The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all The Boeing Company (Boeing) Model 787-8, 787-9, and 787-10 airplanes. The NPRM published in the Federal Register on February 20, 2024 (89 FR 12785). The NPRM was prompted by a report of heat damage on multiple engine inlets around the EAI duct within the inlet aft compartment. A subsequent investigation found that the seals between the inner and outer ducts and between the outer duct and the aft compartment were degraded or missing, which led to EAI air leaking into the aft compartment, exposing inlet components to high temperatures.

In the NPRM, the FAA proposed to require doing a records check and updating the operator's existing MEL, inspecting the left and right engine inlet cowl assembly for signs of heat damage around the EAI duct, installing or replacing the EAI duct seals, repairing any damage, and replacing the engine inlet if necessary. The FAA is issuing this AD to address reduced structural strength and departure of the inlet from the airplane, resulting in subsequent loss of continued safe flight and landing or injury to occupants from a departed inlet contacting the airplane.

The FAA received comments from nine commenters. The commenters were the Air Line Pilots Association, International (ALPA), American Airlines (AAL), Boeing, British Airways, Qantas, United Airlines (UAL), and three individual commenters.

ALPA and two individuals supported the NPRM without change.

One commenter expressed concern about the effect on safety of certain internal Boeing practices. This comment is outside the scope of the NPRM.

The following presents the remaining comments received on the NPRM and the FAA's response to each comment.

In the NPRM, the FAA proposed to require complying with Boeing Alert Requirements Bulletin B787-81205-SB540023-00 RB, Issue 001, dated September 22, 2023, or B787-81205-SB540024-00 RB, Issue 001, dated September 22, 2023, both of which specify replacing the engine inlet with a new or serviceable engine inlet under certain conditions. The requirements bulletins define a serviceable engine inlet as an engine inlet that has been inspected and had applicable corrective actions done in accordance with the requirements bulletins. AAL requested that the FAA consider, as an alternative serviceable engine inlet, one that has been inspected and had applicable corrective actions done in accordance with Collins Service Bulletin 787-G71-013, Revision 00, dated August 3, 2023, or later approved revisions.

The FAA does not agree. The instructions in Collins Aerospace Service Bulletin 787-G71-013 or 787-R71-034 are insufficient to ensure a damaged engine inlet is restored to a serviceable condition. Where indications of heat damage are discovered on metallic components, the Collins service bulletins specify performing conductivity and hardness tests. When the results of the conductivity or hardness test are outside acceptable limits, the Collins service bulletins specify submitting the test results to Collins with no further procedures or instructions to accomplish a repair. The FAA has not changed this AD in this regard.

In the NPRM, the FAA proposed to require complying with Boeing Alert Requirements Bulletin B787-81205-SB540023-00 RB, Issue 001, dated September 22, 2023, or B787-81205-SB540024-00 RB, Issue 001, dated September 22, 2023, both of which specify inspecting the engine inlet cavity in accordance with those requirements bulletins and with Collins Service Bulletin 787-G71-013 or 787-R71-034, both dated August 3, 2023, or later-approved revisions. AAL requested that the FAA revise the AD by adding the inspection procedures from the Boeing and Collins bulletins instead of incorporating those procedures by reference. As support for its request, AAL stated the bulletins are not readily available and accessible to the line mechanics.

The FAA disagrees with AAL's request to revise the proposed AD to include the inspection instructions instead of incorporating the service information by reference. Including all inspection instructions in the AD is inefficient and defeats the purpose of incorporation by reference. The referenced Boeing and Collins service bulletins are readily available to operators through their normal courses of business or from the manufacturers. The FAA has not changed this AD in this regard.

In the NPRM, the FAA proposed to require complying with Boeing Requirements Bulletin B787-81205-SB540023-00 RB, Issue 001, dated September 22, 2023, or B787-81205-SB540024-00 RB, Issue 001, dated September 22, 2023, both of which reference specific sections, by revision number, of the Boeing structural repair manual (SRM) for certain information. Boeing and UAL requested that the FAA revise the proposed AD to allow the use of later-approved revisions of the SRM. Boeing stated that operators do not recall historical SRM revisions, and therefore they can incorporate only the latest revision of the SRM at the time of accomplishment.

The FAA disagrees with the request. The SRM sections cited in the requirements bulletins define heat damage in a way that the FAA finds will address the unsafe condition in this AD. If future revisions of those SRM sections also define heat damage in a way that adequately addresses the unsafe condition in this AD, the commenters can request approval of those sections as an alternative method of compliance (AMOC). The FAA has not changed this AD as a result of this comment.

Boeing requested that the FAA revise the Background section of the NPRM and paragraph (e) of the proposed AD to clarify that partially degraded seals were found in addition to missing seals.

The FAA agrees and has revised the preamble and the unsafe condition statement in paragraph (e) of this AD accordingly.

The preamble of the NPRM explained that the FAA proposed to require doing a records check and updating the operator's MEL, among other actions. Boeing requested that the FAA revise the preamble to clarify that the update is actually within the Dispatch Deviations Guide (DDG) and not with any actual equipment on the list. Boeing stated that this change would avoid confusion regarding the actual MEL changes.

The FAA disagrees with the request. This AD requires revising the operator's MEL by incorporating the DDG update. Although the commenter is correct that the MEL revision is not intended to change any equipment listed on the MEL, since the DDG is part of the MEL, the statement in the NPRM is accurate. The FAA has not changed this AD in this regard.

Boeing, AAL, and UAL requested that the FAA revise paragraph (h)(3) of the proposed AD, which incorrectly referred to paragraph (k) for approval of AMOCs. The correct reference is paragraph (j).

The FAA agrees and has revised paragraph (h) of this AD accordingly.

In the NPRM, the FAA proposed to require complying with Boeing Requirements Bulletin B787-81205-SB540023-00 RB, Issue 001, dated September 22, 2023, or B787-81205-SB540024-00 RB, Issue 001, dated September 22, 2023. Table 10 of the requirements bulletins specifies doing an inspection of the engine inlet cavity at or prior to the expiration of the time interval under MEL 30-21-01-02 or MEL 30-21-01-07 (the interval for repair category C, which is 10 consecutive calendar days (240 hours) with a single extension, if authorized, as defined in the DDG).

British Airways requested that the FAA revise the compliance time to allow an additional 125 days after the expiration of the MEL interval period to do the inspections and any corrective actions. British Airways acknowledged the safety concerns surrounding inlets that have been exposed to high temperatures during the time period allowed under MEL 30-21-01-02 or MEL 30-21-01-07 but stated the compliance time in the NPRM would cause considerable maintenance concerns for operators as it does not give sufficient time to plan for and carry out the required actions in a controlled environment.

The FAA disagrees with the request for a longer compliance time. The FAA anticipates the potential structural damage incurred by the airplane due to dispatch under the MEL to increase as the engine inlet accumulates more operational time under those specific MEL conditions. Since accumulated structural damage on each engine inlet is unknown, the FAA determined that the inspection of the engine inlet at the completion of the dispatch interval period was necessary. Operators who can justify that, after completion of the MEL dispatch interval period, an engine inlet can maintain its structural integrity over a longer time period may propose that time period as an alternative method of compliance under the process specified in paragraph (j) of this AD.

In the NPRM, the FAA proposed to require complying with Boeing Requirements Bulletin B787-81205-SB540023-00 RB, Issue 001, dated September 22, 2023, or B787-81205-SB540024-00 RB, Issue 001, dated September 22, 2023, both of which specify revising the operator's MEL by incorporating the DDG 30-21-01-02 update. The MEL, with the DDG update incorporated, allows dispatch with inoperative equipment specified under items 30-21-01-02 and 30-21-01-07 provided the engine inlet cavity is inspected and applicable corrective actions are taken in accordance with the requirements bulletins and with Collins Service Bulletin 787-G71-013 or 787-R71-034, both dated August 3, 2023, or later approved revisions.

Qantas and UAL requested that the FAA change the location of the required inspection instructions for dispatch under the MEL from the bulletins to the airplane maintenance manual (AMM). Alternatively, UAL requested that the inspection instructions be included in the DDG update itself instead of having the DDG refer to the service bulletins. Qantas, UAL, and British Airways all stated that operators' maintenance systems are not set up to provide maintenance personnel with access to service bulletins. Qantas expressed a concern that maintenance personnel could inadvertently fail to carry out the required inspection as part of the MEL process.

The FAA disagrees. The concern about accessibility of the requirements bulletins to maintenance personnel is not unique to this AD. The FAA commonly issues ADs that mandate service documents containing instructions that must be carried out to resolve an unsafe condition. Operators and repair stations are required to provide those mandatory service documents to their maintenance personnel. In addition, for this AD, the requirement through the MEL is necessary because compliance may be based on the need for dispatch with inoperative equipment. The FAA has not changed this AD as a result of these comments.

Qantas requested that the FAA clarify how to comply with the AD for engine inlets that are not installed on an airplane and for which the last installation is unknown. Qantas stated that since engine inlets can be moved from airplane to airplane, operators may not know whether an engine inlet was installed on airplane and dispatched under the MEL.

The requirements bulletins specify that, if an operator cannot determine whether the airplane was dispatched under MEL 30-21-01-02 or MEL 30-21-01-07, the engine inlet must be inspected or replaced. No change to this AD is necessary as a result of this comment.

UAL stated that the SRM sections referenced in the requirements bulletins do not provide pass/fail criteria for the amount of discoloration when assessing for heat damage. UAL requested clarification of whether any browning of primer would be an indication of a missing seal.

The commenter is correct that the SRM sections referenced in the requirements bulletins do not provide pass/fail criteria. However, the SRM sections do provide appropriate information to determine heat damage. Under the criteria in the SRM, the FAA expects that any discoloration of primer would be treated as evidence of heat damage. The FAA has not changed this AD as a result of this comment.

The FAA reviewed the relevant data, considered any comments received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on these products. This AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.

The FAA reviewed Boeing Alert Requirements Bulletin B787-81205-SB540023-00 RB, Issue 001, dated September 22, 2023; and Boeing Alert Requirements Bulletin B787-81205-SB540024-00 RB, Issue 001, dated September 22, 2023. This material specifies procedures for incorporating (or verifying incorporation of) an updated DDG for item 30-21-01-02 into the operator's existing MEL, checking records to determine whether the inlet has been dispatched under MEL item 30-21-01-02 or 30-21-01-07 before incorporation of the DDG 30-21-01-02 update, and applicable related investigative and corrective actions, including general visual inspection for signs of heat damage around the EAI duct, conductivity measurement and hardness test of areas with heat damage, replacement/installation of the periseal and aft seal, and repair or replacement of the engine inlet. These documents are distinct since they apply to different airplane configurations. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in ADDRESSES .

The FAA considers that this AD would be an interim action. An investigation is ongoing. If final action is later identified, the FAA might consider further rulemaking then.

The FAA estimates that this AD affects 110 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

The FAA estimates the following costs to do any investigative actions or repairs/replacements that would be required based on the results of the records check. The agency has no way of determining the number of airplanes that might need these actions:

The FAA has received no definitive data on which to base the cost estimates for the conductivity measurement, the hardness test, inlet replacement, and installation of a new periseal and aft seal, as specified in this AD.

The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected operators.

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

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

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

(2) Will not affect intrastate aviation in Alaska, and

(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Dassault Aviation Model FALCON 7X airplanes. The NPRM published in the Federal Register on April 10, 2024 (89 FR 25189). The NPRM was prompted by AD 2023-0216, dated December 18, 2023, issued by EASA, which is the Technical Agent for the Member States of the European Union (EASA AD 2023-0216) (also referred to as the MCAI). The MCAI states that certain pylon BALDs might be defective, due to incorrect manufacturing processes and incomplete acceptance test procedures. The presence of defective LH and RH pylon BALDs could lead to undetected pylon overheat, possibly resulting in structural degradation or uncontrolled fire.

In the NPRM, the FAA proposed to require a one-time operational check of affected parts and, depending on findings, accomplishment of applicable corrective action, and to limit the installation of affected parts under certain conditions, as specified in EASA AD 2023-0216. The FAA is issuing this AD to address the possible presence of defective LH and RH pylon BALDs. The unsafe condition, if not addressed, could result in undetected pylon overheat, possibly resulting in structural degradation or uncontrolled fire.

You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2024-0999.

The FAA received no comments on the NPRM or on the determination of the cost to the public.

This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.

EASA AD 2023-0216 specifies procedures for a one-time operational check of affected parts, including an inspection of the routing of the rear and front BALD loops for interference with the aircraft structure between two grommets, an inspection of the BALD loops for overheating and burn marks, an inspection of the area surrounding each test point for possible interference between the hot air gun and the temperature-sensitive piping and harnesses, a test of the BALD loops with a wide blower nozzle for a certain crew alerting system (CAS) message, and a test of the BALD loops with a narrow blower nozzle for a certain CAS message; and, depending on findings, accomplishment of applicable corrective action including replacing defective BALD loops. EASA AD 2023-0216 also provides conditions for installation of affected RH and LH pylon BALDs.

This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA estimates that this AD affects 150 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

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

The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected operators.

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

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

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

(2) Will not affect intrastate aviation in Alaska, and

(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2024-2010; Project Identifier AD-2024-00366-R” at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

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

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Hung Nguyen, Aviation Safety Engineer, FAA, 1801 S Airport Road, Wichita, KS 67209; phone: (562) 627-5362; email: hung.v.nguyen@faa.gov. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The FAA issued AD 2000-18-09, Amendment 39-11894 (65 FR 55175, September 13, 2000) (AD 2000-18-09), for Bell Helicopter Textron, Inc. (now Bell Textron Inc.), Model 412, 412CF, and 412EF helicopters with cap angle part number (P/N) 212-030-191-001, installed. AD 2000-18-09 was prompted by a report of a fatigue crack in a tail boom attachment cap angle. AD 2000-18-09 required repetitively inspecting certain part-numbered cap angles for a crack and, depending on the results, replacing a cracked cap angle with an airworthy cap angle and repairing any cracked adjacent structure. AD 2000-18-09 also required reporting any crack to the FAA. The FAA issued AD 2000-18-09 to prevent failure of a cap angle, loss of the tail boom, and subsequent loss control of the helicopter.

Since the FAA issued AD 2000-18-09, Bell Textron Inc., has received additional reports of occurrences of fractured cap angles, which were found during routine inspections and during the repetitive 100 hours time-in-service (TIS) inspection required by AD 2000-18-09. Further investigation revealed the 100 hours TIS interval is not adequate to detect cracks before fracture of a cap angle could occur. Accordingly, Bell Textron Inc., issued updated material to reduce the inspection interval to 25 flight hours for certain helicopters and 50 flight hours for certain other helicopters to detect cracks and prevent failures of the cap angle. The updated material also specifies inspecting for and removing any sealant before inspecting the cap angle area. Additionally, due to the similarity to Model 412, 412CF, and 412EP helicopters, the FAA determined that Bell Textron Inc., Model 212, 205A, 205A-1, and 205B helicopters are also affected by the same unsafe condition.

Furthermore, since AD 2000-18-09 was issued, the FAA has revised its writing practices to comply with updated formats and policy. As a result, paragraph identifiers have changed and the reporting requirement that was required by AD 2000-18-09 has been revised in this AD. This AD also incorporates updated procedures by reference and removes the information in Note 1 of AD 2000-18-09 as that information is understood.

Lastly, since the FAA issued AD 2000-18-09, Bell Helicopter Textron, Inc., changed its name to Bell Textron Inc.; this AD reflects that change.

The FAA is issuing this AD because the agency determined the unsafe condition described previously is likely to exist or develop in other products of the same type designs.

The FAA reviewed Bell Alert Service Bulletin (ASB) 205-24-122 for Model 205A and 205A-1 helicopters, Bell ASB 205B-24-77 for Model 205B helicopters, Bell ASB 212-24-169 for Model 212 helicopters, Bell ASB 412-24-197 for Model 412 and 412EP helicopters, and Bell ASB 412CF-24-77 for Model 412CF helicopters, all dated April 22, 2024. This material specifies procedures for inspecting for and removing any sealant, inspecting the cap angle area with a 10X magnifying glass and bright light for a crack and if a crack is found, this material specifies replacing the cap angle or contacting Bell for further instructions. This material also specifies touching up any primer that may have been damaged during the sealant removal.

This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This AD requires visually inspecting for sealant around the edge of the fitting and depending on the results, removing any sealant. This AD also requires, using a 10X or higher power magnifying glass and flashlight, inspecting the cap angle and adjacent structure for a crack. Depending on these results, this AD requires removing an affected cap angle from service and installing an airworthy cap angle, repairing an affected adjacent structure, and reporting certain information to the FAA.

If there is a crack in the cap angle and the helicopter is at a location where the cap angle cannot be replaced, the referenced material specifies contacting the manufacturer, whereas this AD does not include that action.

If there is a crack in the adjacent structure to the cap angle, this AD requires repairing the adjacent structure in accordance with a method approved by the FAA, whereas the referenced material does not address this condition.

If there is a crack, this AD requires reporting certain information, whereas the referenced material does not.

The FAA considers this AD to be an interim action. The manufacturer is currently investigating the root cause of the unsafe condition identified in this AD. If final action is later identified, the FAA might consider further rulemaking.

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

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies forgoing notice and comment prior to adoption of this rule because the affected components are part of an assembly that is critical to the control of a helicopter. In addition, cracking could lead to instantaneous failure before detection. As the FAA has no information pertaining to the extent of cracking of the affected components that may currently exist in helicopters or how quickly the condition may propagate to failure, for certain helicopters the initial instance of the actions required by this AD must be accomplished within 25 hours TIS, and thereafter within intervals not to exceed 25 hours TIS. Based on the average flight-hour utilization rate of these helicopters, the compliance time for the initial instance of the required actions is a period of up to 1 month. Accordingly, notice and opportunity for prior public comment are impracticable and contrary to the public interest pursuant to 5 U.S.C. 553(b).

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

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

The FAA estimates that this AD affects 157 helicopters of U.S. registry. Labor costs are estimated at $85 per work-hour. Based on these numbers, the FAA estimates the following costs to comply with this AD.

Visually inspecting for the presence of sealant takes a minimal amount of time for a nominal cost. If required, removing sealant will take approximately 0.5 work-hour for an estimated cost of $43 per helicopter.

Inspecting the cap angle and adjacent structure will take approximately 0.5 work-hour for an estimated cost of $43 per helicopter and $6,751 for the U.S. fleet, per inspection cycle.

If required, replacing an affected cap angle will take approximately 400 work-hours and parts will cost up to approximately $1,171 for an estimated cost of $35,171 per replacement.

If required, repairing an adjacent structure will take approximately 16 work-hours for an estimated cost of $1,360 per helicopter. The FAA has no data to determine the parts costs to accomplish this repair.

If required, reporting inspection results will take approximately 1 work-hour for an estimated cost of $85 per report.

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

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

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

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

(2) Will not affect intrastate aviation in Alaska.

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

The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2024-2013; Project Identifier AD-2024-00363-A” at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

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

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Tim Eichor, Aviation Safety Engineer, Central Certification Branch, FAA, 1801 S. Airport Road, Wichita, KS 67209. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The FAA issued AD 2023-15-07, Amendment 39-22519 (88 FR 53761, August 9, 2023) (AD 2023-15-07), for all Air Tractor Model AT-802 and AT-802A airplanes with Wipaire, Inc. STC No. SA01795CH installed. AD 2023-15-07 required repetitively inspecting the left and right forward horizontal stabilizer spars for cracks, replacing any forward horizontal stabilizer spar found cracked, and reporting inspection results to the FAA. For certain airplanes, AD 2023-15-07 required the inspection before the airplane accumulated 200 hours time-in-service (TIS) after installation of STC No. SA01795CH. AD 2023-15-07 resulted from cracks found in the forward horizontal stabilizer spar bend radius located at the STC finlet mounting locations. The FAA issued AD 2023-15-07 to detect and correct cracks in the forward horizontal stabilizer spar, which could result in structural failure of the horizontal tail with consequent loss of control of the airplane.

As a result of the reports of the inspections required by AD 2023-15-07, additional cracks have been found in the forward horizontal stabilizer spar, including cracks found before the airplane accumulated 200 hours TIS after installation of the STC. Accordingly, the FAA determined that reducing the inspection interval is necessary. In addition, based on a new fatigue analysis, the FAA determined that there is the potential for cracks in the rear horizontal stabilizer spar. Wipaire, Inc. has developed a change to STC No. SA01795CH, which incorporates an improved design that includes modification kits to install bathtub fittings on the horizontal stabilizer spars to mitigate this condition by improving the structural load path. This includes more accessible repetitive inspection intervals of 110 hours TIS. The FAA is issuing this AD to address the unsafe condition on these products.

The FAA is issuing this AD because the agency determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

The FAA reviewed Wipaire, Inc. Service Letter 253, Revision D, dated July 3, 2024 (Wipaire SL 253D), which specifies procedures for repetitively inspecting the left and right, forward and rear, horizontal stabilizer spars for cracks and installing bathtub fittings using Service Kit 1012347-01 or 1012347-02. This material also specifies procedures for repetitively inspecting the left and right, forward and rear, horizontal stabilizer spars for cracks, elongated holes, and corrosion after installation of the bathtub fittings. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This AD retains none of the requirements of AD 2023-15-07. This AD requires repetitively inspecting both the left and right, forward and rear, horizontal stabilizer spars for cracks, replacing any horizontal stabilizer spar found cracked or damaged, installing bathtub fittings (Service Kit 1012347-01 or 1012347-02), and reporting inspection results to the FAA. The inspection intervals in this AD are shorter than the intervals required by AD 2023-15-07.

As part of the instructions for installing the bathtub fittings, Wipaire SL 253D specifies that to be eligible for reinstallation, finlet mount weldments must include a certain welded gusset, but that constraint is not required by this AD.

Wipaire SL 253D includes an inspection of the finlets and forward bathtub fittings at intervals of 1,500 hours TIS and establishes a life limit of 7,800 hours TIS on the forward spar and forward bathtub fittings. This AD does not include those requirements because the compliance times would allow sufficient time to provide notice and opportunity for public comment. The FAA is evaluating these actions and may consider future rulemaking.

This AD requires an initial compliance time of within 7 days or before the airplane accumulates 110 hours TIS since installation of STC No. SA01795CH, whichever occurs later, while Wipaire SL 253D specifies different compliance times for different configurations of STC No. SA01795CH.

Wipaire SL 253D specifies repeating the inspections at intervals of 200 hours TIS, but this AD requires the repetitive inspections at intervals not to exceed 110 hours TIS.

The FAA considers this AD to be an interim action. The FAA is evaluating the need to establish a life limit (potentially as low as 2,000 hours TIS) on the horizontal stabilizer spars to further mitigate the unsafe condition long term. The FAA may consider future rulemaking on this subject.

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

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies forgoing notice and comment prior to adoption of this rule because cracks in the horizontal stabilizer spars could lead to structural failure of the horizontal tail with consequent loss of control of the airplane. Airplanes with the affected STC installed are used in fire-fighting missions and put frequent high repetitive fatigue loads in this area at a high utilization rate (about 100 hours TIS monthly). Based on the number of cracks found to date, a significant number of airplanes need to be inspected within 7 days after the effective date of this AD and modified with bathtub fittings within 300 hours TIS (about 3 months for the high utilization airplanes). These compliance times are shorter than the time necessary for the public to comment and for publication of the final rule. Accordingly, notice and opportunity for prior public comment are impracticable and contrary to the public interest pursuant to 5 U.S.C. 553(b).

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

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

The FAA estimates that this AD affects 30 airplanes of U.S. registry.

The FAA estimates the following costs to comply with this AD:

The FAA estimates the following costs to do any necessary replacements that would be required based on the results of the inspection. The agency has no way of determining the number of airplanes that might need this replacement:

The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected operators.

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

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

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

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

(2) Will not affect intrastate aviation in Alaska.

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

On May 1, 2024, the Department of State (the Department) published a proposed rule with request for comments (89 FR 35028) to create an exemption designed to implement the provisions of section 38(l) of the Arms Export Control Act (AECA) (22 U.S.C. 2778(l)), as added by section 1343 of the National Defense Authorization Act (NDAA) for Fiscal Year 2024 (Pub. L. 118-31). The proposed rule at § 126.7 stated that no license or other approval would be required for the export, reexport, retransfer, or temporary import of defense articles; the performance of defense services; or engagement in brokering activities between or among authorized users within Australia, the United Kingdom, and the United States provided certain requirements and limitations are met. The rule also proposed a new supplement no. 2 to part 126, which is an Excluded Technology List (ETL) designed to limit certain defense articles and defense services from being eligible for the provisions of § 126.7. Further, the Department proposed § 126.18(e) for transfers of classified defense articles to dual nationals, who are citizens of Australia and the United Kingdom and another country, provided all other criteria are met in this exemption. Lastly, the proposed § 126.15(c) and (d) aimed to implement a separate provision, section 1344 of the NDAA for Fiscal Year 2024, for expedited licensing for exports of defense articles and defense services to Australia, the United Kingdom, and Canada.

The Department acknowledges and appreciates the comments submitted in response to the proposed rule identified as 89 FR 35028 (herein “proposed rule”) and is now publishing this interim final rule, which contains revisions to certain provisions of the proposed rule and additions to certain ITAR sections. The Department welcomes further public comment on the regulatory text of this interim final rule.

The main changes to regulatory text in this rule, compared to the proposed rule, are as follows:

• In § 123.10(a), the phrase “pursuant to a license or other authorization, except for the exemptions in §§ 126.5 and 126.7” is added to the statement that a nontransfer and use certificate ( i.e., Form DSP-83) generally is required for the export of significant military equipment and classified articles regardless of the form of the applicable export authorization while simultaneously clarifying that no nontransfer and use certificate is required for exports pursuant to the specified exemptions.

• In § 124.8(a)(5), § 126.7 was added to clarify that the exemption may be used to retransfer and reexport defense articles pursuant to this exemption that were originally exported via an agreement.

• In § 126.1(a), § 126.18(e) was added to the list of excepted exemptions from the section's country-based prohibitions.

• In § 126.7(b)(1), the term “activity” replaced the term “transfer” in order to more clearly express the inclusion of defense services and brokering activities under this exemption.

• In § 126.7(b)(2), the term “broker” was added to clarify that depending on the activity, the transferor, recipient, or broker all would need to register with DDTC, as appropriate. Further, language was added to clarify that a U.S. Government department or agency are authorized users of this exemption.

• For § 126.7(b)(4), the recordkeeping requirements in proposed § 126.7(b)(4) are removed in this interim final rule. The Departments notes recordkeeping requirements in § 120.15(e) apply to this exemption as they do for all other ITAR exemptions.

• For § 126.7(b)(6), this proposed provision was removed in this interim final rule. The proposed text was redundant and simply listed a number of ITAR requirements to which users are already subject. Further the proposed text to obtain nontransfer and use assurances was removed from the § 126.7 exemption, as these assurances are incorporated into the authorized user process.

• In § 126.7(b)(8), the reference to Restricted Data and the Atomic Energy Act of 1954, as amended, was removed as it is duplicative and is already referenced in § 120.5(c).

• In § 126.7(b)(8), the requirements for handling classified were changed to a note to § 126.7(b), and the industrial security requirement reference was updated for Australia.

• In § 126.15(c), the ITAR defined term “person” replaced the phrase “corporate entities” to clarify that individuals and entities are included in this provision.

• In § 126.15(d), the phrase “To the extent practicable . . .” was added to align with the NDAA for Fiscal Year 2024.

• In, § 126.18(e), the phrase “retransfer or reexport” replaces the term “transfer” in this provision to clarify more explicitly the types of transfers that are allowed.

• In supplement no. 2 to part 126, the Excluded Technologies List (ETL), is clarified and adjusted to better address the necessary and intended scope of exclusions:

○ The Missile Technology Control Regime (MTCR) exclusion no longer applies to unmanned aerial vehicle (UAV) flight control systems and vehicle management systems described in United States Munitions List (USML) Category VIII(h)(12).

○ The anti-tamper exclusion is clarified.

○ The exclusion specific to source code is removed in its entirety.

○ The exclusion of classified manufacturing know-how for certain articles described in USML Categories XI and XII is removed in its entirety.

○ The entry for articles in USML Categories IV(a)(3), (9), (10), and (11), (b)(2), (h)(5), and (i) was refined to exclude launchers for man-portable air defense systems (MANPADS), but not other articles described in paragraph (b)(2).

○ Excluded articles described in USML Categories XI and XIII are now described across multiple entries to better implement the intent of that entry, as follows:

All articles described in USML Category XI(a)(1)(i) and (ii) are excluded, as are articles described in paragraph (c) or (d) of USML Category XI that are specially designed for the excluded paragraph (a)(1) articles, and directly related technical data and defense services.

The exclusion of classified countermeasures and counter- countermeasures is refined and split into multiple entries as follows:

• Classified articles described in USML Category XI(a)(2), other than underwater acoustic decoy countermeasures; classified articles described in paragraphs (c)(1) through (3) or paragraph (d) of USML Category XI specially designed therefor; and classified, directly related technical data and defense services are excluded.

• Classified articles described in USML Category XI(a)(3)(xviii), classified countermeasures and counter-countermeasures described in Category XI(a)(4)(iii), and classified articles described in Category XI(a)(5)(iii); classified articles described in paragraphs (c)(1) through (3) and (18) or paragraph (d) of USML Category XI specially designed therefor; and classified, directly related technical data and defense services are excluded.

• Classified articles described in USML Category XI(c) or (d) that implement countermeasures or counter-countermeasures for defense articles described in Category XI(a), and classified, directly related technical data and defense services, are excluded.

The exclusion of classified articles described in USML Category XI(b), which also excludes classified, directly related technical data and defense services, is split out into a separate entry.

Classified articles described in USML Category XI(c) specially designed for articles described in Category XIII(b); and classified, directly related technical data and defense services; are excluded. This replaces the previously proposed exclusions of articles specially designed for Category XIII(b) articles and classified articles for cryptographic systems.

The exclusion of classified articles described in USML Category XIII(b) is split out into a separate entry, along with classified, directly related technical data and defense services.

○ Following consultations with the Department of Defense (DoD), the Department is adding classified articles described in USML Category XI(a)(4)(i), certain classified articles specially designed for those articles, and classified, directly related technical data and defense services to the previously proposed exclusions. The excluded articles and services relate to intelligence capabilities. Technology for integrating or incorporating U.S. National Security Administration data used in these electronic support articles requires case-by-case review to assess the sensitivity and releasability of the specific technology.

○ The exclusion of classified articles described in USML Category XII(d)(3) and directly related technical data and defense services is removed.

○ The exclusion of source code and classified technical data and defense services directly related to certain night vision commodities is removed in its entirety.

○ Classified articles in paragraphs (f)(7) and (12) of USML Category XIX, specially designed for excluded articles in paragraph (f)(1) or (2) of that category, and directly related technical data and defense services, are now excluded.

○ The entry for USML Category XX manufacturing know-how is modified to remove the exclusion for manufacturing know-how directly related to classified uncrewed vessels, and to also exclude design methodology and engineering analysis for crewed vessels, articles used only in crewed vessels, classified payloads, and classified uncrewed underwater vessel (UUV) signature reduction techniques.

A review and response to the public comments submitted on the proposed rule, organized by applicable proposed section of the ITAR, is as follows.

Several commenters expressed support for the proposed rulemaking effort and the Department acknowledges that support, while two commenters noted that they opposed the exemption outright as they assessed it could result in unsecured trade in munitions. The Department notes the terms of the exemption support secure defense trade and the trilaterally shared security standards associated with the protection of defense technology.

Two commenters recommended regulators commit to additional industry review for this exemption. The Department notes this rulemaking takes the form of an interim final rule, which allows for further public comment.

Two commenters proposed a specific exemption to allow government contractors from Australia, the United Kingdom, and the United States to work together more effectively without needing a license or other approval from DDTC. The Department notes the previously proposed exemption in § 126.7 allows for designated parties, including government contractors, from those three countries to use the exemption in support of their work, provided the terms of the exemption are met.

Two commenters recommended the addition of “classified and unclassified” before the phrase “defense articles” to more clearly include the type of export allowed and instructions given in § 126.7(a) and (b)(8), respectively. The Department notes throughout the ITAR, unless specified, the term “defense articles” applies to both unclassified and classified articles. For example, where a given provision refers specifically to “unclassified defense articles,” the scope of the provision applies only to unclassified defense articles. However, a reference to “defense articles” should be read to apply to both unclassified and classified defense articles.

Similarly, another commenter wanted confirmation that the § 126.7 exemption included technical data. The Department confirms the exemption includes technical data and notes that technical data is included in the ITAR definition of “defense article” found at § 120.31.

One commenter requested clarification as to whether retransfers are allowed under the § 126.7 exemption if the defense article was exported to Australia or the United Kingdom under another ITAR exemption. Similarly, another commenter asked whether one has to be an authorized user for retransfers under the § 126.7 exemption. The Department confirms such retransfers are permitted under § 126.7 provided all the criteria are met, including § 126.7(b)(2)(ii)—requirements associated with the transferor, recipient, or broker.

Two commenters requested clarification as to whether the original U.S. exporter, the original equipment manufacturer, and the recipient of a defense article exported under the § 126.7 exemption could apply for a retransfer or reexport authorization to a territory outside of Australia or the United Kingdom. The Department confirms that any of the three may apply for a retransfer or reexport authorization. Similarly, another commenter also recommended the creation of a new Open General License to allow for authorized users to reexport unclassified defense articles to destinations outside of Australia, the United Kingdom, and the United States. The Department acknowledges this comment and may consider this recommendation in the future.

One commenter recommended the Department set out in § 126.7(a) that activities described in the section are not subject to a requirement for licensing or other approvals, rather than referring to the provision as an exemption. The Department declines to accept this recommendation and notes the exemption authorizes, without further licenses or other approvals from DDTC, activities authorized by the exemption, provided the criteria for use of the exemption are met.

One commenter suggested modifying § 126.7(b) to add the phrase “Except as provided in § 120.54, the exemption described in paragraph (a) . . .”. The commenter also advised finalizing and incorporating the text from the proposed rule (87 FR 77046) to this interim final rule, especially § 120.54(a)(6) regarding the taking of defense articles subject to this subchapter on deployment or training exercises to countries not previously approved. The Department notes this activity generally is already allowed, presuming there is no change in end-user or end-use, and is the subject of a separate rulemaking (87 FR 77046, Dec. 16, 2022) (proposed) and FR Doc. 2024-18249, scheduled to publish on August 15, 2024 (RIN 1400-AF26). As for the expressed reference to § 120.54, the Department declines to adopt this suggestion, as no other ITAR provision outside of part 120 references § 120.54. That provision is definitional and therefore applies to the entire ITAR. Including a specific reference in this one instance could lead to confusion as to whether other provisions of the ITAR must specifically reference that or other definitional provisions.

Three commenters asserted proposed § 126.7(b)(4), (6), and (7) are additional limitations and requirements not specified in AECA section 38(l)(4). The commenter further claimed this statutory exemption also states that it “exempt[s]” the applicable transfers “from the licensing and other approval requirements” of the AECA and that it should not be called an exemption, but rather something else. The Department disagrees with this commenter's interpretation. While an exemption is a type of authorization and a type of other approval, the statutory language in AECA section 38(l) states that the Department “shall immediately exempt from the licensing or other approval requirements of this section exports and transfers . . . .” The Department interprets the provision to refer to creating an exemption from the requirement to obtain, prior to a regulated activity, either a license or other approval, i.e., a written document DDTC may issue in lieu of a license, such as a Technical Assistance Agreement, to approve a regulated activity. Further, the Department does not interpret the provision as creating an exemption while restricting its ability to issue an exemption. “Exemption” is the term the statute repeatedly uses, and what § 126.7 will create is an exemption consistent with the definition in § 120.57(c).

Similarly, another commenter asserted that § 120.11(c) does not apply to this provision, and the Department cannot impose requirements on reexport and retransfers. The Department disagrees. The requirements of the ITAR, including but not limited to registration, recordkeeping requirements, § 120.11(c), and penalties for violations continue to apply to this exemption as they do with other exemptions, such as the Canadian exemptions. The part of the law the commenter relies upon to support their argument, 22 U.S.C. 2778(l)(2), is not an independent export authority. Instead, that provision simply empowers the Department to issue a country-based exemption under its other core unaltered authorities in section 2778(a) and (b). This is further supported by the fact that in section 2778(f)(2) the Department's ability to issue a country-based exemption under its core existing authorities were at one point restricted before being allowed again for the United Kingdom (UK) and Australia by section 1345(a) of the NDAA for Fiscal Year 2024. Consequently, the Department is required to issue an exemption only from the AECA and ITAR requirements to obtain a license or other approval for exports and various transfers, not from other ITAR provisions, which still do and will apply.

Several commenters recommended expansion of the scope of transfers allowed in § 126.7(b)(1) to include transfers (1) to or within the physical territory of Australia, the United Kingdom, or the United States; (2) to members of the armed forces of Australia, the United Kingdom, or the United States acting in their official capacity or while on deployment; (3) to government employees of Australia, the United Kingdom, and the United States; (4) to § 126.7 authorized users deployed in support of such armed forces, to include maintenance, repair, and overhaul providers; (5) to international waters when in support of AUKUS testing or operations; and (6) by Australian, U.S., and UK persons to export or transfer defense articles for end use by the armed forces of Australia, the United Kingdom, or the United States outside of their physical territories. Commenters expressed that the proposed § 126.7 precludes support in various ways, including to the three countries' armed forces when deployed outside their physical territories, and restricts contractors in support of those armed forces while deployed. This exemption is subject to statutory implementation requirements mandating its introduction in relatively short timeframes. The scope of the suggested changes is significant and additional time is required to consider them. The Department has determined that an interim final rule with another round of public comments will support continued refinement of the exemption to ensure the exemption works for the regulated community and supports the goals of this rulemaking.

One commenter recommended revising the proposed § 126.7(b)(1) text to include the clarifying phrase “. . . the transfer of defense articles or performance of defense services must be to or within the physical territory . . .” to clarify that transfers applies to defense articles and defense services. The Department accepts this comment in part and amends § 126.7(b)(1) to clarify that the term “activity” includes brokering and the provision of defense services within the scope of the exemption.

Two commenters recommended the creation of a definition of Australia and the United Kingdom in the ITAR, similar to how the United States is defined in § 120.60. The Department declines to adopt a specific definition for any one foreign country. Longstanding practice and the ordinary meaning of a country's physical territory has been understood in both the ITAR and the Department of Commerce's Export Administration Regulations (EAR). Should an unusual and country-specific question as to physical territory arise, the Department recommends asking it within an advisory opinion request pursuant to ITAR § 120.22.

One commenter sought clarification regarding the scope of the exemption with respect to “cyber physical space” managed by Australia, the United Kingdom, or the United States. The Department clarifies that servers hosting technical data in one of the three countries would still be within the physical territory of Australia, the United Kingdom, or the United States; however, transfers of technical data must be to or from those that meet the criteria set out in § 126.7(b)(2). Further, the Department notes the text of § 120.54, which lists activities that are not exports, reexports, retransfer, or temporary imports, including sending, taking, or storing of certain encrypted unclassified technical data that meet the specific criteria provided there.

Another commenter sought clarification as to whether a U.S. person who works for a U.S. company can utilize the § 126.7 exemption while traveling outside the United States. The Department notes that, per the proposed § 126.7(b)(1), the transfer must be to or within the physical territory of Australia, the United Kingdom, or the United States. Similarly, the Department again notes the text of § 120.54, which lists activities that are not exports, reexports, retransfer, or temporary imports.

Three commenters asked whether retransfers or reexports are allowed under § 126.7 if an ITAR-controlled defense article is exported from a non-authorized user to an authorized user. The Department clarifies that both transferors and recipients would need to be authorized users, in addition to meeting all other criteria in § 126.7, before retransfers or reexports would be allowed under this exemption.

Several commenters requested more information regarding the authorized user process. While additional information and guidance on the enrollment process will be provided separately, the Department notes that Australian and UK entities will manage the authorized user enrollment process through their respective governments.

Several commenters asked how often the authorized user list in the proposed § 126.7(b)(2)(ii) will be updated, as well as whether there will be an annual reevaluation process to remain on the authorized user list. Some commenters recommended the list be published on a public website, rather than within a user-restricted website such as the Defense and Export Control Compliance System (DECCS). Further, one commenter requested guidance to confirm that “a transferor should require no additional due diligence steps beyond checking the list . . .”, and another asked if industry will need to provide notice and then wait for approval from DDTC before each transfer of a defense article. The Department notes it is developing separate guidance on the use and administration of the authorized user list and based off of consultations with representatives from Australia and the UK, that will be released shortly through the DDTC website.

Similarly, another commenter suggested the inclusion of validity dates with the list of authorized users and provide a process to notify current authorized users when persons are removed from the list of authorized users. The Department reiterates that it is developing separate guidance on the use and administration of the authorized user list, including these points, that will be released shortly through the DDTC website.

One commenter expressed concern that the authorized users for Australia and the UK would only include those that chose to enroll, and this is not the case for other ITAR exemptions. The Department cannot require Australian or UK entities to become authorized users as that is a business decision for them to make. The Department is designing the authorized user process, in coordination with the UK and Australian governments, to encourage interest to use the § 126.7 exemption.

One commenter inquired if foreign entities who are authorized users could access DECCS and if they could apply for a Technical Assistance Agreement through DECCS or would need to submit a General Correspondence request. The Department affirms non-U.S. authorized users will have access to DDTC's website after enrolling and will be able to view the authorized user list. The Department is not designing additional functionality for non-U.S. authorized users in DECCS. Further, under 22 U.S.C. 2778(g)(5), the Department is prohibited from issuing export licenses to foreign persons. As a result, the Department does not accept the commenter's suggestion to modify DECCS to allow foreign persons to apply for Technical Assistance Agreements and other types of export authorizations. Foreign persons can submit General Correspondence requests seeking authorization to reexport and retransfer defense articles, and foreign persons owned or controlled by U.S. persons may seek approval to engage in brokering activities.

Two commenters requested the Department work with industry to publish an authorized user list in a form that can be directly accessed by industry-standard automated screening software just as it does for denied parties. The Department, in coordination with the UK and Australian governments, is designing the list to be as simple as possible to use, while maintaining certain security protocols. The Department does not develop or support third-party screening software and cannot speak to its integration with the authorized user list.

One commenter asserted that the Department should not confirm the eligibility of U.S. registrants who are not utilizing the exemption for defense trade and cooperation among Australia, the United Kingdom, and the United States. The Department clarifies DDTC will not confirm to third parties a U.S. registrant's eligibility to participate in a transfer via the § 126.7 exemption. Similarly, another commenter asserted the Department should not vet entities that the Australian and UK governments have already vetted as it is counterproductive. The Department disagrees with the premise that its vetting of parties is counterproductive as approval by both governments ensures comprehensive vetting of entities.

Two commenters recommended members of the Australian, UK, and U.S. governments be separately enumerated within § 126.7(b)(2) so one does not need to check the authorized user list. The commenters added the enumerated list should include all departments and agencies, and contractor support personnel thereof, of the Australian, UK, and U.S. governments. The Department requires the Australian and UK governments' department or agencies be identified on the authorized user list, instead of the regulatory text itself, to provide agility and flexibility in implementing updates. The Department further clarifies that the exemption would cover “contractor support personnel thereof” if the contractor personnel are authorized users.

Two commenters warned that certifying authorized users for the § 126.7 exemption will be overly complex and recommended against using a “positive” list of authorized users. Conversely, another commenter supported identifying U.S. registrants on a list accessible to exporters and reexporters on an official website. Further, two commenters suggested the Department have a help desk to aid entities with inquiries about the registration status of a company. The Department notes that only authorized users of Australia and the UK will be identified on the authorized user list on DECCS. Further, the Department is developing separate guidance on use and administration of the authorized user list that will be released shortly through the DDTC website.

Two commenters suggested certain entities should immediately be presumed eligible to be authorized users. These include government agencies and organizations of Australia and the United Kingdom, foreign subsidiaries of U.S. registered companies, and any party previously authorized for the export of defense article. Further, another commenter suggested to identify UK and Australian companies by business registry numbers and for the Department to align changes to the authorized user list with the general correspondence process for Foreign Entity Name Changes to ensure that both lists remain current. The Department notes because defense articles and defense services provide a critical military or intelligence advantage, vetting of eligible parties is vital to maintaining secure defense trade. The Department acknowledges these comments and notes it will publish separate guidance on the use and administration of the authorized user list that will be released shortly through the DDTC website. For prospectively eligible private entities, subsidiaries and affiliates might be included under the parent entity's authorized user status, depending on the parent entity's corporate structure and place of incorporation.

Three commenters requested confirmation that individual U.S. persons, including U.S. persons working abroad (USPABs), can be authorized users. Further, several commenters wanted confirmation that furnishing a defense service under § 126.7 is allowed by authorized users so separate USPAB authorization is not needed, and the defense services provided will not cause a foreign-produced defense article to become ITAR controlled. The Department affirms that all U.S. persons, as defined in § 120.62, including individual persons, are eligible to become authorized users. The § 126.7 exemption is a unique authorization not to be conflated with a USPAB authorization issued under § 120.22(b), which authorizes the export of limited defense services only. The Department reconfirms that the mere presence or involvement of a U.S. person during the design, development, etc. of a foreign-origin defense article, or the provision of limited defense services authorized via a USPAB authorization, does not subject a resultant foreign-origin defense article to the ITAR or its reexport and retransfer requirements. However, to utilize the § 126.7 exemption, a U.S. person must be an authorized user—and defense services provided via the exemption subjects technical data and any resulting defense article to the ITAR, including retransfer and reexport restrictions outside the authorized user community. The Department will provide guidance on the authorized user process separate from this rulemaking. Transferors are best positioned to determine whether the § 126.7 exemption or a USPAB authorization best suits their needs. Similarly, another commenter requested confirmation that UK or Australian citizens, including dual nationals, can be authorized users such that their employers can transfer technical data to them under this exemption. The Department clarifies that UK and Australian dual nationals can be authorized users and § 126.18(e) outlines the exemption available to them for transferring classified defense articles.

One commenter recommended clarification that registration is required only for the applicable activity being conducted ( e.g., exporting or brokering). One does not need both unless they are conducting both activities. The commenter suggested to amend the proposed § 126.7(b)(2)(i) with U.S. persons registered with the applicable registration type ( i.e., manufacturer, exporter, and/or broker) and not debarred under § 127.7. The Department accepts this comment in part and has amended the regulatory text herein.

Several comments were submitted pertaining to brokering requirements under the new exemption. These included:

• whether brokering registration as described in part 129 is required for proposed § 126.7(b)(2)(i);

• whether §§ 129.4 and 129.10(b) should be revised to clarify if entities that engage in brokering under this exemption need to register and furnish reports to DDTC;

• if the brokering recipient must be an authorized user that is supporting AUKUS; and

• if a foreign broker needs to be an authorized user and be registered as a broker;

The Department confirms that brokering registration is required per § 129.3, with certain exceptions. The Department also notes that the brokering requirements covering exemptions are already specified in § 129.4, and there is a reporting requirement in § 129.10(b) that still applies with this exemption. The recipient of any defense article must be an authorized user or registered U.S. person per proposed § 126.7(b)(2)(i); however, the proposed exemption is available for use between and among Australia, the United Kingdom, and the United States, and need not be in support of AUKUS. Lastly, the Department clarifies that foreign persons who are brokers as defined in § 129.2 must register with the Department to engage in brokering activities and must be an authorized user, per proposed § 126.7(b)(2), to use this exemption. The Department amends the proposed § 126.7(b)(2) to clarify that U.S. and foreign persons must be registered with DDTC pursuant to §§ 122.1 and 129.3, as appropriate.

Relatedly, several commenters made requests for more outreach events regarding the § 126.7 exemption and the authorized user process as well as guidance materials, including Frequently Asked Questions (FAQs) to be shared with the regulated community. The Department agrees and notes that it intends to conduct outreach and issue further guidance and FAQs on the exemption.

One of these commenters sought clarification as to whether freight forwarders, carriers, and warehousing companies need to be authorized users. The commenter similarly asked if subcontractors need to be authorized users if they receive documentation in relation to a defense article from an existing authorized user. The Department clarifies that, for purposes of § 126.7(b)(2), anyone who has access to a defense article would need to be an authorized user. We note that many carriers and other service providers do not require such access; however, freight forwarders often do as they require access to the defense articles they are processing.

Four commenters recommended expansion of the scope of the § 126.7 exemption to include British and Australian persons employed by an authorized user in the United States to avoid the need for a Foreign Person Employment (FPE) license, and to expand the exemption to include U.S. persons working abroad (USPABs) who provide defense services to an employer who is an authorized user. The Department notes that an expansion of the exemption is not needed as the existing text may be used by Australian or British FPEs or USPABs who can satisfy the elements of § 126.7, including by becoming an authorized user. However, the Department clarifies that any defense article produced or manufactured from U.S.-origin technical data or defense service(s) transferred via § 126.7 may only be transferred pursuant to a DDTC license or other authorization, which may include the § 126.7 exemption itself. In other words, any defense article that is designed, developed, engineered, manufactured, produced, assembled, tested, repaired, maintained, modified, operated, demilitarized, destroyed, processed, or used by an FPE or USPAB pursuant to § 126.7 becomes subject to the ITAR.

Another commenter sought clarification regarding how USPAB authorizations intersect with the § 126.7 exemption, in particular for dual nationals or those with Australian permanent residency. The Department notes a USPAB authorization is for limited defense services. For dual nationals, the Department notes there are ITAR exemptions available, such as in § 126.18.

One commenter requested clarification regarding the text “. . . DDTC will confirm eligibility of parties under this exemption prior to the transfer . . . . of defense articles or defense services” in the proposed rule and if this was a requirement prior to each transfer and what the process is for confirming eligibility of parties. The Department clarifies there is no requirement to check with the Department prior to each transfer and additional guidance on how this process will work will be released shortly through the DDTC website.

One commenter recommended the addition to § 126.15 of a list of defense articles for which the U.S. Government requires a license for national security reasons and recommended the public have an opportunity to comment on that list. The Department notes the list, called the Excluded Technology List (ETL), in supplement no. 2 to part 126 articulates those defense articles and defense services that are not eligible for the exemption in § 126.7. This list was created based on a combination of statutory obligations and policy decisions, including national security reasons. The public had an opportunity to comment on that list when the proposed rule published on May 1, 2024. Further, the public may continue to comment on that list with this interim final rule.

Many commenters asked how often the ETL will be updated, and some asked if there would be an opportunity for industry input. The Department notes that it is statutorily required to conduct a review of the USML every three years and any applicable changes resulting from those reviews will be reflected in the ETL. Further, the U.S. Government has also committed to ensure that the items on the ETL will be specifically reviewed on a more frequent basis, annually for the first five years from implementation and periodically thereafter, and changes will be made to the ETL, depending on the outcome of each review.

One commenter asked whether transfers of third-country origin ( e.g., South African-origin; German-origin) defense articles between and among authorized users is allowed under § 126.7, provided such transfer occurs to or within the physical territory of Australia, the United Kingdom, and the United States and the defense articles are not listed on the Excluded Technology List. The Department notes the ETL describes defense articles, which includes foreign-origin defense articles, and if the foreign-origin defense articles are subject to the ITAR, are not on the ETL, and all other criteria are met, one may elect to use the § 126.7 exemption.

Several commenters asked if the recordkeeping requirements in § 120.15(e) apply to the proposed § 126.7 exemption and how the proposed § 126.7(b)(4) differs. Similarly, several commenters recommended the replacement of § 126.7(b)(4) with § 120.15(e), and another commenter recommended confirmation that ITAR recordkeeping requirements are satisfied if the recordkeeper meets the recordkeeping obligations of the comparable national export control system in their nation. Because the recordkeeping requirements are already present in § 120.15(e) and are applicable to any kind of exemption, including the one at § 126.7, the Department will remove § 126.7(b)(4) from § 126.7 to avoid suggesting the recordkeeping requirements for the new exemption are any different than those for any other exemption. The requirements set out in the proposed § 126.7(b)(4) were similar to § 120.15(e), with the exception of criteria such as recording the Electronic Export Information (EEI) Internal Transaction Number (ITN) in one's records. Of note, the EEI number required in § 120.15(e) is only applicable to certain transfers as it is the electronic export data filed in the U.S. Customs and Border Protection's Automated Export System (AES). If your transaction required an EEI filing, then you should maintain it in your records; if it did not, then that is not part of the record. The Department also declines to accept a different nation's recordkeeping requirements as meeting the ITAR's requirements.

One commenter claimed there is nothing established regarding processes and procedures to track and report defense articles received under this exemption and differentiate between this exemption and other ITAR exemptions. The Department acknowledges this comment; however, the standard recordkeeping requirements under this exemption are the same as the standard recordkeeping requirements other ITAR exemptions are subject to (see § 120.15(e)). How companies wish to document and track and report ITAR-controlled technical data releases or transfers of defense articles is at the discretion of each company. The Department does not set expectations about what processes or procedures to use to meet that requirement.

Several commenters raised a concern that recording an individual's personal information and associated data has privacy implications and suggested recording the details of the entity rather than the natural person. The Department clarifies maintaining internal records of “the name of the natural person responsible for the transaction” refers to the transferor, not the recipient. Understanding who is responsible for executing a transfer is standard in a compliance program, allowing entities to identify problems and self-correct, and supports audits. Similarly, several commenters raised concerns that tracking certain information required for record keeping may violate the European Union's General Data Protection Regulation if shared with the Department and sought clarification as to what the term “transaction” means in this provision. The Department notes that these are the standard recordkeeping procedures that exist today and with which companies must comply with to operate under the provisions of the ITAR. Review of these recordkeeping requirements is not the subject of this rulemaking, but the Department may use the information obtained here to inform a future rulemaking. Further, the Department clarifies that term “transaction” in the proposed § 126.7(b)(4) referred to the transfer of the defense article or provision of the defense service; however, that proposed provision has been removed in this interim final rule since recordkeeping requirements are already captured in § 120.15(e).

One commenter requested confirmation that the § 126.7 exemption requires the authorized user to keep all shipping information pursuant to the exemption. The Department notes that § 120.15(e) articulates the recordkeeping requirements for ITAR exemptions, to include shipping information.

One commenter requested clarification as to who is responsible for keeping records and what constitutes a sufficient record for a technical data exchange. The Department notes technical data releases are subject to recordkeeping requirements. The Department further confirms it is removing the previously proposed § 126.7(b)(4), as § 120.15(e) sufficiently articulates the recordkeeping requirements for the § 126.7 exemption and § 120.15(e) is the provision to which a transferor should refer.

One commenter sought clarification regarding the phrase “. . . and such records must be made available to DDTC upon request . . .” in § 126.7(b)(4). The Department acknowledges this comment while noting that the subject subparagraph is removed in this rule, as explained above.

One commenter suggested modification of the proposed § 126.7(b)(5) to state that “The value of the transfer does not exceed the amounts described in § 123.15 and does not enable the manufacturing abroad of significant military equipment as described in § 124.11.” The Department notes there are separate statutory requirements for congressional certifications (sometimes referred to as congressional notifications), which are based on value thresholds associated with the transaction, including those for exports of major defense equipment, as described in § 123.15. Further, manufacturing abroad of significant military equipment is not allowed under this exemption, as this activity is subject to congressional certification requirements. To the extent the commenter suggests replacing the word “involve” with “enable” in the regulatory text, the Department declines that suggestion and will keep the former term, which is also the one used in the controlling statute, 22 U.S.C. 2776(d).

Two commenters noted there is an opportunity to reform how congressional certifications are handled with the § 126.7 exemption. Similarly, another commenter suggested changing the congressional certification process for transfers eligible for expedited licensing but subject to reporting to Congress. The commenter stated 22 U.S.C. 2276(c) and (d) set requirements for the President to report to Congress when licenses are submitted, and both provisions grant the President the opportunity to use an emergency certification to waive the requirement and instead issue the license. The commenter further recommended furnishing an annual report for the AUKUS-related licenses to Congress. The Department presumes the commenter intended to cite 22 U.S.C. 2776(c) and (d) and not 2276(c) and (d). Given the type of transfers the Department anticipates being eligible for the exemption at § 126.7, the Department does not assess it could certify that each transfer constitutes the type of emergency contemplated under 22 U.S.C. 2776. The Department appreciates feedback on how it may expedite existing processes and will use the information provided as appropriate.

Four commenters suggested the Department remove § 126.7(b)(5) and eliminate unnecessary congressional certification requirements because the commenters asserted that, under 22 U.S.C. 2778(l)(2), Congress explicitly required that the Department exempt certain defense articles from export license requirements. Thus, by failing to eliminate corresponding congressional certification requirements for these covered defense articles, the proposed rulemaking will require exporters to apply for licenses to ensure that congressional certifications are submitted. Further, the commenters suggest, the Department will be notifying Congress of exports Congress already exempted from the export licensing requirements and any associated congressional certification requirements. The Department disagrees with the comment and assesses that the exemption at § 126.7 is consistent with both the scope of 22 U.S.C. 2778 and with the Department's obligations under 22 U.S.C. 2776 to provide notification to Congress of the types of exports described in 22 U.S.C. 2776(c) and 2776(d). Within 22 U.S.C. 2778(l)(6), Congress specifically made the congressional certification requirements of 22 U.S.C. 2753 not applicable to items transferred under the exemption but did not mention 22 U.S.C. 2776. Furthermore, the authority to issue the exemption under 22 U.S.C. 2778(l) is modeled after many provisions in 22 U.S.C. 2778(j) and 2778(j)(3)(C), which requires that congressional certifications continue to be notified regardless of any exemption issued under 22 U.S.C. 2778(j). One commenter suggested to task the State Department's Defense Trade Advisory Group (DTAG) to explore whether congressional approval requirements should remain in place under the Arms Export Control Act for exports to (§ 123.15) and manufacturing of significant military equipment (SME) (§ 124.11). The Department notes it is unnecessary to task the DTAG with assessing the Department's legal obligations, as that is the Department's responsibility. The Department assessed, consistent with 22 U.S.C. 2778(j)(3)(C) and (l)(6) the congressional certification obligations contained in 22 U.S.C. 2776 apply to exports conducted under the exemption in § 126.7.

Two commenters sought clarification regarding the § 126.7 exemption and congressional certification given the fact that both existing Australia and UK Defense Trade Cooperation Treaties (DTCT) exemptions contain an entire section on congressional certifications. Similarly, another commenter recommended inclusion of a provision similar to the procedures for legislative notification described under § 126.16(o) as the commenter asserts it allows for the congressional certification process to be executed without a license application. The Department notes the statutorily authorized § 126.7 exemption is separate from the Australia and UK DTCT exemptions, which were authorized under treaties. Comparing the criteria and conditions of § 126.7 to those articulated in §§ 126.16 and 126.17 is not appropriate because those sections implement the DTCT, rather than exemptions to the routine ITAR license requirements. The congressional certification requirements for transfers conducted pursuant to the DTCTs are unique and distinct from those articulated in 22 U.S.C. 2776 and ITAR §§ 123.15 and 124.11. Further, transfers that do not meet all of the criteria articulated in § 126.7 are not eligible for the exemption. This includes transfers that exceed a certain dollar value threshold or those that involve the manufacture of significant military equipment abroad. Those transfers will continue to require licenses or other authorizations consistent with the routine procedures and requirements, and the export authorization for those transfers will be the applicable license or agreement rather than the exemption.

One commenter sought clarification as to how the values of intangibles, such as conversations involving technical data, should be calculated. The Department confirms that the value of every transfer should be calculated because transfers that exceed certain values are not eligible under § 126.7(b)(5) and may require congressional certification in line with the provisions of ITAR §§ 123.15 and 124.11. The Department defers to exporters on the most appropriate formula to calculate the value of intangible transfers. When establishing the value of a transfer, exporters should strive for consistency regardless of whether a transfer will occur pursuant to a license, agreement, or exemption.

One commenter sought confirmation as to whether a license is required if a contract was modified and the values exceeded the congressional certification thresholds articulated in § 126.7(b)(5). The Department confirms a license or other authorization would be required for exports exceeding the congressional certification value thresholds or involving the manufacture of significant military equipment abroad.

One commenter suggested the Department provide information regarding the use of the § 126.7 exemption and the congressional certification requirement pursuant to § 123.15. The Department confirms the § 126.7 exemption may not be used to conduct exports that require congressional certification as described in § 123.15.

One commenter recommended that congressional certification values be calculated separately for each transfer under the exemption provided the transfer is not split or structured to avoid exceeding applicable notification dollar value limits. The Department does not dispute this approach.

One commenter recommended replacing § 120.16 with § 120.16(c) in the proposed § 126.7(b)(6) text. The Department rejects this comment, as all of § 120.16 applies to the § 126.7 exemption. The same commenter suggested § 126.7(b)(6) is redundant and the Department should consider its removal. The Department accepts this comment and removed this provision; however, the Department notes that use of the exemption still requires adherence to all applicable sections in the ITAR, including registration and recordkeeping requirements.

Three commenters asked if part 130 reports are required with the proposed § 126.7 exemption, how those reports should be provided to DDTC with no associated license application in DECCS, and whether ITAR exemptions in general require part 130 reporting. The Department clarifies that ITAR exemptions do not require part 130 reporting, as exemptions do not require an applicant to seek authorization from DDTC pursuant to §§ 130.2 and 130.9.

Four commenters recommended removal of the requirement to obtain nontransfer and use assurances through the DSP-83 form from the § 126.7 exemption and incorporation of those assurances in the authorized user process. The Department accepts this comment and amends § 123.10(a) with a clarification to that effect. Similarly, five commenters requested removal of the DSP-83 signature requirement for Australia and the United Kingdom, similar to how the Canadian government is treated. The Department accepts this comment. The Department notes that the Canadian government is not required to sign DSP-83s because the government has communicated the necessary assurances to the Department through other means. The UK and Australia governments have also provided the necessary assurances through other means. Two commenters recommended that Australia, the United Kingdom, and the United States agree to one common format for nontransfer and use assurances. Lastly, one commenter asked if nontransfer and use assurances require ink signature and original copies to be maintained and are electronic signatures and/or scanned copies allowed. As previously mentioned, the Department has incorporated the nontransfer and use assurances into the authorized user process. Separately, the Department accepts the use of electronic, digital, or wet signatures provided the name of the individual signing is clearly legible ( e.g., printed below the electronic signature), and there is a date provided with the signature.

One commenter requested clarification on how § 123.9(b) works with this exemption, particularly in the case where a recipient is receiving an intangible, e.g., certain technical data. The Department clarifies that § 123.9(b) refers to tangible items only and it sets the requirement that the exporter must notify the end user of certain criteria, including the exemption citation, if an exemption is used.

One commenter recommended the addition of a note to § 126.7(b)(8) stating: “NOTE: Refer to the Atomic Energy Act of 1954 for any transfers of Restricted Data as defined in that Act” since the proposed exemption appears to imply that Restricted Data could be exported under the exemption. The Department acknowledges and partly accepts the comment. The Department deleted reference to Restricted Data and the Atomic Energy Act of 1954 from the regulatory text, given it is already referenced in § 120.5(c). Because that text regarding Restricted Data was deleted from what was originally proposed in § 126.7(b)(8), there is no need for the clarifying note. Relatedly, the Department takes this opportunity to remind the public that the ITAR exemption does not authorize permanent imports of defense articles and defense services described on the U.S. Munitions Import List (USMIL). Regulations pertaining to permanent imports are administered by the Bureau of Alcohol, Tobacco, Firearms, and Explosives and are found at 27 CFR part 447.

One commenter asked if § 126.7(b)(8) was necessary to include in the exemption given the handling of classified materials are subject to other laws, and it should be a note to paragraph (b) rather than a limitation or requirement, especially since it is not specified by AECA section 38(l)(4). The Department accepts this comment and amends the regulatory text with the addition of a note to paragraph (b).

Two commenters recommended revision and expansion of the expedited license process to include the armed forces of Australia, the United Kingdom, or the United States acting in their official capacity outside the physical territory of the countries and to entities deployed in support of the armed forces of Australia, the United Kingdom, or the United States acting in their official capacity. Further, the commenters suggested the term “corporate entities” in the proposed § 126.15(c) is confusing, leading one commenter to recommend replacing that term with “person” as defined in § 120.61. This would, the commenter suggested, clarify that natural persons and academia qualify for expedited licensing too. The Department declines to accept the comment to expedite the license processing timelines for exports to members of the armed forces of Australia, the United Kingdom, or the United States and entities that support those armed forces while deployed outside the physical territories of these countries. That would expand the expedited licensing application processing timelines beyond that which Congress required. Moreover, the ability for a country's armed forces to take defense articles to third countries is the subject of a different rulemaking (87 FR 77046, Dec. 16, 2022) (proposed) and FR Doc. 2024-18249, scheduled to publish on August 15, 2024 (RIN 1400-AF26). However, the Department does accept the recommendation to replace “corporate entities” with “person” in § 126.15(c).

Four commenters recommended expanding the expedited licensing process beyond exports to also include reexports, retransfers, and temporary imports of defense articles; the performance of defense services; and brokering to, among or within Australia, the United Kingdom, Canada, or the United States. The Department appreciates the comment but declines to expand the scope of § 126.15(c) as it implements the provisions of section 1344 of NDAA for Fiscal Year 2024, which require the Department to expedite export license applications and do not extend to reexports, retransfers, brokering, or temporary import requests.

Three commenters recommended the Department create a policy of “presumption of approval” in § 126.15 for all AUKUS-related applications; where the ultimate end user is the Government of Australia or the Government of the United Kingdom and where all parties to the transaction, with the exception of freight forwarders and brokers, are incorporated in the United States, United Kingdom, Canada, New Zealand, or Australia who have previously received a DDTC approval for the same articles. The Department acknowledges this comment; however, it is outside the scope of the rulemaking. The Department is implementing the provisions of section 1344 of NDAA for Fiscal Year 2024. Three commenters suggested the Department make public how it intends to facilitate the expedited licensing process, including the U.S. Government's adjudication timeframes. Further, one commenter recommended the Department update its licensing guidelines, including the Agreement Guidelines, with standardized language to easily identify which applications meet the expedited licensing criteria. Two commenters suggested that DDTC create a dedicated, internal AUKUS coordination office. The Department declines to publish detailed information about the deliberative license adjudication process. Further, the Department notes it is not necessary to update the Agreements Guidelines to identify license applications that qualify for expedited treatment under § 126.15 as the Agreements Guidelines and other licensing instructions already require submission of any information necessary to determine whether § 126.15 applies to a specific submission. The Department also can confirm that National Security Presidential Directive-56 has already established defined timeframes for U.S. Government adjudication of all license requests, including those licenses that involve Australia, the United Kingdom, and Canada. Adherence to those existing timeframes will enable the expedited processing of license applications consistent with § 126.15. Lastly, the Department notes the recommendation to establish a AUKUS coordination office is outside the scope of this rulemaking.

Another commenter recommended that DDTC provide standardized provisos for these expedited license applications to alleviate uncertainty on the scope of activities, technical exchanges, and defense services that are authorized. The Department appreciates the comment; however, the Department has endeavored to create the § 126.7 exemption with the broadest possible applicability and predictability. The transfers that cannot be undertaken pursuant to the exemption at § 126.7 or another exemption within the ITAR are likely to be more unique transfers that may not lend themselves to standard provisos. To the extent the commenter is encouraging the Department to standardize provisos more generally, the Department recognizes the value in that line of effort and is already undertaking steps to ensure provisos are applied more consistently on licenses in the future.

Another commenter recommended that AUKUS-related licenses be free of provisos and conditions. The Department notes a commitment by DDTC to expedite the licensing review timeline should not be confused with a commitment by DDTC to approve the scope and content of all license requests for Australia, the UK, or Canada. The Department is still required to vet license applications for foreign policy and national security considerations. This requires vetting individual parties on license applications to assess risks of diversion and to ensure proposed exports are consistent with the United States's multilateral regime commitments, including those articulated in the Missile Technology Control Regime (MTCR). Occasionally, that vetting will require DDTC to include provisos or conditions when approving a license.

Four commenters recommended that AUKUS-related license applications not be staffed to the interagency for review when they are “in furtherance of” (IFO) licenses, or licenses that require congressional certification. Additionally, one commenter stated that licenses that do require congressional certification should be subject to a shorter processing period, for example, less than five business days. These commenters suggest that those applications, including relevant IFO licenses, were already reviewed when the existing agreement was adjudicated and as part of the congressional certification process. Another commenter suggested removing the current increase in value thresholds or scope expansions that prompt re-notification of previously notified programs. The Department notes these comments are outside the scope of the rulemaking as they offer recommendations regarding the Department's internal deliberative process for adjudicating licenses and not the previously proposed regulatory text. However, the Department takes this opportunity to note that the types of license applications that trigger congressional certification thresholds or involve the manufacture of SME abroad are generally the types of cases that warrant case-by-case review and consideration. As a result, it would not be appropriate to short-circuit the interagency staffing process for these cases or to mandate that they be notified to Congress in five business days or less. Furthermore, the Department has a long-standing arrangement and practice with Congress regarding the timeframe afforded for informal congressional review of license applications prior to formal certification. These suggestions would be inconsistent with that long-standing expectation and practice.

One commenter questioned whether anything should be notated in a license application submission to make it eligible for expedited review. The Department notes applicants are encouraged to submit any information that they believe would help facilitate an expeditious and streamlined review by the Department. Additionally, license application submissions are regularly reviewed to identify cases that qualify for expedited processing consistent with the provisions of § 126.15.

Two commenters requested retention of the ability to make licensing requests from Australia and the United Kingdom to the Department directly because U.S. exporters, at times, are no longer available to submit a reexport or retransfer authorization request. The Department confirms that Australian and UK companies are free to submit reexport and retransfer requests. To the extent that such requests by Australian and UK companies are intended to change the scope of existing active agreement, those amendments should be submitted by the U.S. exporter in order to ensure that the Department has a single record and authorization of the full scope of activities necessary to support a given line of effort. This is necessary, among other reasons, to ensure that the Department complies with applicable congressional certification requirements under 22 U.S.C. 2776.

One commenter requested confirmation that a UK company could rely on § 126.15(a) for expedited processing of a license application. The Department notes that the expedited licensing procedures outlined in § 126.15 apply to export licenses, not licenses for reexports, retransfers, or temporary imports. Because foreign companies are not permitted to submit export license applications under 22 U.S.C. 2778(g)(5), a UK company would not be able to request expedited processing under § 126.15. The same commenter inquired if there could be expedited processing for General Correspondence requests. The Department notes that the NDAA for Fiscal Year 2024 requirements being implemented by this section apply to export licenses, not reexport or retransfer authorizations. The Department, therefore, will not commit to expediting such requests in this section of the ITAR but will continue to process them as appropriate.

Five commenters recommended the Department clarify whether Memorandums of Understanding (MOUs) and Foreign Military Sales (FMS) benefit from the expedited licensing process described in § 126.15(d). Expedited licensing is not applicable to MOUs or FMS cases as the ITAR only regulates direct commercial sales (DCS) and does not govern the government-to-government process for concluding MOUs or Letter of Offer and Acceptances (LOAs) for FMS cases.

Further, two commenters asserted that expedited processing is reserved for license applications “that are not covered” by an ITAR exemption; however, the proposed rule stated, “describing an export that cannot be undertaken under an exemption” and recommends the provision be modified by replacing “cannot be undertaken” with “is not covered.” The Department declines to accept this recommendation because the Department assesses that the phrases “cannot be undertaken under an exemption” and “is not covered by an exemption” would apply equally to the scenarios presented by the commenters. In particular, if the U.S. Government has declined to take some step that is necessary for an exporter to rely on any exemption within the ITAR for a proposed export, that proposed export cannot be undertaken under an exemption and is not covered by an exemption.

One commenter recommended additional resources be committed to support the expedited licensing process because historically the proposed timeframes proposed in § 126.15(d) have not materialized. The Department disagrees, as data collected on license processing timelines does not support the commenter's statement. The same commenter also recommended the Department include in the annual report required by section 1344 of the NDAA for Fiscal Year 2024 a certification that the expedited timelines have been satisfied. This comment is outside of the scope of this rulemaking and section 1344 of the NDAA does not have an annual report requirement. The Department believes that the commenter may have meant to refer to section 1341 of the NDAA, which does require a related annual report. When preparing and submitting the report required by 22 U.S.C. 10411(e) (the location to which section 1341 of the NDAA for Fiscal Year 2024 was classified) the Department will include all required information.

Three commenters noted the expedited licensing timeframes proposed in this provision could result in cases being returned without action (RWA) if an agency is not ready to position the case and provide a response back to the DDTC within 30 or 45 days. Similarly, another commenter suggested the Department implement a process to hold a license for a specified period of time to permit minor changes and adjustments to a license that would otherwise be returned without action. The Department accepts these comments and amends § 126.15(d) with the qualifying phrase “to the extent practicable” in order to better reflect the statutory NDAA language in section 1344(c) (classified to 22 U.S.C. 10423(c)) to expedite certain applications and avoid unnecessary and burdensome RWAs when adjudication in the 30- or 45-day timeframe is not practicable.

Three commenters suggested the inclusion of a provision stipulating the automatic approval of licenses exceeding the 45-day review period and to identify which USML categories should trigger staffing to certain intra- and interagency offices/agencies that participate in the licensing review process, including the Defense Technology Security Administration (DTSA) for AUKUS-related cases instead of staffing all license requests to these offices/agencies. The Department declines to accept the recommendation to automatically approve licenses after 45 days. A commitment by the Department to expedite the license is not a commitment by the Department to approve all license requests for Australia, the United Kingdom, or Canada. The Department is still required to vet license applications for foreign policy and national security considerations. This requires vetting individual parties on license applications to assess risks of diversion and to ensure propose exports are consistent with the United States's multilateral regime commitments, including those articulated in MTCR. Additionally, recommendations regarding the policies and procedures the Department and the interagency apply to the deliberative process of reviewing individual license applications are outside the scope of this rulemaking.

One commenter sought clarification as to what constitutes a government-to-government agreement and how would the regulated community know if a government-to-government agreement exists. A government-to-government agreement is used to authorize Foreign Military Sales (FMS), coproduction agreements, or other authorizations between governments to export defense articles and defense services outside of the ITAR or direct commercial sales (DCS) framework. Parties to exports that are related to such agreements would have such information from their company or contractor and would identify it on their license applications to qualify for the expedited process.

Two commenters suggested the Department provide expectations regarding the Department of Defense's Technology Security & Foreign Disclosure (TSFD) review process and Low Observable and/or Counter Low Observable (LO/CLO) review process and mandate that interagency review for AUKUS applications include expedited TSFD and LO/CLO approvals to ensure meeting the statutory timelines. The Department notes that the comment is outside the scope of the rulemaking as it offers recommended changes to the U.S. Government's internal deliberative process. The Department has, however, relayed this comment to the Department of Defense.

One commenter asked how AUKUS-related licenses would be identified to be subject to expedited licensing; requested Canada be included for expedited licensing; inquired if other countries will be considered for expedited licensing aside from those listed in § 126.15(c) and (d); and suggested to update DDTC's Agreement Guidelines to enable the quick identification of licenses subject to expedited processing. The Department notes that all export license applications meeting the requirements of § 126.15(d) are subject to expedited review, not just those in support of AUKUS-related programs. Additionally, licenses that include parties from countries other than those listed in § 126.15(c) and (d) will not benefit from the expedited license processing timelines. Lastly, the Department confirms that Canada was already included in the proposed § 126.15(c) and (d) text as section 1344 of the NDAA for Fiscal Year 2024 applies to applications to export to Australia, the United Kingdom, and Canada.

The same commenter recommended the inclusion of technical data in § 126.15(d) and a stipulation that any license application that is returned or denied must be done so within 14 days of receipt with an explanation for the return or denial, with an opportunity for the applicant to resubmit if the reason for return or denial can be addressed. The Department declines to accept these suggestions as it is not possible to guarantee that all license applications will be returned or denied within 14 days of receipt because DDTC is not always able to determine within 14 days how a specific license will be adjudicated. The Department is committed to expediting export license applications for Australia, the UK, and Canada to the greatest extent possible and to meeting 30- and 45-day processing timelines for those applications. It is not currently possible to shorten that timeframe to 14 days. Additionally, the Department will not add the term “technical data” to this provision as “technical data” is already covered by the term “defense article,” as defined in § 120.31.

One commenter requested the term “review” be replaced with “approved, returned, or denied” in § 126.15(d) to ensure final adjudications of a license applications are provided to the applicant within the 45-calendar day timeframe. The Department declines to accept this comment as the proposed text already states “. . . any review shall be completed no later than 45 calendar days . . . ,” which is the equivalent of the proposed change.

Three commenters asked if a dual national with Australian citizenship who was born in a § 126.1 country, who holds an Australian security clearance and works for a U.S. or Australian company, can have classified technical data under this exemption. The Department notes if the criteria in § 126.18(e) are met then no additional authorization is required and the dual national can receive classified technical data. Similarly, another commenter requested the U.S. Government provide details regarding multilateral efforts to ensure personnel and facilities' security clearance processes in all three countries can support the final implementation of the proposed exemption. The Department notes this comment is outside the scope of this rulemaking.

Three commenters wanted clarification as to several aspects of the § 126.18(e) exemption: if this exemption is only available for use in relation to the § 126.7 exemption, or if one can just be an authorized user; if § 126.18(e) can be used with existing ITAR agreements that involve classified technical data; if § 126.18(e) can be used for FMS transfers and MOU/Cooperative Armament Programs; if § 126.18(e) can be used by contractors who are not “regular employees” as defined in § 120.64; whether one needs approval from a U.S. original equipment manufacturer (OEM) to use the exemption; and if there are provisos in an existing DDTC authorization, whether this exemption supersedes those provisos. The Department notes the § 126.18(e) provision is not just available for use in relation to the § 126.7 exemption and can be used with existing ITAR agreements provided the terms of the provision are met. Further, for clarity, the Department amends § 126.18(e) by replacing “transfer” with “reexport” and “retransfer.” The exemptions within the ITAR are not applicable to FMS cases or MOU/Cooperative Armament Programs (unless the MOU/Cooperative Armament Programs are executed under the authorities of the ITAR). The Department notes the exemption cannot be used by contractors that are not regular employees and suggests reviewing the definition of “regular employee” in § 120.64. The Department further notes ITAR exemptions are self-certifying, so no additional approval is needed from a U.S. OEM to utilize this provision of the ITAR; however, this exemption does not supersede any existing provisos placed on authorizations issued by DDTC. To the extent an exporter chooses to rely on a particular export authorization to conduct a transfer, including exemptions, the provisos, conditions, and limitations that were applied to that authorization continue to govern the transfer.

Two commenters wanted confirmation that § 126.18(e) was not limited by the ETL and requested that “regular employee” be removed from this provision. The Department declines to accept the comment to remove “regular employee” from this provision and notes that § 126.18(e) is not limited by the ETL.

Finally, in light of the comments received about this subsection, the Department made certain clarifying but minor and non-substantive changes to its phrasing and presentation.

One commenter wanted clarification that “dual nationals of another country” in § 126.18(e)(1) includes § 126.1 countries. The Department acknowledges this comment and notes § 126.1(a) is amended by this rule to include § 126.18(e).

One commenter sought clarification regarding whether § 126.18(e)(1) applies to third-country nationals, and if not, what authorization is needed to receive classified defense articles. The Department confirms that this provision only applies to dual nationals and not third-country nationals. There are other provisions within § 126.18 that apply to third-country nationals for transfers of unclassified defense articles; however, to transfer classified technical data to third-country nationals, separate DDTC authorization would be required.

Two commenters recommended the removal of the criteria of “regular employees of an authorized user of the exemption in § 126.7” as the individuals are still required to hold a security clearance under the § 126.18(e) exemption and limiting the criteria to an individual being a regular employee of an authorized user provides no additional assurances for the Department. Similarly, another commenter requested clarification on what constitutes a regular employee. The Department declines to accept the comment to remove “regular employee” from § 126.18(e) as previously mentioned and clarifies that “regular employee” is defined in § 120.64.

One commenter asked if UK and Australian militaries can take defense articles transferred under the § 126.18 exemption outside their physical territories while on deployment in other countries. The Department clarifies that this provision is only applicable to dual nationals and one must meet all other criteria in § 126.18(e) before it may be used, but the Department confirms that military members acting in their official capacity can transfer classified defense articles to dual nationals who are citizens of Australia and the United Kingdom. Of note, this provision is only for classified defense articles and not for unclassified defense articles. For either unclassified or classified defense articles, this comment is the subject of a separate rulemaking (87 FR 77046, Dec. 16, 2022) (proposed) and FR Doc. 2024-18249, scheduled to publish on August 15, 2024 (RIN 1400-AF26).

Several commenters requested that the Department reduce the overall size of the ETL to facilitate AUKUS Pillar II objectives and that the list of exclusions be defined as narrowly as possible, including limiting the list to those articles required by law or critical to national security and citing the relevant USML entries as specifically as possible. The Department's initial development of the ETL included a detailed review of statutory obligations, coordination with its Australian and UK partners, and coordination across the U.S. Government to ensure exclusion of only those technologies required by statute or otherwise determined to require continued licensing review for national security reasons. The Department, in coordination with the Department of Defense, has now reviewed concerns raised in the public comments regarding the need to update the list of exclusions as described in this rule and has made reductions in the scope of exclusions. The exclusions represent the technologies that require continued—and now expedited—licensing review for statutory or national security reasons.

Two commenters noted that the proposed ETL was in some ways more restrictive than the Canadian exemptions in § 126.5 and recommended that the ETL not be more restrictive than that exemption. The Department, in coordination with the Department of Defense, reviewed the ETL in light of this concern. The Department has removed the entry restricting certain source code. Further, the Department notes that the ETL's exclusion of classified Category XIII(b) articles and classified cryptographic devices is not more restrictive than the Canadian exemptions, which is limited to unclassified articles. The Department declines to remove the other ETL entries highlighted by the commenters because they are based on legal requirements or other policy factors.

One commenter suggested carving out certain DoD programs, such as the F-35 aircraft program, from the exclusions in the ETL because those programs are already subject to significant U.S. Government involvement and oversight. The Department declines to adopt this suggestion, as the license review process is an important mechanism for such oversight and the excluded technologies have been identified as warranting continued license review.

Several commenters requested guidance on how to read the ETL. For example, one commenter asked if technical data and defense services excluded by the ETL row for USML Categories XIV(a), (b), (c)(5), (f)(1), (i), and (m) are limited to technical data and defense services directly related to articles described in the other specified paragraphs. The Department affirms that this row excludes Category XIV(m) technical data and defense services directly related to articles described in paragraph (a), (b), (c)(5), (f)(1), or (i) of Category XIV. It does not affect the availability of the § 126.7 exemption for other Category XIV(m) technical data and defense services, such as those directly related only to articles described in Category XIV(f)(2).

The Department also offers the following example of how to utilize the ETL. This example considers the use of the § 126.7 exemption to export a part that (1) is classified, (2) is described only in USML Category XI(c)(18), (3) is specially designed for a radio described in USML Category XI(a)(5)(iii), (4) does not have anti-tamper features, and (5) does not implement countermeasures or counter-countermeasures. To review the requirement in § 126.7(b)(3) that the part not be identified on the ETL as ineligible for transfer, first review each row of the ETL to determine which entries include USML Category XI(c)(18) in the first column. Second, for each of those entries that include USML Category XI(c)(18) in the first column, determine whether the second column of the entry excludes the part specific article. In this example, only five ETL entries include USML Category XI(c)(18) in the first column. If none of those five ETL entries identifies the part, then this example part is not excluded by the ETL:

• The first three applicable entries don't apply, as the part does not have an “MT” designation in paragraph (c)(18), is not an article with anti-tamper features, and is designed for a radio (not a cluster munition).

• The next applicable entry begins with “XI(a)(5)(iii).” If the part is specially designed for a classified radio described in USML Category XI(a)(5)(iii), then it is described by the second clause in the second column (“classified articles specially designed [for] classified articles described in USML Category XI(a)(5)(iii)”) and thus is excluded by this entry. In that case, the review stops, as it is excluded by at least one entry on the ETL.

• The last applicable entry, for “XI(c) and (d),” would not apply, as the part is specially designed for a radio described in XI(a)(5)(iii)—and is thus not described in the second column of this entry.

One commenter suggested improving the readability of the ETL by including the full names of the USML Categories and the full text of excluded USML entries in the ETL entries. The Department to declines to adopt this suggestion. The Department refers to USML Category numbers and entries in the ETL to keep the text concise and to require fewer updates when USML language may be revised in the future. Furthermore, to assess whether a defense article or defense service is described in a USML entry, it is often necessary to view the USML entry noted in the ETL in the context of other USML entries and applicable notes and definitions. Therefore, the Department declined to fully reproduce USML text in the ETL entries, to simplify interpretation and clearly identify instances wherein the scope of a USML entry and an ETL entry are the same.

Several commenters noted difficulty understanding various terminology used in the ETL. Some terminology referenced by commenters is defined in ITAR part 120 ( e.g., “commodity” and “specially designed”). While the ITAR does not define “directly related,” this term has been used throughout the USML for decades and is implemented daily by the regulated community. However, the entry excluding certain underwater equipment has been updated to use the term “specially designed” instead of “directly related” in relation to specially designed articles. Similarly, the entry for USML Category XX(d) has been revised to refer to articles “used only in,” rather than “directly related to,” classified payloads and classified underwater unmanned vehicle signature reduction techniques. Commenters also recommended that, to improve clarity, the ETL should refer only to specific USML subentries instead of broader categories. For most ETL entries, the Department referenced USML entries and terms defined in the ITAR instead of using novel regulatory language. However, in some entries, it was necessary to use terminology not defined in the ITAR ( e.g., “cluster munitions”) to more narrowly specify an exclusion not coextensive with the related USML entries.

One commenter asserted that using the term “article” instead of “hardware” or “defense article” is “undefined, unclear, and/or subjective,” and that doing so unintentionally expands the scope of the ETL. The Department disagrees and retains the term “article” as a more concise equivalent for “defense article” in this context. Specifically, as only defense articles are described on the USML and the ETL, and all defense articles are articles (by definition), all ETL entries referring to “articles” refer to all “defense articles” otherwise described by the ETL entry.

A commenter also asked whether it may use the § 126.7 exemption for programs that involve defense articles eligible for the exemption and other defense articles identified on the ETL as ineligible for the exemption. Articles and services identified on the ETL are not eligible for export under the exemption, regardless of whether they are packaged with eligible articles. Provided that all other conditions of the § 126.7 exemption are met, an exporter may use the exemption for the articles not described on the ETL but must obtain a license or an authorization other than the § 126.7 exemption for articles identified on the ETL.

One commenter asked whether articles in USML Categories XI and XII are excluded from export when packaged as spares or kits for larger assemblies or end items. Unless otherwise specified in the relevant ETL entry ( e.g., the anti-tamper entry), the Department confirms excluded articles are ineligible for use of the § 126.7 exemption, irrespective of whether those articles are shipped individually, packaged with other articles, or already incorporated and integrated into a larger assembly. For example, a classified article described in Category XI(b) is ineligible for the exemption, either as a spare or when installed in an aircraft.

Several commenters encouraged the Department to work with its AUKUS partners to implement consistent lists of excluded articles and services. The Department appreciates these comments and anticipates continued efforts by all three nations to harmonize the lists to the extent feasible and consistent with national legislation and notes that there will still be nuanced differences in definitions and regulatory structures between Australia, the United Kingdom, and the United States.

One commenter suggested the creation of a single table of excluded technologies with the applicable categories from the USML and the Australian and United Kingdom munitions lists. The Department acknowledges this comment but declines to adopt this recommendation. Though consistency across the three nations' exclusion lists is desirable, the lists do not perfectly align, and each partner must maintain its own list to account for separate national legal and policy requirements and to remain agile in adapting to revisions to its own national regulations.

Several commenters requested that the Department implement a process to confirm for exporters whether a particular defense article or defense service is identified on the ETL. The Department declines to accept this request, as exporters must conduct a case-by-case review to validate whether all requirements to use an exemption have been satisfied. The Department does not provide exemption validation as exporters are best positioned to make their own determination based on the particular conditions associated with any controlled event, to include exports. The Department notes the advisory opinion process described in § 120.22(c) is available to request an interpretation of the language used in the ETL, but not whether a specific technology is described.

Two commenters suggested renaming the ETL to “Excluded Defense Article List.” The Department declines this suggestion and notes the list applies not only to defense articles, but also to defense services, and novice exporters could misinterpret “defense articles” as applying only to hardware.

Two commenters requested that the Department publish the rationale for each exclusion in the ETL, which the Department declines to do. Some ETL entries are required by law, while others are based on policy assessments that involve ongoing internal deliberative processes. The Department notes it continues to discuss iterative improvements to the ETL with its interagency and AUKUS partners.

One commenter asked if articles will be removed from the ETL automatically as they are removed from the Wassenaar Arrangement Munitions List or the MTCR Annex. The Department notes the ETL will only be updated by established rulemaking processes. The ETL will remain as specified in supplement no. 2 to part 126 until modified by the Department.

The same commenter requested a 90-day prior notice to removal of items from the ETL to allow industry to secure alternate authorizations (DSP-5, TAA, etc.). The Department declines to do so because removing something from the ETL does not impose additional licensing requirements. Rather, items described in any ETL entry are not eligible for the exemption provided at § 126.7, while items not described in any ETL entry may be transferred without additional licensing provided the other requirements of § 126.7 are met.

The same commenter also asked what criteria are used to determine inclusion or exclusion of items on the ETL. The Department declines to provide specific criteria, noting that some ETL entries are required by law, while others are based on policy assessments that consider a variety of factors.

Several commenters noted the Department of Commerce does not require a license for many exports of MTCR-controlled articles to Australia and the United Kingdom. In contrast, most MT-designated articles on the USML continue to require a license. The Department notes there is no requirement for the Departments of State and Commerce to perfectly align their licensing requirements, as the agencies derive their authorities and mandates from separate sources and regulate technologies of differing importance to U.S. national security and foreign policy interests.

Several commenters noted that the MTCR entry on the ETL is broader than required by law, with one recommending the Department use the language from the MTCR and AECA instead. The Department declines to rely on the regulated community to interpret elements of the AECA and MTCR, including the term “for use in rocket systems.” The Department has not included USML entries with an “MT” designation in the MTCR entry on the ETL when the USML entry (1) does not include MTCR Category I commodities and (2) does not include MTCR Category II commodities for use in rockets. USML Category XIX is an example from the proposed rule. In this interim final rule, the Department also removes the ETL exclusion for MT-designated articles described in paragraph (h)(12) of Category VIII, as the defense articles described therein are demonstrably for use in UAVs, not rockets (flight control systems for rockets are described in paragraph (h)(1) of Category IV and remain excluded). The Department appreciates the intent of these comments and is reviewing other ways to facilitate collaboration on MTCR technologies among and between Australia, the United Kingdom, and the United States.

Similarly, two commenters observed the MTCR entry on the USML treats USML Category IV propulsion differently than Category XIX, asserting technologies excluded from one category but not the other will introduce conflicts and recommending removal of Category IV propulsion from the ETL. Another commenter asked why MT-designated articles in Category XIX are not excluded. The Department notes this was intentional, as engines described in USML Category XIX are generally not for use in rocket systems (including ballistic missiles, space launch vehicles, and sounding rockets, while excluding cruise missiles, target drones, and reconnaissance drones), and therefore are not excluded. Engines described in USML Category IV with an MT designation are excluded from eligibility due to their use in rocket systems.

One commenter recommended the Department “declare a general policy exception for MT cooperation” with Australia and the United Kingdom, and another suggested clearing specific programs that involve the transfer of MT-designated defense articles. The Department acknowledges these comments; however, policies of this nature are outside the scope of this rulemaking.

One commenter asserted the distinction between hypersonic kinetic energy weapons and MT-designated defense articles is unclear and requested clarification that hypersonic systems are not excluded from the § 126.7 exemption. The Department declines this request as beyond the scope of the current rulemaking. The ETL specifies excluded technologies based upon their USML categories, and a case-by-case review is necessary to assess whether, and in which USML paragraph(s), any particular hypersonic system is described on the USML. Multiple USML paragraphs may describe a given commodity, and the commodity jurisdiction process described in § 120.12 is available for resolving doubt with regard to the jurisdiction and classification of a particular defense article or defense service.

One commenter suggested limiting the MTCR exclusion to classified articles or creating a separate exemption for MTCR commodities. The Department declines to limit the MTCR exclusion to classified articles, as the underlying reasons for the ETL exclusion, including 22 U.S.C. 2778(j)(1)(C)(ii)(I) through (III), are not limited to classified articles. A separate exemption for MTCR commodities is outside the scope of this rulemaking.

Several commenters asked the Department to define “anti-tamper” and “readily identifiable” as used in the anti-tamper exclusion. Following consultations with DoD, the Department has clarified the exclusion, which is intended to apply to articles developed in accordance with a DoD Program Protection Plan. Companies that implement anti-tamper methodologies to protect DoD Critical Program Information are well versed in this area. The Department has also deleted the term “readily identifiable” from the entry. The Department confirms that the anti-tamper exclusion does not apply to commodities protected by incorporated anti-tamper mechanisms but not otherwise listed on the ETL. For these reasons, the Department declines to define “anti-tamper.”

One commenter asked where anti-tamper articles are described on the USML. Such articles may be described in multiple USML entries, depending upon their characteristics and functions, and commonly in catch-all controls. The exclusion applies to all anti-tamper articles described on the ETL, regardless of which USML entry describes them.

Five commenters requested removal, limitation, or clarification of the ETL entry that excluded certain source code. Commenters noted the necessity of source code for co-development and integration efforts, and they noted certain inconsistencies with the Canadian exemption. The Department accepts these comments and, after interagency consultation, deletes that entry from the ETL, as well as the entry that excluded source code pertaining to certain night vision commodities in USML Category XII.

Commenters recommended removing the exclusion of certain manufacturing know-how in USML Categories II(k), III(e), IV(i), X(e), and XIX(g), particularly with regard to hypersonic weapons capabilities and kinetic energy weapons. The Department concurs that some manufacturing know-how is critical to the success of AUKUS Pillar II objectives concerning hypersonics. However, the specific technologies excluded by the ETL have been identified, following consultations with DoD, as warranting continued licensing review.

One commenter asserted that the exclusion of USML Category XIX manufacturing know-how is overly restrictive. The Department disagrees with the commenter's assessment that manufacturing know-how for Category XIX engines is “relatively low-level technology.” Following consultations with the Department of Defense, the Department of State confirms that the technology in question continues to require exclusion from the exemption for national security reasons and the Department declines to modify the exclusion of manufacturing know-how for Category XIX articles.

Several commenters requested the Department remove the exclusion of classified manufacturing know-how for articles described in USML Categories XI(a)(3) or (4), or XII(d). Commenters asserted these exclusions would impede AUKUS goals with regard to electronic warfare (EW) and other collaborative efforts such as position, navigation, and timing (PNT) capabilities. The Department has removed this exclusion, while noting the remaining ETL entries (such as the MTCR exclusion and the exclusion pertaining to Category XI) may continue to restrict use of the exemption for some of these systems.

Four commenters requested clarification or removal of the ETL entry for USML Category II(j)(9) through (11) and (k). The Department clarifies that this ETL entry exists to ensure that articles described in Category II(j)(9) through (11), and directly related technical data and defense services, are not transferred under the § 126.7 exemption unless they are elements of armaments, weapons, or military platforms. This ETL entry does not affect the use of the § 126.7 exemption for articles designed for integration into, or incorporated as elements of, platforms such as military aircraft, or technical data and defense services directly related to such articles.

One commenter requested clarification for USML Category II(j) and referred to “difficulties carving out items in [USML Categories] XI and XII.” The Department cannot respond because it does not understand this comment.

Multiple commenters requested the Department further limit the ETL scope when able. Consistent with that request, the Department further revised one ETL entry to continue to exclude launchers for MANPADS described in USML Category IV(b)(2), while removing the exclusion of other articles described in Category IV(b)(2).

One commenter objected to the ETL excluding articles described in USML Category VI(e) or (f)(5) and Category XX, asserting that excluding support for nuclear propulsion may be “counter to the whole purpose of AUKUS.” The Department disagrees and notes naval nuclear propulsion capabilities must be transferred pursuant to a mutual defense agreement such as the one required for AUKUS Pillar I. Such agreements are described in sections 91(c), 123, and 144(c) of the Atomic Energy Act of 1954 (AEA) (42 U.S.C. 2121(c), 2153, 2143(c)), as well as section 1352(d)(3) of the 2024 NDAA (22 U.S.C. 10431(d)(3)).

One commenter suggested the establishment of a new Naval Nuclear Propulsion Plant Information (NNPI) agreement between the United States, Australia, and the United Kingdom. Another commenter proposed a secure data management program to enable the safe and secure sharing of submarine data, including NNPI and Alternate and Compensatory Control Measures (ACCM). The Department acknowledges these comments; however, they are outside the scope of the rulemaking.

One commenter opined that the “boundaries” defining naval nuclear propulsion items require further clarification because such items may be interconnected with the overall operation and maintenance of military vessels. The Department declines to further define such boundaries, as the ETL entry excluding naval nuclear propulsion items clearly identifies specific USML entries and uses established ITAR terms. If doubt exists as to the export classification of an item, the Commodity Jurisdiction process at § 120.12 is available.

One commenter incorrectly asserted that the ETL does not exclude articles for the F-22 aircraft, such as the mission computer and engine, which are described in USML entries other than paragraphs (a)(2), (h)(1), and (i) of USML Category VIII, because they are described in other USML paragraphs. The Order of Review in § 120.11 identifies that an item may be described in multiple entries. Paragraph (h)(1) of Category VIII describes parts, components, accessories, and attachments specially designed for the F-22 aircraft, subject to the Note to that paragraph, irrespective of whether those articles are also described in other USML entries. As such, the Department rejects the comment and resulting recommendation to exclude further F-22 parts described elsewhere on the USML, as a redundancy.

Several commenters observed that the previously proposed ETL entry for USML Categories XI(a) through (d); and XIII(b) and (l) appeared to exclude technical data and defense services only if they are directly related to naval acoustic spectrum control and awareness and asked the Department to revise the entry to clarify its intent. Having consulted with DoD, the Department clarifies the intent was to exclude all technical data and defense services directly related to unclassified articles excluded in this ETL entry and to exclude only classified technical data and defense services directly related to classified articles excluded in this entry.

Two commenters recommended separating USML Category XIII(b) and (l) onto a separate row from Category XI or placing them with other Category XIII exclusions. The Department accepts this comment. This entry has been split into multiple rows to address different exclusions and to more clearly specify the relevant USML entries.

Many commenters advocated clarifying, eliminating, or narrowing the scope of the exclusion for articles directly related to naval acoustic spectrum control and awareness. One commenter asked whether this phrase describes all of USML Category XI(a)(1)(i). Two commenters suggested limiting the exclusion to classified articles. Another proposed removing the phrase “and awareness.” Following consultations with DoD, the Department declines to narrow the scope of this exclusion, as these articles continue to require (now expedited) case-by-case review for export. The Department has modified this entry to clarify the exclusion applies to all articles described in USML Category XI(a)(1)(i) and (ii), specially designed articles therefor, and directly related technical data and defense services.

Several commenters requested clarification as to whether the exclusion of classified countermeasures and counter-countermeasures in USML Category XI applies to unclassified hardware designed for a classified system. They noted that in some cases, the only classified element of the system is software provided on a government-to-government basis and installed onto the hardware after export. Furthermore, one commenter requested the Department review whether the exclusion would prevent collaboration on aspects of a defense article not related to the classified portions of the defense article. Another commenter asserted that § 120.11(c) should not apply to excluded defense articles—specifically, that end items incorporating classified countermeasures or counter-countermeasures should be eligible for export. Yet another commenter requested clarification as to which USML entries describe the specially designed parts, components, accessories, and attachments excluded under this entry. And one commenter expressed confusion on how to interpret the term “classified.”

The Department has revised the proposed countermeasures and counter-countermeasures exclusion both for greater clarity and to focus the exclusion more precisely on relevant, classified defense articles. Such revisions include distributing the contents of the proposed entry across multiple narrower entries, more clearly identifying the relevant USML entries, and removing unclassified articles designed for classified articles. Classified, directly related technical data and defense services are also excluded. Articles excluded from the exemption at § 126.7 remain excluded even when incorporated into an article that is not otherwise excluded. The Department also confirms that an exclusion of classified articles and classified, directly related technical data and defense services, does not prevent use of the exemption to transfer unclassified articles used in the classified article, or unclassified technical data and defense services. The Department further notes the term “classified” is defined within the ITAR in § 120.38.

One commenter requested removal of USML Category XIII(b) cryptographic devices, software, and components from the ETL, asserting they are authorized for transfer under the Canadian exemptions in § 126.5. The Department notes that the Canadian exemptions are distinct from the § 126.7 exemption. Nonetheless, the classified articles described in Category XIII(b) previously proposed for exclusion are today excluded from the § 126.5 Canadian exemptions, as it is limited to the transfer of unclassified articles.

One commenter objected to the exclusion of classified articles described in USML Category XIII(b), asserting it will prevent the use of the exemption for UK, Australian, North Atlantic Treaty Organization (NATO), and other allied classified cryptography that is not used to access U.S. Top Secret or Sensitive Compartmented Information (SCI) information, some of which is provided by the U.S. Defense Industrial base. Following consultation with DoD, including the National Security Agency, the Department declines to limit this entry. Classified cryptography, even that which is shared with U.S. allies, must remain subject to significant oversight and distribution limits, including that which is provided by the (now expedited) licensing process.

Many commenters observed the proposed rule excluded classified articles described in USML Category XIII(b), but excluded all articles specially designed for a Category XIII(b) article, regardless of classification status. Commenters were uncertain how to interpret this exclusion and asked whether the Department intended to exclude only classified articles, and which USML paragraphs describe the specially designed articles that are excluded. The Department recognizes the requested clarifications of this entry. Following consultations with DoD, the Department revises the scope consistent with the intent to exclude (1) classified articles described in USML Category XIII(b), (2) classified articles in USML Category XI specially designed for the excluded Category XIII(b) articles and (3) classified, directly related technical data and defense services.

In a section of its comment devoted to the ETL, one commenter advocated for “more harmonization on cryptographic technology.” The Department assesses any actionable response to this comment falls outside the scope of the proposed rule.

One commenter requested confirmation that the Department is not asserting jurisdiction over articles not described on the USML. As an example, the commenter noted the use of the phrase “specially designed parts, components, accessories, and attachments therefor” in the ETL entry that excludes classified countermeasures and counter-countermeasures, incorrectly asserting there is no catch-all entry on the USML for such items. The Department confirms it does not assert regulatory jurisdiction via the ETL, which only identifies the articles and services already under the Department's jurisdiction that are excluded from transfer via the § 126.7 exemption. The Department notes the proposed exclusion, which would have applied to paragraphs (a) through (d) of USML Category XI, in addition to paragraphs (b) and (l) of USML Category XIII, would have applied to articles described in USML Category XI(c)(1) through (19) that are specially designed for classified countermeasures or counter-countermeasures.

One commenter requested narrowing of the exclusion for source code and classified technical data and defense services pertaining to night vision-related items. After further review and consultation with DoD, the Department removed this exclusion.

Also, consistent with commenters' requests to narrow the ETL, the Department has, after consultation with DoD, removed the exclusion for classified articles described in Category XII(d)(3).

Two commenters welcomed the ability to transfer unclassified Category XV(f) technical data and defense services under the exemption because such transfers will facilitate initial unclassified discussions related to the bid phase for novel space-based power generation systems. They and three other commenters requested complete or partial removal of the ETL entry excluding classified articles described in Category XV(a) or (e); and directly related classified technical data and defense services. Based on interagency consultations, the Department declines to do so. Such articles necessitate a case-by-case review prior to export, which is inherent in the licensing process.

One commenter requested that the Department confirm that information collected by excluded defense articles in USML Category XV is not subject to the ITAR, or that such information falls within the scope of the § 126.7 exemption. The Department declines this request as a case-by-case review is necessary to assess whether such information is described on the USML or the ETL. The requested carve-outs are overly broad and not actionable within this rulemaking. The Department notes that just because information was “collected by a defense article” does not make that information “directly related to the defense article that collected it”; and most ETL entries exclude information only as technical data directly related to excluded defense articles.

One commenter requested removal of “cooperative docking” capability from the list of technologies described in USML Category XV. The Department notes that this comment is outside the scope of this rulemaking, as the rule does not contemplate changes to the USML.

One commenter requested the Department specify the relevant paragraphs within USML Category XVI that are excluded; the Department confirms all articles described in USML Category XVI are excluded, and thus declines to specify each paragraph individually.

One commenter requested removal of the ETL entry that excludes classified articles in Category XVIII specially designed for counter-space operations, asserting this would improve the relationship between the three countries' Space Commands and facilitate collaboration between their industrial bases. The Department, based on U.S. Government review, declines to remove this entry at this time, as the excluded technologies warrant continued, and now expedited, case-by-case review for national security concerns.

One commenter noted that it would be unable to take advantage of the proposed exemption for exports related to classified parts for use in the engine for the F-35 aircraft. The Department confirms this, based on the description of those parts in an excluded entry.

One commenter suggested that paragraphs (f)(6) and (7) of USML Category XIX should be added to the exclusion for classified articles described in paragraphs (e) and (f)(1) and (2) of USML Category XIX, as those paragraphs describe production commodities directly related to the technologies excluded by the existing Category XIX entry. The Department appreciates this comment and notes that excluding the articles described in paragraphs (f)(7) and (12) for manufacturing the excluded articles is consistent with the Department's intent to exclude articles not yet integrated and their technical data. Following consultations with DoD, the Department declines to add defense articles described in paragraph (f)(6), as the Category XIX classified defense articles warranting exclusion are already described in the ETL entry. Thus, following consultations with DoD, State is excluding the articles described in paragraphs (f)(7) and (12) for manufacturing the excluded articles in paragraphs (f)(1) and (2).

Multiple commenters recommended the Department eliminate or narrow the exclusions in USML Category XX. Commenters noted that exchange of Category XX articles, including manufacturing know-how, will be necessary to support AUKUS Pillar I, which is intended to enable Australia to safely and effectively operate nuclear-powered submarines and establish a corresponding manufacturing industrial base in Australia. One commenter noted that the exclusion of certain Category XX manufacturing know-how is not required by AECA and asserted that exclusions of articles not otherwise restricted by law or other international obligations is contrary to the premise that Australia and the UK have comparable systems with the United States. Commenters specifically cited the need for transfer of information regarding processes necessary to meet materials specifications, instruction with regard to test and commissioning software, and design models that may contain manufacturing know-how. One commenter recommended eliminating the exclusion for manufacturing know-how pertaining to classified UUV signature reduction techniques or making the exclusion specific to current U.S.-fielded technologies in programs of record. One commenter also estimated that, without an exclusion for manufacturing know-how, approximately 200 manufacturing license agreements would be necessary to support the anticipated transfers of submersible manufacturing capabilities. Another commenter suggested restricting the exclusions in Category XX to classified technologies.

The Department affirms the articles and services described in USML Category XX(d) are critical to the success of AUKUS Pillar I and further notes this exemption is not the only means of facilitating the safe and effective operation or manufacture of nuclear-powered submarines. The specific technologies excluded by the ETL have been identified as warranting continued (and now expedited) licensing review. Having consulted with DoD, the Department further amends the USML Category XX(d) entry to (1) remove manufacturing know-how directly related to uncrewed vessels, (2) clarify the entry, and (3) further exclude design methodology and engineering analysis directly related to certain USML Category XX commodities for the same reasons manufacturing know-how is excluded for those commodities.

One commenter requested clarification whether manufacturing know-how is excluded if it pertains to a USML Category XX(c) defense article used in both crewed vessels and classified UUVs. The Department has revised the manufacturing know-how entry for Category XX, which no longer specifically excludes all manufacturing know-how for classified UUVs. Manufacturing know-how directly related to crewed vessels remain excluded. For Category XX(c) defense articles used both in crewed and uncrewed vessels, exporters must assess whether the information under consideration is directly related to crewed vessels and is therefore excluded. The Department further notes that technical data directly related to a Category XX(c) commodity may be excluded by other ETL entries. For example, other ETL entries exclude technical data directly related to Category XX(c) articles specially designed for articles in Categories XX(b)(1) and (2).

Several commenters cautioned against finalizing a § 126.7 exemption that hampers collaboration and innovation for technological development in support of future AUKUS programs. The Department notes that the exemption was developed by the U.S. Government cognizant of the goals of AUKUS and the exemption was designed to support these goals while maintaining individual licensing requirements for the most sensitive items subject to the ITAR.

Multiple commenters argued that, because section 38(l) of the AECA (22 U.S.C. 2778(l)) requires all three nations to have “comparable” export control systems, an exporter should not need U.S. authorization to retransfer or reexport defense articles previously exported via the § 126.7 exemption outside of the authorized user community or outside of the three AUKUS nations. Instead, these commenters recommended a license or other authorization from Australia or the United Kingdom from which the defense article is to be retransferred or reexported should suffice. DDTC declines to accept this recommendation. The § 126.7 exemption does not authorize the reexport or retransfer of defense articles outside its scope for several reasons. The Department was provided legal authority under section 38(l) of the AECA to implement such license-free defense trade for Australia and the United Kingdom and only under certain conditions. Having comparable export controls ensures that all three nations are using similar systems to protect technologies within their territory from being transferred illicitly. However, government decisions to authorize the export of defense articles implicate a range of national security and foreign policy interests of a nation.

Multiple commenters also requested the Department eliminate the effect of § 120.11(c) (commonly referred to as the “see-through rule”) for transactions that take place under the proposed § 126.7 exemption or the proposed § 126.15 expedited licensing process, to simplify export compliance for Australian and UK exporters. The Department declines this request, for the same reasons it requires entities to obtain a license or other authorization for retransfers or reexports outside the authorized user community. The underlying reasons for ITAR regulation of defense articles do not change following incorporation or integration into another item, unless specifically provided otherwise in the ITAR ( e.g., see USML Category XV, Note 2 to paragraph (e)).

Several commenters requested clarification that § 124.8(a)(5) does not apply to the proposed exemption. ITAR § 124.8(a)(5) requires certain agreements to include a clause specifying that technical data or defense services exported from the United States in furtherance of the agreement, and any defense article which may be produced or manufactured therefrom, may not be transferred to a foreign person except pursuant to § 126.18, as specifically authorized in the agreement, or where prior written approval of the Department of State has been obtained. While § 124.8(a)(5) does not apply, the Department notes that a similar provision is included in the authorized user process. Use of the § 126.7 exemption does not eliminate the equities underlying § 124.8(a)(5) regarding transfers outside of Australia, the United Kingdom, or the United States. Moreover, maintaining this regulatory provision is key to ensuring know-how transferred under the exemption is not repurposed for use in defense articles not described in Australia and the UK's munitions lists. Without this provision, AECA section 38(j)(1)(C)(ii)(VI) and (VII) would require the Department to substantially expand the ETL to prevent unlicensed exports of U.S. technological capabilities outside of the United Kingdom and Australia. However, to further facilitate trade within the approved user community, and for clarity, the Department is amending § 124.8(a)(5) to affirm the exemption at § 126.7 may be used to retransfer and reexport articles and services within the authorized user community that were originally exported via an agreement subject to § 124.8(a)(5).

One commenter inquired when the Department plans to certify that Australia and the United Kingdom have comparable export controls. The Department notes that such a certification must occur prior to the effective date of this final rule implementing the exemption.

One commenter supported the passing of the Australian Defence Trade Controls Amendment Act 2024; however, expressed concern that the law will increase compliance requirements for Australian industry. The Department notes that this comment is outside the scope of this rulemaking regarding the ITAR exemption that the United States Government proposed.

One commenter requested clarification as to whether the term “export” in the proposed rule refers to both permanent and temporary exports. The Department clarifies that, consistent with how the term “export” is used elsewhere in the ITAR, unless otherwise specified, the term “export” refers to both permanent and temporary exports.

One commenter sought clarification as to whether the § 126.7 exemption would supersede an existing license or other authorizations already issued by DDTC, and if provisos in an existing license or other authorization include tighter restrictions than the § 126.7 exemption, which authorization should the exporter refer to. Another commenter suggested the Department clarify that provisos in an existing authorization no longer apply if the § 126.7 exemption is available for use. Similarly, two commenters inquired if there is a transition period for existing license or other authorizations to using the § 126.7 exemption. The Department notes that use of the § 126.7 exemption in lieu of an existing license or other authorization is allowed effective immediately upon the effective date of this interim final rule provided all exemption criteria are met, consistent with the application of other ITAR exemptions. There is no transition period required for this exemption. The Department notes ITAR exemptions do not automatically invalidate previously authorized licenses or agreements. For example, to the extent an exporter chooses to rely on a particular authorization to export, the provisos, conditions, and limitations that were applied to that authorization continue to govern the authorization.

One commenter sought clarification if this exemption could be used for a defense article originally shipped via FMS and what the requirements were for continued transfers. The Department confirms that the ITAR authorizes commercial exports of defense articles and defense services, also known as direct commercial sales or DCS. Defense articles transferred via government-to-government channels such as FMS are conducted pursuant to separate and distinct authorities. Those separate authorities continue to govern the export, reexport, and retransfer of those defense articles. This means that defense articles originally exported pursuant to an FMS case continue to be subject to the terms and conditions of the FMS Letter of Offer and Acceptance and are not eligible for retransfer or reexport under § 126.17 or any other provision of the ITAR.

One commenter sought clarification on the proposed rule's impact on the existing United Kingdom and Australian DTCTs and if this rule will replace or alter §§ 126.16 and 126.17. The Department notes that the existing United Kingdom and Australian DTCTs will not be altered. The § 126.7 exemption is new and a separate exemption.

One commenter expressed concern about arms transfers and money laundering. The Department notes that this comment is outside the scope of this rulemaking.

One commenter expressed that all defense trade and cooperation should exclude Israel. The Department notes the § 126.7 exemption is solely for Australia, the United Kingdom, and the United States and that the comment is otherwise outside the scope of this rulemaking.

Two commenters recommended the Department waive agreement signatures and nondisclosure agreements (NDA) for authorized users who are a party to ITAR agreements which are for end-use by AUKUS governments and include non-AUKUS parties and suggested that the NDA requirement be included in the authorized user enrollment process to mitigate administrative hurdles. Similarly, one commenter recommended the same waivers but for end-use by AUKUS governments, authorization to export defense articles on the ETL, and only include authorized users. The commenter acknowledges that the latter recommendation requires a license but asserts that without these waivers it is burdensome and does not support AUKUS objectives. The Department notes that these recommendations exceed the scope of the proposed rulemaking insofar as it recommends changing requirements that apply to transfers that are not described within the § 126.7 exemption being proposed or the expedited processing timelines that would apply under § 126.15. The Department also does not agree with the commenter's suggestion that signatures on approved agreements are “administrative hurdles.” A party's signature to an agreement is an acknowledgement that the party has been made aware of and agrees to comply with the terms and conditions of the specific agreement to which the party has affixed its signature. Further, exports of defense articles on the ETL especially, these specific assurances are an important measure designed to help ensure that all parties to the transaction, including authorized user understand their specific obligations.

Similarly, another commenter suggested to remove the NDA requirement for sublicensees when transfers are on the ETL and require licensing. The Department notes that these recommendations exceed the scope of the proposed rulemaking.

One commenter noted classified and FMS are not captured in the § 126.7 exemption and recommended the Department consider harmonizing licensing pathways for users of the exemption. The Department acknowledges this comment; however, classified is not prohibited in the § 126.7 exemption provided all criteria in that section are met, and regarding different licensing pathways, the ITAR does not regulate FMS. The Department acknowledges that continued efforts to streamline and facilitate defense trade generally and may consider this comment within other efforts.

Two commenters recommended to create an exception similar to § 120.54(a)(3) for authorized users. While this is outside the scope of this particular rulemaking, the Department may consider it in a future rulemaking.

Two commenters acknowledged this is outside the realm of export controls but recommended all three nationals have harmonized cyber security standards. The Department notes that this comment is outside the scope of this rulemaking.

The same commenter inquired how controlled unclassified information (CUI) will be handled with AUKUS, what upcoming AUKUS-related streamlining of the FMS system are being considered and requested the creation of a non-U.S. Defense Trade Advisory Group (DTAG). The Department notes that this comment is outside the scope of this rulemaking, however there are several mechanisms for foreign industry to provide comments to the U.S. Government on defense trade matters, including through their governments. These comments were passed to the U.S. Government entities overseeing CUI and FMS processes.

One commenter expressed that efforts to expedite transfers to NTIB (National Technology and Industrial Base) partners is still important. The Department notes that this comment is outside the scope of this rulemaking.

One commenter suggested to amend § 123.9(c)(4) to include the proposed § 126.7 exemption to reflect Australian and UK authorized users are allowed to submitted retransfer authorizations. The Department declines to accept this comment as the § 123.9(c)(4) provision imposes conditions on reexports and retransfers of defense articles originally exported pursuant to the Defense Trade Cooperation Treaties in §§ 126.16 and 126.17, which impose unique requirements, including on reexports and retransfers.

One commenter suggested DDTC work with the Office of Regional Security and Arms Transfers (RSAT), the Defense Security Cooperation Agency (DCSA), and other government entities to inform the public about changes to DCS and FMS processes within the AUKUS framework, including activities done through FMS channels which can transition to be handled through the § 126.7 exemption. The Department reemphasizes that the ITAR regulates DCS only and ITAR exemptions cannot be used for FMS transfers. However, the Department recognizes the need for continued outreach and education on defense trade process more generally and will aim to coordinate outreach between the DCS and FMS communities.

One commenter applauded the Department of State and the Department of Commerce for aligning its export controls, in particular the inclusion of the AUKUS exemption and conforming authorizations in the Export Administration Regulations (EAR). The commenter further suggested both agencies consider revising the treatment of nationality to ensure that national security concerns and risks relating to dual- and third-country nationals are consistent across the ITAR and the EAR, particularly with respect to technology transfers and “deemed exports.” The Department notes that the Department of State and Department of Commerce have different authorities for export controls and thus the ITAR and EAR have different scopes of technology, with the ITAR controlling more sensitive defense articles and defense services. As such, the ITAR control may be more stringent than those implemented by the EAR.

One commenter proposed to have a series of tabletop exercises with the governments of Australia, the United Kingdom, and the United States to better streamline policies or regulations, conduct gap analyses, and support harmonization prior to the finalization of this rule. The Department notes it continues to coordinate with the United Kingdom and Australia on this rulemaking and the reciprocal exemptions being created by the United Kingdom and Australia.

One commenter wanted clarification if the requirements set out in § 126.18(a), (b), and (c)(2) apply to § 126.7. The Department notes that those provisions are separate and do not apply to § 126.7 but are still available for use if all the criteria are met. Moreover, the Department notes that these provisions are for dual and third-country nationals.

One commenter recommended Canada be included in §§ 126.7 and 126.18(e). The Department notes its focus on implementing the requirements set forth in section 38(l) of the AECA, which are specific to Australia and the United Kingdom.

One commenter suggested the Department align subject matter experts to specific AUKUS pillars, each country would have an administrator that manages those pillars, and the administrator is responsible for vetting entities as authorized users. The Department notes that this comment is outside the scope of the rulemaking in terms of how future AUKUS programs will be structured and which countries will collaborate on those projects or programs.

One commenter recommended that DoD and the intelligence community conduct a comprehensive review of classification policy to ensure defense articles are not routinely marked with classifications that limit sharing with Australian and UK partners. The Department notes this comment is outside the scope of this rulemaking.

This rulemaking is exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act (APA) pursuant to 5 U.S.C. 553(a)(1) as a military or foreign affairs function of the United States Government. Good cause also exists under 5 U.S.C. 553(b)(B) and (d)(3) to issue this final rule with an immediate effective date, as 22 U.S.C. 2778(l)(2) requires that this rule implementing an exemption be immediately issued upon an assessment of comparability. The Department believes that the statutory directive is a result of congressional intent and recognition that the foreign affairs function exception to the requirements of 5 U.S.C. 553 apply to ITAR rules. E.g., 22 CFR 120.20. Moreover, since Australia and the United Kingdom have implemented a comparable exemption from their export control requirements for the United States in furtherance of the trilateral trade concept envisioned by statute, and have made changes and commitments regarding their own laws and processes, good cause exists to quickly issue a final rule, have certain limitations to the exemption based on security and shared objectives, ensure it goes into effect on or near a certain coordinated date, and otherwise facilitate the enhanced trilateral partnership envisioned by AUKUS.

Since this rule is exempt from the notice-and-comment provisions of 5 U.S.C. 553 as a military or foreign affairs function, and based on the Department's finding of good cause, the rule does not require analysis under the Regulatory Flexibility Act.

This rulemaking does not involve a mandate that will result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any year and it will not significantly or uniquely affect small governments. Therefore, no actions are deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This rulemaking 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. Therefore, in accordance with Executive Order 13132, it is determined that this amendment does not have sufficient federalism implications to require consultations or warrant the preparation of a federalism summary impact statement. The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities do not apply to this rulemaking.

Executive Order 12866, as amended by Executive Order 14094, and Executive Order 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, distributed impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Because the scope of this rule does not impose additional regulatory requirements or obligations, the Department believes costs associated with this rule will be minimal. Regarding the exemption, Australia and the United Kingdom, as set forth in the section 655 reports required annually by the Foreign Assistance Act of 1961, as amended, are ordinarily among the most commonly licensed destinations for transfers subject to the ITAR. The Department expects that fewer license applications will be submitted as a result of this rule for authorized users that meet the criteria of the exemption, for eligible transfers of defense articles and defense services to and between Australia, the United Kingdom, and the United States. Consequently, this exemption will relieve licensing burdens for some exporters. Regarding the expedited licensing review process when an ITAR exemption is not available for use, the Department expects minimal costs associated with this provision for the public, with the benefit of license applications involving Australia, the United Kingdom, or Canada being subject to faster adjudication. The Department is seeking public comment on its assessment of the costs and benefits of this interim final rule. This rule has been designated as a significant regulatory action by the Office and Information and Regulatory Affairs under Executive Order 12866.

The Department of State has reviewed this rulemaking in light of Executive Order 12988 to eliminate ambiguity, minimize litigation, establish clear legal standards, and reduce burden.

The Department of State has determined that this rulemaking will not have tribal implications, will not impose substantial direct compliance costs on Indian tribal governments, and will not preempt tribal law. Accordingly, Executive Order 13175 does not apply to this rulemaking.

This rulemaking does not impose or revise any information collections subject to 44 U.S.C. Chapter 35.

For the reasons set forth above, title 22, chapter I, subchapter M, parts 123, 124, and 126 of the Code of Federal Regulations are amended as follows:

A Negotiated Service Agreement (NSA) is “a written contract, to be in effect for a defined period of time, between the Postal Service and a mailer, which provides for customer-specific rates or fees and/or terms of service in accordance with the terms and conditions of the contract.” 39 CFR 3010.101(f). These NSAs require prior Commission approval before they are added to the applicable product lists; however, different statutory and regulatory criteria apply to the approval of Market Dominant NSAs and Competitive NSAs. 1

Before adding a product (such as a Competitive NSA) to the Competitive product list, the Commission undertakes two types of review: (1) review under 39 U.S.C. 3642; and (2) review under 39 U.S.C. 3633. Upon consideration of required information submitted by the Postal Service, including projections of the proposed product's revenues and costs and responses to any information requests, 2 the Commission determines whether the product complies with the requirements for Competitive products in 39 U.S.C. 3642. The Commission also makes a preliminary determination of whether the proposed product will comply with the criteria outlined in 39 U.S.C. 3633(a). Final determination of compliance with 39 U.S.C. 3633(a) is made retrospectively, in the Commission's Annual Compliance Determination(s) (ACD), as set forth in 39 U.S.C. 3653.

Over the years, various efforts have sought to streamline review of NSAs in certain respects by applying the concept of functional equivalence to groups of NSAs. 3 An umbrella product is a grouping of NSAs that are functionally equivalent to a baseline agreement. The Commission has used a functional equivalence analysis to approve umbrella product agreements. 4 Non-published rates NSA products are a refinement of umbrella products that receive further streamlined review because the products “conform to a template agreement and offer prices within specified, pre-approved ranges.” Order No. 5753 at 3. These products must comply with Commission classification and regulatory requirements, including pre-approved pricing formulas, minimum cost coverage, and documentation, and allow for a streamlined review process because the contract template and financial model are approved in advance. 5

In Order No. 6446, 6 the Commission outlined concepts for potential enhancements to its regime for adding NSAs to the Competitive product list in a conceptual framework. See Order No. 6446 at 12. The Commission received comments in response to Order No. 6446. Having considered the comments received, the Commission proposed rules. 7

The Commission codifies, with modifications, its existing NSA filing and review procedures as default rules for proposals to add NSAs to the Competitive product list. The Commission codifies, with modifications, existing, optional, streamlined methods for adding qualifying umbrella products and non-published rate products to the Competitive product list. The Commission also creates a new streamlined filing option for qualifying NSAs called Standardized Distinct Products. Each streamlined option has distinct filing and review procedures providing different levels of scrutiny and streamlined review. The final rules preserve the Postal Service's existing contracting flexibility with default review procedures, while providing the option for streamlined pre-implementation review of NSAs that satisfy the eligibility requirements of one of the optional streamlined methods.

The Commission establishes new filing and review procedures for Standardized Distinct Product NSAs. These procedures include advance review of financial models to streamline review of individual NSAs that are based on existing Postal Service competitive products. Proposing new non-published rate products also involves advance review of financial models. By contrast, filing and review procedures for umbrella products generally follow current practices. Default filing and review procedures consist of former, generally applicable filing and review practices for competitive NSAs (other than umbrella product or non-published rate product NSAs).

The Commission also establishes rules for administering NSAs on the competitive product list. These rules cover amendments, renewals, extensions, and terminations of competitive NSAs, as well as periodic reporting requirements.

The final rules are designed to streamline competitive NSA review, while ensuring transparency and accountability, preserving existing flexibility, and enabling a smooth transition with minimum disruption for stakeholders. Under the final rules, the vast majority of proposed competitive NSAs should qualify for a streamlined review procedure. Use of such streamlined procedures, particularly the Standardized Distinct Product option, should markedly simplify adding new NSAs to the competitive product list.

For the reasons stated in the preamble, the Commission amends chapter III of title 39 of the Code of the Federal Regulations as follows:

Throughout this document, “we,” “us,” and “our” refer to the EPA.

On April 16, 2024 (89 FR 26813), the EPA proposed to approve the following rules and rule rescissions into the Arizona SIP.

We proposed to approve the rescission of the rules in table 1, and the inclusion of the rules in table 2, because we determined that the rule rescissions in table 1 and rule replacements in table 2 comply with the relevant CAA requirements. Our proposed action contains more information on the rules and our evaluation.

The EPA's proposed action provided a 30-day public comment period. During this period, we received two comments. The comments discussed Arizona's legalization of recreational marijuana and its impact on air quality. The EPA has determined that the comments fail to raise issues germane to the proposed recission and/or replacement of local rules from the MCAQD portion of the Arizona SIP. Therefore, we have determined that these comments do not necessitate a response, and the EPA will not provide specific responses to the comments in this notice.

No comments were submitted that change our assessment of the rule recissions as described in our proposed action. Therefore, as authorized in section 110(k)(3) of the Act, the EPA is approving the rule recissions in table 1, and the inclusion of the Rules in table 2 into the Arizona SIP. The recissions will remove the previously approved Rule 22, Rule 28, Rule 32 sections G, H, J, and K, Rule 41, Rule 42 and Rule 74 section C from the SIP. Rule 320, section 306 will replace Rule 32, section G and Rule 320, section 307 will replace Rule 32, section J in the SIP.

In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. The EPA is also finalizing deletion of rules that were previously incorporated by reference from the applicable Arizona SIP. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of Maricopa Rule 320 section 306,—Odors and Gaseous Air Contaminants, Limitation—Sulfur from Other Industries, and Rule 320 section 307, Odors and Gaseous Air Contaminants, Operating Requirements—Asphalt Kettles and Dip Tanks, revised on July 2, 2003, which regulates sulfur and visible emissions from asphalt kettle or dip tanks. The EPA is also finalizing the incorporation by reference for the rescission of the Arizona rules described in the amendments to 40 CFR part 52 set forth below. Therefore, these materials have been approved by the EPA for removal from the SIP, and will be incorporated by reference by the EPA into that plan, are fully federally enforceable under sections 110 and 113 of the CAA as of the effective date of the final rulemaking of the EPA's approval in the next update to the SIP compilation. 1 The EPA has made, and will continue to make, these documents available through www.regulations.gov and at the EPA Region IX Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information).

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve State choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves State law as meeting federal requirements and does not impose additional requirements beyond those imposed by State law. For that reason, this action:

• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 14094 (88 FR 21879, April 11, 2023);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because it approves a State program;

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001); and

• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act.

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

Executive Order 12898 (Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, February 16, 1994) directs Federal agencies to identify and address “disproportionately high and adverse human health or environmental effects” of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. The EPA defines environmental justice (EJ) as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” The EPA further defines the term fair treatment to mean that “no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.”

The State did not evaluate environmental justice considerations as part of its SIP submittal; the CAA and applicable implementing regulations neither prohibit nor require such an evaluation. The EPA did not perform an EJ analysis and did not consider EJ in this action. Due to the nature of the action being taken here, this action is expected to have a neutral to positive impact on the air quality of the affected area. Consideration of EJ is not required as part of this action, and there is no information in the record inconsistent with the stated goal of Executive Order 12898 of achieving environmental justice for people of color, low-income populations, and Indigenous peoples.

This action is subject to the Congressional Review Act, 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 is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by October 21, 2024. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

For the reasons stated in the preamble, EPA amends part 52, chapter I, Title 40 of the Code of Federal Regulations as follows:

This is a synopsis of the Commission's Report and Order ( Order ) and Further Notice of Proposed Rulemaking ( FNPRM ) in WC Docket No. 21-31; FCC 24-76, adopted on July 18, 2024 and released on July 29, 2024. The full text of this document is available at the following internet address: https://docs.fcc.gov/public/attachments/FCC-24-76A1.pdf.

Technology has become an integral part of the modern classroom and receiving an education, especially in the recent past, and the barrier to accessing such technology puts individuals at a significant disadvantage to their peers and often prevents educators from being able to teach. In the Report and Order ( Order ), the Commission take steps to modernize the E-Rate program to meet the evolving needs of schools and libraries around the country by allowing for the distribution of Wi-Fi hotspots and services to students, school staff, and library patrons for off-premises use.

Since its inception more than 25 years ago, the Commission's E-Rate program has supported high-speed, affordable internet services to and within school and library buildings, and has been instrumental in providing students, school staff, and library patrons with access to the essential broadband services that are required for next-generation learning. Recognizing the Commission's responsibility to ensure the E-Rate program evolves with the educational needs of students and library patrons, the Commission has frequently modernized the program to reflect the changes in education and technology, including by providing more equitable access to funding for Wi-Fi networks in schools and libraries. Recently the Commission has seen significant advances in technology that have changed not only the way schools and libraries provide educational resources, but also the way students, school staff, and library patrons access such resources. In particular, an internet connection has become an essential requirement for learners to access tasks that are vital to obtaining an education, including homework assignments, online classes, library materials, continuing education, and career and government applications.

The need for internet connectivity beyond the campus boundaries was further underscored by nationwide school and library closures beginning in 2020 as a result of the COVID-19 pandemic, when most educational activities were unexpectedly forced to shift online overnight. During this time, thanks to the creativity and resourcefulness of schools and libraries around the country, many students, school staff, and library patrons that would have been caught on the wrong side of the digital divide or the “Homework Gap”— i.e., students unable to fully participate in educational opportunities because they lack broadband connectivity in their homes—were able to obtain a broadband connection provided by their local school or library. Many schools and libraries used funding provided through the congressionally-appropriated Emergency Connectivity Fund (ECF) program to purchase connected devices, Wi-Fi hotspot devices, broadband connections, and other eligible equipment and services for students, school staff, and library patrons in need, to use at a variety of locations, including locations other than schools and libraries, during the pandemic. Notably, schools and libraries found success in establishing ECF-funded Wi-Fi hotspot lending programs to provide the hotspot equipment and monthly mobile wireless broadband services needed to connect individuals who otherwise lacked the internet access needed to fully participate in remote learning.

Even with schools and libraries reopening and returning to in-person instruction, the need for internet connections outside of the school or library buildings to fully engage in education remains, and schools and libraries are seeking to continue funding these valuable lending programs to keep their students, school staff, and library patrons connected. That is why the Commission adapts the E-Rate program to recognize these needs. Building on its experiences in the ECF program and the comments the Commission received in response to the Notice of Proposed Rulemaking ( NPRM ), 88 FR 85157, December 7, 2023, the Commission adopts a budget mechanism to allow for the equitable distribution of Wi-Fi hotspots and services to students, school staff, and library patrons. These rules are intended to be another step in updating the E-Rate program to reflect the realities of many schools and libraries by lending Wi-Fi hotspots and services through community and school libraries across the country so that students, school staff, and library patrons with the greatest need can be connected and learn without limits.

In the Order, the Commission takes steps to modernize the E-Rate program to ensure that schools and libraries across the nation have the tools necessary to connect their students, school staff, or library patrons who have fallen onto the wrong side of the digital divide or the Homework Gap. First, the Commission permits schools and libraries to purchase Wi-Fi hotspots and services that they can lend to students, school staff, and library patrons for off-premises use and direct the Wireline Competition Bureau (Bureau) to make the services and equipment eligible as part of the funding year 2025 eligible services list proceeding. Second, relying on the successes of and lessons learned from the ECF program, as well as the Wi-Fi hotspot lending programs established by schools and libraries with ECF support, the Commission establishes a budget mechanism to set a limit on the amount of support that an eligible school or library can request for Wi-Fi hotspots and services that can be loaned to their students, school staff, and library patrons, thereby allowing schools and libraries the flexibility to target those with the greatest need in their respective populations. Next, the Commission also remains committed to supporting the connectivity needs of school and library buildings by prioritizing funding for these off-premises services after on-premises-related funding requests. Mindful of its duty to be a responsible steward of limited universal service resources, the Commission also adopts safeguards to ensure the E-Rate funds are used for their intended purpose. Finally, the Commission reaffirms its conclusions that the obligations of the Children's internet Protection Act (CIPA) apply if the school or library receives E-Rate support for internet service, internet access, or network connection services or related equipment, including Wi-Fi hotspots.

Based on the record and consistent with its authority pursuant to section 254(h) of the Communications Act, the Commission adopts its proposal to permit schools and libraries to receive E-Rate support for Wi-Fi hotspots and services to be used off-premises by students, school staff, and library patrons. Although the E-Rate program has not historically provided support for most off-premises uses of E-Rate- supported services, the Commission agrees with commenters that today's educational environment has substantially changed since the advent of the E-Rate program in 1997. Namely, the increasing shift to digital learning due to evolving technologies as well as pandemic-related changes has resulted in internet connectivity becoming a necessity to being able to fully participate in modern education for students, school staff, and library patrons alike.

For schools, the pandemic highlighted the digital divide, leaving those students without access to reliable home internet unable to access educational resources, participate in remote learning, or connect with teachers. Smith Bagley, Inc. (SBi) described how emergency funding during the pandemic increased educational opportunities for Tribal students by focusing on digital inclusion and introducing digital learning tools that have been available to urban and suburban communities for years, allowing them to connect to schools on days they would otherwise miss and allowing teachers to reach students that would otherwise be left disconnected. The digital divide between students with access to broadband at home and those without exacerbates existing inequalities, particularly for certain communities—such as those in rural or economically-disadvantaged areas. Commenters note that stable internet connectivity at home is essential to “educational opportunity, equity, and achievement” with digital learning tools enabling “more expansive, up-to-date content, the inclusion of educational videos, and effective online collaboration.” Others explain the reliance on online digital resources allows learners “to engage with supplemental educational materials, complete homework assignments, and connect with one another,” which leaves “[s]tudents and staff that are unable to access the connected classroom . . . at a significant disadvantage.” A 2021 report observed that “[h]istorically students caught in the digital divide have lower academic achievement with a significant impact on lifetime earnings.”

Likewise, for libraries, providing free, high-speed access to the internet is critical to many of the services libraries provide, particularly for disadvantaged communities. Library services increasingly include virtual offerings. For example, libraries allow patrons to access digital resources remotely, including reserving or renewing books, accessing digital collections and e-materials, providing community support resources, and even offering support to library patrons who are educators or students, making these digital resources available to library patrons at the moment they need them. Additionally, Wi-Fi hotspot lending programs that provide remote access to the internet for library patrons are both successful and in high demand. For instance, one commenter explains that at the Chicopee Public Library, Wi-Fi hotspots are checked out “every day to people who have no other way of accessing this service without putting themselves in danger of being unable to afford basic necessities.”

The Commission modernizes the E-Rate program to address this digital inequity that leaves some students, school staff, and library patrons unable to fully participate in schoolwork or access library resources. The Commission further recognizes how learning is no longer confined to the physical school or library building during regular operating hours, and how libraries and schools often serve to fill the educational and connectivity gap for their students, school staff, and library patrons who lack access to the internet. Additionally, based on its experiences through the ECF program, the Commission further seeks to recognize the utility of Wi-Fi hotspots as an easily sourced and affordable means of providing connectivity for schools and libraries and acknowledge the commenters' countless examples of how Wi-Fi hotspot lending programs established with ECF funding have benefitted communities and students around the nation. Now, numerous libraries and schools are faced with the difficult decision to reduce the number of Wi-Fi hotspots available for circulation or start charging fees, not because of lack of demand, but because of lack of available funding. This has only been further exacerbated by the recent loss of Affordable Connectivity Program (ACP) benefits by many low-income households across the country. As such, the Commission extends eligibility to provide eligible schools and libraries with much-needed assistance in getting the students, school staff, and library patrons with the greatest need connected via Wi-Fi hotspots and services that can be used off-premises.

Eligible Equipment & Services. The Commission adopts the proposed definitions to permit Wi-Fi hotspots and mobile wireless internet services as eligible for E-Rate support. In the NPRM, the Commission sought comment on what specific equipment and services should be deemed eligible for the off-premises use of Wi-Fi hotspots and mobile wireless internet services. Specifically, the Commission sought comment on adopting the ECF program's definition of a Wi-Fi hotspot ( i.e., “a device that is capable of (a) receiving advanced telecommunications and information services; and (b) sharing such services with a connected device through the use of Wi-Fi”) and limiting service eligibility to commercially available mobile wireless internet services that can be supported by and delivered with such Wi-Fi hotspots. Commenters are largely supportive of making off-premises uses eligible for E-Rate funding and, despite also requesting additional equipment and services be made eligible, were supportive of the proposed definitions of Wi-Fi hotspots and mobile wireless internet services that can be used off-premises. Based on the record, the Commission adopts the proposed definitions for the equipment and services eligible for support in the E-Rate program and direct the Bureau to add Wi-Fi hotspots and mobile wireless internet services that can be used off-premises as eligible services as part of the funding year 2025 eligible services list proceeding.

With respect to eligible equipment, the Commission adopts definitions of “Wi-Fi” and “Wi-Fi hotspot” in its rules that are based on the definitions adopted by it in the ECF program. Specifically, the Commission defines “Wi-Fi” as “wireless networking protocol based on Institute of Electrical and Electronics Engineers standard 802.11” and the Commission defines “Wi-Fi hotspot” as “a device that is capable of receiving advanced telecommunications and information services, and sharing such services with another connected device through the use of Wi-Fi.” The Commission finds that this decision is both supported by the record and by its own experiences successfully providing connectivity to students, school staff, and library patrons delivered by Wi-Fi hotspots through the ECF program. However, the Commission also wishes to acknowledge that these terms may have other accepted meanings within the communications industry. For example, Intel defines “Wi-Fi hotspot” to mean “a physical location where individuals can access the internet wirelessly through a wireless local area network (WLAN) using Wi-Fi technology.” The Commission concludes that this definition would be overly broad for these purposes, as the function described can be provided by many different types of devices and may permit unintended scenarios such as funding public Wi-Fi hubs in a public park or a community center, which is beyond the scope of its goal to provide connectivity to individual students, school staff, or library patrons caught in the Homework Gap or digital divide. Therefore, for the purposes of the E-Rate program, the definition the Commission adopts for “Wi-Fi hotspot” means a device (sometimes referred to as a “mobile hotspot” or “portable hotspot device”) that is intended to provide Wi-Fi connectivity to a hotspot user as its sole function. Additionally, the Commission limits the capability of a sole purpose Wi-Fi hotspot to devices that: (1) are portable; and (2) are a single device ( i.e., not a set of linked devices). Finally, these Wi-Fi hotspots must be for use with a commercially available mobile wireless internet service, rather than for use with Citizens Band Radio Service (CBRS) or other private network services.

The Commission declines to make other multi-functional devices that can support Wi-Fi eligible for E-Rate support. Thus, the Commission finds such multi-functional devices, e.g., smartphones, PCs, notebooks, tablets, customer premises equipment, routers or switches, and wireless access points, etc., are not eligible. In the ECF Order, 86 FR 29136, May 28, 2021, the Commission also found it unnecessary to support costly smartphones used as Wi-Fi hotspots, when much less expensive hotspot devices can serve the same purpose. The Commission finds this determination remains true today; and therefore, the Commission limits E-Rate support to sole function Wi-Fi hotspot devices. Additionally, with respect to the requests to support end-user devices like laptops or tablets, the Commission concludes that this equipment remains ineligible for E-Rate support, consistent with its previous decisions to decline support for “computers and other peripheral equipment” based on its finding that only equipment that is an essential element in the transmission of information is eligible ( e.g., internal connections) for E-Rate support. Similar to its reasoning for making smartphones ineligible, the Commission also finds it unnecessary to take on the costly expenses of laptops or tablets with built-in wireless connections, when less expensive, sole purpose Wi-Fi hotspots are capable of delivering the same service. The Commission also declines to permit applicants to request the mobile wireless services delivered to broadband-enabled end user devices ( e.g., laptops, tablets). While the Commission recognizes that there are some benefits to students using these devices, the Commission is concerned that it adds unneeded complexity in its review of the services eligibility, particularly in trying to ensure these E-Rate-supported services are targeted to students with need, rather than just to students who need a school-assigned tablet or laptop.

With respect to mobile wireless internet services, the Commission limits the use of services to those that can be supported by and delivered with Wi-Fi hotspots provided to an individual user. The Commission appreciates the suggestions of several commenters who urge it to also expand eligibility beyond just Wi-Fi hotspots and mobile wireless services. Citing concerns that limiting eligibility to Wi-Fi hotspots and mobile wireless services would be contrary to the statutory requirement in section 254(h)(2)(A) of the Communications Act to establish “competitively neutral” rules, these commenters argue that the Commission should also permit E-Rate support for other off-premises technologies, including: fixed wireless connections and the related equipment, private 5G/LTE networks, CBRS and television white space (TVWS), fiber, and network expansion or construction. The Commission acknowledges these commenters' concerns and recognize that connectivity provided by Wi-Fi hotspots is not a one-size-fits-all solution. However, in taking this action, the Commission remains focused on the statutory obligation to establish rules that enhance access to the extent it is “economically reasonable.” At this time, the Commission does not possess the information necessary to make a broader determination, nor did any commenters sufficiently analyze the feasibility of broadening the scope of eligibility. In particular, the Commission does not have sufficient data to rely on to establish funding caps on the equipment or service costs associated with other solutions or to establish an overall budget like the one adopted for Wi-Fi hotspots herein. At this time, the Commission establishes caps in this program on both services and equipment in order to simplify review, aid administration, and constrain costs. Commenters provided examples of costs for existing network builds, but not in a way that would allow the Commission to establish caps or assess cost-effectiveness on costs of access points, antennas, switches, radios, customer premises equipment, backhaul, installation, RF design and planning, engineering, licenses, maintenance, software updates, and other miscellaneous charges. For example, while some stakeholders urge the Commission to permit E-Rate support for applicant-enabled off-campus networks, and provide some analysis for the potential cost efficiency of such solutions, they also acknowledge that these alternatives that would require much higher up-front deployment costs and rely on reaching a large number of students, school staff, and library patrons. Even if constrained by the overall budgets adopted, the Commission is concerned that these alternative solutions would be challenging to review for cost-effectiveness by applicants and the Administrator without additional data and analysis. In contrast, the Commission's experiences funding Wi-Fi hotspots and mobile wireless internet services through the ECF program have demonstrated that this particular solution can reasonably be supported. The Commission therefore finds that taking this incremental step toward supporting the off-premises educational needs of its nation's students, school staff, and library patrons is not only in the public interest, but it is also within its legal authority. As such, the Commission limits eligibility to commercially available mobile wireless internet services and the Wi-Fi hotspots needed to deliver such services to an individual user.

Per-User Limits. Mindful of the importance of maximizing the use of limited funds, and consistent with the limitation adopted in the ECF program, the Commission adopts a rule to prohibit an eligible school or library from applying for more than one Wi-Fi hotspot provided for use by each student, school staff member, or library patron in the E-Rate program. The NPRM sought comment on whether the Commission should impose per-user limitations on eligible Wi-Fi hotspots and services. The ECF program limited support to one Wi-Fi hotspot device per student, school staff, or library patron. Many commenters expressed support for this approach. In adopting a per-user limitation on these equipment and services, the Commission seeks to equitably distribute and maximize the use of limited funds and the number of students, school staff, and library patrons served.

Minimum Service Standards. The Commission declines to adopt minimum service standards for Wi-Fi hotspots and services used off-premises at this time. While the Commission understands commenters' requests to establish limits related to data and quality of service, it finds that adopting minimum service standards runs the risk of penalizing the students, school staff, and library patrons in places where slower speed, data capped, and/or high latency services are currently the only affordable options. Furthermore, the Commission agrees with commenters' views that schools and libraries are in the best position to know what is available and sufficient for their students', school staff members', and library patrons' remote learning needs. The Commission expects that schools and libraries will make the best decisions to meet the remote learning needs of their students, school staff, and library patrons.

Demonstrating Cost-Effective Purchases of Wireless Services. In making the off-premises use of Wi-Fi hotspots and mobile wireless services eligible, the Commission concludes that the E-Rate program's current requirement that applicants demonstrate that mobile wireless services are more cost-effective than internal broadband services is not applicable to off-premises use. The Commission adopted that requirement because schools and libraries often require substantial bandwidth connections to meet their on-premises connectivity needs, which in turn would require them to seek E-Rate support for large numbers of data plans to meet those needs that may be more expensive than other methods of providing internal broadband access for mobile devices at the school or library. Here, the Commission solely makes the off-premises use of mobile wireless services eligible at this time; and thus, it finds no need to impose any such requirements for applicants seeking support for the off-premises use of wireless internet service and the Wi-Fi hotspots needed to deliver the services. In the event that the off-premises use of additional services and equipment becomes eligible in the future, the Commission will reconsider this approach and whether other requirements may be necessary. The Commission also reminds applicants seeking support for the off-premises use of wireless internet services and Wi-Fi hotspots that they remain subject to the E-Rate program's competitive bidding rules when seeking support for these services and equipment, including the requirement that they select the most cost-effective service offering, using price of the eligible equipment and services as the primary factor considered.

Implementation. The Commission directs the Bureau to make Wi-Fi hotspots and internet services eligible for E-Rate funding as part of the funding year 2025 eligible services list proceeding. Additionally, in implementing these changes, the Commission reaffirms the delegation of authority to the Bureau to interpret its rules and otherwise provide clarification and guidance regarding any ambiguity that may arise to ensure that support for these services provided to schools and libraries further the goals it has adopted for the E-Rate program. The Commission also directs the Universal Service Administrative Company (USAC), the Administrator of the E-Rate program, in coordination with and under the oversight of the Bureau, to issue further guidance and training on administrative and related processes for requesting support for the off-premises use of Wi-Fi hotspots and services.

Wi-Fi Hotspot Lending Program Mechanism. The Commission now adopts a budget mechanism to allow for the equitable distribution of Wi-Fi hotspots and services to students, school staff, and library patrons. In doing so, the budget mechanism will allow eligible schools and libraries to develop hotspot lending programs, while setting a limit on the amount of support that an applicant can request for Wi-Fi hotspots and services. In the NPRM, the Commission sought comment on how to establish a Wi-Fi hotspot program, recognizing that there are insufficient E-Rate funds to support a Wi-Fi hotspot and recurring service for every student, school staff member, and library patron across the nation. The NPRM also asked whether a per-student limit, like the one used for category two funding budgets, could help ensure support was distributed equitably to schools and libraries. The NPRM sought administratively feasible ways to prioritize support to students and library patrons without sufficient internet access. In response, several commenters described the challenges to the approaches used in the ECF program and sought greater flexibility for schools and libraries. The Commission also looks to lessons learned from its administration of the ECF program in addressing these challenges, with particular focus on program integrity. With these considerations in mind, the Commission adopts a budgeted approach based on a mechanism provided in the comments to create a targeted lending program that allows eligible schools and libraries to be able to request a limited number of Wi-Fi hotspot devices and services, if they have need for them, within a pre-discount budget similar to the E-Rate program's category two budgets. This approach takes into account the applicant size, using information that is already collected as part of the category two budget process, and also relies on the E-Rate program's historic focus on poverty and rurality by using the applicants' discount rates to calculate a Wi-Fi hotspot budget. Schools and libraries at higher discount rate levels will be eligible to request and receive a greater amount of E-Rate support for Wi-Fi hotspot devices and services than schools and libraries at lower discount rate levels.

In establishing a budgeted approach to the lending program mechanism, the Commission expects that the limited number of available Wi-Fi hotspots will more naturally be targeted to students, school staff, or library patrons with the most need. The budget mechanism will allow schools and libraries to target the appropriate individuals that lack broadband access; therefore, the Commission finds it does not need to adopt a survey requirement or other document collection requirement. Specifically, except in the one occasion discussed in this document, this limited lending approach will not require applicants to document whether a particular student, school staff member, or library patron has “unmet need” as the Commission defined that term in the ECF program, relying instead on establishing a hotspot budget to prevent applicants from over-purchasing Wi-Fi hotspots and services and permitting applicants to use their judgment to determine the need in their own localities within those limits. Instead, to ensure that use of the hotspot lending program is consistent with its objectives, the Commission will require schools and libraries to adopt and provide notice to the Wi-Fi hotspot recipients of an acceptable use policy (AUP) that highlights that the goal of the hotspot lending program is to provide broadband access to students and library patrons who need it. In combination with the applicant's requirement to pay its non-discounted share of costs, schools and libraries will be incented to right-size their Wi-Fi hotspot and service requests. However, the details of such a hotspot lending program—such as length of lending periods and how to target the appropriate students and library patrons—will be left to the applicant to determine and tailor the hotspot lending program to their local needs. For these reasons, the Commission can streamline the procedures that caused applicants the most challenges in the ECF program, benefiting applicants, service providers, and the Administrator.

The Commission finds adopting this approach to be a reasonable mechanism for limiting how many Wi-Fi hotspots and connections can be requested by an applicant. Specifically, applicants will be limited to a budget based on their full-time student count or library square footage, and their category one discount rate. In doing so, the Commission establishes bright line limits that are fair and equitable—allowing eligible schools and libraries to request Wi-Fi hotspots and service, but limiting the pool of Wi-Fi hotspots and service lines an applicant can request based on its discount rate and school or library size. This will allow schools and libraries to request funding for a Wi-Fi hotspot lending program that can provide wireless internet service to its students, school staff, and library patrons when it is needed most. The Commission prohibits one situation based on its experience in the ECF program—using Wi-Fi hotspots as part of a one to one (1:1) hotspot initiative, where every student receives a Wi-Fi hotspot. The Commission recognizes that even under the limiting mechanism, applicants might have a sufficient Wi-Fi hotspot budget that they could try to focus them all to a 1:1 initiative at a single low-income school in a district or a particular grade ( e.g., all juniors). Generally, applicants are prohibited from seeking E-Rate support for a 1:1 hotspot initiative like this and will be required to certify on the FCC Form 471 application that the hotspots and service will not be used for a 1:1 hotspot initiative. If E-Rate-funded Wi-Fi hotspots are used as part of a 1:1 initiative—either in practice by providing all of the devices to a single school in the district or in conjunction with Wi-Fi hotspots funded via other sources, applicants must document clearly ( i.e., individual survey results or attestations) that each individual student needed a Wi-Fi hotspot, in accordance with the AUPs, and may not rely on general or estimated findings about income levels. Funding disbursements for applicants without specific documentation to support a 1:1 Wi-Fi hotspot initiative will be subject to denial and/or recovery.

Wi-Fi Hotspot and Services Funding Caps. The Commission first adopts pre-discount funding caps on the amounts that can be requested for services and hotspot equipment in the E-Rate program. Specifically, the Commission adopts a pre-discount $15 per month limit on recurring mobile wireless internet service and a pre-discount $90 per Wi-Fi hotspot limit, based on the median cost of monthly services and Wi-Fi hotspots purchased in the ECF program. Taxes and State electronic waste fees are not included in the cap, while other reasonable costs such as delivery fees, activation, and configuration costs are included in the capped amounts. All taxes and fees should be separately identified on invoices and requested on a separate funding line. In the NPRM, the Commission sought comment on cost control mechanisms, including funding caps on Wi-Fi hotspots or services. Some commenters support a cap on the Wi-Fi hotspots and services, with some suggesting that the averages from the ECF program would be an appropriate place to start. Others disagreed, suggesting that competitive bidding and the applicants' non-discounted share of costs requirement would be sufficient, with some cost-effectiveness checks during the Program Integrity Assurance (PIA) review process.

On balance, the Commission agrees with commenters suggesting that funding caps will more effectively ensure equitable distribution of Wi-Fi hotspots, drive more cost-effective purchasing within the E-Rate program, and reduce the likelihood that these costs become unsustainable. The Commission also expects that clear funding caps will lead to a more streamlined review of these funding requests, simplifying administration of these requests. For example, the Commission disagrees with commenters that unreasonable costs are easily taken up in the PIA reviews, when the data the Commission have from the ECF program and the record in this proceeding shows a large variation in costs depending on service provider, technology type, and how contracts are structured. Setting funding caps will also reduce concerns about applicants selecting multiple service offerings in instances where a single service provider will not be able to cover the entire coverage area. In these instances, the program's competitive bidding rules would otherwise be less effective in ensuring cost-effective purchasing when applicants may need multiple service providers in order to provide coverage options in various geographic parts of the student or library patron community. By using a funding cap, applicants that select multiple service providers will still be capped at a cost-effective price, even if they require selection of service offerings that may be more expensive.

Consistent with the ECF program, applicants are permitted to select a Wi-Fi hotspot or service that costs more than the funding caps, but E-Rate commitments will not exceed the funding caps. The Commission expects the E-Rate program's competitive bidding rules to aid applicants in selecting the most cost-effective service offerings, but it also directs USAC to examine costs that do not appear to be cost-effective, based upon other costs within the program or other commercially available offerings. Although the Commission is adopting funding caps for recurring services and Wi-Fi hotspots to help control overall costs to the E-Rate program, the Commission expects applicants to request E-Rate support based on actual, commercial-based costs. For example, an applicant cannot request funding at the cap levels, but purchase Wi-Fi hotspots and recurring services at lower costs and allow service providers to keep the difference in costs as their profit or windfall. The Commission will also require service providers to certify that the costs of the Wi-Fi hotspots do not exceed commercial value. USAC is permitted to modify or reduce such funding requests, as appropriate, to reflect the actual, market-based price of commercially-available Wi-Fi hotspots and to seek recovery in the event of a later determination that the E-Rate funded costs were higher than the actual costs of the requested Wi-Fi hotspots and/or recurring services.

Calculating Budgets. Next, the Commission establishes a formula to calculate a three-year pre-discount Wi-Fi hotspot and service budget, limiting the amount of E-Rate support that can be requested by an applicant for Wi-Fi hotspots and recurring service over three funding years. E-Rate Central suggests adopting a formula modeled after the category two budgets that limits applicants to 20 hotspots per 100 students and 5.5 hotspots per 1,000 library square feet, adjusted by discount rate. Using this proposed formula and multiplying the result by the three-year cost of the funding caps ($630), applicants will calculate a three-year Wi-Fi hotspots and service budget. This is the maximum amount of pre-discount funding permitted for Wi-Fi hotspots and/or service over three funding years. E-Rate Central proposed limiting the quantity of Wi-Fi hotspots and services, but there are important benefits to calculating a maximum Wi-Fi hotspot budget for several reasons. One, a budget will allow schools and libraries greater flexibility in spending by allowing applicants to request funding for the most appropriate mix of Wi-Fi hotspots and service, depending on their needs. Two, a budget will provide applicants better incentives to make cost-effective purchases by permitting them to purchase higher quantities if there are lower costs. Three, budgets will also facilitate use of existing Wi-Fi hotspots purchased through the ECF program or with other Federal funds that are still functional by permitting applicants to purchase higher quantities of service requests, if needed. Applicants that select lower-cost Wi-Fi hotspots, or that find ways to maintain Wi-Fi hotspots for longer, will be able to request a larger quantity of E-Rate supported hotspots or lines of service depending on their individual needs and budget.

Calculating Independent School and School District Hotspot Budgets. Independent schools and school district applicants will calculate their Wi-Fi hotspot and service budgets by multiplying their student counts by 20% ( i.e., 20 hotspots per 100 students), and adjusting by their category one discount rates. This number is rounded up to the nearest ten. The applicant then multiplies that rounded number by $630 to determine the three-year budget. For example, an independent school with 500 students and a 90% discount rate would have a three-year, pre-discount budget of $56,700, while a school district with 500 students and a 40% discount rate would have pre-discount budget of $25,200. Unlike the ECF program, these limits will reduce the number of hotspots that could be requested from the start, requiring schools and districts to make choices about how to distribute and prioritize access for students with the greatest need or set lending terms that allow students to access devices at times when need is high. To the extent that the formula needs adjustments, the Commission provides a means for future changes as discussed, but expect that the benefits of a single formula applicable to all school applicants will be simpler and more administrable than attempting to find a precise number for different types of applicants and will greatly decrease burdens on applicants and the Administrator than if different formulas were adopted dependent upon type of school applicant.

Calculating Independent Libraries and Library System Hotspot Budgets. Likewise, independent libraries and library systems would calculate their Wi-Fi hotspots and service budgets using their square footage, allowing 5.5 devices per 1,000 square feet, adjusted by their category one discount rates. This number is rounded up to the nearest ten. The applicant then multiplies that rounded number by $630 to determine the three-year pre-discount budget. For example, an independent library of 10,000 square feet at the 90% discount rate would have a three-year pre-discount budget of $31,500, while a library system with 100,000 square feet and a 90% discount rate would have a three-year pre-discount budget of $315,000. Smaller libraries would thus be eligible for at least 10 devices and services lines, while larger library systems would be eligible for more. Like schools, the Commission adopts this formula in order to allow libraries to plan for and determine how and whether to request E-Rate support for a library hotspot lending program. The Commission adopts the factor suggested in the comments, which is roughly based on the ratios developed in the category two budgets for schools and libraries, but also adopt a means to adjust the formula in the future should the library factor be insufficient for library patron access, particularly in areas of the country where there may be higher need, but small libraries, such as rural-remote areas.

For purposes of the calculation, full-time student count and square footage figures will be calculated at the district-wide or library system level in order to make use of existing information collections and procedures. Independent schools may apply using entity-level student counts. In doing this, the Commission seeks to use data that is already collected on the FCC Form 471 application for the applicants' category two budgets. Similarly, the Commission will allow an applicant to rely on a validated category two student count or square footage figure for purposes of the Wi-Fi hotspot limiting mechanism. Relying on information already collected and validated for category two purposes will reduce burdens on applicants and the Administrator. For funding year (FY) 2025 through FY 2027, schools and school districts with a validated category two student count could rely on that number (and similarly, libraries with a validated square footage), but would need to revalidate student counts in the next three-year Wi-Fi hotspot funding cycle ( i.e., FY 2028 through FY 2030).

The Commission also will use fixed three-year budget cycles, after which the budgets will reset, beginning with funding years 2025 through 2027. Based on the experience with category two budgets, the Commission believes a fixed cycle will reduce applicant confusion and simplify administration. Entities are allowed to spread out their requests for Wi-Fi hotspots and services over the three-year timeframe, as long as the total pre-discount amount does not exceed the budget over the three funding years. Entities may request support for Wi-Fi hotspot service even if the associated Wi-Fi hotspots were not directly funded under the new E-Rate rules. However, applicants may not request more than 45% of its three-year budget in any year. The Commission finds this valuable in order to prevent applicants with high numbers of existing Wi-Fi hotspots from simply using the entire budget in a single funding year. The Commission will also require that such services must be competitively bid prior to requesting E-Rate support pursuant to the program's competitive bidding rules.

The Commission emphasizes that the hotspot budget represents the maximum pre-discount amount an applicant may request across three funding years, rather than an allocation of funding for Wi-Fi hotspots and service lines for which an applicant is entitled reimbursement. Applicants should evaluate whether there is need in their own school and library communities and what can be effectively used and tracked in compliance with program rules. Applicants will also continue to be subject to the E-Rate program rules requiring that schools and libraries are responsible for paying the non-discounted share of the costs. The intent of this hotspot lending program is for the Wi-Fi hotspots to be available for loan to and for use by students, school staff, or library patrons without sufficient broadband access at home and other off-campus locations for educational purposes. Applicants and service providers will be subject to E-Rate program rules, certifications, and other requirements designed to protect program integrity, as discussed.

Applicants may not request funding for Wi-Fi hotspots for future use or to be stored in case of an emergency, and the Commission will not allow applicants to purchase Wi-Fi hotspots to store in case of theft, loss, or breakage. Each Wi-Fi hotspot must be associated with a line of service. The Commission recognizes the concerns from commenters about replacing Wi-Fi hotspots, but based on lessons from the ECF program, determine that a streamlined approach would be simpler to administer, provide clarity for applicants, and ensure limited E-Rate program funds are used appropriately. In the event of loss or breakage, applicants may purchase extra devices with other sources of funding to use with the E-Rate-supported service or they can request replacement devices paired with lines of service in the next funding year if they have not exhausted their budgets. The Commission cautions, however, that applicants that do not replace lost or broken hotspots must work with their service providers to discontinue the associated service within a reasonable amount of time of becoming aware of the issue ( e.g., 30 days). In order to ensure the E-Rate program is not paying for services that sit unused for these or other reasons, the Commission will require service providers to exclude or waive any associated early termination fees for the services to Wi-Fi hotspots being funded with E-Rate support that are lost, broken, or unused and can no longer be distributed to students, school staff, or library patrons. The Commission reminds applicants that they must document information about lost or broken equipment in the asset inventory containing details about each Wi-Fi hotspot.

In combination, the Commission expects this three-year pre-discount budget mechanism and the funding caps to be effective in ensuring that schools and libraries with students, school staff, and library patrons with need have access to E-Rate funding to effectively set up and request funding for hotspot lending programs, while protecting the Universal Service Fund from overspending and reducing administrative burdens, as compared to the ECF program. At the same time, the Commission is cognizant that a one-size formula for limiting hotspot requests may not fit every school and library and may need to be adjusted if it is impacting program participation. As such, the Commission delegates to the Bureau, working with the Office of Economics and Analytics, the ability to adjust the limiting mechanism quantities ( i.e., 20 per 100 students and 5.5 per 1,000 square feet) as well as the funding caps in future funding years or future three-year budget cycles, after seeking comment on such an adjustment. The Commission also delegates to the Bureau the authority to resolve technical, procedural, and administrative issues that may arise in connection with this formula.

In the NPRM, the Commission sought comment on what category of service should be used for wireless internet service and the Wi-Fi hotspots needed to deliver the service, as well as how to prioritize such services should demand for E-Rate support exceed the annual funding cap. Consistent with the existing eligible services list, wireless internet services will be listed as eligible as a category one service, and will not be subject to the category two budgets. Wi-Fi hotspots will be eligible as category one network equipment necessary to make category one wireless internet services functional. The Commission agrees with commenters arguing that it should be eligible as category one, consistent with the treatment of supporting equipment necessary to sustain connectivity.

At the same time, in the event that demand for E-Rate support exceeds available funding, the Commission also adopts a rule to fund requests for eligible off-premises use of Wi-Fi hotspots and services after requests for eligible on-premises services, inclusive of both category one and category two services. Based on recent funding years and the limits that the Commission is adopting on Wi-Fi hotspot and recurring service requests, it does not expect the changes it adopts to cause demand to exceed the E-Rate funding cap. However, the Commission agrees with commenters that this approach will ensure that on-campus E-Rate funding is available and predictable for schools and libraries in future funding years. In making this determination, the Commission also applies it to requests for funding for off-premises use of school bus Wi-Fi services. Mobile wireless broadband connectivity for school buses is also eligible as a category one service, but as an off-premises wireless internet service, it will be funded after eligible on-premises services should demand exceed the E-Rate annual funding cap. This appropriately treats these off-premises wireless internet services and the equipment needed for the connectivity in the same manner and ensures that future demand for these off-premises services does not make access to on-premises broadband connectivity to and within the schools and libraries less predictable.

Next, mindful of its obligation to protect the integrity of the E-Rate program and be a careful steward of these limited funds, the Commission adopts a number of safeguards aimed at ensuring compliance with its rules and strengthening program integrity. In deciding whether and which measures to adopt, the Commission considers a variety of factors, including, importantly, the intended purpose for which this funding is available, its experience with the ECF program, and commenters' concerns regarding the burdens associated with and feasibility around adopting such protections. The Commission also relies on and leverage existing tools to ensure compliance with its rules, such as its audit procedures and competitive bidding, non-discounted share of costs, and discount rate rules. Coupled with those protections already built into the design of the mechanism the Commission establishes for the distribution of Wi-Fi hotspots and services, it seeks to protect the Fund, and the Commission reiterates its commitment to identify and pursue instances of waste, fraud, and abuse, including recovery of improperly disbursed funds where appropriate.

In the NPRM, the Commission sought comment on ways to ensure that the off-premises use of Wi-Fi hotspots and services primarily serves an educational purpose consistent with the Commission's rules and section 254(h)(1)(B) of the Communications Act. Specifically, the Commission asked whether requiring schools and libraries to certify on their forms that E-Rate support is being used primarily for this purpose is sufficient or if additional safeguards should be imposed to protect against improper use. Based on its experience with the ECF program and recognizing that the off-premises use of Wi-Fi hotspots and services raises novel challenges about ensuring their proper use, the Commission finds that adopting additional safeguards is necessary to ensure that E-Rate program funds are used for their intended purpose and to protect the integrity of the program. In so doing, the Commission rejects those views expressed by commenters that the existing certifications are sufficient safeguards, and that ensuring the proper use of Wi-Fi hotspots and services off-premises is overly burdensome or impractical.

The Commission reminds applicants that E-Rate program rules require schools and libraries to use E-Rate-supported services, including Wi-Fi hotspots and services used off-premises, primarily for educational purposes. Thus, in addition to requiring schools and libraries to use the existing E-Rate certifications to ensure that the off-premises use of E-Rate-funded Wi-Fi hotspots and services is primarily for an educational purpose, the Commission requires applicants to maintain and—where necessary—update their acceptable use policies to clearly state that this off-premises use must be primarily for an educational purpose as defined by its rules. With respect to schools, this means that the acceptable use policy must state that the use must be “integral, immediate, and proximate to the education of students.” Similarly, for libraries, the acceptable use policy must clearly state that the use must be “integral, immediate, and proximate to the provision of library services to library patrons.”

While the Commission's rules require schools and libraries to ensure the use of E-Rate-funded services align with these purposes, it has long-recognized that schools and libraries are in the best position to determine what guidelines and restrictions should govern the appropriate use of their networks and other technology. The Commission did not find the need to impose any other restrictions or specifications in the ECF program; and the Commission agrees with commenters that schools and libraries are appropriately positioned to make determinations about acceptable use in their communities. Applicants are subject to the requirements under the Children's internet Protection Act, which requires local educational agencies and libraries to establish specific technical protections before allowing network access. In establishing such protections, applicants often create AUPs that outline expected user behaviors. For example, schools in Virginia are “required to establish guidelines for appropriate technology use” and AUPs must, among other things, state “the educational uses and advantages of the internet” and identify “prohibited forms of technology-based applications and hardware use.” School staff and students are also required to “monitor the use of technologies for grade-level and content appropriateness, ethics, and safety.” Similarly, Maine State Libraries are encouraged to have an AUP in place for technology that is available for patron use and to review these policies with library staff. The Commission expects that schools and libraries will implement content and user network restrictions consistent with the restrictions that they place on their building-based networks, and to adopt suitable AUPs and other policies to limit access, but the Commission seeks to ensure applicants have the flexibility for unique situations and to avoid layering additional, similar restrictions that could result in program violations. For example, duration limits could deter applicants seeking to use hotspots for students that are home sick or home for inclement weather and accessing school or homework remotely.

Nor does the Commission require applicants to restrict access to the off-premises use of Wi-Fi hotspots and services to only users with appropriate credentials at this time. Based on the record, the Commission finds that it does not have sufficient information to adopt such requirements; and its experience with the ECF program suggests that many schools and libraries already require appropriate credentials when logging into their networks and using school- or library-issued devices, while those that do not have such restrictions typically have other technical solutions to limit access. To avoid unnecessarily penalizing those applicants with technical limitations and to provide applicants with flexibility, the Commission does not require schools and libraries to implement specific user access restrictions at this time, and it seeks additional comment on this issue in the companion FNPRM. Notwithstanding, consistent with Bureau's expectation around the use of Wi-Fi services on school buses, to the extent schools and libraries already restrict access to their networks and devices, the Commission expects them to continue to implement content and user network restrictions consistent with those restrictions that they place on their building-based broadband networks as described in their acceptable use and other policies. The Commission finds that this approach provides reasonable limits to ensure that the off-premises use of Wi-Fi hotspots and services is primarily for educational purposes in accordance with a school's and library's existing AUP and other policies.

To ensure students, school staff, and library patrons are aware of the limited purpose for which they might use E-Rate-funded Wi-Fi hotspots and services off-premises, the Commission requires schools and libraries to provide notice by adopting and publicly posting their acceptable use policies in whatever form they deem appropriate, but do not require them to collect signed documentation of user compliance with these policies as the Commission required of libraries participating in the ECF program. Given that schools and libraries already typically provide some form of notice of their acceptable use policies to students, school staff members, and library patrons, the Commission finds that imposing such a requirement would not be overly burdensome. The Commission likewise agrees with those commenters who argue that collecting signed documentation of user compliance with these policies is a significant burden on applicants, many of whom have limited resources and staff to collect and maintain such documentation. Indeed, its experience with libraries who participated in the ECF program has demonstrated just how onerous and complicated collecting and maintaining signed user compliance documentation can be; and the Commission is particularly sensitive to the concerns raised by some commenters that such measures might cause libraries to run afoul of their State privacy laws and, as a result, discourage participation. Accordingly, the Commission does not require applicants to collect this sort of user compliance documentation. However, applicants will be required to certify on their FCC Forms 486 that they have updated and publicly posted their acceptable use policies in accordance with the rules adopted herein. Additionally, applicants may be requested to provide their acceptable use policies and provide evidence of where it is publicly posted, upon request by the Commission or the Administrator.

Finally, while the Commission recognizes that schools and libraries may not have the same level of supervision or control over their students', school staff members', or patrons' off-premises use of Wi-Fi hotspots and services as they might have on-premises or even on a school bus as one commenter suggests, with these additional safeguards in place, the Commission expects to better ensure their proper use consistent with its rules and the Communications Act than if the Commission only relied on the existing E-Rate certifications. And, consistent with its existing rules, the Commission remind applicants that its rules require that E-Rate-supported equipment and services be primarily used for educational purposes, not solely used for this purpose as one commenter submits. Thus, its rules provide some, albeit intentionally limited, flexibility to use these Wi-Fi hotspots and services for other purposes when they are not needed for educational purposes in the first instance. Applicants may be required, during a post-commitment review or audit, to explain what steps they have taken to comply with the requirement that use of the Wi-Fi hotspots is primarily for educational purposes ( e.g., user restrictions, content restrictions, or duration or time limits).

In the NPRM, the Commission sought comment on how to prevent the warehousing of Wi-Fi hotspots and reimbursement for unused equipment and/or services. Among the various ways contemplated, the Commission asked whether it should adopt numerical criteria to assess usage, require participants to provide evidence of usage, direct service providers to terminate services that are not being used, and/or limit E-Rate support to nine months out of the year ( i.e., the length of a typical school year) to prevent the program from covering the costs of unused devices and services during the summer. Many commenters agree that the E-Rate program should not pay for unused and/or warehoused equipment or services. At the same time, commenters urge us to create requirements that are both administrable for participants and also take into consideration the practical reasons why equipment or services may go unused for limited periods of time before adopting specific non-usage requirements and reimbursement denial procedures. As a general matter, the Commission agrees with these commenters and recognize that there are numerous reasons for non-usage and that applicants and service providers are often unable to monitor or mitigate all instances of non-usage. The Commission therefore distinguishes the treatment for equipment or services that are entirely unused or warehoused from instances where Wi-Fi hotspot equipment and services may have limited periods of non-usage.

The Commission first relies on the agency's extensive experience overseeing the ECF program in designing a hotspot program that protects against waste and abuse. It's experience suggests that reasonable safeguards to prevent warehousing and manage non-usage are necessary and possible, and the Commission rejects the view expressed by one commenter that there is no need for any usage requirement if the Commission applies existing competitive bidding requirements to off-premises services. In addition, the Commission made several important modifications to this hotspot initiative to distinguish it from the statutorily required procedures in the ECF program. First, the competitive bidding requirements required here were not mandatory in ECF, and the Commission believes requiring them will help ensure applicants consider available options and make cost-effective purchases. Next, the budget mechanism the Commission imposes will also require applicants to use limited funding to target those students, school staff, and library patrons with the greatest need. The Commission also placed funding caps for hotspot devices and recurring service, which will have the effect of limiting the E-Rate funding available for Wi-Fi hotspots and service. Finally, the Commission also believes requiring schools and libraries to pay the non-discount share of costs will help incentivize applicants to make measured choices and determine community needs. These important distinctions from the ECF program will be integral to helping us protect limited funds. The Commission disagrees with the commenter and find it is necessary to adopt additional requirements to ensure that the Commission is maximizing the use of E-Rate supported Wi-Fi hotspots and services.

Requirements. Considering its long-standing obligation to protect the integrity of the E-Rate program and being mindful of the concerns expressed by commenters regarding the feasibility of tracking and identifying non-usage, the Commission adopts a combination of requirements to protect against non-usage. The Commission first requires applicants to activate the Wi-Fi hotspot and service, make it available for loan, and publicize the availability of the Wi-Fi hotspot device and service to students, teachers, and library patrons via public notice or other means. To further protect the program from potential waste, the Commission also requires applicants to certify to having taken these steps on their FCC Forms 486. Applicants already use the FCC Form 486 to notify USAC that services have started on a particular funding request and will be required to certify to adopting measures to ensure proper use of E-Rate-funded Wi-Fi hotspots and services, among other things, and are required to submit these forms 120 days after the service start date or the date of the funding commitment decision letter, whichever is later. The Commission finds that requiring applicants to also certify to having taken these steps on their FCC Forms 486 before they or their service providers can begin to submit their requests for reimbursement is reasonable and would not be overly burdensome. To be clear, the Commission expects schools and libraries to make every effort to make available and encourage the use of Wi-Fi hotspots and services supported by the E-Rate program.

Second, the Commission expects that schools and libraries will carefully consider how to structure their lending programs to promote ongoing use of Wi-Fi hotspots and services. ALA highlights the importance of flexibility in circulation policies to address local needs but notes a general standard is necessary to “ensur[e] the data is used regularly by users.” The Commission agrees that schools and libraries understand well their community needs and are in the best position to structure a lending program to meet those needs, and can do so in a way that maximizes use of Wi-Fi hotspots and services following the requirements the Commission adopted. Such measures to encourage use may include limited lending periods ( e.g., 21 days or less), providing technical assistance to students and library patrons, monitoring circulation statistics, or other approaches deemed suitable by the school or library for the local community. For example, EveryLibrary Institute explains that libraries often already have mechanisms in place to pause service to a specific device which is “typically enough reason for the patron to return the device.” This prevents the service provider from billing “for the time elapsed when the device was not in service, reducing program costs automatically.” Similarly, ALA reported that “the Dublin Public Library in Texas and Pima County Library in Arizona [are] able to work with service providers to track data usage and other aspects of hotspot use.”

Finally, to further prevent the E-Rate program from paying for ongoing services that are not being used, lines of service that have no data usage for approximately three consecutive months must be terminated by the service provider. As discussed further in this proceeding, on a monthly basis, service providers are required to notify applicants of each line of hotspot service that goes unused for at minimum 60 consecutive days and to provide applicants 30 days for the hotspot to be used before terminating the line of service. Service providers are also required to provide schools and libraries with data usage reports as described, and schools and libraries should regularly review these reports to identify hotspots with periods of non-usage to determine if there is an issue with the device or to seek the return of a Wi-Fi hotspot after some period of non-use so the device can be loaned out again.

Warehousing. In the ECF program, the Commission prohibited schools and libraries from requesting E-Rate support for the purchase of additional Wi-Fi hotspots beyond the per-user limitation to “maximize the use of limited funds” and only provided support for devices and services currently needed, thus avoiding unnecessary warehousing. Several commenters, including the EveryLibrary Institute, flagged “the possibility of applicants overstocking equipment to prepare for breakage or loss” and that the E-Rate program should not pay for such equipment and services. The Commission agrees and adopt the same per-user limitation and prohibition against warehousing. Considering the limited funding available, the Commission finds that permitting applicants to purchase hotspots in anticipation of future use, loss, or breakage would be wasteful, and it concludes that limiting support in this way is reasonable. Applicants must certify to their compliance with this limitation on the FCC Form 471 application. Wi-Fi hotspots that have not been made available for distribution per the requirements specified will be considered to have been warehoused, a violation of the Commission's rules, and subject to a financial recovery.

Limited periods of non-use. As well-documented in the record, there may be legitimate reasons for limited periods of non-use by students, school staff, and library patrons that are outside of the control of schools, libraries, and service providers. Even in the context of the ECF program, the Commission has recognized that there may be circumstances where non-usage occurs but services would still be eligible for support, such as during a school's summer break. At the same time, the Commission is mindful of the need to balance the legitimate reasons for limited periods of non-use with its need to protect program integrity, and as such have adopted the approach described, with a notice opportunity before services will be terminated.

Commenters expressed concern with requirements that would leave schools and libraries responsible for paying the full amount of service charges when there is limited usage and indicated that such an approach would discourage participation in the program. However, service providers have also asserted that they have no control over the hotspots provided by a school or library to students, staff members, or library patrons. In response to the approaches proposed in the NPRM, commenters explained that assessing usage against numerical criteria would be challenging because usage below a pre-determined weekly, monthly, or quarterly threshold does not necessarily indicate that the hotspot devices are being warehoused and should be prohibited from reimbursement. Commenters also described the importance of student access to hotspots in the summer months to complete summer reading projects and other educational activities, and that the year-round access provided by libraries is essential. The Commission agrees with commenters that overly complex usage requirements would likely deter schools and libraries from seeking support for Wi-Fi hotspots and services, and find that such an outcome would negate its efforts to ensure schools and libraries can operate lending programs to connect students, school staff, and library patrons for off-premises use. Similarly, given the vital importance of internet connectivity, the Commission finds that limiting E-Rate support to nine months would contravene the purpose of this funding and “would further exacerbate the `summer slump'—the decrease in learning between school years—and inhibit remote learning during summer school.”

However, to reduce the risk of waste and inefficiencies in supporting Wi-Fi hotspots and services in the E-Rate program, the Commission finds that imposing a reasonable non-usage threshold requirement is both appropriate and necessary to ensure that E-Rate support is going to services that are actually being used. The Commission therefore adopt a rule to prohibit E-Rate support for lines of service that have not been used for a period of three consecutive months and have gone through the required notice process. Pursuant to this new rule, at least once every 31 days, service providers are directed to identify lines of service that have gone unused for no less than 60 days and provide the school or library with 30 days' notice that failure for the hotspot service to be used within the 30-day notice period will result in service termination for that particular line. The Commission concludes that this approach appropriately accounts for limited legitimate instances of non-usage, such as a school's summer break, while also providing sufficient time to allow schools and libraries to work with their service provider, as well as their student, school staff, and library patron users to cure the non-usage without being unnecessarily penalized. Upon receipt of a non-usage notification from a service provider, applicants should take steps to determine whether the device and services are being used, should be redistributed, or should be discontinued. Applicants may work with their service provider to restart services that have been terminated ( e.g., where a hotspot is redistributed) one time per funding year, but the Commission caution applicants that such action to restart service after termination will be subject to program integrity reviews and therefore, applicants should take steps to ensure that they have the associated need prior to restarting services terminated for non-usage again.

The Commission is also sympathetic to the concerns expressed in the comments regarding a rule that would leave schools and libraries responsible for paying the full amount of service charges for limited usage or in this case, a terminated line of service. In the event of a terminated line of service resulting from this non-usage requirement, service providers are prohibited from billing the applicant for the balance that was not paid for by the E-Rate program. Service providers will be required to certify on their FCC Form 473 (Service Provider Annual Certification (SPAC) Form) that they will comply with this non-usage notice and termination requirement and will not charge applicants the balance for the terminated services.

Finally, while the Commission understands service providers' concerns regarding their lack of a direct customer relationship with a student, school staff, and library patron user, it finds that imposing this usage requirement will appropriately incentivize service providers to avoid requesting reimbursement for ongoing lines of services that are not being used. This requirement follows a similar principle to the non-usage rules adopted in other programs, like ACP and Lifeline, and therefore the Commission expects that many mobile wireless service providers are familiar with monitoring usage and have even adapted their systems to track and provide notice accordingly. The Commission concludes that this rule strikes a reasonable and appropriate balance between ensuring that E-Rate support for Wi-Fi hotspots is being used responsibly, while not implementing overly complex rules that would be unadministrable for schools and libraries or deter participation.

Some commenters alternatively suggest that the Commission provides program participants with an opportunity to explain the reason for the non-usage before denying funding and argue that this approach is preferable. The Commission declines to take this approach because it finds that such a process would be overly resource intensive and fail to efficiently achieve the program's goals. In particular, the Commission finds that tracking down students, school staff members, and library patrons to ascertain the reason for non-usage while disbursements are on hold could take time and significantly delay the review and disbursement process. In addition, such an approach would require the Commission to prescribe a comprehensive list of the permissible reasons for which Wi-Fi hotspots and services may not be used after they have been distributed, which it would then need to be able to verify for purposes of ensuring program compliance. Considering the record, the Commission is reluctant to create and implement such a list because that approach would only delay reimbursements, frustrate program participants, and cause uncertainty about the availability of funding. Comparatively, the Commission finds the non-usage notice and termination rule detailed will better allow schools and libraries to work with their students, school staff, and library patrons, as well as their service providers to ensure the hotspots and services are being used without impacting or delaying the review and disbursement processes.

Moreover, in the context of the new program safeguards that the Commission adopts in the Order, the additional usage requirements the Commission establishes protects public funds and maximize the use of supported Wi-Fi hotspots and services. In particular, the Commission believes the funding cap for monthly service described will aid in controlling costs and the requirement of paying the non-discount share of costs will incentivize schools and libraries to avoid subscribing to unused services, enabling us to provide support for Wi-Fi connectivity necessary to engage in remote learning for students, school staff, and library patrons. However, in light of the challenges identified with the solutions proposed in the NPRM and lack of information in the record to address these issues, the Commission remains cognizant of the risk of non-usage of E-Rate-funded hotspots and want to ensure applicants are encouraging use among their students, school staff, and library patrons. The Commission therefore finds it necessary to explore further ways to monitor and address non-usage in the companion FNPRM. Additionally, the Commission delegates authority to the Bureau to resolve any procedural or administrative issues that arise with the usage requirements adopted herein.

Usage reports. To enable schools and libraries to monitor usage and make adjustments to the structure of their lending programs in a way that maximizes the use of Wi-Fi hotspots and services, the Commission requires service providers to provide reports regarding data usage to applicants at least once per billing period. Such reports must be provided in machine-readable digital format, so that the information lines can be read and sorted, clearly identifying the lines that are not being used across billing periods or that will be or have been terminated as a result of the non-usage rules adopted herein. Because service providers regularly make such reports available to applicants and the Commission provides flexibility in how reports are provided, the Commission finds that imposing such a requirement would not be overly burdensome. Further, no commenter opposes this idea. Schools and libraries are also required to make these reports available to the Commission and/or USAC upon request, including to support program integrity reviews. The Commission expects applicants to review the data usage reports and to take actions to address non-usage included in the reports, including requesting the return of the Wi-Fi hotspot or requesting the service to be turned off to prompt the return of the unused hotspot device, consistent with the requirements described herein.

Program integrity reviews. In addition to the existing standard post-commitment reviews and audits to ensure compliance with E-Rate program rules more broadly, the Commission directs USAC to regularly conduct program integrity reviews to monitor school, library, and service provider compliance with the requirements defined, including checking for warehousing and discontinued lines of services for non-usage. The Commission further directs USAC, subject to approval by the Bureau, to develop risk-based procedures for these reviews. Schools and libraries subject to these program integrity reviews must provide usage reports and other documentation as requested, consistent with E-Rate program rules.

The Commission modifies § 54.516 of its rules to require E-Rate participants who receive support for the off-premises use of Wi-Fi hotspots and services to maintain detailed asset and service inventories of each hotspot and wireless service provided for use off-premises. In the NPRM, the Commission sought comment on whether to adopt the ECF program's requirement to keep detailed asset and service inventories for each hotspot device and service provided to a student, school staff member, or library patron. In response, commenters raised concerns about the burdens associated with maintaining such inventories. The Commission's experience with the ECF program, however, demonstrated the inventory requirements served a critical purpose in ensuring that schools and libraries receiving support know where the equipment and services are located and that they comply with the program requirements. In particular, the inventories were helpful in detecting, for example, warehousing of devices by identifying which devices had not been distributed. As such, the Commission concludes that the benefit to the program of adopting more detailed inventory requirements will outweigh the burden of requiring increased recordkeeping. The Commission is further convinced that this is a reasonable requirement by the fact that the E-Rate program is not an emergency program like the ECF program. The Commission therefore concludes that there is time for schools and libraries to make a reasonable assessment of their needs and ability to comply with these recordkeeping requirements, and urge applicants to do so prior to requesting support. Relatedly, the Commission reminds participants that they may be asked to provide this information upon request to the Commission or USAC, and that failure to comply with program rules, including the requirement to maintain asset and service inventories, may result in a denial of funding or a financial recovery.

In adopting the more detailed inventory requirements, the Commission is sympathetic to the concerns expressed by library commenters, who claim that the level of detail required by the ECF program's inventory requirements served as a barrier to participation in the program because of conflicts with many States' library patron privacy laws and existing library circulation systems and practices. In particular, commenters explain that the majority of States have laws in place that protect the confidentiality of library records and prohibit disclosure of patrons' personally identifiable information ( e.g., individual names) without first seeking a waiver from each individual or, in some cases, needing a court order. Circulation and tracking systems are set up to be compliant with these State laws, meaning that libraries did not already track and retain records with sufficient detail to meet the ECF program's requirements, resulting in the need for manual tracking of this information, and to do so potentially in conflict with applicable State laws. While the Commission recognizes that schools also have their own privacy laws to which they adhere, the limitations are not so strict as to create comparable burdens for recordkeeping. The Commission therefore agrees with commenters who advocate for adopting library-specific rules to recognize the realities of libraries' abilities to maintain such records and to ensure that libraries can take part in this important funding source to continue their successful hotspot lending programs.

The Commission also agrees with commenters who urges it to be clear up front about what is expected of the recordkeeping requirements. The Commission finds that modifying § 54.516 of its rules to adopt the specific information required for an asset and service inventory of Wi-Fi hotspots and services purchased with E-Rate support is the best approach to ensure parties understand exactly what is expected. The Commission also reminds applicants that the obligation of schools and libraries to keep track of and document the devices that they distribute includes documenting information about missing, lost, or damaged equipment.

For school participants receiving support for Wi-Fi hotspots and services, the asset and service inventory must identify: (1) the equipment make/model; (2) the equipment serial number; (3) the full name of the person to whom the equipment was provided; (4) the dates the equipment was loaned out and returned, or the date the school was notified that the equipment was missing, lost, or damaged; and (5) service detail. By “service detail,” the Commission means the line number or other unique identifier that associates a device to that particular line of service. For library participants receiving support for Wi-Fi hotspots and services, the asset and service inventory must identify: (1) the equipment make/model; (2) the equipment serial number; (3) the dates the equipment was loaned out and returned, or the date the library was notified that the equipment was missing, lost, or damaged; and (4) service detail.

Consistent with the E-Rate program's current recordkeeping rule, program participants are required to retain documentation related to their participation in the E-Rate program, including the asset and service inventories, acceptable use policies, evidence of publicizing Wi-Fi hotspot availability, and other required documentation for at least 10 years after the latter of the last day of the applicable funding year or the service delivery deadline for the funding request. Separately, the Commission amends the language of § 54.516 of its rules to include E-Rate-funded equipment and services provided on school buses.

As was the case for the ECF program, the Commission is mindful of privacy concerns regarding the collection of personally identifiable information about the individual ( e.g., student, school staff member, or library patron) that makes use of E-Rate-supported equipment and services. The Commission, USAC, and any contractors or vendors will abide by all applicable Federal and State privacy laws. The Commission also directs Commission, USAC, and contractor/vendor staff to take into account the importance of protecting the privacy of students, school staff and library patrons; to design requests for information, including those related to the data usage reports and asset and service inventories, from schools and libraries in a way that minimizes the need to produce information that might reveal personally identifiable information; and to work with auditors to accept anonymized or deidentified information in response to requests for information wherever possible. In addition to the existing standard post-commitment reviews and audits to ensure compliance with E-Rate program rules more broadly, the Commission directs USAC to regularly conduct program integrity reviews to monitor school, library, and service provider compliance with the asset and service inventory rules.

In the NPRM, the Commission sought comment on safeguards to prevent duplicative funding for off-premises use of Wi-Fi hotspots and services across the Federal universal service programs and other funding programs, including Federal, State, Tribal, or local programs. The Commission also requested comment on whether “a certification by the school or library [would] be sufficient to indicate that E-Rate support is only being sought for eligible students, school staff, or library patrons and the school or library does not already have access to Wi-Fi hotspots purchased with ECF support or other sources of funding.” Generally, commenters agree that the Commission should not duplicate funding for Wi-Fi hotspots and services that are funded through other sources or programs. The Commission concludes that it is appropriate to prohibit duplicative funding for off-premises Wi-Fi hotspots and services funded with E-Rate support and further find that protections against duplicate funding adopted herein should apply to all E-Rate-funded equipment and services.

For example, NTCA argues that Wi-Fi hotspots and services should be limited to locations where High-Cost USF support is not distributed and where the Commission's own broadband availability data indicate service is not already available. In contrast, other commenters contend that “the Commission should not impose unnecessary restrictions on households' receipt of funding from multiple Federal universal service programs . . . households are entitled to apply under different USF programs for different eligible needs.” The Commission agrees that it should not duplicate funding for Wi-Fi hotspots and services that are already funded. However, the Commission disagrees that the availability of High-Cost support or the availability of service as indicated in its broadband data should preclude funding for an E-Rate-supported Wi-Fi hotspot because this does not guarantee that a student or library patron has the off-premises broadband access needed to complete their educational activities.

As noted in the NPRM, households may justifiably receive support from multiple universal service programs at the same time; however, to make the most of the support available through the E-Rate program, and to protect against waste, fraud, and abuse, the Commission finds it necessary to not extend E-Rate support to Wi-Fi hotspots and services that have already been funded though other sources or programs. Therefore, the Commission will not provide E-Rate support for eligible Wi-Fi hotspots and services, or the portion of eligible Wi-Fi hotspots and services that have already been reimbursed with other Federal, State, Tribal, or local funding, or other external sources of funding. Additionally, while commenters suggested that the Commission should not provide funding to households that receive ACP benefits, the Commission note that the ACP officially ended on June 1, 2024. As such, the Commission finds that not only does this eliminate the concern of duplicative funding between ACP and the Wi-Fi hotspots and services funded through the E-Rate program, but it also reinforces the need for E-Rate support to connect students, school staff, and library patrons who may now lack access as a result of losing the ACP benefit.

To prevent duplicative funding, the Commission takes a similar approach to the approach the Commission took in the ECF program and adopt a rule prohibiting E-Rate participants from seeking support or reimbursement for eligible equipment and services that have been funded by other programs, including Federal ( e.g. other universal service programs, ECF, etc.), State, Tribal, or local programs. Recognizing that the need to protect against duplicative funding is not limited to E-Rate-funded Wi-Fi hotspots and services used off-premises, the Commission adopts rules to prohibit duplicative funding for all E-Rate-funded equipment and services. The Commission also finds this to be consistent with the Commission's past actions to prevent duplicate funding in other universal service support mechanisms. Additionally, consistent with record support for requiring applicants to certify that there is no duplicative funding for their requests, the Commission requires applicants to certify on the application for funding and on the request for reimbursement forms ( i.e., the FCC Forms 472/474) that they are not seeking support for eligible equipment and services that have been funded by other sources. This measure balances the interest of applicants by allowing them to continue participating and receiving funding from other programs, for which they are eligible, while simultaneously preventing waste of limited E-Rate funds by not funding equipment and services that have already been funded by other programs. These rules will help ensure that applicants are aware of the prohibition on duplicative funding for equipment and services, and are only requesting funding that they do not otherwise have available.

Section 254(h)(3) of the Communications Act, which applies to the E-Rate program, and the existing E-Rate rules prohibit sale, resale, or transfer of E-Rate-supported equipment for five years. In the ECF Order, the Commission adopted a three-year wait time to dispose, sell, trade, or donate equipment purchased with ECF funds, including Wi-Fi hotspots, explaining that “devices and other equipment loaned to students, school staff, and library patrons and installed off-campus will likely have a shorter average life cycle than equipment installed and maintained on school or library premises.” Consistent with its approach in the ECF program, the Commission finds that Wi-Fi hotspot devices intended for off-premises use by students, school staff, and library patrons are likely to have a shorter lifecycle and therefore, the Commission adopts a rule that Wi-Fi hotspot devices for off-premises use and supported with E-Rate funds can be disposed of after three years.

Schools and libraries requesting E-Rate support for Wi-Fi hotspots are prohibited from selling, reselling, or transferring equipment in consideration of money or any other thing of value for three years after its purchase. Wi-Fi hotspots purchased with E-Rate funds and used off-premises will be considered obsolete at the end of the three year period. Obsolete equipment may be resold or transferred in consideration of money or any other thing of value, disposed of, donated, or traded. This approach takes into consideration the limited lifespan of Wi-Fi hotspots, while also helping prevent potential waste, fraud, and abuse by ensuring that the hotspot devices are used for a minimum of three years.

Head Start, Pre-Kindergarten, and Kindergarten. In the NPRM, the Commission proposed to limit the student population eligible for E-Rate support for the off-premises use of Wi-Fi hotspots and service. Specifically, the Commission proposed to exclude Head Start programs, providing early learning and development for pre-school children from the ages of 3 to 5, and pre-kindergarten students from receiving E-Rate support for off-premises use of Wi-Fi hotspots and services. Commenters agree with excluding the eligibility of Head Start and pre-kindergarten populations for a Wi-Fi hotspot to be used off-premises, but also urged that kindergarten populations should be excluded as well. SECA supports making young learners, pre-kindergarten, and kindergarten ineligible for Wi-Fi hotspots when they are off-campus stating that not giving them this device can “help curb lost and damaged devices” and further stating that “hotspots generally should be made available only for students in grades where they are required to access the internet off-campus for their homework and for other educational purposes.” WISPA also agrees that funding for Wi-Fi hotspots should be limited to post-kindergarten students who are more likely to need internet access for educational purposes.

The Commission agrees and make Head Start, pre-kindergarten, and kindergarten populations ineligible for E-Rate-supported Wi-Fi hotspots for off-premises use, consistent with the support of commenters. As noted in the NPRM, studies recommend an hour or less of internet exposure for children under the age of five. Therefore, for these populations the risks may outweigh the benefits of receiving an E-Rate-supported Wi-Fi hotspot for off-premises use, and as a result, these populations are less likely to need the internet for educational purposes. As mentioned in the NPRM, Head Start and/or pre-kindergarten education facilities serving this particular age group may be eligible for E-Rate funding for broadband connectivity to and within their facilities, if determined to be elementary schools under their applicable State laws. Commenters also note that kindergarteners are unlikely to need internet access for off-campus educational uses. The Commission thus limits eligibility for Wi-Fi hotspots and internet services to post-kindergarten students and school staff. The Commission notes, however, that for the purposes of calculating the hotspot budgets, it seeks to streamline the information collections and will use the full-time student enrollments that are used for category two budgets, which includes kindergarten students and may also include pre-kindergarten students in certain States.

In providing support for the off-premises use of Wi-Fi hotspots and services, the Commission is also mindful of the longstanding goal of fair and open competitive bidding for such equipment and services. The Commission recognizes that many schools and libraries may have taken advantage in recent years of discounted Wi-Fi hotspots and/or recurring services offered during the pandemic to enable their students, school staff, and library patrons to engage in remote learning. The Commission recognizes that applicants may have done this while it temporarily waived the gift rules for the ECF and E-Rate programs. The Commission reminds all E-Rate program participants seeking reimbursement for Wi-Fi hotspots and services of its gift rules, which prohibit applicants from soliciting or accepting any gift or other thing of value from a service provider participating in or seeking to participate in the E-Rate program. Similarly, service providers are prohibited from offering or providing any gift or other thing of value to those personnel of eligible entities involved in either program. The Commission's gift rule is always applicable to E-Rate program participants and is not in effect or triggered only during the time period when competitive bidding is taking place. Additionally, applicants are not permitted to solicit or accept a gift or thing of value over $20 from a service provider, and service providers are not permitted to offer or provide applicants a gift or thing of value over $20.

The Commission has previously explained that the gift rule is not intended to discourage charitable donations to E-Rate eligible entities as long as those donations are not directly or indirectly related to E-Rate procurement activities or decisions and provided the donation is not given with the intention of circumventing the competitive bidding or other E-Rate program rules. For example, the Commission understands that some service providers offer free or discounted Wi-Fi hotspots with a service plan. The gift rule prohibits service providers from offering these kinds of special equipment discounts or equipment with service arrangements to E-Rate recipients only if such offerings are not currently available to some other class of subscribers or segment of the public.

Moreover, the record and its experiences in the ECF program have shown that service providers sometimes bundle Wi-Fi hotspots and ineligible components into the costs of services. Entities seeking E-Rate support for Wi-Fi hotspots and services for off-premises use are reminded that E-Rate recipients are required to cost-allocate ineligible components that are bundled with eligible equipment or services. With respect to offerings that bundle the costs of the eligible Wi-Fi hotspots and services together, applicants may continue to seek E-Rate funding for eligible components of bundled services. However, for the ease of administration and to streamline review of funding requests, applicants and service providers should itemize these eligible components when invoicing, and Wi-Fi hotspots, services, as well as any eligible components or fees should be requested on separate funding lines when seeking support for these equipment and services.

The Commission considers audits and other review mechanisms in the E-Rate program to be important tools in ensuring compliance with its rules and identifying instances of waste, fraud, and abuse. Considering the action the Commission takes to extend the off-premises uses eligible for E-Rate funding, the Commission expects that these tools will continue to be paramount to its ability to ensure that these finite funds are used appropriately and consistent with its rules. The Commission makes clear, therefore, that any support provided for the off-campus use of Wi-Fi hotspots and services under the program will be subject to all audits and reviews currently used by the program ( e.g., Beneficiary and Contributor Audit Program (BCAP) audits, Payment Quality Assurance (PQA) assessments, and Program Integrity Assurance (PIA) reviews and Selective Reviews (SR) reviews) and could be subject to recovery should the Commission and/or USAC find a violation of its rules and deem it appropriate. Specifically, consistent with existing E-Rate audits and reviews, applicants and service providers may be subject to audits and other investigations to evaluate compliance with the rules the Commission adopt, including, for example, what equipment and services are eligible and how the equipment and services may be used.

The Commission, USAC, and contractor/vendor staff are directed to work with auditors to accept anonymized or deidentified information in response to requests for information wherever possible. If anonymized or deidentified information regarding the students, school staff, and library patrons is not sufficient for auditors' or investigative purposes, the auditors or investigators may request that the school or library obtain consent of the parents or guardians, for students, and the consent of the school staff member or library patron to have access to this personally identifiable information or explore other legal options for obtaining personally identifiable information. In the event consent is not available, the Commission recognizes that the auditors may need to use other procedures or take different actions to determine if there is any evidence of waste, fraud, or abuse from the use of E-Rate funding for off-premises Wi-Fi hotspots. The Commission additionally delegates to the Bureau and Office of the Managing Director, in consultation with the Office of General Counsel (and specifically the Senior Agency Official for Privacy) the authority to establish requirements for the Bureau's, USAC's, or any contractor's/vendor's collection, use, processing, maintenance, storage, protection, disclosure, and disposal of personally identifiable information in connection with any audit or other compliance tool.

The Commission also reminds program participants of their obligation to maintain documentation sufficient to demonstrate their compliance with program rules for ten years after the latter of the last day of the applicable funding year or the service delivery deadline for the funding request. And, upon request, they must submit documents sufficient to demonstrate compliance with program rules, including the Wi-Fi hotspot-specific documentation requirements the Commission adopted, such as maintaining asset and service inventories and acceptable use policies. Additionally, schools, libraries, and service providers participating in the E-Rate program may be subject to other audit processes, including audits and inspections by the Office of Inspector General and other entities with authority over the entity.

Sections 254(c)(1), (c)(3), (h)(1)(B), and (h)(2) of the Communications Act collectively grant the Commission broad and flexible authority to establish rules governing the equipment and services that will be supported for eligible schools and libraries, as well as to design the specific mechanisms of support. This authority reflects recognition by Congress that in order to advance its universal service objective, the types of services supported by the various support mechanisms are constantly evolving in light of “advances in telecommunications and information technologies and services.” In the NPRM, the Commission sought comment on whether these provisions authorize it to provide E-Rate support for schools or libraries to purchase Wi-Fi hotspots and wireless internet services for off-premises use, recognizing how today's technology-based educational environment has significantly evolved beyond the physical boundaries of a school or library campus. Specifically, the Commission proposed to find that school or library purchases of Wi-Fi hotspots and internet services for off-premises use by students, school staff, and library patrons for remote learning and the provision of virtual library services constitutes an educational purpose and enhances access to advanced telecommunications and information services pursuant to section 254 of the Communications Act. As explained further in this proceeding, the Commission concludes that it has authority under section 254 of the Communications Act to permit eligible schools and libraries to receive E-Rate support for the off-premises use of Wi-Fi hotspots and wireless internet services.

First, the Commission considers its proposed finding that the off-premises use of school- or library-purchased wireless internet services and the Wi-Fi hotspots needed to deliver such connectivity constitutes services that are “provide[d] . . . to elementary schools, secondary schools, and libraries,” and thus, may be supported pursuant to section 254(h)(1)(B) of the Communications Act when used “for educational purposes.” In response, many commenters agree that section 254(h)(1)(B) of the Communications Act does not prohibit the Commission from allowing E-Rate funds to be used by schools or libraries to support remote learning for students and school staff, and access to library services for library patrons so long as it first finds that the equipment and services that schools or libraries purchase for off-premises use will serve an educational purpose. The Commission finds this view to be consistent with its determination in the School Bus Wi-Fi Declaratory Ruling that any future decision to support school or library purchases of E-Rate-supported services requires the Commission to first find that the off-premises use of such service is “integral, immediate, and proximate to the education of students or the provision of library services to library patrons” and, therefore, serves an educational purpose.

Turning next to the question of whether the off-premises use at issue herein serves an educational purpose, many commenters urge the Commission to find that the off-premises use of such wireless internet services and the Wi-Fi hotspots needed to deliver such connectivity to be integral, immediate, and proximate to the education of students or the provision of library services to library patrons. For example, the North American Catholic Educational Programming Foundation (NACEPF) and Mobile Beacon argue that “[e]nabling students to participate in hybrid learning, complete their homework, or participate in other educational opportunities clearly qualifies as an `educational purpose.' ” Likewise, commenters assert that Wi-Fi hotspots are needed to ensure library patrons can access library services. The Commission agrees with these commenters. Given the lack of a reliable broadband connection at some students', school staff members', and library patrons' homes, the struggle for many households to afford high-speed broadband (particularly in light of the end of the ACP), and the increasing need for connectivity in today's technology-based educational environment that extends learning beyond a school or library building ( e.g., for virtual classes, electronic research projects, homework assignments, virtual library resources, research, etc.), the Commission finds that the off-premises use of such wireless internet services and the Wi-Fi hotspots needed to deliver such connectivity to students, school staff, or library patrons is “integral, immediate, and proximate to the education of students or the provision of library services to library patrons” and, therefore, serves an educational purpose. For example, if a student is unable to complete their homework or participate in a virtual class or research project due to lack of internet access while off-premises, that lack of access is likely to have an immediate, negative impact on that student's academic performance, which is integral to their education. Similarly, if a library patron is unable to access work-related research for school or career advancement, that lack of access is likely to have an immediate, negative impact on that patron's career. As such, the Commission finds that the connectivity provided through the off-premises use of Wi-Fi hotspots can make a difference in a student's, school staff member's, or library patron's ability to meaningfully engage in learning and fully access library services; the provision of such services thus serves an educational purpose.

The Commission disagrees with the commenters who assert that “educational purpose” is defined to require a physical link to a school or library campus. Although activities that occur on-campus are presumed to serve an educational purpose, the Commission has never stated that the inverse would be true ( i.e., that all off-premises uses are presumed not to be for an educational purpose). To the contrary, the Commission has already recognized that in certain instances, the off-premises use of E-Rate-funded telecommunications services and information services are found to serve an educational purpose, such as when a school bus driver uses wireless telecommunications services while delivering children to and from school, or when students use Wi-Fi or similar access point technologies on school buses to complete homework. A number of commenters agree that it is consistent with this precedent to find that the off-premises use of wireless internet services and the Wi-Fi hotspots needed to deliver such connectivity similarly serves an educational purpose. The Commission further disagree with NTCA's claim that its prior orders have required that services be physically “tied to a place of instruction.” Although the Commission has previously stated that “the purpose for which support is provided” must “be for educational purposes in a place of instruction,” neither the Commission nor the statute has defined the physical confines of where instruction can take place, and the Schools and Libraries Second Report and Order, 68 FR 36931, June 20, 2003, that NTCA quotes did allow funding for certain off-premises services, demonstrating the Commission's longstanding understanding that “educational purposes in a place of instruction” can include off-premises uses. Therefore, based on the record and consistent with Commission precedent, the Commission concludes that section 254(h)(1)(B) of the Communications Act allows E-Rate support for services purchased by “elementary schools, secondary schools, and libraries” for the purpose of allowing students, school staff, and library patrons to use those services off-premises for educational purposes. Finally, contrary to NTCA's assertion, the Commission also finds this conclusion is consistent with the statutory language requiring that services be provided “to” schools and libraries because schools or libraries are the customers and recipients of the services they purchase, and the services are therefore provided to them within the meaning of section 254(h)(1)(B), even if used elsewhere.

The provision of support to schools and libraries to purchase wireless internet services for off-premises use for educational purposes fits squarely within the Commission's long-established authority and direction under section 254(h)(1)(B) of the Communications Act to designate “ `services that are within the definition of universal service under subsection (c)(3),' which itself authorizes the Commission to designate non-telecommunications services for support under E-Rate.” As explained in the NPRM, the Commission expressly rejected the assertion that the support provided under section 254(h) of the Communications Act is limited to telecommunications services when it concluded in the First Universal Service Order, 62 FR 32862, June 17, 1997, that section 254(h)(1)(B) through section 254(c)(3) of the Communications Act authorizes universal service support for telecommunications services and additional services such as information services. Pursuant to this longstanding precedent, authority provided by section 254(h)(1)(B) and section 254(c)(3) is not limited to telecommunications services but also authorizes support for the off-premises use of wireless internet services. Further, the Commission finds that section 254(h)(1)(B) through section 254(c)(3) of the Communications Act provides authority to support the Wi-Fi hotspot devices that are necessary to provide the wireless internet services. In the First Universal Service Order, the Commission concluded that “it can include `the information services' e.g., protocol conversion and information storage, that are needed to access the internet, as well as internal connections, as `additional services' that section 254(h)(1)(B), through section 254(c)(3), authorizes us to support.” The Commission further distinguished between ineligible types of peripheral equipment ( e.g., laptops) and eligible equipment that is necessary to make the services functional. The Commission find that because Wi-Fi hotspots can provide a critical connection for delivery of internet service, they fall into the latter category, and the Commission therefore concludes that it has authority under section 254(h)(1)(B) through section 254(c)(3) of the Communications Act to support the off-premises use of Wi-Fi hotspot devices that are needed for the delivery of wireless internet services.

Separately, the Commission finds that section 254(h)(2)(A) of the Communications Act authorizes it to permit E-Rate support for the off-premises use of Wi-Fi hotspots and services because hotspots and services that connect students, school staff, and library patrons to digital learning will “enhance, to the extent technically feasible and economically reasonable, access to advanced telecommunications and information services for all public and nonprofit elementary and secondary school classrooms . . . and libraries.” First, the Commission finds that providing support for such equipment and services through the E-Rate program will be “technically feasible and economically reasonable.” This is best demonstrated by the more than one million ECF-funded Wi-Fi hotspots and services that were distributed to students, school staff, and library patrons who may have otherwise lacked access and who were successfully connected to remote learning. Based on those experiences in the ECF program, as well as demand falling short of the E-Rate program's funding cap for many years and the limited lending program budget mechanism adopted herein, the Commission believes that the cost of funding the off-premises use of Wi-Fi hotspots and services can be accomplished within the E-Rate program's existing budget.

Second, the Commission concludes that funding Wi-Fi hotspots and services for off-premises use will help enhance access for school classrooms and libraries to the broadband connectivity necessary to facilitate digital learning for students and school staff, as well as library services for library patrons who lack broadband access when they are away from school or library premises. As discussed, the internet has become critical for equitable access to education. For example, even before the pandemic, a significant number of teachers and students around the country reported requiring an internet connection to complete homework, and after the pandemic, some schools still retain the option to attend classes virtually. Beyond the context of school, digital literacy has become increasingly important in the workforce, with many applications, interviews, and forms that in an earlier era applicants might have used library resources to complete in person are now taking place online. Yet, a portion of our population still lacks internet access, meaning that they are unable to engage in such regular educational tasks like homework, research, developing or updating resumes, or applying for jobs. For many of these individuals, the internet access provided by their local school or library is their primary means of accessing such critical resources. The record is filled with examples of how Wi-Fi hotspots and services, in particular, have been very effective at closing this Homework Gap and digital divide. By providing E-Rate support for Wi-Fi hotspots and wireless internet services that can be used off-premises, the Commission can help schools and libraries to connect, for example, the student who has no way of accessing their homework to prepare for the next day's classroom lesson, or the school staff member who is unable to engage in parent-teacher meetings or professional trainings that take place after the school day ends, or the library patron who needs to attend a virtual job interview or perform bona fide research after their library's operating hours. Thus, the Commission concludes that by permitting support for the purchase of Wi-Fi hotspots and internet wireless services that can be used off-premises and by allowing schools and libraries to use this technology to connect the individuals with the greatest need to the resources required to fully participate in classroom assignments and in accessing library services, the Commission will thereby extend the digital reach of schools and libraries for educational purposes and allow schools, teachers, and libraries to adopt and use technology-based tools and supports that require internet access at home. For these reasons, the Commission concludes that the action adopted is within the scope of its statutory directive under section 254(h)(2)(A) of the Communications Act to enhance access to advanced telecommunications and information services for school classrooms and libraries.

Furthermore, the Commission agrees with commenters that permitting E-Rate support for the off-premises use of Wi-Fi hotspots and services is consistent with its exercise of its authority under section 254(h)(2)(A) of the Communications Act to establish the Connected Care Pilot Program and to clarify that the use of Wi-Fi on school buses is eligible for E-Rate funding. In establishing the Connected Care Pilot Program, the Commission found that providing support for patients' home broadband connections expanded health care providers' digital footprints for purposes of providing connected care services and allowed health care providers and patients to overcome the obstacle of cost to adopt beneficial connected care services through the pilot program, thus enhancing eligible health care providers' access to advanced telecommunications and information services. As NACEPF & Mobile Beacon explain in their reply comments, similar reasoning exists to support off-premises access for classrooms and libraries: many students lack the broadband connectivity required to fully participate in their education and to complete their assignments. Providing for the off-premises use of Wi-Fi hotspots and services would remove this obstacle and therefore, enhance the ability of classrooms and libraries to connect with learners and enable them to participate fully in their classwork and lessons, and complete their assignments. The Commission disagrees with ACA Connects' assertion that the NPRM' s proposal differs from the permissible actions taken in the School Bus Wi-Fi Declaratory Ruling because unlike a school bus, which is a school-controlled facility, no nexus exists between the school or library and the off-premises learning location ( e.g., a student's home). The Commission does not agree that the school or library needs to be in control of a location where the individual learns for there to be a nexus, because the Commission finds that this is not in line with the reality of how classroom instruction incorporates online resources ( e.g., assignments that must be completed and submitted online—often by a deadline outside of ”school hours”, schoolwork sent home with a student, online school days, required use of e-books or online videos) or the intent of E-Rate funding. Rather, the Commission finds that students, school staff, and library patrons have a direct nexus with their school or library through the provision of remote learning and education and that this nexus will be further strengthened by the safeguards the Commission also imposed.

Finally, the Commission finds section 254(h)(2)(A)'s reference to services for “classrooms” includes using E-Rate support to connect students, school staff, and library patrons to valuable digital educational resources when they are not located on the school or library campus. The Commission notes that the statute directs the Commission to establish rules to enhance access “ for all public and nonprofit elementary and secondary school classrooms . . . and libraries.” Notably, the text does not say to enhance access to services “at” or “in” school classrooms (or libraries), as would more naturally indicate a tie to a physical location. Moreover, the Commission sought comment in the NPRM on whether the reference in section 254(h)(2)(A) of the Communications Act to “elementary and secondary school classrooms . . . and libraries” includes expanding access to supported services that can be used in student, school staff, and library patron homes, given that today's educational environment often extends outside of the physical school or library building. In response, many commenters highlight the proliferation of online instruction and remote learning, particularly in the wake of the COVID-19 pandemic. Specifically, commenters argue that the language of section 254(h)(2)(A) of the Communications Act should be interpreted to reflect the increasingly hybrid nature of education and enable off-premises access to important educational resources that support learning, such as student access to homework or online classes, or educator access to professional learning courses, networks, and materials, and library patron access to e-books and virtual programs. As exemplified during the COVID-19 pandemic-era campus closures, the physical school building is not the only place where a student can be in “class” and there are myriad reasons why a student, school staff member, or library patron may not be able to travel to the physical campus but still requires access to their remote learning and other educational resources. As such, the Commission concludes that section 254(h)(2)(A)'s reference to “classrooms” is appropriately interpreted to extend beyond the brick and mortar school buildings. Although a few commenters argue that interpretation is inconsistent with the statute's use of the word “classroom” because hotspots can be used anywhere, the Commission disagrees. As explained, in today's world, effective classroom learning often demands access to the internet outside of the school or library building, and the Commission therefore continues to believe that the best reading of “for . . . classrooms” allows funding for services that support effective classroom instruction, even if such services are used outside of a brick-and-mortar classroom. At the same time, to ensure the Commission is making the most-effective use of these scarce funds and limiting the off-premises use of Wi-Fi hotspots and services to educational purposes, the Commission finds it necessary to adopt the specific safeguards discussed.

The Commission concludes that the obligations of the Children's internet Protection Act (CIPA) apply if the school or library receives E-Rate (or ECF) support for internet access, internet service, internal connections, and/or the related network equipment, including Wi-Fi hotspots. Enacted as part of the Consolidated Appropriations Act of 2001, CIPA prohibits certain schools and libraries from receiving funding under section 254(h)(1)(B) of the Communications Act for internet access, internet service, or internal connections, unless they comply with specific internet safety requirements. Specifically, CIPA requires schools and libraries “having computers with internet access” to certify that they are enforcing a policy of internet safety that includes the operation of a technology protection measure ( e.g., a filter). Congress enacted this law to ensure that children are protected from exposure to harmful material while accessing the internet provided by a school or library. Schools and libraries are therefore required to block or filter visual depictions that are obscene, child pornography, or harmful to minors across all sites, including social media. CIPA also requires monitoring the online activities of minors and providing education about appropriate online behavior, including warnings against cyberbullying.

First and foremost, the Commission remains focused on CIPA's intended purpose and expect schools and libraries to take every step necessary to ensure internet access funded by the E-Rate program remains safe for use by minors. Recognizing that accessing the internet carries inherent risk for minors, many schools have already implemented measures to restrict students' access to certain websites, including social media. For example, one school district in New Mexico relies on a filter to only permit student access to selected sites, while also blocking access to sites deemed non-educational. The top 20 domains where students were denied access by the filter included primarily social media sites, with TikTok and Snapchat comprising roughly 40% of denied requests. Schools and libraries, in compliance with the requirements of CIPA, should continuously evaluate the effectiveness of their internet safety policies and technology protection measures against the shifting nature of potentially harmful online content and the various sites and platforms that make content available to minors. Similarly, many service providers offer network-level filtering in their service offerings to support schools' and libraries' deployment of network-level technology protection measures. The Commission recognizes that determinations of what is considered appropriate are left to the local communities, and it encourages schools and libraries to evaluate the needs of their communities and apply filters as appropriate at the network level to ensure E-Rate-funded internet is safe for use by minors in line with the intent of the law.

The NPRM sought comment on the applicability of CIPA when connecting E-Rate-funded Wi-Fi hotspots to the internet off-premises, and proposed to require that CIPA applies if the school or library accepts E-Rate or ECF support for internet access or internet services, or E-Rate support for internal connections. The Commission has previously clarified that Wi-Fi hotspots qualify as eligible “Network Equipment” for internet access, internet service, or internal connections and would trigger CIPA compliance for the purchasing school or library. In response to the NPRM, several commenters express support for requiring CIPA compliance. The Commission agrees with these commenters and find that the requirements of CIPA apply for off-premises use if the school or library receives E-Rate-funded internet service, internet access, internal connections, or related network equipment (including Wi-Fi hotspots).

The Commission finds the concerns raised about the applicability and privacy implications of CIPA when funding the off-premises use of Wi-Fi hotspots and services unpersuasive. The Commission is not aware of any issues with CIPA compliance arising from the ECF program, in which the Commission applied CIPA to off-premises use. Moreover, its rules require schools and libraries to certify to CIPA compliance, under penalty of reimbursement of funds and enforcement under Federal requirements regarding truthful statements. The Commission has recognized the “long history” supporting this approach to CIPA compliance in the E-Rate application process. The Commission's rules also provide that the certifying entity may be “the relevant school, school board, local education agency, or other authority with responsibility for administration of the school” or the relevant “library, library board, or other authority with responsibility for administration of the library.” The Commission is therefore confident that participants in E-Rate are well positioned to understand and enforce their CIPA obligations.

Finally, the Commission denies requests that E-Rate funds be used to pay for CIPA implementation costs. The Commission has previously determined that E-Rate recipients are statutorily prohibited from obtaining discounts under the universal service support mechanism for the purchase or acquisition of technology protection measures necessary for CIPA compliance.

All of the rules that are adopted in the Order are designed to further the support provided by the E-Rate program to schools and libraries to ensure affordable access to high-speed broadband and to protect the integrity of the E-Rate program funding. However, each of the separate rules the Commission adopts herein shall be severable. If any of the rules are declared invalid or unenforceable for any reason, it is the Commission's intent that the remaining rules shall remain in full force and effect.

Paperwork Reduction Act. This document contains new information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, will invite the general public to comment on the information collection requirements contained in the Order as required by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, the Commission notes that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees.

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

Regulatory Flexibility Act. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Addressing the Homework Gap through the E-Rate Program Notice of Proposed Rulemaking, released in November of 2023. The Federal Communications Commission sought written public comment on the proposals in the NPRM, including comment on the IRFA. No comments were filed addressing the IRFA. This Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

The Commission is required by section 254 of the Communications Act of 1934, as amended, to promulgate rules to implement the universal service provisions of section 254. Under the schools and libraries universal service support mechanism, also known as the E-Rate program, eligible schools, libraries, and consortia that include eligible schools and libraries may receive discounts for eligible telecommunications services, internet access, and internal connections. The Commission's E-Rate program provides support to schools and libraries allowing them to obtain affordable, high-speed broadband services and internal connections, which enables them to connect students and library patrons to critical next-generation learning opportunities and services. The E-Rate program thus plays an important role in closing the digital divide, a top priority for the Commission.

In the Order, the Commission addresses the remote learning needs of today's students, school staff, and library patrons and help close the country's digital/educational divide by making the off-premises use of Wi-Fi hotspots and services by students, school staff, and library patrons eligible for E-Rate support. The ECF program highlighted the demand and need for off-premises use of Wi-Fi hotspots and services for educational success. As mentioned in the NPRM, “[b]roadband access is proven to improve individuals' educational outcomes, while lack of access has been shown to severely hamper educational opportunities.” Allowing E-Rate support for the off-premises use of Wi-Fi hotspots and services is an important step to ensure student and library patrons can take advantage of all available educational opportunities, and to help close the “homework gap”, especially as the ECF program is winding down and support under the ACP ended as of June 1, 2024.

In the Order, the Commission finds that the off-premises use of Wi-Fi hotspots and services constitutes an educational purpose and enhances access to advanced telecommunications and information services for schools and libraries. Applicants will have a calculated budget, limiting the amount of E-Rate support available for Wi-Fi hotspots and services based on applicant size and E-Rate discount rate. This will help schools and libraries create a hotspots lending program, lending Wi-Fi hotspots and services to students or patrons who most need remote access to meet their educational goals. Further, to balance its goal of reducing the digital divide with the responsibility of being a prudent steward of the universal service funds, the Commission adopts funding caps of $15 month for service and $90 for a Wi-Fi hotspot (for 3 years) to keep the costs low, limit the impact on the fund, and to encourage support to only those that need the devices and services the most. The budget mechanism and funding caps, along with other safeguards ( e.g. certifications, competitive bidding, prohibition against duplicative funding, audits, recordkeeping, usage requirements, etc.) will protect program integrity and prevent potential waste, fraud, and abuse. Additionally, the Commission will ensure that off-premises funding for Wi-Fi on school buses and for Wi-Fi hotspots and wireless internet service does not deter on-premises funding by prioritizing on-campus funding before these off-premises funding requests. Overall, the measures taken in the Order, help ensure that off-premises educational opportunities are available to students, school staff, and library patrons with the most need, while also protecting E-Rate's critical funds.

There were no comments filed that specifically addressed the proposed rules and policies presented in the IRFA.

Pursuant to the Small Business Jobs Act of 2010, which amended the RFA, the Commission is required to respond to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration (SBA), and to provide a detailed statement of any change made to the proposed rules as a result of those comments. The Chief Counsel did not file any comments in response to the proposed rules in this proceeding.

The RFA directs agencies to provide a description of, and, where feasible, an estimate of, the number of small entities that may be affected by the rules, adopted herein. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one 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.

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

Next, the type of small entity described as a “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 or less to delineate its annual electronic filing requirements for small exempt organizations. Nationwide, for tax year 2022, there were approximately 530,109 small exempt organizations in the U.S. reporting revenues of $50,000 or less according to the registration and tax data for exempt organizations available from the IRS.

Finally, the small entity described as a “small governmental jurisdiction” is defined generally as “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.” U.S. Census Bureau data from the 2022 Census of Governments indicate there were 90,837 local governmental jurisdictions consisting of general purpose governments and special purpose governments in the United States. Of this number, there were 36,845 general purpose governments (county, municipal, and town or township) with populations of less than 50,000 and 11,879 special purpose governments—independent school districts with enrollment populations of less than 50,000. Accordingly, based on the 2022 U.S. Census of Governments data, the Commission estimates that at least 48,724 entities fall into the category of “small governmental jurisdictions.”

Small entities potentially affected by the rules herein are Schools, Libraries, Wired Telecommunications Carriers, All Other Telecommunications, Wireless Telecommunications Carriers (except Satellite), Wireless Telephony, Wired Broadband internet Access Service Providers (Wired ISPs), Wireless Broadband internet Access Service Providers (Wireless ISPs or WISPs), internet Service Providers (Non-Broadband), Vendors of Infrastructure Development or Network Buildout, Telephone Apparatus Manufacturing, Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing.

In the Order, the Commission applies existing or modified E-Rate or ECF recordkeeping requirements for the off-premises use of Wi-Fi hotspots and services. The Commission limits the use of services to those that can be supported by and delivered with Wi-Fi hotspots provided to an individual user. Schools and libraries must adopt and provide notice of an acceptable use policy highlighting that the goal of the hotspot lending program is to provide broadband access to students and library patrons who need it and for educational purposes. When E-Rate-funded hotspots are used in conjunction with hotspots funded via other sources, applicants must document clearly ( e.g., individual survey results or attestations) that each individual student needed a Wi-Fi hotspot, in accordance with the AUPs, and may not rely on general or estimated findings about income levels. Applicants will have a calculated budget, limiting the amount of E-Rate support available for off-premises Wi-Fi hotspots and services based on their full-time student count or library square footage, and their category one discount rate.

Additionally, the Commission requires applicants to certify on their FCC Form 486 that they have taken reasonable steps to ensure proper use, to prevent warehousing, and to manage non-usage of devices. This will not be overly burdensome, because applicants already use FCC Form 486 to notify USAC that services have started on a particular funding request. Considering the limited funding available, applicants may not request funding for hotspot devices for future use or to be stored in case of an emergency, and the Commission will not allow applicants to purchase extra devices to store in case of theft, loss, or breakage. The Commission finds that this would be wasteful in this first year of expanding the program. Each device must be associated with a line of service, and applicants may not request more than 45 percent of the three-year hotspot budget in a single funding year.

At least once every 31 days, service providers are required to identify lines of hotspot service that have gone unused for 60 consecutive days and to provide applicants 30 days to use the hotspot before the line of service is terminated. Additionally, service providers must provide data usage reports to applicants at least once per billing period. The reports need to clearly identify the lines that are not being used across billing periods or that will be or have been terminated as a result of non-usage. The usage reports should not be overly burdensome because service providers regularly make such reports available to applicants. Applicants are also required to make these usage reports available to the Commission and/or USAC upon request, including to support program integrity reviews. Service providers are required to certify on their FCC Form 473 (Service Provider Annual Certification (SPAC) Form) that they will comply with this non-usage notice and termination requirement and will not charge the balance for terminated services.

Schools are required to maintain a similar, but modified asset and service inventory requirements to the ECF's program's asset and service inventory requirements, which details equipment and service inventories for each device or service purchased with E-Rate support and provided to an individual student or school staff member. The school's asset inventory must identify: (1) the equipment make/model; (2) the equipment serial number; (3) the full name of the person to whom the equipment was provided; (4) the dates the equipment was loaned out and returned, or the date the school was notified that the equipment was missing, lost, or damaged and (5) service detail. By “service detail,” the Commission means the line number or other identifier that associates a device to that particular line of service.

Taking into consideration the State's library patron privacy laws that some libraries must adhere to and existing library circulation systems and practices, the Order, adopts a limited asset and service inventory requirement for libraries. The limited asset and service inventory provides libraries more flexibility in accounting and tracking Wi-Fi hotspots and services funded with E-Rate support. For library participants receiving support for Wi-Fi hotspots and services, the asset and service inventory must identify: (1) the equipment make/model; (2) the equipment serial number; (3) the dates the equipment was loaned out and returned, or the date the library was notified that the equipment was missing, lost, or damaged; and (4) service detail. The asset inventories of schools and libraries will help us verify that there is no warehousing of hotspots, and confirm that hotspots are being used as intended.

Consistent with the E-Rate program's current recordkeeping rule, program participants will be required to retain documentation related to their participation in the E-Rate program, including the asset and service inventories, acceptable use policies, and data usage reports for at least ten years after the latter of the last day of the applicable funding year or the service delivery deadline for the funding request. Commenters are concerned about adopting new recordkeeping requirements, but there is support for maintaining the E-Rate program's existing recordkeeping requirements, due to applicants familiarity with the requirements. The recordkeeping adopted in the Order, would be similar to what most applicants, including small entities, are already familiar with and currently undertake for the E-Rate and ECF programs. As such, the Commission anticipates that the costs for compliance created by the decisions in the Order will be minimal. The recordkeeping requirements also help protect E-Rate funds from potential waste, fraud and abuse.

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

In the Order, the Commission minimizes the economic impact on small entities by making the off-premises use of Wi-Fi hotspots and services eligible for E-Rate funding to support remote learning for students, school staff, and library patrons. The availability of E-Rate funding for Wi-Fi hotspots and services gives applicants, including small entities, the opportunity to administer hotspot lending programs and provide students, school staff, and library patrons the off-premise broadband connectivity needed for educational success. The steps taken in the Order are especially important now that the ECF program is winding down and applicants will no longer have ECF funding available to meet the remote learning needs of their students, school staff, or library patrons and as of June 1, 2024, ACP support is no longer available for many households as well.

The Commission considered the benefits of multi-functional devices, including smartphones, tablets, and laptops with built-in wireless connections, but decline to include them at this time because it does not have sufficient information to justify this use and the Commission found them to be more expensive than sole-function Wi-fi hotspots. Further, equipment such as laptops and tablets remain ineligible for E-Rate support. The Commission recognizes that off-premises connectivity provided via Wi-Fi hotspots is not a one-size-fits-all solution, however the actions in the Order are a step in creating an economically reasonable method of meeting its statutory obligations.

The NPRM asked whether applicants should be required to determine and maintain records of students', school staff members', or library patrons' unmet need by, for example, conducting surveys. Commenters were not in favor of recordkeeping for unmet need. Commenters mentioned that schools and libraries are in the best position to know which students and patrons need the hotspots and services most, and therefore, the Commission should not impose recordkeeping requirements for unmet needs, but should allow schools and libraries to determine who to lend the devices and services to. In consideration of the comments, and finding that a budget mechanism approach for a lending program reduces the need to implement any unmet needs requirements, the Order does not impose recordkeeping requirements for unmet needs. Applicants, including small entities, will be able to determine their unmet need and not be burdened by unmet need documentation.

Further, to minimize significant economic impact on applicants, service providers are not allow to bill applicants for the balance that was not paid for by the E-Rate program for terminated lines of service from the non-usage requirements adopted in the Order.

Finally, any burdens for applicants presented in the Order are outweighed by the benefits to applicants. With funding from the E-Rate program applicants will now have the opportunity to offer off-campus access to broadband to help meet the educational necessities of students, staff, and library patrons.

The Commission will send a copy of the Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the Order and FRFA (or summaries thereof) will also be published in the Federal Register .

Late-Filed Comments. The Commission notes there were several comments filed in this proceeding after the January 16, 2024 comment deadline and January 29, 2024 reply comment deadline. In the interest of having as complete and accurate record as possible, and because the Commission would be free to consider the substance of those filings as part of the record in any event, the Commission will accept the late-filed comments and waive the requirements of 47 CFR 1.46(b), and have considered them in the Order.

Accordingly, it is ordered , that pursuant to the authority contained in sections 1 through 4, 201-202, 254, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-202, 254, 303(r), and 403, the Report and Order is adopted effective September 19, 2024.

It is further ordered , that pursuant to the authority contained in sections 1 through 4, 201 through 202, 254, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-202, 254, 303(r), and 403, part 54 of the Commission's rules, 47 CFR part 54, is AMENDED, and such rule amendments shall be effective September 19, 2024, except for §§ 54.504(a)(1)(x)-(xii), 54.504(g), and 54.516(e)-(g), which are delayed indefinitely. The Commission will publish a document in the Federal Register announcing the effective date for those sections after approved by the Office of Management and Budget as required by the Paperwork Reduction Act.

It is further ordered that the Office of the Secretary shall send a copy of the Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 54 as follows:

The Pacific Coast Groundfish fishery in the U.S. exclusive economic zone (EEZ) seaward of Washington, Oregon, and California is managed under the Pacific Coast Groundfish Fishery Management Plan (FMP). The Pacific Fishery Management Council (Council) developed the Pacific Coast Groundfish FMP pursuant to the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), 16 U.S.C. 1801 et seq. The Secretary of Commerce approved the Pacific Coast Groundfish FMP and implemented the provisions of the plan through Federal regulations at 50 CFR part 660, subparts C through G. Species managed under the Pacific Coast Groundfish FMP include more than 90 species of roundfish, flatfish, rockfish, sharks, and skates.

On April 1, 2024, NMFS published a temporary emergency rule (89 FR 22352) that allows recreational vessels in California to stop and/or anchor in Federal waters shoreward of the Recreational Rockfish Conservation Area (RCA) line when the fishery is offshore-only. A full description of the issue can be found in the emergency rule (April 1, 2024, 89 FR 22352). NMFS held a public comment period on the emergency rule for 30 days from April 1, 2024, to May 1, 2024 and received no comments. Without extension, the emergency rule would expire on September 30, 2024. The California recreational groundfish seasons in the management areas from the border with Oregon to 36° N lat. are open in the offshore fishery in the months of October and December (closed in November). The management areas south of 36° N lat. are open in the offshore fishery in the months of October, November, and December (50 CFR 660.360(c)(3)(i)(A)). Therefore, this issue remains relevant through the remainder of the calendar year. The Council has developed an action to address this issue permanently, which, if approved, would be effective in 2025. Therefore, consistent with section 305(c)(3) of the Magnuson-Stevens Act, NMFS finds good cause to extend the emergency measures until December 31, 2024.

In Federal waters, extending the emergency measures requires a modification to 50 CFR 660.360(c)(3)(i)(A) that requires recreational vessels to continuously transit while shoreward of the RCA boundary. Under the extension of this emergency measure, recreational vessels in California would be allowed to stop and/or anchor in Federal waters shoreward of the Recreational RCA line until December 31, 2024. Recreational fishing vessels off of California would not be able to deploy groundfish recreational gear inside the Recreational RCA, therefore this action would not create any new risks of quillback rockfish mortality. Hook-and-line gear is the primary gear type used by recreational vessels to target groundfish; therefore, prohibiting its deployment while inside the Recreational RCA would help enforce the modified transit provisions while still allowing vessels to use other gear types for non-groundfish fishing ( e.g., traps for lobster or hoop nets for bait fish). This extended emergency rule would not change any other elements of the California recreational fishery. For additional explanation on the rationale and effects of this emergency rule extension, see the original emergency rule published on April 1, 2024 (89 FR 22352).

NMFS is issuing an extension of this emergency rule pursuant to section 305(3)(c) of the Magnuson-Stevens Act. The NMFS Assistant Administrator has determined that this emergency rule is consistent with the Pacific Coast Groundfish FMP, section 305(c) and other provisions of the Magnuson-Stevens Act, the Administrative Procedure Act (APA), and other applicable law. Pursuant to 5 U.S.C. 553(b)(B), the Assistant Administrator for Fisheries finds prior notice and public comment is not required because it would be impracticable and contrary to the public interest. The reasons justifying promulgation of this rule on an emergency basis, coupled with the fact that the public has had the opportunity to comment on the original emergency rule, make solicitation of additional comment unnecessary, impractical and contrary to the public interest. This rule must be in place before the expiration of the original emergency rule to provide the necessary relief to California recreational fishery participants. Modifying the continuous transit requirement for California recreational vessels would not pose a conservation risk; and it would allow recreational vessels to continue to utilize multi-day and multi-target trips even when the offshore fishery is in place. The impacts of the California recreational fisheries have been prior analyzed in the Environmental Assessment for Amendment 30 to the Pacific Coast Groundfish Fishery Management Plan, 2023-2024 Harvest Specifications, and Management Measures.

Additionally, this rule is excepted from the 30-day delayed effectiveness provision of the APA under 5 U.S.C. 553(d)(1) because it relieves a restriction that would otherwise place California recreational vessels at an economic disadvantage in 2024. Immediate implementation of this rule is necessary to prevent the possible cancellation of thousands of fishing trips that could otherwise occur if not for the current continuous transit requirement.

This action is being taken pursuant to the emergency provision of the Magnuson-Stevens Act and is exempt from Office of Management and Budget review.

The Regulatory Flexibility Act does not apply to this emergency rule because prior notice and opportunity for public comment is not required.

This emergency/interim rule contains no information collection requirements under the Paperwork Reduction Act.

For the reasons set out in the preamble, NMFS amends 50 CFR part 660 as follows:

NMFS manages the groundfish fishery in the BSAI according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The 2024 Pacific cod TAC specified for vessels using jig gear in the BSAI is 848 metric tons (mt) as established by the final 2024 and 2025 harvest specifications for groundfish in the BSAI (89 FR 17287, March 11, 2024) and reallocation (89 FR 24736, April 9, 2024).

The 2024 Pacific cod TAC specified for trawl catcher vessels in the BSAI is 30,754 mt as established by the final 2024 and 2025 harvest specifications for groundfish in the BSAI (89 FR 17287, March 11, 2024).

The 2024 Pacific cod TAC specified for catcher vessels greater than or equal to 60 feet (18.3 m) LOA using hook-and-line gear in the BSAI is 277 mt as established by the final 2024 and 2025 harvest specifications for groundfish in the BSAI (89 FR 17287, March 11, 2024).

The 2024 Pacific cod TAC allocated to catcher vessels less than 60 feet (18.3 m) LOA using hook-and-line or pot gear in the BSAI is 3,867 mt as established by final 2024 and 2025 harvest specifications for groundfish in the BSAI (89 FR 17287, March 11, 2024) and reallocation (89 FR 24736, April 9, 2024).

The Administrator, Alaska Region, NMFS, (Regional Administrator) has determined that jig vessels will not be able to harvest 750 mt of the 2024 Pacific cod TAC allocated to those vessels under § 679.20(a)(7)(ii)(A)( 1 ), trawl catcher vessels will not be able to harvest 1,000 mt of the 2024 Pacific cod TAC allocated to those vessels under § 679.20(a)(7)(ii)(A)( 9 ), and catcher vessels greater than or equal to 60 feet (18.3 m) LOA using hook-and-line gear will not be able to harvest 267 mt of the 2023 Pacific cod TAC allocated to those vessels under § 679.20(a)(7)(ii)(A)( 3 ).

Therefore, in accordance with § 679.20(a)(7)(iv)(C), NMFS apportions 750 mt of Pacific cod from the jig vessels to the annual amount specified for catcher vessels less than 60 feet (18.3 m) LOA using hook-and-line or pot gear. Also, in accordance with § 679.20(a)(7)(iii)(A), NMFS reallocates 1,000 mt from trawl catcher vessels, and 267 mt from the catcher vessels greater than or equal to 60 feet (18.3 m) LOA using hook-and-line gear to the annual amount specified for catcher vessels less than 60 feet (18.3 m) LOA using hook-and-line or pot gear.

The harvest specifications for 2024 Pacific cod included in final 2024 and 2025 harvest specifications for groundfish in the BSAI (89 FR 17287, March 11, 2024) and reallocation (89 FR 24736, April 9, 2024) is revised as follows: 98 mt to vessels using jig gear, 29,754 mt to trawl catcher vessels, 10 mt to catcher vessels greater than or equal to 60 feet (18.3 m) LOA using hook-and-line gear, and 5,884 mt to catcher vessels less than 60 feet (18.3 m) LOA using hook-and-line or pot gear.

NMFS issues this action pursuant to section 305(d) of the Magnuson-Stevens Act. This action is required by 50 CFR part 679, which was issued pursuant to section 304(b), and is exempt from review under Executive Order 12866.

Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would allow for harvests that exceed the originally specified apportionment of the Pacific cod TAC. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 14, 2024.

The Assistant Administrator for Fisheries, NOAA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.