements of exempt commodities and movements of boxcars. NSR suggests that, by incorporating that data, the Board would have a more useful benchmark to evaluate the quality of service to a petitioner. (NSR Comments, V.S. Israel 15-18.) Under NSR's proposal, the reliability standard would be replaced with a standard that measured deviations from system-wide average performance in competitive markets. (
The Board will not adopt NSR's proposal, which would undermine predictability and ease of administration by potentially requiring multiple OETA standards, the identification of the particular competitive movement(s) that would provide a benchmark for the petitioner's movement, and periodic revisions to the OETA standard(s). NSR's proposal is also flawed insofar as it suggests that the Board should not prescribe a reciprocal switching agreement when service falls below reasonable expectations and performance goals unless the carrier has singled out one or more captive shippers in failing to meet those expectations and goals. In effect, NSR's proposal is based on the incorrect premise that the Board's discretion to introduce an alternate carrier is limited to situations in which the carrier is engaged in a demonstrated abuse of market power.
UP argues that the reliability standard should allow adjustments for delays that are not service related, such as a customer's request while a car is en route to have the car delivered to a different destination. (UP Comments 6.) It is not necessary to incorporate such a “time-out” into the reliability standard. The Board has provided, in part 1145, for affirmative defenses, which can include that a shipment was diverted en route based on a customer's request. The Board can judge the merits of such a defense in the context of a specific case and it seems unlikely that a petitioner would bring a petition if its service were routinely affected by that issue in any given 12-week period.
CSXT raises concerns that part 1145 does not require evidence that the customer relied on the OETA to its detriment or even that the customer was aware of OETA. CSXT also suggests that railroads should get credit for providing updated OETAs. (CSXT Comments 17-18.) CSXT's concerns fail to grapple with the purpose of the reliability standard, which is to promote on-time deliveries vis-à-vis the schedule that the carrier originally provides unless an affirmative defense applies. As noted by the Coalition Associations, accurate OETAs help avoid supply disruptions. (Coal. Ass'ns Reply 33.) They submit that, without an accurate OETA, a rail customer cannot effectively plan its shipments, operations, and fleet needs to avoid a supply disruption at the destination. (
The Board appreciates that updated ETAs remain important to customers so that the actual status of the car and probable date of arrival are known. With that said, shippers have pointed to numerous valid reasons why failure to meet OETA is problematic for customers and harmful to business operations. Given the goal of part 1145, it is reasonable to hold a railroad accountable for its original trip plan. To not hold the railroad accountable would undermine one of the Board's goals of incentivizing carriers to provide service that meets their own and shippers' expectations and needs. The Board will therefore not modify the rule as suggested by CSXT.
In conclusion, the Board will adopt the service reliability standard in the
As discussed in the
Some carriers question the usefulness of the service consistency standard. For example, CSXT asserts that fluctuations in transit time for individual lanes are normal on a dynamic network and not meaningful indicia of a service problem. (CSXT Comments 18.) CSXT adds that a year-over-year comparison does not consider other events affecting velocity such as track work, capacity improvements, volume surges in other traffic, slowdowns on another railroad network, and service design changes. (
Using a rolling 12-week observation period at a 20% service consistency standard, AAR's consultants project a high likelihood—65.5%—that any given carload would not meet the service consistency standards. (AAR Reply, R.V.S. Baranowski & Zebrowski 7, tbl. 2.) AAR argues that this study confirms that there are substantial natural variations in transit time, such that nearly any lane, observed enough times, could trigger the service consistency standard. (AAR Reply 50.)
Based on data that AAR submitted in its reply comments, NSR asserts that the service consistency standard is seriously flawed as a measure of inadequate service. Rather than identifying potential service problems, the standard (according to NSR) captures the majority of rail traffic, where normal variations in transit time do not indicate inadequate service. (NSR Reply 9-15.) NSR argues that, if the Board wishes to use a service consistency standard, the Board should suspend this proceeding to more carefully study transit time data, so that any service consistency standard is empirically supported. (
The Board will retain the service consistency standard. Taken at face value, Baranowski and Zebrowski's results seem to indicate normal variability in transit times. But that appearance is misleading. A majority of the analysis period primarily covers the pandemic and supply chain crises years (2020, 2021, 2022).
The railroads have pushed our sites to take on more expense and change operations to match the new process and operating strategies. We have had to increase our railcar fleet by over 10 percent in the past couple of years solely due to inconsistency in the rail service and increased transit time. And we're about to increase our fleet again in the next six months by approximately seven to eight percent. This is again due to the inconsistency in the service and transit time.
Furthermore, as explained in the
NSR itself notes that transit time data is a useful tool:
[T]ransit time data is important to its customers, and it is important to NS—NS monitors transit time and uses it as a tool to diagnose and problem-solve network issues as part of its commitment to providing safe, reliable service to its customers. As such, NS believes transit time data can be valuable for monitoring service.
The Board appreciates the carriers' concerns that normal variants could be captured by the metric under certain challenging operating periods like those that occurred during the pandemic. But just because a situation is “normal” or has occurred before does not mean it is excusable or acceptable. That said, part 1145 has also left the door open to other affirmative defenses such as, for example, a velocity problem that was due to scheduled maintenance and capital improvement projects.
A number of shipper groups ask the Board to set the service consistency standard at a level that would capture smaller reductions in velocity from one year to the next. For example, based on member feedback, the Coalition Associations urge the Board to reduce the standard to 15%. (Coal. Ass'ns Comments 32.) They assert that a sustained 15% increase in transit times would mean that shippers must purchase or lease additional railcars and would incur additional railcar maintenance costs. (Coal. Ass'ns Comments 32.) And, as shippers rely on more and more railcars to address longer transit times, these additional railcars can create network congestion that increases transit times even more, thereby requiring the shipper to acquire even more railcars. (
Other shipper groups also support a more rigorous service consistency standard. ACD agrees that the standard should be set at 15%, (ACD Comments 5), while NGFA believes the Board should intervene except where transit time is nearly equal to transit time during the preceding year, (NGFA Comments 12-13). Olin adds that a service consistency standard in the 10% to 15% range is appropriate because service has been especially bad in the last few years and hence the “base” transit times have already been skewed downwards. (Olin Comments 6.)
AAR responds that none of the proposed service consistency standards are supported by data and that therefore none of the proposed standards identify where prescription of a reciprocal switching agreement could relieve inadequate service. (AAR Reply 49;
The Board proposed in the
As with the reliability standard, a number of shipper groups ask the Board to decrease the observation period for the service consistency standard. NSSGA submits that 12 weeks is too long a period of bad service, claiming that it could potentially ruin its members' businesses. (NSSGA Comments 8.) NSSGA instead proposes a six-week period. (
The Board will retain the 12-week observation period. As noted early in the service reliability section, a shorter observation period would not as clearly signal the public interest in introducing an alternate rail carrier via switching as the means to allow the petitioner to choose the carrier that better met its needs. And, as noted earlier, stakeholders will continue to have access to other Board relief, including parts 1144, 1146, and 1147—without needing to wait for a 12-week observation period to end.
Various carriers claim that the service consistency standard should not be triggered by decreases in velocity for movements of empty railcars. According to CN, application of the service consistency standard to movements of empty railcars could give a shipper access to an alternate line-haul carrier for loaded cars when the incumbent carrier is performing well in delivering those cars. In that case, according to CN, the shipper's petition would not meet the “actual necessity or compelling reason” standard that carriers contend should apply. (CN Comments 47;
The Coalition Associations urge the Board to reject railroad arguments that oppose considering empty-car movements under the service consistency standard. They assert that railroad concerns about the differences in how loaded and empty cars move are overstated. (Coal. Ass'ns Reply 35.) Even though empty railcars might not cycle between the same origins and destinations, the Coalition Associations note that railroads can still measure transit times on empty cars that do move between the same empty origin and empty destination, which the Coalition Associations claim is a substantial number of private cars. (
The Board will continue to include movements of empty cars in applying the service consistency standard. Consistent transit time in returning private/leased empties to the original place of loading is critical to having cars available for loading at that location. Indeed, if a year ago a shipper's fleet cycled at the rate of two roundtrips per month and that deteriorated to, for example, 1.4 roundtrips per month while demand remained constant, the customer would be faced with either obtaining more equipment or reducing its delivery of product. As AFPM explains, increased transit times for empty railcars can interrupt a rail customer's supply of cars needed to support operations, deprive a rail customer of empty cars that it may need for the goods it produces, and ultimately prevent a rail customer from fulfilling its own customers' orders. (AFPM Comments 11.) In the direst situations, a disruption in empty-car supply may cause severe facility backups, requiring a reduction of or even stalling operations. (
UP asserts that the Board should apply the service consistency standard to routes as opposed to lanes. (UP Comments 9-10.)
The Board will continue to apply the service consistency standard to lanes, not routes. It is true that different routes can have different run times and lead to different delivery dates. But those changes nonetheless can affect a shipper's or receiver's business. If a railroad has decided to downgrade a route and condense volume on a core route and that decision adds miles and days to the transit time, then there might be grounds to prescribe access to another line haul carrier, subject to other requirements in part 1145. As noted by the Coalition Associations, UP's proposal would not capture increases in transit time that resulted from the incumbent carrier's routing decisions. (Coal. Ass'ns Comments 39.) If a routing decision is a function of, for example, a bridge washing out, the Board has provided an affirmative defense for extraordinary circumstances, and the carrier has other affirmatives defenses available in other circumstances.
DCPC recommends making a customer's facility open to reciprocal switching for all lanes, presumably as long as the incumbent carrier failed to meet a performance standard for at least one of those lanes and as long as the other conditions to a prescription were met. (DCPC Comments 4.) The company reasons that otherwise the customer and the carriers would need to closely monitor which cars from the facility were eligible for reciprocal switching and which cars from the facility were not. (
The Board declines at this time to adopt DCPC's approach, which would represent a major change to the framework the Board proposed in the
Several carriers raise the concern that the service consistency standard will disproportionately affect traffic that has relatively short running times. CN reasons that, for trips of twelve hours, the addition of only a few hours in transit time from year to year could mean failing to meet the service consistency standard. (CN Comments 46.) CPKC raises a similar concern, noting that a 24-hour or greater delay-occasioned for example by a single missed connection-over a shipment that is scheduled to arrive in four days would exceed the 20% service consistency standard. (CPKP Reply 26.) CPKC argues that establishing a minimum absolute value for downward movement in average transit times of “perhaps 36 hours” would help to address this flaw. (CPKC Reply 26, 41.)
The Coalition Associations respond that the service consistency standard should be based on a percentage of transit time. They reason (1) that increases in cycle time require proportional increases in the size of the fleet that the shipper needs to maintain the same delivery rate to the destination, and (2) that this increase in the required size of the fleet imposes significant economic consequences on shippers. Having said that, the Coalition Associations suggest that the Board could adopt a 24-hour floor for the service consistency standard because its shippers typically plan fleet needs based on days in transit rather than hours in transit. (
The Board will adopt an absolute floor of 36 hours, meaning that an increase in transit time over a 12-week period will fail the service consistency standard only if the increase is more than 36 hours. This approach is grounded in practical considerations and the specific goals of part 1145. A reciprocal switching movement itself might add roughly 24 hours to a trip. It is therefore unlikely that it would serve the public interest to prescribe a reciprocal switching agreement under
Some shipper groups raise concerns that the service consistency standard applies only to the incumbent carrier's portion of an interline movement and therefore does not account for increases in transit time over the entire interline movement. (PRFBA Comments 10; EMA Comments 9.) NSSGA suggests that applying the standard only to the incumbent carrier's portion is, in effect, to apply the standard to an “arbitrary subset” of the entire movement. (NSSGA Comments 8.) The Board disagrees that it is arbitrary to apply the service consistency standard only to the incumbent carrier's portion of the interline movement, given that the incumbent carrier has the most direct control over its portion of the movement. If the incumbent carrier provided sufficiently consistent transit times over its portion, yet there was an excessive decline in transit times over the entire movement, then this would very likely be due to factors beyond the incumbent carrier's reasonable control. Given this high likelihood, the Board sees no value in requiring the incumbent carrier to demonstrate, as an affirmative defense, that a decline in transit time over the entire movement was beyond the incumbent carrier's reasonable control.
AAR notes that the service consistency standard requires comparing transit time performance in a particular lane between two windows of time. (AAR Comments 56.) To make this an “apples-to-apples” comparison, it asks the Board to clarify that the selected windows must have seen reasonably equivalent volumes shipped, with shipments moving under non-exempt common carrier service in both windows. (
A number of parties claim that comparing transit time from one year to the next might not capture a significant increase in transit time that develops over a period of several years. For example, AFPM notes that, using the standard's proposed 20% or 25% year-over-year increase for a shipment that takes 14 days today could result in an increase to 17.5 days in the first year and nearly 22 days in the second year, continuing to grow exponentially in perpetuity, nearly doubling its 14-day transit time to more than 27 days after just three years. (AFPM Comments 11;
To capture a slow increase in transit time that becomes substantial over time, the Board will modify the transit time measure to include an additional metric, which a carrier would not meet if a petitioner's transit time over the lane increased by more than 25% over the prior three years.
The Board will adopt the service consistency standard that was proposed in the
The third performance standard—ISP—would measure a rail carrier's success in performing local deliveries (“spots”) and pick-ups (“pulls”) of loaded railcars and unloaded private or shipper-leased railcars during the planned service window.
The Board proposed the 80% standard based on data submitted in Docket No. EP 770 (Sub-No. 1).
A number of carriers challenge the appropriateness of the ISP standard. For example, CN asserts that the Board should eliminate the ISP standard from § 1145.2 on the ground that the prescription of a reciprocal switching agreement is not an effective remedy for inadequate local service. CN reasons that, even where the petitioner chose the alternate carrier for line-haul service, the incumbent carrier would continue to provide local service to the petitioner. (CN Comments 36.) AAR agrees, adding that the petitioner's choice to rely on the alternate carrier for line-haul service might exacerbate the inadequate local service. (AAR Comments 57-58.) AAR suggests that a more appropriate response to poor local service might be the prescription of terminal trackage rights. AAR adds, however, that providing for the prescription of terminal trackage rights in this proceeding would exceed the scope of the
AAR asserts that, if the Board retains the ISP standard, the Board should establish a technical working group to study and consider the matter. AAR reasons that there is significant technical complexity related to how carriers provide local service. (
The Board will retain the ISP standard. The record in this proceeding demonstrates a significant public interest in promoting adequate local service. As discussed below, a number of shipper groups advocate for higher standards for service. (
The Board declines to convene a working group to consider complexities and variations in the provision of local service. From the customer's perspective, what matters is whether the carrier delivers and picks up cars when it says it will. The Board expects that each carrier will take into account the complexities of its operations when making those communications to the customer.
Under the ISP standard proposed in the
The Coalition Associations propose two standards for local service. One standard would measure how many cars, out of the cars that were scheduled to be delivered or picked up during a planned service window, were not delivered or picked up. (Coal. Ass'ns Comments 4-5.) The other standard would measure how many planned service windows during the observation period were “no shows,” where the carrier failed to provide any local service during the planned service window. (
AAR asserts that any standard for local service should be based on the number of cars that were spotted or pulled as scheduled within the planned service window. (AAR Comments 59.) AAR claims that the approach in the
The Board will retain the approach to local service that was proposed in the
Several shipper groups ask the Board to increase the threshold percentage used in the ISP standard. NSSGA argues that 80% is too low—that local service at that level causes a backup of products at the facilities of NSSGA members. (NSSGA Comments 9.) NSSGA asserts that 90% would be a more appropriate standard, which, if achieved, could protect against such backups. (
The Board will increase the local service standard. The 80% standard that was proposed in the
AFPM argues that the 12-week observation period for the local service standard is too long for refiners and petrochemical manufacturers, adding that poor local service over such a sustained period will “dramatically hurt” their operations. (AFPM Comments 12.) For the reasons discussed above in the Observation Period sections concerning the service reliability standard and the service consistency standard, the Board will retain the 12-week observation for the local service standard.
CSXT is concerned that the local service standard does not account for missed spots or pulls that were caused by the customer or resulted from the customer's request for service that exceeded the capacity of the customer's facility. (CSXT Comments 22.) CSXT asserts that the carrier should not be required to prove to the Board, after the event, that the miss was caused by the customer, arguing that the local crew's recorded determination at the time of the miss should be treated as presumptive evidence on that point. (
As stated in the
The Board will not adopt CSXT's proposal to treat the local crew's determination of the cause of a miss as presumptive evidence of the cause. The burden should be on the railroad to provide persuasive evidence of the cause of the miss, given that the railroad would have the most direct knowledge of the cause. Persuasive evidence might include the local crew's determination at the time and can be provided by the railroad. The Board will consider this evidence but might find, based on the facts at hand, that the local crew's determination was insufficient.
The Board proposed in the
The Board will adopt this proposal in the final rule. AAR claims that an increase based on a reduction in the frequency of local service would limit carriers' flexibility and would make railroads more cautious to experiment with increased local service levels. (AAR Comments 59.) While the Board supports efforts to optimize rail service, it is important to disincentivize carrier efforts that, without collaboration with the shipper, reduce the quality of service to a shipper or receiver without corresponding increases in efficiency. A reduction in the frequency of local service can have substantial adverse effects on a shipper or receiver, especially if it does not reflect coordination with the shipper. For example, a shipper might need to build additional plant trackage to accommodate reduced pulls by the carrier. However, the Board may consider the impact of all customer
The Board will extend to two years the period during which the increased local standard would apply. As the Coalition Associations explain, the burden of mitigating the risk of missed spots and pulls is significant and its members indicate that the infrastructure and fleet design changes necessary to implement these mitigation measures can take two years to fully implement. (Coal. Ass'ns Comments 41.) Although AFPM suggests a 95% standard, claiming that it recognizes some disruptions may occur while protecting shippers from service reductions that would result in poor ISP performance, (AFPM Comments 13), the Board will not adopt such a high standard. A 90% standard achieves the Board's goals, recognizing the high degree of accuracy that is appropriate in the context of local service while reserving the Board's introduction of an additional line-haul carrier for relatively significant local service issues.
The
The Board sought comment on two alternatives for what service window to use in applying the local service standard.
The Coalition Associations recommend using service windows that comply with the carrier's established protocol rather than a standardized 12-hour window. (Coal. Ass'ns Comments 42.) They assert that using service windows that comply with the carriers' established protocol will encourage rail carriers to provide local service that meets the expectations that flow from the protocol, thus reducing disruptions to shippers. (
The Board finds that, on balance, it is best to use a standardized 12-hour window for purposes of applying the local service standard. In response to the Coalition Associations' concern, the Board emphasizes that the 12-hour window that is used for purposes of the local service standard is not meant to override the rail carrier's protocols or to excuse carriers from complying with those protocols. The benefit of using a standardized 12-hour window for purposes of the local service standard is that it will result in uniform understanding of the point at which the Board would consider regulatory intervention. To use a carrier's shorter window would impose costs that the carrier might not have accounted for in setting that shorter window; the carrier might therefore be encouraged to lengthen the window beyond the window that is otherwise most efficient for that carrier. That outcome is inconsistent with the Board's intent, as it would undermine the public interest in efficient operation as well as the interests of the individual shipper or receiver. Likewise, for the sake of uniformity across railroads, the Board will decline AFPM's proposal to use a window that extends from two hours before to two hours after the estimated service time that was specified in the local crew's job plan. (AFPM Comments 13.)
The Board sought comment from stakeholders on whether a rail carrier should be required to provide notice to the customer before the carrier changes the on-duty time for the local crew that serves the customer—at least for the purposes of regulatory measurement—and, if so, how much advance notice should be required.
The Coalition Associations ask the Board to require carriers to provide 60 days' notice of a change to the service window. (Coal. Ass'ns Comments 43-44.) AFPM goes further and argues that railroads should not be allowed to unilaterally change a service window without (1) agreement from a customer, or (2) going through a formal mediation process. (AFPM Comments 13.)
The Board will not adopt these measures, which seem unnecessarily rigid and do not directly relate to the purpose and design of part 1145. The Board notes, though, that regular or unreasonably abrupt changes to a customer's service window might be relevant considerations under parts 1144 or 1147 of the Board's regulations.
Per the Coalition Associations' request, the Board clarifies that the spot and pull standard includes “spot on arrival” railcars. (Coal. Ass'ns Comments 42.) However, failure to spot “spot on arrival” railcars for a planned service window results in a missed service window only if the railcars arrived at the local yard that services the customer and are ready for local service before the cut-off time applicable to the customer and in accordance with the carrier's established protocol.
CN asks the Board to clarify that the local service standard does not apply to unit trains or intermodal traffic. (CN Comments 43.) CN states that unit trains are not handled through the same process as manifest traffic—that unit trains are often staged in yards upstream from the destination while CN coordinates with the customer to determine the appropriate time for service. (
The Board did not propose to apply the local service standard to unit trains or intermodal traffic and will not do so in the final rule. Unit trains are not switched or spotted and pulled in the same manner as other carload shipments. Similarly, when traffic is
The Board will adopt the local service standard that was proposed in the
The Board proposed in the
It is true that the Board did not extend the temporary data reporting as defined in Docket No. EP 770 (Sub-No. 1) because overall performance data, especially with regard to service, showed improvement and because BNSF, CSXT, NSR, and UP were meeting the majority of their one-year service targets.
The Board will therefore adopt the data collection it proposed in the
AAR agrees with the Board that reporting service data by individual rail carriers is “helpful to understanding conditions on the rail network.” (AAR Comments 106.) However, it asserts that there are some details and considerations that need to be worked through before the Board requires permanent reporting. (
Similarly, CPKC seeks a technical conference or other process for undertaking a more systematic evaluation of real-world lane-specific service data before implementing a rule that could have sweeping consequences for the railroad operations and the incentives railroads confront in designing services that meet shipper needs. (CPKC Reply 1, 3, 24, 40-41.)
The Board will not establish a technical working group or hold a conference before implementing the final rule. The Class I carriers have had experience reporting data in Docket No. EP 770 (Sub-No. 1) and in
A number of entities ask the Board to require the rail carriers to provide additional data. For example, FRA and DOT suggest that the Board consider maintaining intermodal traffic data as a reporting requirement, stating that, while intermodal is not rate-regulated traffic, it is a valuable metric to monitor supply chain efficiency. (DOT/FRA Comments 3.) The Board will not require the Class I rail carriers to report this data because the railroads measure this traffic differently from other traffic, and standardizing intermodal service measurement is not one of the purposes of this regulation. Intermodal traffic is also typically a one-train event from origin to destination with no terminal switching events at origin, intermediate points, or destination.
API encourages the agency to collect regional-level data. It claims that this data will better inform the Board as to what and where FMLM issues exist. (API Comments 8.) Similarly, USDA argues that the Board should also collect regional data for transit time. (USDA Comments 3.) It notes that data is critical to well-functioning markets. (
AAR claims that because the proposed rule's service metrics are new, railroads need time to modify their systems to conform to the new standards and to build new systems to support their obligations. (AAR Comments 111.) CSXT raises a similar point and adds that it would need to
CPKC adds that unique to it is the challenge of preparing to comply with the proposed rule at a time when the separate rail carriers that are part of the CPKC network continue to maintain separate systems that have yet to be fully integrated. (CPKC Comments 11.) In CPKC's judgment, the systems of its predecessors will require modification to be able to provide petitioners the data on a lane-specific basis from different 12-week periods in the way the proposed rule contemplates. (
The Board disagrees with UP's stated concern that an entirely new system will be needed to meet the reporting requirements of this rule and similarly disagrees with CSXT's assertion that it will take a year to update its existing software. While the Board recognizes that implementation of this new rule may require some software programming changes, the railroads fail to support their burden arguments. Specifically, the railroads do not adequately explain how the variances in measuring OETA using their current definitions would require such a significant reprogramming based on the definition of OETA the Board is adopting for part 1145. They also do not make such a showing as to modifying the definition of ISP and the underlying metrics in their systems.
Additionally, while CSXT raises a concern about building a reporting platform, the Board finds this claim to be overstated. CSXT's current platform already has a module, “Trip Plan Performance,” which “provides customers with information on how well CSXT is complying with the trip schedules it generates for each container, trailer, and carload shipped by CSXT at the system, location, and lane level.” CSXT Comments 6, Dec. 17, 2021,
Additionally, AAR argues that, in light of policy and fairness concerns, the Board should not order a switching prescription based on a carrier's performance before the date on which any final rule is promulgated. (AAR Comments 111.) The Board finds this reasonable. Cases can therefore only be brought under part 1145 based on service occurring after the rule becomes effective.
AAR argues that the Board should gain experience applying performance standards to single-line traffic before applying performance standards to interline traffic, given the greater complexities with interline traffic. (AAR Comments 11.) The Board disagrees. There is no need to apply the rule first to single-line movements and then to interline movements as the standards measure an individual carrier's success in performing its own movement. However, as discussed in the Performance Standards section, the Board appreciates that there can be problems at an interchange and has adjusted its definition of when a shipment is delivered there.
CPKC also argues that the Board should defer application of part 1145 to interline movements based on similar concerns. (CPKC Comments 8; CPKC Reply 39-40.) When the Board does apply the rule to interline movements, CPKC seeks two modifications based on its fear that a petitioner could be incentivized to seek an alternate carrier to convert an interline movement into a single-line movement when an incumbent carrier only handles traffic for a minority of the origin to destination routing. (CPKC Comments 8.) One proposed modification involves limiting the eligibility of certain alternate carriers, and the second involves limiting the duration of the prescription. (
The second approach could be applied in cases where the only available alternate carrier would serve the entire route after being granted switching rights. In those situations, according to CPKC, the Board should avoid an overreaching restructuring of the shipper's rail service options by limiting the duration of the order to that necessary to enable the incumbent to demonstrate that it can provide adequate service. According to CPKC, an appropriate limit might be that the order is effective initially for three months, during which time the incumbent would be entitled to demonstrate that its service had risen to an adequate level thereby terminating the alternate carrier's access. (
The Board will not adopt these adjustments concerning interline traffic. A prescription would be available under part 1145 with respect to the incumbent carrier's portion of an interline movement only if the requirements of part 1145 were met with respect to that movement. The prescription in that case would be consistent with the Board's goals in enacting part 1145. There is no cause, within this framework, to consider the petitioner's motivation in seeking access to an alternate carrier for the incumbent carrier's portion of the interline movement. To the extent that the incumbent carrier believed that the proposed prescription would cause undue impairment as provided for in part 1145, the Board would consider the carrier's objection in deciding whether to grant the prescription.
In the
CN and CSXT oppose the data disclosure proposal, arguing that it amounts to pre-petition discovery and that it improperly departs from both traditional litigation and standard Board practice. (CN Comments 32-22; CSXT Comments 38-39.) The carriers also argue that the
CN, CSXT, and UP also argue that the proposed data disclosure regulation at § 1145.8(a) is vague and overly broad. (CN Comments 31-32; CSXT Comments 39; UP Reply 2;
The Coalition Associations oppose requiring shippers to file a petition under part 1145 before a rail carrier is required to disclose individualized performance data. The Coalition Associations argue that such a procedure would require shippers to file a petition before knowing whether data demonstrates a service inadequacy that supports a petition under part 1145. (Coal. Ass'ns Reply 25.) As an alternative to the proposal to require a petition to be filed before a railroad would be required to disclose data, the Coalition Associations propose that shippers submit a 30-day pre-filing notice, after which the incumbent rail carrier would have five business days to provide the requisite service data for the six-month period preceding the pre-filing notice. (
The Board declines to adopt proposals that would require railroads to disclose performance data to a shipper or receiver only after the shipper or receiver has filed a petition under part 1145. Section 1321(a) gives the Board broad authority to fashion means to carry out its duties under Chapter 13 and Subtitle IV of the Interstate Commerce Act, including the Board's duty to exercise its discretion under section 11102(c) in furtherance of the public interest. Indeed, as expressly provided in section 1321(a), the enumeration of particular powers in Chapter 13 and Subtitle IV does not exclude other powers that the Board may have in carrying out those provisions. More generally as well, the Board has broad discretion to fashion means to carry out its duties, even when those means are not expressly enumerated in the Act.
Here, the data disclosure requirement is a reasonable exercise of the Board's discretion and is narrowly tailored to implement a particular procedure under section 11102(c) effectively. As stated in the
Moreover, although some rail carriers argue that shippers already have access to carriers' online platforms containing data necessary to file a petition, rail users have complained that railroads often provide data in a way that is “incomprehensible to even seasoned industry veterans.”
Contrary to CN's argument, it would not be inconsistent with the Board's practices to require data disclosure before a regulatory proceeding. For example, the Board requires carriers to include specific information on demurrage bills to allow customers to more readily gauge whether to challenge their demurrage assessments.
The Board also rejects the Coalition Associations' proposal to require a potential petitioner to submit a prefiling notice, with that notice serving as the basis for the potential petitioner to obtain data from its incumbent carrier. The purpose of the data disclosure requirement is to enable a potential petitioner to assess
However, the Board is persuaded that greater specificity in § 1145.8(a) would facilitate timely responses by carriers to requests for individualized performance records. The proposed regulatory text will be modified to require a response by the carrier when a shipper or receiver has practical physical access to only one Class I rail carrier with respect to the lane(s) in question and when the request identifies the relevant lane(s), the range of dates for which records are requested, and the performance standard(s) in question. The Board will also define “individualized performance records” as OETA, transit times, and/or ISP data related to the shipper or receiver's traffic, along with the corresponding time stamps.
The Board will not, as some rail carriers suggest, place limitations on the frequency of requests for individualized performance records or the time period during which data can be requested. (
Additionally, and as proposed in the
In this proceeding, the Board proposed a rule that would permit shippers and receivers to seek prescription of a reciprocal switching agreement for a movement that begins or ends within a terminal area. The reciprocal switching agreement would provide for the shipment to be transferred within the terminal area in which the shipment begins or ends its journey on the rail system.
The Coalition Associations—joined by Celanese and AF&PA/ISRI—state that they support the Board's proposed definition of “terminal area” (the area in which a shipper or receiver must be located to be eligible for prescription of a reciprocal switching agreement under part 1145) because “[t]he function-based definition is consistent with precedent” and constrains carriers' ability to undermine the proposal by seeking to establish “narrow geographic boundaries.” (Coal. Ass'ns Comments 5, 45;
Several commenters approve of the overall switching proposal in the
With respect to NGFA's comment concerning action in other dockets, the Board notes that a final rule was issued earlier this year in Docket No. EP 762 amending the emergency service regulations at part 1146; among other things, the new rule establishes a more streamlined and accelerated process for entertaining emergency service petitions under 49 U.S.C. 11123 and clarifies the Board's use of its regulations when acting on its own initiative to direct emergency service.
Conversely, AAR asserts that any prescription of reciprocal switching must be limited to traffic within a terminal area because “the terminal-area limitation is required by statute.” (AAR Comments 25-26;
As stated in the
The Board underscores at the outset that, consistent with case precedent, the Board has taken a functional approach to defining “terminal area” for purposes of this rule. The agency has long understood “terminal area” in such functional terms: as a commercially cohesive area in which two or more railroads engage in the local collection, classification, and distribution of rail shipments for purposes of line-haul service, characterized by multiple points of loading/unloading and yards for such local collection, classification, and distribution.
While the regulatory text does not incorporate a list, the Board notes that, as a general matter, a normal revenue interchange point on the Open and Pre-Pay Stations List is often located within a “terminal area.” AAR asserts that inclusion on that list “does not suggest there is” a terminal area as described in the
The Board also notes that the types of equipment and crew used to accomplish a movement that is incidental to a line-haul move do not dictate whether a particular origin or destination point is within a “terminal area.” AAR's suggestion to the contrary is
For similar reasons, AAR's suggestion that a terminal area does not exist if one carrier serves all the industries in an area and “must carry traffic on a line haul” to reach the other carrier for purposes of the switch, (AAR Comments 26 n.3), is misguided. The Board would consider, on a case-by-case basis, taking into account all the pertinent facts, whether a particular switching interchange could be considered to be within a terminal area for purposes of this rule. FRCA/NCTA point out that “[t]here are areas where a single railroad provides the terminal service for itself as well as its competitor(s),” and assert that “the requirement that two carriers perform terminal services in a given area appears overly restrictive.” (FRCA/NCTA Comments 2.) The Board will maintain the two-carrier requirement in the final rule, without dictating what it would mean, in an individual case, for two carriers to perform terminal-area services. Consistent with the principles discussed above, in the event of a dispute, the resolution of whether a particular carrier or activity satisfies the rule's definition would be made based on case-by-case analysis.
Finally, it is unnecessary to amend the regulatory text of proposed §§ 1145.2(c) and 1145.6(a) to state, as suggested by AAR, that reciprocal switching will be prescribed only within a terminal area. (AAR Comments 27-28.) The existing definition of “reciprocal switching agreement” is clear—as are the
Some commenters state that the final rule should omit a definition of “terminal area.” AAR asserts that the rule does not need to define this term because agency precedent already describes how to identify a terminal area; AAR maintains that adding a definition by rule could create confusion. (AAR Comments 28-29.) CN reiterates this view. (CN Comments 30.) Some shippers also favor omitting the definition. (
CN additionally expresses confusion about the meaning of the last sentence of the proposed definition of “terminal area” in § 1145.1. (CN Comments 29.) As proposed, that sentence states: “A point of origin or final destination on the rail system is not suitable for a prescribed switching arrangement if the point is not integrated into
The
To the extent that AAR is arguing that the Board should not consider the existence of such a tariff as relevant evidence at all, the Board disagrees.
The Board also invited comments on how to reconcile inconsistencies in tariffs.
The Board stated in the
AAR and CSXT argue that a petitioner under part 1145 should be required to address practicability in its petition. According to AAR, the Board has recognized that shippers must affirmatively address feasibility concerns in other access proceedings.
The Board rejects the suggestion that practicability must be addressed in a petition filed under part 1145. Under the rule, the prescription would only occur in a terminal area, thereby lowering the likelihood of infeasibility and undue operational impact (as compared to a more expansive form of potential regulatory intervention). If an objection to practicability were raised, it would be, therefore, reasonable to require the objecting rail carrier to bear the burden of proof of showing that transfers under the proposed agreement would be infeasible. Placing this obligation on the rail carrier would also promote the RTP by allowing efficient and expeditious handling of a petition under part 1145.
Nor is it necessary for part 1145 to follow the approach in part 1147, which does require that an initial petition discuss practicability. A petition filed under part 1147 requires an advance commitment from another available railroad to provide the alternative service,
AAR asserts that, in assessing practicability under part 1145, the Board should apply the standards that were articulated in
There is, in fact, no significant difference between the standards that the ICC applied in
Carriers also oppose the presumption that was proposed in the
Conversely, the Coalition Associations support the presumption of operational feasibility when a reciprocal switching arrangement already exists in a petitioner's terminal area. (Coal. Ass'ns Comments 5-6, 45.) The Coalition Associations argue, however, that the Board should adopt a similar requirement for any location where the incumbent and alternate carrier interchange traffic. The Coalition Associations reason that the transfer of railcars at an interchange en route on a line haul is operationally the same as the transfer of railcars within a terminal area for a reciprocal switch. (
The Board will retain the presumption of operational feasibility based on an existing reciprocal switching arrangement in the petitioner's terminal area. That presumption pertains only to operational feasibility of the reciprocal switch, not to other potential elements of impracticability (such as undue impairment of the incumbent carrier's operations, the infeasibility of the alternate carrier's line-haul service, or undue impairment of the incumbent rail carrier's or the alternate rail carrier's ability to serve its existing customers). An existing reciprocal switching arrangement would demonstrate that railcars could be transferred between carriers within the terminal area. The presumption is rebuttable and the carriers will have the opportunity to demonstrate that the petitioner's traffic could not reasonably be added to switching operations. Further, the Board will retain flexibility to assess all relevant information bearing on the issue of practicability.
With respect to the Coalition Associations' proposal to presume operational feasibility at any location where the incumbent and alternate carrier interchange traffic, the Board finds that such a proposal is outside the scope of this proceeding. This rulemaking is limited to establishing criteria for the prescription of reciprocal switching agreements within terminal areas as defined in part 1145.
Some commenters argue that the Board should consider safety as part of its assessment of practicability. (
BLET also raises concerns that switching “would impair the safe operations of crews on both the host and guest railroads.” (BLET Comments 2.) This concern, however, seems to address a trackage rights scenario as opposed to reciprocal switching, as BLET later refers to a guest railroad traversing the tracks of a host railroad. (
Part 1145 does not preclude the Board from considering safety in its assessment of a petition filed under part 1145. The proposed rule requires any petition for prescription of a reciprocal switching agreement to be served on FRA.
CRC and Metrolink express concern that a reciprocal switching agreement under part 1145 could adversely impact existing agreements between freight rail carriers and passenger rail carriers, including agreements regarding shared use of facilities, on-time performance goals, safety, and dispatching priorities. CRC and Metrolink assert that, given the potential impact reciprocal switching agreements may have on a shared rail corridor, the Board must consider the interests of passenger rail carriers in a proceeding under part 1145. (CRC Comments 4-6; Metrolink Comments 1-2.) To that end, CRC suggests that the Board modify proposed § 1145.6(b) to permit a “potentially affected rail carrier” to bring practicability concerns before the Board. (CRC Comments 7-8.)
The Board declines to modify proposed § 1145.6(b) as suggested by CRC. As CRC notes, freight rail carriers and passenger rail carriers already have existing shared use and/or operational agreements. There is no reason to suppose that those agreements would be nullified by the Board's prescription of a reciprocal switching agreement. To the contrary, the Board may assume that the alternate carrier under the prescribed agreement would provide line-haul service to the petitioner in accordance with the alternate carrier's operating agreements with other carriers. In all events, freight rail carriers are in a position to make the Board aware of any practicability issues involving passenger carriers.
Finally, BNSF urges the Board to consider car supply issues when weighing the practicability of a proposed reciprocal switching agreement, including the alternate carrier's ability to supply cars and how added car supply responsibilities will impact the alternate carrier's other customers. (BNSF Comments 8.) BNSF notes that its existing, market-based car-supply programs have substantial built-in lead times and argues that the Board should ensure that these programs are not adversely affected by a prescribed reciprocal switching agreement. (
Although BNSF urges the Board to consider car supply issues when considering the practicability of a reciprocal switch, the Board notes that it is possible that the petitioner and the alternate carrier will have addressed car supply issues in advance of the filing of a petition. Nevertheless, the Board reiterates that, under § 1145.6(b), the Board will not prescribe an agreement if the alternate carrier demonstrates that the provision of line-haul service to the petitioner would be infeasible or that it would unduly impair the alternate rail carrier's ability to serve its existing customers—and will consider evidence, for example, of whether the alternate carrier would be unable to accommodate the car supply needs of the petitioner in the event a reciprocal switching agreement were ordered.
The Board sought comment on whether a prescription should include a minimum level of switching service, and if so, whether the Board should establish a separate and specific penalty structure to be imposed on carriers that do not meet that level of service.
The Coalition Associations and PCA support establishing such a requirement, along with a specific penalty structure to be imposed on carriers that do not meet the customer's level of service requirements. (Coal. Ass'ns Comments 58; PCA Comments 7-8.) AAR asserts that no such requirement or “penalty structure” is appropriate, as the prescribed service will be subject to the common carrier obligation under 49 U.S.C. 11101, and the usual remedies for a failure to provide adequate service upon reasonable request will be available. (AAR Comments 94.)
While the Board expects movements under a prescribed reciprocal switching agreement to occur on a timely and efficient basis, the Board will not attempt through this rule to anticipate or set standards for resolving related disputes. The Board will leave enforcement of carriers' obligations under a prescribed reciprocal switching agreements to other proceedings, should a dispute arise.
The
NSR suggests that customers should be required to communicate with the incumbent carrier during the period of the alleged service issue upon which a petition is based. (NSR Comments 11 (stating that it is consistent with the RTP of 49 U.S.C. 10101(2) to promote the private resolution of disputes);
Rail carriers also argue that an incumbent rail carrier would be better situated to cure a service issue if the Board extended the five-day negotiation period. According to UP, a 30-day negotiation period would allow the customer and carrier “to resolve issues and make longer-term, permanent changes to address the concerns.” (UP Comments 14.) BNSF also suggests a 30-day negotiation period and states that, during the 30-day period, Board staff from the OPAGAC or the Rail Customer and Public Assistance Program (RCPA) could assist in resolving disputes. (BNSF Comments 4-5; BNSF Reply 2-3;
NSSGA responds that carriers' request for additional time to cure a service deficiency shows that carriers can improve service if threatened with the possibility of a reciprocal switching proceeding and are only interested in improving service when a shipper intends to pursue a switching prescription. (NSSGA Reply 4.) NSSGA argues that carriers can improve service at any time, that providing carriers with additional time to cure would delay service improvement, and that carriers may make only temporary improvements to avert a switching prescription. (
The Board rejects proposals to extend the five-day negotiation period or to require additional pre-filing communication between rail carriers and shippers or receivers, including during the period of alleged service inadequacy. As a practical matter, the Board expects that—given both the regulatory requirement that a petitioner must seek to engage in good faith negotiations to resolve its dispute and the practical dynamics of the business relationship between carriers and their customers—a shipper or receiver would have communicated with the incumbent carrier during the period of alleged service inadequacy, and parties are encouraged to seek assistance from RCPA to informally resolve disputes.
AAR argues that the Board did not explain why it proposed a 20-day period to reply to a petition, rather than a 30-day period as permitted under 49 CFR 1147.1(b)(2). (AAR Comments 89);
The proposed 20-day reply period is consistent with the Board's general regulations, which permit a party to file a reply to any pleading within 20 days after the pleading is filed, unless otherwise provided.
Rail carriers urge the Board to clarify the alternate carrier's role in a proceeding for a switching prescription under part 1145. (
Other rail carriers argue that the proposed rule should require petitioners to obtain a commitment from the alternate carrier before filing a petition. (
ACD responds that a commitment requirement is unnecessary, as the
The Board will not adopt the suggestion that petitioners should obtain a commitment from an alternate rail carrier before filing a petition. However, for the Board to best meet its information needs and carry out the regulations, the Board will require that an alternate carrier participate in a proceeding under part 1145 by filing a reply to a petition.
The procedures in this rule allow an alternate carrier to meaningfully participate in a Board proceeding while reducing barriers to petitioners. Additionally, requiring an alternate carrier to file a reply to a petition will allow the Board to better assess any concerns relating to practicability and to weigh those concerns against the public interest. In short, the Board rejects rail carriers' assertions that, in the absence of a commitment requirement, an alternate carrier would be forced to offer line-haul service where there are legitimate practicability concerns that would unduly impair the alternate carrier's operations. Finally, requiring a commitment from the alternate carrier would contradict the design of part 1145, which seeks to allow the successful petitioner to choose between available rail carriers as the petitioner sees fit.
VPA, while noting that the Board “has appropriately focused its proposed rulemaking on shippers and receivers of freight,” nevertheless argues that the Board should “modestly expand the scope” of the entities eligible to seek a reciprocal switching prescription “to include ports and port facilities.” (VPA Comments 5.) VPA asserts that a port, in effect, is the originator or terminator of traffic because every rail movement involving a port either starts or ends at the port, and that ports have a need for reliable, predictable, and efficient rail service similar to that of shippers and receivers. (
AAR opposes VPA's request to expand eligibility to ports, arguing that shippers and receivers “are the entities with the essential economic and operational relationships with the carrier,” and that expanding eligibility “would raise numerous questions about how the entities with those economic and operational relationships would properly be heard” and would “pose complicated issues related to data confidentiality.” (AAR Reply 66 n.21.)
While it may be, as VPA suggests, that port facilities can bear certain similarities to shippers and receivers from an operational perspective, it is also true that they serve a distinct function as links in the national and international supply chain. (
DCPC raises whether a group of shippers in the same terminal area could file for a prescription of a reciprocal switching agreement, giving as an example a group of shippers located in an industrial park. (DCPC Comments 13.) DCPC asserts that groups of shippers served by the same incumbent railroad in the same terminal area that demonstrate inadequate service according to the established standards should be allowed to seek a prescription. (
AAR urges the Board to clarify that “if the party with the economic relationship to the carriers [
Under proposed § 1145.5(c), a petitioner would be required to serve the petition for prescription of a reciprocal switching agreement on the incumbent rail carrier, the alternate rail carrier, and FRA. Several commenters encourage the Board to recognize that other entities may be affected by a prescription and to require that the petition should be served on them also.
AAR argues that shippers should serve notice on short lines and passenger railroads to prevent complications, and that those parties should be permitted to submit comments on a petition if needed. (AAR Reply 65-66.) Similarly, ASLRRA argues that short lines should be notified of switches impacting their traffic—so a short line railroad scheduled to receive a shipment subject to a reciprocal switch prescription earlier in its journey should be notified of the petition as well. (ASLRRA Comments 1, 7.) CSXT supports ASLRRA's proposal to notify short lines of petitions that could affect “joint line traffic handled by that short line.” (CSXT Reply 14.) CSXT also argues that pre-Staggers standards for joint use of terminal facilities, which Congress “imported” when adopting section 11102(c), made clear that a determination as to whether a prescribed reciprocal switching is in the public interest requires consideration of the relief's impact on other parties. (
CRC asks the Board to add a definition of “Potentially Affected Rail Carrier” that would include any rail carrier—freight or passenger—that operates on track shared with one of the rail carrier parties to a prescribed reciprocal switching agreement, and to amend § 1145.5 to require that the petition be served on potentially affected rail carriers. (CRC Comments 7-8.) CSXT supports CRC's suggestion about notifying affected passenger railroads. (CSXT Reply 14.) Metrolink asks that commuter rail and intercity passenger rail entities be given notice of a proceeding and the ability to comment. (Metrolink Comments 1.) Within a case, Metrolink also asks that the Board consider impacts on passenger rail and those entities' shared-use agreements with Class I carriers. (
With respect to commenter requests for post-prescription notifications, the Board notes that voluntary reciprocal switching arrangements involving a Class I rail carrier are reflected on that carrier's public website,
Proposed § 1145.6(d) provides, in part, that upon the Board's prescription of a reciprocal switching agreement, the affected rail carriers must “include, in the appropriate disclosure under 49 CFR part 1300, the location of the petitioner's facility, indicating that the location is open to reciprocal switching, and the applicable terms and price.”
This provision was intended to ensure a measure of public notice in the ordinary course of business (apart from the Board's prescription proceeding itself) that a particular location has become open to reciprocal switching. The Board acknowledges AAR's concern, however, that the
USDA suggests that the Board develop a “ranking component” to prioritize proceedings under part 1145 based on the severity of the performance lapses and “help expedite extraordinary cases.” (USDA Comments 7.) The Board appreciates suggestions for potential ways to enhance the efficiency of Board proceedings. However, the type of system described by USDA would itself be time-consuming (and, in all likelihood, complicated and contentious) to develop. Moreover, the Board is not anticipating a high volume
The Board explained in the
Several railroads and AAR urge the Board to consider all relevant evidence that may bear on the reasons for the failure to satisfy the relevant performance standard. The carriers also assert that the incumbent railroad must have the opportunity to put the metric-based showing into case-specific context, whereby the incumbent railroad would try to establish that there was no service inadequacy. (AAR Comments 75; CSXT Comments 32; NSR Comments 7; CN Comments 25; CPKC Reply 27; NSR Reply 19-21 (proposing language that would allow for “any defense relevant to whether there is a service inadequacy for which there is actual necessity or compelling reason for a prescribed switching agreement”); CN Reply 12 (same).) Some carriers and AAR also assert that the proposed affirmative defenses are highly restrictive, reasoning that service quality may be influenced by a variety of factors that are varied and difficult to predict. (AAR Comments 73-74;
Some railroads and AAR propose additional affirmative defenses that would address situations they contend are likely to recur: the incumbent carrier's curing of the potential service inadequacy during the course of the proceeding, (AAR Comments 75; UP Comments 14); scheduled maintenance and capital improvement projects undertaken by the incumbent, (AAR Comments 75-76; CN Comments 24); conduct of third parties, including action or inaction by the shipper that led to failure to meet a performance standard, (AAR Comments 76-77; BNSF Comments 10-11);
AFPM generally supports delineating a limited number of affirmative defenses but notes that these should be clearly defined and understood, as ambiguous affirmative defenses could weaken the usefulness of this proposal. (AFPM Comment 15.) AFPM further suggests that the “surprise surge” and “highly unusual shipment patterns” affirmative defenses are redundant and could potentially be combined. (
The Board will adopt one of the additional affirmative defenses proposed by commenters as part of the final rule. As noted above, the Board already proposed to include a defense for delays caused by dispatching choices of a third party. The suggestion to include, as an affirmative defense, other conduct by third parties is consistent with the reasoning for including the dispatching-related defense, to the extent that conduct is outside the control of the incumbent carrier.
To be clear, the affirmative defense for third-party conduct will be narrowly construed to prevent this or any defense from being used as a frivolous tactic to unduly prolong or delay, or unnecessarily increase the cost of the proceeding so as to deter the current or future petitioners from bringing proceedings under this rule. This third-party conduct affirmative defense will include only conduct that had a direct, cognizable impact on the incumbent carrier's meeting the applicable performance standard, and that was outside the reasonable control of the incumbent carrier. To the extent that the impact of the conduct could not have been reasonably prevented, the defense will not apply if the incumbent carrier failed to take reasonable steps to mitigate the impact of the third-party conduct. To the extent the conduct could have been reasonably prevented, the defense will not apply if the incumbent carrier failed to take reasonable steps to prevent and mitigate the impact of the third-party conduct. As with the other affirmative defenses, the burden will be on the incumbent carrier to prove each of these elements.
The Board declines to adopt the other additional affirmative defenses proposed by commenters. The Board is adopting a number of specific affirmative defenses, designed to cover scenarios that should be considered when evaluating whether a reciprocal switching agreement should be prescribed and the Board will also, under proposed § 1145.3, consider on a case-by-case basis affirmative defenses that are not specified in the rule. Though the Board recognizes the variability of rail customers, many of the other suggested defenses undermine the underlying purposes of the rule.
As a general matter, the Board's specified affirmative defenses are focused on reasons that a carrier's service might be below a metric during the relevant 12-week period. The Board
The Board clarifies that the “extraordinary circumstances” defense in § 1145.3(a) would not be interpreted broadly to include
The Board appreciates the carriers' suggestion to include “scheduled maintenance and capital improvement projects” as an affirmative defense and recognizes that several shipper interests do not oppose such an addition, but the Board finds that such instances are better addressed on a case-by-case basis. The Board does not intend for the rule to disincentivize capital investment and in fact expects that this rule will help promote investments necessary for adequate service. However, the Board observes that the nature of “scheduled” maintenance and capital improvement projects suggests that carriers have a degree of control over their execution, and the Board expects carriers to exercise that control with reasonable consideration of shippers' service levels.
Lastly, the Board clarifies that the affirmative defense pertaining to a surprise surge in a petitioner's traffic is distinct from the affirmative defense regarding a petitioner's highly unusual shipment patterns. For the former, a surprise surge is defined by rule as an increase in traffic by 20% or more during the 12-week period in question (compared to the 12 weeks prior for non-seasonal traffic or the same 12-week period during the previous year for seasonal traffic), without timely advance notification from the shipper.
The
AAR and NSR assert that, as under part 1147, the Board should take a case-by-case approach to setting fees under part 1145. AAR and NSR reason that the Board plays a limited role in setting compensation under section 11102(c) and that cases in which the Board would need to set compensation would be rare. (NSR Comments 15, 17; AAR Comments 92;
The Coalition Associations support the Board's use of the SSW Compensation methodology, (Coal. Ass'ns Comments 59), and suggest that
AAR disagrees with the Coalition Associations' proposal because it attempts to set fees based on the incumbent carrier's fully allocated costs, an approach that AAR claims contradicts the Board's precedent. (AAR Reply 70.) According to AAR, approaches that are based on fully allocated costs of service inappropriately use depreciated historic costs rather than forward-looking costs. AAR also argues that these approaches fail to account for revenue adequacy and the ability to engage in demand-based differential pricing. (
LyondellBasell stresses the need for an efficient regulatory process to set a reciprocal switching fee, noting that, while the regulatory process to set compensation is underway, a petitioner that has successfully obtained a reciprocal switching prescription would bear a provisional fee either as a pass through or as part of the alternate carrier's rate for line-haul service. (LyondellBasell Comments 3-4.) According to LyondellBasell, this outcome would discourage use of the reciprocal switching agreement. (
PCA asks the Board to set reciprocal switching fees at levels that facilitate effective, aggressive competition and improved service. (PCA Comments 14-15.) PCA also requests that the final rule incorporate the
Ravnitzky proposes that, unless otherwise agreed by the parties or determined by the Board based on compelling evidence, the Board should establish a default reciprocal switching fee based on the average cost of providing switching service in similar circumstances. (Ravnitzky Comments 2.)
The Coalition Associations urge the Board to clarify that, even when the carriers agree to a reciprocal switching fee, the petitioner may challenge that fee before the Board using the same methodology that the Board adopts for setting reciprocal switching fees itself. (Coal. Ass'ns Comments 60.) AAR replies that there is no legal basis for allowing the petitioner to challenge a reciprocal switching fee that was mutually agreed upon by the carriers. (AAR Reply 69.) AAR reasons that the Board has no role in establishing a reciprocal switching fee unless the carriers fail to reach agreement within a reasonable period. (
The Board encourages rail carriers that are party to a Board-prescribed reciprocal switching agreement to reach agreement on compensation within a reasonable period, as contemplated in section 11102(c). The Board has concluded that, if the carriers fail to do so, it is appropriate to determine the compensation methodology on a case-by-case basis because the relevant circumstances in a particular case might warrant the use of one methodology over the other.
While the Board thus declines to choose a single methodology by rule, the Board expects that, in individual cases, the two proposed methodologies will be considered in establishing compensation. As stated in the
With respect to the SSW Compensation methodology, the Board continues to find that, in some cases, this might inform the Board's determination of the appropriate compensation. The SSW Compensation methodology is a flexible approach that can be (and has been) modified to account for the particular facts of each case, including difficulties in valuation, various types of costs, and the specific nature and extent of the line's use.
The Board declines to address the Coalition Associations' request (1) to clarify that a petitioner could challenge a reciprocal switching fee that was mutually agreed upon between the carriers, and (2) to identify what methodology the Board would use in such a case. The associated issues are outside the scope of this proceeding.
The Board proposed that a prescribed agreement under part 1145 would ordinarily have a term of two years from the date on which reciprocal switching operations thereunder began and could have a term of up to four years if the petitioner demonstrated that the longer minimum term was necessary for the prescription to be practical given the petitioner's or alternate carrier's legitimate business needs.
AAR and some rail carriers assert that a two-year term would be disproportionate to the 12 weeks of service that constituted the basis for the order. (AAR Comments 96; CN Comments 26; CSXT Comments 49.) AAR and CSXT state that the Board should determine the initial duration of a prescribed switching agreement on a case-by-case basis and tailor the remedy to the service problem to ensure that the term corresponds to the actual need that the shipper has shown. (AAR Comments 97; CSXT Comments 50.) CN asserts that a lengthy prescription term with no option for earlier termination would be contrary to the public interest of addressing a “service inadequacy at present” and may disincentivize investment in the rail network because of increased uncertainty regarding volumes, density, potential impact on revenues, and return on investment. (CN Comments 26.)
AAR asserts that one year is sufficient to make alternative service attractive and feasible to potential alternate carriers, as an attractive alternate would most likely involve integrating the shipper's lane into the alternate carrier's existing traffic, using existing assets. (AAR Comments 97-98;
AAR asserts that the Board should make clear that authorizing a term longer than two years would apply only in cases where such a term is absolutely necessary to remedy the service inadequacy shown, such as situations involving a particularly persistent service failure that would be expected to last for a long time. (AAR Comments 98-99.) BNSF contends that any situation where it would take two years (or more) for an alternate carrier to make service feasible cannot, by definition, satisfy the statutory requirement that switching be practicable. (BNSF Comments 15.)
Shipper interests assert that a five-year minimum term is necessary to provide sufficient incentive for an alternate carrier to make the investment to implement the switch. (Coal. Ass'ns Comments 47 (also proposing a ten-year maximum term); DCPC Comments 11 (same); EMA Comments 3; NSSGA Comments 4; PRFBA Comments 10;
The Coalition Associations argue that, in considering the minimum term, the Board should look to the duration of rail contracts for competitive traffic, which may be longer than three years, as the carrier has an incentive to “lock up” competitive traffic for an extended period. (Coal. Ass'ns Comments 48.) The Coalition Associations further note that a longer period may be required for the alternate carrier to recover its investment in competitive rail traffic, as such traffic “tends to have lower rates.” (
The Board will modify the proposed rule such that, in prescribing a reciprocal switching agreement, the Board shall prescribe a minimum term of three years and may prescribe a longer term of service up to five years, depending on what is necessary for the prescription to be practical given the petitioner's or alternate carrier's legitimate business needs.
While rail carriers argue that a prescription term should correspond to the time needed to remedy a service inadequacy, the duration of a prescribed reciprocal switching agreement reflects what the Board considers at this time sufficient to introduce competition through a commercial rail option in the petitioner's case and incentivize adequate service throughout the rail industry in general. For the same reason, the duration of a prescribed agreement need not be proportionate to the 12-week period that served as the basis for the Board's prescription.
Moreover, the Board finds that a set time period promotes transparency and certainty for petitioners and carriers and therefore helps ensure the effectiveness of the rule. Setting a clear minimum helps petitioners, who are served by a single rail carrier, better assess whether to incur the costs of bringing a case and changing carriers, (Coal. Ass'ns Comments 50-52), and it helps alternate carriers make complex business decisions about investments needed to provide service on a relatively short-term basis. Meanwhile, a clear maximum helps incumbent carriers plan their businesses and reduces negative effects, if any, that may come from intervention, relative to an indefinite switching arrangement.
Under the timetable set forth in the
AAR and some rail carriers assert that the incumbent carrier should be allowed to seek termination once it establishes adequate service. (AAR Comments 101-02 (proposing that, to terminate a switching order, the incumbent demonstrate “materially changed circumstances” if it has addressed the circumstances that led to the imposition of a switching order); CN Comments 28-29 (proposing that a switching order automatically terminate “absent a showing of some enduring actual necessity or compelling reason and practicability put forth by the petitioner”); CSXT Comments 51.) BNSF argues that the switching prescription should automatically terminate after two years, and if the petitioner would like to extend the switching prescription past two years, the petitioner should be required to demonstrate, at the end of the term, that an extension would be in the public interest. (BNSF Comments 15.)
The Coalition Associations express the need for adequate time for a shipper to transition its operations from an alternate carrier to the incumbent carrier upon termination of a switch prescription. (Coal. Ass'ns Comments 50-52.) They assert that time is needed for a shipper to, among other things, negotiate a new contract with the incumbent carrier, update the shipper's internal systems, and assess the need for fleet and supply adjustments. (
The Board recognizes that a shipper needs adequate lead time prior to the end of a prescription arrangement to switch its operations from the alternate carrier to the incumbent carrier. To this end, the Board will modify the rule by requiring a petition to terminate to be filed no less than 150 days before the end of the prescription period.
The Board declines to adopt the modifications proposed by rail carriers that would allow the incumbent carrier to petition to terminate at any time once it has established adequate service or allow a prescribed agreement to automatically terminate absent a showing of compelling need by the shipper. Rail carriers assert that these proposals are consistent with the notion that a prescription must correspond to a remedial need. However, as discussed, the purpose of the rule is to provide for a rail option as a means to avoid drops in network performance, both with respect to a given petitioner when the incumbent carrier's service failed to meet a performance standard and more generally throughout the network. As noted, the transparency and certainty of a set time range for a switching arrangement are important components for incentivizing performance. Indeed, the duration of three-to-five years is appropriate to securing a rail option as a means to address service issues; the possibility of earlier termination would be less consistent with providing that option and therefore could undermine the purposes of this rule. As also noted in the
As set forth in the
AAR proposes that, rather than examining “similar traffic,” as defined in the rule, the Board should consider the incumbent carrier's performance on any traffic that would cast light on the relevant question before the Board,
The Coalition Associations urge the Board to adopt a narrower definition of “similar traffic,” depending on which of the service metrics is being measured, as the proposed definition could lead to “irrelevant comparisons.” (Coal. Ass'ns Comments 55.) The Coalition Associations assert that, for the OETA and transit time standards, “similar traffic” should be defined as other manifest traffic moving between the terminal where the reciprocal switch occurs and the terminal or local serving yard at the other end of the movement of the switched traffic. (
The Board declines to modify its proposed definition of “similar traffic.” While AAR urges the Board to consider
The Board will, however, modify the standard for a petition to terminate by requiring an incumbent carrier to demonstrate that it has met all three performance standards for similar traffic on average, rather than only the performance standard that provided the basis for the prescription. As the Coalition Associations note, it would undermine the goal of the rule to terminate a prescribed agreement when an incumbent carrier is providing service that would otherwise warrant a reciprocal switching prescription. (
The Board will also modify the rule such that the Board would grant a petition to terminate a prescribed agreement if the incumbent rail carrier demonstrates that its service for similar traffic met performance standards for the most recent 12-week period prior to the filing of the petition to terminate, rather than the prior 24-week period. The Board finds that a 12-week period is sufficient to provide the Board an accurate representation of the incumbent carrier's operations, and that it is reasonable to “harmonize” the time period that serves as the basis for the prescription to the period examined for purposes of a petition to terminate, as AAR suggests. (
Under the proposed rule, in the event the incumbent rail carrier does not timely file a petition for termination, or files such a petition and fails to sustain its burden of proof, the prescribed reciprocal switching agreement would automatically renew for the same period as the initial prescription.
AAR and some rail carriers assert that automatic renewal is not consistent with the need for a switching order to address an actual necessity or compelling need. (AAR Comments 99; CN Comments 27-28; CSXT Comments 50.) AAR proposes that, rather than automatic renewal, the Board should provide for an orderly opportunity for the shipper to show that the term of the switching order should be extended, with no break in service. (AAR Comments 100;
The Coalition Associations support automatic renewal for the same duration as the initial term, noting that the feasibility and attractiveness of handling a shipper's traffic to an alternate carrier is directly related to the potential contract duration, whether access to that traffic is via an initial or renewed switch prescription. (Coal. Ass'ns Comments 57;
Under the final rule, if the incumbent carrier does not timely file a petition for termination, the prescribed agreement will automatically renew at the end of its term for the same period as the initial prescription. However, the Board will modify the proposed rule so that, if a petition to terminate is denied, the Board will determine, on a case-by-case basis, the appropriate renewal period based on the evidentiary record, but for a duration no longer than the initial prescription. This will allow the Board to account for the unique circumstances presented in a particular termination proceeding. (
While AAR and rail carriers argue that automatic renewal is inconsistent with the need for a prescription to address an actual necessity or compelling need, the purpose of the rule, as discussed, is to introduce a second rail option when there is sufficient cause based on application of the performance standards in part 1145. Automatically renewing the prescribed agreement, absent a petition to terminate, furthers this goal and is consistent with rule's placement on the incumbent railroad of the burden of demonstrating that the prescription is no longer warranted. Further, the Board reiterates that nothing in the rule prevents the incumbent carrier from competing to keep its traffic or attempting to win back the traffic by voluntary agreement during the prescription period.
The Board sought comment on whether the Board should prescribe a reciprocal switching agreement on a permanent basis when an incumbent rail carrier had been subject to a prescription under part 1145 and when, within a specified time after termination of the prescribed agreement, that carrier again failed to meet a performance standard under part 1145 (without demonstrating an affirmative defense or impracticability as provided for in part 1145).
The Board declines at this time to adopt a provision that would impose a permanent switching order following a subsequent failure by the incumbent carrier. The Board is not persuaded that “gamesmanship” by an incumbent carrier is likely, particularly given that the termination process will require proof that incumbent carrier's operations for similar traffic meet all three standards set forth in this rule for a 12-week period.
The Coalition Associations propose to require the incumbent carrier to provide the shipper with all data for “similar traffic” that are relevant to the standards the incumbent must satisfy to terminate a prescription, and assert that this should be the same type of data the incumbent carrier is required to provide to a shipper under proposed § 1145.8(a). (Coal. Ass'ns Comments 53.) AAR urges the Board to reject this proposal, arguing that it is unnecessary, burdensome, and raises significant confidentiality concerns. (AAR Reply 78.) The Board anticipates that an incumbent carrier seeking termination will provide the Board with the relevant data to support its petition to terminate. As noted in the
In the
With respect to the first question, AAR and all Class I rail carriers oppose the use of performance data for contract service as the basis for determining that an incumbent carrier is not meeting the performance standards and therefore prescribing a reciprocal switching agreement that would become effective when the contract expires.
AAR and several carriers argue that, in light of section 10709(b), the Board may not use performance data for contract traffic as the basis for finding that the performance standards were not met and prescribing post-expiration reciprocal switching because doing so would create a new “duty”—compliance with the performance standards—that is not “specified by the terms of the contract.” (
AAR argues that its position is consistent with the two cases cited in the
AAR and several carriers also say that applying the proposed rule to traffic that is subject to a transportation contract is bad policy, primarily because they say it would interfere with contract negotiations. (
Shippers and shipper organizations that address the contract issue argue that the Board can and should use an incumbent carrier's contract performance data as the basis for post-expiration reciprocal switching prescriptions.
The Coalition Associations make an additional statutory interpretation argument regarding section 10709. They point out that 49 U.S.C. 10705 says that the Board may require a rail carrier to include substantially less than the entire length of railroad in a through route only in certain limited situations, including when required under sections 10741, 10742, or 11102. (Coal. Ass'ns Reply 7.) The Coalition Associations note that section 10741 expressly states that it shall not apply to contracts covered by section 10709, whereas section 11102 (which includes the reciprocal switching provision) and section 10742 have no such statement. (
The Coalition Associations and other commenters argue that there is precedent for the Board's use of contractual performance data to address service issues. The Coalition Associations and ACD claim that in two decisions—
Shipper organizations also make policy arguments in favor of considering contract performance data as the basis for post-expiration reciprocal switching. They say that the overwhelming majority of rail traffic moves under contract and that the proposed rule will provide little benefit to the overall rail network if contract traffic is excluded. (
Numerous shippers and shipper organizations respond to the arguments made by AAR and the carriers about the purported effects that relying on contract performance data will have on contract negotiations. They argue that shippers, especially captive shippers, are at a disadvantage in contract negotiations with railroads, with contracts often presented on a take-it-or-leave-it basis. (
After considering the comments, the Board will not use incumbent carriers' contract performance data as the basis for reciprocal switching prescriptions under part 1145. Using contract performance data as the basis for reciprocal switching under the rule would attach the potential for a regulatory consequence to the carriers' failure to meet Board-specified numerical performance standards while under contract, which the Board views as inconsistent with the limitations that section 10709 imposes. Given the particular design of part 1145, this would effectively create a “duty” that was not present in the contract, which does not reasonably align with section 10709(b)'s statement that contracting parties shall have “no duty in connection with services provided under such contract other than those duties specified by the terms of the contract.” Shipper organizations are correct that the availability of reciprocal switching would not
The Coalition Associations' argument based on 49 U.S.C. 10705 is not persuasive. Section 10705 provides that the Board may require a rail carrier to include in a through route substantially less than the entire length of railroad only in certain limited situations, including when required under 49 U.S.C. 10741, 10742, or 11102. The Coalition Associations point out that section 10741 (a discrimination provision) specifically states that the provision shall not apply to contracts described in section 10709, in contrast to section 11102, which is silent as to section 10709 contracts. (Coal. Ass'ns Reply 7-8.) Relying on the principle that “where Congress includes particular language in one section of a statute but omits it in another . . . , it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion,” the Coalition Associations argue that the lack of a reference to contracts in section 11102 should be interpreted as an intentional congressional choice to allow the Board to apply reciprocal switching to contract traffic. (
The cases cited by shipper organizations where the agency discussed contract performance in
Second,
In
Similarly, in
Nor do
Neither decision supports the use of contract performance data as the basis for prescribing a reciprocal switching agreement under part 1145. Both decisions merely affirm that the Board itself may collect general network data that may include contract movements for the purpose of monitoring and understanding network fluidity. Indeed, the 2014 decision in Docket No. EP 724 cautions that section 10709 will limit the scope of prospective relief that the Board can provide with respect to contract traffic, describing this issue as a “significant concern.”
The Coalition Associations also argue that language in the Board's decision in
As for transportation that is provided under a rail transportation contract, AAR is correct that we cannot enforce, interpret, or disturb the contracts themselves, nor can we directly regulate transportation that is provided under such a contract. 49 U.S.C.
The Board disagrees that this passage from the Board's 1998 decision in
Nor do
The Board's use of contract data in “Three Benchmark” rate cases also does not support the use of contract data as the basis for a reciprocal switching prescription under the proposed rule. (
The Board appreciates the concerns of shippers and shipper organizations that the Board's decision not to consider the performance of contract traffic may limit the impact of the proposed rule.
Related to the first question, the Board requested comment in the
The Coalition Associations argue that because the Board has authority, in their view, to consider contract performance data when deciding whether to prescribe reciprocal switching, it follows that the Board has authority to require carriers to provide performance data to contract customers. (Coal. Ass'ns Comments 13.) The Coalition Associations point to
The Board need not address whether it has statutory authority to require carriers to provide, to the relevant customer, data regarding the railroad's performance under a contract. Because the Board will not prescribe reciprocal switching under part 1145 based on performance during the term of a contract, the Board sees no basis to require railroads to provide the data in question to customers that are not eligible to file a petition under the rule. Though the Board values open communication between carriers and shippers generally and encourages carriers to voluntarily provide performance data relevant to transportation under contract, in this proceeding commenters did not identify any purpose for requiring the provision of contract performance data other than using it as the basis for a petition under part 1145.
Regarding the second question in the
Given the Board's decision not to rely on performance that occurs during the term of a contract as the basis for a prescription under part 1145, it is unnecessary to consider how far in advance of contract termination the Board may issue such a prescription. Because a prescription under part 1145 must be based on common carrier transportation performance, shippers will need to petition under part 1145 after contract termination and after experiencing service under common carriage for at least 12 weeks.
Commenters made additional contract-related suggestions that were not directly related to one of the questions above: (1) allowing reciprocal switching prescriptions to go into effect before contract termination, with respect to volume that exceeds the shipper's minimum volume commitment as specified in a contract; and (2) treating contractual provisions that preclude the application of reciprocal switching relief as violations of the common carrier obligation.
First, the Coalition Associations “perceive an implicit assumption” in the
The Board will not extend part 1145 to allow prescribed reciprocal switching agreements to go into effect prior to the expiration of a contract, even with respect to a volume of traffic that exceeds the contract minimum. Doing so would require the Board to use contract performance as the basis for action under part 1145, which, as the Board has explained, is inconsistent with section 10709. Moreover, the
Second, FRCA and NCTA argue that: “It may become appropriate to consider whether new contracts that preclude the application of reciprocal switching relief for inadequate service are consistent with 49 U.S.C. [] 11101(a) (`Commitments which deprive a carrier of its ability to respond to reasonable requests for common carrier service are not reasonable.').” (FRCA/NCTA Comments 4.) This suggestion arises in connection with their observation that “the
In the
Comments from railroads and AAR focus primarily on three arguments. First, they contend that the Board cannot use performance metrics from the incumbent carrier's exempt traffic as the basis for reciprocal switching prescriptions. (
Second, AAR and some railroads argue that the Board cannot grant partial revocation to allow reciprocal switching based solely on a carrier's failure to meet the performance standards. (
Shipper organizations that commented on the issue argue that shippers of exempt traffic should be able to obtain a reciprocal switching prescription without the need for cumbersome proceedings, and they offer various suggestions regarding how the Board could facilitate this. FRCA and NCTA argue that the Board should partially revoke an exemption whenever the performance of exempt traffic becomes “inadequate,” because poor service demonstrates that market forces are insufficient to carry out the RTP and to protect shippers from the abuse of market power. (FRCA/NCTA Comments 4.) PCA as well as AF&PA and ISRI urge the Board to revoke certain exemptions
Moreover, AF&PM and ISRI reject the contention that consideration of pre-revocation performance as a basis for reciprocal switching is impermissibly retroactive. (AF&PA/ISRI Reply 10-13.) They point out that the Board's
Finally, some shipper organizations suggest that the Board could prescribe a reciprocal switching agreement with respect to some exempt traffic
First, the Board will not, as a general matter, prescribe reciprocal switching or require the production of data under § 1145.8(a) with respect to exempt traffic unless it first revokes the exemption at least to the extent necessary to do so. Although NSSGA, EMA, and PRFBA suggest that the Board may prescribe reciprocal switching with respect to exempt commodities that were exempted “for reasons related to competition” rather than service issues, (NSSGA Comments 5, EMA Comments 4-5, PRFBA Comments 5), the Board's commodity exemptions do not make such a distinction. Rather, the commodity exemptions apply to all of Subtitle IV of Title 49 of the U.S. Code, except where otherwise indicated in the exemption or required by statute. Because the reciprocal switching statute, 49 U.S.C. 11102, falls within Subtitle IV, regulations promulgated under this provision generally cannot be applied to these commodities, regardless of the original rationale for the exemption or the purposes of this rule. The only exception is the boxcar exemption, which expressly retains Board regulation with respect to reciprocal switching.
As AF&PA and ISRI point out, the Board ordered alternative rail service with respect to exempt traffic in the
Second, the Board will not partially revoke any exemptions as part of this final rule, as some shipper organizations have requested. (PCA Comments 10; AF&PA/ISRI Comments 6-7, 10-15.) AF&PA and ISRI argue that the
Third, regarding the standard the Board will use to evaluate petitions for partial revocation to the extent necessary to permit a prescription of a reciprocal switching agreement, (
In addition to RTP evidence, parties in some revocation proceedings also submit evidence regarding whether revocation is necessary to address the potential for abuse of market power.
Fourth, should the Board partially revoke an exemption, the Board clarifies that it will not rely on pre-revocation performance as the basis for a prescription of a reciprocal switching agreement under this rule. As noted above, AAR and several carriers argue that the Board cannot rely on pre-revocation performance as the basis for a prescription under part 1145 because this would amount to retroactive regulation. (
In
Although AF&PA and ISRI correctly point out that
The two
The Board understands that this determination means that a shipper or receiver would need to obtain partial revocation of the exemption, and then wait until the newly regulated service fell short of the performance standards in part 1145, before filing a petition under part 1145. To mitigate impediments arising from this two-step process, petitions for partial revocation filed in furtherance of part 1145 cases will be prioritized in order to resolve them expeditiously. Moreover, the Board intends to explore whether it should partially revoke all exemptions, on its own initiative, to allow for reciprocal switching petitions, as is currently the case for the boxcar exemption.
The Board proposed to limit prescriptions under part 1145 to situations in which the incumbent rail carrier is a Class I carrier or, for purposes of the industry spot and pull standard, an affiliated company
Some shipper groups fear that the Board's proposal is too limited. NMA asserts that, for a number of its members, the interchanging Class III rail carrier is not affiliated with a Class I rail carrier. (NMA Comments 5.) ACD raises similar concerns, noting that a sizeable
Some groups also argue that the Board should allow a Class II or Class III rail carrier to be an alternate carrier. For example, PCA argues that the Board should allow a reciprocal switching agreement to be prescribed under part 1145 where a Class I railroad provides origin or destination service, but a short line railroad is able to participate in a reciprocal switching arrangement. (PCA Comments 15;
AAR and ASLRRA oppose permitting a petition under part 1145 to be filed against a short line. ASLRRA asserts that none of the shipper comments cite legal authority or facts supporting their position, only anecdotal conclusory statements. (ASLRRA Reply 6-8.) ASLRRA also argues that there have been very few complaints about the service provided by short lines, that imposing the metrics outlined in the
ASLRRA also proposes a definition for “affiliated companies” to ensure Class II and III rail carriers are not “inadvertently covered” under the new regulations:
Affiliated companies means companies or persons that directly or indirectly through one or more intermediaries control, or are controlled by, or are under common control with the accounting carrier. . . . [A]n affiliated company is one that is included in a Class I railroad's annual combined rail reporting to the STB and that acts as an operating division of [a Class I] railroad.
The Board will not extend its rule to permit a petitioner to seek prescription of a reciprocal switching agreement based on a Class II or Class III rail carrier's service. While there are surely times when short line railroads provide a lower level of service, they are historically not a significant source of the service problems this rule seeks to address, and the record here has not demonstrated a need to expand part 1145 to include the smaller
The Board also will not prescribe a reciprocal switching agreement under part 1145 if the alternate line haul carrier would be a Class II or Class III rail carrier, other than Class II or Class III carriers that are affiliated companies of a Class I carrier. To allow an unaffiliated Class II or Class III rail carrier to serve as an alternate line haul carrier would raise a question of fairness in applying part 1145; a Class I railroad could lose its line haul to a Class II or Class III carrier under part 1145, but the Class II or Class III carrier would not be subject to the same possibility under part 1145. This determination is not meant to address whether a shipper could seek prescription of a reciprocal switching agreement under part 1144 or
AAR suggests that the
The Board appreciates these concerns but does not anticipate that the prescription of a reciprocal switching agreement would frequently conflict with the scope clauses of a collective bargaining agreement. Under 49 U.S.C. 11102(c)(2), the Board may require a prescribed agreement to contain provisions for the protection of the interests of affected employees. The Board will consider on a case-by-case basis whether any such provision is appropriate based on the facts of that case.
CSXT argues that the potential additional car handlings, yard activity, and transit delays from a Board-ordered switch could lead to more emissions and environmental impacts.
Environmental review under the National Environmental Policy Act (NEPA), 42 U.S.C. 4321-4370m-11, for operational changes is only required where the Board's thresholds for environmental review would be met. The thresholds for assessing environmental impacts from increased rail traffic on rail lines are an increase in rail traffic of at least 100% (measured in gross ton miles annually) or an increase of at least eight trains per day. 49 CFR 1105.7(e)(5)(i). For rail lines located in areas that are in nonattainment status under the Clean Air Act (42 U.S.C. 7401-7671q), the threshold for air quality analysis is an increase in rail traffic of at least 50% (measured in gross ton miles annually) or an increase of at least three trains per day. 49 CFR 1105.7(e)(5)(ii). Here, however, the Board doubts that a shipper choosing to reroute its traffic to an alternate carrier based on a Board prescription would result in enough rerouted traffic to reach any of these thresholds. Most switches would likely involve additional cars per day rather than additional trains per day.
For these reasons, the Board will not require specific environmental documentation for proceedings under part 1145 unless a showing is made in a particular case that there is enough potential for environmental impacts to warrant an environmental review.
The final rule is categorically excluded from environmental review under 49 CFR 1105.6(c).
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, generally requires a description and analysis of new rules that would have a significant economic impact on a substantial number of small entities. In drafting a rule, an agency is required to: (1) assess the effect that its regulation will have on small entities; (2) analyze effective alternatives that may minimize a regulation's impact; and (3) make the analysis available for public comment. Sections 601-604. In its notice of proposed rulemaking, the agency must either include an initial regulatory flexibility analysis, section 603(a), or certify that the proposed rule would not have a “significant impact on a substantial number of small entities,” section 605(b). The impact must be a direct impact on small entities “whose conduct is circumscribed or mandated” by the proposed rule.
The final rule is directed at Class I railroads and their affiliated companies. As such, the regulations will not impact a substantial number of small entities.
The Board sought comments in the
In the
The Board received comments from AAR and a number of carriers addressing the Board's burden analysis for two types of collections of information under the PRA.
First, UP challenges the
For the reasons explained in the Implementation section, the Board disagrees with UP's stated concern that an entirely new system will be needed to meet the reporting requirements of this rule and similarly disagrees with CSXT's assertion that it will take a year to update its existing software. It is true that the new rule creates a standardized definition of OETA for purposes of part 1145. But, because the railroads' systems already have the code in place to measure OETA (under the demurrage definition), the new definition of OETA should require limited changes to their system codes. Therefore, to meet the new rules, the only change that should be required is an update to the OETA and ISP definitions within the railroads' existing software.
In their conclusory claims about the need for extreme alternatives—creating a whole new system or engaging in a year-long software update—UP and CSXT fail to provide a reasonable basis for the Board to update its estimate of hourly burdens based on either carrier's actual system requirements. Even so, upon further consideration, the Board recognizes that the update of definitions may require more time to edit, test, and implement than estimated in the
Second, CN, CSXT, and UP challenge the data disclosure requirement of proposed § 1145.8(a) (concerning shipper/receiver requests for data from railroads) as vague and overly broad. (CN Comments 35; CSXT Comments 39; UP Reply 3;
AAR contends that the estimates in the
This collection, along with the comments from AAR and the railroads and the Board's response, will be submitted to OMB for review as required under the PRA, 44 U.S.C. 3507(d), and 5 CFR 1320.11. That submission will also address the comments discussed above as part of the PRA approval process.
Pursuant to the Congressional Review Act, 5 U.S.C. 801-808, the Office of Information and Regulatory Affairs has designated this rule as non-major, as defined by 5 U.S.C. 804(2).
Common carrier, Freight, Railroads, Rates and fares, Reporting and recordkeeping requirements, and Shipping.
1. The Board adopts the final rule as set forth in this decision. Notice of the adopted rule will be published in the
2. This decision is effective on September 4, 2024.
3. A copy of this decision will be served upon the Chief Counsel for Advocacy, Office of Advocacy, U.S. Small Business Administration.
By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and Schultz. Board Member Primus concurred with a separate expression.
The final rule adopted today is unlikely to accomplish what the Board set out to do under the statute's authorization of reciprocal switching that is “practicable and in the public interest.”
This final rule relies on service performance standards, which the incumbent carrier must fail during a 12-week period before a petitioner can seek a reciprocal switching order. The
The same is not true, however, with respect to the final rule. A large proportion of rail traffic moves under contract, and the final rule establishes that the Board will not prescribe a reciprocal switching agreement under part 1145 based on performance that occurs during the term of a contract.
A would-be petitioner under the final rule could incur this “tariff premium” indefinitely; 11 weeks into the customer's payment of tariff rates, for example, the carrier's average performance for the period could move above the threshold before falling again. Depending on the magnitude of this blip in the data, the 12-week period could effectively begin again. Rather than incurring the costs of tariff transportation indefinitely—before knowing whether a reciprocal switching petition is even a possibility—I expect contract customers will simply avoid trying to use part 1145.
The decision opines that, “if the rule can achieve its objectives with respect to common carrier traffic, this would make it worthwhile.” As the decision acknowledges, however, only a small percentage of traffic moves in common carrier service. And part 1145 does not even apply to all common carrier traffic; the traffic must also be non-exempt, among other requirements.
I disagree with the conclusion that aiming so low is worthwhile, given that the Board could have implemented the public interest prong without the deterrent effect I have described.
Contrary to an assertion in the decision above, the final rule therefore does not provide most rail customers with a reasonably predictable and efficient path toward a prescription under section 11102(c). I also do not share the optimism reflected in the decision's expectation that part 1145 will be a significant step in incentivizing Class I railroads through competition to achieve and maintain higher service levels on an ongoing basis. Rather, the Board's action is likely to have far less benefit than it intends.
This is a missed opportunity. Almost 13 years after the National Industrial Transportation League filed its petition for rulemaking with regard to reciprocal switching, the Board is adopting rules that do nothing with respect to the statute's competitive rail service prong and may not do very much under the public interest prong. We should do more, we should do better, and we should do it without letting another decade pass.
49 U.S.C. 1321 and 11102
The following definitions apply to this part:
(1) The recipient has the option, by prior agreement between the rail carrier and the customer, to have the rail carrier hold the shipment pending the recipient's request for delivery to the designated destination and the recipient has not yet requested delivery; or
(2) The recipient is unable to accept delivery at the designated destination.
The performance standards in this section apply only to petitions for prescription of a reciprocal switching agreement under this part.
(a)
(1) A car that is delivered more than 24 hours before or after its OETA will not be considered as being delivered within 24 hours of OETA.
(2) Once a carrier has communicated an original estimated time of arrival to a customer, that time will not be changed by any subsequent changes to the original trip plan of the car, no matter what the cause of the changed trip plan may be.
(b)
(1)
(2)
(3) A carrier will not fail the service consistency standard if the increase in
(c)
(d)
(2) A rail carrier's failure to meet a performance standard as provided in this paragraph (d) provides the basis for prescribing a reciprocal switching agreement that governs both the delivery of the empty cars and the delivery of the associated shipments of loaded cars.
(e)
(1) A rail carrier meets the industry spot and pull standard if, over a period of 12 consecutive weeks, the carrier has a success rate of 85% or more in performing requested spots and pulls within the planned service window, as determined based on the total number of planned service windows during that 12-week period.
(2) Failure to spot constructively placed cars that have been ordered in by the cut-off time applicable to the customer for a planned service window is included as a failure in calculating compliance with the industry spot and pull standard.
(3) Failure to spot “spot on arrival” railcars for a planned service window results in a missed service window only if the railcars arrived at the local yard that services the customer and are ready for local service before the cut-off time applicable to the customer.
(4) If a rail carrier cancels a service window other than at the shipper's or receiver's request, that window is included as a failure in calculating compliance with the industry spot and pull standard.
(5) When a rail customer causes a carrier to miss a planned service window, that window will not be considered a miss in determining the success rate under this paragraph (e).
(6) If a rail carrier reduces the frequency of its local service to a shipper's or receiver's facility, and if rail carrier cannot demonstrate that reduction is necessary based on a commensurate reduction in customer demand, then the industry spot and pull standard increases to a success rate of 90% for two years.
(f) The performance standards in paragraphs (a) and (b) of this section apply to movements within the United States and to the U.S. portion of movements between the United States and another country, in the latter case when the carrier's general practice with respect to such movements is to record receipt or delivery of the shipment at a point at or near the U.S. border (including where the carrier receives the shipment from or delivers the shipment to an affiliated carrier).
An incumbent rail carrier shall be deemed not to fail a performance standard in § 1145.2 if any of the conditions described in this section are met. The Board will also consider, on a case-by-case basis, affirmative defenses that are not specified in this section.
(a) The rail carrier experiences extraordinary circumstances beyond the carrier's control, including but not limited to unforeseen track outages stemming from natural disasters, severe weather events, flooding, accidents, derailments, and washouts. A carrier's intentional reduction or maintenance of its workforce at a level that itself causes workforce shortage, or, in the event of a workforce shortage, failure to use reasonable efforts to increase its workforce, would not, on its own, be considered a defense for failure to meet any performance standard. A carrier's intentional reduction or maintenance of its power or car supply, or failure to use reasonable efforts to maintain its power or car supply, that itself causes a failure of any performance standard would not, on its own, be considered a defense.
(b) The petitioner's traffic increases by 20% or more during the 12-week period in question, as compared to the preceding 12 weeks (for non-seasonal traffic) or the same 12 weeks during the previous year (for seasonal traffic such as agricultural shipments), where the petitioner failed to notify the incumbent rail carrier at least 12 weeks prior to the increase.
(c) There are highly unusual shipments by the shipper during any week of the 12-week period in question. For example, a pattern might be considered highly unusual if a shipper projected traffic of 120 cars in a month and 30 cars per week, but the shipper had a plant outage for three weeks and then requested shipment of 120 cars in a single week.
(d) The incumbent rail carrier's failure to meet the performance standard is due to the dispatching choices of a third party.
(e) The incumbent rail carrier's failure to meet the performance standard was directly caused by the conduct of a third party. This defense will be narrowly construed to avoid undue delay of the proceeding and unnecessary litigation costs. When presenting a defense under this paragraph (e), the incumbent rail carrier must prove that such conduct was outside its reasonable control. The incumbent rail carrier must also prove that it took reasonable steps to prevent and mitigate the impact of the third-party conduct or, if the impact could not be reasonably prevented, that the incumbent carrier took reasonable steps to mitigate the impact of the third-party conduct.
At least five days prior to petitioning for prescription of a reciprocal switching agreement hereunder, the petitioner must seek to engage in good faith negotiations to resolve its dispute with the incumbent rail carrier.
(a) If a shipper or a receiver believes that a rail carrier providing it service failed to meet a performance standard described in § 1145.2, it may file a petition for prescription of a reciprocal switching agreement.
(b) The petition must include the information and documents described in this paragraph (b).
(1) Confirmation that the petitioner attempted good faith negotiations as required by § 1145.4, identify the performance standard the railroad failed to meet over the requisite period of time, identify the requested duration of the prescription of a reciprocal switching agreement, and provide evidence supporting its claim and requested prescription.
(2) Identification of at least one possible rail carrier to provide alternative service.
(3) Identification of any relevant switching publications of the incumbent rail carrier and the potential alternate carrier(s).
(4) A motion for a protective order that would govern the disclosure of data that the rail carrier provided to the petitioner under this part.
(c) The petition must have been served on the incumbent rail carrier, the alternate rail carrier(s), and the Federal Railroad Administration.
(d) A reply to a petition is due within 20 days of a completed petition. The burden of proof of establishing infeasibility and/or undue impairment is on the rail carrier (either the incumbent or the alternate) that is objecting to the petition.
(e) A rebuttal may be filed within 20 days after a reply to a petition.
(f) The Board will endeavor to issue a decision on a petition within 90 days from the date of the completed petition.
(a) The Board will prescribe a reciprocal switching agreement under this part if all the conditions in this paragraph (a) are met.
(1) For the lane of traffic that is the subject of the petition, the petitioner has practical physical access to only one Class I carrier that could serve that lane.
(2) The petitioner demonstrates that the incumbent rail carrier failed to meet one or more of the performance standards in § 1145.2 with regards to its shipment.
(3) The incumbent rail carrier fails to demonstrate an affirmative defense as provided in § 1145.3.
(b) Notwithstanding paragraph (a) of this section, the Board will not prescribe a reciprocal switching agreement if the incumbent rail carrier or alternate rail carrier demonstrates that the agreement is not practicable, including: switching service under the agreement,
(c) In prescribing a reciprocal switching agreement, the Board shall prescribe a term of service of three years, provided that the Board may prescribe a longer term of service of up to five years if the petitioner demonstrates that the longer minimum term is necessary for the prescription to be practical given the petitioner's or alternate carrier's legitimate business needs.
(d) Upon the Board's prescription of a reciprocal switching agreement under this part, the affected rail carriers must set the terms of the agreement and offer service thereunder within 30 days of service of the prescription and notify the Board within 10 days of when the carriers offered service that the agreement has taken effect. Additionally, the incumbent carrier must promptly amend its switching publication(s) as appropriate to reflect the availability of reciprocal switching under the prescription.
(e) If the affected carriers cannot agree on compensation within 30 days of the service of the prescription, then the affected rail carriers must offer service and petition the Board to set compensation.
(a) If the incumbent carrier does not timely file a petition for termination, a prescription hereunder automatically renews at the end of the term established under § 1145.6(c). Automatic renewal is for the same term as the original term of the prescription. If the Board denies a petition to terminate the prescription, it will determine, on a case-by-case basis, the appropriate renewal term based on the evidentiary record, not to exceed the original term of the prescription. At the end of the renewal term, if the incumbent carrier does not timely file a petition for termination, the prescribed agreement will automatically renew for the same number of years as the renewed term.
(b) The Board will grant a petition to terminate a prescription if the incumbent rail carrier demonstrates that, for the most recent 12-week period prior to the filing of the petition to terminate, the incumbent rail carrier's service for similar traffic on average met all three performance standards under this part. This requirement includes a demonstration by the incumbent carrier that it has been able to meet, over the most recent 12-week period, the performance standards for similar traffic to or from the relevant terminal area.
(c) The incumbent rail carrier may submit a petition to terminate a prescription not more than 180 days and not less than 150 days before the end of the current term of the prescription.
(d) A reply to a petition to terminate is due within 15 days of the filing of the petition.
(e) A rebuttal may be filed within 10 days of the filing of the reply.
(f) The Board will endeavor to issue a decision on a petition to terminate within 90 days from the close of briefing.
(1) If the Board does not act within 90 days from the close of briefing, the prescription automatically terminates at the end of the current term of the prescription.
(2) If the Board does not issue a decision due to extraordinary circumstances, as determined by the Board, the prescription is automatically renewed for 30 days from the end of the current term. When there are extraordinary circumstances, the Board will issue an order alerting the parties that it will not issue a decision within the required time period. Under such circumstances, the Board will issue its decision as expeditiously as possible.
(3) A prescribed agreement will continue in effect until 30 days after the Board serves a decision that grants a petition to terminate or after the end of the prescription period, whichever is later.
(a) A shipper or receiver with practical physical access to only one Class I carrier serving the lane of traffic for which individualized performance records are sought, and based on a good faith belief that the Class I carrier has provided service that does not meet at least one performance standard from § 1145.2, may submit a written request to the incumbent rail carrier for all individualized performance records relevant to the performance standard(s) the shipper or receiver believes the rail carrier has failed.
(1) In the request to the rail carrier, the shipper or receiver must identify the
(2) Within seven days of the written request, the incumbent rail carrier shall provide the shipper or receiver with the requested individualized performance records.
(3) For purposes of this section, “individualized performance records” means the original estimated times of arrival, transit times, and/or industry spot and pull records related to the shipper or receiver's traffic, along with the corresponding time stamps.
(b) All Class I carriers shall report to the Board on a weekly basis, in a manner and form determined by the Board, data that shows: the percentage of shipments on the carrier's system that moved in manifest service and that were delivered within 24 hours of OETA, out of all shipments on the carrier's system that moved in manifest service during that week; and, for each of the carrier's operating divisions and for the carrier's overall system, the percentage of planned service windows during which the carrier successfully performed the requested local service, out of the total number of planned service windows on the relevant division or system for that week, all within the meaning of this part.
(c) Class I carriers shall provide, in the format of their choosing, machine-readable access to the information listed in this section.
(1)
(2)
(d) Class I carriers shall retain all data necessary to respond to a request under paragraph (a) of this section for a minimum of four years.
Bureau of Land Management, Interior.
Final rule.
This rule governs the management of surface resources and Special Areas in the National Petroleum Reserve in Alaska (Reserve or NPR-A). The Bureau of Land Management (BLM) manages the NPR-A consistent with its duties under the Naval Petroleum Reserves Production Act, as amended (NPRPA), Federal Land Policy and Management Act, as amended, (FLPMA), and other authorities. The rule revises the framework for designating and assuring maximum protection of Special Areas' significant resource values and protects and enhances access for subsistence activities throughout the NPR-A. It also incorporates aspects of the NPR-A Integrated Activity Plan (IAP) approved in April 2022.
This rule is effective on June 6, 2024.
James Tichenor, Advisor—Office of the Director, at 202-573-0536 or
Individuals in the United States who are deaf, deafblind, hard of hearing, or have a speech disability may dial 711 (TTY, TDD, or TeleBraille) to access telecommunications relay services. Individuals outside the United States should use the relay services offered within their country to make international calls to the point-of-contact in the United States. For a summary of the rule, please see the rule summary document in docket BLM-2023-0006 on
To ease the reading of this preamble and for reference purposes, the following acronyms and abbreviations are used in the preamble:
The Naval Petroleum Reserves Production Act of 1976 (NPRPA) gives the BLM three overarching mandates for managing the Reserve: (1) conduct an oil and gas exploration, leasing, and production program; (2) protect environmental, fish and wildlife, historical, and scenic surface resources from the impacts of that program through mitigation of reasonably foreseeable and significantly adverse effects; and (3) assure maximum protection for significant surface values from the impacts of the oil and gas program, including subsistence use, within Special Areas. Through this rulemaking process, the BLM is developing a more cohesive framework for these three mandates by establishing requirements and procedures for protecting the surface values of the Reserve while conducting the oil and gas program.
The final rule implements the critical components of the statutory framework described above, establishing procedures for the BLM to mitigate reasonably foreseeable and significantly adverse effects of proposed oil and gas activities on the surface resources of the Reserve and to provide maximum protection for surface values within Special Areas for proposed oil and gas activities. The BLM will continue to follow the part 3130 regulations for managing oil and gas leasing and production in the Reserve.
The rule updates the purpose of the subpart 2361 regulations to more accurately and completely reflect the scope of the regulations. The purpose of the updated regulations is to provide standards and procedures to implement 42 U.S.C. 6506a(b), which requires the Secretary to ensure that “[a]ctivities undertaken pursuant to this Act include or provide for such conditions, restrictions, and prohibitions as [she] deems necessary or appropriate to mitigate reasonably foreseeable and significantly adverse effects on the surface resources of the [NPR-A],” and to provide standards and procedures to implement 42 U.S.C. 6504(a), under which any exploration in Special Areas “shall be conducted in a manner which will assure the maximum protection of such surface values to the extent consistent with the requirements of this Act for the exploration of the [NPR-A].”
The rule establishes new standards and procedures for managing and protecting surface resources in the Reserve from the reasonably foreseeable and significantly adverse effects of oil and gas activities. It requires the BLM, in each decision concerning oil and gas activity in the Reserve, to adopt measures to mitigate the reasonably foreseeable and significantly adverse effects on surface resources, taking particular care with surface resources that support subsistence. The rule requires the BLM to manage oil and gas activities in accordance with the IAP, enshrining longstanding BLM practice into regulations. In the BLM's experience, the IAP provides an invaluable means of evaluating management options, engaging the public, and guiding decision-making, consistent with the BLM's duties under NPRPA and the National Environmental Policy Act (NEPA).
The rule codifies the five existing Special Areas and their significant resource values and management as currently established in Secretarial decisions and the 2022 IAP, and it establishes a process for designating, amending, and de-designating Special Areas in the future. The rule sets forth standards and procedures for managing oil and gas activities within Special Areas, confirming that the management priority within Special Areas is to assure maximum protection of significant resource values consistent with the requirements of the NPRPA for exploration of and production from the Reserve. The procedures detail requirements for analyzing proposed oil and gas leasing, exploration, development, or new infrastructure in Special Areas, including providing opportunities for public participation and consulting with federally recognized Tribes and Alaska Native Claims Settlement Act (ANCSA) corporations that use the affected Special Area for subsistence purposes or have historic, cultural, or economic ties to the Special Area. The BLM must evaluate potential adverse effects on significant resource values and consider measures to avoid, minimize, or otherwise mitigate adverse effects to achieve maximum protection of significant resource values.
The rule requires the BLM to manage Special Areas to protect and support
The BLM is promulgating this final rule because the regulatory framework governing the management and protection of environmental, fish and wildlife, other surface resources, and Special Areas in the Reserve needs updating. Conditions throughout the Arctic have changed dramatically since 1977, when the BLM issued the current regulations for management of surface resources and Special Areas in the Reserve. Rapidly changing conditions, including the intensifying impacts of climate change on the Reserve's natural environment and Native communities, make it necessary and appropriate for the BLM to develop new regulations that account for and respond to these changing conditions and that require the BLM to regularly address changing conditions.
In addition, the current regulations do not reflect the full management regime for the Reserve. This rule will provide a framework for management to protect Special Areas and surface resources in the Reserve, which requires a delicate balance between exploration for and development of oil and gas resources and protecting subsistence, recreational, fish and wildlife, historical, scenic, and other values. The applicable legal standards and procedures for management of the Reserve are currently scattered throughout several statutes and BLM regulations, plans, and guidance documents. For example, the existing regulations do not integrate with the BLM's development and use of IAPs, which have been used for more than two decades to guide management of lands within the Reserve. Although the BLM is not required to prepare a resource management plan for the Reserve under FLPMA, see 42 U.S.C. 6506a(c), it has chosen to produce and update the IAP through a public process and supported by analysis in an Environmental Impact Statement (EIS). The IAP allocates land uses in the Reserve and includes oil and gas lease stipulations and infrastructure restrictions that apply to BLM authorizations in Special Areas and other areas throughout the Reserve. The overlay of an updated regulatory regime to govern the Reserve, including the requirement to develop future IAPs to direct management of the lands and resources in the Reserve, will enhance consistency and certainty, particularly with respect to protection of surface resources and Special Areas.
Through the NPRPA, as amended, Congress has given the BLM three overarching mandates for managing the Reserve: (1) conduct an oil and gas exploration, leasing and production program; (2) protect environmental, fish and wildlife, historical, and scenic surface resources from the impacts of that program through mitigation of reasonably foreseeable adverse effects; and (3) assure maximum protection for significant surface values from the impacts of the oil and gas program, including subsistence use, within Special Areas. Through this rulemaking process, the BLM is developing a more cohesive framework for these three mandates by establishing requirements and procedures for protecting the surface values of the Reserve while conducting the oil and gas program, as discussed in more detail below.
The NPRPA directs the Secretary of the Interior to “conduct an expeditious program of competitive leasing of oil and gas in the Reserve in accordance with this Act.” In response to this mandate, in 1981 the BLM developed regulations establishing the procedures for administering a competitive leasing program for oil and gas within the Reserve. Those regulations are set forth in 43 CFR part 3130, and they are not being amended in this rulemaking process. Following promulgation of the part 3130 regulations, the BLM held two lease sales in the Reserve in 1982 and one each in 1983 and 1984.
The BLM continues to authorize oil and gas leasing and production in the Reserve. The most recent oil and gas lease sale in the Reserve occurred in 2019. Under the 2022 IAP, approximately 11.8 million acres of the Reserve's subsurface estate are available for oil and gas leasing. In March 2023, the BLM approved the Willow Master Development Plan Project for construction and operation of new infrastructure in the Bear Tooth Unit within the Reserve. The approved Willow project incorporates substantial resource protection measures, such as reducing the number of proposed drill sites, while authorizing the production and transportation to market of Federal oil and gas resources within the Reserve, consistent with the BLM's statutory directives.
Under the NPRPA, the Secretary of the Interior assumes all responsibilities for the protection of environmental, fish and wildlife, and historical or scenic values. The Act authorizes the Secretary to “promulgate such rules and regulations as [she] deems necessary and appropriate for the protection of such values within the reserve.” 42 U.S.C. 6503(b). The BLM additionally has a responsibility to “provide for such conditions, restrictions, and prohibitions as the Secretary deems necessary or appropriate to mitigate reasonably foreseeable and significantly adverse effects [of oil and gas activities] on the surface resources” throughout the Reserve. 42 U.S.C. 6506a(b). The current regulations, however, provide little detail on the standards and procedures the BLM should use to implement these important requirements. New and revised standards and procedures are needed to ensure that the BLM is fulfilling its statutory duties under the NPRPA, FLPMA, and other authorities to the best of its ability.
The many important surface resources of the Reserve are described in detail in
The NPRPA requires the BLM to “assure the maximum protection of [significant subsistence, recreational, fish and wildlife, or historical or scenic] values” within Special Areas “to the extent consistent with the requirements of [the NPRPA] for the exploration of the reserve.” 42 U.S.C. 6504(a). This requirement applies to the impacts of all oil and gas activities. 42 U.S.C. 6504(a); 6506a(n)(2). The final rule improves upon the standards and procedures that implement this requirement. For example, the current regulations identify specific measures the BLM may take to assure maximum protection but provide no further guidance on the evaluation and selection of such measures.
The final rule also maintains and enhances access for long-standing subsistence activities in the Reserve. The importance of subsistence harvesting to the Iñupiat people and residents of communities in and around the Reserve is discussed in depth in the preamble to the proposed rule. Impacts on subsistence are occurring on the North Slope with greater frequency as development expands across the region. Nuiqsut, the community closest to current oil and gas development on the North Slope, has experienced the most impacts. Effects on subsistence and concerns for ongoing subsistence activities have also been documented for Point Lay, Wainwright, Utqiagvik, Atqasuk, and Anaktuvuk Pass. Many of these effects are related to oil and gas exploration and development—including seismic activity and oil and gas-related research, pipelines, and traffic—on caribou and other terrestrial species. Provisions of the rule for management of subsistence uses within Special Areas and co-stewardship opportunities in management of Special Areas and subsistence fulfill the special trust relationship that the Department of the Interior has with Tribes.
In sum, this rule implements the critical components of the statutory framework described above, establishing procedures for the BLM to mitigate reasonably foreseeable and significantly adverse effects of proposed oil and gas activities on the surface resources of the Reserve and to provide maximum protection for surface values within Special Areas for proposed oil and gas activities, consistent with the requirements of the Act related to conducting oil and gas exploration and production—all as explicitly required by the NPRPA. The BLM will continue to follow the part 3130 regulations for managing oil and gas leasing and production in the Reserve. The BLM will also continue to maintain an IAP for the Reserve per the final rule. The IAP addresses management of the Reserve more broadly than oil and gas activities, whereas this rule and the codification of the 2022 IAP in provisions of this rule apply only to oil and gas activities.
During the public comment period, the BLM received approximately 89,000 comments on
This preamble responds to comments in the relevant part of the discussion. For example, the following addresses comments on the need for the rule.
Designated by President Warren G. Harding in 1923 as Naval Petroleum Reserve No. 4, E.O. 3797-A, the Reserve is one of several naval petroleum reserves established on public land in the early part of the 20th Century to serve as an emergency oil reserve for the U.S. Navy. The Reserve extends from the north slope of the Brooks Range to the Arctic Coast and encompasses approximately 23 million acres of public land.
The U.S. Navy explored for oil and gas in the Reserve from 1944 to 1953, resulting in the discovery of two small oil fields (Simpson and Umiat), one prospective oil field (Fish Creek), a gas field (South Barrow), and four prospective gas fields (Meade, Square Lake, Titaluk, and Wolf Creek). The Navy also pioneered numerous methods for oil exploration in the Arctic and collected a tremendous amount of scientific information concerning northern Alaska. By the 1970s, when Congress began debating the role of the naval petroleum reserves in the context of the nation's changing energy needs, the Reserve remained “largely unexplored and almost completely undeveloped.” H.R. Rep. No. 94-156, at 3 (1975). In 1976, Congress passed the NPRPA, which transferred administrative jurisdiction over the Reserve from the Secretary of the Navy to the Secretary of the Interior and redesignated the “Naval Petroleum Reserve Numbered 4, Alaska” as the “National Petroleum Reserve in Alaska” in 1977. Public Law 94-258 (1976) (codified at 42 U.S.C. 6502). It also directed the President to prepare a study to “determine the best overall procedures” for exploring, developing, and transporting the reserve's oil and gas resources.
In the NPRPA, Congress sought to strike a balance between oil and gas exploration and “the protection of environmental, fish and wildlife, and historical or scenic values” in the Reserve. It did so by directing the Secretary to “promulgate such rules and regulations as he [or she] deems necessary and appropriate for the protection of such values within the reserve.” 42 U.S.C. 6503(b). The Conference Report explained that the Act would immediately vest responsibility for protection of the Reserve's “natural, fish and wildlife, scenic and historical values . . . in the Secretary of the Interior . . . so that any activities which are or might be detrimental to such values will be carefully controlled.” H.R. Conf. Rep. No. 94-942 (1976). The report stated the Conference Committee's expectation “that the Secretary will take every precaution to avoid unnecessary surface damage and to minimize ecological disturbances throughout the reserve.”
Congress further directed that “[a]ny exploration within the Utukok River, the Teshekpuk Lake areas, and other areas designated by the Secretary of the Interior containing any significant subsistence, recreational, fish and wildlife, or historical or scenic value, shall be conducted in a manner which will assure the maximum protection of such surface values to the extent consistent with the requirements of this Act for the exploration of the reserve.” 42 U.S.C. 6504(a). The Conference Report elaborated that the Act would “immediately authorize the Secretary to require that the exploration activities within these designated areas be conducted in a manner designed to minimize adverse impacts on the values which these areas contain.” H.R. Conf. Rep. No. 94-942 (1976).
To implement the NPRPA, the BLM developed regulations in 1977 to govern management and protection of the Reserve. Those regulations, which have remained unchanged since their original promulgation, are set forth at 43 CFR part 2360, subpart 2361. The regulations provide a purpose and objectives for the protection of the environmental, fish and wildlife, and historical or scenic values of the Reserve and require the BLM to take such action as is necessary to mitigate or avoid unnecessary surface damage and to minimize ecological disturbance throughout the Reserve to the extent consistent with the requirements of the NPRPA for the exploration of the Reserve. Among other provisions, the regulations identify examples of maximum protection measures that may be implemented to protect significant resource values and provide guidance for designating additional Special Areas within the Reserve.
Three years after the BLM developed regulations to govern management of the Reserve, the Department of the Interior Appropriations Act, Fiscal Year 1981, directed the Secretary to “conduct an expeditious program of competitive leasing of oil and gas” in the Reserve, while “provid[ing] for such conditions, restrictions, and prohibitions as the Secretary deems necessary or appropriate to mitigate reasonably foreseeable and significantly adverse effects on . . . surface resources . . . .” Public Law 96-514, 94 Stat. 2957 (1980). The BLM subsequently developed a new set of regulations to govern the oil and gas leasing program in the Reserve, which were promulgated in 1981 and are set forth at 43 CFR part 3130. The part 3130 regulations did not amend the subpart 2361 regulations, and, as a result, the BLM currently follows two sets of regulations located in different parts of the code governing management of the Reserve.
The Fiscal Year 1981 Appropriations Act also exempted the Reserve from the requirement to prepare land use plans under section 202 of FLPMA. However, the BLM has found that planning is beneficial to ensure compliance with the statutory and regulatory framework governing the Reserve and since 1998 has maintained an IAP for the Reserve. Because planning in the Reserve is exempted from FLPMA section 202, the IAP is not developed as a resource management plan and does not implement multiple use and sustained yield. Instead, the IAP focuses possible future BLM management practices on those uses that are allowable under the NPRPA for the Reserve, and consistent with NEPA regulations at 40 CFR parts 1500 through 1508, the IAP is developed through an EIS process.
The BLM first developed an IAP for the Northeast portion of the Reserve, which was finalized in 1998, and established initial surface protections relevant to the Teshekpuk Lake and Colville River Special Areas. Upon signing the 1998 ROD, the Secretary approved the addition of “much of the Kikiakrorak and Kogosukruk Rivers and an area approximately two miles on either side of these rivers” to the Colville River Special Area, thus increasing its size to 2.44 million acres, and the addition of the Pik Dunes to the Teshekpuk Lake Special Area. 64 FR 16747 (April 6, 1999). The 2003 Northwest NPR-A IAP proposed the new Kasegaluk Lagoon Special Area, which the Secretary approved in a ROD in 2004. See 70 FR 9096 (Feb. 24, 2005). The Kasegaluk Lagoon Special Area is located in the northwestern corner of the Reserve and includes important habitat for marine mammals, among other values.
The BLM developed the first IAP for the full Reserve in 2013. Through the 2013 IAP, the Secretary made several
The current IAP, adopted in April 2022, was informed by a Final EIS issued by the agency in 2020. The EIS evaluated a range of alternatives for managing oil and gas activities and resources in the Reserve. (BLM, NPR-A Final IAP/EIS (June 2020),
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In addition to the above, the current IAP benefited from suggestions and careful review of the analysis in the IAP/EIS by several cooperating agencies: the Bureau of Ocean Energy Management, Iñupiat Community of the Arctic Slope, National Park Service, North Slope Borough, State of Alaska, and U.S. Fish and Wildlife Service. During the IAP/EIS process, the BLM consulted with:
• Tribes as required by a Presidential Executive Memorandum dated April 29, 1994;
• Communities, Tribal organizations, and Native corporations on the North Slope;
• The U.S. Fish and Wildlife Service and the National Oceanic and Atmospheric Administration—Fisheries pursuant to the Endangered Species Act; and
• Alaska's State Historic Preservation Office pursuant to the National Historic Preservation Act.
Pursuant to Alaska National Interest Lands Conservation Act (ANILCA) section 810(a)(1) and (2), the BLM also conducted hearings in North Slope communities to gather comments regarding potential impacts to subsistence use resulting from the alternatives considered in the IAP/EIS. Section 3.6 of the 2022 IAP details the BLM's process for evaluating impacts to subsistence use and findings based on that evaluation.
The 2022 IAP makes approximately 11.8 million acres (52 percent) of the Reserve's subsurface estate available for oil and gas leasing. The remaining approximately 11 million acres (48 percent) of the Reserve, including the majority of lands within Special Areas and much of the coastal area of the Reserve along the Beaufort Sea, are closed to oil and gas leasing to protect and conserve important surface resources and uses in these areas. The majority of the area closed to oil and gas leasing was determined to be medium or low potential for discovery or development of oil and gas resources in the Reasonably Foreseeable Development Scenario in the 2020 NPR-A Final IAP/EIS. (BLM, NPR-A Final IAP/EIS at B-1 (June 2020),
The NPRPA is the primary source of management authority for the Reserve. Under the NPRPA, the Secretary must “assume all responsibilities” for “any activities related to the protection of environmental, fish and wildlife, and historical or scenic values” and “promulgate such rules and regulations as he [or she] deems necessary and appropriate for the protection of such values within the reserve.” 42 U.S.C. 6503(b).
Congress has also directed the Secretary to “conduct an expeditious program of competitive leasing of oil and gas” in the NPR-A.
The NPRPA also authorizes the Secretary to designate Special Areas to protect “significant subsistence, recreational, fish and wildlife, or historical or scenic value[s]” in the NPR-A and provides that any “exploration” in Special Areas “shall be conducted in a manner which will assure the maximum protection of such surface values to the extent consistent with the requirements of this Act for the exploration of the reserve.”
Other authorities that guide management of the NPR-A include FLPMA and the Alaska National Interest Lands Conservation Act of 1980 (ANILCA). Although Congress in 1980 exempted the NPR-A from FLPMA's land use planning and wilderness study requirements, 42 U.S.C. 6506a(c), it did not exempt the NPR-A from FLPMA's other provisions. Hence, the BLM must “take any action necessary to prevent unnecessary or undue degradation” of all BLM-administered public lands, including within the NPR-A. 43 U.S.C. 1732(b).
Similarly, certain portions of ANILCA apply within the Reserve. Of particular importance for this rule, section 810 of ANILCA, which governs subsistence
Similarly, this rule appropriately implements the applicable provisions of FLPMA to the management of the Reserve. The Department of the Interior and Related Agencies' Fiscal Year (FY) 1981 Appropriations Act (Pub. L. 96-514) exempted management of the Reserve from only two sections of FLPMA: section 202 (43 U.S.C. 1712), which requires the BLM to prepare resource management plans to guide management of public lands; and section 603 (43 U.S.C. 1782), which required the BLM to complete wilderness reviews and describes the procedures for managing any lands recommended to Congress for wilderness designation pending congressional action. The BLM is otherwise obligated to manage public lands within the Reserve pursuant to FLPMA, where consistent with the NPRPA, as amended. Under FLPMA, the BLM has broad authority to regulate the use, occupancy, and development of public lands within the Reserve and must take action “to prevent unnecessary or undue degradation of the lands” (43 U.S.C. 1732(b)).
The BLM published the proposed rule in the
During the comment period, the BLM hosted a variety of public outreach activities. The BLM held two virtual public meetings on October 6 and November 6, 2023. Presentation slides and video recordings of the virtual meetings were made available on the BLM website for the rulemaking (
The BLM also posted a fact sheet, a frequently-asked-questions document, a side-by-side comparison of the proposed rule with the existing regulation, and other background information on the BLM website to further public understanding of the proposed rule (
In addition, during the comment period, the BLM conducted external outreach and participated in meetings to discuss the content of the proposed rule, including congressional briefings; meetings with the State of Alaska; and meetings with industry and other stakeholder interest groups.
Commenters noted their perception that the BLM did not seek the input of those likely to be affected by the rulemaking prior to issuing the Notice of Intent in the
Commenters also provided input on outreach methods. Commenters suggested that the BLM utilize KBRW as local residents often listen to that station for important announcements including meetings. Commenters also suggested that the BLM reach out to local search and rescue offices in villages because those volunteers directly interact with subsistence users. Comments emphasized that many Tribes and allotment owners do not have cell phones, utilize social media, or own computers; many do not have internet access, and if they do, it is limited and unreliable.
For some proposed rules, the BLM chose to engage with stakeholders about the broader topic earlier in the rulemaking process. In this instance, however, we believed it would be more productive to engage in more in-depth discussion regarding the content of the proposed changes to the rule with the benefit of the actual proposal for review and discussion.
The BLM worked with communities within the Reserve to host in-person public comment meetings, including posting meeting flyers, amplifying meetings on social media, and announcing the meetings on local CB radios. We always appreciate suggestions on outreach methods and how we might better reach audiences. We note the commenters' specific outreach suggestions for future efforts in the North Slope region.
Commenters expressed their concerns that the timeline for review of the rule directly conflicted with hunting and fall subsistence whaling activities. Commenters also noted their perception that the BLM is ignoring local circumstances such as the North Slope Borough's mayoral elections, which they stated prevented meaningful input on the proposed rule from North Slope communities. Comments expressed the opinion that the public comment timeline was inadequate, noting that 60 days was insufficient, and that the additional 30 days of extensions still did not allow North Slope organizations to diligently prepare comments on the rule and to weigh-in to the fullest extent possible. Commenters requested additional time to allow the public to have meaningful opportunity to review the necessary information and provide substantive comments.
Commenters expressed concern that the comment period for the rule overlapped with the comment period for the Coastal Plain Oil and Gas Leasing Program Supplemental EIS comment period.
Commenters emphasized the importance of working with the NPR-A Working Group, as the group consists of important local leaders and provides a forum for discussion of the rule including recommendations. Commenters suggested that certain group members (specifically Utqiagvik) did not receive notification of the meetings and that they should be involved in the discussion.
Commenters noted their opinion that the schedule for in-person and virtual public meetings for the rule did not provide sufficient notice to allow the public to meaningfully participate, nor the opportunity to adjust schedules so as to attend in person. Commenters also noted their opinion that the meetings were hastily scheduled, with only a few days' notice, and that meetings were canceled with little or no notice and often not rescheduled. Commenters requested additional public meetings and requested that those additional meetings be adequately noticed to facilitate public participation and local engagement.
Commenters noted that there is no reason the proposed rule should have substantially less public participation than other, less significant actions that have dictated management of the Reserve as both have been subject to the Administrative Procedure Act (APA). Commenters noted that the APA ensures that BLM rulemaking is a transparent and regular process.
The BLM received requests to extend the public comment period for the proposed rule; specifically, we were asked to extend the comment period for an additional 90 days, which would have made for a 150-day (5-month) comment period. A 5-month comment period far exceeds the typical duration for rulemaking comment periods. While we were unable to grant the requested extension, the BLM did extend the comment period for 30 days, resulting in a 90-day comment period for the proposed rule. While the comment period for the proposed rule overlapped with the comment period on the Draft Supplemental EIS for the Coastal Plain, the Coastal Plain comment period was 60-days and ended one month before the close of the comment period on the proposed rule.
Commenters provided input on the format of both the in-person and virtual meetings. Commenters noted that public comment and testimony was not part of the meetings, which, in their opinion, confirmed the BLM's “limited intention to actually gather knowledge or data, or
Some commenters noted that, in their opinion, the BLM should “reset the process to allow more public engagement and to receive the benefit of comment from informed stakeholders who can contribute to a better and more durable final rule.”
The informational sessions were designed to help the interested public understand the proposed rule and provide a forum to answer questions. The BLM communicated with attendees that comments would not be collected at the informational sessions due to the logistical feasibility of accurately and comprehensively recording comments in those venues. Participants were given both the
The BLM worked with communities within the Reserve to host in-person public comment meetings. We have heard on numerous occasions through other project outreach efforts that submitting public comments online or through the mail often poses a challenge to these communities. To facilitate greater participation, we offered opportunities for community members at these meetings to submit their comments to the record through comment cards or orally through a transcriber.
Commenters expressed their opinion that the BLM incorrectly relied on the public comment process that informed the 2020 IAP ROD and noted that the BLM should have conducted NEPA review for the proposed rule. Commenters noted their opinion that the BLM streamlined the public involvement process and the actual impacts of the rule by claiming that it is administrative in nature, thus dismissing the need for additional stakeholder input. Commenters also noted their opinion that the rule vastly alters major Federal planning processes and land management standards that were developed using robust public input and that if the BLM wants to move forward with a rule that alters existing Federal land management, then the agency must acknowledge the public involvement process requirements at a minimum.
The BLM received comments stating that “The State [of Alaska] strongly opposes and finds it disingenuous for BLM to consider and describe stakeholder engagement during the NPR-A IAP relevant stakeholder engagement and as justification for the need of the proposed rule.”
On August 25, 2023, the BLM invited via mail 45 Tribes and 30 Alaska Native Corporations to engage in consultation regarding the proposed NPR-A rule. Since the announcement of the proposed rule, we have continued to offer consultation to Native Village of Atqasuk, Atqasuk Corporation, Village of Wainwright, Olgoonik Corporation, Native Village of Nuiqsut, Kuupik Corporation, Native Village of Barrow, UIC, ICAS, and ASRC. We met with the Mayor of Atqasuk on October 31, Native Village of Nuiqsut on November 1, ICAS on November 3 and February 6, Village of Wainwright on November 21, Olgoonik Corporation on December 19, ASRC on December 21, and Kuukpik on February 1. In addition, staff met and discussed the proposed rule with the NPR-A Working Group (consisting of representatives from North Slope local governments, Native corporations, and Tribal entities,
Commenters expressed their opinion that the Alaska Native Corporations and the federally Recognized Tribes of Alaska were not properly consulted during the rulemaking process. Commenters expressed their opinion that the BLM did not comply with E.O. 13175, Secretary's Order 3043, President Biden's “Memorandum on Tribal Consultation and Strengthening Nation-to-Nation Relationships” and “Memorandum on Uniform Standards for Tribal Consultation,” and the DOI Policy Manual 512 DM 4 and 5. Comments stated that the BLM letter to Alaska Tribes and Alaska Native Corporations was sent 7 business days before the proposed rule's publication which “fails to meet the numerous consultation requirements detailed at length” in the Executive order and Memoranda listed above.
Commenters expressed that because the rule was published during fall whaling season, “What little
Commenters requested that the BLM engage in meaningful communication and consultation with local villages and Tribes to ensure the new regulations meet the needs and concerns of the communities who rely on the Reserve. Comments requested that the BLM consultation be more inclusive than just the federally recognized Tribes and ANSCA corporations. One commenter stated: “Also, the rule seems to treat ANCSA corporations the same as Tribes which needs further clarification.”
Another commenter stated: “BLM's efforts to avoid working with local stakeholders of the NPR-A is almost impressive in its breadth. Not only has the State been excluded, but also leaders from impacted NPR-A Alaska Native communities, the North Slope Borough, the BLM-created NPR-A Working Group, the congressionally established ASRC, the tribal representatives from the ICAS, the Voice of the Arctic Inupiat (VOICE), and the general public of Alaska and residents of the NPR-A. These process deficiencies are especially stark after so many prior NPR-A-focused planning and permitting efforts featured comprehensive consultation and process. Conversely, this may be the North Slope's most disconnected and disingenuous public process in the modern era.”
In addition, 512 DM 6 (
In its many years of engaging with North Slope communities, the BLM has gained a deep understanding of the connection those communities have with the NPR-A. For example, for the Iñupiat of the North Slope, “cultural resources are not merely places or things but also provide a link between North Slope history, Iñupiat culture and values, subsistence activities, and the biological and physical environment. These resources have spiritual and cultural importance to residents of the North Slope, and their protection is of utmost importance to the Iñupiat.”
Commenters requested that the BLM ensure decisions are consistent with Council on Environmental Quality (CEQ) guidance, Environmental Protection Agency (EPA) guidance, and Secretarial Order 3399 regarding addressing climate impacts. In particular, commenters recommended that the BLM include a requirement in the rule to analyze the social cost of carbon, consider the reasonably foreseeable effects of climate change on infrastructure, and model greenhouse gas emissions. Commenters proposed various frameworks and approaches for incorporating climate analysis and emissions management into the rule.
At the same time, we note that, while the terms of an existing lease and approved development project or permit will not be affected by the rule, a valid lease does not entitle the leaseholder the unfettered right to drill wherever it chooses or categorically preclude the BLM from considering alternative development scenarios within leased areas, nor does it give the leaseholder the right to produce all economically recoverable oil and gas on the lease. Further, the BLM can condition permits for drilling on implementation of environmentally protective measures and could even deny a specific application altogether if it were to propose development in a particularly sensitive area, and where mitigation measures would not be effective. Future development of an existing lease, by its terms, could be subject to additional terms and conditions. For example, the standard lease for activities in the Reserve states, “An oil and gas lease does not in itself authorize any on-the-ground activity” and notes that more restrictive stipulations may be added. Similarly, a standard lease stipulation entitled “Conservation of Surface Values for NPR-A Planning Area Land” provides: “Operational procedures designed to protect resource values will be developed during Surface Use Plan preparation, and additional protective measures may be required beyond the general and special stipulations identified in the above-referenced documents.”
The following paragraphs summarize changes the BLM made from the proposed rule to the final rule. More detailed explanations for the changes are found in the responses to comments and the description of the final rule in section IV of this preamble to the final rule.
The BLM added references to FLPMA and ANILCA in the Authorities section in the final rule, including the caveat that the land use planning and wilderness study requirements of FLPMA do not apply to lands within the Reserve, pursuant to 42 U.S.C. 6506a(c).
The BLM revised the definition of “infrastructure” in the final rule to clarify that the term means, “a permanent or semi-permanent structure or improvement that is built to support commercial oil and gas activities on BLM-administered lands within the Reserve, such as pipelines, gravel drilling pads, man camps, and other structures or improvements.” The revised definition further clarifies that “infrastructure” does not include structures or improvements that will primarily be used by and provide a benefit to communities located within or in close proximity to the Reserve.
The BLM clarified in the final rule that the term “significant resource values” refers to surface values that the BLM identifies as significant, in order to ensure consistency with the language in the NPRPA. Similarly, the BLM made minor clarifications in the definition of the term “Special Areas” to ensure consistency with the language in the NPRPA. The final rule defines “Special Areas” as: “areas within the Reserve identified by the Secretary or by statute as having significant resource values and that are managed to assure maximum protection of such surface values, to the extent consistent with the requirements of the Act for the exploration and production of the Reserve.”
The final rule incorporates the definition for the term “co-stewardship” that is used in BLM Permanent Instruction Memorandum No. 2022-011 (Co-Stewardship with Federally Recognized Indian and Alaska Native Tribes Pursuant to Secretary's Order 3403).
The BLM added “oil and gas” before the word “activities” throughout the section to clarify that the requirements of this rule only apply to oil and gas activities. The final rule replaces “Bureau” with “authorized officer” to provide clarity about the BLM official responsible for implementing requirements in the rule.
The BLM removed proposed paragraph (b)(3) from the final rule because it is duplicative of environmental analysis requirements under NEPA. The paragraph had provided that, in assessing effects of a decision concerning proposed activity in the Reserve, the Bureau would identify and evaluate any reasonably foreseeable effects of its decision, including effects later in time or farther removed in distance, and effects that result from the incremental effects of the proposed activities when added to the effects of other past, present, and reasonably foreseeable actions.
The BLM did not amend the final rule in response to specific comments regarding the significant resource values, boundaries, or management of existing Special Areas. The rule merely codifies the existing Special Areas and their significant resource values and management as currently established in Secretarial decisions and the 2022 IAP. The final rule establishes a process in § 2361.30 for designating, amending, and de-designating Special Areas that will be followed to make changes to Special Areas.
The BLM reorganized § 2361.30 in the final rule, with a new paragraph (a) that outlines requirements applicable to all processes that will designate, de-designate, or otherwise change boundaries or management of Special Areas. These provisions require that the BLM: (1) rely on the best available scientific information, including Indigenous Knowledge; (2) provide the public and interested stakeholders with meaningful opportunities to participate in the evaluation process; (3) consult with any federally recognized Tribes and ANCSA corporations that use the affected Special Area for subsistence purposes or have historic, cultural or economic ties to the Special Area; and (4) base decisions solely on the presence or absence of significant resource values. This new paragraph will provide more consistency to all decision-making processes for Special Areas.
The final rule changes the Special Area evaluation period from 5 to 10 years, while specifying that the BLM may conduct the evaluation sooner if the authorized officer determines that changing conditions warrant earlier review. For example, the BLM may decide to conduct an evaluation in less than 10 years upon receiving nominations or recommendations for Special Area changes. The BLM believes this change addresses concerns about agency and community capacity while ensuring regular reviews occur to maintain an inventory of resource conditions and make management changes as appropriate. The final rule specifies that as part of the evaluation, the BLM will determine whether to require additional measures or strengthen existing measures to assure maximum protection of significant resource values within existing Special Areas.
The BLM also revised the final rule to provide more clarity and certainty around the interim measures provision. The final rule clarifies that interim measures may be implemented at any time after BLM receives a recommendation to designate or modify a Special Area. The final rule also clarifies that any interim measures must be consistent with the governing management prescriptions in the IAP, and the BLM is required to provide public notice that interim measures are in place and reassess such measures to determine if they are still needed if they remain in place for more than 5 years.
Section 2361.40 is revised in the final rule to state the management priority within Special Areas is to assure maximum protection of significant resource values, “consistent with the requirements of the NPRPA for exploration [and production] of the Reserve.” The BLM believes this clarification addresses public comments requesting additional consistency with the language of the NPRPA and reflects the BLM's statutory mandate for managing the Reserve.
The final rule clarifies that the BLM will identify and adopt maximum protection measures for each significant resource value that is present in a Special Area when Special Areas are designated. The BLM will also update maximum protection measures as appropriate thereafter, including in the IAP, lease terms, and permits to conduct oil and gas activities. The final rule also includes maximum protection measures that are identified in the existing regulation but had been eliminated in the proposed rule, as well as additional examples of categories of measures.
On lands within Special Areas that are allocated as closed to leasing or unavailable to new infrastructure, the final rule allows for the BLM to approve new permanent infrastructure related to existing oil and gas leases only if such infrastructure is necessary to comport with the terms of a valid existing lease. This provision removes language in the proposed rule that further specified that the infrastructure must be essential for exploration or development activities
The final rule provides clarity around how the presumption against new leasing and new infrastructure on lands within Special Areas that are allocated as open for those activities will be addressed through the environmental review process. The rule provides that as part of the environmental analysis, the BLM will document a justification for overcoming the presumption, such as if the proposed infrastructure is necessary to comport with the terms of a valid existing lease, or if it will primarily be used by and provide a benefit to communities located within or in close proximity to the Reserve, and the proposal has been conditioned to avoid, minimize, or otherwise mitigate adverse effects. The public will have an opportunity to review and comment on any justification for overcoming the presumption.
The BLM reorganized § 2361.40 to clarify the requirements for preparing an environmental analysis of proposed leasing, exploration, development, or new infrastructure in Special Areas, and reaching a final decision. These procedures are set forth in a revised § 2361.40(g). The BLM must provide meaningful opportunities for public participation, including responding to comments, and consult with federally recognized Tribes and ANCSA corporations that use the affected Special Area for subsistence purposes or have historic, cultural, or economic ties to the Special Area. The BLM must evaluate potential adverse effects on significant resource values and consider measures to avoid, minimize, or otherwise mitigate adverse effects to achieve maximum protection of significant resource values. The BLM must also document and consider uncertainty about potential adverse effects on significant resource values, and account for any uncertainty when taking actions taken to avoid, minimize, or mitigate adverse effects.
If the BLM determines through the environmental analysis that the proposal cannot avoid adverse effects on significant resource values in a Special Area, then the BLM must prepare a Statement of Adverse Effect. The requirement to prepare a Statement of Adverse Effect was included in the proposed rule, but the final rule provides more clarity around how it fits within the environmental review process. The Statement of Adverse Effect will be incorporated into the environmental analysis and provided to the public for review and comment.
Lastly, the BLM updated the maps for the final rule so that they show the boundaries of the existing Special Areas on the maps from the 2022 IAP showing the current allocations for oil and gas leasing and infrastructure. The maps depict the exact data from the IAP ROD, and do not change any designations or allocations from the 2022 IAP.
The final rule removes the phrase “to the extent consistent with assuring maximum protection of all significant resource values that are found in such areas” from this section, so paragraph (b) now simply reads: “The Bureau will provide reasonable access to and within Special Areas for subsistence purposes.” This phrase was causing confusion and was unnecessary because § 2361.30 requires the BLM to adopt measures to assure maximum protection of significant resource values when designating Special Areas.
The BLM also revised the language in this section to refer to “reasonable access” instead of “appropriate access” for consistency with the language in section 811 of ANILCA.
In the final rule, the title of this section is revised from “Co-stewardship opportunities in Special Areas.” The first sentence is also revised to add “and subsistence resources throughout the Reserve.” Those revisions reflect that the BLM will seek co-stewardship opportunities not just in managing Special Areas, but also in managing subsistence resources more broadly.
The first sentence is also revised to add “federally recognized” to clarify that the BLM engages in co-stewardship only with federally recognized Tribes. Separately, the Bureau may partner with Alaska Native Claims Settlement Act corporations, local governments, or organizations as provided by law, which will not be co-stewardship arrangements but a different type of partnership. The text of the rule has been revised to make this distinction clearer.
Existing § 2361.0-1 is redesignated to § 2361.1 in the final rule. The existing provision states that the purpose of the regulations is “to provide procedures for the protection and control of environmental, fish and wildlife, and historical or scenic values” in the Reserve. The BLM proposed to revise § 2361.1 to establish a two-part purpose for the rule to more accurately and completely reflect the scope of the regulations. The first purpose was to provide standards and procedures to implement 42 U.S.C. 6506a(b), which requires the Secretary to ensure that “[a]ctivities undertaken pursuant to this Act include or provide for such conditions, restrictions, and prohibitions as [she] deems necessary or appropriate to mitigate reasonably foreseeable and significantly adverse effects on the surface resources of the [Reserve].”
The second purpose outlined in the proposed rule was to provide standards and procedures to implement 42 U.S.C. 6504(a), under which any exploration in Special Areas “shall be conducted in a manner which will assure the maximum protection of such surface values to the extent consistent with the requirements of this Act for the exploration of the reserve.” The standards and procedures to implement these two provisions will also fulfill the BLM's mandate to take action necessary to prevent unnecessary or undue degradation under FLPMA, 43 U.S.C. 1732(b).
Commenters expressed support for the proposed revisions to § 2361.1 to provide needed clarity, purpose, and priority for the protection and management of Special Areas. We agree that the changes will help.
Commenters recommended that the BLM include oil and gas leasing and production as a purpose of the regulations. We decline this suggestion. Regulations for oil and gas leasing and production within the Reserve are covered in 43 CFR part 3130.
Commenters requested that the BLM revert to the purpose in the original version of § 2361.1. We decline this request. The existing regulations do not reflect the full scope of the BLM's statutory obligations or the scope of this rule. Proposed § 2361.1 accurately and completely reflected that scope.
Commenters requested that the Purpose section include language that is in the current version of 42 U.S.C. 2361.0-2, which recites that the objective of the regulations is to provide environmental protection “to the extent consistent with the requirements of the Act.” We believe that is unnecessary. The proposed rule included language in the Purpose section which stated that the regulation was “pursuant to and consistent with the provisions of the Naval Petroleum Reserves Production
The BLM received comments requesting that the rule explicitly state that the purpose of the regulations is to provide standards and procedures to cease any new oil and gas activities in the Reserve and execute a phase down of all existing oil and gas extraction. The comments suggest that including this language would allow the BLM to meet its statutory requirement to ensure mitigation of reasonably foreseeable and significantly adverse effects and prevent unnecessary or undue degradation. This comment's recommendation would not be consistent with the NPRPA, which directs the Secretary to implement an oil and gas leasing program in the Reserve.
The BLM did not change this section of the proposed rule in the final rule. The final rule states the purpose of the regulations is to provide procedures for protection and control of the environmental, fish and wildlife, and historical and scenic values of the National Petroleum Reserve in Alaska, including mitigating the significantly adverse effects of oil and gas activities on the surface resources of the Reserve and assuring maximum protection of significant resource values in Special Areas pursuant to and consistent with the provisions of the Naval Petroleum Reserves Production Act of 1976 (90 Stat. 303; 42 U.S.C. 6501
The existing § 2361.0-2 states the objectives of the regulations. The BLM proposed to remove this section because the proposed revision of § 2361.1 would make it redundant.
The BLM received comments requesting that it not amend the Objectives section because the original Objectives section clarified that environmental protections are designed to control exploration and production activities. Commenters expressed the opinion that the existing provision appropriately states the objective of the NPRPA and implements regulations based on Congress's intent to provide for the protection of the environmental and other surface values consistent with the exploration and development of oil and gas resources within the Reserve. Commenters suggested the proposed changes to the Objectives section disregard the BLM's primary purpose under the NPRPA of expeditious leasing, exploration, and development of the Reserve. Commenters recommended the Objectives include the clause: “. . . maximum protection of such surface values to the extent consistent with the requirements of this Act for the exploration of the reserve” in accordance with the BLM's obligations under the NPRPA and associated law.
The BLM did not change this section of the proposed rule in the final rule. The final rule removes § 2361.0-2 from the regulations.
Existing § 2361.0-3 is redesignated to § 2361.3 in the final rule. The existing rule identifies the NPRPA as the only statutory authority for the regulations. In the proposed rule, the BLM included the Department of the Interior Appropriations Act, Fiscal Year 1981 (Pub. L. 96-514), which amended the NPRPA and instructed the Secretary to mitigate reasonably foreseeable and significantly adverse effects on the surface resources in the Reserve (codified at 43 U.S.C. 6506a).
Commenters recommended the rule include ANILCA as an authority for the rule, in part because section 810 of ANILCA governs subsistence use on public lands in Alaska. Commenters also pointed out that FLPMA generally applies to public land management in Alaska, rather than section 202. We agree that referring to ANILCA is helpful. Other than the land use planning provisions of section 202 and the wilderness inventory requirements in section 603, FLPMA applies to lands within the Reserve.
The BLM changed the final rule in response to comments, adding references to FLPMA and ANILCA in the Authorities section in the final rule, including the caveat that the land use planning and wilderness study requirements of FLPMA do not apply to lands within the Reserve, pursuant to 42 U.S.C. 6506a(c).
Existing § 2361.0-4 is redesignated to § 2361.4 in the final rule.
The BLM proposed to modify the statement in the existing regulations that, under the NPRPA, the BLM is responsible for managing surface resources in the Reserve to add that BLM is also responsible for managing the subsurface mineral resources in the Reserve. The proposed rule also added that the BLM is responsible for assuring maximum protection of Special Areas' significant resource values. The proposed rule deleted paragraph (b) because the U.S. Geological Survey is no longer responsible for managing exploration in the Reserve. Secretarial Order 3071, 47 FR 4751 (Feb. 2, 1982); Secretarial Order 3087, 48 FR 8982-83 (Mar. 2, 1983).
The BLM did not change this section of the proposed rule in the final rule. Section 2361.4 in the final rule states that the BLM is responsible for the surface and subsurface management of the Reserve, including protecting surface resources from environmental degradation and assuring maximum protection of significant resource values in Special Areas.
Existing § 2361.0-5 is redesignated to § 2361.5 in the final rule.
The BLM proposed to update the definition for “exploration” to ensure consistency with NPRPA's definition of “petroleum” (42 U.S.C. 6501); update the definition of “Special Areas” for consistency with other proposed changes to the regulations; and incorporate a definition for “Indigenous Knowledge,” consistent with the guidance set forth in the Memorandum issued by CEQ and the Office of Science and Technology Policy (OSTP) on November 30, 2022. The BLM also proposed to add new definitions for “Integrated Activity Plan,” “infrastructure,” and “significant resource value.”
Commenters pointed out that they believe the definition of “essential” in the 2022 IAP ROD differs slightly from the definition of essential in § 2361.40(d)(3).
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In response to comments, the BLM revised the definition of “infrastructure” in the final rule to clarify that the term means, “a permanent or semi-permanent structure or improvement that is built to support commercial oil and gas activities on BLM-administered lands within the Reserve, such as pipelines, gravel drilling pads, man camps, and other structures or improvements.” The revised definition further clarifies that “infrastructure” does not include structures or improvements that will primarily be used by and provide a benefit to communities located within or in close proximity to the Reserve.
The BLM also clarified in the final rule that the term “significant resource values” refers to surface values, in order to ensure consistency with the language in the NPRPA. Similarly, the BLM made minor clarifications in the definition of the term “Special Areas” to ensure consistency with the language in the NPRPA. The final rule defines “Special Areas” as: “areas within the Reserve identified by the Secretary or by statute as having significant resource values and that are managed to assure maximum protection of such surface values, to the extent consistent with the requirements of the Act for the exploration and production of the Reserve.”
The final rule incorporates the definition for the term “co-stewardship” that is used in BLM Permanent Instruction Memorandum No. 2022-011 (Co-Stewardship with Federally Recognized Indian and Alaska Native Tribes Pursuant to Secretary's Order 3403). This definition was added in response to comments on § 2361.60.
All other definitions included in the proposed rule are carried forward to the final rule without change.
Existing § 2361.0-7 is redesignated to § 2361.6 in the final rule. The BLM proposed to update this section to conform to existing legal authorities, including adding provisions to implement the Department of the Interior Appropriations Act, Fiscal Year 1981, Public Law 96-514 (Dec. 12, 1980), 94 Stat. 2957, 2964, in revised paragraph (a), and the Barrow Gas Field Transfer Act of 1984, Public Law 98-366 (July 17, 1984), 98 Stat. 468, 470, in new paragraph (b)(4).
Commenters supported the provision included at proposed § 2361.6(b)(4) authorizing the Secretary to grant such rights-of-way to the North Slope Borough as may be necessary to permit the North Slope Borough to provide energy supplies to villages on the North Slope. We agree with these comments.
Commenters recommended that this section state that the rule does not apply to oil and gas leases issued prior to the effective date of the rule. The BLM addresses the rule's application to existing oil and gas leases in responses to comments in section III(E) earlier in this preamble to the final rule (General Public Comments, Comments about oil and gas production).
The BLM did not change this section of the proposed rule in the final rule.
The BLM proposed this new section to establish that if any provision of part 2360 is invalidated, then all remaining provisions would remain in effect.
Commenters recommended the BLM remove this section from the final rule because they see it as unnecessary or uncharacteristic for a rulemaking. The BLM decided to retain this section as proposed in the final rule because the various components of the rule are distinct and may operate independently. As such, they should be considered separately by a reviewing court, and if any portion of the rule were to be invalidated, the remaining provisions could continue to provide the BLM with necessary tools to manage oil and gas activity and protect important resources in the Reserve.
Many of the provisions simply update the regulations to bring them more into line with the BLM's statutory duties. Those updates would function independently of the rest of the rule. The procedural requirements in § 2361.10(b) for protecting surface resources in the Reserve also would stand alone, as would the codification of existing Special Areas in § 2361.20, the procedural requirements in § 2361.30, the specific requirements for new infrastructure in § 2361.40, and other provisions.
Further, the paragraphs within specific sections may also function independently of each other. For example, the final rule's provisions pertaining to the management of oil and gas activities in Special Areas in § 2361.40 describe how the authorized officer will assure maximum protection for significant resource values while allowing for exploration and production within the Reserve. Within that section, each paragraph serves a separate function, such as requiring the authorized officer to avoid the adverse effects of proposed oil and gas activities on the significant resource values of Special Areas; directing the authorized officer to identify, adopt, and update maximum protection measures; prescribing requirements for considering the authorization of new leases or infrastructure proposed in areas allocated as closed to leasing or unavailable to new infrastructure; prescribing different requirements for considering the authorization of new leases or infrastructure proposed in areas allocated as available for future oil and gas leasing or new infrastructure; and providing the framework for considering new oil and gas activities through a NEPA process. Hence, if a court prevents any provision of one part of this rule from taking effect, that should not affect the other parts of the rule. The remaining provisions would remain in force.
The BLM did not change this section of the proposed rule in the final rule.
Existing § 2361.1 is redesignated to § 2361.10 in the final rule, and the title is changed from “protection of the environment” to “protection of surface resources” to more closely track with the BLM's statutory authority under 42 U.S.C. 6506a(b), which directs the BLM to “provide for such conditions, restrictions, and prohibitions as the Secretary deems necessary or appropriate to mitigate reasonably foreseeable and significantly adverse effects on the surface resources of the [Reserve].”
The BLM proposed to establish new standards and procedures for managing and protecting surface resources in the Reserve from the reasonably foreseeable and significantly adverse effects of oil and gas activities. In 1980, Congress authorized the Secretary to mitigate those effects through “necessary or appropriate” “conditions, restrictions, and prohibitions.” 42 U.S.C. 6506a(b). Existing paragraph (a) requires the authorized officer to take action “to mitigate or avoid unnecessary surface damage and to minimize ecological disturbance throughout the reserve to the extent consistent with the requirements of the Act for the exploration of the reserve.” The BLM proposed to amend paragraph (a) to mirror the statutory language. As amended, paragraph (a) also provided further clarification by recognizing that, in some circumstances, the BLM may delay or deny proposed activities that would cause reasonably foreseeable and significantly adverse effects on surface resources.
The proposed rule deleted existing paragraph (b). It concerns coordination between the BLM and the U.S. Geological Survey, which is no longer relevant because the Geological Survey is no longer responsible for managing exploration in the Reserve. Paragraph (b) in the proposed rule spelled out new procedures for protecting surface resources in the Reserve. As explained above, Congress assigned the BLM the duty to protect the surface resources in the Reserve, but BLM regulations do not fully explain the scope of that duty. The proposed rule was drafted to provide direction to the agency and the public in complying with Congress's mandate.
In paragraph (b)(1), the proposed rule directed the BLM to manage oil and gas activities in accordance with the IAP. In doing so, the proposed rule enshrined longstanding BLM practice into regulations. As explained above, in the 1980 Amendments to the NPRPA Congress chose to exempt the Reserve from FLPMA's planning requirements (42 U.S.C. 6506a(c)). Nonetheless, since 1998, the BLM has prepared several IAPs to primarily govern oil and gas activities in the Reserve. The IAP is a form of land use plan that “addresses a narrower range of multiple use management than a resource management plan.” 2013 NPR-A IAP ROD at 17. In the BLM's experience, the IAP provides an invaluable means of evaluating management options, engaging the public, and guiding decision-making, consistent with the BLM's responsibilities under applicable
Paragraph (b)(2) of the proposed rule required the BLM, in each decision concerning oil and gas activity in the Reserve, to adopt measures to mitigate the reasonably foreseeable and significantly adverse effects on surface resources, taking particular care with surface resources that support subsistence. The BLM would do so by documenting for each decision its consideration of effects and how those effects informed the choice of mitigation measures. Paragraphs (b)(3) and (4) specified that the BLM's effects analysis would include any reasonably foreseeable effects, including indirect effects (those that are “later in time or farther removed in distance”), cumulative effects (those “that result from the incremental effects of proposed activities when added to the effects of other past, present, and reasonably foreseeable actions”), and “any uncertainty concerning the nature, scope, and duration of potential effects.” For example, if the BLM determined that a proposed lease sale's effects on subsistence resources—when added to the effects of other past, present, and reasonably foreseeable actions—could be significantly adverse, then under this proposed section, the BLM would need to adopt measures to mitigate those effects.
The proposed rule deleted existing paragraphs (c) and (d). Existing paragraph (c) requires the BLM to take maximum protection measures on all actions within Special Areas and identify the boundaries of Special Areas on maps. It also describes some requirements that may constitute “maximum protection measures.” Existing paragraph (d) concerns designation of new Special Areas. The proposed rule moved this content to §§ 2361.20, 2361.30, and 2361.40, as most appropriate. Moving this material to those new sections would provide clarification by focusing § 2361.10 on protection of surface resources throughout the Reserve.
Proposed new paragraph (c) clarified that for surface resources in Special Areas, the BLM also would have to comply with the provisions governing Special Areas in §§ 2361.20 through 2361.60. Moving the provisions concerning Special Areas to different sections makes that cross-reference necessary.
Proposed new paragraph (d) required the BLM to include in each oil- and gas-related decision or authorization, “such terms and conditions that provide the Bureau with sufficient authority to fully implement the requirements of this subpart.” That provision would ensure that the BLM incorporates into decision documents whatever language is necessary to enable it to implement any final rule.
Existing paragraph (e)(1) provides that “the authorized officer may limit, restrict, or prohibit use of and access to lands within the Reserve, including special areas.” The existing rule conditions that authority by requiring it to be exercised “consistent with the requirements of the Act and after consultation with appropriate Federal, State, and local agencies and Native organizations.” The proposed rule specified that the authorized officer has that authority “regardless of any existing authorization.” That added language would clarify that existing authorizations would not prevent the BLM from limiting, restricting, or prohibiting access to the Reserve consistent with the requirements of the Act. The proposed rule retained the condition that exercises of that authority must be consistent with the NPRPA, and it added “and applicable law” to clarify that the authorized officer cannot contradict other legal requirements. Instead of requiring the authorized officer to consult with “Native organizations,” the proposed rule provided more specificity by requiring consultation with federally recognized Tribes and Alaska Native Claims Settlement Act corporations. Consistent with the BLM's duty under NPRPA and ANILCA, the proposed rule also amended paragraph (e)(1) to allow the authorized officer to limit, restrict, or prohibit use of and access to the Reserve to protect subsistence uses and resources.
The proposed rule amended existing paragraph (f) to recognize the breadth of Federal laws that apply to the management and protection of historical, cultural, and paleontological resources in the Reserve.
We also note that the final rule in § 2361.40 references the BLM's mandate under the NPRPA to assure maximum protection of significant resource values in Special Areas “consistent with the requirements of the NPRPA for exploration and production of the Reserve.”
Analyzing climate impacts of oil and gas development is not part of this rule, which is focused on impacts to surface values of special areas and surface resources broadly. Climate change impacts the surface values that the BLM is required to protect, including subsistence resources, fish and wildlife habitat, and recreation opportunities, and those impacts will be analyzed and addressed through NEPA processes when evaluating potential projects. Similarly, the BLM is not addressing specific resource values such as caribou in the rule; however, caribou habitat will be considered as a significant resource value where appropriate as the BLM implements the rule.
Commenters requested that the BLM make commitments related to mitigation measures for the ecosystems and species affected by oil and gas development, as well as design and adopt a comprehensive mitigation plan for impacts to threatened or endangered species in the Reserve. The BLM received comments requesting the BLM supplement its 2022 IAP with additional mitigation measures that address the impacts of all permitted activities in the Reserve as well as the cumulative impacts of actions outside of agency control.
Commenters recommended adding a new section requiring a commitment to survey and monitor significant surface resources on an on-going basis and to rigorously study changes in and impacts to those resources.
Commenters recommended that the regulations require the BLM to establish baseline data for resources in the Reserve, including specifically caribou distribution and movement, subsistence food contamination, and air quality data.
While not considered government-to-government consultation, per 512 DM 6, it is the policy of the Department to recognize and fulfill its legal obligations to consult with ANCSA Corporations on the same basis as Alaska Native Tribes. Native organizations are always invited to participate in the public-involvement periods of NEPA projects and lend their voices to management actions within the Reserve or on any BLM-managed public lands.
In response to comments, the BLM removed paragraph (b)(3) from the final rule because it is duplicative of environmental analysis requirements under NEPA. The BLM also added “oil and gas” before the word “activities” throughout the section to clarify that the requirements of this rule only apply to oil and gas activities. The final rule clarifies that new use authorizations must conform to any designation or modifications of Special Areas that have occurred outside of the IAP.
The final rule replaces “Bureau” with “authorized officer” to provide clarity about the BLM official responsible for implementing requirements in the rule. The final rule defines authorized officer as “any employee of the Bureau of Land Management who has been delegated the authority to perform the duties of this subpart.” This term refers to an employee that carries out duties that are carefully circumscribed by this rule, other relevant regulations, and Bureau policy, such as the BLM delegation of authority manual. This employee's duties are also subject to the control or direction of other executives including the BLM Director, the Assistant Secretary for Land and Minerals Management, the Deputy Secretary, and the Secretary, all of whom are officers of the United States, appointed by the President and confirmed by the Senate. The remainder of the section is unchanged from the proposed rule.
The existing regulations only identify the Colville River, Teshekpuk Lake, and Utukok River Uplands Special Areas by name (§ 2361.1(c)); they do not account for the Kasegaluk Lagoon and Peard Bay Special Areas. Further, the current regulations do not identify or describe the significant resource values associated with each Special Area. Under the NPRPA, the BLM must assure maximum protection of each of these values consistent with exploration of the Reserve. In pursuit of that obligation, the proposed rule established new § 2361.20 to incorporate all five of the existing Special Areas into part 2360 and identify the significant subsistence, recreational, fish and wildlife, historical, and scenic values that are associated with each of them.
The proposed rule required any lands designated as a Special Area to continue to be managed as such for the already-identified values and any additional values identified through the process set forth in new § 2361.30. The existing
Comments specific to the Teshekpuk Lake Special Area include:
• Polar bears have begun inhabiting the Teshekpuk Lake area due to the receding sea ice and should be identified as a significant resource value;
• Pik Dunes has unique geologic character, insect‐relief habitat for caribou, rare endemic plant populations, use by various water and shorebirds, and scenic and recreational value, and should be closed to fluid mineral leasing, new infrastructure, and other activities including sand and gravel mining;
• The Special Area should be expanded to include the area between the Teshekpuk Lake Special Area western boundary and the village of Atqasuk, which has high density of Yellow‐billed loons, Red-throated Loons, King Eider, raptor nests, and caribou calving sites;
• The Qupaluk Flyway Network Site be reviewed to ensure that it is not available for leasing or infrastructure; and
• The Special Area is unnecessarily large, and the BLM should re‐analyze the Teshekpuk Lake Special Area boundaries before finalizing the rule.
Comments specific to the Colville River Special Area include:
• The final rule should be updated to reflect the following special resource values are present in the Special Area: caribou summer range, winter range, and migratory connectivity; suitable Wild and Scenic Rivers; Yellow-billed loons; raptors; and moose;
• The Colville River Delta is particularly important for birds and should be closed to all to oil and gas leasing;
• The Arctic peregrine falcon has been delisted, so the Special Area should be decreased or eliminated;
• The Special Area should be considered critical habitat for the Arctic peregrine falcon; and
• Parts of the Special Area, specifically Ocean Point, are important for subsistence, yet heavy traffic and long‐term impacts from development threaten caribou migration and subsistence hunting.
Comments specific to the Kasegaluk Lagoon Special Area include:
• The Special Area is important for brants, shorebird migration, Red‐throated and Yellow‐billed loons, and the significant resource values for the Special Area should include high‐use staging and migration area for waterfowl, shorebirds, loons, and other waterbirds.
Comments specific to the Utukok River Uplands Special Area include:
• The final rule should be updated to reflect that suitable Wild and Scenic Rivers are special resource values in the Special Area;
• The final rule should designate an area north and west of the Kokolik River near the west boundary of the Reserve as part of the Utukok River Uplands Special Area to help avoid river crossings of the Kokolik River to access potential development areas and better protect the Kokolik River; and
• The final rule should move the northern border of the area unavailable for leasing and new infrastructure to cover all of the Utukok River Upland Special Area as this area was not included in the area made unavailable for leasing and infrastructure in the 2013 IAP. Commenters state that the reasons for excluding it no longer exist and failing to make this area unavailable for leasing infrastructure may lead to Western Arctic Caribou Herd calving habitat loss under possible future developments.
The BLM did not change this section of the proposed rule in the final rule. The following existing Special Areas are codified in the final rule:
• Colville River Special Area, which has important habitat for raptor and other bird species, including the Arctic peregrine falcon; important habitat for moose; important habitat for fish; important subsistence activities; important recreational activities; world-class paleontological deposits; and significant cultural resources;
• Kasegaluk Lagoon Special Area, which has important habitat for marine mammals; unique ecosystem for the Arctic Coast; opportunities for primitive
• Peard Bay Special Area, which has haul-out areas and nearshore waters for marine mammals; and high-use staging and migration areas for shorebirds and waterbirds;
• Teshekpuk Lake Special Area, which has important habitat for a large number of migratory and other waterbirds; important caribou habitat; important shorebird habitat; subsistence hunting and fishing activities; Pik Dunes; and overwintering habitat for fish; and
• Utukok River Uplands Special Area, which has important habitat for the Western Arctic Caribou Herd; subsistence hunting activities; grizzly bear habitat; and important wilderness values.
Additional details on the significant resource values of each Special Area are found in the preamble to the proposed rule.
The existing regulations provide general direction for recommending and considering additional Special Areas in § 2361.1(d). In the past, the BLM has typically designated Special Areas, and received Special Area recommendations from the public and stakeholders, through the IAP revision and amendment process. Enumerating procedures for designating and amending Special Areas in the regulations will provide clarity for stakeholders and ensure that the BLM fulfills its statutory obligation to assure maximum protection of Special Areas' significant resource values.
The proposed rule added a new section to provide standards and procedures for designating and amending Special Areas. Paragraph (a) required the BLM, at least once every 5 years, to evaluate lands in the Reserve for significant resource values and designate new Special Areas or update existing Special Areas by expanding their boundaries, recognizing the presence of additional significant resource values, or requiring additional measures to assure maximum protection of significant resource values. Paragraph (a)(2) allowed, but did not require, the BLM to conduct this evaluation through the IAP amendment process. Paragraph (a)(3) required the BLM to rely on the best available scientific information, including Indigenous Knowledge, and the best available information concerning subsistence uses and resources.
Paragraph (a)(4) required the BLM to provide meaningful opportunities for public participation in the evaluation process, including review and comment periods and, as appropriate, public meetings. Existing § 2361.1(d) concerns the submission, content, and public review of recommendations for additional Special Areas. Proposed paragraph (a)(4) retained the basic contours of that provision but provided additional specificity. The proposed language allowed the public to participate in the evaluation process, including by recommending new Special Areas, new significant resource values for existing Special Areas, and measures to assure maximum protection of Special Areas' significant resource values. The proposed rule required the BLM to evaluate and respond to such recommendations. Similar to existing § 2361.1, proposed paragraph (a)(4) specified that Special Area recommendations should describe the size and location of the lands, significant resource values, and measures necessary to assure maximum protection of those values.
Proposed paragraph (a)(5) allowed the authorized officer to implement interim measures to assure maximum protection of significant resource values in lands under consideration for designation as a Special Area. This provision was designed to assist the BLM in fulfilling its statutory duty to protect Special Areas.
Paragraph (a)(6) required that the BLM base decisions to designate Special Areas solely on whether significant resource values are present and prohibited the BLM from considering the existence of measures to protect or otherwise administer those values. For example, if lands not within a Special Area contained important caribou calving habitat and those lands were already subject to certain protections under the IAP, the BLM would not be permitted to consider those protections during the decision-making process for the proposed designation or update. The proposed rule explained that this change is needed to align the regulations with the NPRPA, which authorizes the Secretary to designate Special Areas based on the presence of “any significant subsistence, recreational, fish and wildlife, or historical or scenic value . . . .” 42 U.S.C. 6504(a).
Proposed paragraph (a)(7) required the BLM, when designating a Special Area or recognizing the presence of additional significant resource values in an existing Special Area, to adopt measures to assure maximum protection of significant resource values. That provision mirrors the BLM's statutory responsibility under the NPRPA. 42 U.S.C. 6504(a). Paragraph (a)(7) was designed to provide needed clarification by specifying that those measures would supersede any inconsistent provisions in the IAP.
Proposed paragraph (a)(8) incorporated the requirement of existing § 2361.1(c) that the BLM publish in the
Proposed § 2361.30(b) established a framework for removing lands from Special Area designations. Because Congress identified the Utukok River Uplands and Teshekpuk Lake Special Areas in the NPRPA and required them to be managed to protect surface resources, the BLM cannot remove lands from those Special Area designations absent statutory authorization. See Public Law 94-258, sec. 104(b), 90 Stat. 304 (1976). For other Special Areas, the proposed rule permitted the BLM to remove lands from a Special Area designation only when the significant resource values that supported the designation are no longer present (
Before removing lands from a Special Area designation, proposed paragraph (b) required the BLM to provide the public with the opportunity to review and comment on its proposed decision and consult with federally recognized Tribes and Alaska Native Claims Settlement Act corporations. Finally, the proposed rule required the BLM to document its consideration of those comments. Those requirements would assure public participation in the de-designation process.
Commenters recommended that the BLM continue to use the IAP for management of the Reserve including adding, revising, or removing Special Areas. Commenters suggested that requiring a separate 5-year cycle for Special Area review and evaluation may establish a different management framework applicable only to Special Areas which would be separate from the review and management of the entire Reserve through IAP/EIS processes.
Commenters expressed concern that mechanisms provided in the proposed rule that could be used to manage lands as Special Areas could preclude a rigorous public process pursuant to NEPA.
Commenters expressed concern that there is an over-reliance on public participation in the contraction and expansion processes outlined in the proposed rule, and suggested this may allow the Reserve to be managed by outside interest groups instead of prioritizing Native communities and local stakeholders.
The final rule has been updated from the proposed rule to ensure that robust public participation is a mandated component of all processes to designate, amend, and de-designate Special Areas. The BLM is required to include and consider input from all members of the public in making decisions governing the public lands. The BLM will continue to work closely with Native communities and local stakeholders when making decisions regarding management of the Reserve.
• Commenters believe that the timing of the Special Area review should be more frequent than the 5 years proposed to account for rapidly changing conditions;
• Commenters expressed support for the 5-year review interval;
• Commenters believe that the 5-year review is restrictive and unfounded in law;
• Commenters suggested including an additional mid-way report to help ensure agency accountability;
• Commenters requested the BLM remove the 5-year review requirement and allow for changes to be made when best available information demonstrates that such changes are necessary;
• Commenters recommended a 10-year interval for Special Area evaluation and suggested that the BLM conduct evaluations in the context of preparing a holistic IAP. Comments suggest that this would bring stability to managing the Reserve and help reduce the needed frequency for stakeholder engagement during large-scale planning efforts;
• Commenters expressed concern that the BLM lacks the staff and resources to engage in 5-year reviews;
• Commenters expressed concern that 5-year interval reviews would place a heavy burden on local communities and preclude or limit local input on the public process; and
• Commenters recommended that at every 5-year period, the BLM should consider removing and decreasing Special Areas, not only creating or expanding Special Areas.
The NPRPA requires the BLM to manage areas designated by the Secretary to have significant resource values in a manner that assures the maximum protection of those values consistent with exploration and production of the Reserve. Once those values have been identified and designated, they must continue to be managed for protection consistent with the Act. The BLM will only remove Special Area designations when the significant resource values are no longer present. Therefore, the rule does not require the BLM to regularly evaluate eliminating or reducing Special Area designations. The BLM will evaluate the presence or absence of significant resource values in existing Special Areas when updating the IAP, and through that process the public can provide information to BLM regarding the absence of significant resource values to inform de-designation decisions.
Commenters requested more clarity around the process for implementing interim measures in lands under consideration for designation as a Special Area.
The option for the authorized officer to apply interim measures is not inconsistent with the requirement of 42 U.S.C. 6504 to ensure maximum protection of significant resource values to the extent consistent with the requirements of the NPRPA. Rather, this discretion supports the BLM's ability to fulfill this obligation as part of a formal designation of a new Special Area while ensuring any interim management is consistent with both the requirements of the NPRPA and the specific provisions of the current IAP.
The BLM revised the final rule to provide more clarity and certainty around the interim measures provision. The final rule clarifies that interim measures may be implemented at any time after the BLM receives an internal or external recommendation to designate or modify a Special Area. The final rule also clarifies that any interim measures must be consistent with the governing management prescriptions in the IAP, and the BLM is required to provide public notice that interim measures are in place and reassess such measures to determine if they are still
Other commenters supported the recognition that Special Area designations and expansions be based solely on the presence of significant resource values without regard to the administration of measures to protect the values.
Commenters recommended that the rule should require the BLM to use the best scientific data available when determining whether the significant resource values that support the designation are no longer present.
Section 2361.30 is reorganized in the final rule, with a new paragraph (a) that outlines requirements applicable to all processes that will designate, de-designate, or otherwise change boundaries or management of Special Areas. In all processes, including those resulting in de-designation or removal of lands from a Special Area, the BLM is required to rely on the best available scientific information, including Indigenous Knowledge, as well as the best available information concerning subsistence uses and resources within the Reserve. The BLM must provide the public and interested stakeholders with meaningful opportunities to participate in the evaluation process and consult with any federally recognized Tribes and Alaska Native Claims Settlement Act corporations that use the affected Special Area for subsistence purposes or have historic, cultural, or economic ties to the Special Area. The BLM must also base decisions solely on the presence or absence of significant resource values and not the existence of measures that have been or may be adopted to protect or otherwise administer those values.
Section 2361.30(b) requires the BLM to evaluate all public lands within the Reserve for the presence of significant subsistence, recreational, fish and wildlife, historical, or scenic values every 10 years, or sooner if the authorized officer determines that changing conditions warrant. As part of this evaluation, the BLM will consider designating new Special Areas, expanding existing Special Areas, recognizing the presence of additional significant resource values in existing Special Areas, and requiring additional measures or strengthening existing measures to assure maximum protection of significant resource values within existing Special Areas. The evaluation may occur through an IAP amendment process but can occur separately.
The BLM is required to consider and respond to recommendations from the public and interested stakeholders in the evaluation process regarding lands that should be considered for designation as a Special Area, significant resource values that should be recognized in Special Areas, and measures that should be required to assure maximum protection of significant resource values within Special Areas. The rule lists information that should be submitted by the public to ensure the BLM can adequately review recommendations, including the size and location of the recommended lands, significant resource values that are present within or supported by the recommended lands, and measures that may be necessary to assure maximum protection of those values.
Section 2361.30(b)(4) provides that the BLM may implement interim measures to protect significant resource values while the agency is considering Special Area designations and changes to management. The BLM could implement interim measures at any point after receiving a recommendation for a new or modified Special Area. These measures must be consistent with the governing management prescriptions in the IAP. The BLM must provide public notice that interim measures are in place and such measures will be reassessed to determine if they are still needed if they remain in place for more than 5 years.
When the BLM decides to designate lands as a Special Area or recognizes the presence of additional significant resource values in a Special Area, the BLM must adopt measures to assure maximum protection of the significant resource values. These measures are not constrained by the provisions of the current IAP. Once adopted, these measures supersede inconsistent provisions of the IAP then in effect for the Reserve and will be incorporated into the IAP during the next revision or amendment. When the BLM designates lands as a Special Area, the agency must publish a legal description of those lands in the
Section 2361.30(c) provides procedures for removing lands from or de-designating a Special Area. Lands may only be removed from Special Area designation when all of the significant resource values that support the designation are no longer present. In making such a determination, the BLM must prepare a summary of its proposed determination, including the underlying factual findings, and provide a public comment opportunity on the proposed determination. The BLM must also comply with all of the requirements in § 2361.30(a). The BLM's final determination must document how the views and information provided by the public, federally recognized Tribes, Alaska Native Claims Settlement Act corporations, federally qualified subsistence users, and other interested stakeholders have been considered. The BLM may not remove lands from the Teshekpuk Lake and Utukok River Uplands Special Areas unless directed to do so by statute.
The current regulations paraphrase the maximum protection requirement of the NPRPA and provide examples of measures that the BLM could potentially take to assure maximum protection. See § 2361.1(c). Proposed new § 2361.40 enhanced the specificity of the current regulations on the mechanisms for assuring maximum protection of significant resource values in Special Areas by establishing new standards and procedures for achieving maximum protection of Special Areas' significant resource values, with a specific focus on addressing the impacts of oil and gas activities. Of note, this section affirmatively established that assuring maximum protection of significant resource values is the management priority for Special Areas. Under proposed paragraph (a), the BLM needed to comply with this standard and adopt maximum protection measures for each significant resource value associated with a Special Area. Proposed paragraph (b) required the BLM take such steps to avoid the adverse effects of proposed oil and gas activities on the significant resource values of Special Areas, including by conditioning, delaying action on, or denying proposals for activities.
Proposed paragraph (c) required oil and gas leasing and new infrastructure to conform to the land use allocations and restrictions identified on maps 2 and 4 of the 2022 IAP ROD, unless the BLM makes revisions in accordance with § 2361.30 of these regulations. Map 2 shows the areas of the Reserve that are open and closed to oil and gas leasing. The map reflects that approximately 11.8 million acres are
Map 4 shows the areas of the Reserve that are available and unavailable for new infrastructure. The map shows that new infrastructure is prohibited on approximately 8.3 million acres of the Reserve, limited to “essential” infrastructure on approximately 3.3 million acres, and permitted on approximately 10.8 million acres.
The proposed purpose of requiring leasing and infrastructure in Special Areas to conform to IAP maps 2 and 4 was to codify the existing protections and restrictions from the 2022 IAP ROD. The BLM developed that land use plan through a lengthy public planning process involving all stakeholders, which stretches back to the development of the 2013 IAP ROD. The 2022 IAP ROD, which is based in large part on the framework set forth in the 2013 IAP ROD, incorporates aspects of the 2020 IAP ROD, and reflects now-settled expectations about the use of the Reserve. It also reflects what the BLM views as the floor of protections for the Reserve that grew out of the public planning process. By incorporating the two maps into the rule, the BLM intended to incorporate the land use allocations, restrictions, and stipulations from the 2022 IAP ROD into the rule without reprinting lengthy text.
Proposed paragraph (c) also established a presumption against leasing and new infrastructure on lands in Special Areas that are allocated as available for those activities. That presumption could have been overcome if specific information is available to the BLM that clearly demonstrates that those activities can be conducted with no or minimal adverse effects on the significant resource values of the Special Area. The intensive process that led to the IAP resulted in a comprehensive plan for protection of the Special Areas in the Reserve. To fulfill the BLM's statutory duty to assure maximum protection for those areas' significant resource values, the BLM believed that plan should be treated as a regulatory floor, and additional activities should only be allowed when maximum protection is assured.
The proposed definition of “infrastructure” in § 2361.5(g) excluded “exploratory wells that are drilled in a single season; infrastructure in support of science and public safety; and construction, renovation, or replacement of facilities on existing gravel pads at previously disturbed sites where the facilities will promote safety and environmental protection.” These exceptions were specifically analyzed and adopted in the 2022 IAP ROD. Proposed § 2361.40(d) established three additional exceptions to the oil and gas leasing and new infrastructure prohibitions in paragraph (c). The first exception permitted leasing and infrastructure solely to address drainage of Federal oil and gas resources. Drainage occurs “when a well that is drilled or is in production adjacent to Federal or Indian leases or unleased lands is potentially draining Federal or Indian oil and gas resources.” BLM MS-3160, Drainage Protection Manual 1-1 (2015),
Proposed paragraph (e) required the BLM to document and consider any uncertainty regarding potential adverse effects on Special Areas and ensure that its actions account for such uncertainty. That provision was drafted to help the BLM fulfill its statutory mandate to assure maximum protection for Special Areas' significant resource values.
Proposed paragraph (f) required the BLM to prepare a Statement of Adverse Effect whenever it cannot avoid adverse effects on a Special Area. In each statement, the BLM was required to describe the significant resource values that may be affected; the nature, scope, and duration of the effects; measures the BLM evaluated to avoid those effects; a justification for not requiring those measures; and measures it would require to minimize and mitigate the adverse effects on significant resource values. Measures the BLM could require under this provision include compensatory mitigation. Such measures would be developed, evaluated, and, as necessary, adopted in project-specific analyses. Proposed paragraphs (g) and (h) required the BLM to provide the public with an opportunity to review and comment on any Statement of Adverse Effect and consult with federally recognized Tribes and Alaska Native Claims Settlement Act corporations that have ties to the area.
Finally, proposed paragraph (i) required the BLM to include in each oil- and gas-related decision or authorization “terms and conditions that provide the Bureau with sufficient authority to fully implement the requirements of this section.” That provision ensured that the BLM incorporates into decision documents the necessary language to implement any final rule.
Commenters requested the BLM discuss significant resource values and include clear definitions of the measures necessary to ensure maximum protection for each. Comments contained suggestions that the denial or reduction of proposed drilling sites, prohibition of roads, restrictions on sand and gravel extraction and water withdrawals, suspension of activities, and specified rates of development and production should be specifically listed as potential maximum protection measures.
Commenters suggested that the presumption against new leasing and new infrastructure on lands within Special Areas that are allocated as open to those activities is contrary to the NPRPA and ANILCA section 1326.
The BLM received comments stating that limiting infrastructure to that which is essential and for which no practicable alternatives exist would establish an implied presumption that no infrastructure can be installed in Special Areas, which violates the NPRPA and the terms of existing leases.
• Commenters recommended the rule include provisions that authorize the BLM to review and modify mitigation measures as needed after oil and gas operations have commenced.
• Commenters suggested that the BLM lacks statutory authority to require compensatory mitigation, and none is provided in the NPRPA, FLPMA, or ANILCA.
• Commenters expressed concern that despite BLM mitigation and environmental review efforts, impacts to Nuiqsut from oil and gas activities have gotten worse. Commenters state that the current mitigation process requires stakeholders to advocate for mitigation measures, which places an unfair burden on the stakeholder, including Native villages. Commenters recommend the BLM include a regular process for identifying new mitigation measures and updating existing mitigation measures similar to the process for evaluating Special Areas in the proposed rule. Commenters also recommended that the rule include a requirement for establishing baseline data and monitoring of impacts.
Commenters requested that the proposed rule revise leasing program operations regarding water withdrawal to address the concern that lake water withdrawals for ice roads are leading to low stream water levels.
• Commenters expressed concern that the maps do not provide sufficient information to the public to identify and protect significant resource values, and maps can be misinterpreted. The BLM updated the maps for the final rule by adding the boundaries of the existing Special Areas to the maps from the 2022 IAP that show the current allocations for oil and gas leasing and infrastructure. We believe this addresses concerns that the maps contained in the IAP do not provide sufficient information to identify significant resource values. The maps included with this final rule depict the exact data from the IAP ROD, and do not change any designations or allocations from the 2022 IAP. The BLM believes including maps with the final rule will assist with public understanding of and agency implementation of the regulations, and we do not believe that benefit is outweighed by potential misinterpretation of maps.
• Commenters requested clarity on whether reliance on the maps means the ability to waive, except, and modify the stipulations otherwise applicable under the IAP would still apply. Inclusion of the maps in the final rule does not change the criteria for waivers, exceptions, and modifications adopted in the IAP.
• Commenters noted that maps 2 and 4 do not include the boundaries of the Special Areas themselves and therefore do not provide sufficient information. Commenters recommended that the BLM produce a map that shows the
• Commenters requested clarity on whether the land use allocations and restrictions in the IAP maps are being considered as maximum protection measures. The allocations and restrictions in the 2022 IAP maps may be considered maximum protection measures, but they do not necessarily represent the full extent of maximum protection measures that may ultimately be required as a result of this rule. The final rule, in § 2361.30(b)(5), requires the BLM to adopt measures to assure maximum protection of significant resource values when designating lands as Special Areas or recognizing the presence of additional significant resource values in existing Special Areas. Once adopted, these measures become part of and supersede inconsistent provisions of the IAP then in effect for the Reserve. The final rule, in § 2361.40(b), also directs the BLM to update maximum protection measures as appropriate thereafter, including in the IAP, lease terms, and other approvals to conduct oil and gas activities.
• Commenters requested clarification on why K-4 areas, such as lagoons, inlets, and associated islands, that are otherwise unavailable for new infrastructure, allow essential pipeline crossings. The IAP decision to allow for essential pipeline crossings in these areas was to ensure that the prohibition on new infrastructure did not completely block development on neighboring Outer Continental Shelf or State Lands. The BLM is not reevaluating IAP decisions as part of this rulemaking process.
• Commenters stated that the Colville River Special Area is much larger than the land use allocations and restricted areas depicted on the maps, and it is not apparent from the proposed rule what maximum protections measures are needed in addition to those depicted on maps 2 and 4 to adequately protect the entire Special Area. Commenters are correct that there are additional protection measures for the Colville River Special Area which are in the Colville River Special Area management plan, which is a separate document from the IAP. The BLM is not adopting or changing management of Special Areas through this rulemaking process. Additional maximum protection measures that may be needed for the Colville River Special Area would be considered and adopted through a Special Area planning process, and/or through a project-level NEPA process for proposed development in the Colville River Special Area.
• Commenters requested that the BLM update the maps to show the level of activities and infrastructure currently in place in the NPR-A. Commenters also suggested that the maps be updated to explain why essential pipeline corridors, which were suggested in the 2020 IAP, are not available. Commenters further recommended the maps be updated to state that the BLM welcomes public participation to designate or expand Special Areas. The BLM declined to change the maps by showing existing levels of activities and infrastructure, discuss essential pipeline corridors, or state that public participation is welcome in Special Area designation decisions because those data are not germane to decisions made in the rule. The BLM's intention with providing maps is to display and help the public understand decisions codified in the rule, which include existing Special Area designations and leasing and infrastructure allocations adopted in the 2022 IAP. The rule does not make decisions regarding existing infrastructure, essential pipeline corridors, or future Special Area designation decisions.
Section 2361.40 affirms that the management priority within Special Areas is to assure maximum protection of significant resource values, consistent with the requirements of the NPRPA for exploration and production of the Reserve. The section sets forth procedures for fulfilling this duty at each stage in the decision-making process for oil and gas activities in the Reserve.
Section 2361.40(a) requires that the BLM must, to the extent consistent with the NPRPA, take such steps as are necessary to avoid the adverse effects of proposed oil and gas activities on significant resource values in Special Areas. Such steps may include conditioning, delaying action on, or denying proposals for activities.
Section 2361.40(b) directs the BLM to identify and adopt maximum protection measures for each significant resource value that is present in a Special Area when Special Areas are designated, and to update maximum protection measures as appropriate thereafter, including in the IAP, lease terms, and permits to conduct oil and gas activities. Section 2361.40(c) specifies examples of maximum protection measures, including rescheduling activities and use of alternative routes; limiting new infrastructure and roads; limiting extraction of sand and gravel or withdrawal of water; limiting types of vehicles and loadings; limiting types of aircraft in combination with minimum flight altitudes and distances from identified places; and applying special fuel handling procedures.
Section 2361.40(c) provides that oil and gas leasing and authorization of new infrastructure in Special Areas must conform to the land use allocations and restrictions identified on the map published with the final rule, until and unless those allocations are revised by a Special Area designation, amendment, or de-designation process as set forth in § 2361.30. The map shows Special Area designations and oil and gas leasing and new infrastructure allocations adopted in the 2022 IAP. The BLM produced one consolidated map for the final rule that includes multiple data included in the 2022 IAP maps but did not change any of the designations or allocations depicted on the 2022 IAP maps.
The map reflects that approximately 11.8 million acres of the Reserve are open to leasing subject to the terms and conditions detailed in the IAP, while approximately 11 million acres are closed, including most of the Teshekpuk Lake and Utukok River Uplands Special Areas. The map shows that new infrastructure is prohibited on approximately 8.3 million acres of the Reserve, limited to “essential” infrastructure on approximately 3.3 million acres, and permitted on approximately 10.8 million acres.
The restrictions identified on the map that would apply to new oil and gas leases and infrastructure are detailed in the 2022 IAP ROD and summarized in the following table.
Section 2361.40(e) provides for limited circumstances in which certain uses may be authorized on lands within Special Areas that are allocated as closed to leasing or unavailable to new infrastructure. The BLM may issue oil and gas leases in areas closed to leasing if drainage is occurring. The BLM may authorize new roads, pipelines, transmission lines, and other types of infrastructure in unavailable areas if the infrastructure will primarily be used by and provide a benefit to local communities or will support subsistence activities. In those cases, the BLM must adopt measures to assure maximum protection of significant resource values. These measures, which are required by the NPRPA, would be specific to oil and gas activities and would be designed to limit potential impacts on subsistence use. Consistent with this approach, the BLM revised § 2361.50 to make clear that the BLM will ensure reasonable access to and within Special Areas for subsistence uses. The BLM may authorize new permanent infrastructure related to existing oil and gas leases in unavailable areas only if such infrastructure is necessary to comport with the terms of a valid existing lease.
Section 2361.40(f) directs that on lands within Special Areas that are allocated as available for future oil and gas leasing or new infrastructure, the BLM will presume that proposed oil and gas activities should not be permitted unless it can be clearly demonstrated that those activities can be conducted with no or minimal adverse effects on significant resource values, or unless they are necessary to comport with the terms of a valid existing lease. This provision only applies to designated Special Areas within the Reserve, and implements the obligation placed on the BLM by the NPRPA to assure the maximum protection of surface values to the extent consistent with the requirements of the Act. The presumption is based on the BLM's experience managing oil and gas exploration and development in the Reserve that all permitted oil and gas activities within a Special Area will result in significant adverse impacts to surface resources. Therefore, absent the need to honor the terms of a valid existing lease or a demonstration by the leaseholder that activities can be conducted with no or minimal adverse effect, the maximum protection mandate in the NPRPA requires the BLM to adopt this approach.
Section 2361.40(g) sets forth procedures that must be followed when the BLM prepares an environmental analysis of proposed oil and gas leasing, development, or new infrastructure within Special Areas in the Reserve. The BLM must provide meaningful opportunities for public participation, including responding to comments, and consult with federally recognized Tribes and Alaska Native Claims Settlement Act corporations that use the affected Special Area for subsistence purposes or have historic, cultural, or economic ties to the Special Area. The BLM must evaluate potential adverse effects on significant resource values and consider measures to avoid, minimize, or otherwise mitigate adverse effects to achieve maximum protection of significant resource values. The BLM must also document and consider uncertainty about potential adverse effects on significant resource values. Actions taken to avoid, minimize, or mitigate adverse effects must account for any uncertainty. These procedures are foundational to all NEPA processes the agency undertakes, with increased attention given to assuring maximum protection and long-term resilience of significant resource values, consistent with the NPRPA.
If the proposed project is on lands in a Special Area that are allocated as closed to leasing or unavailable to new infrastructure, then the BLM must document how the proposal falls within one of the exceptions provided for in § 2361.40(e). If the proposed project is
If the BLM determines through the environmental analysis that the proposal cannot avoid adverse effects on significant resource values in a Special Area, then the BLM must prepare a Statement of Adverse Effect. The Statement of Adverse Effect must describe the significant resource values that may be adversely affected; the nature, scope, and duration of those adverse effects; measures the BLM evaluated to avoid the adverse effects, including whether any practicable alternatives exist that would have less adverse impact on significant resource values of the Special Area; justification for not requiring those measures; measures the BLM will require to minimize adverse effects on significant resource values of the Special Area; and measures the BLM will require to mitigate any residual adverse effects that cannot be avoided or minimized. The Statement of Adverse Effect would be incorporated into the environmental analysis and provided to the public for review and comment.
Section 2361.40(h) requires that each decision and authorization related to oil and gas activity in the Reserve includes terms and conditions that provide the authorized officer with sufficient authority to fully implement the requirements of this section.
The BLM proposed this new section to require Special Areas to be managed to protect and support fish and wildlife and their habitats and the associated subsistence use of those areas by rural residents as defined in 50 CFR 100.4, the Department of the Interior's subsistence management regulations for public lands in Alaska. The proposed rule also required the BLM to provide appropriate access to and within Special Areas for subsistence purposes, and explicitly referenced assuring maximum protection of the significant resource values of the Special Areas in the context of providing that access.
Commenters requested the BLM clarify the differences between “appropriate access” as used in the proposed rule versus “reasonable access” under ANILCA section 811 and ensure the rule is not inconsistent with ANILCA. Commenters recommended that the BLM clarify the type of access anticipated by this provision. Commenters requested the rule be revised to clarify that the BLM's authority will never be used to restrict access for local subsistence users.
Including the recommended language within the regulatory text is
The final rule adopts the proposed rule but deletes from paragraph (b) the phrase “to the extent consistent with assuring maximum protection of all significant resource values that are found in such areas.” This phrase was causing confusion and was unnecessary because § 2361.30 requires the BLM to adopt measures to assure maximum protection of significant resource values when designating Special Areas.
The BLM proposed this new section to encourage the BLM to explore co-stewardship opportunities for Special Areas, including co-management, collaborative and cooperative management, and tribally led stewardship. The title of this section in the proposed rule was “Co-stewardship opportunities in Special Areas.” This provision was designed to further the Department of the Interior's trust relationship and obligation to protect Tribal interests and further the Nation-to-Nation relationship with Tribes. It also was designed to advance the Federal Government's commitment to strengthening the role of Tribal governments in Federal land management. (Presidential Memorandum on Tribal Consultation and Strengthening Nation-to-Nation Relationships, January 26, 2021; Joint Secretarial Order on Fulfilling the Trust Responsibility to Indian Tribes in the Stewardship of Federal Lands and Waters, Order No. 3403, November 15, 2021.)
Commenters supported use of the term “tribally led stewardship.” Commenters recommended strengthening the provision to fully support tribally led stewardship in alignment with the Joint Secretarial Order on Fulfilling the Trust Responsibility to Indian Tribes in the Stewardship of Federal Lands and Waters Order 3403.
Commenters requested that the BLM create Indigenous-led stewardship groups that could perform activities such as monitoring harvests and ensuring permit compliance, collecting data on climate change indicators, invasive species control, collecting Traditional Indigenous Knowledge, and monitoring cultural sites.
Commenters recommended that the BLM establish a “Western Arctic Indigenous Knowledge (IK) Expert Advisory Group” to aid with co-management and co-stewardship.
In the final rule, the title is revised to read “Co-stewardship opportunities in management of Special Areas and subsistence.” The first sentence is also revised to add “and subsistence resources throughout the NPR-A.” Those revisions reflect that the BLM will seek co-stewardship opportunities not just in managing Special Areas, but also in managing subsistence resources more broadly. The first sentence is also revised to add “federally recognized” to clarify that the BLM engages in co-stewardship with federally recognized Tribes. This section of the final rule fulfills the special trust relationship that the Department of the Interior has with Tribes.
Existing § 2361.2 is redesignated to § 2361.70 in the final rule. Existing paragraph (a) states that all use authorizations require approval from the authorized officer “[e]xcept for petroleum exploration which has been authorized by the Act.” The proposed rule omitted that exception. The NPRPA of 1976 authorized the Federal Government to conduct exploration activities; those activities did not require approval by an authorized officer. Since the 1980 amendments initiated a competitive oil and gas leasing program, all oil and gas activities are conducted by oil and gas companies and require authorization from a BLM authorized officer.
No substantive changes were proposed to § 2361.70(b).
The proposed rule modified § 2361.70(c) for clarity purposes and updated § 2361.70(d) to recognize the BLM's duties to protect surfaces resources and assure maximum protection of Special Areas' significant resource values in the NPR-A.
Commenters recommended that the final rule specifically include trapping as a use that does not require a use authorization. Non-commercial trapping would not require a use authorization under the rule. The examples of activities exempted in § 2361.70(b) are not comprehensive, as indicated by “
In paragraph (b), the phrase “pursuant to §§ 2361.1 and 2361.2 or otherwise” is deleted as unnecessary. Otherwise, the final rule adopts the proposed rule without changes.
Existing § 2361.3 is redesignated to § 2361.80 in the final rule. No substantive changes were proposed to this section.
No substantive comments were received specific to this section.
The final rule adopts the section as proposed, which provides that any person who violates or fails to comply with regulations of this subpart is subject to prosecution, including trespass and liability for damages, pursuant to the appropriate laws.
E.O. 12866, as amended by E.O. 14094, provides that the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) will review all significant regulatory actions. OIRA has determined that this rule is significant.
E.O. 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the Nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The Executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements.
The rule revises the framework for designating and assuring maximum protection of Special Areas and associated values and will protect and enhance access for subsistence activities throughout the NPR-A. It also incorporates aspects of the 2022 IAP. The rule will have no effect on currently authorized oil and gas operations in the NPR-A.
BLM's economic analysis concludes that most of the provisions of the final rule are editorial, administrative, or otherwise could have no quantifiable economic cost or benefit. There are two changes that may generate economic costs or benefits. First, the change requiring evaluation of the NPR-A for new Special Areas and associated values every 10 years (or sooner if the authorized officer determines that changing conditions warrant) could generate time and real costs related to public engagement. These can be minimized by combining this process with the existing process for revising the IAP. Second, the rule establishes the current management strategy governing oil and gas activity in Special Areas of the NPR-A in regulation. The current management strategy is described in the 2022 IAP ROD and is the baseline for the economic analysis. Compared to the baseline, there is either no or minimal change in oil and gas management. Future changes to the framework and
The BLM estimates the annual effect on the economy of the regulatory changes will be less than $200 million and will not adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities. As such, the rule is not significant under section 3(f)(1) of E.O. 12866, as amended by E.O. 14094. Pursuant to E.O. 12866, the BLM is required to conduct an economic analysis in accordance with section 6(a)(3)(B) of that Executive order. The BLM has complied with that directive.
BLM notes that public commenters raised potential distributional impacts to specific communities. BLM expects limited impacts of this rule relative to the 2022 IAP baseline. However, to clarify the impacts to management of these areas when considering future leases or infrastructure, the economic analysis refers to the EIS of the 2022 IAP for a high-level summary of potential impacts to those communities from the broader scope of the IAP. That EIS addressed potential incremental effects to Iñupiat residents of the North Slope Borough and other communities of the North Slope.
Regarding the comments that IAPs should incorporate a cost-benefit analysis, the NEPA process that will occur when changes are made to an IAP does not require formal cost-benefit analysis, but it may examine socio-economic effects of the action, as appropriate. In addition, any future changes to management that require regulatory action are subject to
The Secretary of the Interior certifies that this final rule will not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
The Small Business Administration (SBA) has developed size standards to carry out the purposes of the Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act. The size standards can be found in 13 CFR 121.201. For a specific industry identified by the North American Industry Classification System (NAICS), small entities are defined by the SBA as an individual, limited partnership, or small company considered at “arm's length” from the control of any parent company, which meet certain size standards.
The final rule is most likely to affect business currently operating in the oil and gas sector in the NPR-A. There are eight active lessees in NPR-A. These eight companies (and information about the companies obtained from the public domain) include: The Aklaq Company, Alaska (an Alaska-registered company); Borealis Alaska Oil, Inc (acquired by Pantheon Resources, a United Kingdom-based oil and gas company); Oil Search Alaska, LLC (a subsidiary of Santos Limited, a large Australian oil company); Armstrong Oil and Gas, Inc (a Colorado-based exploration company); North Slope Exploration, LLC (managed by Armstrong Oil and Gas, Inc.); Repsol E&P USA Inc (a subsidiary of Repsol, a large Spanish oil company); ConocoPhillips Alaska, Inc (a subsidiary of ConocoPhillips, a large American multinational corporation); and Emerald House LLC (owned by XCD Energy Ltd, an Australian-based oil company).
SBA size standards identify small business in the crude petroleum extraction (NAICS 211120) and natural gas extraction (NAICS 211130) industries to be those with 1,250 or fewer employees. Of the companies identified, based on information that BLM was able to obtain from the public domain, the BLM believes that the Aklaq Company Alaska, Borealis Alaska Oil Inc, Armstrong and North Slope Exploration, and Emerald House LLC meet the SBA's criteria of a small business. The BLM has determined that this is less than a substantial number of small entities potentially affected.
In addition to small business, the RFA also requires consideration of impacts on small governmental jurisdictions. There are four communities within the Reserve that are likely considered small government jurisdictions: Wainwright, Utqiagvik, Atqasuk, and Nuiqsut. However, this rule will not override the terms or status of existing leases, will not affect authorized operations, and does not impose direct regulatory cost on any business or community.
Further, this rule does not change management decisions regarding future leasing and oil and gas development in areas outside Special Areas, or within Special Areas where leasing or infrastructure is already restricted. In the remaining areas, the impact on future leasing is uncertain but expected to be nominal or minimal for the reasons identified above. Therefore, this rule will not have significant economic impact on small businesses holding these leases or small government jurisdictions in the Reserve.
Based upon the economic analysis, this final rule does not meet the criteria under 5 U.S.C. 804(2), the Congressional Review Act. This rule will not:
(a) Have an annual effect on the economy of $100 million or more.
(b) Cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions.
(c) Have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S. based enterprises to compete with foreign based enterprises.
The final rule will not have a significant or unique effect on State, local, or Tribal governments or the private sector. The final rule contains no requirements that will apply to State, local, or Tribal governments. The costs that the final rule will impose on the private sector are below the monetary threshold established at 2 U.S.C. 1532(a). A statement containing the information required by UMRA (2 U.S.C. 1531
This rule does not affect a taking of private property or otherwise have taking implications under E.O. 12630. Section 2(a) of E.O. 12630 identifies policies that do not have takings implications, such as those that abolish regulations, discontinue governmental programs, or modify regulations in a manner that lessens interference with the use of private property. The rule will not interfere with private property. A takings implication assessment is not required.
Under the criteria in section 3 of E.O. 13132, this final rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. A federalism impact statement is not required.
The final rule does not have a substantial direct effect on the States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the levels of government. It does not apply to States or local governments or State or local governmental entities. The final rule will affect the relationship between operators, lessees, and the BLM, but it does not directly impact the States. Therefore, in accordance with E.O. 13132, the BLM has determined that this final rule does not have sufficient federalism implications to warrant preparation of a federalism assessment.
This final rule complies with the requirements of E.O. 12988. More specifically, this final rule:
a. Meets the criteria of section 3(a), which requires agencies to review all regulations to eliminate errors and ambiguity and to write all regulations to minimize litigation; and
b. Meets the criteria of section 3(b)(2), which requires agencies to write all regulations in clear language with clear legal standards.
The BLM endeavors to maintain and strengthen its government-to-government relationship with Indian Tribes through a commitment to consultation with Indian Tribes and recognition of their right to self-governance and Tribal sovereignty. The BLM evaluated possible effects of the rule on federally recognized Indian Tribes under E.O. 13175, the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951), and 512 Departmental Manual 2, as part of this rulemaking process and determined that the rule has tribal implications.
In conformance with the Secretary's policy on tribal consultation and 512 Departmental Manual 4-7, on August 25, 2023, the BLM invited via mail 45 Tribes and 30 Alaska Native Corporations to engage in consultation regarding the proposed NPR-A rule. The BLM engaged in Tribal consultation on the decisions and resulting actions related to the IAP, including the 2022 IAP ROD. This regulation incorporates those IAP decisions and also updates a 50-year-old framework to reflect the IAP and lessons learned through preparing IAPs. Prior consultation on the specific procedural changes that were being proposed provided the BLM with valuable feedback on how the regulatory language, in particular, might be improved to better reflect Tribal interests. The BLM felt that it would be more productive to seek new feedback after providing the proposal in the form of a proposed regulation, which necessarily differs from the process, content, and form of a management plan.
The BLM has continued to offer consultation to Tribes and Alaska Native Corporations that it determined would be most likely to have substantial direct effects from the rule, including the Native Village of Atqasuk, Atqasuk Corporation, Village of Wainwright, Olgoonik Corporation, Native Village of Nuiqsut, Kuupik Corporation, Native Village of Barrow, UIC, ICAS, and ASRC. BLM Leadership and State and Field Office staff met with the Mayor of Atqasuk on October 31, Native Village of Nuiqsut on November 1, ICAS on November 3 and February 6, Village of Wainwright on November 21, Olgoonik Corporation on December 19, ASRC on December 21, and Kuukpik Corporation on February 1. In addition, staff met and discussed the proposed rule with the NPR-A Working Group (consisting of representatives from North Slope local governments, Native corporations, and tribal entities,
As detailed in the public engagement section above, the BLM received requests, including from Tribes and Alaska Native Corporations, to extend the 60-day public comment period for the proposed rule for an additional 90 days, which would have resulted in a 150-day (5-month) comment period. A 5-month comment period far exceeds the typical duration for rulemaking comment periods. While the BLM was unable to grant the requested extension, we did extend the comment period for an additional 30 days, resulting in a 90-day comment period for the proposed rule. While the comment period for the proposed rule overlapped with the comment period on the Draft Supplemental EIS for the Coastal Plain, the Coastal Plain comment period was 60 days and ended one month before the close of the comment period on the proposed rule.
During consultation, the Tribes and Alaska Native Corporations raised similar concerns as they submitted during the comment period of the rule, which are addressed in the responses to comment above. Notable concerns raised during consultation include the potential for loss of revenue from oil and gas development, the need for protections to sustain tribal members' subsistence way of life, ensuring adequate consultation going forward, and ensuring that the rule allows access for communities and continued economic development opportunities for community members. Changes made in response to this input, include: revising sections of the rule that relate to consultation to clarify that an economic tie to a Special Area is a basis for consultation; ensuring consultation is consistently required throughout the processes for designating, de-designating and modifying Special Areas and evaluating proposed oil and gas activities in Special Areas; adding subsistence as an area for co-stewardship across the Reserve, broadening the language in the section on co-stewardship beyond opportunities in Special Areas; and revising the language in the section on subsistence to provide for reasonable access, to be consistent with ANILCA, rather than using the term “appropriate” access.
The Paperwork Reduction Act (PRA) (44 U.S.C. 3501 through 3521) generally provides that an agency may not conduct or sponsor, and not withstanding any other provision of law a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Collections of information include requests and requirements that an individual, partnership, or corporation obtain information, and report it to a Federal agency. See 44 U.S.C. 3502(3); 5 CFR 1320.3(c) and (k).
This final rule contains an information-collection requirement that is subject to review by OMB under the PRA. This information-collection is located in § 2361.30(a)(4). One of the key principles of the final rule is the inclusion of stakeholder and the public notice and participation in the designation and removal of lands to be included in an SA. To help ensure that the BLM receives the information needed to inform its decision to include lands in an SA, § 2361.30(a)(4) includes a list of criteria that should be addressed when a member of the public recommends lands for such a designation. This information includes the following:
• The size and location of the recommended lands;
• The significant subsistence, recreational, fish and wildlife, historical, or scenic resource values that are present within or supported by the recommended lands;
• Measures that may be necessary to assure maximum protection of those values; and
• Any other pertinent information.
The BLM has submitted a request to OMB for the information-collection requirement contained in this final rule. The estimated burden associated with this information-collection is outlined below.
If you want to comment on the information-collection requirements in this final rule, please send your comments and suggestions on this information-collection request within 30 days of publication of this final rule in the
This final rule meets the criteria set forth at 43 CFR 46.210(i) for a Departmental categorical exclusion in that this final rule is “of an administrative, financial, legal, technical, or procedural nature.” They do not involve any of the extraordinary circumstances listed in 43 CFR 46.215.
Under E.O. 13211, agencies are required to prepare and submit to OMB a Statement of Energy Effects for significant energy actions. This statement is to include a detailed statement of “any adverse effects on energy supply, distribution, or use (including a shortfall in supply, price increases, and increase use of foreign supplies)” for the action and reasonable alternatives and their effects.
Section 4(b) of E.O. 13211 defines a “significant energy action” as “any action by an agency (normally published in the
This final rule will not have a significant effect on the Nation's energy supply. It restates existing statutory standards and establishes a procedural framework for ensuring that the BLM meets those standards. It also codifies land use restrictions that already are legally binding in the 2022 IAP ROD. Further, the final rule presumes, in final § 2361.40(c), that oil and gas leasing or infrastructure on lands allocated as available for such activities “should not be permitted unless specific information available to the Bureau clearly demonstrates that those activities can be conducted with no or minimal adverse effects on significant resource values.” That presumption merely implements the BLM's existing statutory duty to assure maximum protection of the significant resource values in Special Areas to the extent consistent with the requirements of this Act for the exploration and production of the Reserve. 42 U.S.C. 6504(a). The presumption is consistent with this statutory direction and limited by it, such that the actions that the BLM may take under this framework to assure maximum protection are within the same scope as those that could have been taken without the framework set out in the rule. As discussed in more detail in the regulatory impact analysis (RIA), based on the status of existing leases, most recent lease sales, and the fact that the rule will not alter the terms of approved leases or approved development, the BLM does not expect the rule to have a substantial impact on exploration and production from the Reserve. Therefore, the final rule will not change the supply, distribution, or use of energy.
The BLM received comments that the proposed rule constitutes a significant energy action as it would affect the supply, distribution, and use of energy, and thereby fails to comply with E.O. 13211. One commenter specified that “actions taken to restrict and limit oil and gas development, access to the NPR-A for oil and gas development, and codification of BLM's authority to restrict, deny, and minimize oil and gas development in the NPR-A would logically have an impact on the Nation's energy supply.” Commenters also asserted that oil production from the NPR-A will extend the economic lifetime of the Trans-Alaska Pipeline and enable domestic oil to reach the rest of the United States. For the reasons stated above, the rule will not change the supply, distribution, or use of energy.
Other commenters cited an estimate from the U.S. Geological Survey that there are 8.7 billion barrels of undiscovered oil in the NPR-A, an important reserve created specifically by Congress for energy production. Commenters added that “ . . . by denying development in the region,
These comments misunderstand the rule; it does not prohibit exploration for and development of oil and gas in the Reserve. Rather, it allows oil- and gas-related activities to continue consistent with the NPRPA by establishing procedures for the BLM to mitigate reasonably foreseeable and significantly adverse effects of proposed oil and gas activities on the surface resources of the Reserve and to provide maximum protection for surface values within Special Areas for proposed oil and gas activities.
The BLM received comments discussing the Russian invasion of Ukraine and the importance of energy security and strengthening the supply chain for the U.S. and its allies. Commenters indicated that “as one of the largest exporters of petroleum in the world, the United States' ability to facilitate global diversification from Russian energy can only be enhanced by NPR-A development.” Again, these comments misunderstand the rule; it does not prohibit exploration for and development of oil and gas in the Reserve.
Alaska, Oil and gas activity, Protection of surface resources, Special areas, Tribes.
This action by the Principal Deputy Assistant Secretary is taken pursuant to an existing delegation of authority.
42 U.S.C. 6501
The purpose of the regulations in this subpart is to provide procedures for protection and control of the environmental, fish and wildlife, and historical and scenic values of the National Petroleum Reserve in Alaska from significantly adverse effects of oil and gas activities on the surface resources of the Reserve and assuring maximum protection of significant resource values in Special Areas pursuant to and consistent with the provisions of the Naval Petroleum Reserves Production Act of 1976 (90 Stat. 303; 42 U.S.C. 6501
The primary statutory authority for this subpart is the Naval Petroleum Reserves Production Act of 1976, as amended by the Department of the Interior Appropriations Act, Fiscal Year 1981 (Pub. L. 96-514). Additional authority is provided by the Federal Land Policy and Management Act (43 U.S.C. 1701
The Bureau of Land Management is responsible for the surface and subsurface management of the Reserve, including protecting surface resources from environmental degradation and assuring maximum protection of significant resource values in Special Areas. The Act authorizes the Bureau to prepare rules and regulations necessary to carry out surface management and protection duties.
As used in this subpart, the term:
(a) Subject to valid existing rights, and except as provided by the Department of the Interior Appropriations Act, Fiscal Year 1981 (Pub. L. 96-514), all lands within the exterior boundaries of the Reserve are reserved and withdrawn from all forms of entry and disposition under the public land laws, including the mining and mineral leasing laws, and all other acts.
(b) Notwithstanding the provisions of paragraph (a) of this section, the Secretary is authorized to:
(1) Make dispositions of mineral materials pursuant to the Act of July 31, 1947 (61 Stat. 681), as amended (30 U.S.C. 601), for appropriate use by Alaska Natives and the North Slope Borough.
(2) Make such dispositions of mineral materials and grant such rights-of-way, licenses, and permits as may be necessary to carry out the Secretary's responsibilities under the Act.
(3) Convey the surface of lands properly selected on or before December 18, 1975, by Native village corporations pursuant to the Alaska Native Claims Settlement Act, as amended (43 U.S.C. 1601,
(4) Grant such rights-of-way to the North Slope Borough, under the provisions of title V of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1761
(c) All other provisions of law heretofore enacted and actions heretofore taken reserving such lands as a Reserve shall remain in full force and effect to the extent not inconsistent with the Act.
(d) To the extent not inconsistent with the Act, all other public land laws are applicable.
If a court holds any provision of the regulations in this part or their applicability to any person or circumstances invalid, the remainder of the regulations in this part and their applicability to other people or circumstances will remain unaffected.
(a) In administering the Reserve, the Bureau must protect surface resources by adopting whatever conditions, restrictions, and prohibitions it deems necessary or appropriate to mitigate reasonably foreseeable and significantly adverse effects of proposed oil and gas activities. Such conditions, restrictions, or prohibitions may involve conditioning, delaying action on, or denying some or all aspects of proposed oil and gas activities, and will fully consider community access and other infrastructure needs, after consultation with the North Slope Borough and consistent with § 2361.6.
(b) The Bureau will use the following procedures to protect surface resources from the reasonably foreseeable and significantly adverse effects of proposed oil and gas activities:
(1) The Bureau will maintain an Integrated Activity Plan (IAP) addressing management of all BLM-administered lands and minerals throughout the Reserve. When issuing a use authorization, the authorization must conform to the IAP and this subpart, including any subsequent designation or modifications of Special Areas. To the extent there is any inconsistency between the IAP and this subpart, this subpart governs;
(2) In each decision concerning proposed activity in the Reserve, the authorized officer will document consideration of, and adopt measures to mitigate, reasonably foreseeable and significantly adverse effects on fish and wildlife, water, cultural, paleontological, scenic, and any other surface resource. The authorized officer will take particular care to account for, and mitigate adverse effects on, surface resources that support subsistence uses and needs; and
(3) In assessing effects of a decision concerning proposed activity in the Reserve, the authorized officer will document consideration of any uncertainty concerning the nature, scope, and duration of potential effects on surface resources of the Reserve and shall ensure that any conditions, restrictions, or prohibitions on proposed oil and gas activities account for and reflect any such uncertainty.
(c) When affected surface resources are located in a Special Area, the authorized officer must comply with the procedures and requirements of §§ 2361.20 through 2361.60.
(d) The authorized officer must include in each decision and authorization related to proposed oil and gas activity in the Reserve such terms and conditions that provide the Bureau with sufficient ability to fully implement the requirements of this subpart.
(e)(1) To the extent consistent with the requirements of the Act, other applicable law, and the terms of any applicable existing authorization, and after consultation with appropriate Federal, State, and local agencies, federally recognized Tribes, and Alaska Native Claims Settlement Act corporations, the authorized officer may limit, restrict, or prohibit the use of or access to lands within the Reserve,
(2) The consultation requirement in paragraph (e)(1) of this section is not required when the authorized officer determines that emergency measures are required.
(f) No site, structure, object, or other values of historical, cultural, or paleontological character, including, but not limited to, historic and prehistoric remains, fossils, and artifacts, shall be injured, altered, destroyed, or collected without authorization under an appropriate Federal permit and without compliance with applicable law governing cultural items, archaeological resources, and historic properties.
Any lands within the Reserve designated as a Special Area as of June 6, 2024, will continue to be managed as a Special Area except as modified pursuant to § 2361.30, including:
(a)
(1) Important habitat for raptor species, including, but not limited to, the Arctic peregrine falcon;
(2) Important habitat for other bird species, including, but not limited to, neotropical migratory birds, shorebirds, loons, waterfowl, inland dwelling sea birds, and passerines;
(3) Important habitat for moose;
(4) Important habitat for fish;
(5) Important subsistence activities;
(6) Important recreational activities;
(7) World-class paleontological deposits; and
(8) Significant cultural resources, including numerous sites from the prehistoric and historic eras.
(b)
(1) Important habitat for marine mammals;
(2) Unique ecosystem for the Arctic Coast;
(3) Opportunities for primitive recreational experiences;
(4) Important habitat for migratory birds; and
(5) Important subsistence activities.
(c)
(1) Haul-out areas and nearshore waters for marine mammals; and
(2) High-use staging and migration areas for shorebirds and waterbirds.
(d)
(1) Important nesting, staging, and molting habitat for a large number of migratory and other waterbirds;
(2) Important caribou habitat;
(3) Important shorebird habitat;
(4) Subsistence hunting and fishing activities;
(5) Pik Dunes; and
(6) Overwintering habitat for fish.
(e)
(1) Important habitat for the Western Arctic Caribou Herd;
(2) Subsistence hunting activities;
(3) Grizzly bear habitat; and
(4) Important wilderness values.
(a) In designating, de-designating, or otherwise changing boundaries or management of Special Areas, the authorized officer must:
(1) Rely on the best available scientific information, including Indigenous Knowledge, as well as the best available information concerning subsistence uses and resources within the Reserve;
(2) Provide the public and interested stakeholders with notice of, and meaningful opportunities to participate in, the evaluation process;
(3) Consult with any federally recognized Tribes and Alaska Native Claims Settlement Act corporations that use the affected Special Area for subsistence purposes or have historic, cultural, or economic ties to the Special Area; and
(4) In designating, de-designating, or otherwise changing boundaries of Special Areas, base their decisions solely on the presence or absence of significant resource values and not the existence of measures that have been or may be adopted to protect or otherwise administer those values.
(b) The Bureau must evaluate lands within the Reserve for the presence of significant subsistence, recreational, fish and wildlife, historical, or scenic values and shall designate lands as Special Areas containing such values in accordance with the following procedures:
(1) Every 10 years, or sooner if the authorized officer determines that changing conditions warrant, the authorized officer must evaluate and determine whether to:
(i) Designate new Special Areas;
(ii) Expand existing Special Areas;
(iii) Recognize the presence of additional significant resource values in existing Special Areas; or
(iv) Require additional measures or strengthen existing measures to assure maximum protection of significant resource values within existing Special Areas.
(2) The authorized officer may, but is not required to, conduct the evaluation and otherwise designate and amend Special Areas through amendment of the IAP.
(3) The authorized officer must provide the public and interested stakeholders with the opportunity to recommend lands that should be considered for designation as a Special Area, significant resource values that the authorized officer should consider recognizing for existing Special Areas, and measures that the authorized officer should consider requiring to assure
(i) The size and location of the recommended lands;
(ii) The significant resource values that are present within or supported by the recommended lands;
(iii) Measures that may be necessary to assure maximum protection of those values; and
(iv) Any other pertinent information.
(4) If, at any point after receipt of an internal or external recommendation, the authorized officer determines that interim measures are required to assure maximum protection of significant resource values in lands under consideration for designation as a new or modified Special Area, the authorized officer may implement such measures that are consistent with the governing management prescriptions in the IAP during the period for which the lands remain under consideration; provided, however, that the authorized officer will provide public notice that interim measures are in place and such measures will be reassessed to determine if they are still needed if they remain in place for more than 5 years.
(5) When the authorized officer designates lands as Special Areas or recognizes the presence of additional significant resource values in existing Special Areas, the authorized officer must adopt measures to assure maximum protection of significant resource values. Such measures are not constrained by the provisions of the current IAP. Once adopted, these measures supersede inconsistent provisions of the IAP then in effect for the Reserve and will be incorporated into the IAP during the next revision or amendment.
(6) For any lands designated as a Special Area, the authorized officer will publish a legal description of those lands in the
(c) The Bureau may not remove lands from the Teshekpuk Lake and Utukok River Uplands Special Areas unless directed to do so by statute. The Bureau may remove lands within other Special Areas only when all of the significant resource values that support the designation are no longer present. When determining whether to remove lands from a Special Area designation, the authorized officer must:
(1) Prepare a summary of its proposed determination, including the underlying factual findings;
(2) Provide the public and interested stakeholders with the opportunity to review and comment on the proposed determination; and
(3) Issue a determination that documents how the views and information provided by the public, federally recognized Tribes, Alaska Native Claims Settlement Act corporations, federally qualified subsistence users, and other interested stakeholders have been considered.
The management priority within Special Areas is to assure maximum protection of significant resource values, consistent with the requirements of the Act for exploration and production of the Reserve. The Bureau must fulfill this duty at each stage in the decision-making process for oil and gas activities in the Reserve, and in accordance with the following procedures:
(a) The authorized officer must, to the extent consistent with the Act, take such steps as are necessary to avoid the adverse effects of proposed oil and gas activities on the significant resource values of Special Areas. This includes, but is not limited to, conditioning, delaying action on, or denying proposals for activities, either in whole or in part, and ensuring that leasing and production is approved only subject to the provisions of this section.
(b) The authorized officer will identify and adopt maximum protection measures for each significant resource value that is present in a Special Area when Special Areas are designated. The authorized officer will update maximum protection measures as appropriate thereafter, including in the IAP, lease terms, and permits to conduct oil and gas activities.
(c) Maximum protection may include, but is not limited to, requirements for:
(1) Rescheduling activities, including specifying rates of development, and requiring use of alternative routes;
(2) Limiting new infrastructure and roads;
(3) Limiting extraction of sand and gravel or withdrawal of water;
(4) Limiting types of vehicles and loadings;
(5) Limiting types of aircraft in combination with minimum flight altitudes and distances from identified places; and
(6) Applying special fuel handling procedures.
(d) Subject to any revisions made pursuant to § 2361.30, oil and gas leasing and authorization of new infrastructure in Special Areas will conform to the land use allocations and restrictions identified on the maps published as of June 6, 2024, and available for public inspection at the Arctic District Office.
(e) On lands within Special Areas that are allocated as closed to leasing or unavailable to new infrastructure, certain uses may be authorized under limited circumstances:
(1) The authorized officer may issue oil and gas leases in Special Areas if drainage is occurring. Any lease issued for drainage purposes will include provisions that prohibit surface-disturbing oil and gas activities on the entire lease tract.
(2) The authorized officer may approve new roads, pipelines, transmission lines, and other types of infrastructure in Special Areas provided that:
(i) The infrastructure will primarily be used by and provide a benefit to communities located within or in close proximity to the Reserve or will support subsistence activities; and
(ii) Appropriate measures are adopted to assure maximum protection of significant resource values.
(3) The authorized officer may approve new permanent infrastructure related to existing oil and gas leases only if such infrastructure is necessary to comport with the terms of a valid existing lease.
(f) On lands within Special Areas that are allocated as available for future oil and gas leasing or new infrastructure, the authorized officer will presume that proposed oil and gas activities should not be permitted unless specific information available to the authorized officer clearly demonstrates that those activities can be conducted with no or minimal adverse effects on significant resource values or unless they are necessary to comport with the terms of a valid existing lease.
(g) When preparing an environmental analysis of proposed leasing, exploration, development, or new infrastructure in Special Areas, and reaching a final decision, the authorized officer will:
(1) Provide the public with a meaningful opportunity to review and comment, and consider and respond to any relevant comment they receive;
(2) Consult with federally recognized Tribes and Alaska Native Claims Settlement Act corporations that use the affected Special Area for subsistence purposes or have historic, cultural, or economic ties to the Special Area;
(3) Evaluate potential adverse effects and measures to avoid, minimize, or otherwise mitigate such effects to achieve maximum protection of significant resource values;
(4) Document how the proposal falls within one of the exceptions in paragraph (e) of this section or the justification for overcoming the presumption in paragraph (f) of this section, such as if the proposed infrastructure is necessary to comport with the terms of a valid existing lease, or if it will primarily be used by and provide a benefit to communities located within or in close proximity to the Reserve, and the proposal has been conditioned to avoid, minimize, or otherwise mitigate adverse effects;
(5) Document and consider any uncertainty concerning the nature, scope, and duration of potential adverse effects on significant resource values of Special Areas and ensure that any actions taken to avoid, minimize, or mitigate such effects account for and reflect any such uncertainty; and
(6) Prepare a Statement of Adverse Effect, if the authorized officer determines that the proposal cannot avoid adverse effects on significant resource values in a Special Area. The Statement of Adverse Effect will describe the:
(i) Significant resource values that may be adversely affected;
(ii) Nature, scope, and duration of those adverse effects;
(iii) Measures the Bureau evaluated to avoid the adverse effects, including whether any practicable alternatives exist that would have less adverse impact on significant resource values of the Special Area;
(iv) Justification for not requiring those measures;
(v) Measures the authorized officer will require to minimize, to the maximum extent possible, adverse effects on significant resource values of the Special Area; and
(vi) Measures the authorized officer will require to mitigate any residual adverse effects that cannot be avoided or minimized, including compensatory mitigation, along with an explanation of how those measures will assure maximum protection of significant resource values.
(h) The authorized officer must include in each decision and authorization related to oil and gas activity in the Reserve terms and conditions that provide the authorized officer with sufficient authority to fully implement the requirements of this section.
(a) The Bureau will ensure that Special Areas are managed to protect and support fish and wildlife and fish and wildlife habitat and associated subsistence use of such areas by rural residents as defined in 50 CFR 100.4.
(b) The Bureau will provide reasonable access to and within Special Areas for subsistence purposes.
In accordance with the Bureau's co-stewardship guidance, the Bureau will seek opportunities to engage federally recognized Tribes in co-stewardship for management of Special Areas and subsistence resources throughout the Reserve. Co-stewardship opportunities may include co-management, collaborative and cooperative management, and tribally led stewardship, and can be implemented through cooperative agreements, memoranda of understanding, self-governance agreements, and other mechanisms. The Bureau may also partner with Alaska Native Claims Settlement Act corporations, local governments, or organizations as provided by law.
(a) Use authorizations must be obtained from the authorized officer prior to any use within the Reserve. Only uses that are consistent with the purposes and objectives of the Act and this subpart will be authorized.
(b) Except as may be limited, restricted, or prohibited by the authorized officer, use authorizations are not required for:
(1) Subsistence uses (
(2) Non-commercial recreational uses (
(c) Applications for use authorizations shall be filed in accordance with applicable regulations in this chapter. In the absence of such regulations, the authorized officer may consider and act upon applications for uses allowed under the Act.
(d) In addition to other statutory or regulatory requirements, approval of applications for use authorizations shall be subject to such terms and conditions as the authorized officer determines to be necessary to protect the environmental, subsistence, recreational, fish and wildlife, historical, and scenic values of the Reserve and to assure maximum protection of significant resource values within Special Areas.
Any person who violates or fails to comply with regulations of this subpart is subject to prosecution, including trespass and liability for damages, pursuant to the appropriate laws.
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Direct final rule.
The Energy Policy and Conservation Act, as amended (“EPCA”), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including miscellaneous refrigeration products. In this direct final rule, the U.S. Department of Energy (“DOE”) is adopting amended energy conservation standards for miscellaneous refrigeration products. DOE has determined that the amended energy conservation standards for these products would result in significant conservation of energy, and are technologically feasible and economically justified.
The effective date of this rule is September 4, 2024. If adverse comments are received by August 26, 2024 and DOE determines that such comments may provide a reasonable basis for withdrawal of the direct final rule under 42 U.S.C. 6295(o), a timely withdrawal of this rule will be published in the
The docket for this rulemaking, which includes
The docket web page can be found at
For further information on how to submit a comment or review other public comments and the docket, contact the Appliance and Equipment Standards Program staff at (202) 287-1445 or by email:
The U.S. Department of Justice Antitrust Division invites input from market participants and other interested persons with views on the likely competitive impact of the standards contained in this direct final rule. Interested persons may contact the Antitrust Division at
Mr. Lucas Adin, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 287-5904. Email:
Ms. Kristin Koernig, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (240) 243-3383. Email:
The Energy Policy and Conservation Act, Public Law 94-163, as amended (“EPCA”),
Pursuant to EPCA, any new or amended energy conservation standard must, among other things, be designed to achieve the maximum improvement in energy efficiency that DOE determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B))
In light of the statutory authority above and under the authority provided by 42 U.S.C. 6295(p)(4), DOE is issuing this direct final rule amending the energy conservation standards for MREFs.
The adopted standard levels in this direct final rule were proposed in a letter submitted to DOE jointly by groups representing manufacturers, energy and environmental advocates, consumer groups, and a utility. This letter, titled “Energy Efficiency Agreement of 2023” (hereafter, the “Joint Agreement”
In accordance with the direct final rule provisions at 42 U.S.C. 6295(p)(4), DOE has determined that the recommendations contained therein are compliant with 42 U.S.C. 6295(o). As required by 42 U.S.C. 6295(p)(4)(A)(i), DOE is also simultaneously publishing a notice of proposed rulemaking (“NOPR”) that contains the identical standards to those adopted in this direct final rule. Consistent with the statute, DOE is providing a 110-day public comment period on the direct final rule. (42 U.S.C. 6295(p)(4)(B)) If DOE determines that any comments received may provide a reasonable basis for withdrawal of the direct final rule under 42 U.S.C. 6295(o), or any other applicable law, DOE will publish the reasons for withdrawal and continue the rulemaking under the NOPR. (42 U.S.C. 6295(p)(4)(C)) See section II.A of this document for more details on DOE's statutory authority.
The amended standards that DOE is adopting in this direct final rule are the efficiency levels recommended in the Joint Agreement (shown in Table I.1) expressed in terms of kilowatt hours per year (“kWh/yr”) as measured according to DOE's current MREF test procedure codified at title 10 of the Code of Federal Regulations (“CFR”) part 430, subpart B, appendix A (“appendix A”).
The amended standards recommended in the Joint Agreement are represented as trial standard level (“TSL”) 4 in this document (hereinafter the “Recommended TSL”) and are described in section V.A of this document. The Joint Agreement's standards for MREFs apply to all products listed in Table I.1 and manufactured in or imported into the United States starting on January 31, 2029.
Table I.2 summarizes DOE's evaluation of the economic impacts of the adopted standards on consumers of MREFs, as measured by the average life-cycle cost (“LCC”) savings and the simple payback period (“PBP”)
DOE's analysis of the impacts of the adopted standards on consumers is described in section IV.F of this document.
The industry net present value (“INPV”) is the sum of the discounted cash flows to the industry from the base year through the end of the analysis period (2024-2058). Using a real discount rate of 7.7 percent, DOE estimates that the INPV for manufacturers of MREFs in the case without amended standards is $807.7 million. Under the adopted standards, which align with the Recommended TSL (
DOE's analysis of the impacts of the adopted standards on manufacturers is described in sections IV.J and V.B.2 of this document.
DOE's analyses indicate that the adopted energy conservation standards for MREFs would save a significant amount of energy. Relative to the case without amended standards, the lifetime energy savings for MREFs purchased in the 30-year period that begins in the anticipated year of compliance with the amended standards (2029-2058) amount to 0.32 quadrillion British thermal units (“Btu”), or quads.
The cumulative net present value (“NPV”) of total consumer benefits of the standards for MREFs ranges from $0.17 billion (at a 7-percent discount rate) to $0.77 billion (at a 3-percent discount rate). This NPV expresses the estimated total value of future operating-cost savings minus the estimated increased product costs for MREFs purchased in 2029-2058.
In addition, the adopted standards for MREFs are projected to yield significant environmental benefits. DOE estimates that the standards will result in cumulative emission reductions (over the same period as for energy savings) of 5.85 million metric tons (“Mt”)
DOE estimates the value of climate benefits from a reduction in greenhouse gases (“GHG”) using four different estimates of the social cost of CO
DOE estimated the monetary health benefits of SO
Table I.3 summarizes the monetized benefits and costs expected to result from the amended standards for MREFs. There are other important unquantified effects, including certain unquantified climate benefits, unquantified public health benefits from the reduction of toxic air pollutants and other emissions, unquantified energy security benefits, and distributional effects, among others.
The benefits and costs of the adopted standards can also be expressed in terms of annualized values. The monetary values for the total annualized net benefits are (1) the reduced consumer operating costs, minus (2) the increase in product purchase prices and installation costs, plus (3) the value of climate and health benefits of emission reductions, all annualized.
The national operating cost savings are domestic private U.S. consumer monetary savings that occur as a result of purchasing the covered products and are measured for the lifetime of MREFs shipped during the period 2029−2058. The benefits associated with reduced emissions achieved as a result of the adopted standards are also calculated based on the lifetime of MREFs shipped during the period 2029-2058. Total benefits for both the 3-percent and 7-percent cases are presented using the average GHG social costs with 3-percent discount rate. Estimates of SC-GHG values are presented for all four discount rates in section IV.L of this document.
Table I.4 presents the total estimated monetized benefits and costs associated with the standards adopted in this direct final rule, expressed in terms of annualized values. The results under the primary estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and health benefits from reduced NO
Using a 3-percent discount rate for all benefits and costs, the estimated cost of the standards is $70.8 million per year in increased equipment costs, while the estimated annual benefits are $115 million in reduced operating costs, $18.3 million in climate benefits, and $35.6 million in health benefits. In this case, the net benefit amounts to $98.0 million per year.
DOE's analysis of the national impacts of the adopted standards is described in sections IV.H, IV.K, and IV.L of this document.
DOE has determined that the Joint Agreement was submitted jointly by interested persons that are fairly representative of relevant points of view, in accordance with 42 U.S.C. 6295(p)(4)(A). After considering the analysis and weighing the benefits and burdens, DOE has determined that the recommended standards are in accordance with 42 U.S.C. 6295(o), which contains the criteria for prescribing new or amended standards. Specifically, the Secretary has determined that the adoption of the recommended standards would result in the significant conservation of energy and is technologically feasible and economically justified. In determining whether the recommended standards are economically justified, the Secretary has determined that the benefits of the recommended standards exceed the burdens. The Secretary has concluded that the recommended standards, when considering the benefits of energy savings, positive NPV of consumer benefits, emission reductions, the estimated monetary value of the emissions reductions, and positive average LCC savings, would yield benefits outweighing the negative impacts on some consumers and on manufacturers, including the conversion costs that could result in a reduction in INPV for manufacturers.
Using a 7-percent discount rate for consumer benefits and costs and NOx and SO
The significance of energy savings offered by a new or amended energy conservation standard cannot be determined without knowledge of the specific circumstances surrounding a given rulemaking.
As previously mentioned, the standards are projected to result in estimated national energy savings of 0.32 quads full-fuel-cycle (“FFC”), the equivalent of the primary annual energy use of 2.1 million homes. In addition, they are projected to reduce cumulative CO
Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is issuing this direct final rule amending the energy conservation standards for MREFs. Consistent with this authority, DOE is also simultaneously publishing elsewhere in this issue of the
The following section briefly discusses the statutory authority underlying this direct final rule, as well as some of the relevant historical background related to the establishment of standards for MREFs.
EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA
The energy conservation program under EPCA, consists essentially of four parts: (1) testing, (2) labeling, (3) the establishment of Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of the EPCA specifically include definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), energy conservation standards (42 U.S.C. 6295), and the authority to require information and reports from manufacturers (42 U.S.C. 6296).
Federal energy efficiency requirements for covered products established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal preemption in limited instances for particular State laws or regulations, in accordance with the procedures and other provisions set forth under EPCA. (
Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of each covered product. (42 U.S.C. 6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products must use the prescribed DOE test procedure as the basis for certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA and when making representations to the public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 6295(s)) Similarly, DOE must use these test procedures to determine whether the products comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test procedure for MREFs appears at appendix A (
DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including MREFs. Any new or amended standard for a covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary of Energy determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B)) Furthermore, DOE may not adopt any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o)(3))
Moreover, DOE may not prescribe a standard (1) for certain products, including MREFs, if no test procedure has been established for the product, or (2) if DOE determines by rule that the standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, the following seven statutory factors:
(1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water) savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (“Secretary”) considers relevant.
Further, EPCA, as codified, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA, as codified, also contains what is known as an “anti-backsliding” provision, which prevents the Secretary from prescribing any amended standard that either increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States in any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6295(o)(4))
EPCA specifies requirements when promulgating an energy conservation standard for a covered product that has two or more subcategories. A rule prescribing an energy conservation standard for a type (or class) of product must specify a different standard level for a type or class of products that has the same function or intended use if DOE determines that products within such group (A) consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature which other products within such type (or class) do not have and such feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-related feature justifies a different standard for a group of products, DOE considers such factors as the utility to the consumer of such a feature and other factors DOE deems appropriate. (
Additionally, pursuant to the amendments contained in the Energy Independence and Security Act of 2007 (“EISA 2007”), Public Law 110-140, final rules for new or amended energy conservation standards promulgated after July 1, 2010, are required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) DOE's current test procedure for MREFs addresses standby mode and off mode energy use, as do the amended standards adopted in this direct final rule.
Finally, EISA 2007 amended EPCA, in relevant part, to grant DOE authority to issue a final rule (
The direct final rule must be published simultaneously with a NOPR that proposes an energy or water conservation standard that is identical to the standard established in the direct final rule, and DOE must provide a public comment period of at least 110 days on this proposal. (42 U.S.C. 6295(p)(4)(A)-(B)) While DOE typically provides a comment period of 60 days on proposed standards, for a NOPR accompanying a direct final rule, DOE provides a comment period of the same length as the comment period on the direct final rule—
DOE has previously explained its interpretation of its direct final rule authority. In a final rule amending the Department's “Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products” at 10 CFR part 430, subpart C, appendix A (“Process Rule”), DOE noted that it may issue standards recommended by interested persons that are fairly representative of relative points of view as a direct final rule when the recommended standards are in accordance with 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable. 86 FR 70892, 70912 (Dec. 13, 2021). But the direct final rule provision in EPCA does not impose additional requirements applicable to other standards rulemakings, which is consistent with the unique circumstances of rules issued as consensus agreements under DOE's direct final rule authority.
In a direct final rule published on October 28, 2016 (“October 2016 Final Rule”), DOE prescribed the current energy conservation standards for MREFs manufactured on and after October 28, 2019. 81 FR 75194. These standards are set forth in DOE's regulations at 10 CFR 430.32(aa)(1)-(2). These standards are consistent with a negotiated term sheet submitted to DOE by interested parties representing manufacturers, energy and environmental advocates, and consumer groups.
On October 12, 2021, DOE published a test procedure final rule (“October 2021 TP Final Rule”) amending the test procedure for MREFs, at appendix A. 86 FR 56790. The test procedure amendments included adopting the latest version of the relevant industry standard published by the Association of Home Appliance Manufacturers (“AHAM”), updated in 2019, AHAM Standard HRF-1, “Energy and Internal Volume of Refrigerating Appliances” (“HRF-1-2019”). 10 CFR 430.3(i)(4). The standard levels adopted in this direct final rule are based on the annual energy use (“AEU”) metrics as measured according to appendix A.
On April 1, 2015, DOE published a notice announcing its intention to establish a negotiated rulemaking working group under the Appliance Standards Rulemaking Advisory Committee (“ASRAC”) to negotiate energy conservation standards for refrigeration products such as wine chillers. 80 FR 17355. DOE then created a working group of interested parties to develop a series of recommended energy conservation standards for MREFs. On July 18, 2016, DOE published the July 2016 Final Coverage Determination that added MREFs as covered products. 81 FR 46768. In that determination, DOE noted that MREFs, on average, consume more than 150 kilowatt hours per year (“kWh/yr”) and that the aggregate annual national energy use of these products exceeds 4.2 terawatt hours (“TWh”). 81 FR 46768, 46775. In addition to establishing coverage, the July 2016 Final Coverage Determination established definitions for “miscellaneous refrigeration products,” “coolers,” and “combination cooler refrigeration products” in 10 CFR 430.2. 81 FR 46768, 46791-46792.
On October 28, 2016, a negotiated term sheet containing a series of recommended standards and other related recommendations were submitted to ASRAC for approval and, subsequently, DOE published the October 2016 Direct Final Rule adopting energy conservation standards consistent with the recommendations contained in the term sheet. 81 FR 75194. Concurrent with the October 2016 Direct Final Rule, DOE published a NOPR in which it proposed and requested comments on the standards set forth in the direct final rule. 81 FR 74950. On May 26, 2017, DOE published a notice in the
On September
When the Joint Agreement was submitted, DOE was conducting a rulemaking to consider amending the standards for MREFs. As part of that process, DOE published a NOPR and announced a public meeting on March 31, 2023 (“March 2023 NOPR”) seeking comment on its proposed amended standards to inform its decision consistent with its obligations under EPCA and the Administrative Procedure Act (“APA”). 88 FR 19382. DOE held a public webinar on May 2, 2023, to discuss and receive comments on the March 2023 NOPR and NOPR TSD (“May 2, 2023, public meeting”). The NOPR TSD is available at:
Although DOE is adopting the Joint Agreement as a direct final rule and no longer proceeding with its prior rulemaking, DOE did consider relevant comments, data, and information obtained during that rulemaking process in determining whether the recommended standards from the Joint Agreement are in accordance with 42 U.S.C. 6295(o). Any discussion of comments, data, or information in this direct final rule that were obtained during DOE's prior rulemaking will include a parenthetical reference that provides the location of the item in the public record.
DOE is issuing this direct final rule after determining that the recommended standards submitted in the Joint Agreement meet the requirements in 42 U.S.C. 6295(p)(4). More specifically, DOE has determined that the recommended standards were submitted by interested persons that are fairly representative of relevant points of view and the recommended standards satisfy the criteria in 42 U.S.C. 6295(o).
This direct final rule covers those consumer products that meet the definition of “miscellaneous refrigeration product,” as codified at 10 CFR 430.2, which states that it is a consumer refrigeration product other than a refrigerator, refrigerator-freezer, or freezer, which includes coolers and combination cooler refrigeration products.
The differences between miscellaneous refrigeration products and other consumer refrigeration products, which were addressed in a separate rulemaking for refrigerators, refrigerator-freezers, and freezers, are largely in compartment temperature capability. Refrigerators are broadly defined as a cabinet capable of maintaining a compartment temperature above 32 °F and below 39 °F. Freezers are broadly defined as a cabinet capable of maintaining compartment temperature of 0 °F or below. Refrigerator-freezers have two or more compartments, with one capable of maintaining compartment temperatures above 32 °F and below 39 °F (
When evaluating and establishing energy conservation standards, DOE divides covered products into product classes by the type of energy used, or by capacity, or based upon performance-related features that justify a higher or lower standard. (42 U.S.C. 6295(q)) In making a determination whether a performance-related feature justifies a different standard, DOE must consider such factors as the utility of the feature to the consumer and other factors DOE determines are appropriate. (
The Joint Agreement proposed approach for MREF product classes embeds within the energy use equations the difference between classes for MREFs that are otherwise identical except for presence of an icemaker, using a logical variable I (equal to 1 for a product with an icemaker and equal to 0 for a product without an icemaker) multiplied by the constant icemaker energy use adder.
The product class representation simplification in the Joint Agreement is consistent with what was proposed by DOE in the March 2023 NOPR. Based on the comments received in response to the March 2023 NOPR and DOE's evaluation of the Joint Agreement, this direct final rule adopts this change. See section IV.A.1 of this document for further detail and discussion regarding the product classes analyzed in this direct final rule.
Under the direct final rule provision in EPCA, recommended energy conservation standards must be submitted by interested persons that are fairly representative of relevant points of view (including representatives of manufacturers of covered products, States, and efficiency advocates) as determined by DOE. (42 U.S.C. 6295(p)(4)(A)) With respect to this requirement, DOE notes that the Joint Agreement included a trade association, AHAM, which represents 15 manufacturers of MREFs.
In each energy conservation standards rulemaking, DOE conducts a screening analysis based on information gathered on all current technology options and prototype designs that could improve the efficiency of the products or equipment that are the subject of the rulemaking. As the first step in such an analysis, DOE develops a list of technology options for consideration in consultation with manufacturers, design engineers, and other interested parties. DOE then determines which of those means for improving efficiency are technologically feasible. DOE considers technologies incorporated in commercially available products or in working prototypes to be technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix A to 10 CFR part 430, subpart C (“Process Rule”).
After DOE has determined that particular technology options are technologically feasible, it further evaluates each technology option in light of the following additional screening criteria: (1) practicability to manufacture, install, and service; (2) adverse impacts on product utility or availability; (3) adverse impacts on health or safety and (4) unique-pathway proprietary technologies. Sections 7(b)(2)-(5) of the Process Rule. Section IV.B of this document discusses the results of the screening analysis for MREFs, particularly the designs DOE considered, those it screened out, and those that are the basis for the standards considered in this rulemaking. For further details on the screening analysis for this rulemaking, see chapter 4 of the direct final rule TSD.
When DOE proposes to adopt a new or amended standard for a type or class of covered product, it must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such product. (42 U.S.C. 6295(o)(2)(A)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (“max-tech”) improvements in energy efficiency for MREFs, using the design parameters for the most efficient products available on the market or in working prototypes. The max-tech levels that DOE determined for this rulemaking are described in section IV.C of this document and in chapter 5 of the direct final rule TSD.
For each TSL, DOE projected energy savings from application of the TSL to MREFs purchased in the 30-year period that begins in the year of compliance with the amended standards (2029-2058).
DOE used its national impact analysis (“NIA”) spreadsheet models to estimate national energy savings (“NES”) from potential amended standards for MREFs. The NIA spreadsheet model (described in section IV.H of this document) calculates energy savings in terms of site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE reports national energy savings in terms of primary energy savings, which is the savings in the energy that is used to generate and transmit the site electricity. For natural gas, the primary energy savings are considered to be equal to the site energy savings. DOE also calculates NES in terms of FFC energy savings. The FFC metric includes the energy consumed in
To adopt any new or amended standards for a covered product, DOE must determine that such action would result in significant energy savings. (42 U.S.C. 6295(o)(3)(B))
The significance of energy savings offered by a new or amended energy conservation standard cannot be determined without knowledge of the specific circumstances surrounding a given rulemaking. For example, some covered products and equipment have most of their energy consumption occur during periods of peak energy demand. The impacts of these products on the energy infrastructure can be more pronounced than products with relatively constant demand. Accordingly, DOE evaluates the significance of energy savings on a case-by-case basis, taking into account the significance of cumulative FFC national energy savings, the cumulative FFC emissions reductions, and the need to confront the global climate crisis, among other factors.
As stated, the standard levels adopted in this direct final rule are projected to result in national energy savings of 0.32 quads (FFC), the equivalent of the primary annual energy use of 2.1 million homes. Based on the amount of FFC savings, the corresponding reduction in emissions, and need to confront the global climate crisis, DOE has determined the energy savings from the standard levels adopted in this direct final rule are “significant” within the meaning of 42 U.S.C. 6295(o)(3)(B).
As noted previously, EPCA provides seven factors to be evaluated in determining whether a potential energy conservation standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)(VII)) The following sections discuss how DOE has addressed each of those seven factors in this rulemaking.
In determining the impacts of potential amended standards on manufacturers, DOE conducts an MIA, as discussed in section IV.J of this document. DOE first uses an annual cash-flow approach to determine the quantitative impacts. This step includes both a short-term assessment—based on the cost and capital requirements during the period between when a regulation is issued and when entities must comply with the regulation—and a long-term assessment over a 30-year period. The industry-wide impacts analyzed include (1) INPV, which values the industry on the basis of expected future cash flows; (2) cash flows by year; (3) changes in revenue and income; and (4) other measures of impact, as appropriate. Second, DOE analyzes and reports the impacts on different types of manufacturers, including impacts on small manufacturers. Third, DOE considers the impact of standards on domestic manufacturer employment and manufacturing capacity, as well as the potential for standards to result in plant closures and loss of capital investment. Finally, DOE takes into account cumulative impacts of various DOE regulations and other regulatory requirements on manufacturers.
For individual consumers, measures of economic impact include the changes in LCC and PBP associated with new or amended standards. These measures are discussed further in the following section. For consumers in the aggregate, DOE also calculates the national net present value of the consumer costs and benefits expected to result from particular standards. DOE also evaluates the impacts of potential standards on identifiable subgroups of consumers that may be affected disproportionately by a standard.
EPCA requires DOE to consider the savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered product that are likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP analysis.
The LCC is the sum of the purchase price of a product (including its installation) and the operating cost (including energy, maintenance, and repair expenditures) discounted over the lifetime of the product. The LCC analysis requires a variety of inputs, such as product prices, product energy consumption, energy prices, maintenance and repair costs, product lifetime, and discount rates appropriate for consumers. To account for uncertainty and variability in specific inputs, such as product lifetime and discount rate, DOE uses a distribution of values, with probabilities attached to each value.
The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a more-efficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost due to a more-stringent standard by the change in annual operating cost for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will purchase the covered products in the first year of compliance with new or amended standards. The LCC savings for the considered efficiency levels are calculated relative to the case that reflects projected market trends in the absence of new or amended standards. DOE's LCC and PBP analysis is discussed in further detail in section IV.F of this document.
Although significant conservation of energy is a separate statutory requirement for adopting an energy conservation standard, EPCA requires DOE, in determining the economic justification of a standard, to consider the total projected energy savings that are expected to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As discussed in section IV.H of this document, DOE uses the NIA spreadsheet models to project national energy savings.
In establishing product classes, and in evaluating design options and the impact of potential standard levels, DOE evaluates potential standards that would not lessen the utility or performance of the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data available to DOE, the standards adopted in this document would not reduce the utility or performance of the products under consideration in this rulemaking.
EPCA directs DOE to consider the impact of any lessening of competition, as determined in writing by the
DOE also considers the need for national energy and water conservation in determining whether a new or amended standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the adopted standards are likely to provide improvements to the security and reliability of the Nation's energy system. Reductions in the demand for electricity also may result in reduced costs for maintaining the reliability of the Nation's electricity system. DOE conducts a utility impact analysis to estimate how standards may affect the Nation's needed power generation capacity, as discussed in section IV.M of this document.
DOE finds that environmental and public health benefits associated with the more efficient use of energy are important to take into account when considering the need for national energy conservation. The adopted standards are likely to result in environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases (“GHGs”) associated with energy production and use. DOE conducts an emissions analysis to estimate how potential standards may affect these emissions, as discussed in section IV.K of this document; the estimated emissions impacts are reported in section V.B.6 of this document. DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L of this document.
In determining whether an energy conservation standard is economically justified, DOE may consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To the extent DOE identifies any relevant information regarding economic justification that does not fit into the other categories described previously, DOE could consider such information under “other factors.”
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a rebuttable presumption that an energy conservation standard is economically justified if the additional cost to the consumer of a product that meets the standard is less than three times the value of the first year's energy savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE's LCC and PBP analyses generate values used to calculate the effect potential amended energy conservation standards would have on the payback period for consumers. These analyses include, but are not limited to, the 3-year payback period contemplated under the rebuttable-presumption test. In addition, DOE routinely conducts an economic analysis that considers the full range of impacts to consumers, manufacturers, the Nation, and the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE's evaluation of the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification). The rebuttable presumption payback calculation is discussed in section IV.F of this document.
This section addresses the analyses DOE has performed for this rulemaking with regard to MREFs. Separate subsections address each component of DOE's analyses, including relevant comments DOE received in its separate rulemaking to amend the energy conservation standards for MREFs prior to receiving the Joint Agreement.
DOE used several analytical tools to estimate the impact of the standards considered in this document. The first tool is a spreadsheet that calculates the LCC savings and PBP of potential amended energy conservation standards. The national impacts analysis uses a second spreadsheet set that provides shipments projections and calculates national energy savings and net present value of total consumer costs and savings expected to result from potential energy conservation standards. DOE uses the third spreadsheet tool, the Government Regulatory Impact Model (“GRIM”), to assess manufacturer impacts of potential standards. These three spreadsheet tools are available on the DOE website for this rulemaking:
DOE develops information in the market and technology assessment that provides an overall picture of the market for the products concerned, including the purpose of the products, the industry structure, manufacturers, market characteristics, and technologies used in the products. This activity includes both quantitative and qualitative assessments, based primarily on publicly-available information. The subjects addressed in the market and technology assessment for this rulemaking include (1) a determination of the scope of the rulemaking and product classes, (2) manufacturers and industry structure, (3) existing efficiency programs, (4) shipments information, (5) market and industry trends, and (6) technologies or design options that could improve the energy efficiency of MREFs. The key findings of DOE's market assessment are summarized in the following sections. See chapter 3 of the direct final rule TSD for further discussion of the market and technology assessment.
The Joint Agreement specifies 11 product classes for MREFs. (Joint Agreement, No. 34 at p. 7) In particular, the Joint Agreement recommends a consolidated product class representation, which incorporates icemaker energy adders and door allowances into the energy use equations for product classes in which they are applicable. As discussed further in section IV.A.1.a of this document, DOE notes that the consolidation of product class representation in the Joint Agreement does not combine the product classes, but rather serves to simplify the list of classes, in particular for those product classes with and without icemakers, and facilitates the implementation of a single equation for representation of their maximum allowable energy use. In this direct final rule, DOE is adopting the product classes from the Joint Agreement, as listed in Table IV.1.
DOE further notes that product classes established through EPCA's direct final rule authority are not subject to the criteria specified at 42 U.S.C. 6295(q)(1) for establishing product classes. Nevertheless, in accordance with 42 U.S.C. 6295(o)(4)—which is applicable to direct final rules—DOE has concluded that the standards adopted in this direct final rule will not result in the unavailability in any covered product type (or class) of performance characteristics, features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States currently.
The Joint Agreement includes a proposed simplification of maximum allowable energy and expresses the maximum allowable energy use for both icemaking and non-icemaking classes in the same equation, thus consolidating the presentation of classes and their energy conservation standards. The energy use equations will, for those classes that may or may not have an icemaker, include a term equal to the icemaking energy use adder multiplied by a factor that is defined to equal 1 for products with icemakers and to equal 0 for products without icemakers. This approach does not combine classes that are the same other than the presence of an icemaker but does simplify the list of classes and representation of their maximum allowable energy use, providing for each set of classes with and without ice makers a single equation for maximum energy use. This simplification is consistent with the approach proposed in the March 2023 NOPR.
In this direct final rule, DOE is adopting the Joint Agreement proposal to express the maximum allowable energy use for any set of classes differing only in whether the class includes an icemaker or not within a single equation. The single equation does this by including the icemaker energy use adder multiplied by logical variable I that is set equal to 1 for a product with an icemaker present and 0 for a product without an icemaker.
The Joint Agreement recommends the addition of a new product class C-5-BI (
The Joint Agreement recommends a standard equation of 5.47AV + 196.2 + 28I kWh/yr for product class C-5-BI. DOE notes that this recommended level is consistent with the level proposed in the March 2023 NOPR for product class C-5-BI, which represents a 10 percent more stringent level than the baseline level identified in the March 2023 NOPR.
Considering that the recommendation is consistent with the proposed level in the March 2023 NOPR and carries support from a broad cross-section of interests, including trade associations representing these manufactures, environmental and energy-efficiency advocacy organizations, consumer advocates, and electric utility providers as well as the support of several States, DOE believes it appropriate to adopt this new product class, C-5-BI, and the recommended standard equation. DOE's direct rulemaking authority under 42 U.S.C. 6295(p)(4) is constrained only by the requirements of 42 U.S.C. 6295(o), which does not include the product class requirements in 42 U.S.C. 6295(q). However, DOE notes that the addition of a PC C-5-BI is warranted as the application of bottom-mounted freezer and icemaker on a built-in cooler with refrigerator-freezer provides consumers the utility of storage compartments at freezing, fresh food, and cooler temperature levels, whereas the current classes combine a cooler compartment with either a freezer or fresh food compartment, but not both. In addition, establishing separate classes of this configuration both with and without automatic icemaking addresses the unique utility of icemaking that may be
Given the indication from the Joint Agreement that such a product class standard would be beneficial in its implementation, the classification of a bottom-mounted freezer and icemaker as performance related features, and the recommendation's consistency with the other adopted standards, DOE is adopting a PC C-5-BI standard in this direct final rule.
See section V of this document for more information regarding the TSL configuration and discussion of the adopted level for this product class. See chapter 5 of the direct final rule TSD for more discussion regarding the addition of this product class.
In the preliminary market analysis and technology assessment, DOE identified 36 technology options initially determined to improve the efficiency of MREFs, as measured by the DOE test procedure. In this direct final rule, DOE considered the technology options listed in Table IV.2, consistent with the table of technology options presented in the March 2023 NOPR. 88 FR 19382, 19395-19396. Chapter 3 of the direct final rule TSD includes a detailed list and descriptions of all technology options identified for MREFs.
DOE uses the following five screening criteria to determine which technology options are suitable for further consideration in an energy conservation standards rulemaking:
(1)
(2)
(3)
(4)
(5)
In sum, if DOE determines that a technology, or a combination of technologies, fails to meet one or more of the listed five criteria, it will be excluded from further consideration in the engineering analysis. The reasons for eliminating any technology are discussed in the following sections.
The subsequent sections include DOE's evaluation of each technology option against the screening analysis criteria and whether DOE determined that a technology option should be excluded (“screened out”) based on the screening criteria.
In this direct final rule, DOE screened out the technologies presented in Table IV.3 on the basis of technological feasibility, practicability to manufacture, install, and service, adverse impacts on utility or availability, adverse impacts on health and safety, and/or unique-pathway proprietary technologies. Chapter 4 of the direct final rule TSD includes a detailed description of the screening analysis for each of these technology options.
Through a review of each technology, DOE concludes that all of the other identified technologies listed in section IV.B.2 of this document met all five screening criteria to be examined further as design options in DOE's direct final rule analysis. In summary, DOE did not screen out the following technology options:
DOE determined that these technology options are technologically feasible because they are being used or have previously been used in commercially-available products or working prototypes. DOE also finds that all of the remaining technology options meet the other screening criteria (
The purpose of the engineering analysis is to establish the relationship between the efficiency and cost of MREFs. There are two elements to consider in the engineering analysis; the selection of efficiency levels to analyze (
DOE typically uses one of two approaches to develop energy efficiency levels for the engineering analysis: (1) relying on observed efficiency levels in the market (
The approach used for this direct final rule to define the efficiency levels for analysis is largely the same as the approach DOE had used for the March 2023 NOPR analysis.
For its analysis in this direct final rule, DOE used a combined efficiency level and design option approach to directly analyze five products classes: freestanding compact coolers, freestanding coolers, and combination cooler classes C-13A, C-3A, and C-9. First, an efficiency-level approach was used to establish an analysis tied to existing products on the market. Several products from the cooler class (compact and standard size) and one product from the combination cooler class (C-13A) were used in physical teardowns. Additional analyses were conducted on classes C-3A and C-9; however, a lack of physical teardown products for these classes led DOE to rely heavily on adjusted analyses from the consumer refrigerator, refrigerator-freezer, and freezers (“RF”) classes 3 and 9, respectively. Then, a design option approach was used to extend the analysis through “built-down” efficiency levels and “built-up” efficiency levels where there were gaps in the range of efficiencies of products that were reverse engineered. As discussed in the section that follows, DOE applied its direct analyses of freestanding products to the corresponding built-in product classes. DOE's direct analysis informed the adopted standards for those product classes that were not directly analyzed. See section 5.4.1 of the direct final rule TSD for more discussion on DOE's efficiency analysis.
In this direct final rule analysis, DOE used the freestanding MREF classes as proxies for built-in classes. DOE conducted analysis of the current market for miscellaneous refrigeration products and found that built-in and freestanding products occupy the same range of efficiencies, and DOE did not identify any unique characteristic that would inhibit efficiency improvements for built-in products relative to freestanding products based on a review on the market. As a result, DOE chose to apply its freestanding products analyses to built-in classes.
In response to the March 2023 NOPR, AHAM and Sub-zero Group Inc. (“Sub-zero”) argued that freestanding product classes are not a proxy for built-in product classes and DOE should evaluate them separately. (AHAM, No. 31 at p. 6; Sub-zero, No. 30 at p. 1) AHAM and Sub-zero stated that built-in products have constraints, such as incorporation into kitchen designs and needing to be flush with cabinetry, that affect that the technology options for achieving higher efficiency levels. (AHAM, No. 31 at pp. 6-7; Sub-zero, No. 30 at p. 2) AHAM and Sub-Zero also stated that different testing requirements for built-ins (
As discussed in section IV.C.1.c of this document, the efficiency levels analyzed for this direct final rule represent a percentage reduction in energy use below the currently applicable standard for each product class. DOE's analysis of the freestanding product classes as a proxy for the built-in product classes does not presume that the two product types have the same nominal costs at each higher efficiency level, but rather reflects that
For each product class, DOE generally selects a baseline model as a reference point for each class, and measures changes resulting from potential energy conservation standards against the baseline. The baseline model in each product class represents the characteristics of a product/equipment typical of that class (
For this direct final rule, DOE chose baseline efficiency levels represented by the current Federal energy conservation standards, expressed as maximum annual energy consumption as a function of the product's adjusted volume. The baseline levels differ for coolers and combination coolers to account for design differences; all coolers share the same baseline level,
DOE directly analyzed a sample of market representative models from within five product classes from multiple manufacturers. Directly analyzed classes include three different AV coolers (AVs of 3 ft
As part of DOE's analysis, the maximum available efficiency level is the highest efficiency unit currently available on the market. DOE also defines a “max-tech” efficiency level to represent the maximum possible efficiency for a given product.
For this direct final rule, DOE analyzed up to five incremental efficiency levels beyond the baseline for each of the analyzed product classes. The efficiency levels begin at EL 1, which was 10 percent more efficient than the current MREF energy conservation standards. For the compact coolers analysis, DOE extended the efficiency levels in steps of 10 percent of the current energy conservation standard up to EL 4 at 40 percent; for full-size coolers, EL 4 is analyzed at 35 percent. For combination coolers (excluding C-9) efficiency levels above EL 1 are in steps of roughly 5 percent up to EL 4. Finally, EL 5 represents maximum technology (“max-tech”), which uses design option analysis to extend the analysis beyond EL 4 by using all applicable design options, including max efficiency variable-speed compressors and maximum practical use of vacuum-insulated panels (“VIPs”). For compact coolers, max tech stands at either 59 percent or 50 percent for the two directly analyzed AVs—3.1 ft
DOE conducted analysis for product class C-9 starting with analysis for a class 9 upright freezer with comparable total refrigerated volume. In its analysis, DOE concluded that application of all of the design options being considered at max-tech would be required for the product to be compliant with the current energy conservation standards. Currently, the Compliance Certification Database (“CCD”) includes only one product that is certified as C-9—an LG product certified with energy use 17 percent below the standard. DOE did not purchase, test, and reverse-engineer this product, in-part because of the limited product offering and expected insignificant potential for energy savings for the class. Thus, DOE is relying primarily on its analysis of the RF product class 9 freezer, to suggest that opportunities for energy savings are likely limited and likely not cost-effective, even if improved efficiency is technically feasible. DOE has not analyzed efficiency levels beyond baseline for this product class in this direct final rule but has taken into consideration all design options applied at max-tech in its analysis.
DOE notes the current Energy Star specifications correspond to EL 1 for freestanding full-size coolers (10 percent), EL 2 for freestanding compact coolers (20 percent), and EL 3 for both classes of built-in coolers (30 percent).
The efficiency levels analyzed beyond the baseline are shown in Table IV.5 as follows.
In response to the March 2023 NOPR, AHAM suggested that DOE evaluate the robustness of the supply chains for variable-speed compressors (“VSCs”) while considering the growing demand given more stringent standards for cooling appliances, including both air conditioning and refrigeration. (AHAM, No. 31 at p. 5)
In considering this comment and comments provided in response to the RF rulemaking, DOE interviewed relevant compressor manufacturers to gather information regarding the level of VSC implementation that would be required at the efficiency levels analyzed in this direct final rule, the current and predicted supply of VSCs into the U.S. market, the predicted time to ramp up production of VSCs, and pricing of VSCs and components. None of the compressor manufacturers interviewed expressed any concerns regarding the ability to ramp-up VSC capacity in response to more stringent MREF standards. Compressor manufacturers additionally noted that any previous bottlenecks in the VSC supply chain are no longer a factor at this time, and that they have been modifying sourcing strategies to ensure a reliable supply of VSCs going forward. DOE concluded from these interviews that compressor manufacturers will be able to readily meet any increased demand for VSCs as a result of the adopted standards within the 5-year
The cost analysis portion of the engineering analysis is conducted using one or a combination of cost approaches. The selection of cost approach depends on a suite of factors, including the availability and reliability of public information, characteristics of the regulated product, the availability and timeliness of purchasing the product on the market. The cost approaches are summarized as follows:
In the present case, DOE conducted the analysis using primarily physical teardowns. Where possible, physical teardowns were used to provide a baseline of technology options and pricing for a specific product class at a specific EL. Then with technology option information, DOE estimated the cost of various design options including compressors, VIPs, and insulation, by extrapolating the costs from price surveys. With specific costs for technology options, DOE was then able to “build-up” or “build-down” from the various teardown models to finish the cost-efficiency curves. DOE used this approach to calibrate the analysis to certified or measured energy use of specific available models where possible, while allowing a broader range of potential efficiency levels to be considered.
The resulting bill of materials provides the basis for the manufacturer production cost (“MPC”) estimates.
To account for manufacturers' non-production costs and profit margin, DOE applies a multiplier (the manufacturer markup) to the MPC. The resulting manufacturer selling price (“MSP”) is the price at which the manufacturer distributes a unit into commerce. DOE developed an average manufacturer markup by examining corporate annual reports and Securities and Exchange Commission (“SEC”) 10-K reports
The results of the engineering analysis are reported as cost-efficiency data (or “curves”) in the form of AEU (in kWh) versus MPC (in dollars), which form the basis for subsequent analyses.
DOE developed estimates of MPCs for each unit in the teardown sample, and also performed additional modeling for each of the teardown samples, to extend the analysis to cover the range of efficiency levels appropriate for a representative product. To estimate the MPCs necessary to achieve higher efficiency levels, in particular those beyond the highest-efficiency products in the test sample, DOE considered design options that were most likely to be considered and implemented by manufacturers to achieve the higher efficiency levels. Based on input from manufacturers and an understanding of the markets, DOE then estimated the costs associated with those design options to determine the MPCs at each of the analyzed efficiency levels.
The resulting weighted average incremental design option by efficiency level and cost curves for each directly analyzed product class are (
The markups analysis develops appropriate markups (
For MREFs, DOE identified two distribution channels: (1) manufacturers to retailers to consumers, and (2) manufacturers to wholesalers to dealers/retailers to consumers. The parties involved in the distribution channel are retailers, wholesalers, and dealers.
DOE developed baseline and incremental markups for each actor in the distribution chain. Baseline markups are applied to the price of products with baseline efficiency, while incremental markups are applied to the difference in price between baseline and higher-efficiency models (the incremental cost increase). The incremental markup is typically less than the baseline markup and is designed to maintain similar per-unit operating profit before and after new or amended standards.
DOE relied on economic data from the U.S. Census Bureau to estimate average baseline and incremental markups. Specifically, DOE used the 2017 Annual Retail Trade Survey for the “electronics and appliance stores” sector to develop retailer markups,
For this direct final rule, DOE considered comments it had received regarding the markups analysis conducted for the March 2023 NOPR. The approach used for this direct final rule is largely the same as the approach DOE had used for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM commented on DOE's reliance on the concept of incremental markups, stating that it is based on discredited theory, and it is in contradiction to empirical evidence provided by AHAM during a 2014 proposed rulemaking for energy conservation standards for residential dishwashers. (AHAM, No. 31 at p. 9)
DOE's incremental markup approach assumes that an increase in profitability, which is implied by keeping a fixed markup when the product price goes up due to higher efficiency standards, is unlikely to be viable over time in a reasonably competitive market like household appliance retailers. The Herfindahl-Hirschman Index (“HHI”) reported by the 2017 Economic Census indicates that the household appliance stores sector (NAICS 443141) is a highly competitive marketplace.
DOE acknowledges that markup practices in response to amended standards are complex and vary with business conditions. However, DOE's analysis necessarily only considers changes in appliance offerings that occur in response to amended standards and isolate the effect of amended standards from other factors. Obtaining data on markup practices in the situation described previously is very challenging. Hence, DOE continues to maintain that its assumption that standards do not facilitate a sustainable increase in profitability is reasonable.
Chapter 6 of the direct final rule TSD provides details on DOE's development of markups for MREFs.
The purpose of the energy use analysis is to determine the annual energy consumption of MREFs at different efficiencies in representative U.S. households, and to assess the energy savings potential of increased MREF efficiency. The energy use analysis estimates the range of energy use of MREFs in the field (
DOE determined a range of annual energy use of MREFs as a function of unit volume. As shown in Table IV.8, DOE developed distributions of adjusted volume of product classes with more than one representative unit base on the capacity distributions reported in the TraQline® wine chiller data spanning from 2020 Q1 to 2022 Q1.
For this direct final rule, DOE considered comments it had received regarding the energy use analysis conducted for the March 2023 NOPR. The approach used for this direct final rule is largely the same as the approach DOE had used for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM commented that DOE relies heavily on the EIA's Residential Energy Consumption Survey (“RECS”) data for estimating energy use and how consumption varies at the household level. Specifically, AHAM expressed concern that the use of RECS data to estimate energy consumption at the household level may introduce “outlier values,” resulting in uncertainty and inaccuracies (AHAM, No. 31 at p. 11) In this direct final rule, as well as in the March 2023 NOPR, DOE did not tie the energy consumption of MREFs to RECS survey data. 87 FR 35678. No household or demographic information from RECS was used in the energy use analysis for MREFs. Instead, as mentioned above, DOE used the TraQline wine chiller data to develop a sample of households representing MREF purchasers and derived the energy consumption of MREFs as measured by the DOE MREF test procedure. DOE further notes that AHAM is a party to the Joint Agreement and is supportive of the recommended standards adopted in this direct final rule.
Chapter 7 of the direct final rule TSD provides details on DOE's energy use analysis for MREFs.
DOE conducted LCC and PBP analyses to evaluate the economic impacts on individual consumers of potential energy conservation standards for MREFs. The effect of new or amended energy conservation standards on individual consumers usually involves a reduction in operating cost and an increase in purchase cost. DOE used the following two metrics to measure consumer impacts:
□ The LCC is the total consumer expense of an appliance or product over the life of that product, consisting of total installed cost (manufacturer selling price, distribution chain markups, sales tax, and installation costs) plus operating costs (expenses for energy use, maintenance, and repair). To compute the operating costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the product.
□ The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a more-efficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost at higher efficiency levels by the change in annual operating cost for the year that amended or new standards are assumed to take effect.
For any given efficiency level, DOE measures the change in LCC relative to the LCC in the no-new-standards case, which reflects the estimated efficiency distribution of MREFs in the absence of new or amended energy conservation standards. In contrast, the PBP for a given efficiency level is measured relative to the baseline product.
For this direct final rule, DOE considered comments it had received regarding the LCC analysis conducted for the March 2023 NOPR. The LCC approach used for this direct final rule is largely the same as the approach DOE had used for the March 2023 NOPR analysis.
During the May 2, 2023, public meeting, Edison Electric Institute (“EEI”) questioned the cost-effectiveness of the proposed TSL (TSL 4), due to the high percentage of consumers experiencing a net LCC cost and the simple payback period results ranging from 6.8 to 8 years, and urged DOE to consider selecting another TSL that may be more cost-effective for consumers. (May 2, 2023, Public Meeting Transcript, No. 33 at pp. 5-6). In response, DOE notes that when deciding whether a proposed standard is economically justified, DOE determines whether the benefits of the standard exceed its burdens by considering the seven statutory factors discussed in section II.A of this document. DOE considered the seven statutory factors when evaluating the Recommended TSL in the Joint Agreement. As discussed in section V.C.1 of this document, overall, the LCC savings would be positive for all MREF product classes, and, while 43.7 percent of MREF consumers would experience a net cost, slightly more than half of MREF consumers would experience a net benefit (52.9 percent). DOE provides a detailed comparative discussion and rigorous justification on the adopted
For each considered efficiency level in each product class, DOE calculated the LCC and PBP for a nationally representative set of MREF purchasers. As stated previously, DOE developed purchaser samples based on TraQline wine chiller survey data. The survey panel is weighted against the U.S. Census based on their demographic characteristics to make the sample representative of the U.S. population. The wine chiller survey asked respondents about the product features of the wine chillers they recently purchased, as well as the purchasing channel of the products. To account for the more recent MREF consumers, DOE used the last 2 years of survey data (2020 Q1 to 2022 Q1) to construct the household sample used in this direct final rule.
For each sample purchaser, DOE determined the energy consumption for the MREFs and the appropriate energy price. By developing a representative sample of purchasers, the analysis captured the variability in energy consumption and energy prices associated with the use of MREFs.
Inputs to the calculation of total installed cost include the cost of the product—which includes MPCs, manufacturer markups, retailer and distributor markups, and sales taxes—and installation costs. Inputs to the calculation of operating expenses include annual energy consumption, energy prices and price projections, repair and maintenance costs, product lifetimes, and discount rates. DOE created distributions of values for product lifetime, discount rates, and sales taxes, with probabilities attached to each value, to account for their uncertainty and variability.
The computer model DOE uses to calculate the LCC relies on a Monte Carlo simulation to incorporate uncertainty and variability into the analysis. The Monte Carlo simulations randomly sample input values from the probability distributions and MREF user samples. The model calculated the LCC for products at each efficiency level for 10,000 MREF purchasers per simulation run. The analytical results include a distribution of 10,000 data points showing the range of LCC savings for a given efficiency level relative to the no-new-standards case efficiency distribution. In performing an iteration of the Monte Carlo simulation for a given consumer, product efficiency is chosen based on its probability. If the chosen product efficiency is greater than or equal to the efficiency of the standard level under consideration, the LCC calculation reveals that a consumer is not impacted by the standard level. By accounting for consumers who already purchase more-efficient products, DOE avoids overstating the potential benefits from increasing product efficiency.
DOE calculated the LCC for consumers of MREFs as if each were to purchase a new product in the first year of required compliance with amended standards. As discussed earlier in this document, the compliance date of amended standards is January 31, 2029, for TSL 4 (the Recommended TSL detailed in the Joint Agreement). For all other TSLs considered in this direct final rule, standards apply to MREFs manufactured 5 years after the date on which any amended standard is published. (42 U.S.C. 6295(l)(2)) Therefore, DOE used 2029 as the first year of compliance with any amended standards for MREFs for all TSLs.
Table IV.9 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The subsections that follow provide further discussion. Details of the spreadsheet model, and of all the inputs to the LCC and PBP analyses, are contained in chapter 8 of the direct final rule TSD and its appendices.
In response to the March 2023 NOPR, AHAM commented that should be conducting a purchase decision analysis in its LCC model to reflect the actual conditions and expectations of the purchaser rather than relying on an outcome modeling approach. (AHAM, No. 31 at pp. 8-9) In the current setup of LCC analysis, DOE is not explicitly modeling the purchase decision made by purchasers when the standard becomes effective. DOE's analysis is intended to model the range of individual outcomes likely to result from a hypothetical amended energy
To calculate consumer product costs, DOE multiplied the MPCs developed in the engineering analysis by the markups described previously (along with sales taxes). DOE used different markups for baseline products and higher-efficiency products, because DOE applies an incremental markup to the increase in MSP associated with higher-efficiency products.
Economic literature and historical data suggest that the real costs of many products may trend downward over time according to “learning” or “experience” curves. Experience curve analysis implicitly includes factors such as efficiencies in labor, capital investment, automation, materials prices, distribution, and economies of scale at an industry-wide level.
DOE included variable-speed compressors as a technology option for higher efficiency levels. To develop future prices specific for that technology, DOE applied a different price trend to the controls portion of the variable-speed compressor, which represents part of the price increment when moving from an efficiency level achieved with the highest efficiency single-speed compressor to an efficiency level with variable-speed compressor. DOE used PPI data on “semiconductors and related device manufacturing” between 1967 and 2022 to estimate the historic price trend of electronic components in the control.
In response to the March 2023 NOPR, AHAM commented that there is no theoretical underpinning for the implementation of an experience or learning curve and the functional form it should take. In addition, AHAM stated that the data that DOE used merely represents an empirical relationship, and a clear connection between the actual products in question and the data used needs to be made. AHAM noted that there is little reason to support the concept that price learning through manufacturing efficiencies should extend beyond the labor and materials in the product itself, and that such a relationship should not hold for other cost components. (AHAM, No. 31 at p. 10)
DOE notes that there is considerable empirical evidence of consistent price declines for appliances in the past few decades. Several studies examined retail prices of a wide range of household appliances during different periods of time and showed that prices had been steadily falling while efficiency had been increasing, for example Dale,
Installation cost includes labor, overhead, and any miscellaneous materials and parts needed to install the product. DOE is not aware of any data that suggest the cost of installation changes as a function of efficiency for MREFs. DOE therefore assumed that installation costs are the same regardless of EL and do not impact the LCC or PBP. As a result, DOE did not include installation costs in the LCC and PBP analysis.
For each sampled consumer, DOE determined the energy consumption for MREFs at different efficiency levels using the approach described previously in section IV.E of this document.
Because marginal electricity price more accurately captures the incremental savings associated with a change in energy use from higher efficiency, it provides a better representation of incremental change in consumer costs than average electricity prices. Therefore, DOE applied average electricity prices for the energy use of the product purchased in the no-new-standards case, and marginal electricity prices for the incremental change in energy use associated with the other efficiency levels considered.
DOE derived electricity prices in 2022 using data from EEI Typical Bills and Average Rates reports. Based upon comprehensive, industry-wide surveys, this semi-annual report presents typical monthly electric bills and average kilowatt-hour costs to the customer as charged by investor-owned utilities. For the residential sector, DOE calculated electricity prices using the methodology described in Coughlin and Beraki (2018).
DOE's methodology allows electricity prices to vary by sector, region, and season. In the analysis, variability in electricity prices is chosen to be consistent with the way the consumer economic and energy use characteristics are defined in the LCC analysis. See chapter 8 of the direct final rule TSD for details.
To estimate energy prices in future years, DOE multiplied the 2022 energy prices by the projection of annual average price changes from the Reference case in
Repair costs are associated with repairing or replacing product components that have failed in an appliance; maintenance costs are associated with maintaining the operation of the product. Typically, small incremental increases in product efficiency entail no, or only minor, changes in repair and maintenance costs compared to baseline efficiency products. DOE is not aware of any data that suggest the cost of repair or maintenance for MREFs changes as a function of efficiency. DOE therefore assumed that these costs are the same regardless of EL and do not impact the LCC or PBP. As a result, DOE did not include maintenance and repair costs in the LCC and PBP analysis.
For MREFs, DOE used lifetime estimates from products that operate using the same refrigeration technology: covered refrigerators and refrigerator-freezers, based on the Refrigerators, Refrigerator-Freezers, and Freezers direct final rule analysis. 89 FR 3026 (January 17, 2024). DOE estimated a maximum lifetime of 40 years for all product classes and an average lifetime of 10.6 years for compact coolers and 14.6 years for full-size coolers. The weighted average lifetime over the sample population, considering the market distribution, was 12.6 years. DOE also assumed that the probability function for the annual survival of MREFs would take the form of a Weibull distribution. See chapter 8 of the direct final rule TSD for a more detailed discussion.
In the calculation of LCC, DOE applies discount rates appropriate to households to estimate the present value of future operating cost savings. DOE estimated a distribution of discount rates for MREFs based on consumer financing costs and the opportunity cost of consumer funds.
DOE applies weighted average discount rates calculated from consumer debt and asset data, rather than marginal or implicit discount rates.
To establish residential discount rates for the LCC analysis, DOE identified all relevant household debt or asset classes in order to approximate a consumer's opportunity cost of funds related to appliance energy cost savings. It estimated the average percentage shares of the various types of debt and equity by household income group using data from the Federal Reserve Board's triennial Survey of Consumer Finances
To accurately estimate the share of consumers that would be affected by a potential energy conservation standard at a particular efficiency level, DOE's LCC analysis considered the projected distribution (market shares) of product efficiencies under the no-new-standards case (
For this direct final rule, DOE is using the efficiency distribution by product class as provided by AHAM in response to a notice of public meeting and availability of the preliminary technical support document for MREFS. 87 FR 3229 (Jan. 21, 2022) (See AHAM, No. 18, pp. 2-5) DOE understands that this approach inherently assumes that the rest of the MREF market has a similar distribution of efficiencies. However, due to lack of efficiency data from non-AHAM members, DOE has no reason to question that assumption. DOE also assumed that the current distribution of product efficiencies would remain constant in 2029, and during the
The estimated market shares for the no-new-standards case for MREFs are shown in Table IV.10. See chapter 8 of the direct final rule TSD for further information on the derivation of the efficiency distributions.
The LCC Monte Carlo simulations draw from the efficiency distributions and randomly assign an efficiency to the MREF purchased by each sample household in the no-new-standards case. The resulting percent shares within the sample match the market shares in the efficiency distributions.
The payback period is the amount of time (expressed in years) it takes the consumer to recover the additional installed cost of more-efficient products, compared to baseline products, through energy cost savings. Payback periods that exceed the life of the product mean that the increased total installed cost is not recovered in reduced operating expenses.
The inputs to the PBP calculation for each efficiency level are the change in total installed cost of the product and the change in the first-year annual operating expenditures relative to the baseline. DOE refers to this as a “simple PBP” because it does not consider changes over time in operating cost savings. The PBP calculation uses the same inputs as the LCC analysis when deriving first-year operating costs.
As noted previously, EPCA establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the first year's energy savings resulting from the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE determined the value of the first year's energy savings by calculating the energy savings in accordance with the applicable DOE test procedure, and multiplying those savings by the average energy price projection for the year in which compliance with the amended standards would be required.
DOE uses projections of annual product shipments to calculate the national impacts of potential amended or new energy conservation standards on energy use, NPV, and future manufacturer cash flows.
DOE defined two broad MREF product categories (coolers and combination cooler refrigeration products) and developed models to estimate shipments for each category. DOE used various data and assumptions to develop the shipments for each product class considered in this rulemaking.
Given the limited available data sources on historical shipments of coolers, DOE assumed a constant penetration rate of 13.3 percent in the U.S. households throughout the analysis period based on online surveys
DOE used the efficiency distributions by product class to match the data submitted by AHAM. DOE also assumed that the market share of each product class (in relation to the total MREF shipments) matched the market shares provided by AHAM. To estimate total MREF shipments, DOE utilized the AHAM shipments data and AHAM-member information and reviewed the TraQline data from 2020 Q1 to 2022 Q1 to estimate non-AHAM-member shipments.
The NIA assesses the NES and the NPV from a national perspective of total consumer costs and savings that would be expected to result from new or amended standards at specific efficiency levels.
DOE evaluates the impacts of new or amended standards by comparing a case without such standards with standards-case projections. The no-new-standards case characterizes energy use and consumer costs for each product class in the absence of new or amended energy conservation standards. DOE compares the no-new-standards case with projections characterizing the market for each product class if DOE adopted new or amended standards at specific energy efficiency levels (
DOE uses a spreadsheet model to calculate the energy savings and the national consumer costs and savings from each TSL. Interested parties can review DOE's analyses by changing various input quantities within the spreadsheet. The NIA spreadsheet model uses typical values (as opposed to probability distributions) as inputs.
Table IV.11 summarizes the inputs and methods DOE used for the NIA analysis for this direct final rule. Discussion of these inputs and methods follows the table. See chapter 10 of the direct final rule TSD for further details.
A key component of the NIA is the trend in energy efficiency projected for the no-new-standards case and each of the standards cases. Section IV.F.8 of this document describes how DOE developed an energy efficiency distribution for the no-new-standards case (which yields a shipment-weighted average efficiency) for each of the considered product classes for the year of anticipated compliance with an amended standard.
For the standards cases, DOE used a “roll-up” scenario to establish the
In the absence of data on trends in efficiency, DOE assumed no efficiency trend over the analysis period for both the no-new-standards and standards cases. For a given case, market shares by efficiency level were held fixed to their 2029 distribution.
The NES analysis involves a comparison of national energy consumption of the considered products between each potential standards case (“TSL”) and the case with no new or amended energy conservation standards. DOE calculated the national energy consumption by multiplying the number of units (stock) of each product (by vintage or age) by the unit energy consumption (also by vintage). DOE calculated annual NES based on the difference in national energy consumption for the no-new-standards case and for each higher efficiency standard case. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to primary energy (
Use of higher-efficiency products is sometimes associated with a direct rebound effect, which refers to an increase in utilization of the product due to the increase in efficiency. DOE did not find any data on the rebound effect specific to MREFs that would indicate that consumers would alter their utilization of their product due to an increase in efficiency. MREFs are typically plugged in and operate continuously; therefore, DOE assumed a rebound rate of 0. DOE did not receive any comments regarding this assumption in response to the March 2023 NOPR.
In 2011, in response to the recommendations of a committee on “Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards” appointed by the National Academy of Sciences, DOE announced its intention to use FFC measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in which DOE explained its determination that EIA's National Energy Modeling System (“NEMS”) is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain, multi-sector, partial equilibrium model of the U.S. energy sector
The inputs for determining the NPV of the total costs and benefits experienced by consumers are (1) total annual installed cost, (2) total annual operating costs (energy costs and repair and maintenance costs), and (3) a discount factor to calculate the present value of costs and savings. DOE calculates net savings each year as the difference between the no-new-standards case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculates operating cost savings over the lifetime of each product shipped during the projection period.
As discussed in section IV.F.1 of this document, DOE developed MREF price trends based on an experience curve calculated using historical PPI data. DOE applied the same trends to project prices for each product class at each considered efficiency level including baseline. By 2058, which is the end date of the projection period, the average price of single-speed compressor MREFs is projected to drop 33.2 percent and the average price of MREFs with a variable-speed compressor is projected to drop about 33.8 percent relative to 2029.
To evaluate the effect of uncertainty regarding the price trend estimates, DOE investigated the impact of different product price projections on the consumer NPV for the considered TSLs for MREFs. In addition to the default price trend, DOE considered high and low-price-decline sensitivity cases. For the single-speed compressor MREFs and the non-variable- speed controls portion of MREFs, DOE estimated the high- price- decline and the low- price- decline scenarios based on household refrigerator and home freezer PPI data limited to the period between the period 1981-2008 and 2009-2022, respectively. For the variable-speed controls portion of MREFs, DOE estimated the high price decline and the low- price- decline scenarios based on an exponential trend line fit of the semiconductor PPI between the period 1994-2022 and 1967-1993, respectively. The derivation of these price trends is described in Chapter 8 and the results of these sensitivity cases are given in appendix 10C of the direct final rule TSD.
The energy cost savings are calculated using the estimated energy savings in each year and the projected price of the appropriate form of energy. To estimate energy prices in future years, DOE multiplied the average regional energy prices by the projection of annual national-average residential energy price changes in the Reference case from
In calculating the NPV, DOE multiplies the net savings in future years by a discount factor to determine their present value. For this direct final rule, DOE estimated the NPV of consumer benefits using both a 3-percent and a 7-percent real discount rate. DOE uses these discount rates in accordance with guidance provided by the Office of Management and Budget (“OMB”) to Federal agencies on the development of regulatory analysis.
In analyzing the potential impact of new or amended energy conservation standards on consumers, DOE evaluates the impact on identifiable subgroups of consumers that may be disproportionately affected by a new or amended national standard. The purpose of a subgroup analysis is to determine the extent of any such disproportional impacts. DOE evaluates impacts on particular subgroups of consumers by analyzing the LCC impacts and PBP for those particular consumers from alternative standard levels. For this direct final rule, DOE analyzed the impacts of the considered standard levels on senior-only households. Low-income consumers were not considered in the subgroup analysis, as MREFs are not products generally used by this subgroup. Based on the TraQline wine chiller data, less than 4 percent of MREF owners are below the Federal household income threshold for poverty. The analysis used a subset of the TraQline consumer sample composed of households that meet the criteria for this subgroup. DOE used the LCC and PBP computer model to estimate the impacts of the considered efficiency levels on senior-only households. Chapter 11 in the direct final rule TSD describes the consumer subgroup analysis.
DOE performed an MIA to estimate the financial impacts of amended energy conservation standards on manufacturers of MREFs and to estimate the potential impacts of such standards on employment and manufacturing capacity. The MIA has both quantitative and qualitative aspects and includes analyses of projected industry cash flows, the INPV, investments in research and development (“R&D”) and manufacturing capital, and domestic manufacturing employment. Additionally, the MIA seeks to determine how amended energy conservation standards might affect manufacturing employment, capacity, and competition, as well as how standards contribute to overall regulatory burden. Finally, the MIA serves to identify any disproportionate impacts on manufacturer subgroups, including small business manufacturers.
The quantitative part of the MIA primarily relies on the GRIM, an industry cash flow model with inputs specific to this rulemaking. The key GRIM inputs include data on the industry cost structure, unit production costs, product shipments, manufacturer markups, and investments in R&D and manufacturing capital required to produce compliant products. The key GRIM outputs are the INPV, which is the sum of industry annual cash flows over the analysis period, discounted using the industry-weighted average cost of capital, and the impact on domestic manufacturing employment. The model uses standard accounting principles to estimate the impacts of more-stringent energy conservation standards on a given industry by comparing changes in INPV and domestic manufacturing employment between a no-new-standards case and the various standards cases (
The qualitative part of the MIA addresses manufacturer characteristics and market trends. Specifically, the MIA considers such factors as a potential standard's impact on manufacturing capacity, competition within the industry, the cumulative impact of other DOE and non-DOE regulations, and impacts on manufacturer subgroups. The complete MIA is outlined in chapter 12 of the direct final rule TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase 1 of the MIA, DOE prepared a profile of the MREF manufacturing industry based on the market and technology assessment and publicly-available information. This included a top-down analysis of MREF manufacturers that DOE used to derive preliminary financial inputs for the GRIM (
In Phase 2 of the MIA, DOE prepared a framework industry cash-flow analysis to quantify the potential impacts of amended energy conservation standards. The GRIM uses several factors to determine a series of annual cash flows starting with the announcement of the standard and extending over a 30-year period following the compliance date of the standard. These factors include annual expected revenues, costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. In general, energy conservation standards can affect manufacturer cash flow in three distinct ways: (1) creating a need for increased investment, (2) raising production costs per unit, and (3) altering revenue due to higher per-unit prices and changes in sales volumes.
In addition, during Phase 2, DOE developed interview guides to distribute to manufacturers of MREFs in order to develop other key GRIM inputs, including product and capital conversion costs, and to gather additional information on the anticipated effects of energy conservation standards on revenues, direct employment, capital assets, industry competitiveness, and subgroup impacts.
In Phase 3 of the MIA, DOE conducted structured, detailed interviews with representative manufacturers. During these interviews, DOE discussed engineering, manufacturing, procurement, and financial topics to validate assumptions used in the GRIM and to identify key issues or concerns. As part of Phase 3, DOE also evaluated subgroups of manufacturers that may be disproportionately impacted by amended standards or that may not be accurately represented by the average cost assumptions used to develop the industry cash flow analysis. Such manufacturer subgroups may include small business manufacturers, low-volume manufacturers, niche players, and/or manufacturers exhibiting a cost structure that largely differs from the industry average. DOE identified one subgroup for a separate impact analysis:
DOE uses the GRIM to quantify the changes in cash flow due to new or amended standards that result in a higher or lower industry value. The GRIM uses a standard, annual discounted cash-flow analysis that incorporates manufacturer costs, markups, shipments, and industry financial information as inputs. The GRIM models changes in costs, distribution of shipments, investments, and manufacturer margins that could result from an amended energy conservation standard. The GRIM spreadsheet uses the inputs to arrive at a series of annual cash flows, beginning in 2024 (the base year of the analysis) and continuing to 2058. DOE calculated INPVs by summing the stream of annual discounted cash flows during this period. For manufacturers of MREFs, DOE used a real discount rate of 7.7 percent, which was derived from industry financials and then modified according to feedback received during manufacturer interviews.
The GRIM calculates cash flows using standard accounting principles and compares changes in INPV between the no-new-standards case and each standards case. The difference in INPV between the no-new-standards case and a standards case represents the financial impact of the new or amended energy conservation standard on manufacturers. As discussed previously, DOE developed critical GRIM inputs using a number of sources, including publicly available data, results of the engineering analysis, results of the shipments analysis, and information gathered from industry stakeholders during the course of manufacturer interviews. The GRIM results are presented in section V.B.2 of this document. Additional details about the GRIM, the discount rate, and other financial parameters can be found in chapter 12 of the direct final rule TSD.
Manufacturing more efficient products is typically more expensive than manufacturing baseline products due to the use of more complex components, which are typically more costly than baseline components. The changes in the MPCs of covered products can affect the revenues, gross margins, and cash flow of the industry. For its analysis in this direct final rule, DOE used a combined efficiency level and design option approach. First, an efficiency-level approach was used to establish an analysis tied to existing products on the market. A design option approach was then used to extend the analysis through “built-down” efficiency levels and “built-up” efficiency levels where there were gaps in the range of efficiencies of products that were reverse engineered.
For a complete description of the MPCs, see section IV.C of this document and chapter 5 of the direct final rule TSD.
The GRIM estimates manufacturer revenues based on total unit shipment projections and the distribution of those shipments by efficiency level. Changes in sales volumes and efficiency mix over time can significantly affect manufacturer finances. For this analysis, the GRIM uses the NIA's annual shipment projections derived from the shipments analysis from 2024 (the base year) to 2058 (the end year of the analysis period). See section IV.G of this document and chapter 9 of the direct final rule TSD for additional details.
New or amended energy conservation standards could cause manufacturers to incur conversion costs to bring their production facilities and product designs into compliance. DOE evaluated the level of conversion-related expenditures that would be needed to comply with each considered efficiency level in each product class. For the MIA, DOE classified these conversion costs into two major groups: (1) product conversion costs; and (2) capital conversion costs. Product conversion costs are investments in research, development, testing, marketing, and other non-capitalized costs necessary to make product designs comply with new or amended energy conservation standards. Capital conversion costs are investments in property, plant, and equipment necessary to adapt or change existing production facilities such that new compliant product designs can be fabricated and assembled.
DOE based its estimates of the product conversion costs necessary to meet the varying efficiency levels on information from manufacturer interviews, the design paths analyzed in the engineering analysis, the prior MREF rulemaking analysis (
DOE relied on information from manufacturer interviews and the engineering analysis to evaluate the level of capital conversion costs would likely incur at the considered standard levels. During interviews, manufacturers provided estimates and descriptions of the required tooling changes that would be necessary to upgrade product lines to meet the various efficiency levels. Based on these inputs, DOE modeled incremental capital conversion costs for efficiency levels that could be reached with individual components swaps. However, based on feedback, DOE modeled higher capital conversion costs when manufacturers would have to redesign their existing product platforms. DOE used information from manufacturer interviews to determine the cost of the manufacturing equipment and tooling necessary to implement complete redesigns.
Increases in foam thickness require either reductions to interior volume or increases to exterior volume. Many MREFs are sized to fit standard widths, meaning any increase in foam thickness would likely result in the loss of interior volume. Additionally, many MREFs are sized to maximize storage of specific products (
To minimize reductions to interior volume, manufacturers may choose to adopt VIP technology. Extensive incorporation of VIPs into designs requires significant upfront capital due to differences in the handling, storing, and manufacturing of VIPs as compared to typical polyurethane foams. VIPs are
To develop industry conversion cost estimates, DOE estimated the number of product platforms in DOE's CCD
DOE acknowledges that manufacturers may follow different design paths to reach the various efficiency levels analyzed. An individual manufacturer's investments depend on a range of factors, including the company's current product offerings and product platforms, existing production facilities and infrastructure, and make vs. buy decisions for components. DOE's conversion cost methodology incorporated feedback from all manufacturers that took part in interviews and extrapolated industry values. While industry average values may not represent any single manufacturer, DOE's model provides reasonable estimates of industry-level investments.
In general, DOE assumes all conversion-related investments occur between the year of publication of the direct final rule and the year by which manufacturers must comply with the new standard. The conversion cost figures used in the GRIM can be found in section V.B.2 of this document. For additional information on the estimated product and capital conversion costs, see chapter 12 of the direct final rule TSD.
MSPs include direct manufacturing production costs (
Under the preservation-of-gross-margin-percentage scenario, DOE applied a single uniform “gross margin percentage” markup across all efficiency levels, which assumes that manufacturers would be able to maintain the same amount of profit as a percentage of revenues at all efficiency levels within a product class. As manufacturer production costs increase with efficiency, this scenario implies that the per-unit dollar profit will increase. DOE assumed a gross margin percentage of 20 percent for FCC and 28 percent for all other product classes.
In the preservation-of-operating-profit scenario, as the cost of production goes up under a standards case, manufacturers are generally required to reduce their manufacturer markups to a level that maintains base-case operating profit. DOE implemented this scenario in the GRIM by lowering the manufacturer markups at each TSL to yield approximately the same earnings before interest and taxes in the standards case as in the no-new-standards case in the year after the expected compliance date of the amended standards. The implicit assumption behind this scenario is that the industry can only maintain its operating profit in absolute dollars after the standard takes effect.
A comparison of industry financial impacts under the two manufacturer markup scenarios is presented in section V.B.2.a of this document.
For this direct final rule, DOE considered comments it had received regarding its MIA presented in the March 2023 NOPR. The approach used for this direct final rule is largely the same approach DOE had used for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM stated that it cannot comment on the accuracy of DOE's approach for including how manufacturers might or might not recover potential investments (
As discussed in section IV.J.2.d of this document, DOE modeled two standards-case manufacturer markup scenarios to represent the uncertainty regarding the potential impacts on prices and profitability for manufacturers following the implementation of amended energy conservation standards. For the March 2023 NOPR, DOE applied the preservation-of-gross-margin-percentage scenario to reflect an upper bound of industry profitability and a preservation-of-operating-profit scenario
In response to the March 2023 NOPR, AHAM commented the cumulative regulatory burden is significant for home appliance manufacturers when needing to redesign products and product lines for the proposed levels for MREFs, for consumer clothes dryers, residential clothes washers, consumer conventional cooking products, dishwashers, RF, and the finalized levels for room air conditioners and microwave ovens. (
DOE analyzes cumulative regulatory burden in accordance with section 13(g) of the Process Rule. DOE details the rulemakings and expected conversion expenses of Federal energy conservation standards that could impact MREF original equipment manufacturers (“OEMs”) that take effect approximately 3 years before and after the 2029 compliance date in section V.B.2.e of this document. As shown in Table V.23 in section V.B.2.e of this document, DOE considers the potential cumulative regulatory burden from other DOE energy conservation standard rulemakings for consumer clothes dryers, residential clothes washers, consumer conventional cooking products, dishwashers, RF, room air conditioners, and microwave ovens in this direct final rule analysis.
Regarding AHAM's suggestion about spacing out the timing of final rules for home appliance rulemakings, DOE has statutory requirements under EPCA on the timing of rulemakings. For consumer clothes dryers, residential clothes washers, consumer conventional cooking products, dishwashers, RF, room air conditioners, and microwave ovens, amended standards apply to covered products manufactured 3 years after the date on which any new or amended standards are published. (42 U.S.C. 6295(m)(4)(A)(i)) For MREFs, amended standards apply 5 years after the date on which any new or amended standard is published. (42 U.S.C. 6295(l)(2)) And the multi-product Joint Agreement, where stakeholders can recommend different compliance dates under DOE's direct final rule authority, stated “jointly recommended compliance dates will achieve the overall energy and economic benefits of this agreement while allowing necessary lead-times for manufacturers to redesign products and retool manufacturing plants to meet the recommended standards across product categories.” (Joint Agreement, No. 34 at p. 2) The staggered compliance dates between the statutorily-required dates and the dates recommended in the Joint Agreement help mitigate manufacturers' concerns resource allocation and concurrent amended standards. See section II.B.4 of this document for compliance dates of rulemakings recommended in the Joint Agreement.
In response to the March 2023 NOPR, the Appliance Standards Awareness Project (“ASAP”)
The emissions analysis consists of two components. The first component estimates the effect of potential energy conservation standards on power sector and site (where applicable) combustion emissions of CO
The analysis of electric power sector emissions of CO
FFC upstream emissions, which include emissions from fuel combustion during extraction, processing, and transportation of fuels, and “fugitive”
The emissions intensity factors are expressed in terms of physical units per MWh or MMBtu of site energy savings. For power sector emissions, specific emissions intensity factors are calculated by sector and end use. Total emissions reductions are estimated using the energy savings calculated in the national impact analysis.
DOE's no-new-standards case for the electric power sector reflects the
However, beginning in 2016, SO
CSAPR also established limits on NO
The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE's energy conservation standards would be expected to slightly reduce Hg emissions. DOE estimated mercury emissions reduction using emissions factors based on
As part of the development of this direct final rule, for the purpose of complying with the requirements of Executive Order 12866, DOE considered the estimated monetary benefits from the reduced emissions of CO
To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in the
DOE estimates the monetized benefits of the reductions in emissions of CO
DOE exercises its own judgment in presenting monetized climate benefits as recommended by applicable Executive orders, and DOE would reach the same conclusion presented in this proposed rulemaking in the absence of the estimated benefits from reductions in GHG emissions. That is, the social
DOE estimated the global social benefits of CO
There are a number of limitations and uncertainties associated with the SC-GHG estimates. First, the current scientific and economic understanding of discounting approaches suggests discount rates appropriate for intergenerational analysis in the context of climate change are likely to be less than 3 percent, near 2 percent or lower.
In the February 2021 SC-GHG TSD, the IWG stated that the models used to produce the interim estimates do not include all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature. For these same impacts, the science underlying their “damage functions” lags behind the most recent research. In the judgment of the IWG, these and other limitations suggest that the range of four interim SC-GHG estimates presented in the TSD likely underestimate societal damages from GHG emissions. The IWG is in the process of assessing how best to incorporate the latest peer-reviewed science and the recommendations of the National Academies to develop an updated set of SC-GHG estimates, and DOE remains engaged in that process.
DOE is aware that in December 2023, EPA issued a new set of SC-GHG estimates in connection with a final rulemaking under the Clean Air Act.
DOE's derivations of the SC-CO
The SC-CO
DOE multiplied the CO
The SC-CH
DOE multiplied the CH
In December 2023 EPA issued a new set of SC-GHG estimates (2023 SC-GHG) in connection with a final rulemaking under the Clean Air Act.
The overall climate benefits are greater when using the higher, updated SC-GHG 2023 estimates, compared to the climate benefits using the older IWG SC-GHG estimates. The results of the sensitivity analysis are presented in appendix 14C of the direct final rule TSD.
For this direct final rule, DOE estimated the monetized value of NO
DOE multiplied the site emissions reduction (in tons) in each year by the associated $/ton values and then discounted each series using discount rates of 3 percent and 7 percent as appropriate.
The utility impact analysis estimates the changes in installed electrical capacity and generation projected to result for each considered TSL. The analysis is based on published output from the NEMS associated with
The output of this analysis is a set of time-dependent coefficients that capture the change in electricity generation, primary fuel consumption, installed capacity and power sector emissions due to a unit reduction in demand for a given end use. These coefficients are multiplied by the stream of electricity savings calculated in the NIA to provide estimates of selected utility impacts of potential new or amended energy conservation standards.
DOE considers employment impacts in the domestic economy as one factor in selecting a standard. Employment impacts from new or amended energy conservation standards include both direct and indirect impacts. Direct employment impacts are any changes in the number of employees of manufacturers of the products subject to standards. The MIA addresses those impacts. Indirect employment impacts are changes in national employment that occur due to the shift in expenditures and capital investment caused by the purchase and operation of more-efficient appliances. Indirect employment impacts from standards consist of the net jobs created or eliminated in the national economy, other than in the manufacturing sector being regulated, caused by (1) reduced spending by consumers on energy, (2) reduced spending on new energy supply by the utility industry, (3) increased consumer spending on the products to which the new standards apply and other goods and services, and (4) the effects of those three factors throughout the economy.
One method for assessing the possible effects on the demand for labor of such shifts in economic activity is to compare sector employment statistics developed by the Labor Department's BLS. BLS regularly publishes its estimates of the number of jobs per million dollars of economic activity in different sectors of the economy, as well as the jobs created elsewhere in the economy by this same economic activity. Data from BLS indicate that expenditures in the utility sector generally create fewer jobs (both directly and indirectly) than expenditures in other sectors of the economy.
DOE estimated indirect national employment impacts for the standard levels considered in this direct final rule using an input/output model of the U.S. economy called Impact of Sector Energy Technologies version 4 (“ImSET”).
DOE notes that ImSET is not a general equilibrium forecasting model, and that the uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Because ImSET does not incorporate price changes, the employment effects predicted by ImSET may over-estimate actual job impacts over the long run for this direct final rule. Therefore, DOE used ImSET only to generate results for near-term timeframes (2029-2033), where these uncertainties are reduced. For more details on the employment impact analysis, see chapter 16 of the direct final rule TSD.
As discussed previously, DOE considered relevant comments, data, and information obtained through the 2023 NOPR public comment process in determining whether the recommended standards from the Joint Agreement are in accordance with 42 U.S.C. 6295(o). And while some of those comments were directed at specific aspects of DOE's analysis of the Joint Agreement under 42 U.S.C. 6295(o), others were more generally applicable to DOE's energy conservation standards rulemaking program as a whole. The ensuing discussion focuses on these general comments concerning energy conservation standards issued under EPCA.
The National Academies of Sciences, Engineering, and Medicine (“NAS”) periodically appoint a committee to peer review the assumptions, models, and methodologies that DOE uses in setting energy conservation standards
In response to the March 2023 NOPR, AHAM stated that despite previous requests from AHAM and others, DOE has failed to review and incorporate the recommendations of the NAS report, instead indicating that it will conduct a separate rulemaking process without such a process having been initiated. (AHAM, No. 31 at p. 8) AHAM further stated that DOE seems to be ignoring the recommendations in the NAS Report and even conducting analysis that is opposite to the recommendations. AHAM commented that DOE cannot continue to perpetuate the errors in its analytical approach that have been pointed out by stakeholders and the NAS report as to do so will lead to arbitrary and capricious rules. (
As discussed, the rulemaking process for establishing new or amended standards for covered products and equipment are specified at appendix A to subpart C of 10 CFR part 430 (the Process Rule). DOE periodically examines and revises these provisions in separate rulemaking proceedings. The recommendations provided in the NAS Report, which pertain to the processes by which DOE analyzes energy conservation standards, will be considered by DOE in a separate, forthcoming rulemaking process.
The following section addresses the results from DOE's analyses with respect to the considered energy conservation standards for MREFs. It addresses the TSLs examined by DOE, the projected impacts of each of these levels if adopted as energy conservation standards for MREFs, and the standards levels that DOE is adopting in this direct final rule. Additional details regarding DOE's analyses are contained in the direct final rule TSD supporting this document.
In general, DOE typically evaluates potential new or amended standards for products and equipment by grouping individual efficiency levels for each class into TSLs. Use of TSLs allows DOE to identify and consider manufacturer cost interactions between the product classes, to the extent that there are such interactions, and price elasticity of consumer purchasing decisions that may change when different standard levels are set.
In the analysis conducted for this direct final rule, DOE analyzed the benefits and burdens of five TSLs for MREFs. DOE developed TSLs that combine efficiency levels for each analyzed product class. TSL 1 represents a 10 percent increase in efficiency, corresponding to the lowest analyzed efficiency level above the baseline for each analyzed product class. TSL 2 represents efficiency levels consistent with Energy Star requirements for coolers, which in most cases except freestanding coolers (“FC”) represent an increase compared to TSL 1, and a modest increase in efficiency for certain combination cooler product classes compared to TSL 1. TSL 3 increases the efficiency for FC by an additional 10 percent compared to TSLs 1 and 2 and built-in coolers (“BIC”) by an additional 10 percent compared to TSL 1
Table V.1 presents the TSLs and the corresponding efficiency levels that DOE has identified for potential amended energy conservation standards for MREFs.
DOE analyzed the economic impacts on MREF consumers by looking at the effects that potential amended standards at each TSL would have on the LCC and PBP. DOE also examined the impacts of potential standards on selected consumer subgroups. These analyses are discussed in the following sections.
In general, higher-efficiency products affect consumers in two ways: (1) purchase price increases and (2) annual operating costs decrease. Inputs used for calculating the LCC and PBP include total installed costs (
Tables V.2 through V.17 show the LCC and PBP results for the TSLs considered for each product class. In the first of each pair of tables, the simple payback is measured relative to the baseline product. In the second table, the impacts are measured relative to the efficiency distribution in the no-new-standards case in the compliance year (see section IV.F.8 of this document). Because some consumers purchase products with higher efficiency in the no-new-standards case, the average savings are less than the difference between the average LCC of the baseline product and the average LCC at each TSL. The savings refer only to consumers who are affected by a standard at a given TSL. Those who already purchase a product with efficiency at or above a given TSL are not affected. Consumers for whom the LCC increases at a given TSL experience a net cost.
In the consumer subgroup analysis, DOE estimated the impact of the considered TSLs on senior-only households, which account for 8.7% of the total MREF household sample. DOE did not consider low-income consumers in this direct final rule because MREFs are not products generally used by this subgroup, as they typically cost more than comparable compact refrigerators, which are able to maintain lower temperatures compared to MREFs, and therefore serve a wider range of applications. Based on the TraQline wine chiller data, less than 4 percent of MREF owners are below the federal household income threshold for poverty. Table V.18 compares the average LCC savings and PBP at each efficiency level for the senior-only consumer subgroup with similar metrics for the entire consumer sample for all product classes. In most cases, the average LCC savings and PBP for senior-only households at the considered efficiency levels are improved (
As discussed in section IV.F.9 of this document, EPCA establishes a rebuttable presumption that an energy conservation standard is economically justified if the increased purchase cost for a product that meets the standard is less than three times the value of the first-year energy savings resulting from the standard. (42 U.S.C. 6295(o)(2)(B)(iii)) In calculating a rebuttable presumption payback period for each of the considered TSLs, DOE used discrete values and, as required by EPCA, based the energy use calculation on the DOE test procedure for MREFs. In contrast, the PBPs presented in section V.B.1.a of this document were calculated using distributions that reflect the range of energy use in the field.
Table V.19 presents the rebuttable-presumption payback periods for the considered TSLs for MREFs. While DOE examined the rebuttable-presumption criterion, it considered whether the standard levels considered for this rule are economically justified through a
DOE performed an MIA to estimate the impact of amended energy conservation standards on manufacturers of MREFs. The next section describes the expected impacts on manufacturers at each considered TSL. Chapter 12 of the direct final rule TSD explains the analysis in further detail.
In this section, DOE provides GRIM results from the analysis, which examines changes in the industry that would result from a standard. The following tables summarize the estimated financial impacts (represented by changes in INPV) of potential amended energy conservation standards on manufacturers of MREFs, as well as the conversion costs that DOE estimates manufacturers of MREFs would incur at each TSL.
The impact of amended energy conservation standards was analyzed under two scenarios: (1) the preservation-of-gross-margin percentage; and (2) the preservation-of-operating-profit, as discussed in section IV.J.2.d of this document. The preservation-of-gross-margin percentages applies a “gross margin percentage” of 20 percent for FCC and 28 percent for all other product classes.
The preservation-of-operating-profit scenario reflects manufacturers' concerns about their inability to maintain margins as MPCs increase to reach more stringent efficiency levels. In this scenario, while manufacturers make the necessary investments required to convert their facilities to produce compliant products, operating profit does not change in absolute dollars and decreases as a percentage of revenue. The preservation-of-operating-profit scenario results in the lower (or more severe) bound to impacts of potential amended standards on industry.
Each of the modeled scenarios results in a unique set of cash flows and corresponding INPV for each TSL. INPV is the sum of the discounted cash flows to the industry from the base year through the end of the analysis period. The “change in INPV” refers to the difference in industry value between the no-new-standards case and standards case at each TSL. To provide perspective on the short-run cash flow impact, DOE includes a comparison of free cash flow between the no-new-standards case and the standards case at each TSL in the year before amended standards would take effect. This figure provides an understanding of the magnitude of the required conversion costs relative to the cash flow generated by the industry in the no-new-standards case.
Conversion costs are one-time investments for manufacturers to bring their manufacturing facilities and product designs into compliance with potential amended standards. As described in section IV.J.2.c of this document, conversion cost investments occur between the year of publication of the direct final rule and the year by which manufacturers must comply with the amended standards. The conversion costs can have a significant impact on the short-term cash flow of the industry and generally result in lower free cash flow in the period between the publication of the direct final rule and the compliance date of potential amended standards. Conversion costs are independent of the manufacturer markup scenarios and are not presented as a range in this analysis.
The following cash flow discussion refers to product classes as defined in Table I.1 in section I of this document and the efficiency levels and design options as detailed in Table IV.4 in section IV.C.3 of this document.
At TSL 1, the standard represents a modest increase in efficiency, corresponding to the lowest analyzed efficiency level above baseline for all classes, except product classes C-9 and C-9-BI at baseline efficiency. The change in INPV is expected to range from -4.2 to -3.8 percent. At this level, the free cash flow is estimated to decrease by 41.5 percent compared to the no-new-standards case value of $60.4 million in the year 2028, the year before the standards year. Currently, 24.4 percent of MREF shipments meet the efficiencies required at TSL 1. See Table V.21 for the percentage of shipments that meet each TSL by product class.
DOE analyzed implementing various design options for the range of directly analyzed product classes. These design options could include implementing more efficient single-speed compressors, tube and fin evaporators and/or condensers, hot walls, and argon-filled glass. At TSL 1, capital conversion costs are minimal because most manufacturers can incorporate design options with component changes. Product conversion costs may be necessary for sourcing components, building prototypes, and testing new components. DOE estimates capital conversion costs of $1.3 million and product conversion costs of $54.0 million. Conversion costs total $55.3 million.
At TSL 1, the shipment-weighted average MPC for all MREFs is expected to increase by 0.7 percent relative to the no-new-standards case shipment-weighted average MPC for all MREFs in 2029. Given the relatively small increase in production costs, DOE does not project a notable drop in shipments in the year the standard takes effect. In the preservation-of-gross-margin percentage scenario, the minor increase in cashflow from the higher MSP is slightly outweighed by the $55.3 million in conversion costs, causing a small negative change in INPV at TSL 1 under this scenario. Under the preservation-of-operating-profit scenario, manufacturers earn the same per-unit operating profit as would be earned in the no-new-standards case, but manufacturers do not earn additional profit from their investments. In this scenario, the manufacturer markup decreases in 2030, the year after the analyzed 2029 compliance year. This reduction in the manufacturer markup and the $55.3 million in conversion costs incurred by manufacturers cause a slightly negative change in INPV at TSL 1 under the preservation-of-operating-profit scenario. See section IV.J.2.d of this document for details on the manufacturer markup scenarios.
TSL 2 represents efficiency levels consistent with ENERGY STAR requirements for coolers and a modest increase in efficiency for certain combination cooler product classes. The change in INPV is expected to range from -6.1 to -4.6 percent. At this level, the free cash flow is estimated to decrease by 43.1 percent compared to the no-new-standards case value of $60.4 million in the year 2028, the year before the standards year. Currently, 12.6 percent of MREF shipments meet the efficiencies required at TSL 2.
The design options DOE analyzed for most product classes include implementing similar design options as TSL 1, such as more efficient single-speed compressors. For FCC, C-13A, and C-13A-BI, TSL 2 corresponds to EL 2. For BICC and BIC, TSL 2 corresponds to EL 3. For the remaining product classes, the efficiencies required at TSL 2 are the same as TSL 1. The increase in conversion costs compared to TSL 1 are largely driven by the higher efficiencies required for BICs, which account for 3.5 percent of MREF shipments. For BIC products that do not
At TSL 2, the shipment-weighted average MPC for all MREFs is expected to increase by 3.4 percent relative to the no-new-standards case shipment-weighted average MPC for all MREFs in 2029. In the preservation-of-gross-margin percentage scenario, the minor increase in cashflow from the higher MSP is slightly outweighed by the $74.8 million in conversion costs, causing a small negative change in INPV at TSL 2 under this scenario. Under the preservation-of-operating-profit scenario, manufacturers earn the same per-unit operating profit as would be earned in the no-new-standards case, but manufacturers do not earn additional profit from their investments. In this scenario, the manufacturer markup decreases in 2030, the year after the analyzed compliance year. This reduction in the manufacturer markup and the $74.8 million in conversion costs incurred by manufacturers cause a negative change in INPV at TSL 2 under the preservation-of-operating-profit scenario.
TSL 3 increases the efficiency for FCs by an additional 10 percent compared to TSL 2, and TSL 3 decreases the efficiency for BICs by 10 percent. Combination coolers are at the same efficiency levels as TSL 2. The change in INPV is expected to range from -5.7 to -4.4 percent. At this level, free cash flow is estimated to decrease by 40.7 percent compared to the no-new-standards case value of $60.4 million in the year 2028, the year before the standards year. Currently, approximately 5.8 percent of domestic MREF shipments meet the efficiencies required at TSL 3.
At this level, DOE analyzed similar design options as TSL 1 and TSL 2, such as implementing incrementally more efficient single-speed compressors. For all product classes except FC and BIC, the efficiencies required at TSL 3 are the same as TSL 2. For FC, TSL 3 corresponds to EL 2. For BIC, TSL 3 reflects a lower efficiency level (EL 2) as compared to TSL 2 (EL 3). Industry capital conversion costs decrease at TSL 3 as compared to TSL 2 due to the lower efficiency level required for BIC. As previously discussed, DOE expects manufacturers of BIC would likely need to increase insulation thickness at TSL 2 (EL 3) and incorporate variable-speed compressors. However, at TSL 3, DOE's engineering analysis and manufacturer feedback indicate that manufacturers could achieve EL 2 efficiencies for BIC with relatively straightforward component swaps versus a larger product redesign associated with increasing insulation. DOE estimates capital conversion costs of $1.3 million and product conversion costs of $70.8 million. Conversion costs total $72.1 million.
At TSL 3, the shipment-weighted average MPC for all MREFs is expected to increase by 3.2 percent relative to the no-new-standards case shipment-weighted average MPC for all MREFs in 2029. In the preservation-of-gross-margin-percentage scenario, the slight increase in cashflow from the higher MSP is outweighed by the $72.1 million in conversion costs, causing a slightly negative change in INPV at TSL 3 under this scenario. Under the preservation-of-operating-profit scenario, the manufacturer markup decreases in 2030, the year after the analyzed compliance year. This reduction in the manufacturer markup and the $72.1 million in conversion costs incurred by manufacturers cause a slightly negative change in INPV at TSL 3 under the preservation-of-operating-profit scenario.
At the Recommended TSL (
At the Recommended TSL, all product classes correspond to EL 3, except BIC, C-3A, C-3A-BI, C-9, and C-9-BI. For BIC, the Recommended TSL corresponds to EL 2. For C-3A, the efficiencies required at the Recommended TSL are the same as TSL 3 (EL 1). For C-3A-BI, the Recommended TSL corresponds to EL 1. Both C-9 and C-9-BI correspond to baseline efficiency. At this level, conversion costs are largely driven by the efficiencies required for FC, which accounts for approximately 11.8 percent of industry shipments. DOE's shipments analysis estimates that no FC shipments currently meet the efficiencies required at the Recommended TSL. All manufacturers would need to update their product platforms, which could include increasing insulation thickness and implementing variable-speed compressors. Increasing insulation thickness would likely result in the loss of interior volume or an increase in exterior product dimensions. A decrease of interior volume would require redesign of the cabinet as well as the designs and tooling associated with the interior of the product, such as the liner, shelving, racks, and drawers. DOE estimates capital conversion costs of $26.6 million and product conversion costs of $104.1 million. Conversion costs total $130.7 million.
At the Recommended TSL, the shipment-weighted average MPC for all MREFs is expected to increase by 8.1 percent relative to the no-new-standards case shipment-weighted average MPC for all MREFs in 2029. Given the projected increase in production costs, DOE expects an estimated 4 percent drop in shipments in the year the standard takes effect relative to the no-new-standards case. In the preservation-of-gross-margin-percentage scenario, the increase in cashflow from the higher MSP is outweighed by the $130.7 million in conversion costs and the drop in annual shipments, causing a negative change in INPV at the Recommended TSL under this scenario. Under the preservation-of-operating-profit scenario, the manufacturer markup decreases in 2030, the year after the analyzed compliance year. This reduction in the manufacturer markup, the $130.7 million in conversion costs incurred by manufacturers, and the drop in annual shipments cause a negative change in INPV at the Recommended TSL under the preservation-of-operating-profit scenario.
TSL 5 represents max-tech efficiency levels for all product classes. The change in INPV is expected to range from -52.1 to -35.1 percent. At this level, free cash flow is estimated to decrease by 381.5 percent compared to the no-new-standards case value of $60.4 million in the year 2028, the year before the standards year. Currently, approximately 2.9 percent of domestic MREF shipments meet the efficiencies required at TSL 5.
DOE's shipments analysis estimates that no shipments meet the efficiencies required across all product classes except for BICC, which account for only 4 percent of industry shipments. A max-tech standard would necessitate significant investment to redesign
At TSL 5, the large conversion costs result in a free cash flow dropping below zero in the years before the standards year. The negative free cash flow calculation indicates manufacturers may need to access cash reserves or outside capital to finance conversion efforts.
At TSL 5, the shipment-weighted average MPC for all MREFs is expected to increase by 32.7 percent relative to the no-new-standards case shipment-weighted average MPC for all MREFs in 2029. Given the projected increase in production costs, DOE expects an estimated 13 percent drop in shipments in the year the standard takes effect relative to the no-new-standards case. In the preservation-of-gross-margin-percentage scenario, the increase in cashflow from the higher MSP is outweighed by the $555.1 million in conversion costs and drop in annual shipments, causing a significant negative change in INPV at TSL 5 under this scenario. Under the preservation-of-operating-profit scenario, the manufacturer markup decreases in 2030, the year after the analyzed compliance year. This reduction in the manufacturer markup, the $555.1 million in conversion costs incurred by manufacturers, and the drop in annual shipments cause a significant decrease in INPV at TSL 5 under the preservation-of-operating-profit scenario.
To quantitatively assess the potential impacts of amended energy conservation standards on direct employment in the MREF industry, DOE used the GRIM to estimate the domestic labor expenditures and number of direct employees in the no-new-standards case and in each of the standards cases during the analysis period. For this direct final rule, DOE used the most up-to-date information available. DOE calculated these values using statistical data from the 2021
Labor expenditures related to product manufacturing depend on the labor intensity of the product, the sales volume, and an assumption that wages remain fixed in real terms over time. The total labor expenditures in each year are calculated by multiplying the total MPCs by the labor percentage of MPCs. The total labor expenditures in the GRIM were then converted to total production employment levels by dividing production labor expenditures by the average fully burdened wage multiplied by the average number of hours worked per year per production worker. To do this, DOE relied on the
The number of production employees is then multiplied by the U.S. labor Percentage to convert total production employment to total domestic production employment. The U.S. labor percentage represents the industry fraction of domestic manufacturing
The domestic production employees estimate covers production line workers, including line supervisors, who are directly involved in fabricating and assembling products within the OEM facility. Workers performing services that are closely associated with production operations, such as materials-handling tasks using forklifts, are also included as production labor. DOE's estimates only account for production workers who manufacture the specific products covered by this rulemaking.
Non-production workers account for the remainder of the direct employment figure. The non-production employees estimate covers domestic workers who are not directly involved in the production process, such as sales, engineering, human resources, and management.
Using the GRIM, DOE estimates in the absence of amended energy conservation standards there would be 211 domestic production and non-production workers for MREFs in 2029. Table V.22 shows the range of the impacts of energy conservation standards on U.S. manufacturing employment in the MREF industry. The following discussion provides a qualitative evaluation of the range of potential impacts presented in Table V.22.
The direct employment impacts shown in Table V.22 represent the potential domestic employment changes that could result following the compliance date for the MREF product classes in this direct final rule. The upper bound estimate corresponds to a change in the number of domestic workers that would result from amended energy conservation standards if manufacturers continue to produce the same scope of covered products within the United States after compliance takes effect. The lower bound estimate represents the maximum decrease in production workers if manufacturing moved to lower labor-cost countries. At lower TSLs, DOE believes the likelihood of changes in production location due to amended standards are low due to the relatively minor production line updates required. However, as amended standards increase in stringency and both the complexity and cost of production facility updates increases, manufacturers may reevaluate domestic production siting options. Specifically, implementing VIPs could necessitate additional labor content and significant capital investment. However, at the Recommended TSL (
Additional detail on the analysis of direct employment can be found in chapter 12 of the direct final rule TSD. Additionally, the employment impacts discussed in this section are independent of the employment impacts from the broader U.S. economy, which are documented in chapter 16 of the direct final rule TSD.
In interviews, manufacturers noted that the majority of MREFs—namely FCC—are manufactured in Asia and rebranded by home appliance manufacturers. Manufacturers had few concerns about manufacturing constraints below the max-tech level and the implementation of VIPs. However, at max-tech, some manufacturers expressed technical uncertainty about industry's ability to meet the efficiencies required as few OEMs offer products at max-tech today. For example, DOE is not aware of any OEMs that currently offer FCC that meet TSL 5 efficiencies. DOE's shipments analysis estimates that except for BICC, which only accounts for 4 percent of MREF shipments, no shipments of other product classes meet the max-tech efficiencies.
Some low-volume domestic and European-based OEMs offer niche or high-end MREFs (
Using average cost assumptions to develop industry cash-flow estimates may not capture the differential impacts among subgroups of manufacturers. Small manufacturers, niche players, or manufacturers exhibiting a cost structure that differs substantially from the industry average could be affected disproportionately. DOE investigated small businesses as a manufacturer subgroup that could be disproportionally impacted by energy conservation standards and could merit additional analysis.
DOE analyzes the impacts on small businesses in a separate analysis for the standards proposed in the NOPR published elsewhere in this issue of the
One aspect of assessing manufacturer burden involves looking at the cumulative impact of multiple DOE standards and the regulatory actions of other Federal agencies and States that affect the manufacturers of a covered product or equipment. While any one regulation may not impose a significant burden on manufacturers, the combined effects of several existing or impending regulations may have serious consequences for some manufacturers, groups of manufacturers, or an entire industry. Multiple regulations affecting the same manufacturer can strain profits and lead companies to abandon product lines or markets with lower expected future returns than competing products. For these reasons, DOE conducts an analysis of cumulative regulatory burden as part of its rulemakings pertaining to appliance efficiency.
For the cumulative regulatory burden analysis, DOE examines Federal, product-specific regulations that could affect MREF manufacturers that take effect approximately 3 years before and after 2029 the compliance date. This information is presented in Table V.23.
As shown in Table V.23, most of the rulemakings with the largest overlap of MREF OEMs include RFs, consumer conventional cooking products, residential clothes washers, consumer clothes dryers, and MREFs, which are all part of the multi-product Joint Agreement submitted by interested parties.
This section presents DOE's estimates of the national energy savings and the NPV of consumer benefits that would result from each of the TSLs considered as potential amended standards.
To estimate the energy savings attributable to potential amended standards for MREFs, DOE compared their energy consumption under the no-new-standards case to their anticipated energy consumption under each TSL. The savings are measured over the entire lifetime of products purchased in the 30-year period that begins in the year of anticipated compliance with amended standards (2029-2058). Table V.25 presents DOE's projections of the national energy savings for each TSL considered for MREFs. The savings were calculated using the approach described in section IV.H.2 of this document.
OMB Circular A-4
DOE estimated the cumulative NPV of the total costs and savings for consumers that would result from the TSLs considered for MREFs. In accordance with OMB's guidelines on regulatory analysis,
The NPV results based on the aforementioned 9-year analytical period are presented in Table V.28. The impacts are counted over the lifetime of products purchased in 2029-2037. As mentioned previously, such results are presented for informational purposes only and are not indicative of any change in DOE's analytical methodology or decision criteria.
The previous results reflect the use of a default trend to estimate the change in price for MREFs over the analysis period (see section IV.H.3 of this document). DOE also conducted a sensitivity analysis that considered a low benefits scenario which combines a lower rate of price decline and AEO 2023 Low Economic Growth, as well as a high benefits scenario which combines a higher rate of price decline and AEO 2023 High Economic Growth. The results of these alternative cases are presented in appendix 10C of the direct final rule TSD. In the high benefits scenario where high-price-decline case is applied, the NPV of consumer benefits is higher than in the default case. In the low benefits scenario where low-price-decline case is applied, the NPV of consumer benefits is lower than in the default case.
DOE estimates that amended energy conservation standards for MREFs will reduce energy expenditures for consumers of those products, with the resulting net savings being redirected to other forms of economic activity. These expected shifts in spending and economic activity could affect the demand for labor. As described in section IV.N of this document, DOE used an input/output model of the U.S. economy to estimate indirect employment impacts of the TSLs that DOE considered. There are uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Therefore, DOE generated results for near-term timeframes (2029-2033), where these uncertainties are reduced.
The results suggest that the adopted standards are likely to have a negligible impact on the net demand for labor in the economy. The net change in jobs is so small that it would be imperceptible in national labor statistics and might be offset by other, unanticipated effects on employment. Chapter 16 of the direct final rule TSD presents detailed results regarding anticipated indirect employment impacts.
As discussed in section III.E.1.d of this document, DOE has concluded that the standards adopted in this direct final rule will not lessen the utility or performance of the MREFs under consideration in this rulemaking. Manufacturers of these products
DOE considered any lessening of competition that would be likely to result from amended standards. As discussed in section III.E.1.e of this document, EPCA directs the Attorney General of the United States (“Attorney General”) to determine the impact, if any, of any lessening of competition likely to result from a proposed standard and to transmit such determination in writing to the Secretary within 60 days of the publication of a proposed rule, together with an analysis of the nature and extent of the impact. To assist the Attorney General in making this determination, DOE is providing DOJ with copies of this direct final rule and the direct final rule TSD for review.
Enhanced energy efficiency, where economically justified, improves the Nation's energy security, strengthens the economy, and reduces the environmental impacts (costs) of energy production. Reduced electricity demand due to energy conservation standards is also likely to reduce the cost of maintaining the reliability of the electricity system, particularly during peak-load periods. Chapter 15 in the direct final rule TSD presents the estimated impacts on electricity-generating capacity, relative to the no-new-standards case, for the TSLs that DOE considered in this rulemaking.
Energy conservation resulting from potential energy conservation standards for MREFs is expected to yield environmental benefits in the form of reduced emissions of certain air pollutants and greenhouse gases. Table V.29 provides DOE's estimate of cumulative emissions reductions expected to result from the TSLs considered in this rulemaking. The emissions were calculated using the multipliers discussed in section IV.K of this document. DOE reports annual emissions reductions for each TSL in chapter 13 of the direct final rule TSD.
As part of the analysis for this direct final rule, DOE estimated monetary benefits likely to result from the reduced emissions of CO
As discussed in section IV.L.2 of this document, DOE estimated the climate benefits likely to result from the reduced emissions of methane and N
DOE is well aware that scientific and economic knowledge about the contribution of CO
DOE also estimated the monetary value of the economic benefits associated with NO
Not all the public health and environmental benefits from the reduction of greenhouse gases, NO
The Secretary of Energy, in determining whether a standard is economically justified, may consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No other factors were considered in this analysis.
Table V.35 presents the NPV values that result from adding the estimates of the economic benefits resulting from reduced GHG and NO
When considering new or amended energy conservation standards, the standards that DOE adopts for any type (or class) of covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining whether a standard is economically justified, the Secretary must determine whether the benefits of the standard exceed its burdens by, to the greatest extent practicable, considering the seven statutory factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or amended standard must also result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B))
For this direct final rule, DOE considered the impacts of amended standards for MREFs at each TSL, beginning with the maximum technologically feasible level, to determine whether that level was economically justified. Where the max-tech level was not justified, DOE then considered the next most efficient level and undertook the same evaluation until it reached the highest efficiency level that is both technologically feasible and economically justified and saves a significant amount of energy.
To aid the reader as DOE discusses the benefits and/or burdens of each TSL, tables in this section present a summary of the results of DOE's quantitative analysis for each TSL. In addition to the quantitative results presented in the tables, DOE also considers other burdens and benefits that affect economic justification. These include the impacts on identifiable subgroups of consumers who may be disproportionately affected by a national standard and impacts on employment.
DOE also notes that the economics literature provides a wide-ranging discussion of how consumers trade off upfront costs and energy savings in the absence of government intervention. Much of this literature attempts to explain why consumers appear to undervalue energy efficiency improvements, an issue known as the “energy efficiency gap”. There is evidence that consumers undervalue future energy savings as a result of (1) a lack of information; (2) a lack of sufficient salience of the long-term or aggregate benefits; (3) a lack of sufficient savings to warrant delaying or altering purchases; (4) excessive focus on the short term, in the form of inconsistent weighting of future energy cost savings relative to available returns on other investments; (5) computational or other difficulties associated with the evaluation of relevant tradeoffs; and (6) a divergence in incentives (for example, between renters and owners, or builders and purchasers).
In DOE's current regulatory analysis, potential changes in the benefits and costs of a regulation due to changes in consumer purchase decisions are included in two ways. First, if consumers forgo the purchase of a product in the standards case, this decreases sales for product manufacturers, and the impact on manufacturers attributed to lost revenue is included in the MIA. Second, DOE accounts for energy savings attributable only to products actually used by consumers in the standards case; if a standard decreases the number of products purchased by consumers, this decreases the potential energy savings from an energy conservation standard. DOE provides estimates of shipments and changes in the volume of product purchases in chapter 9 of the direct final rule TSD. However, DOE's current analysis does not explicitly control for heterogeneity in consumer preferences, preferences across subcategories of products or specific features, or consumer price sensitivity variation according to household income.
DOE continues to explore additional potential updates to the quantifiable framework for estimating the benefits and costs of changes in consumer purchase decisions due to an energy conservation standard, and DOE is committed to developing a framework that can support empirical quantitative tools for improved assessment of the consumer welfare impacts of appliance standards. DOE has posted a paper that discusses the issue of consumer welfare impacts of appliance energy conservation standards and potential enhancements to the methodology by which these impacts are defined and estimated in the regulatory process.
Tables V.36 and V.37 summarize the quantitative impacts estimated for each TSL for MREFs. The national impacts are measured over the lifetime of MREFs purchased in the 30-year period that begins in the anticipated year of compliance with amended standards (2029-2058). The energy savings, emissions reductions, and value of emissions reductions refer to full-fuel-cycle results. DOE is presenting monetized benefits of GHG emissions reductions in accordance with the applicable Executive orders and DOE would reach the same conclusion presented in this document in the absence of the estimated benefits from reductions in GHG emissions, including the Interim Estimates presented by the Interagency Working Group. The efficiency levels contained in each TSL are described in section V.A of this document.
DOE first considered TSL 5, which represents the max-tech efficiency levels. For coolers (
The cumulative emissions reductions at TSL 5 are 10.0 Mt of CO
Using a 7-percent discount rate for consumer benefits and costs, health benefits from reduced SO
At TSL 5, for the product classes with the largest market share, which are FCC, FC, and C-13A and together account for approximately 92 percent of annual shipments, the LCC savings are all negative (−$45.3, −$178.8, and −$73.4, respectively) and their payback periods are 13.0 years, 29.9 years, and 19.5 years, respectively, which are all longer than their corresponding average lifetimes. For these product classes, the fraction of consumers experiencing a net LCC cost is 81.6 percent, 98.2 percent, and 93.9 percent due to increases in first cost of $185.0, $420.5, and $167.5, respectively. Overall, a majority of MREF consumers (84.5 percent) would experience a net cost and the average LCC savings would be negative for all analyzed product classes.
At TSL 5, the projected change in INPV ranges from a decrease of $421.0 million to a decrease of $283.2 million, which corresponds to decreases of 51.2 percent and 35.1 percent, respectively. DOE estimates that industry must invest $555.1 million to comply with standards set at TSL 5.
DOE estimates that approximately 2.9 percent of current MREF shipments meet the max-tech levels. For FCC, FC, and C-13A, which together account for approximately 92 percent of annual shipments, DOE estimates that zero shipments currently meet max-tech efficiencies.
At TSL 5, manufacturers would likely need to implement all the most efficient design options analyzed in the engineering analysis. Manufacturers that do not currently offer products that meet TSL 5 efficiencies would need to develop new product platforms, which would require significant investment. Conversion costs are driven by the need for changes to cabinet construction, such as increasing foam insulation thickness and/or incorporating VIP technology. Increasing insulation thickness could result in a loss of interior volume or an increase in exterior volume. If manufacturers chose to maintain exterior dimensions, increasing insulation thickness would require redesign of the cabinet as well as the designs and tooling associated with the interior of the product, such as the liner, shelving, racks, and drawers. Incorporating VIPs into MREF designs could also require redesign of the cabinet to maximize the efficiency benefit of this technology. In addition to insulation changes, manufacturers may need to implement triple-pane glass, which could require implementing reinforced hinges and redesigning the door structure.
At this level, DOE estimates a 13-percent drop in shipments in the year the standard takes effect compared to the no-new-standards case, as some consumers may forgo purchasing a new MREF due to the increased upfront cost of baseline models.
At TSL 5 for MREFs, the Secretary concludes that the benefits of energy savings, emission reductions, and the estimated monetary value of the emissions reductions would be outweighed by the economic burden on many consumers, negative NPV of consumer benefits, and the impacts on manufacturers, including the significant potential reduction in INPV. A majority of MREF consumers (84.5 percent) would experience a net cost and the average LCC savings would be negative. Additionally, manufacturers would need to make significant upfront investments to update product platforms. The potential reduction in INPV could be as high as 52.1 percent. Consequently, the Secretary has concluded that TSL 5 is not economically justified.
DOE then considered the Recommended TSL (
The cumulative emissions reductions at the Recommended TSL are 5.9 Mt of CO
Using a 7-percent discount rate for consumer benefits and costs, health benefits from reduced SO
At the Recommended TSL, for the product classes with the largest market share, which are FCC, FC, and C-13A, the LCC savings are $12.6, $28.0, and $12.0, respectively, and their payback periods are 6.8 years, 8.5 years, and 7.3 years, respectively, which are all shorter than their corresponding average lifetimes. For these product classes, the fraction of consumers experiencing a net LCC cost is 46.8 percent, 44.0 percent, and 47.2 percent, and increases in first cost for these classes are $91.7, $360.9, and $124.3, respectively. Overall, the LCC savings would be positive for all MREF product classes, and, while 43.7
At the Recommended TSL (
DOE estimates that approximately 3.9 percent of shipments currently meet the required efficiencies at the Recommended TSL. For most product classes (
After considering the analysis and weighing the benefits and burdens, the Secretary has concluded that at a standard set at the recommended TSL for MREFs would be economically justified. At this TSL, the average LCC savings are positive for all product classes for which an amended standard is considered, with a shipment-weighted average of $15.2 savings. The FFC national energy savings are significant and the NPV of consumer benefits is positive using both a 3-percent and 7-percent discount rate. The standard levels at TSL 4 are economically justified even without weighing the estimated monetary value of emissions reductions. When those emissions reductions are included—representing $0.3 billion in climate benefits (associated with the average SC-GHG at a 3-percent discount rate), and $0.6 billion (using a 3-percent discount rate) or $0.2 billion (using a 7-percent discount rate) in health benefits—the rationale becomes stronger still.
As stated, DOE conducts the walk-down analysis to determine the TSL that represents the maximum improvement in energy efficiency that is technologically feasible and economically justified as required under EPCA. The walk-down is not a comparative analysis, as a comparative analysis would result in the maximization of net benefits instead of energy savings that are technologically feasible and economically justified, which would be contrary to the statute. See 86 FR 70892, 70908. Although DOE has not conducted a comparative analysis to select the adopted energy conservation standards, DOE notes that the Recommended TSL represents the option with positive LCC savings ($15.2) for all product classes compared to TSL 5 (−$99.5). Further, when comparing the cumulative NPV of consumer benefit using a 7% discount rate, TSL 4 ($0.7 billion) has a higher benefit value than TSL 5 (−$0.4 billion), while for a 3-percent discount rate, TSL 4 ($1.7 billion) is also higher than TSL 5 (−$0.07 billion), which yields negative NPV in both cases. These additional savings and benefits at the Recommended TSL are significant. DOE considers the impacts to be, as a whole, economically justified at the Recommended TSL.
Although DOE considered amended standard levels for MREFs by grouping the efficiency levels for each product class into TSLs, DOE evaluates all analyzed efficiency levels in its analysis. For all product classes, except for BIC and C-3A-BI, the amended standard level represents the maximum energy savings that does not result in negative LCC savings. DOE did not include efficiency levels with negative LCC savings in any TSLs with the exception of TSL 5, which represents the max-tech efficiency levels. Specifically, for FC, FCC, BICC, C-13 A, and C13-A-BI, DOE did not include EL4 in a TSL due to negative LCC savings, and for C-3A, DOE did not include EL 2 or 3, and for C-3A-BI, DOE did not include EL 3 for the same reason. For BIC and C-3A-BI, the standard level represents the maximum energy savings that is economically justified. For BIC, DOE did not include EL4 in any TSL due to negative LCC savings. TSL 4, the Recommended TSL and the one adopted here, includes an EL for BIC that is lower than the EL at TSL 2. That is because TSL 2 represents ENERGY STAR for all product classes for which an ENERGY STAR criterion exists, including EL 3 for BIC. As such, DOE analyzed TSL 2 with a higher efficiency level for BIC than TSL 4 because of the ENERGY STAR criterion. TSL 4 also includes an EL for C-3A-BI, EL1, that is lower than another EL, EL2, that has positive LCC savings. DOE has considered standards at those ELs for those products and found them not to be economically justified. Although these ELs have positive LCC savings, they would result in a majority of purchasers experiencing a net cost (53% and 57%, respectively). Further, for BIC products, DOE expects some manufacturers would likely need to increase insulation thickness to meet efficiency levels above EL 2, which could require new cabinet designs and fixtures. Due to the high percentage of consumers with a net cost and the extensive redesigns that would be needed to support EL3, DOE has concluded that this efficiency level for BIC is not economically justified. However, at the Recommended TSL (EL 2 for BIC), DOE expects manufacturers could likely meet the efficiency level required for BIC without significant redesign. The ELs at the amended standard level result in positive LCC savings for all product classes and reduce the decrease in INPV and conversion costs to the point where DOE has concluded they are economically justified, as discussed for the Recommended TSL in the preceding paragraphs.
Therefore, based on the previous considerations, DOE adopts the energy conservation standards for MREFs at the Recommended TSL.
While DOE considered each potential TSL under the criteria laid out in 42 U.S.C. 6295(o) as discussed in the preceding paragraphs, DOE notes that the Recommended TSL for MREFs in this direct final rule is part of a multi-product Joint Agreement covering six rulemakings (RFs; MREFs; conventional cooking products; residential clothes washers; consumer clothes dryers; and dishwashers). The signatories indicate that the Joint Agreement for the six rulemakings should be considered as a joint statement of recommended standards, to be adopted in its entirety. As discussed in section V.B.2.e of this document, many MREF OEMs also manufacture RFs, conventional cooking products, residential clothes washers, consumer clothes dryers, and dishwashers. Rather than requiring compliance with five amended standards in a single year (2027),
The amended energy conservation standards for MREFs, which are expressed in kWh/yr, are shown in Table V.38.
The benefits and costs of the adopted standards can also be expressed in terms of annualized values. The annualized net benefit is (1) the annualized national economic value (expressed in 2022$) of the benefits from operating products that meet the adopted standards (consisting primarily of operating cost savings from using less energy), minus increases in product purchase costs, and (2) the annualized monetary value of the climate and health benefits.
Table V.39 shows the annualized values for MREFs under the Recommended TSL, expressed in 2022$. The results under the primary estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and NO
Executive Order (“E.O.”) 12866, “Regulatory Planning and Review,” as supplemented and reaffirmed by E.O. 13563, “Improving Regulation and Regulatory Review,” 76 FR 3821 (Jan. 21, 2011) and amended by E.O. 14094, “Modernizing Regulatory Review,” 88 FR 21879 (April 11, 2023), requires agencies, to the extent permitted by law, to (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public. DOE emphasizes as well that E.O. 13563 requires agencies to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible. In its guidance, the Office of Information and Regulatory Affairs (“OIRA”) in the Office of Management and Budget (“OMB”) has emphasized that such techniques may include identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes. For the reasons stated in this preamble, this final regulatory action is consistent with these principles.
Section 6(a) of E.O. 12866 also requires agencies to submit “significant regulatory actions” to OIRA for review. OIRA has determined that this final regulatory action constitutes a “significant regulatory action” within the scope of section 3(f)(1) of E.O. 12866. DOE has provided to OIRA an assessment, including the underlying analysis, of benefits and costs anticipated from the final regulatory action, together with, to the extent feasible, a quantification of those costs; and an assessment, including the underlying analysis, of costs and benefits of potentially effective and reasonably feasible alternatives to the planned regulation, and an explanation why the planned regulatory action is preferable to the identified potential alternatives. These assessments are summarized in this preamble and further detail can be found in the technical support document for this rulemaking.
The Regulatory Flexibility Act (5 U.S.C. 601
DOE is not obligated to prepare a regulatory flexibility analysis for this rulemaking because there is not a requirement to publish a general notice of proposed rulemaking under the Administrative Procedure Act.
Manufacturers of MREFs must certify to DOE that their products comply with any applicable energy conservation standards. In certifying compliance, manufacturers must test their products according to the DOE test procedures for MREFs, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including MREFs. (
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
Pursuant to the National Environmental Policy Act of 1969 (“NEPA”), DOE has analyzed this proposed action rule in accordance with NEPA and DOE's NEPA implementing regulations (10 CFR part 1021). DOE has determined that this rule qualifies for categorical exclusion under 10 CFR part 1021, subpart D, appendix B5.1 because it is a rulemaking that establishes energy conservation standards for consumer products or industrial equipment, none of the exceptions identified in B5.1(b) apply, no extraordinary circumstances exist that require further environmental analysis, and it meets the requirements for application of a categorical exclusion.
E.O. 13132, “Federalism,” 64 FR 43255 (Aug. 10, 1999), imposes certain requirements on Federal agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. The Executive order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE has examined this direct final rule and has determined that it would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of this direct final rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297) Therefore, no further action is required by Executive Order 13132.
With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of E.O. 12988, “Civil Justice Reform,” imposes on Federal agencies the general duty to adhere to the following requirements: (1) eliminate drafting errors and ambiguity, (2) write regulations to minimize litigation, (3) provide a clear legal standard for affected conduct rather than a general standard, and (4) promote simplification and burden reduction. 61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 3(a), section 3(b) of E.O. 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation (1) clearly specifies the preemptive effect, if any, (2) clearly specifies any effect on existing Federal law or regulation, (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction, (4) specifies the retroactive effect, if any, (5) adequately defines key terms, and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of E.O. 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this direct final rule meets the relevant standards of E.O. 12988.
Title II of the Unfunded Mandates Reform Act of 1995 (“UMRA”) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). For a regulatory action likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a
DOE has concluded that this direct final rule may require expenditures of $100 million or more in any one year by the private sector. Such expenditures may include (1) investment in research and development and in capital expenditures by MREF manufacturers in the years between the direct final rule and the compliance date for the new standards and (2) incremental additional expenditures by consumers to purchase higher-efficiency MREFs, starting at the compliance date for the applicable standard.
Section 202 of UMRA authorizes a Federal agency to respond to the content requirements of UMRA in any other statement or analysis that accompanies the direct final rule. (2 U.S.C. 1532(c)) The content requirements of section 202(b) of UMRA relevant to a private sector mandate substantially overlap the economic analysis requirements that apply under section 325(o) of EPCA and Executive Order 12866. This
Under section 205 of UMRA, DOE is obligated to identify and consider a reasonable number of regulatory alternatives before promulgating a rule for which a written statement under section 202 is required. (2 U.S.C. 1535(a)) DOE is required to select from those alternatives the most cost-effective and least burdensome alternative that achieves the objectives of the rule unless DOE publishes an explanation for doing otherwise, or the selection of such an alternative is inconsistent with law. As required by 42 U.S.C. 6295(m), this direct final rule establishes amended energy conservation standards for MREFs that are designed to achieve the maximum improvement in energy efficiency that DOE has determined to be both technologically feasible and economically justified, as required by 6295(o)(2)(A) and 6295(o)(3)(B). A full discussion of the alternatives considered by DOE is presented in chapter 17 of the TSD for this direct final rule.
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any proposed rule or policy that may affect family well-being. Although this direct final rule would not have any impact on the autonomy or integrity of the family as an institution as defined, this rule could impact a family's well-being. When developing a Family Policymaking Assessment, agencies must assess whether: (1) the action strengthens or erodes the stability or safety of the family and, particularly, the marital commitment; (2) the action strengthens or erodes the authority and rights of parents in the education, nurture, and supervision of their children; (3) the action helps the family perform its functions, or substitutes governmental activity for the function; (4) the action increases or decreases disposable income or poverty of families and children; (5) the proposed benefits of the action justify the financial impact on the family; (6) the action may be carried out by State or local government or by the family; and (7) the action establishes an implicit or explicit policy concerning the relationship between the behavior and personal responsibility of youth, and the norms of society.
DOE has considered how the proposed benefits of this direct final rule compare to the possible financial impact on a family (the only factor listed that is relevant to this rule). As part of its rulemaking process, DOE must determine whether the energy conservation standards contained in this direct final rule are economically justified. As discussed in section V.C.1 of this document, DOE has determined that the standards are economically justified because the benefits to consumers far outweigh the costs to manufacturers. Families will also see LCC savings as a result of this direct final rule. Further, the standards will also result in climate and health benefits for families.
Pursuant to E.O. 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (March 18, 1988), DOE has determined that this rule would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to review most disseminations of information to the public under information quality guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, Improving Implementation of the Information Quality Act (April 24, 2019), DOE published updated guidelines which are available at
E.O. 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OIRA at OMB, a Statement of Energy Effects for any significant energy action. A “significant energy action” is defined as any action by an agency that promulgates or is expected to lead to promulgation of a final rule, and that (1) is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.
DOE has concluded that this regulatory action, which sets forth amended energy conservation standards for MREFs, is not a significant energy action because the standards are not likely to have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as such by the Administrator at OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects on this direct final rule.
On December 16, 2004, OMB, in consultation with the Office of Science and Technology Policy (“OSTP”), issued its Final Information Quality Bulletin for Peer Review (“the Bulletin”). 70 FR 2664 (Jan. 14, 2005). The Bulletin establishes that certain scientific information shall be peer reviewed by qualified specialists before it is disseminated by the Federal Government, including influential scientific information related to agency regulatory actions. The purpose of the Bulletin is to enhance the quality and credibility of the Government's scientific information. Under the Bulletin, the energy conservation standards rulemaking analyses are “influential scientific information,” which the Bulletin defines as “scientific information the agency reasonably can determine will have, or does have, a clear and substantial impact on important public policies or private sector decisions.” 70 FR 2664, 2667.
In response to OMB's Bulletin, DOE conducted formal peer reviews of the energy conservation standards development process and the analyses that are typically used and prepared a report describing that peer review.
As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of this direct final rule prior to its effective date. The report will state that the Office of Information and Regulatory Affairs has determined that this action meets the criteria set forth in 5 U.S.C. 804(2).
The Secretary of Energy has approved publication of this direct final rule.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Imports, Intergovernmental relations, Reporting and recordkeeping requirements, Small businesses.
This document of the Department of Energy was signed on April 10, 2024, by Jeffrey Marootian, Principal Deputy Assistant Secretary for Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
For the reasons set forth in the preamble, DOE amends part 430 of chapter II, subchapter D, of title 10 of the Code of Federal Regulations, as set forth below:
42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
(aa)
(1)
(ii) Coolers manufactured on or after January 31, 2029, shall have an Annual Energy Use (AEU) no more than:
(2)
(ii) Combination cooler refrigeration products manufactured on or after January 31, 2029, shall have an Annual Energy Use (AEU) no more than: