issue-1996-03-27•Federal Register final rules — 1996-03-27
Federal Register final rules — 1996-03-27
issue-1996-03-27Federal Register final rules — 1996-03-27Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 96-7450 Pesticide Tolerance for Benzoic Acid
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13426-13428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7450]
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[[Page 13427]]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 180
[PP 4E4375/R2219; FRL-5357-6]
RIN 2070-AB78
Pesticide Tolerance for Benzoic Acid
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule establishes a tolerance for residues of the
insecticide benzoic acid (3,5-dimethyl-1-(1,1-dimethylethyl)-2-(4-
ethylbenzoyl) hydrazide), in or on the raw agricultural commodity
apples. The regulation to establish a maximum permissible level for
residues of the insecticide was requested in a petition submitted by
the Rohm and Haas Co.
EFFECTIVE DATE: This regulation becomes effective March 27, 1996.
ADDRESSES: Written objections and hearing requests, identified by the
docket number, [PP 4E4375/R2219], may be submitted to: Hearing Clerk
(1900), Environmental Protection Agency, Rm. M3708, 401 M St., SW.,
Washington, DC 20460. A copy of any objections and hearing requests
filed with the Hearing Clerk should be identified by the docket number
and submitted to: Public Response and Program Resources Branch, Field
Operations Division (7506C), Office of Pesticide Programs,
Environmental Protection Agency, 401 M St., SW., Washington, DC 20460.
In person, bring copy of objections and hearing requests to Rm. 1132,
CM #2, 1921 Jefferson Davis Hwy., Arlington, VA 22202. Fees
accompanying objections shall be labeled ``Tolerance Petition Fees''
and forwarded to: EPA Headquarters Accounting Operations Branch, OPP
(Tolerance Fees), P.O. Box 360277M, Pittsburgh, PA 15251. An electronic
copy of objections and hearing requests filed with the Hearing Clerk
may be submitted to OPP by sending electronic mail (e-mail) to: opp-
[email protected].
Copies of electronic objections and hearing requests must be
submitted as an ASCII file avoiding the use of special characters and
any form of encryption. Copies of electronic objections and hearing
requests will also be accepted on disks in WordPerfect 5.1 file format
or ASCII file format. All copies of electronic objections and hearing
requests must be identified by the docket number [PP 4E4375/R2219] . No
Confidential Business Information (CBI) should be submitted through e-
mail. Copies of electronic objections and hearing requests on this rule
may be filed online at many Federal Depository Libraries. Additional
information on electronic submissions can be found below in this
document.
FOR FURTHER INFORMATION CONTACT: By mail: Richard P. Keigwin, Jr.,
Product Manager (PM) 10, Registration Division (7505C), Office of
Pesticide Programs, Environmental Protection Agency, 401 M St., SW.,
Washington, DC 20460. Office location and telephone number: Rm. 210, CM
#2, 1921 Jefferson Davis Highway, Arlington, VA 22202, 703-305-6788; e-
mail: [email protected].
SUPPLEMENTARY INFORMATION: EPA issued a notice (FRL-4948-2), published
in the Federal Register of April 5, 1995 (60 FR 17357), which announced
that Rohm and Haas Co. had submitted pesticide petition (PP) 4E4375 to
EPA requesting that the Administrator, pursuant to section 408(d) of
the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a(d),
establish a tolerance for residues of the insecticide benzoic acid
(3,5-dimethyl-1,1-(1,1-dimethylethyl)-2-(4-ethylbenzoyl)hydrazide), in
or on the raw agricultural commodity apples at 1.0 parts per million
(ppm). As of February 29, 1996 there are no U.S. registrations for
apples.
The scientific data submitted in the petition and other relevant
material have been evaluated. The toxicological data considered in
support of the tolerance include:
1. A 1-year dog feeding study with a lowest-observable-effect
level(LOEL) of 250 ppm (8.7 mg/kg/day for male and 8.9 mg/kg/day for
female dogs) based on growth retardation in the male and in both sexes
decreases in RBC, HCT, and HGB, increases in Heinz bodies,
methemoglobin, MCV, MCH, reticulites, platelets, plasma total
bilirubin, spleen weight, and spleen/body weight ratio, and liver
weight and liver/body weight ratio. Hematopoiesis and sinusoidal
engorgement occurred in the spleen, and hyperplasia occurred in marrow
of the femur and sternum. The liver showed an increased pigment in the
Kupffer cells. The no-observable-effect level (NOEL) for systemic
toxicity is 50 ppm (1.8mg/kg/day for males and 1.9 mg/kg/day for
females).
2. An 18-mounth mouse carcinogenicity study with no carcinogenicity
observed at dosage levels up to and including 1,000 ppm (males 155 mg/
kg/day; females 186 mg/kg/day).
3. A 2-year rat carcinogenicity study with no carcinogenicity
observed at dosage levels up to and including 2,000 ppm (97 mg/kg/day
and 125 mg/kg/day for males and females, respectively).
4. A 2-generation rat reproduction study with a NOEL of 150 ppm
(12.1 mg/kg/day) for reproductive effects compared to a systemic NOEL
of 10 ppm (0.85 mg/kg/day).
5. A rat developmental study with a NOEL of 1,000 mg/kg/day for
developmental toxicity and a NOEL of 250 mg/kg/day for maternal
toxicity.
6. A rabbit developmental study with a NOEL of 1,000 mg/kg/day for
developmental toxicity.
7. Several mutagenicity tests which were all negative. These
include an Ames assay with and without metabolic activation, an in vivo
cytogenetic assay in rat bone marrow cells, an in vitro chromosome
aberration assay in CHO cells, a CHO/HGPRT assay, a reverse mutation
assay with E. coli, and an unscheduled DNA synthesis assay (UDS) in rat
hepatocytes.
The reference dose (RFD), for chronic toxicity as defined in a 1-
year chronic dog study is 0.018 mg/kg/day based upon a NOEL of 1.8 mg/
kg/day in male dogs and applying an uncertainty factor of 100. Granting
this use of benzoic acid (3,5-dimethyl-1-(1,1-dimethylethyl)-2-(4-
ethylbenzoyl)hydrazide) on apples raises the theoretical maximum
residue contribution (TMRC) for the overall U.S. population from
0.000001 mg/kg/day to 0.000792 mg/kg/day and represents 4.4% of the
RFD. The TMRC for the highest exposed subgroup, non-nursing infants is
raised from 0.000001 mg/kg/day to 0.008051 mg/kg/day and represents
44.7% of the RFD for that subgroup.
The metabolism of benzoic acid, (3,5-dimethyl-1-(1,1-
dimethylethyl)-2-(4-ethylbenzoyl)hyrazide), is adequately understood.
An adequate analytical method, HPLC separation with UV detection,
is available for enforcement purposes.
There are presently no actions pending against the continued
registration of this chemical.
Based on the information and data considered, the Agency has
determined that the tolerance established by amending 40 CFR part 180
will protect the public health. The pesticide is considered useful for
the purposes for which the tolerance is sought. Therefore, the
tolerance is established as set forth below.
Any person adversely affected by this regulation may, within 30
days after publication of this document in the Federal Register, file
written objections to the regulation and may also request a hearing on
those objections. Objections and hearing requests must be filed with
the Hearing Clerk, at the
[[Page 13428]]
address given above (40 CFR 178.20). A copy of the objections and/or
hearing requests filed with the Hearing Clerk should be submitted to
the OPP docket for this rulemaking. The objections submitted must
specify the provisions of the regulation deemed objectionable and the
grounds for the objections (40 CFR 178.25). Each objection must be
accompanied by the fee prescribed by 40 CFR 180.33(i). If a hearing is
requested, the objections must include a statement of the factual
issue(s) on which a hearing is requested, the requestor's contentions
on such issues, and a summary of any evidence relied upon by the
objector (40 CFR 178.27). A request for a hearing will be granted if
the Administrator determines that the material submitted shows the
following: There is genuine and substantial issue of fact; there is a
reasonable possibility that available evidence identified by the
requestor would, if established, resolve one or more of such issues in
favor of the requestor, taking into account uncontested claims or facts
to the contrary; and resolution of the factual issue(s) in the manner
sought by the requestor would be adequate to justify the action
requested (40 CFR 178.32).
A record has been established for this rulemaking under the docket
number [PP 4E4375/R2219] (including any comments and data submitted
electronically). A public version of this record, including printed,
paper versions of electronic comments, which does not include any
information claimed as CBI, is available for inspection from 8 a.m. to
4:30 p.m., Monday through Friday, excluding legal holidays. The public
record is located in Room 1132 of the Public Response and Program
Resources Branch, Field Operations Division (7506C), Office of
Pesticide Programs, Environmental Protection Agency, Crystal Mall #2,
1921 Jefferson Davis Highway, Arlington, VA.
The official record for this rulemaking, as well as the public
version, as described above will be kept in paper form. Accordingly,
EPA will transfer any copies of objections and hearing requests
received electronically into printed, paper form as they are received
and will place the paper copies in the official rulemaking record which
will also include all comments submitted directly in writing. The
official rulemaking record is the paper record maintained at the
Virginia address in ``ADDRESSES'' at the beginning of this document.
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to all the requirements of the Executive Order
(i.e., Regulatory Impact Analysis, review by the Office of Management
and Budget (OMB)). Under section 3(f), the order defines
``significant'' as those actions likely to lead to a rule (1) having an
annual effect on the economy of $100 million or more, or adversely and
materially affecting a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also known as
``economically significant''); (2) creating serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlements,
grants, user fees, or loan programs; or (4) raising novel legal or
policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in this Executive Order.
Pursuant to the terms of this Executive Order, EPA has determined
that this rule is not ``significant'' and is therefore not subject to
OMB review.
Pursuant to the requirements of the Regulatory Flexibility Act
(Pub. L. 9-354, 94 Stat. 1164, 5 U.S.C. 601-612), the Administrator has
determined that regulations establishing new tolerances or raising
tolerance levels or establishing exemptions from tolerance requirements
do not have a significant economic impact on a substantial number of
small entities. A certification statement to this effect was published
in the Federal Register of May 4, 1981 (46 FR 24950).
List of Subjects in 40 CFR Part 180
Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.
Dated: March 15, 1996.
Stephen L. Johnson,
Director, Registration Division, Office of Pesticide Programs.
Therefore, 40 CFR part 180 is amended as follows:
PART 180--[AMENDED]
1. The authority citation for part 180 continues to read as
follows:
Authority: 21 U.S.C. 346a and 371.
2. In Sec. 180.482, by adding alphabetically to the table, an entry
for the raw agricultural commodity ``apples'', to read as follows:
Sec. 180.482 Benzoic acid; tolerances for residues.
* * * * *
------------------------------------------------------------------------
Parts per
Commodities million
------------------------------------------------------------------------
Apples..................................................... 1.0
* * * * *
------------------------------------------------------------------------
[FR Doc. 96-7450 Filed 3-26-96; 8:45 am]
BILLING CODE 6560-50-F
Complete official Federal Register PDF
FR Doc. 96-7449 Pesticide Tolerance for 2,4-D
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13428-13430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7449]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 180
[PP 4E3060/R2218; FRL-5357-2]
RIN 2070-AC78
Pesticide Tolerance for 2,4-D
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: EPA is extending the tolerance for residues of the herbicide
2,4-D (2,4-dichlorophenoxyacetic acid) in or on the raw agricultural
commodity soybeans. The Agency has not completed the regulatory
assessment of its science findings; therefore, the Agency is extending
this tolerance for 3 years.
EFFECTIVE DATE: This extension is effective March 27, 1996. The
tolerance expires on December 31, 1998.
ADDRESSES: Written objection and hearing requests, identified by the
docket number, [PP 4E3060/R2218], may be submitted to: Hearing Clerk
(1900), Environmental Protection Agency, Rm. M3708, 401 M St., SW.,
Washington, DC 20460. Fees accompanying objections shall be labeled
``Tolerance Petition Fees'' and forwarded to: EPA Headquarters
Accounting Operations Branch, OPP (Tolerance Fees), P.O. Box 360277M,
Pittsburgh, PA 15251. A copy of any objections and hearing request
filed with the Hearing Clerk should be identified by the docket number
and submitted to: Public Response and Program Resources Branch, Field
Operations Division (7506C), Office of Pesticide Programs,
Environmental Protection Agency, 401 M St., SW., Washington, DC 20460.
In person, bring a copy of objections and hearing requests to: Rm.
1132, CM #2, 1921 Jefferson Davis Hwy., Arlington, VA 22202. A copy of
objections and hearing requests filed with the Hearing Clerk may also
be submitted electronically by sending electronic mail (e-mail) to:
[email protected].
Copies of objections and hearing requests must be submitted as an
ASCII
[[Page 13429]]
file avoiding the use of special characters and any form of encryption.
Copies of objections and hearing requests will also be accepted on
disks in WordPerfect 5.1 file format or ASCII file format. All copies
of objections and hearing requests in electronic form must be
identified by the docket number [PP 4E3060/R2218]. No Confidential
Business Information (CBI) should be submitted through e-mail.
Electronic copies of objections and hearing requests on this rule may
be filed online at many Federal Depository Libraries. Additional
information on electronic submission can be found below in this
document.
FOR FURTHER INFORMATION CONTACT: By mail: Joanne Miller, Product
Manager (PM 23), Registration Division (7505C), Office of Pesticide
Programs, Environmental Protection Agency, 401 M St., SW., Washington,
DC 20460. Office location and telephone number: Rm. 237, CM #2, 1921
Jefferson Davis Hwy., Arlington, VA 22202, 703-305-6224, e-mail
address: [email protected].
SUPPLEMENTARY INFORMATION: In the Federal Register of February 7, 1996
(61 FR 4623), EPA issued a proposed rule that gave notice pursuant to
section 408 of the Federal Food, Drug, and Cosmetic Act (FFDCA) (21
U.S.C. 346a), the Agency proposed to extend until December 31, 1998, a
tolerance for residues of the herbicide 2,4-D (2,4-
dichlorophenoxyacetic acid) in or on the raw agricultural commodity
(RAC) soybeans at 0.1 parts per million (ppm).
There were no comments or requests for referral to an advisory
committee received in response to this proposed rule.
Any person adversely affected by this regulation may, within 30
days after publication of this document in the Federal Register, file
written objections with the Hearing Clerk, at the address given above
(40 CFR 178.20). A copy of the objections and/or hearing requests filed
with the Hearing Clerk should be submitted to the OPP docket for this
rulemaking. The objections submitted must specify the provisions of the
regulation deemed objectionable and the grounds for the objections (40
CFR 178.25). Each objection must be accompanied by the fee prescribed
by 40 CFR 180.33(i). If a hearing is requested, the objections must
include a statement of the factual issue(s) on which the hearing is
requested, the requestor`s contentions on each such issue, and a
summary of any evidence relied upon by the objector (40 CFR 178.27). A
request for a hearing will be granted if the Administrator determines
that the material submitted shows the following: There is a genuine and
substantial issue of fact; there is a reasonable possibility that
available evidence identified by the requestor would, if established,
resolve one or more issues in favor of the requestor, taking into
account uncontested claims or facts to the contrary; and resolution of
the factual issue(s) in the manner sought by the requestor would be
adequate to justify the action requested (40 CFR 178.32).
A record has been established for this rulemaking under docket
number [PP 4E3060/R2218] (including objections and hearing requests
submitted electronically as described below). A public version of this
record, including printed, paper versions of electronic comments, which
does not include any information claimed as CBI, is available for
inspection from 8 a.m. to 4.30 p.m., Monday through Friday, excluding
legal holidays. The public record is located in Room 1132 of the Public
Response and Program Resources Branch, Field Operations Division
(7506C), Office of Pesticide Programs, Environmental Protection Agency,
Crystal Mall #2, 1921 Jefferson Davis Highway, Arlington, Va.
Written objections and hearing requests, identified by the docket
number [PP 4E3060/R2218] may be submitted to the Hearing Clerk (1900),
Environmental Protection Agency, Rm 3708, 401 M St. SW., Washington, DC
20460. A copy of electronic objections and hearing requests filed with
the Hearing Clerk can be sent directly to EPA at:
opp-D[email protected]
A copy of electronic objections and hearing requests filed with the
Hearing Clerk must be submitted as an ASCII file avoiding the use of
special characters and any form of encryption.
The official record for this rulemaking, as well as the public
version, as described above will be kept in paper form. Accordingly,
EPA will transfer any objections and hearing requests received
electronically into printed, paper form as they are received and will
place the paper copies in the rulemaking record which will also include
all objections and hearing requests submitted directly in writing. The
official record is the paper record maintained at the address in
``ADDRESSES'' at the beginning of this document.
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to review by the Office of Management and Budget
(OMB) and the requirements of the Executive Order. Under section 3(f),
the order defines a ``significant regulatory action'' as an action that
is likely to result in a rule (1) having an annual effect on the
economy of $100 million or more, or adversely and materially affecting
a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or tribal
governments or communities (also referred to as ``economically
significant''); (2) creating serious inconsistency or otherwise
interfering with an action taken or planned by another agency; (3)
materially altering the budgetary impacts of entitlement, grants, user
fees, or loan programs or the rights and obligation of recipients
thereof; or (4) raising novel legal or policy issues arising out of
legal mandates, the President`s priorities, or the principles set forth
in this Executive Order.
Pursuant to the terms of the Executive Order, EPA has determined
that this rule is not ``significant'' and is therefore not subject to
OMB review.
Pursuant to the requirements of the Regulatory Flexibility Act
(Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. 601-612), the Administrator
has determined that regulations establishing new tolerances or raising
tolerance levels or establishing exemptions from tolerance requirements
do not have a significant impact on a substantial number of small
entities. A certification statement to this effect was published in the
Federal Register of May 4, 1981 (46 FR 24950).
List of Subjects in 40 CFR Part 180
Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.
Dated: March 13, 1996.
Stephen L. Johnson,
Director, Registration Division, Office of Pesticide Programs.
Therefore, 40 CFR part 180 is amended as follows:
PART 180--[AMENDED]
1. The authority citation for part 180 continues to read as
follows:
Authority: 21 U.S.C. 346a and 371.
2. In Sec. 180.142 by revising paragraph (k), to read as follows,
Sec. 180.142 2,4-D; tolerances for residues.
* * * * *
(k) A tolerance that expires on December 31, 1998, is established
for
[[Page 13430]]
residues of the herbicide 2,4-D (2,4-dichlorophenoxyacetic acid)
resulting from the preplant use of 2,4-D ester or amine in or on the
raw agricultural commodity as follows:
------------------------------------------------------------------------
Parts per
Commodity million
------------------------------------------------------------------------
Soybeans................................................... 0.1
------------------------------------------------------------------------
[FR Doc. 96-7449 Filed 3-26-96; 8:45 am]
BILLING CODE 6560-50-F
Complete official Federal Register PDF
FR Doc. 96-7444 Meat Meal and Red Pepper; Exemption From the Requirement of a Tolerance
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13424-13426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7444]
=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 180
[PP 5F4509/R2221; FRL-5357-9]
Meat Meal and Red Pepper; Exemption From the Requirement of a
Tolerance
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule establishes an exemption from the requirement of a
tolerance for residues of the active ingredients meat meal and red
pepper in or on all raw agricultural commodities when applied as animal
repellants in accordance with good agricultural practices. This
exemption was requested by Lakeshore Enterprises.
EFFECTIVE DATE: The regulation becomes effective on March 27, 1996.
ADDRESSES: Written objections and hearing requests, identified by the
docket number, [PP 5F4509/R2221], may be submitted to: Hearing Clerk
(1900), Environmental Protection Agency, Rm. M3708, 401 M St., SW.,
Washington, DC 20460. A copy of any objections and hearing requests
filed with the Hearing Clerk should be identified by the docket number
and submitted to: Public Response and Program Resources Branch, Field
Operations Division (7506C), Office of Pesticide Programs,
Environmental
[[Page 13425]]
Protection Agency, 401 M St., SW., Washington, DC 20460. In person,
bring a copy of objections and hearing requests to Rm. 1132, CM #2,
1921 Jefferson Davis Hwy., Arlington, VA 22202. Fees accompanying
objections shall be labeled ``Tolerance Petition Fees'' and forwarded:
EPA Headquarters Accounting Operations Branch, OPP (Tolerance Fees),
P.O. Box 360277M, Pittsburgh, PA 15251. An electronic copy of
objections and hearing requests filed with the Hearing Clerk may be
submitted to OPP by sending electronic mail (e-mai l) to: opp-
[email protected]
Copies of electronic objections and hearing requests must be
submitted as an ASCII file avoiding the use of special characters and
any form of encryption. Copies of electronic objections and hearing
requests will also be accepted on disks in WordPerfect 5.1 file format
or ASCII file format. All copies of electronic objections and hearing
requests must be identified by the docket number [PP 5F4509/R2221] . No
Confidential Business Information (CBI) should be submitted through e-
mail. Copies of electronic objections and hearing requests on this rule
may be filed online at many Federal Depository Libraries. Additional
information on electronic submissions can be found below in this
document.
FOR FURTHER INFORMATION CONTACT: By mail: Julie Fry, Biopesticides and
Pollution Prevention Division, Office of Pesticide Programs (7501W), U.
S. Environmental Protection Agency, 401 M St., SW., Washington, DC
20460. Office location and telephone number: 5th Floor CS1, 2800
Crystal Drive, Arlington, VA 22202, Telephone 703-308-8673, e-mail:
[email protected].
SUPPLEMENTARY INFORMATION: In the Federal Register of February 7, 1996,
EPA issued a notice that Lakeshore Enterprises had submitted pesticide
petition 5F4509 to EPA, proposing to amend 40 CFR part 180 by
establishing a regulation pursuant to section 408 of the Federal Food,
Drug and Cosmetic Act (FFDCA), 21 U.S.C. 346a(d) to exempt from the
requirement of a tolerance the residues of the biochemicals meat meal
and red pepper (synonyms include capsicum, cayenne pepper, chile
pepper) in or on all raw agricultural commodities when applied as
animal repellants in accordance with good agricultural practices. The
Agency received one comment opposing tolerance levels proposed for the
pesticides described primarily based on possible roles of pesticides in
neurotoxicity. The commentor also supported the promotion of ``safe/
safer'' alternatives to toxic chemicals. The Agency believes that the
subject active ingredients, meat meal and red pepper, don't pose a risk
including risk of neurotoxicity based on their extended use without any
reported adverse effects. Furthermore, both meat meal and red pepper
fall in the category of ``safe/safer'' pesticides, as supported by the
response of the commentor.
Product Chemistry
Meat Meal
Meat meal is a sterilized, animal food by-product produced at
livestock rendering plants from clean, fresh animal proteins. It is
composed of greater than or equal to 85% crude protein, greater than or
equal to 8% crude fiber, less than or equal to 3% fat, and less than or
equal to water. This composition may vary from the batch-to-batch,
depending on the by-products rendered (traces of hair, stomach
belchings and urine might occur unavoidably in good manufacturing
processes.) The moisture is removed from the crude product and the
dried meat meal is sterilized at a temperature ranging from 210 deg.F
to 250 deg.F for at least 1 1/2 hours. No chemicals are added to the
meat meal. The resulting product is an unconsolidated fibrous powder.
Red Pepper
Red pepper is natural, processed vegetable matter that has been
part of the human diet for many years. Red pepper is made by
dehydrating fresh red chili pepper pods (Capsicum spp.), processing the
dried pods through a mill and sifter, then blending the varieties of
pepper powder into a final product. Known constituents of red pepper
include capsaicin oil (0.1 - 1%), the source of red pepper's pungent
effect and capsanthin, a carotenoid pigment.
Human Health Risk Assessment
EPA waived the data requirements for residue chemistry and
toxicology data pursuant to 40 CFR 177.110(b) because it was
unnecessary. As discussed below, EPA already has adequate information
to determine that meat meal and red pepper do not pose a human health
hazard without the waived data.
Meat Meal
Meat meal is available from livestock rendering plants nationwide;
it is widely distributed in commerce and available to the general
public. It is used as an animal food/feed supplement and as organic
fertilizer. No significant adverse effects from exposure to meat meal
have been reported. The expected uses of meat as an olfactory animal
repellant will include meat meal packaged in bags and applied in powder
form around the base of plants. Meat meal will not be applied directly
to the plant. Negligible human exposure is anticipated.
Meat meal is composed mainly of sterilized animal proteins and
fats. These natural components do not persist in the environment
because they biodegrade rapidly. Furthermore, meat meal has been
identified by EPA as a List 4A-Minimum Risk Inert. This list, published
in the Federal Register, September 28, 1994 (59 FR 49400), identifies
substances ``considered to be of minimal risk in pesticide products to
human health when used as inert ingredients.'' These substances are
also exempt from the requirement of tolerance when used as an inert
ingredient. EPA believes that the risk from the use of meat meal on
food is comparable whether it is used as an active or as an inert
ingredient.
Red Pepper
Lack of toxicity of red pepper is supported by its long history of
use by humans as a food additive/component without any indication of
deleterious effects. Red peppers are ubiquitous in the cooking of many
African countries and most of India, Ceylon and S.E. Asia. (Capsicum
spp). Pepper exports amount to 176,000 tons annually (Ref. 1) (Rehm, S.
and G. Espig. 1991. The Cultivated Plants of the Tropics and Subtropics
- Cultivation, Economic Value, Utilization. Verlag Josef Margraf
Scientific Books. Berlin, Germany. Pages 279-280). Red pepper is listed
by the Food and Drug Administration as Generally Regarded as Safe
(GRAS) in 21 CFR part 182. Furthermore, red pepper, a common food
additive/component, also falls within the scope of the policy announced
in the Federal Register, September 28, 1994 (59 FR 49400) which states
``... EPA is announcing that substances commonly consumed as food will
also be considered minimal risk, List 4A, even if they have previously
not been used in pesticide products and are therefore not currently on
the list. Substances commonly consumed as foods will be considered
acceptable for use in all pesticide products, both food and nonfood
use, and will not require a specific exemption from tolerance.'' EPA
believes the risk from the use of red pepper on food is comparable
whether it is used as an active or as an inert ingredient.
Conclusion
Based on the low toxicity of meat meal, a sterilized food by-
product and
[[Page 13426]]
red pepper, a common additive/component of the human diet, the Agency
concludes that establishment of a tolerance is not necessary to protect
the public health. Therefore, the exemption from tolerance is
established as set forth below.
Any person adversely affected by this regulation may, within 30
days after publication of this document in the Federal Register, file
written objections to the regulation and may also request a hearing on
those objections. Objections and hearing requests must be filed with
the Hearing Clerk, at the address given above (40 CFR 178.20). A copy
of the objections and/or hearing requests filed with the Hearing Clerk
should be submitted to the OPP docket for this rulemaking. The
objections submitted must specify the provisions of the regulation
deemed objectionable and the grounds for the objections (40 CFR
178.25). Each objection must be accompanied by the fee prescribed by 40
CFR 180.33(i). If a hearing is requested, the objections must include a
statement of the factual issue(s) on which a hearing is requested, the
objections must include a statement of the factual issue(s) on which a
hearing is requested, the requestor's contentions on such issues, and a
summary of any evidence relied upon by the objector (40 CFR 178.27). A
request for a hearing will be granted if the Administrator determines
that the material submitted shows the following: There is a genuine and
substantial issue of fact; there is reasonable possibility that
available evidence identified by the requestor would, if established,
resolve one or more of such issues in favor of the requestor, taking
into account uncontested claims or facts to the contrary; and
resolution of the factual issue(s) in the manner sought by the
requestor would be adequate to justify the action requested (40 CFR
178.32).
EPA has established a record for this rulemaking under docket
number [PP 5F4509/R2221] (including any comments and data submitted
electronically). A public version of this record, including printed,
paper versions of electronic comments, which does not include any
information claimed as CBI, is available for inspection from 8 a.m. to
4:30 p.m., Monday through Friday, excluding legal holidays. The public
record is located in Room 1132 of the Public Response and Program
Resources Branch, Field Operations Division (7506C), Office of
Pesticide Programs, Environmental Protection Agency, Crystal Mall #2,
1921 Jefferson Davis Highway, Arlington, VA.
Electronic comments may be sent directly to EPA at:
[email protected].
Electronic comments must be submitted as an ASCII file avoiding the
use of special characters and any form of encryption.
The official record for this rulemaking, as well as the public
version, as described above will be kept in paper form. Accordingly,
EPA will transfer any copies of objections and hearing requests
received electronically into printed, paper form as they are received
and will place the paper copies in the official rulemaking record which
will also include all comments submitted directly in writing. The
official rulemaking record is the paper record maintained at the
address in ``ADDRESSES'' at the beginning of this document.
References Cited
The following reference is cited in this tolerance rule:
(1) Rehm, S. and G. Espig. (1991). The Cultivated Plants of the
Tropics and Subtropics - Cultivation, Economic Value, Utilization.
Verlag Josef Margraf Scientific Books. Berlin, Germany. pp. 279-280.
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to all the requirements of the Executive Order
(i.e., Regulatory Impact Analysis, review by the Office of Management
and Budget (OMB)). Under section 3(f), the order defines
``significant'' as those actions likely to lead to a rule (1) having an
annual effect on the economy of $100 million or more, or adversely and
materially affecting a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also known as
``economically significant''); (2) creating serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlements,
grants, user fees, or loan programs; or (4) raising novel legal or
policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in this Executive Order.
Pursuant to the terms of this Executive Order, EPA has determined
that this rule is not ``significant'' and is therefore not subject to
OMB review.
Pursuant to the requirements of the Regulatory Flexibility Act
(Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. 601-612), the Administrator
has determined that regulations establishing new tolerances or raising
tolerance levels or establishing exemptions from tolerance requirements
do not have a significant economic impact on a substantial number of
small entities. A certification statement to this effect was published
in the Federal Register of May 4, 1981 (46 FR 24950).
Pursuant to Title II of the Unfunded Mandates Reform Act of 1995,
Pub. L. 104-4, EPA has determined that this regulation does not impose
a Federal mandate upon State, local, or tribal governments or the
private sector and does not contain any regulatory requirements that
might significantly or uniquely affect small governments because the
regulation does not impose any enforceable duties upon those entities.
List of Subjects in 40 CFR Part 180
Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.
Dated: March 18, 1996.
Daniel M. Barolo,
Director, Office of Pesticide Programs.
Therefore, 40 CFR part 180 is amended as follows:
PART 180--[AMENDED]
1. The authority citation for part 180 continues to read as
follows:
Authority: 21 U.S.C. 346a and 371.
2. In subpart D, by adding Sec. 180.1164, to read as follows:
Sec. 180.1164 Food and food by-products; exemption from the
requirement of a tolerance.
(a) Meat meal, a sterilized food by-product, is exempt from the
requirement of a tolerance on all raw agricultural commodities when
used as an olfactory animal repellent.
(b) Red pepper (Capsicum spp.) is exempt from the requirement of a
tolerance on all raw agricultural commodities when used as a gustatory
animal repellent.
[FR Doc. 96-7444 Filed 3-26-96; 8:45 am]
BILLING CODE 6560-50-F
Complete official Federal Register PDF
FR Doc. 96-7438 Nectarines and Peaches Grown in California; Revision of Handling Requirements for Fresh Nectarines and Peaches
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13386-13393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7438]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
7 CFR Parts 916 and 917
[Docket No. FV95-916-4-IFR]
Nectarines and Peaches Grown in California; Revision of Handling
Requirements for Fresh Nectarines and Peaches
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This rule revises the handling requirements for California
nectarines and peaches by modifying the grade, size, maturity,
container, and pack requirements for fresh shipments of these fruits,
beginning with 1996 season shipments. This rule enables handlers to
continue shipping fresh nectarines and peaches meeting consumer needs
in the interest of producers, handlers, and consumers of these fruits.
DATES: Effective April 1, 1996. Comments which are received by April
26, 1996 will be considered prior to issuance of any final rule.
ADDRESSES: Interested persons are invited to submit written comments
concerning this rule. Comments must be sent in triplicate to the Docket
Clerk, Fruit and Vegetable Division, AMS, USDA, P.O. Box 96456, Room
2523-S, Washington, DC 20090-6456; or by facsimile at 202-720-5698. All
comments should reference the docket number and the date and page
number of this issue of the Federal Register and will be made available
for public inspection at the office of the Docket Clerk during regular
business hours.
FOR FURTHER INFORMATION CONTACT: Terry Vawter, Marketing Specialist,
California Marketing Field Office, Marketing Order Administration
Branch, Fruit and Vegetable Division, AMS, USDA, 2202 Monterey Street,
[[Page 13387]]
Suite 102B, Fresno, California 93721; telephone: (209) 487-5901; or
Kenneth Johnson, Marketing Specialist, Marketing Order Administration
Branch, Fruit and Vegetable Division, AMS, USDA, P.O. Box 96456, Room
2523-S, Washington, DC 20090-6456; telephone: (202) 720-2861.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing
Agreement and Marketing Order Nos. 916 and 917 (7 CFR Parts 916 and
917) regulating the handling of nectarines and peaches grown in
California, hereinafter referred to as the orders. The orders are
effective under the Agricultural Marketing Agreement Act of 1937, as
amended (7 U.S.C. 601-674), hereinafter referred to as the Act.
The Department of Agriculture (Department) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12778, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This rule will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with the Secretary a
petition stating that the order, any provision of the order, or any
obligation imposed in connection with the order is not in accordance
with law and request a modification of the order or to be exempted
therefrom. A handler is afforded the opportunity for a hearing on the
petition. After the hearing the Secretary would rule on the petition.
The Act provides that the district court of the United States in any
district in which the handler is an inhabitant, or has his or her
principal place of business, has jurisdiction in equity to review the
Secretary's ruling on the petition, provided a bill in equity is filed
not later than 20 days after the date of the entry of the ruling.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Administrator of the Agricultural Marketing Service
(AMS) has considered the economic impact of this action on small
entities. The purpose of the RFA is to fit regulatory actions to the
scale of business subject to such actions in order that small
businesses will not be unduly or disproportionately burdened. Marketing
orders issued pursuant to the Act, and rules issued thereunder, are
unique in that they are brought about through group action of
essentially small entities acting on their own behalf. Thus, both
statutes have small entity orientation and compatibility.
There are about 300 California nectarine and peach handlers subject
to regulation under the orders covering nectarines and peaches grown in
California, and about 1,800 producers of these fruits in California.
Small agricultural producers have been defined by the Small Business
Administration (13 CFR 121.601) as those having annual receipts of less
than $500,000, and small agricultural service firms are defined as
those whose annual receipts are less than $5,000,000. A majority of
these handlers and producers may be classified as small entities.
The Nectarine Administrative Committee (NAC) and the Peach
Commodity Committee (PCC) met December 7, 1995, and unanimously
recommended that the handling requirements for California nectarines
and peaches be revised, respectively. These committees meet prior to
and during each season to review the rules and regulations effective on
a continuous basis for California nectarines and peaches under the
orders. These committee meetings are open to the public, and interested
persons may express their views at these meetings. The Department
reviews committee recommendations and information, as well as
information from other sources, and determines whether modification,
suspension, or termination of the rules and regulations would tend to
effectuate the declared policy of the Act.
Container and Pack Requirements (Nectarines)
Section 916.350 specifies container and pack requirements for fresh
nectarine shipments. Paragraph (a)(4)(iv) of Sec. 916.350 specifies the
tray-pack size designations which must be marked on loose-filled or
tight-filled containers, depending on the size of the fruit. The size
designations specify the maximum number of nectarines in a 16-pound
sample for each tray-pack size designation. This rule revises paragraph
(a)(4)(iv) of Sec. 916.350 by modifying one size designation for the
weight-count standards in Column B of TABLE 1 for early-season and mid-
season nectarine varieties and one size designation for the weight-
count standards in Column B of TABLE 2. Continuing research conducted
by the NAC indicate that early-season and mid-season fruit weighs less
than late-season fruit and the weight-count standards were, therefore,
modified for the past two seasons based on that consideration. Results
from the 1995 season suggest that a minor modification of TABLE 1 and
TABLE 2 is necessary to provide more accurate weight-count standards
for early-season and mid-season nectarines, and late-season nectarines.
The NAC recommended these revised weight-count standards for
nectarines after a comprehensive review of the appropriate
relationships between the tray-pack containers and loose-filled or
tight-filled containers for early-season and mid-season nectarine
varieties, as well as late-season varieties. Specifically, the NAC's
recommendation provides that the maximum number of nectarines of size
50 in a 16-pound sample of early-season and mid-season fruit is more
appropriately 39 rather than 38. Also the maximum number of nectarines
of size 50 in a 16-pound sample of late-season fruit is more
appropriately 37 rather than 36.
Pack regulations provide for uniform packing practices. In
particular, weight-count standards provide for equality between fruit
packed in loose-filled or tight-filled containers and fruit packed in
tray-pack styles.
According to the NAC, packers occasionally moved fruit from tray-
pack styles of pack to loose-filled or tight- filled pack styles. This
activity has led to an awareness that fruit which was of proper size
when tray-packed exceeded the maximum number of nectarines for the 16-
pound sample for corresponding loose-filled or tight-filled pack size.
In some instances, these samples required an additional piece of fruit
to meet the 16-pound weight requirement, thus causing the pack to be
``marked'' smaller than its equivalent tray-pack size. When packs are
``marked'' smaller this causes the container to be sold for a lower
price.
Revised and refined weight-count standards should provide for more
accurate marking of sizes when packed in loose-filled or tight-filled
pack styles compared to equivalent sizes that are tray packed. These
regulations provide for uniformly packed containers of nectarines.
These regulations also attempt to assure equivalent returns for growers
based on style of pack used.
This rule also further clarifies the definition of ``tree ripe''
added to section 916.350 paragraph (b) for the 1995 season. According
to the NAC, ``tree ripe'' is an optional marking with regard to
maturity that is stamped on containers of nectarines. Currently, the
definition of tree ripe is based on the California Well Matured
maturity requirement and is intended to be used for fruit which has
been allowed to
[[Page 13388]]
ripen naturally by remaining longer on the tree. California Well
Matured means that fruit has been picked at a maturity level distinctly
more advanced than ``mature.'' The definition of ``tree ripe'' was
added in 1995 so that its meaning was consistent with other descriptive
markings and provided a consistent minimum maturity level throughout
the industry to the benefit of consumers. However, during the 1995
season, some handlers marked their boxes of fruit as ``tree ripened.''
It has been recommended by the NAC that the terms ``tree ripe'', and
``tree ripened'', and other terms which denote an advanced level of
maturity due to the fruit remaining on the tree for a longer period,
are interchangeable terms indicative of the enhanced maturity of the
fruit inside the box. Requiring containers of nectarines to be at a
minimum California Well Matured in order to be marked ``tree ripe'' or
``tree ripened,'' or other interchangeable terms such as ``ripened on
the tree'', or ``ripened on tree'' will clarify the current regulation
by specifying when the ``tree ripe'' or some similar marking using the
words ``tree'' and ``ripe'', can be used and help to ensure that buyer
expectations are met.
The NAC also recommended that a new container, that allows for
markings on the lid of the container, be approved for nectarine
shipments for the 1996 season only. The NAC will review the impact of
the use of this container with shippers prior to the 1997 season.
The marketing order, under Sec. 916.350, requires that all
containers be marked with specific information (e.g. handler, grade,
size, and variety) and that all such markings on nectarine containers
have to be applied to the outside end of the container. This has been
defined as any of the four sides of the container, but not on the lid.
Currently, there is interest by handlers in containers that are
reusable thus creating financial savings for handlers. There is now a
reusable and recyclable container, a single layer, plastic, 12 x 20
inch box, that is available for use with nectarines. However, the
design of the container, which has cooling slots in all of its sides,
is such that the markings cannot easily be placed on the outside end of
the container.
The NAC believes that allowing for markings to be placed on the
container lid will facilitate the use of this plastic, reusable and
recyclable container in compliance with marketing order requirements.
Authorizing the use of this new container will allow handlers to reduce
their container costs through the continued reuse of the container.
Maturity Requirements (Nectarines)
Section 916.356 specifies maturity requirements for fresh
nectarines in paragraphs (a)(1) and (a)(1)(i), including TABLE 1. For
fruit being inspected and certified as meeting the maturity
requirements for ``well matured'', maturity determinations are
generally in terms of maturity guides (e.g., color chips) specified in
TABLE 1.
This rule revises paragraph (a)(1) by exempting yellow nectarine
varieties from the requirement that a blush or red color be present on
the skin of the nectarines. By their nature, yellow nectarine varieties
fail to attain any color other than yellow on the skin of the fruit.
The U.S. Standards for Grades of Nectarines requires that a blush or
red color be present on the skin of the fruit in order for the fruit to
be considered as U.S. No. 1 grade.
This rule also revises TABLE 1 of paragraph (a)(1)(i) of
Sec. 916.356 for nectarines to add the maturity guides for four
nectarine varieties. Specifically, an addition to the maturity guides
was recommended for Grand Diamond, King Jim, and Spring Brite at a
maturity guide of L, and Rose Diamond at a maturity guide of J.
The NAC recommended these maturity requirement changes for these
nectarine varieties based on a continuing review by the Shipping Point
Inspection Service of their individual maturity characteristics, and
the identification of the appropriate color chip corresponding to the
``well matured'' level of maturity for such variety.
Size Requirements (Nectarines)
Section 916.356 specifies size requirements for fresh nectarines in
paragraphs (a)(2) through (a)(9). This rule revises Sec. 916.356 to
establish variety-specific size requirements for six nectarine
varieties that were produced in commercially significant quantities of
more than 10,000 packages for the first time during the 1995 season.
This rule also modifies the variety-specific size requirements for two
varieties of nectarines by reassigning those varieties.
Size regulations are put in place to improve fruit quality by
allowing fruit to stay on the tree for a greater length of time. This
increased growing time not only improves maturity and, therefore, the
quality of the product, but also the size of the fruit. Increased size
results in increases in the number of packed boxes of nectarines per
acre. This provides greater consumer satisfaction, more repeat
purchases, and, therefore, increases returns to growers. Varieties
recommended for specific size regulation have been reviewed and
recommendations are based on the characteristics of the variety to
attain minimum size.
Paragraph (a)(3) is revised to include the Johnny's Delight and May
Jim varieties; paragraph (a)(4) is revised to include the Arctic Rose
variety; and paragraph (a)(6) in Sec. 916.356 is revised to include the
Flame Glo, Prima Diamond III, Prima Diamond IV, Prima Diamond VIII, and
the White Jewels nectarine varieties.
This rule also revises Sec. 916.356 to remove eleven nectarine
varieties from the variety-specific size requirements specified in the
section because less than 5,000 packages of each of these varieties
were produced during the 1995 season. Paragraph (a)(2) of that section
is revised to remove the Royal Delight nectarine variety. Paragraph
(a)(4) is revised to remove the Sunfre variety, and paragraph (a)(4) is
also revised to delete the May Jim variety. This variety was placed in
this paragraph prior to the 1995 season. The variety matures to a
smaller-than-average size when compared to other varieties in this
paragraph. Based upon its sizing characteristics from the 1995 season,
removal of the May Jim variety from this paragraph was recommended.
Paragraph (a)(6) is revised to remove the Del Rio Rey, Independence, La
Pinta, Late Le Grand, Royal Red, Son Red, Sun Grand, 181-119 (Sierra
Star), and Nectarine 23 nectarine varieties. Paragraph (a)(6) is also
revised to remove the Arctic Rose variety. This variety was placed in
this paragraph prior to the 1995 season. The variety matures to a
smaller-than-average size when compared to other varieties in this
paragraph. Based upon its sizing characteristics from the 1995 season,
removal of the Arctic Rose variety from this paragraph was recommended.
Nectarine varieties removed from the nectarine variety-specific
list become subject to the non-listed variety size requirements
specified in paragraphs (a)(7), (a)(8), and (a)(9) of Sec. 916.356.
The NAC recommended these changes in the minimum size requirements
based on a continuing review of the sizing and maturity relationships
for these nectarine varieties, and consumer acceptance levels for
various sizes of fruit. This rule is designed to establish minimum size
requirements for fresh nectarines consistent with expected crop and
market conditions.
[[Page 13389]]
Container and Pack Requirements (Peaches)
Section 917.442 currently specifies container and pack requirements
for fresh peach shipments. Paragraph (a)(4)(iv) of Sec. 917.442
specifies the tray-pack size designations which must be marked on
loose-filled or tight- filled containers, depending on the size of the
fruit. The size designations specify the maximum number of peaches in a
16-pound sample for each tray pack size designation. This rule revises
paragraph (a)(4)(iv) of Sec. 917.442 by modifying one size designation
for the weight-count standards in Column B of TABLE 1 for early-season
and mid-season peach varieties. Research conducted by the PCC indicated
that early-season and mid-season fruit weighs less than late- season
fruit and the weight-count standards were, therefore, modified for the
past two seasons based on that consideration. Results from the 1995
season suggest that a minor modification of TABLE 1 is necessary to
provide more accurate weight-count standards for early-season and mid-
season peaches.
The PCC recommended the revised container marking requirement
changes for peaches after a comprehensive review of the appropriate
relationships between the tray-pack containers and loose-filled or
tight-filled containers for early-season and mid-season peach varieties
prior to the 1996 season. Specifically, the PCC's recommendation
provides that the maximum number of peaches of size 54 in a 16-pound
sample of early-season and mid-season fruit is more appropriately 44
rather than 43.
Pack regulations provide for uniform packing practices. In
particular, weight-count standards provide equality between fruit
packed in loose-filled or tight-filled containers and fruit packed in
tray-pack styles.
According to the PCC, packers occasionally moved fruit from tray-
pack styles of pack to loose-filled or tight- filled pack styles. This
activity has led to an awareness, especially in regard to early-season
varieties, that fruit which was of proper size when tray-packed
exceeded the maximum number of nectarines for the 16-pound sample for
corresponding loose-filled or tight-filled pack size. In this instance,
these samples needed an additional piece of fruit to meet the 16-pound
weight requirement, thus causing the pack to be ``marked'' smaller than
its equivalent tray- pack size. When packs are ``marked'' smaller this
causes the container to be sold for a lower price. During the 1994
season, new weight-count assignments for early varieties were in place.
Research continued with the purpose of possible refinement of those
weight-count assignments.
Revised and refined weight-count standards for early varieties
should provide for more accurate marking of size when packed in loose-
filled or tight-filled pack styles compared to equivalent sizes that
are tray packed. These regulations provide for uniformly packed
containers of peaches. These regulations also attempt to assure
equivalent returns for growers based on style of pack used.
This rule also further clarifies the definition of ``tree ripe''
added to section 917.442 paragraph (b) for the 1995 season. According
to the PCC, ``tree ripe'' is an optional marking with regard to
maturity that is stamped on containers of peaches. Currently the
definition of tree ripe is based on the California Well Matured
maturity requirement and is intended to be used for fruit which has
been allowed to ripen naturally by remaining longer on the tree.
California Well Matured means that fruit has been picked at a maturity
level distinctly more advanced than ``mature.'' The definition of
``tree ripe'' was added in 1995 so that its meaning was consistent with
other descriptive markings and provided a consistent minimum maturity
level throughout the industry to the benefit of consumers. However,
during the 1995 season, some handlers marked their boxes of fruit as
``tree ripened.'' It has been recommended by the PCC that the terms
``tree ripe'' and ``tree ripened'' and other terms which denote an
advanced level of maturity due to the fruit remaining on the tree for a
longer period, are interchangeable terms indicative of the enhanced
maturity of the fruit inside the box. Requiring containers of peaches
to be at a minimum California Well Matured in order to be marked ``tree
ripe'' or ``tree ripened,'' or other interchangeable terms such as
``ripened on the tree,'' or ``ripened on tree'' will clarify the
current regulation by specifying when the ``tree ripe'' or some similar
marking using the words ``tree'' and ``ripe'' can be used and help to
ensure that buyer expectations are met.
The PCC also recommended that a new container, that allows for
markings on the lid of the container, be approved for peach shipments
for the 1996 season only. The PCC will review the impact of this
container with shippers prior to the 1997 season.
The marketing order, under Sec. 917.442, requires that all
containers be marked with specific information (e.g. handler, grade,
size, and variety) and that all such markings on peach containers have
to be applied to the outside end of the container. This has been
defined as any of the four sides of the container, but not on the lid.
Currently, there is interest by handlers in containers that are
reusable thus creating financial savings for handlers. There is now a
reusable and recyclable container, a single layer, plastic, 12x20 inch
box, that is available for use with peaches. However, the design of the
container, which has cooling slots in all of its sides, is such that
the markings cannot easily be placed on the outside end of the
container.
The PCC believes that allowing for markings to be placed on the
container lid will facilitate the use of this plastic, reusable and
recyclable container in compliance with marketing order requirements.
Authorizing the use of this new container will allow handlers to reduce
their container costs through the continued reuse of the container.
Maturity Requirements (Peaches)
Section 917.459 specifies maturity requirements for fresh peaches
in paragraph (a)(1), including TABLE 1. For fruit being inspected and
certified as meeting the maturity requirements for ``well matured'',
maturity determinations are generally in terms of maturity guides
(e.g., color chips) specified in TABLE 1. This rule revises TABLE 1 of
paragraph (a)(1)(ii) of Sec. 917.459 for peaches to change the maturity
guide for the Elegant Lady peach variety from a maturity guide M to a
maturity guide L. The Early Delight peach variety has been recommended
to be added with a maturity guide H and the May Sun variety has been
recommended to be added with a maturity guide I.
The PCC recommended these maturity requirement changes for these
peach varieties based on a continuing review by the Shipping Point
Inspection Service of their individual maturity characteristics, and
the identification of the appropriate color chip corresponding to the
``well matured'' level of maturity for such varieties.
Size Requirements (Peaches)
Section 917.459 specifies size requirements for fresh peaches in
paragraphs (a)(2) through (a)(6), and paragraphs (b) and (c). This rule
also revises Sec. 917.459 to establish variety-specific size
requirements for six peach varieties that were produced in commercially
significant quantities of more than 10,000 packages for the first time
during the 1995 season.
Size regulations are put in place to improve fruit quality by
allowing fruit to stay on the tree for a greater length of time. This
increased growing time not
[[Page 13390]]
only improves maturity, and, therefore, the quality of the product, but
also size of the fruit. Increased size results in increases in the
number of packed boxes of peaches per acre. This provides greater
consumer satisfaction, more repeat purchases, and, therefore, increases
returns to growers. Varieties recommended for specific size regulation
have been reviewed and recommendations are based on the characteristics
of the variety to attain minimum size.
In Sec. 917.459 paragraph (a)(5) is revised to include the May Sun
peach variety; and paragraph (a)(6) is revised to include the July Sun,
Kaweah, Snow Giant, Snow King, and Sugar Giant peach varieties.
This rule also revises Sec. 917.459 to remove eleven peach
varieties from the variety-specific size requirements specified in that
section, because less than 5,000 packages of each of these varieties
were produced during the 1995 season. In Sec. 917.459 paragraph (a)(2)
of Sec. 917.459 is revised to remove the Flordaprince peach variety;
paragraph (a)(5) is revised to remove the First Lady, Merrill Gem,
Royal May, Sierra Crest, Summer Crest, and 50-178 peach varieties; and
paragraph (a)(6) is revised to remove the Angelus, August Delight,
Parade, and Scarlet Lady peach varieties. Peach varieties removed from
the variety- specific list become subject to the non-listed variety
size requirements specified in paragraphs (b) and (c) of Sec. 917.459.
The removal of the Flordaprince variety from paragraph (a)(2)
results in there being no varieties regulated within size 96 for the
1996 season. Since the variety-specific list is subject to change from
one season to another, the Department wishes to reserve paragraph
number (a)(2) for future regulation of peaches at size 96.
The PCC recommended these changes in the minimum size requirements
based on a continuing review of the sizing and maturity relationships
for these peach varieties, and the consumer acceptance levels for
various sizes fruit. This rule is designed to establish minimum size
requirements for fresh peaches consistent with expected crop and market
conditions.
This rule reflects the committees' and the Department's appraisal
of the need to revise the handling requirements for California
nectarines and peaches, as specified. The Department's determination is
that this rule will have a beneficial impact on producers, handlers,
and consumers of California nectarines and peaches.
This rule establishes handling requirements for fresh California
nectarines and peaches consistent with expected crop and market
conditions, and will help ensure that all shipments of these fruits
made each season will meet acceptable handling requirements established
under each of these orders. This rule will also help the California
nectarine and peach industries provide fruit desired by consumers. This
rule is designed to establish and maintain orderly marketing conditions
for these fruits in the interest of producers, handlers, and consumers.
Based on the above, the Administrator of the AMS has determined
that this rule will not have a significant economic impact on a
substantial number of small entities.
After consideration of all relevant matters presented, the
information and recommendations submitted by the committees, and other
information, it is found that the rule, as hereinafter set forth, will
tend to effectuate the declared policy of the Act.
Pursuant to 5 U.S.C. 553, it is also found and determined, upon
good cause, that it is impracticable, unnecessary and contrary to the
public interest to give preliminary notice prior to putting this rule
into effect because: (1) California nectarine and peach growers and
handlers should be apprised of this rule as soon as possible, since
early shipments of these fruits are expected to begin about April 1;
(2) this rule relaxes grade requirements for yellow-skinned nectarines
and size requirements for several nectarine and peach varieties; (3)
California nectarine and peach handlers are aware of these revised
requirements that are non-controversial, administrative by nature, and
similar to other recommendations made by the committees in prior
seasons, and they will need no additional time to comply with such
requirements; and (4) the rule provides a 30-day comment period, and
any written comments received will be considered prior to any
finalization of this interim final rule.
List of Subjects
7 CFR Part 916
Marketing agreements, Nectarines, Reporting and recordkeeping
requirements.
7 CFR Part 917
Marketing agreements, Peaches, Pears, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR Parts 916 and 917
are amended as follows:
PART 916--NECTARINES GROWN IN CALIFORNIA
1. The authority citation for 7 CFR Part 916 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. Section 916.350 is amended by revising TABLE 1 and TABLE 2 of
paragraph (a)(4)(iv), revising paragraph (b), and adding a new
paragraph (c) to read as follows:
Sec. 916.350 California Nectarine Container and Pack Regulation.
(a) * * *
(4) * * *
(iv) * * *
Table 1.--Weight-Count Standards for Nectarines Packed in Loose or Tight-
Filled Containers
------------------------------------------------------------------------
Column B--Maximum
number of
nectarines in a
16-pound sample
applicable to
varieties
specified in
Column A--Tray pack size designation paragraphs
(a)(2)(ii),
(a)(3)(ii),
(a)(4)(ii),
(a)(5)(ii),
(a)(7)(ii), and
(a)(8)(ii) of
Sec. 916.356
------------------------------------------------------------------------
108.................................................. 100
96................................................... 90
88................................................... 83
84................................................... 78
80................................................... 75
72................................................... 67
70................................................... 60
64................................................... 55
60................................................... 49
56................................................... 46
54................................................... 40
50................................................... 39
48................................................... 35
42................................................... 31
40................................................... 30
36................................................... 25
34................................................... 23
32................................................... 22
30................................................... 19
------------------------------------------------------------------------
Table 2.--Weight-Count Standards for Nectarines Packed in Loose or Tight-
Filled Containers
------------------------------------------------------------------------
Column B--Maximum
number of
nectarines in a
16-pound sample
applicable to
Column A--Tray pack size designation varieties
specified in
paragraphs
(a)(6)(ii), and
(a)(9)(ii) of
Sec. 916.356
------------------------------------------------------------------------
108.................................................. 92
96................................................... 87
[[Page 13391]]
88................................................... 78
84................................................... 75
80................................................... 67
72................................................... 61
70................................................... 56
64................................................... 51
60................................................... 46
56................................................... 43
54................................................... 39
50................................................... 37
48................................................... 33
42................................................... 28
40................................................... 26
36................................................... 25
34................................................... 23
32................................................... 22
30................................................... 19
------------------------------------------------------------------------
* * * * *
(b) As used in this section, standard pack and fairly uniform in
size shall have the same meanings as set forth in U.S. Standards for
Grades of Nectarines (Secs. 51.3145 to 51.3160) and all other terms
shall have the same meaning as when used in the amended marketing
agreement and order. No. 12B standard fruit box measures 2\3/8\ to 7\1/
8\ x 11\1/2\ x 16\1/8\ inches, No. 22D standard lug box measures
2\7/8\ to 7\1/8\ x 13\1/2\ x 16\1/8\ inches, No. 22E standard lug
box measures 8\3/4\ x 13\1/2\ x 16\1/8\ inches, No. 22G standard lug
box measures 7\3/8\ to 7\1/2\ x 13\1/4\ x 15\7/8\ inches. All
dimensions are given in depth (inside dimension) by width by length
(outside dimension). Individual consumer packages means packages
holding 15 pounds or less net weight of nectarines. ``Tree ripe'' means
``tree ripened'' and fruit shipped and marked as ``tree ripe'', ``tree
ripened'', or any similar terms using the words ``tree'' and ``ripe''
must meet minimum California Well Matured standards.
(c) Each container of nectarines in plastic, 12 x 20 inch reusable
and recyclable containers shall meet and bear, on the container lid,
all applicable marking requirements under the order.
3. Section 916.356 is amended by revising paragraphs (a)(1)
introductory text, Table 1, (a)(2) introductory text, (a)(3)
introductory text, (a)(4) introductory text, and (a)(6) introductory
text to read as follows:
Sec. 916.356 California Nectarine Grade and Size Regulation.
(a) * * *
(1) Any lot or package or container of any variety of nectarines
unless such nectarines meet the requirements of U. S. No. 1 grade:
Provided, that nectarines 2 inches in diameter or smaller, shall not
have fairly light colored, fairly smooth scars which exceed an
aggregate area of a circle \3/8\ inch in diameter, and nectarines
larger than 2 inches in diameter shall not have fairly light colored,
fairly smooth scars which exceed an aggregate area of a circle \1/2\
inch in diameter: Provided further, that an additional tolerance of 25
percent shall be permitted for fruit that is not well formed but not
badly misshapen: Provided further, that all varieties of nectarines
which fail to meet the U.S. No. 1 grade only on account of lack of
blush or red color due to varietal characteristics shall be considered
as meeting the requirements of this subpart. The Federal or Federal-
State Inspection Service shall make final determinations on maturity
through the use of color guides or such other tests as determined
appropriate by the inspection agency.
* * * * *
Table 1
------------------------------------------------------------------------
Column A variety Column B maturity guide
------------------------------------------------------------------------
Alshir Red............................. J
Ama Lyn................................ G
Apache................................. G
April Glo.............................. H
Armking................................ B
August Glo............................. L
August Red............................. J
Aurelio Grand.......................... F
Autumn Delight......................... M
Autumn Grand........................... L
Bob Grand.............................. L
Clinton-Strawberry..................... H
Del Rio Rey............................ G
Desert Dawn............................ G
Early Diamond.......................... J
Early May.............................. F
Early May Grand........................ H
Early Star............................. G
Early Sungrand......................... H
Fairlane............................... M
Fantasia............................... J
Firebrite.............................. H
Flamekist.............................. L
Flaming Red............................ K
Flavor Grand........................... G
Flavortop.............................. J
Flavortop I............................ K
Gee Red................................ H
Gold King.............................. H
Grand Diamond.......................... L
Granderli.............................. J
Grand Stan............................. F
Hi-Red................................. J
Independence........................... H
July Red............................... L
June Glo............................... H
June Grand............................. G
Kent Grand............................. L
King Jim............................... L
Kism Grand............................. J
Larry's Grand.......................... M
Late Le Grand.......................... L
Late Tina Red.......................... I
Le Grand............................... H
Maybelle............................... F
May Diamond............................ I
Mayfair................................ C
May Fire............................... H
May Glo................................ H
May Grand.............................. H
May Kist............................... H
Mayred................................. B
Mid Glo................................ L
Mike Grand............................. H
Moon Grand............................. M
Niagara Grand.......................... H
Pacific Star........................... G
P-R Red................................ L
Red Diamond............................ M
Red Delight............................ I
Red Free............................... L
Red Glen............................... J
Red Grand.............................. H
Red Jim................................ L
Red June............................... G
Red Lion............................... J
Red May................................ J
Regal Grand............................ L
Rio Red................................ L
Rose Diamond........................... J
Royal Delight.......................... F
Royal Giant............................ I
Ruby Grand............................. J
Ruby Sun............................... J
Scarlet Red............................ K
September Grand........................ L
September Red.......................... L
Sheri Red.............................. J
Sierra Star/181-119.................... G
Son Red................................ L
Sparkling June......................... M
Sparkling May.......................... J
Sparkling Red.......................... L
Spring Brite........................... L
Spring Diamond......................... M
Spring Grand........................... G
Spring Red............................. H
Springtop.............................. B
Stan's Grand........................... C
Star Bright............................ G
Star Brite............................. J
Star Grand............................. H
Summer Beaut........................... H
Summer Blush........................... J
Summer Bright.......................... J
Summer Diamond......................... M
Summer Fire............................ L
Summer Grand........................... L
Summer Lion............................ M
Summer Red............................. L
Summer Star............................ G
Sunburst............................... J
Sun Diamond............................ I
Sunfre................................. F
Sun Grand.............................. G
[[Page 13392]]
Super Star............................. G
Tasty Free............................. J
Tasty Gold............................. H
Tom Grand.............................. L
Zee Glo................................ J
61-61.................................. J
------------------------------------------------------------------------
Note: Consult with the Federal or Federal-State Inspection
Service Supervisor for the maturity guides applicable to the
varieties not listed above.
* * * * *
(2) Any package or container of May Glo variety nectarines through
May 5 of each year; or April Glo, or Mayfire variety nectarines,
unless:
* * * * *
(3) Any package or container of May Glo variety nectarines on or
after May 6 of each year, or Earliglo, Early Diamond, Johnny's Delight,
May Jim, or May Kist variety nectarines, unless:
* * * * *
(4) Any package or container of Arctic Rose, Early May, Mike Grand,
June Brite, June Glo, May Grand, May Diamond, May Lion, Pacific Star,
Red Delight, Rose Diamond, Sparkling May, Star Brite, or Zee Grand
variety nectarines unless:
* * * * *
(6) Any package or container of Alshir Red, Alta Red, Arctic Queen,
August Glo, August Red, Autumn Delight, Big Jim, Bob Grand, Early Red
Jim, Early Sungrand, Fairlane, Fantasia, Firebrite, Flame Glo,
Flamekist, Flaming Red, Flavor Grand, Flavortop, Flavortop I, Grand
Diamond, How Red, July Red, King Jim, Kay Diamond, Kism Grand, Late Red
Jim, Mid Glo, Moon Grand, Niagara Grand, Prima Diamond, Prima Diamond
III, Prima Diamond IV, Prima Diamond VIII, P-R Red, Red Diamond, Red
Fred, Red Free, Red Glen, Red Jim, Red Lion, Rio Red, Royal Giant,
Royal Glo, Ruby Diamond, Ruby Grand, Scarlet Red, September Grand,
September Red, Sparkling June, Sparkling Red, Spring Bright, Spring
Diamond, Spring Red, Summer Beaut, Summer Blush, Summer Bright, Summer
Diamond, Summer Fire, Summer Grand, Summer Lion, Summer Red, Summer
Star, Sunburst, Sun Diamond, Super Star, Tasty Gold, Tom Grand, White
Jewels, Zee Glo, 80P-1135, or 424-195 variety nectarines unless:
* * * * *
PART 917--FRESH PEARS AND PEACHES GROWN IN CALIFORNIA
1. The authority citation for 7 CFR Part 917 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. Section 917.442 is amended by revising TABLE 1 of paragraph
(a)(4)(iv), revising paragraph (b), and adding a new paragraph (c) to
read as follows:
Sec. 917.442 California Peach Container and Pack Regulation.
(a) * * *
(4) * * *
(iv) * * *
Table 1.--Weight-Count Standards for Peaches Packed in Loose or Tight-
Filled Containers
------------------------------------------------------------------------
Column B--Maximum
number of peaches
in a 16-pound
sample applicable
to varieties
specified in
Column A--Tray pack size designation paragraphs
(a)(2)(ii),
(a)(3)(ii),
(a)(4)(iii),
(a)(5)(ii), and
(b)(3) of Sec.
917.459
------------------------------------------------------------------------
96................................................... 96
88................................................... 92
84................................................... 83
80................................................... 76
72................................................... 68
70................................................... 64
64................................................... 56
60................................................... 50
56................................................... 46
54................................................... 44
50................................................... 39
48................................................... 35
42................................................... 31
40................................................... 30
36................................................... 27
34................................................... 25
32................................................... 23
30................................................... 21
------------------------------------------------------------------------
* * * * *
(b) As used in this section, standard pack shall have the same
meaning as set forth in U.S. Standards for Grades of Peaches
(Secs. 51.1210 to 51.1223) and all other terms shall have the same
meaning as when used in the amended marketing agreement and order. No.
12B standard fruit box measures 2\3/8\ to 7\1/8\ x 11\1/2\ x 16\1/8\
inches, No. 22D standard lug box measures 2\7/8\ to 7\1/8\ x 13\1/2\
x 16\1/8\ inches, No.22E standard lug box measures 8\3/4\ x 13\1/2\
x 16\1/8\ inches, No. 22G standard lug box measures 7\3/8\ to 7\1/2\
x 13\1/4\ x 15\7/8\ inches. All dimensions are given in depth
(inside dimension) by width by length (outside dimension). Individual
consumer packages means packages holding 15 pounds or less net weight
of nectarines. ``Tree ripe'' means the same as ``tree ripened'' and
fruit shipped and marked as ``tree ripe'', ``tree ripened'', or any
similar terms using the words ``tree'' and ``ripe'', must meet minimum
California Well Matured standards.
(c) Each container of peaches in plastic, 12 x 20 inch reusable and
recyclable containers shall meet and bear, on the container lid, all
applicable marking requirements under the order.
3. Section 917.459 is amended by removing and reserving paragraph
(a)(2), and revising Table 1 of paragraph (a)(1)(ii), (a)(5)
introductory text, and (a)(6) introductory text to read as follows:
Sec. 917.459 California Peach Grade and Size Regulation.
(a) * * *
(1) * * *
(ii) If a grower or handler believes his/her fruit is meeting the
appropriate maturity level but the fruit has not been so graded by the
inspector, he/she may appeal the inspection by calling the officer-in-
charge of the local Federal-State Inspection Service office to arrange
for an on-site examination of the fruit.
Table 1
------------------------------------------------------------------------
Column A variety Column B maturity guide
------------------------------------------------------------------------
Angelus................................ I
Ambercrest............................. G
Armgold................................ D
August Sun............................. I
Autumn Crest........................... I
Autumn Gem............................. I
Autumn Lady............................ H
Autumn Rose............................ I
Bella Rosa............................. G
Belmont (Fairmont)..................... I
Berenda Sun............................ I
Blum's Beauty.......................... G
Bonjour................................ F
Cardinal............................... G
Cal Red................................ I
Carnival............................... I
Cassie................................. H
Coronet................................ E
Crimson Lady........................... J
Crown Princess......................... J
David Sun.............................. I
Desertgold............................. B
Diamond Princess....................... J
Early Coronet.......................... D
Early Delight.......................... H
Early Fairtime......................... I
Early May Crest........................ H
Early O'Henry.......................... I
Early Royal May........................ G
Early Top.............................. G
Elberta................................ B
Elegant Lady........................... L
Fairtime............................... G
Fancy Lady............................. J
Fay Elberta............................ C
[[Page 13393]]
Fayette................................ I
Fire Red............................... I
First Lady............................. D
Flamecrest............................. I
Flavorcrest............................ G
Flavor Queen........................... H
Flavor Red............................. G
Fortyniner............................. F
Franciscan............................. G
Goldcrest.............................. H
Golden Crest........................... H
Golden Lady............................ F
Honey Red.............................. G
Jody Gaye.............................. F
John Henry............................. J
Judy Elberta........................... C
July Lady.............................. G
June Crest............................. G
June Lady.............................. G
June Pride............................. J
June Sun............................... H
Kearney................................ I
Kern Sun............................... H
Kings Lady............................. I
Kings Red.............................. I
Lacey.................................. I
Mardigras.............................. G
Mary Ann............................... G
May Crest.............................. G
May Lady............................... G
May Sun................................ I
Merrill Gem............................ G
Merrill Gemfree........................ G
Morning Sun............................ D
O'Henry................................ I
Pacifica............................... G
Parade................................. I
Pat's Pride............................ D
Preuss Suncrest........................ F
Prima Fire............................. H
Prima Lady............................. J
Prime Crest............................ H
Queen Crest............................ G
Ray Crest.............................. G
Red Cal................................ I
Redglobe............................... C
Redhaven............................... G
Red Lady............................... G
Redtop................................. G
Regina................................. G
Rich Lady.............................. J
Rich May............................... H
Rio Oso Gem............................ I
Royal April............................ D
Royal Lady............................. J
Royal May.............................. G
Ruby May............................... H
Ryan Sun............................... I
Scarlet Lady........................... F
September Sun.......................... I
Sierra Crest........................... H
Sierra Lady............................ I
Sparkle................................ I
Springcrest............................ G
Spring Lady............................ H
Springold.............................. D
Sugar Lady............................. J
Summer Lady............................ M
Summerset.............................. I
Suncrest............................... G
Sun Lady............................... I
Topcrest............................... H
Toreador............................... I
Tra Zee................................ J
Treasure............................... F
Willie Red............................. G
Windsor................................ I
Zee Lady............................... L
50-178................................. G
------------------------------------------------------------------------
Note: Consult with the Federal or Federal-State Inspection
Service Supervisor for the maturity guides applicable to the
varieties not listed above
* * * * *
(5) Any package or container of Babcock, Crimson Lady, Crown
Princess, David Sun, Early May Crest, Flavorcrest, Golden Crest, Honey
Red, June Lady, June Sun, Kern Sun, Kingscrest, Kings Red, May Crest,
May Sun, Merrill Gemfree, Queencrest, Ray Crest, Redtop, Regina, Rich
May, Snow Brite, Snow Flame, Springcrest, Spring Lady, or Sugar May
variety of peaches unless:
* * * * *
(6) Any package or container of Amber Crest, August Sun, Autumn
Crest, Autumn Gem, Autumn Lady, Autumn Rose, Belmont, Berenda Sun,
Blum's Beauty, Cal Red, Carnival, Cassie, Champagne, Diamond Princess,
Early Elegant Lady, Early O'Henry, Elegant Lady, Fairmont, Fairtime,
Fay Elberta, Fire Red, Flamecrest, John Henry, July Lady, July Sun,
June Pride, Kaweah, Kings Lady, Lacey, Late Ito Red, Mary Ann, O'Henry,
Prima Gattie, Prima Lady, Red Boy, Red Cal, Redglobe, Rich Lady, Royal
Lady, Ryan's Sun, September Snow, September Sun, Sierra Lady, Snow
Giant, Snow King, Sparkle, Sprague Last Chance, Summer Lady, Summer
Sweet, Suncrest, Tra Zee, White Lady, or Zee Lady variety of peaches
unless:
* * * * *
Dated: March 21, 1996.
Eric M. Forman,
Deputy Director, Fruit and Vegetable Division.
[FR Doc. 96-7438 Filed 3-26-96; 8:45 am]
BILLING CODE 3410-02-P
Complete official Federal Register PDF
FR Doc. 96-7437 Regulations (Other Than Rules of Practice) Under the Perishable Agricultural Commodities Act, 1930 (PACA)
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13385-13386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7437]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 61, No. 60 / Wednesday, March 27, 1996 /
Rules and Regulations
[[Page 13385]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 46
[Docket No. FV93-353]
RIN 0581-AB28
Regulations (Other Than Rules of Practice) Under the Perishable
Agricultural Commodities Act, 1930 (PACA)
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Agriculture is revising the Regulations
(other than Rules of Practice) Under the Perishable Agricultural
Commodities Act (PACA) to include oil-blanched frozen fruits and
vegetables as a commodity covered under the PACA. This rule will grant
dealers in frozen oil-blanched products the same rights afforded
dealers whose frozen product is water-blanched.
EFFECTIVE DATE: April 26, 1996.
FOR FURTHER INFORMATION CONTACT: J.R. Frazier, Assistant Chief, PACA
Branch, Room 2095-So., Fruit and Vegetable Division, Agricultural
Marketing Service, U.S. Department of Agriculture, Washington, DC
20250, Phone (202) 720-4180.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This final rule is issued under the Perishable Agricultural
Commodities Act (7 U.S.C. 499 et. seq.), as amended, hereinafter
referred to as the ``PACA.'' The Department of Agriculture is issuing
this final rule in conformance with Executive Order 12866.
Executive Order 12778
This final rule has been reviewed under Executive Order 12778,
Civil Justice Reform. It is not intended to have retroactive effect.
This final rule will not preempt any State or local laws, regulation,
or policies, unless they present an irreconcilable conflict with this
rule. There are no administrative procedures which must be exhausted
prior to any judicial challenge to the provisions of this rule.
Regulatory Flexibility Act
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), (5 U.S.C. 601 et seq.), the Administrator of the
Agricultural Marketing Service (AMS) has certified that this action
will not have a significant economic impact on a substantial number of
small entities.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. This is an action that is
brought about at the request of the frozen fruit and vegetable industry
and would benefit producers and small businesses that process and
supply frozen fruits and vegetables by making available to them new
remedies under the PACA.
This rule extends PACA coverage to include frozen fruits and
vegetables that are oil-blanched, especially frozen french fried potato
products. Under previous regulations, suppliers of these commodities
suffered considerable financial losses because oil-blanched products
were excluded by regulation from PACA coverage. This rule grants
dealers in frozen oil-blanched products the same rights afforded
dealers whose frozen product is water- blanched.
It is therefore not unduly or disproportionately burdensome on
small businesses and in fact, rectifies the previous situation in which
processors and suppliers were closed out of remedies with respect to
oil-blanched product.
The PACA establishes a code of fair trading by prohibiting certain
unfair practices in the marketing of fresh or frozen fruits and
vegetables. The law requires that parties fulfill their contractual
obligations including prompt pay, and provides a forum wherein persons
who suffer damages can recover their losses.
The PACA also impresses a statutory trust for the benefit of unpaid
sellers or suppliers on all perishable agricultural commodities
received by a commission merchant, dealer or broker and all inventories
of food or other products derived from the sale of such commodities or
products. Sellers who preserve their eligibility are entitled to
payment ahead of other creditors, from trust assets, of money owed on
past due accounts.
Information submitted to this Agency by the Frozen Potato Products
Institute indicates that frozen potato products represent the largest
single frozen commodity shipped in the United States. This information
further indicates that potatoes cannot be economically frozen and
shipped long distances unless they first undergo oil blanching. As
pointed out by the American Frozen Food Institute, oil blanching, like
water and steam blanching inactivates enzymes without cooking the
product. Water and steam blanched frozen fruits and vegetables are
covered under the current regulations, oil-blanched frozen fruits and
vegetables are not. To exclude such a substantial portion of the frozen
food industry is inconsistent with the intent of the PACA to protect
dealers in fresh or frozen fruits and vegetables.
Retailers who buy in interstate or foreign commerce must obtain a
PACA license if they buy more than $230,000 of fruits and vegetables
during a calendar year. Including oil-blanched product in the
calculation of the $230,000 exemption may result in a marginal increase
in retailers becoming subject to PACA, requiring them to purchase a
PACA license at an annual cost of $400. However, the license fee for
retailers is being phased out under the provisions of the Perishable
Agricultural Commodities Act Amendments of 1995. By calendar year 1999,
retailers will no longer be obligated to pay license fees though they
must still be licensed. A marginal increase in the number of retailers
subject to the PACA, is not significant compared to the benefits
derived in the industry by including these commodities under the PACA.
The proposed rule was published in the Federal Register (59 FR
35487) on July 12, 1994. On September 12, 1994, Notice was given in the
Federal Register (59 FR 46772) re-opening the comment period. That
notice provided another comment period which ended October 12, 1994.
Ten comments were received,
[[Page 13386]]
six in favor and four opposed to the proposed rule.
Three commentors representing retailers and wholesale grocers
opposed the rule claiming that it would expand the PACA program.
It is true that the rule does expand the PACA program to a product
line that is not currently covered, but only because the current
regulations restrict the application of the meaning of ``perishable
agricultural commodity'' as provided in the Act. Oil-blanched product
is well within the definition of a perishable agricultural commodity as
defined by the statute and is consistent with the industry view of the
scope of the Act and the nature of the product. Including oil-blanched
frozen fruits and vegetables does not unduly or disproportionately
burden retailers. With this final rule, all sales of potato products,
whether to wholesale distributors, or retailers, would be covered by
the term ``perishable agricultural commodity.'' Further, retailers
would be less likely than other dealers to be affected by the rule
because frozen oil-blanched product would be a small portion of their
total business. However, continuing to exclude (frozen french fried
potatoes) the largest single frozen commodity in the United States
poses substantial risk to farmers, shippers, and processors who are
extending credit without the trust protection the Act affords to other
dealers.
Another commentor representing a major restaurant chain opposed the
proposed rule because he thought the change might bring restaurants
under the jurisdiction of the PACA, and argued that therefore, the
economic impact of the rule has been underestimated. Restaurants
traditionally have not been considered subject to the PACA by USDA or
Congress unless the buying arm of the restaurant is a separate legal
entity, and is buying for and/or reselling the product to another
entity. Since restaurants are not subject to the PACA, this change in
the regulation will not impact restaurants.
For the reasons stated, we are not making any changes to this final
rule based on the above comments.
The commentors in favor of the proposal claimed that frozen
potatoes cannot be shipped practically and commercially without being
oil-blanched and that extending PACA to cover these products would
protect processors and shippers and enhance the protection to farmers.
They also pointed out that incorporating oil-blanched products into the
regulations was consistent with the current policy of including water-
blanched and steam-blanched product and would streamline the
administration of PACA because it would no longer be necessary to
distinguish oil-blanched from water or steam-blanched products. They
also claimed that the proposed rule would improve marketing efficiency,
thereby benefitting consumers and the potato industry.
After thoroughly analyzing the comments received and all other
available information, the Department has concluded that issuing this
rule is appropriate.
Based on the above, the Administrator of the AMS has determined
that the issuance of this final rule will not have a significant
economic effect on a substantial number of small entities.
After consideration of all relevant material presented, the
comments received, and other available information, it is found that
this regulation, as hereinafter set forth, will tend to effectuate the
declared policy of the Act.
List of Subjects in 7 CFR Part 46
Agricultural commodities, Brokers, Penalties, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, 7 CFR Part 46 of the
Code of Federal Regulations is amended as follows:
PART 46--REGULATIONS (OTHER THAN RULES OF PRACTICE) UNDER THE
PERISHABLE AGRICULTURAL COMMODITIES ACT, 1930
1. The authority citation for part 46 continues to read as follows:
Authority: Sec. 15, 46 Stat. 537; 7 U.S.C. 499o.
2. In section 46.2, paragraph (u) is revised to read as follows:
Sec. 46.2 Definitions.
* * * * *
(u) Fresh fruits and fresh vegetables include all produce in fresh
form generally considered as perishable fruits and vegetables, whether
or not packed in ice or held in common or cold storage, but do not
include those perishable fruits and vegetables which have been
manufactured into articles of food of a different kind or character.
The effects of the following operations shall not be considered as
changing a commodity into a food of a different kind or character:
Water, steam, or oil blanching, chopping, color adding, curing,
cutting, dicing, drying for the removal of surface moisture;
fumigating, gassing, heating for insect control, ripening and coloring;
removal of seeds, pits, stems, calyx, husk, pods, rind, skin, peel, et
cetera; polishing, precooling, refrigerating, shredding, slicing,
trimming, washing with or without chemicals; waxing, adding of sugar or
other sweetening agents; adding ascorbic acid or other agents used to
retard oxidation; mixing of several kinds of sliced, chopped, or diced
fruits or vegetables for packaging in any type of containers; or
comparable methods of preparation.
* * * * *
Dated: March 20, 1996.
Lon Hatamiya,
Administrator.
[FR Doc. 96-7437 Filed 3-26-96; 8:45 am]
BILLING CODE 3410-02-P
Complete official Federal Register PDF
FR Doc. 96-7436 Kiwifruit Grown in California; Relaxation of Container Marking Requirements
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13393-13395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7436]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
7 CFR Part 920
[Docket No. FV95-920-4FR]
Kiwifruit Grown in California; Relaxation of Container Marking
Requirements
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This final rule relaxes the container marking requirements for
kiwifruit packed under the Federal marketing order for kiwifruit grown
in California. This relaxation reduces the number of kiwifruit
containers required to be marked with the lot stamp number. This rule
reduces handling costs and provides more flexibility in kiwifruit
packing operations.
EFFECTIVE DATE: April 26, 1996.
FOR FURTHER INFORMATION CONTACT: Rose Aguayo, California Marketing
Field Office, Marketing Order Administration Branch, Fruit and
Vegetable Division, AMS, USDA, 2202 Monterey Street, suite 102B,
Fresno, California 93721; telephone (209) 487-5901, Fax # (209) 487-
5906; or Charles Rush, Marketing Order Administration Branch, Fruit and
Vegetable Division, AMS, USDA, P.O. Box 96456, room 2526-S, Washington,
DC 20090-6456, telephone (202) 720-5127, Fax # (202) 720-5698.
SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing
Order No. 920 (7 CFR Part 920), as amended, regulating the handling of
kiwifruit grown in California, hereinafter referred to as the
``order.'' The order is effective under the Agricultural Marketing
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter
referred to as the ``Act.''
The Department of Agriculture (Department) is issuing this final
rule in conformance with Executive Order 12866.
This final rule has been reviewed under Executive Order 12778,
Civil Justice Reform. This rule is not intended to have retroactive
effect. This final rule will not preempt any State or local laws,
regulations, or policies, unless they present an irreconcilable
conflict with this rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with the Secretary a
petition stating that the order, any provision of the order, or any
obligation imposed in connection with the order is not in accordance
with law and request a modification of the order or to be exempted
therefrom. A handler is afforded the opportunity for a hearing on the
petition. After the hearing the Secretary would rule on the petition.
The Act provides that the district court of the United States in any
district in which the handler is an inhabitant, or has his or her
principal place of business, has jurisdiction in equity to review the
Secretary's ruling on the petition, provided a bill in equity
[[Page 13394]]
is filed not later than 20 days after date of the entry of the ruling.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Administrator of the Agricultural Marketing Service
(AMS) has considered the economic impact of this rule on small
entities.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and rules issued thereunder, are unique in that
they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 65 handlers of California kiwifruit subject
to regulation under the order and approximately 500 kiwifruit producers
in the production area. Small agricultural service firms are defined by
the Small Business Administration (13 CFR 121.601) as those whose
annual receipts are less than $5,000,000, and small agricultural
producers have been defined as those having annual receipts of less
than $500,000. A majority of handlers and producers of California
kiwifruit may be classified as small entities.
Under the terms of the marketing order, fresh market shipments of
California kiwifruit are required to be inspected and are subject to
grade, size, maturity, pack and container requirements. Current
requirements include specifications that all containers of kiwifruit
shall be plainly marked with the lot stamp number corresponding to the
lot inspection conducted by an authorized inspector, except for
individual consumer packages and containers that are being directly
loaded into a vehicle for export shipment under the supervision of the
Federal or Federal-State Inspection Service.
The Kiwifruit Administrative Committee (committee), the agency
responsible for local administration of the marketing order, met on
November 30, 1995, and recommended, by unanimous vote, to relax the
container marking requirements by reducing the number of containers
plainly marked with the lot stamp number from all containers to all
exposed or outside containers of kiwifruit, but not less than 75
percent of the total containers on a pallet.
The marketing order authorizes under Sec. 920.52(a)(3) the
establishment of container marking requirements. Section 920.303(d) of
the rules and regulations outlines the lot stamp number container
marking requirements for fresh kiwifruit packed under the order.
The committee recommended relaxing the lot stamp number marking
requirement because of changes in the produce retail industry. The
committee anticipates that the current order language, which requires
all containers to be plainly marked with the lot stamp number, will
create a problem in the near future due to industry changes in
container packaging configurations and pallet sizes. This relaxation
allows the industry flexibility for future pallet size and container
configurations.
Many products, outside the produce industry, are received by
retailers on 48- by 40-inch pallets. The kiwifruit industry almost
exclusively used the ``LA Lug'' container which fits on the 35- by 42-
inch or 53- by 42-inch pallets until recent years. The ``LA Lug''
configuration does not create a center tier when stacked on these
pallets. When kiwifruit shippers use 35- by 42-inch or 53- by 42-inch
pallets, receivers must unload the pallets and restack the fruit on
metric pallets, causing more damage to the fruit and more labor costs
to the receiver. Because of retail buying patterns and the retail
demand for operational consistency in pallet usage, the produce
industry has been moving away from using the 35- by 42-inch or 53 x 42
inch pallets and has been moving towards using a standard grocery-
industry metric pallet measuring 48- by 40-inches. The committee
anticipates that the retail usage of the metric pallet will continue to
increase because: (1) Retailer and handler trucking and transportation
costs for produce stacked on metric pallets are less than for produce
stacked on 35- by 42-inch and 53- by 42-inch pallets, (2) retailer
labor and disposal costs are less when metric pallets are utilized, and
(3) receiving areas are steadily being remodeled to handle metric
pallets. In the 1995/1996 season, approximately one percent of the
industry's 9.3 million trays equivalents were packed in ``shoe'' box
containers. The ``shoe'' box container (12 x 20 inches) is one of two
new containers which is stacked in eight columns on a 48- by 40-inches
metric pallet, and is configured in a manner which leaves one side of
each container exposed. The other container that fits on the metric
pallet is the ``mum'' box container. The ``mum'' box container
(13.3 x 16 inches) is stacked nine columns on a pallet with the center
column inaccessible to lot stamp numbering after the containers are
placed on the pallet during block inspection. In block inspection, the
inspection occurs after the pallets have been packed, strapped, and
been placed in storage. In-line inspection is performed during the
packing process, prior to palletization and storage.
The industry's usage of block and in-line inspection methods is
fairly evenly split with approximately 50 percent of the handlers using
in-line inspection and 50 percent using block inspection. The majority
of block inspections are conducted in the northern part of California
while in-line inspections are conducted primarily in the southern part
of California.
The committee's recommendation to relax the container marking
requirement will not significantly lower the number of containers being
inspected or bearing the lot stamp number. Of the 81 containers stacked
on a metric pallet during block inspection, nine containers (the center
tier--approximately 11 percent of the pallet) will not be lot stamp
numbered. The center tiers of all pallets will be randomly inspected by
the Federal or Federal-State Inspection Service for all marketing order
requirements. When the industry utilizes in-line inspection, both the
``shoe'' and ``mum'' containers are accessible to lot stamp number
marking and inspection, as they are being stacked on the pallet.
There is unanimous support in the industry to reduce the lot stamp
number container marking requirement.
Several other alternatives were suggested during the public
meeting. One alternative discussed by the committee was to require all
containers to continue to be lot stamp numbered. Maintaining the
requirement for lot stamp numbers to be placed on all containers
increases handler labor costs, slows handler operations, increases
handler restrapping costs, as well as increases inspection costs. It
was the consensus of the committee that such a requirement will be cost
prohibitive as each block-inspected pallet will have to be manually
pulled apart to enable the lot stamp number to be placed on the nine-
column center tier containers.
Another alternative suggested was to eliminate the block-inspection
method and require all handlers to use the in-line inspection method.
During in-line inspection, containers will be stamped with the lot
stamp number prior to being stacked on the pallet. This will have a
serious financial impact on the industry, especially among small
growers and handlers, due to a large increase in inspection costs. This
suggestion was unacceptable to the industry as it will be cost
prohibitive and could force small growers and handlers out of business.
[[Page 13395]]
Another alternative examined was to establish regulations
prohibiting the use of any containers that create an inaccessible
center when stacked on pallets. This alternative was not acceptable as
it will not allow the industry to make necessary container changes to
meet changing retailer needs and will be an excessive restriction.
This final rule, which relaxes the lot stamp number requirement,
impacts all handlers in the same manner and was viewed by the committee
as the least restrictive and best solution. Relaxing the lot stamp
number requirement solves the problems caused by changes in pallet
sizes and container configurations as well as spares the industry
future financial hardship. It allows the industry flexibility for
future pallet size and container configurations.
A proposed rule concerning this relaxation was issued on January
24, 1996, and published in the Federal Register on February 1, 1996,
(61 FR 3604). That rule provided a 30-day comment period which ended
March 4, 1996. No comments were received.
Based on the above, the Administrator of the AMS has determined
that this action will not have a significant economic impact on a
substantial number of small entities.
After consideration of all relevant matter presented, the
information and recommendations submitted by the committee, and other
available information, it is found that this action will tend to
effectuate the declared policy of the Act.
List of Subjects in 7 CFR Part 920
Kiwifruit, Marketing agreements.
For the reasons set forth in the preamble, 7 CFR Part 920 is
amended as follows:
PART 920--KIWIFRUIT GROWN IN CALIFORNIA
1. The authority citation for 7 CFR Part 920 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. In Section 920.303 paragraph (d) is revised to read as follows:
Sec. 920.303 Container marking regulations.
* * * * *
(d) All exposed or outside containers of kiwifruit, but not less
than 75 percent of the total containers on a pallet, shall be plainly
marked with the lot stamp number corresponding to the lot inspection
conducted by an authorized inspector; except for individual consumer
packages and containers that are being directly loaded into a vehicle
for export shipment under the supervision of the Federal or Federal-
State Inspection Service.
Dated: March 20, 1996.
Eric M. Forman,
Deputy Director, Fruit and Vegetable Division.
[FR Doc. 96-7436 Filed 3-26-96; 8:45 am]
BILLING CODE 3410-02-P
Complete official Federal Register PDF
FR Doc. 96-7430 Editorial Changes to Various Regulations To Conform References to Revised Part 154; Order No. 586; Final Rule
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13418-13421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7430]
=======================================================================
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[[Page 13419]]
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 2, 153, 157, 201, 375 and 382
[Docket No. RM96-9-000]
Editorial Changes to Various Regulations To Conform References to
Revised Part 154; Order No. 586; Final Rule
Issued March 21, 1996.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final Rule.
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SUMMARY: The Federal Energy Regulatory Commission is amending various
regulations under the Natural Gas Act to conform to revisions to part
154 of the Commission's regulations under the Natural Gas Act which
reorganized the filing requirements for interstate natural gas
pipelines.
EFFECTIVE DATE: This final rule is effective April 26, 1996.
FOR FURTHER INFORMATION CONTACT: Richard A. White, Office of the
General Counsel, Federal Energy Regulatory Commission, 888 First Street
NE., Washington, DC 20426, (202) 208-0491.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours at 888 First Street, NE.,
Washington, DC 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing (202) 208-1397 if dialing locally or 1-800 856-3920 if dialing
long distance. To access CIPS, set your communications software to
19200, 14400, 12000, 9600, 7200, 4800, 2400 or 1200bps, full duplex, no
parity, 8 data bits, and 1 stop bit. The full text of this document
will be available on CIPS indefinitely in ASCII and WordPerfect 5.1
format. The complete text on diskette in Wordperfect format may also be
purchased from the Commission's copy contractor, La Dorn Systems
Corporation, located in Room 2-A, 888 First Street NE., Washington, DC
20426.
Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A.
Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa,
Jr.
I. Introduction
The Federal Energy Regulatory Commission (Commission) is amending
parts 2, 153, 157, 201, and 382 of its regulations to conform to
changes in part 154 promulgated by the final rule issued September 28,
1995, in Docket No. RM95-3-000 (60 FR 52960, October 11, 1995). The
changes to the Commission regulations are to be effective April 26,
1996.
II. The Revised Regulations
The final rule in Docket No. RM95-3-000 completely reorganized the
regulations governing the filing requirements for interstate natural
gas pipelines. Therefore, other regulations that reference part 154
must be conformed to reference the appropriate section of the revised
regulations. Accordingly, the Commission is adopting these conforming
changes to its regulations.
Section 2.55 contains a reference to former Sec. 154.91 which
contained the definition of ``independent producer.'' Since former
Sec. 154.91 has been removed, the definition will be incorporated into
paragraph (d) of revised Sec. 2.55. This modification does not
represent a change in Commission policy.
Section 2.64 concerns producer certificates. Producers no longer
have to file for certificates with the Commission. The entire section
has been removed.
Section 153.8 references former Secs. 154.31 through 154.41. This
section is modified to refer to revised Secs. 154.101 through 154.111,
and 154.301 through 154.403.
Section 157.103(d)(8) refers to former Sec. 154.63. This section is
modified to refer to subpart D of part 154.
Section 157.301(d) concerns waiver of requirements formerly
required by Secs. 154.92 through 154.94. These sections have been
removed from the Commission's regulations by Order No. 567.1
Accordingly, Sec. 157.301(d) is removed.
\1\ 68 FERC para. 61,135 (1994). Order No. 567 deleted certain
regulations related to natural gas producer rate regulation that
were either obsolete or nonessential in light of the deregulation of
wellhead gas prices under the Natural Gas Wellhead Decontrol Act of
1989. Pub. L. No. 101-60; 103 Stat. 157 (1989).
---------------------------------------------------------------------------
Part 201, General Instruction 16, refers to former Secs. 2.66 and
154.42. Section 2.66 was removed by Order No. 542 2 and
Sec. 154.42 was removed by Order No 567.3 These sections were
removed because the Natural Gas Wellhead Decontrol Act of 1989 4
made all ``first sales'' of natural gas no longer subject to Federal
regulation. Because General Instruction 16 is predicated on the
requirements of former Secs. 2.66 and 154.42, General Instruction No.
16 is being removed.
\2\ Deletion of Certain Outdated or Nonessential Regulations
Pertaining to the Commission's Jurisdiction over Natural Gas, III
FERC Stats. & Regs. para. 30,945 (1992).
\3\ Removal of Outdated Regulations Pertaining to the Sales of
Natural Gas Production, III FERC Stats. & Regs. para. 30,999 (1994).
\4\ Pub. L. 101-60; 103 Stat. 157 (1989).
---------------------------------------------------------------------------
Part 201, Gas Plant Instruction, 3.(17)(b) refers to former
Sec. 154.63. This reference will be changed to subpart D of revised
part 154.
In part 375, the title of Sec. 375.307 must be changed to reflect
the renaming of the Office of Pipeline and Producer Regulation to the
Office of Pipeline Regulation. The reference to Secs. 154.303(e) and
154.63(a)(2) is changed to reference subpart D of part 154 in
Sec. 375.307(b)(1). In paragraph (b)(5), the reference to Sec. 154.91
has been removed. Paragraph (f)(3), concerns applications for waiver of
various fees. However, the fees are no longer required. Therefore, the
references to Secs. 381.201-206, 381.208, 381.209, 381.401, and 381.404
have been removed. Paragraph (f)(5) has been changed to refer to
Sec. 154.403.
The reference in Sec. 382.103(c) to former Sec. 154.67(c)(2)(iii)
is modified to reflect that the subject of this section, interest
calculations, is now found in revised Sec. 154.501(d).
III. Public Reporting Burden
The Commission estimates the public reporting burden for the
collection of information under the rule will not be affected.
Interested persons may send comments regarding this burden estimate
or any other aspect of this information collection, including
suggestions for reducing the burden by contacting the Federal Energy
Regulatory Commission, 888 First Street, NE, Washington, DC 20426
[Attention: Michael Miller, Information Services Division, (202) 208-
1415], and to the Office of Information and Regulatory Affairs, Office
of Management and Budget, Washington DC 20503 (Attention: Desk Officer
for the Federal Energy Regulatory Commission), FAX: (202) 395-5167.
IV. Regulatory Flexibility Act Certification
[[Page 13420]]
The Regulatory Flexibility Act (RFA) 5 requires agencies to
prepare certain statements, descriptions and analyses of proposed rules
that will have a ``significant economic impact on a substantial number
of small entities.'' The Commission is not required to make such
analyses if a rule would not have such an effect.
\5\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------
The Commission believes that this rule will not have such an impact
on small entities. Most filing companies regulated by the Commission do
not fall within the RFA's definition of small entity.6 Further,
this rule merely changes the section number referenced within an
existing regulation. Therefore, the Commission certifies that this rule
will not have a significant economic impact on a substantial number of
small entities.
\6\ 5 U.S.C. 601(3), citing to section 3 of the Small Business
Act, 15 U.S.C. 632. Section 3 of the Small Business Act defines a
``small-business concern'' as a business which is independently
owned and operated and which is not dominant in its field of
operation.
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V. Environmental Statement
The Commission has excluded certain actions not having a
significant effect on the human environment from the requirement to
prepare an environmental assessment or an environmental impact
statement.7 No environmental consideration is raised by the
promulgation of a rule that is clarifying, corrective, or procedural or
that does not substantially change the effect of legislation or
regulations being amended.8 The instant rule is purely procedural.
Accordingly, no environmental consideration is necessary.
\7\ 18 CFR 380.4.
\8\ 18 CFR 380.4(a)(2)(ii).
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VI. Information Collection Statement
The Office of Management and Budget's (OMB) regulations 9
require that OMB approve certain information and recordkeeping
requirements imposed by an agency. The following existing data
collections are affected by this final rule but with no change in
industry reporting burden: FERC-541, Gas Pipeline Certificates:
Curtailment Plan (1902-0066); FERC-542, Gas Pipeline Rates: Initial
Rates, Rate Change & Tracking Filing (1902-0070): FERC-544, Gas
Pipeline Rates: Rate Change (formal) (1902-0153); FERC-545, Gas
Pipeline Rates: Rate Change (NonFormal) (1902-0154); FERC-577,
Environmental Impact Statement (1902-0128); FERC Form 2, Annual Report
of Major Natural Gas Companies (1902-0028); and, FERC Form 2A, Annual
Report of Nonmajor Natural Gas Companies (1902-0030); and, FERC-582,
Oil, Gas and Electric Annual Charges (1902-0132).
\9\ 5 CFR 1320.12.
---------------------------------------------------------------------------
The Commission is issuing this final rule to change the section
references in existing regulations to conform to the revised part 154.
The Commission uses the information to carry out its regulatory
responsibilities pursuant to the Natural Gas Act. The Commission's
Office of Pipeline Regulation uses the information to review rate
filings by natural gas pipelines for the transportation of gas.
The Commission is submitting to the Office of Management and Budget
a notification of these collections of information. Interested persons
may obtain information on these reporting requirements by contacting
the Federal Energy Regulatory Commission, 888 First Street NE.,
Washington, DC 20426 [Attention: Michael Miller, Information Services
Division, (202) 208-1415]. Comments on the requirements of this rule
can be sent to the Office of Information and Regulatory Affairs of OMB,
Washington, DC 20503, (Attention: Desk Officer for Federal Energy
Regulatory Commission) FAX: (202) 395-5167.
VII. Administrative Findings and Effective Date
The Administrative Procedure Act (APA) exempts certain rules from
notice and comment requirements.10 Specifically, the APA exempts
``rules of agency organization, procedure, or practice'' from the
requirements for notice and comment.11 This change to referenced
sections of part 154 to conform to changes in part 154 qualifies for
exemption as a procedural rule because it does not affect the
substantive rights of a party.
\10\ 5 U.S.C. 553(b)(3).
\11\ 5 U.S.C. 553(b)(3)(A).
---------------------------------------------------------------------------
This order is effective April 26, 1996.
List of Subjects
18 CFR Part 2
Administrative practice and procedure, Electric power, Natural gas,
Pipelines, Reporting and recordkeeping requirements.
18 CFR Part 153
Exports, Imports, Natural Gas, Reporting and recordkeeping
requirements.
18 CFR Part 157
Administrative practice and procedure, Natural gas, Reporting and
recordkeeping requirements.
18 CFR Part 201
Natural gas, Reporting and recordkeeping requirements, Uniform
System of Accounts.
18 CFR Part 375
Authority delegations (Government agencies), Seals and insignia,
Sunshine Act.
18 CFR Part 382
Administrative practice and procedure, Electric utilities
Pipelines, Reporting and recordkeeping requirements.
By the Commission.
Lois D. Cashell,
Secretary.
In consideration of the foregoing, the Commission is amending parts
2, 153, 157, 201, 375 and 382, Chapter I, Title 18, Code of Federal
Regulations, as set forth below.
PART 2--GENERAL POLICY AND INTERPRETATIONS
1. The authority citation for part 2 continues to read as follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 791a-825r,
2601-2645; 42 U.S.C. 4321-4361, 7101-7352.
2. Section 2.55 is amended by revising paragraph (d) to read as
follows:
Sec. 2.55 Definition of terms used in section 7(c).
* * * * *
(d) Taps. Taps on existing transmission pipelines which are
installed solely for the purpose of enabling a purchaser or transporter
to take delivery of gas from an independent producer. An independent
producer means any person as defined in the Natural Gas Act who is
engaged in the production or gathering of natural gas and who sells
natural gas in interstate commerce for resale, but who is not engaged
in the transportation of natural gas (other than gathering) by pipeline
in interstate commerce.
Sec. 2.64 [Removed]
3. Section 2.64 is removed.
PART 153--APPLICATION FOR AUTHORIZATION TO EXPORT OR IMPORT NATURAL
GAS
4. The authority citation for part 153 is revised to read as
follows:
Authority: 15 U.S.C. 717b, 717o; E.O. 10485, 3 CFR, 1949-1953
Comp., p. 970, as amended by E.O. 12038, 3 CFR, 1978 Comp., p. 136.
5. Section 153.8 is revised to read as follows:
[[Page 13421]]
Sec. 153.8 Filing of contracts, rate schedules, etc.
Persons authorized to export natural gas from the United States to
a foreign country or to import natural gas from a foreign country must
file two full and complete copies of every contract and the amendments
thereto, presently or hereafter effective, for such export or import,
together with all rate schedules, agreements, leases or other writings,
tariffs, classifications, rules and regulations relative to such export
or import in the manner specified in part 154 of this chapter, except
that the requirements of Sec. 154.101 through Sec. 154.111 and
Sec. 154.301 through 154.403 shall not be applicable.
PART 157--APPLICATIONS FOR CERTIFICATES OF PUBLIC CONVENIENCE AND
NECESSITY AND FOR ORDERS PERMITTING AND APPROVING ABANDONMENT UNDER
SECTION 7 OF THE NATURAL GAS ACT
6. The authority citation for part 157 continues to read as
follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.
7. Section 157.103 is amended by revising paragraph (d)(8) to read
as follows:
Sec. 157.103 Terms and conditions; other requirements.
* * * * *
(d) * * *
(8) Prohibitions against cost shifting. No costs originally
allocated to a new service may subsequently be allocated to any other
services without a filing under Subpart D of Part 154 and a
determination by the Commission that the costs sought to be reallocated
are in fact being incurred for the benefit of the other services.
* * * * *
Sec. 157.301 [Removed]
8. Section 157.301 is removed.
PART 201--UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR NATURAL GAS
COMPANIES SUBJECT TO THE PROVISIONS OF THE NATURAL GAS ACT
9. The authority citation for Part 201 continues to read as
follows:
Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352,
7651-7651o.
10. In Part 201, General Instructions, paragraph 16 is removed and
reserved.
11. In Part 201, Gas Plant Instructions, paragraph 3(17)(b) remove
the words ``Sec. 154.63'' and add, in their place, the words ``subpart
D of part 154''.
PART 375--THE COMMISSION
12. The authority citation for Part 375 continues to read as
follows:
Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717w, 3301-3432; 16
U.S.C. 791-825r, 2601-2645; 42 U.S.C. 7101-7352.
13. In section 375.307, the section heading and paragraphs (b)(1),
(b)(5), (f)(3) and (f)(5) are revised to read as follows:
Sec. 375.307 Delegations to the Director of the Office of Pipeline
Regulation.
* * * * *
(b) * * *
(1) Accept a tariff or rate schedule filing, except a major
pipeline rate increase under section 4(e) of the Natural Gas Act and
under subpart D of part 154, if it complies with all applicable
statutory requirements, and with all applicable Commission rules,
regulations, and orders for which a waiver has not been granted, or if
a waiver has been granted by the Commission, if it complies with the
terms of such waiver;
* * * * *
(5) Accept statements of eligibility filed under Sec. 2.56(p) of
this chapter by producers of natural gas, as defined in Sec. 157.40 of
this chapter.
* * * * *
(f) * * *
(3) Fees prescribed in Secs. 381.207, 381.402, and 381.403 of this
chapter in accordance with Sec. 381.106(b) of this chapter;
* * * * *
(5) Section 154.403 of this chapter, as necessary, in order to rule
on out-of-cycle purchased gas adjustment filings.
* * * * *
PART 382--ANNUAL CHARGES
14. The authority citation for part 382 continues to read as
follows:
Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717w, 3301-3432; 16
U.S.C. 791a-825r, 2601-2645; 42 U.S.C. 7101-7352; 49 U.S.C. 60502;
49 App. U.S.C. 1-85.
Sec. 382.103 [Amended]
15. In Sec. 382.103(c), the words ``Sec. 154.67(c)(2)(iii)'' are
removed and the words ``Sec. 154.501(d)'' are added in their place.
[FR Doc. 96-7430 Filed 3-26-96; 8:45 am]
BILLING CODE 6717-01-P
Complete official Federal Register PDF
FR Doc. 96-7429 Powerplant Instruments; Fuel Pressure Indication
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13642-13644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7429]
[[Page 13641]]
_______________________________________________________________________
Part VII
Department of Transportation
_______________________________________________________________________
Federal Aviation Administration
_______________________________________________________________________
14 CFR Part 23
Powerplant Instruments; Fuel Pressure Indication; Final Rule
Federal Register / Vol. 61, No. 60 / Wednesday, March 27, 1996 /
Rules and Regulations
[[Page 13642]]
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 23
[Docket No. 28011; Amendment No. 23-52]
RIN 2120-AF41
Powerplant Instruments; Fuel Pressure Indication
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends the certification requirement for fuel
pressure indicators on pump-fed engines of normal, utility, acrobatic,
and commuter category airplanes to permit regulatory alternatives to
fuel pressure indicators to warn pilots of fuel system problems. A fuel
pressure indicator is not technically the only means available to the
pilot of indicating a fuel system problem. The amendment allows
airplanes to be certificated with a means that indicates fuel flow or
that monitors the fuel system and warns the pilot of any fuel flow
trend that could lead to engine failure. New technology incorporated as
a means of compliance with the revised rule could improve engine
operation and reduce airplane operating costs.
EFFECTIVE DATE: July 25, 1996.
FOR FURTHER INFORMATION CONTACT:
J. Lowell Foster, Aerospace Engineer, Standards Office, Small Airplane
Directorate, Aircraft Certification Service, Federal Aviation
Administration, 601 East 12th Street, Kansas City, Missouri 64106;
telephone (816) 426-5688.
SUPPLEMENTARY INFORMATION:
Background
Statement of the Problem
The FAA proposed to amend Title 14 of the Code of Federal
Regulations (CFR), Part 23, Sec. 23.1305(b)(4), which required a fuel
pressure indicator for each pump-fed engine. The pressure indicator
gives continuous fuel pressure readings to the pilot. This information
provides an advance warning of engine failure only when a pilot notices
the pressure reading has deviated from the norm and when the pilot can
diagnose what those deviations mean in terms of potential engine
failure. The change would allow the options of a fuel pressure
indicator, a fuel flow indicator, or a means that continuously monitors
the fuel system and warns the pilot of any fuel flow trend that could
cause engine failure. A fuel flow indicator would give continuous fuel
flow readings to the pilot. Fuel flow information presents the fuel
system status to the pilot in a manner similar to the fuel pressure
indicator, but it also allows the pilot to quickly assess the engine's
performance during critical phases of flight, such as takeoff. A
continuous fuel system monitoring device would alert the pilot to any
fuel flow trend that could lead to engine failure.
History
The Aircraft Owners and Pilots Association (AOPA) petitioned the
FAA for new standards that would allow, on all pump-fed engines, a fuel
flow system employing a differential pressure transducer to be accepted
as a means of compliance equivalent to the current fuel pressure
indicator requirements (55 FR 39299, September 26, 1990). The FAA
requested that the Aviation Rulemaking Advisory Committee (ARAC) review
the petition and recommend a course of action. In January 1992, the
Fuel Pressure Indicators Working Group of the ARAC on General Aviation
and Business Airplane Issues began a review of the AOPA's petition. As
a result of the review, a Notice of Proposed Rulemaking (NPRM), Notice
No. 94-37, was published on December 28, 1994 (59 FR 67114).
Discussion of Comments
General
This amendment is based on the NPRM, Notice No. 94-37, published
December 28, 1994 (59 FR 67114). Interested persons were invited to
participate in the development of this final rule by submitting written
data, views, or arguments to the regulatory docket on or before
February 27, 1995. Four comments were received on the proposal,
including a letter of support from the Air Line Pilots Association.
The intent of the fuel pressure indicator requirement for pump-fed
engines is to advise the pilot of a fuel pressure deficiency before
total engine failure. The term ``indicator'' in Sec. 23.1305(b)(4)
implies that the fuel pressure be constantly displayed.
The FAA proposed a change to allow a fuel pressure indicator or a
fuel flow indicator. The fuel flow indicator would constantly display
information that the pilot could use to evaluate engine power, fuel
mixture, and other engine performance factors in addition to fuel
system status. It is technologically possible to have a microprocessor
that monitors engine operation and triggers a warning if the fuel
system operation does not match the other monitored engine trends;
therefore, the FAA also proposed to change the rule to accept a means
that monitors the fuel system and warns the pilot of any fuel flow
trend that could lead to engine failure.
Accordingly, the FAA proposed to adopt a performance standard,
instead of a requirement for specific equipment. An applicant could
show compliance with paragraph (b) of the proposal by using any design
that monitors the fuel system and warns the pilot of any fuel flow
trend that could lead to engine failure.
Discussion of Comments to Section 23.1305
One commenter, a private individual, does not feel that
Sec. 23.1305(b)(4) should be changed as proposed. The commenter
believes that ``an accurate indication is necessary for the pilot to
have a situation awareness of his operating environment.'' The FAA
understands and agrees with the overall basis for the comment; however,
the FAA does not agree with all of the commenter's arguments and will
address them individually.
First, the commenter believes the proposal implies that small
airplane engines are ``antiquated'' using ``antiquated fuel flow
means.'' The NPRM sections discussing the history of this rule focused
on fuel pump reliability, radial engines, and diagnosing fuel pump
failures, which were more frequent in the 1940's and 1950's than today.
The FAA's intention in discussing the rule's history was to point out
that the reliability of fuel pumps has improved since the 1940's. The
FAA did not intend to imply that these engines were in some way
``antiquated.'' In fact, as the commenter points out, the basic engines
used on most small airplanes are derivatives of the engines designed in
the 1940's. Civil Air Regulation 3 airplanes, which constitute over 85
percent of the existing small airplanes flying today, have an excellent
service history.
The commenter also points out that ``continual reference to
automobile monitoring systems is well taken, except that automobiles
can have a problem and pull off to the side of the road.''
Additionally, ``[a]utomobiles may have indicator lights and warnings as
to the state of fule consumption, but they also have a fuel quantity
gauge so the driver can monitor the system in use to also determine an
accurate fuel flow.'' The FAA used the reference to automobile
technology to make the point that sophisticated engine monitoring is
inexpensive enough to be mass produced for automobiles. Complex fuel
[[Page 13643]]
monitoring systems are available in business jets and recently-
certificated jet transport aircraft. This technology may soon be
affordable to small airplane owners and manufacturers, and the FAA does
not want to impede progress with rules offering no alternatives.
The commenter believes that the proposal would allow ``idiot
lights.'' On the contrary, the FAA stated in the NPRM, ``A light that
comes on at the same time that the engine quits is useless. A warning
light system that would comply with this proposal would be
sophisticated enough to read transients and trends, and would give a
useful warning to the pilot.'' Also, the rule as proposed would require
that any warning light system continuously monitor the fuel system and
warn the pilot of any fuel flow trend that could lead to an engine
failure.
Transport Canada questions the ability to show compliance with the
requirement in Sec. 23,1549 to identify maximum and, if applicable,
minimum safe operating limits as well as the normal operating range of
the instrument. This commenter points out that the typical fuel flow
meter is a digital type, and it would be difficult for the applicant to
provide equivalent markings, Engine manufacturers provide the
information required by Sec. 23.1549, which is then usually transcribed
to the installed fuel pressure gauge. It appears that this information
would not be presented through the use of typical digital fuel flow
meters. The commenter offers the following suggestion: ``FAR 23.1549
was written with a traditional dial instrument in mind where the engine
limitations could be easily displayed on the face of the unit and
monitored by the crew. To allow flow meters or other fuel system
monitors to satisfy the requirements of Sec. 23.1549 where such a gauge
no longer exists, compliance could be shown by (1) different colors to
indicate changing trends in system performance (e.g., amber color for a
low pressure/flow condition, red for impending engine failure), or (2)
placarding, if appropriate, to indicate the normal and abnormal
operating ranges.''
The FAA agrees with the commenter's suggestions as an acceptable
means of compliance with Sec. 23.1549. Suggested items (1) and (2)
above offer the pilot a means to determine fuel flow limitations, which
may be needed if a fuel flow meter is installed.
A commenter from Australia supports the proposal; however, the
commenter feels that the proposed text would require a monitoring
system that provides a warning of any trend that could lead to engine
failure, which is an extremely difficult compliance requirement. The
commenter further states: ``The historic requirement, and the NRPM
preamble, clearly addresses fuel pressure (as an indication of the
availability of fuel flow) or fuel flow only. Such wording may stifle
the development of monitoring instrumentation for small airplanes.''
The commenter suggests that, for clarification, the proposed text for
Sec. 23.1305(b)(4)(ii), be amended to read as follows: ``That
continuously monitors the fuel system and warns the pilot of any fuel
flow trend that could lead to engine failure.''
The FAA agrees with the commenter that the proposed wording may be
too broad, making compliance difficult or the system unnecessarily
complex. The FAA encourages ``smart'' systems; however, the intent of
the proposal was to warn the pilot of any fuel flow trend and, for that
reason, the final rule and the preamble adopt the commenter's language.
Section 23.1305 is adopted with the change in paragraph (b)(4)(ii)
to add the words ``fuel flow'' before the word ``trend.''
International Compatibility
The agency has reviewed corresponding International Civil Aviation
Organization international standards and recommended practices and
Joint Aviation Authorities requirements for compatibility. The FAA has
determined that this final rule, if adopted, would not present any
differences.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1990 (44 U.S.C.
3501 et seq.), there are no reporting or recordkeeping requirements
associated with this rule.
Regulatory Evaluation Summary
Economic Evaluation, Regulatory Flexibility Determination, and Trade
Impact Assessment
Proposed changes to federal regulations must undergo several
economic analyses. First, Executive Order 12866 directs Federal
agencies to promulgate new regulations or modify existing regulations
only if the potential benefits to society outweigh the potential costs.
Second, the Regulatory Flexibility Act of 1980 requires agencies to
analyze the economic impact of regulatory changes on small entities.
Finally, the Office of Management and Budget directs agencies to assess
the effects of regulatory changes on international trade. In conducting
these analyses, the FAA has determined that this rule: (1) will
generate benefits exceeding its costs and is not significant as defined
in Executive Order 12866; (2) is not significant as defined in DOT's
Policies and Procedures; (3) will not have a significant economic
impact on small entities; and (4) will not affect international trade.
These analyses, available in the docket, are summarized below.
Economic Evaluation
The rule adopts a performance standard instead of requiring
specific equipment. In this way, manufacturers can develop any design
that monitors the fuel system and warns the pilot of any fuel flow
trend that could lead to engine failure. The objective of imposing a
performance standard could be met in this case by any means that
``continuously indicates to the pilot fuel pressure or fuel flow, or
that continuously monitors the fuel system and warns the pilot of any
fuel flow trend that could lead to engine failure.'' This will maintain
the level of safety intended by the original requirement, without
imposing any additional costs. For example, a warning light system
could possibly alert the pilot sooner than if the pilot relied on an
instrument panel scan to notice a trend in the fuel pressure indication
alone (as is currently the case).
A fuel flow indicator offers additional benefits compared to a fuel
pressure indicator in that it enables the pilot to monitor the engine's
fuel consumption and compare it to fuel consumption listed in the
airplane flight manual. Consequently, engine operation could be
improved, resulting in reduced fuel consumption and operating costs. In
addition, continual fuel flow readings are useful during critical
phases of flight, such as takeoff and climb. Thus, flight safety could
be enhanced. The other alternative, a means to continuously monitor the
fuel system, will also enhance safety by alerting the pilot to any fuel
flow trend that could lead to engine failure.
Since the rule will permit but not require alternative means of
warning pilots of fuel system problems, it is inherently cost-
beneficial. To the extent that it encourages the future development and
utilization of comprehensive engine control, monitoring, and diagnostic
systems, it will generate benefits in the form of enhanced safety,
improved fuel efficiency, power output, and engine life.
[[Page 13644]]
Regulatory Flexibility Determination
The Regulatory Flexibility Act of 1980 (RFA) was enacted by
Congress to ensure that small entities are not unnecessarily and
disproportionately burdened by government regulations. The RFA requires
a Regulatory Flexibility Analysis if a proposed or final rule would
have a significant economic impact, either detrimental or beneficial,
on a substantial number of small entities. FAA Order 2100.14A,
Regulatory Flexibility Criteria and Guidance, prescribes standards for
complying with RFA requirements in FAA rulemaking actions. The Order
defines ``small entities'' in terms of size, ``significant economic
impact'' in terms of annualized costs, and ``substantial number'' as a
number which is not less than eleven and which is more than one-third
of the small entities subject to a proposed of final rule.
The rule will affect manufacturers of future part 23 airplanes. For
manufacturers, Order 2100.14A defines a small entity as one with 75 or
fewer employees and a significant economic impact as annualized costs
of $19,000 or more. The FAA has determined that the rule will not have
a significant economic impact on a substantial number of small
manufacturers since the annualized certification costs of the rule are
less than $19,000.
International Trade Impact Assessment
The rule will not constitute a barrier to international trade,
including the export of U.S. airplanes and airplane parts to foreign
markets or the import of foreign airplanes and airplane parts in the
United States.
Federalism Implications
The regulations herein 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 12612, it is determined that this regulation will not have
sufficient federalism implications to warrant the preparation of a
Federalism Assessment.
Conclusion
The FAA amends the airworthiness standards to allow airplane
manufacturers to utilize new technology for fuel system monitoring to
improve the operation and economy of part 23 airplanes powered by pump-
fed engines. The current rule requires a fuel pressure indication;
thus, it limits the means of compliance. The advances in engines
monitoring systems and electronics offer technology that should be
utilized by the aviation community. By broadening this airworthiness
standard, fuel flow indicators or new fuel system monitors may provide
better information to the pilot.
For the reasons discussed in the preamble, and based on the
findings in the Regulatory Flexibility Determination and the
International Trade Impact Analysis, the FAA has determined that this
regulation is not significant under Executive Order 12866. In addition,
the FAA certifies that this regulation 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. The
regulation is not considered significant under DOT Regulatory Policies
and Procedures (44 FR 11034; February 26, 1979). A regulatory
evaluation of the regulation, including a Regulatory Flexibility
Determination and Trade Impact Analysis, has been placed in the docket.
A copy may be obtained by contacting the person identified under FOR
FURTHER INFORMATION CONTACT.
List of Subjects in 14 CFR Part 23
Aircraft, Aviation safety, Signs and symbols.
The Amendment
In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR part 23 as follows:
PART 23--AIRWORTHINESS STANDARDS; NORMAL, UTILITY, ACROBATIC, AND
COMMUTER CATEGORY AIRPLANES
1. The authority citation for part 23 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40113, 44701-44702, 44704.
2. Section 23.1305 is amended by revising paragraph (b)(4) to read
as follows:
Sec. 23.1305 Powerplant instruments.
* * * * *
(b) * * *
(4) For each pump-fed engine, a means:
(i) That continuously indicates, to the pilot, the fuel pressure or
fuel flow; or
(ii) That continuously monitors the fuel system and warns the pilot
of any fuel flow trend that could lead to engine failure.
* * * * *
Issued in Washington, D.C. on March 21, 1996.
David R. Hinson,
Administrator.
[FR Doc. 96-7429 Filed 3-26-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-7424 Rules Regarding Delegation of Authority
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Page 13395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7424]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 265
[Docket No. R-0918]
Rules Regarding Delegation of Authority
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Board is amending its Rules Regarding Delegation of
Authority to authorize the Board's General Counsel to deny a request
for stay of the effective date of a Board order. The Board itself would
retain sole discretion to grant a request for stay of the effectiveness
of any decision. This amendment corrects an unintentional omission from
the Rules Regarding Delegation of Authority.
EFFECTIVE DATE: March 27, 1996.
FOR FURTHER INFORMATION CONTACT: Robert deV. Frierson, Assistant
General Counsel (202/452-3711), or Christopher Greene, Attorney (202/
452-2263), Legal Division. For users of Telecommunications Device for
the Deaf (TDD) only, please contact Dorothea Thompson (202/452-3544),
Board of Governors of the Federal Reserve System, 20th and C Streets,
NW., Washington, DC 20551.
SUPPLEMENTARY INFORMATION: In 1987, the Board, pursuant to its
authority under the Bank Holding Company Act and section 11(k) of the
Federal Reserve Act, delegated to its General Counsel authority to deny
a request for stay of the effective date of a Board order (52 FR 48805,
December 28, 1987). The Board reorganized its Rules Regarding
Delegation of Authority (12 CFR part 265) in 1991 to make it easier to
locate specific delegations (56 FR 25614, June 5, 1991). In taking this
action, the General Counsel's authority to deny a request for stay of
the effective date of an action taken by the Board was unintentionally
omitted from the amended Rules Regarding Delegation of Authority. This
final rule corrects this omission.
Public Comment
The provisions of 5 U.S.C. 553 relating to notice, public
participation, and deferred effective date have not been followed in
connection with the adoption of this amendment because the change to be
effected is technical and procedural in nature and does not constitute
a substantive rule subject to the requirements of that section.
Regulatory Flexibility Act
No significant impact on small entities is expected.
Paperwork Reduction Act of 1995
In accordance with section 3506 of the Paperwork Reduction Act of
1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board reviewed
the rule under the authority delegated to the Board by the Office of
Management and Budget. No collections of information pursuant to the
Paperwork Reduction Act are contained in the rule.
List of Subjects in 12 CFR Part 265
Authority delegations (Government agencies), Banks, banking,
Federal Reserve System.
For the reasons set forth in the preamble, the Board amends 12 CFR
Part 265 as set forth below:
PART 265--RULES REGARDING DELEGATION OF AUTHORITY
1. The authority citation for Part 265 continues to read as
follows:
Authority: 12 U.S.C. 248 (i) and (k).
2. In Sec. 265.6, paragraph (a)(1) is revised to read as follows:
Sec. 265.6 Functions delegated to General Counsel.
* * * * *
(a) Procedure--(1) Reconsideration of Board action. Pursuant to
Sec. 262.3(i) of this chapter (Rules of Procedure) to determine whether
or not to grant a request for reconsideration or whether to deny a
request for stay of the effective date of any action taken by the Board
with respect to an action as provided in that part.
* * * * *
By order of the Secretary of the Board of Governors of the
Federal Reserve System, March 22, 1996.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 96-7424 Filed 3-26-96; 8:45 a.m.]
Billing Code 6210-01-P
Complete official Federal Register PDF
FR Doc. 96-7386 Summer Flounder Fishery; Emergency for the Scup Fishery
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13452-13454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7386]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 625
[Docket No. 960314074-6074-01; I.D. 030696C]
RIN: 0648-XX52
Summer Flounder Fishery; Emergency for the Scup Fishery
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Emergency interim rule.
-----------------------------------------------------------------------
SUMMARY: NMFS amends the regulations implementing the Summer Flounder
Fishery Management Plan (Summer Flounder FMP) to establish management
measures for the scup fishery. These measures are contained in an
amendment to the Summer Flounder FMP that will be submitted for NMFS
review shortly. Emergency implementation of these measures is necessary
because of the overexploited status of the stock. This action
establishes a minimum fish size for both the recreational and
commercial fisheries, and implements a minimum codend mesh requirement
for otter trawl vessels that possess 4,000 lb or more (1,814 kg or
more) of scup harvested in or from the exclusive economic zone (EEZ).
EFFECTIVE DATE: This emergency interim rule is effective from March 22,
1996, through June 25, 1996.
ADDRESSES: Copies of documents supporting this action, including the
environmental assessment, are available from David R. Keifer, Executive
Director, Mid-Atlantic Fishery Management Council, Room 2115 Federal
Building, 300 S. New Street, Dover, DE 19901-6790.
FOR FURTHER INFORMATION CONTACT: Regina L. Spallone, Fishery Policy
Analyst, (508)281-9221.
SUPPLEMENTARY INFORMATION: The Mid-Atlantic Fishery Management Council
(Council) began the development of a scup fishery management plan (scup
FMP) in 1978. Although preliminary development work was done, a scup
FMP was not completed.
In January 1990, the Council and the Atlantic States Marine
Fisheries Commission (ASMFC) began the development of an amendment to
the Summer Flounder FMP to manage scup. However, the development of an
amendment to manage scup was delayed because of a series of other
amendments to the Summer Flounder FMP. Work on a separate scup FMP was
not resumed until 1993.
The Council and the ASMFC adopted a scup FMP for NMFS review in
November 1995. The Council had accelerated its work on the scup FMP
after the release in March 1995 of the Plenary Report of the 19th Stock
Assessment Workshop (19th SAW). The 19th SAW report established that
the scup spawning stock biomass was at a record low level, and warned
that recruitment failure in a single year could collapse the fishery.
The report urged immediate action to substantially reduce fishing
mortality. To provide some protection to the stock immediately, the
Council also voted in November 1995 to request emergency implementation
on January 1, 1996, of some of the management measures contained in the
proposed scup FMP. The efforts of the Council and NMFS to prepare and
review the required documents associated with emergency action were
delayed by the government shutdown from December 21, 1995, through
January 7, 1996, and by additional shutdowns due to severe winter
weather.
These delays have also affected the submission of the proposed scup
FMP. In addition, subsequent to the adoption of the scup FMP by the
Council, NMFS requested that the proposed scup FMP be incorporated into
the Summer Flounder FMP, as an amendment, to reduce the number of
separate FMPs and regulations. As a result, the Council shortly will
submit the scup FMP for NMFS review as Amendment 8 to the Summer
Flounder FMP.
The management unit for the fishery is scup (Stenotomus chrysops)
in U.S. waters of the Atlantic Ocean from 35 deg.15.3' N. lat., the
latitude of Cape Hatteras Light, N.C., northward to the U.S.-Canadian
border.
Implementing regulations are authorized by the Magnuson Fishery
Conservation and Management Act (Magnuson Act), and are found at 50 CFR
part 625, subparts C and D. This action is consistent with the criteria
contained in a ``Notice of policy guidelines for the use of emergency
rules'' published at 50 CFR chapter VI (57 FR 375, January 6, 1992).
The Council and NMFS agree that the biological status of the scup stock
requires immediate action through this emergency interim rule for
conservation and management measures to protect the stock while
Amendment 8 undergoes Secretarial review. The measures contained in
this action for minimum fish sizes and minimum mesh size are the same
as those adopted by the Council for Amendment 8. However, issuance of
this emergency rule in no way prejudges approval or disapproval of
Amendment 8. Further, this emergency rule contains a gear restriction,
the effective date of which will be delayed 15 days to provide adequate
time for affected industry members to adjust.
Background
Abundance indices derived from NMFS trawl surveys and surveys
conducted by the States of Rhode Island and Connecticut, and the
Commonwealth of Massachusetts, indicate that the biomass of adult scup
is at low levels. For example, the Northeast Fisheries Science Center's
autumn offshore survey indices of scup (age 1+) abundance have declined
dramatically in recent years. The 1993 index was the third lowest value
observed in the time series and the 1994 index was the all-time lowest
value since the survey began in 1967.
[[Page 13453]]
Reduced abundance is also evident in data collected from commercial
otter trawl vessels. Standardized catch per unit effort (CPUE) of these
vessels peaked in 1978 at greater than 2.5 metric tons (mt)/day. CPUE
has since trended downward to about 1.0 mt/day in recent years. Based
on the trawl survey and CPUE indices, the overall declining trend
suggests that recent exploitation has reduced stock abundance
substantially.
Additionally, the length frequency distribution of scup in
commercial landings has shifted to smaller, younger fish, including
young-of-year, indicating that the fishery is dependent primarily upon
new year classes. Although scup may attain ages of 20 years, recent
landings have been composed primarily of age 2 and 3 year old scup with
a general absence of larger, older fish in the landed catch. This
truncated age distribution also suggests a reduced population level.
All available information indicates that scup are overexploited and
have been for several years. The scup advisory report issued from the
19th Stock Assessment Workshop Plenary Report in March 1995 stated that
the current spawning stock biomass (SSB) is at a record low level and
that recruitment has decreased in recent years. The report further
warns that recruitment failure in a single year could collapse the
fishery and that fishing mortality should be ``substantially reduced
immediately.'' The current condition of the resource is such that
immediate action is required to reduce fishing mortality on fully-
recruited fish and allow for increases in SSB and yield. In the absence
of a strong year class, continued exploitation at current levels will
lead to further decline in the SSB.
In light of the overexploited condition of the stock, the Council
requested emergency implementation of a 9-inch total length (TL)
minimum fish size for the commercial fishery, and a 7-inch TL minimum
fish size for the recreational fishery. These measures are included
among those proposed for implementation in the first year of management
if Amendment 8 is approved.
Discards of small fish are extremely high in this fishery and are
particularly acute during years of good recruitment when small fish are
abundant. NMFS has found that establishing a minimum fish size without
an accompanying minimum mesh requirement would increase the discard of
small fish. Therefore, this emergency action also establishes a 4-inch
(10.2-cm) minimum codend mesh size for otter trawl vessels when those
vessels possess 4,000 lb or more (1,814 kg or more) of scup harvested
in or from the EEZ. The 4,000-lb (1,814-kg) threshold for the minimum
mesh size requirement was selected through an iterative process between
the Council and industry representatives. It is considered to represent
the level at which the directed fishery is differentiated from the
bycatch fishery. This level is substantiated by the fact that trips of
4,000 lb (1814 kg) or more accounted for 80 percent of all landings of
scup in 1992 and 1993. The measures are designed to reduce discarding
of small scup by otter trawl vessels, increase yields, and allow more
scup to reach sexual maturity and spawn.
Analyses of these measures indicate that implementation on an
emergency basis may impose a short-term cost on some harvesters,
although most already use the required mesh. The benefits of
implementing this action include a reduction of discards of small fish
and an improved economic return to the industry due to resulting
increased yields. The benefits outweigh the costs to the industry of
complying with these measures.
Classification
The Assistant Administrator Fisheries, NOAA (AA) has determined
that this rule is necessary to respond to an emergency situation and is
consistent with the Magnuson Act and other applicable law.
The AA finds that failure to implement the actions in this
emergency rule could result in collapse of the fishery.
The foregoing constitutes good cause to waive the requirement to
provide prior notice and an opportunity for public comment, pursuant to
the authority set forth at 5 U.S.C. 553(b)(B), as such procedures would
be contrary to the public interest. Similarly, the need to implement
these measures in a timely manner to address a biological emergency
constitutes good cause under 5 U.S.C. 553(d)(3) to waive the 30-day
delay in effectiveness. However, a 15-day delay in effectiveness of the
gear restriction contained in Sec. 625.54, and a prohibition related to
that measure in Sec. 625.39(a)(3), is necessary to allow the industry
sufficient time to adjust to this new requirement.
This emergency rule has been determined to be not significant for
purposes of E.O. 12866.
The emergency rule is exempt from the requirements of the
Regulatory Flexibility Act to prepare a regulatory flexibility analysis
because this rule is not required to be issued with prior notice and
opportunity for public comment.
List of Subjects in 50 CFR Part 625
Fisheries, Fishing, Reporting and recordkeeping requirements.
Dated: March 20, 1996.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
For the reasons set out in the preamble, 50 CFR part 625 is amended
as follows:
PART 625--SUMMER FLOUNDER AND SCUP FISHERY
1. The authority citation for part 625 continues to read as
follows:
Authority: 16 U.S.C. 1801 et seq.
2. Subpart C, consisting of Secs. 625.31, 625.32, 625.33, and
625.39, and subpart D, consisting of Secs. 625.53 and 625.54 are added
to read as follows:
Subpart C--General Provisions, Scup
625.31 Purpose and scope.
625.32 Definitions.
625.33 Relation to other laws.
625.39 Prohibitions.
Subpart D--Management Measures, Scup
625.53 Minimum sizes.
625.54 Gear restrictions.
Subpart C--General Provisions, Scup
Sec. 625.31 Purpose and scope.
The regulations in this part govern the conservation and management
of scup.
Sec. 625.32 Definitions.
In addition to the definitions in the Magnuson Act and in
Sec. 620.2 of this chapter, the terms used in this part have the
following meanings:
Charter or party boat means any vessel that carries passengers for
hire to engage in fishing.
Commercial fishing means fishing that is intended to or results in
the barter, trade or sale of fish.
Land means to begin offloading fish, to offload fish, or to enter
port with fish.
Recreational fishing means fishing that is not intended to, nor
does it result in, the barter, trade, or sale of fish.
Recreational fishing vessel means any vessel from which no fishing
other than recreational fishing is conducted. Charter and party boats
are considered recreational fishing vessels for purposes of the scup
minimum size requirement.
Scup means the species Stenotomus chrysops.
Total length (TL) means the straight-line distance from the tip of
the snout to the end of the tail (caudal fin) while the fish is lying
on its side.
[[Page 13454]]
Sec. 625.33 Relation to other laws.
(a) The relation of this part to other laws is set forth in
Sec. 620.3 of this chapter and paragraph (b) of this section.
(b) Nothing in these regulations supersedes more restrictive state
management measures.
Sec. 625.39 Prohibitions.
(a) In addition to the general prohibitions specified in Sec. 620.7
of this chapter, it is unlawful for any person owning or operating a
vessel fishing commercially for scup, which are harvested in or from
the EEZ, to do any of the following:
(1) Land or possess at sea any scup, or parts thereof, that fail to
meet the minimum fish sizes specified in Sec. 625.53(a);
(2) Sell any scup harvested in or from the EEZ that fail to meet
the minimum fish size specified in Sec. 625.53(a).
(3) Possess 4,000 or more lb (1,814.4 or more kg) of scup harvested
in or from the EEZ unless the vessel meets the minimum mesh size
requirement specified in Sec. 625.54(a).
(4) Fish with or possess nets or netting in the EEZ that do not
meet the minimum mesh requirement, or that are modified, obstructed,
constricted, or constructed with mesh in which the bars entering or
exiting the knots twist around each other, if subject to the minimum
mesh requirement specified in Sec. 625.54, unless the nets or netting
are stowed in accordance with Sec. 625.24(d).
(5) Engage in recreational fishing in the EEZ while simultaneously
conducting commercial fishing operations.
(b) It is unlawful for the owner or operator of any recreational
fishing vessel, including party or charter boats, to: (1) Possess scup
harvested in or from the EEZ smaller than the minimum size limit for
recreational fishermen established pursuant to Sec. 625.53(b);
(2) [Reserved]
(c) It is unlawful for any person to do any of the following:
(1) Purchase any scup harvested in or from the EEZ that fail to
meet the minimum fish size specified in Sec. 625.53(a).
(2) Possess any scup harvested in or from the EEZ that fail to meet
the minimum fish size specified in Sec. 625.53(b).
(3) Sell any scup harvested in or from the EEZ that fail to meet
the minimum fish sizes specified in Sec. 625.53(a).
(4) Land any scup harvested in or from the EEZ in fillet form with
the skin removed.
Subpart D--Management Measures, Scup
Sec. 625.53 Minimum sizes.
(a) The minimum size for scup is 9 inches (22.9 cm) total length
for all vessels engaged in commercial fishing.
(b) The minimum size for scup is 7 inches (17.8 cm) TL for all
vessels that are engaged in recreational fishing.
(c) The minimum size applies to whole fish or any part of a fish
found in possession, e.g., fillets.
Sec. 625.54 Gear restrictions.
(a) General. Applicable April 8, 1996, otter trawl vessels that
land or possess 4,000 lb or more (1,814.4 kg or more) of scup harvested
in or from the EEZ must fish with nets that have a minimum mesh size of
4 inches (10.2 cm) applied throughout the codend for at least 75
continuous meshes forward of the terminus of the net, or, for codends
with less than 75 meshes, the minimum-mesh-size codend must be a
minimum of one-third of the net, measured from the terminus of the
codend to the head rope, excluding any turtle excluder device
extension.
(b) Mesh-size measurement. Mesh sizes will be measured according to
the procedure described in Sec. 625.24(c).
(c) Net modification and mesh obstruction and constriction. Vessels
are prohibited from modifying, obstructing, and/or constricting their
nets as described in Sec. 625.24(d) and (e).
(d) Stowage of nets. Applicable APril 8, 1996, otter trawl vessels
retaining 4,000 lb or more (1,814.4 or more kg) of scup harvested in or
from the EEZ, and subject to the minimum mesh requirement specified in
paragraph (a) of this section may not have available for immediate use
any net, or any piece of net, not meeting the minimum mesh size
requirement, or mesh that is rigged in a manner that is inconsistent
with the minimum mesh size. A net that conforms to the specifications
specified in Sec. 625.24(f) and that can be shown not to have been in
recent use is considered to be not ``available for immediate use.''
[FR Doc. 96-7386 Filed 3-22-96; 3:45 pm]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 96-7326 Examinations
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Page 13424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7326]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 3
RIN 2900-AH48
Examinations
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document adopts as a final rule, without change, an
interim rule that amended the Department of Veterans Affairs (VA)
adjudication regulations concerning compensation and pension claims
filed by veterans, surviving spouses, or parents. With respect to
language for authorizing VA examinations, this final rule provides that
a VA examination will be authorized where there is a well-grounded
claim for disability compensation or pension but the medical evidence
accompanying the claim is not adequate for rating purposes. This final
rule reflects statutory language and caselaw requirements concerning
such VA examinations.
EFFECTIVE DATE: This final rule is effective March 27, 1996. (The
interim rule was effective October 11, 1995.)
FOR FURTHER INFORMATION CONTACT: Paul Trowbridge, Consultant,
Compensation and Pension Service, Veterans Benefits Administration, 810
Vermont Avenue, NW, Washington, DC 20420, telephone (202) 273-7210.
SUPPLEMENTARY INFORMATION: On October 11, 1995, VA published in the
Federal Register (60 FR 52863) an interim final rule intended to
clarify the circumstances under which a VA examination will be
authorized. Interested parties were invited to submit written comments
on or before December 11, 1995. We received no comments.
Based on the rationale set forth in the interim final rule, the
provisions of the interim final rule are adopted as a final rule
without change.
The Secretary certifies that this final rule will not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612. This final rule will directly affect VA beneficiaries but will not
affect small businesses. Therefore, pursuant to 5 U.S.C. 606(b), this
final rule is exempt from the initial and final regulatory flexibility
analysis requirements of sections 603 and 604.
The Catalog of Federal Domestic Assistance program numbers are
64.100, 64.104, 64.105, 64.106, 64.109, and 64.110.
List of Subjects in 38 CFR Part 3
Administrative practice and procedure, Claims, Disability benefits,
Health care, Pensions, Veterans, Vietnam.
Approved: March 18, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
[FR Doc. 96-7326 Filed 3-26-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-7317 American Lobster Fishery; Emergency Gear Conflict Regulations
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13454-13461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7317]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
50 CFR Part 649
[Docket No. 960304058-6058-01; I.D. 020696A]
RIN 0648-XX50
American Lobster Fishery; Emergency Gear Conflict Regulations
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Emergency interim rule.
-----------------------------------------------------------------------
SUMMARY: NMFS, by emergency interim rule, amends the regulations
implementing the American Lobster Fishery Management Plan (FMP). This
emergency rule implements a prohibition on mobile gear vessels fishing
in newly defined Restricted Gear Areas I and II; a prohibition on
lobster pot vessels fishing in and lobster pots in newly defined
Restricted Gear Area III; and a requirement that all mobile gear
vessels in Restricted Gear Areas I and II and all lobster pot (fixed
gear) vessels in Restricted Gear Area III stow their gear while
transiting the restricted gear areas. The intended effect is to reduce
gear losses caused by use of fixed and mobile gear simultaneously in
the same area.
EFFECTIVE DATE: April 1, 1996 through June 25, 1996. Restricted Gear
Areas I and II will be closed to mobile gear for the duration of this
emergency action. Restricted Gear Area III will be closed April 1, 1996
through April 30, 1996, to fishing by fixed gear vessels.
ADDRESSES: Copies of the Environmental Assessment supporting this
action may be obtained from Douglas Marshall, Executive Director, New
England Fishery Management Council (Council), 5 Broadway, Saugus, MA
01906-1097.
FOR FURTHER INFORMATION CONTACT: Paul H. Jones, Fishery Policy Analyst,
508-281-9273.
SUPPLEMENTARY INFORMATION:
Background
American lobster pot gear vessels began losing fixed gear in the
offshore waters of Southern New England as a result of increased
trawling by mobile gear fishers targeting monkfish during 1991. In
1992, offshore lobster fishers and some mobile gear fishers sought
assistance from the Council. At that time, the Council believed that
voluntary industry agreements were preferable to regulatory action. The
Council helped several groups of fixed and mobile gear fishers draft
and circulate the ``Southern New England Offshore Gear Conflict
Resolution.'' The agreement was initially effective, because the
fishers designed it to allow them to fish their gear in the most
productive areas and seasons. Both fixed and mobile gear fishers gave
up access to fishing grounds when they were less productive to gain
easier access to grounds during more productive seasons. Besides
setting aside areas to separate fixed and mobile gear, the resolution
stressed cooperation
[[Page 13455]]
and good communication among the different fishing groups. Due to the
resolution, the fishers reported much greater cooperation and
significantly less gear loss.
During the 1994-95 season conflicts rapidly escalated as mobile
gear fishers changed their fishing practices. The pursuit of
alternative species, declining abundances of traditional species,
additional regulations to reduce fishing on stressed fish stocks, and
changing market conditions all have contributed to the recent increase
in gear conflicts. New mobile gear fishers targeting monkfish with
deepwater trawls frequently failed to recognize the agreement and gear
conflicts increased.
Because of the increase in gear conflicts, the Council decided at
its February 1995 meeting to hold additional meetings and reemphasize
its support of the voluntary agreement. The Council also warned that
regulations designed to reduce the gear conflicts would be developed if
the voluntary agreement continued to be ineffective. Continued efforts
by the Council to resolve the problem through voluntary means were not
successful during the first half of 1995.
Due to these failed efforts and the anticipated economic hardship,
the Council requested on August 21, 1995, that NMFS take Secretarial
emergency action to implement segments of the voluntary agreement by
regulation. On September 13, 1995, NMFS disapproved the request,
because the situation described by the Council in the emergency request
was a longstanding one and the recent escalation from increased
monkfish trawling was known to the Council the previous fall, the
proposed boundaries were unenforceable, and the Council had not
proposed a permanent solution to the problem.
On October 25, 1995, the Council announced that gear conflicts had
increased. The U.S. Coast Guard affirmed this statement by reporting
that gear conflicts had almost doubled those for October 1994. Due to
the unanticipated level of the increase in fishing effort for monkfish
in areas where lobster fishers place their traps during the winter, the
Council reiterated its request for Secretarial emergency action on
October 25, 1995, and modified its August 21, 1995, request to include
defined straight lines by latitude and longitude, rather than the
fathom contoured lines defined in their last request. The Council's
Gear Conflict Committee met on November 15, 1995, and boundaries
defined by latitude and longitude for the two mobile gear and one fixed
gear areas were developed to accommodate the ability of the U.S. Coast
Guard to enforce the gear closure areas.
In recommending the emergency action, the Council stated that it
recognizes that the action does not address all types of fixed gear
conflicts, nor does it apply to all fishing areas within Southern New
England. The failure of the current industry agreement to adequately
manage the gear conflict is an unforeseen event, for which the Council
had insufficient time to respond by developing amendments and
implementing rules through the standard rulemaking process.
Additionally, the magnitude of the conflict and the degree of economic
hardship in the fixed gear fleet due to the conflict was unanticipated
by the Council.
During the Council's October 25, 1995, meeting, NMFS informed the
Council that development of permanent measures was a requisite for
consideration of its request for Secretarial emergency action. At its
December 13, 1995, meeting, the Council voted to hold public hearings
on an action that will insert a framework mechanism in each of its FMPs
through the amendment process to allow gear conflicts to be addressed
in a timely manner in the future.
Although the development of these framework actions is moving
forward, it will likely take several months for them to be completed
and implemented, if approved. Due to the unanticipated levels of
increases in effort by mobile gear vessels on monkfish and the time
needed for the Council to develop measures to alleviate this problem,
NMFS believes that emergency action is warranted.
NMFS concurs with the Council that this emergency action is
necessary because substantial harm and disruption to the fishery is
occurring on a scale unforeseen in previous seasons that threatens the
economic liability of offshore lobster fishing operations. Direct
economic losses to individual lobster vessels are reported by the
Council to be as high as $75,000. The value of lost gear reported to
the Council for a partial season by eight lobster vessels totaled more
than $290,000. There are approximately 50 active lobster vessels
fishing within the gear conflict areas. If the above data are
extrapolated across the 50 vessel fleet, the direct economic loss as a
result of lost gear is potentially $1.8 million.
The value of lobster landings during October through June, when
operators of lobster vessels move their gear inshore, averaged more
than $8.5 million for 1991-93. Landings data showing the magnitude of
lost fishing opportunity during 1994 and 1995 are unavailable. Lobster
fishers reported setting their gear in a severely closed band that had
a significant effect on catch per trap. Even if the number of traps
remained constant and catch per trap only declined 25 percent, the lost
revenue could have totaled more than $2.1 million. The total estimated
economic loss that could be prevented by taking emergency action is
therefore nearly $4 million. The Council believes that the potential
benefit of taking emergency action significantly exceeds the economic
loss by trawlers targeting monkfish in the restricted gear areas, and
greatly outweighs the value of advance notice and public comment. This
action is consistent with the FMP objectives to minimize social,
cultural, and economic dislocation in the lobster fishery.
The Council is actively pursuing viable means to mitigate the long-
term gear conflicts, but recent conditions have caused rapid escalation
of the conflicts and efforts to resolve this problem have only recently
failed. These conditions include increased targeting of monkfish by
mobile gear vessels, as reported to the Council by the U.S. Coast Guard
on October 25, 1995. The emergency measures are a set of initial
measures addressing the immediate interim need to begin the process of
curtailing gear conflicts. These measures were selected rather than
other options because they are relatively less controversial, as
evidenced by the near unanimous support of the Council and because the
area boundaries are more narrowly defined and more easily enforced.
The emergency action is expected to greatly reduce gear damage and
economic loss. The Council believes, and NMFS agrees, that preventing
the potential economic loss greatly outweighs the need for advance
notice and public comment before taking action.
The closures will be known as Restricted Gear Areas I, II, and III.
Restricted Gear Areas I and II will be closed to mobile gear (defined
as trawls, beam trawls, and dredges) for the duration of this emergency
action. Restricted Gear Area III will be closed upon implementation of
this rule through April 30, 1996, to fishing by fixed gear vessels.
Vessels may transit these areas if their gear is properly stowed.
Classification
NMFS has determined that this rule is necessary to respond to an
emergency situation and is consistent with the
[[Page 13456]]
Magnuson Fishery Conservation and Management Act and other applicable
law.
The Assistant Administrator for Fisheries, NOAA, also finds for
good cause that the reasons justifying implementation of this rule on
an emergency basis make it impracticable and contrary to the public
interest to provide additional notice and opportunity for public
comment, or to delay for 30 days the effective date of these emergency
regulations, under the provisions of sections 553 (b) and (d) of the
Administrative Procedure Act.
This emergency rule has been determined to be not significant for
purposes of E.O. 12866.
This rule is exempt from the procedures of the Regulatory
Flexibility Act to prepare a regulatory flexibility analysis because
the rule is issued without opportunity for prior public comment,
therefore, no analysis has been prepared.
List of Subjects in 50 CFR Part 649
Fisheries.
Dated: March 20, 1996.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
For the reasons set out in the preamble, 50 CFR part 649 is amended
as follows:
PART 649--AMERICAN LOBSTER FISHERY
1. The authority citation for part 649 continues to read as
follows:
Authority: 16 U.S.C. 1801 et seq.
2. In Sec. 649.2 definitions for ``Beam trawl'', ``Dredge or dredge
gear'', ``Fixed gear'', ``Mobile gear'', and ``Trawl'' are added, in
alphabetical order to read as follows:
Sec. 649.2 Definitions.
* * * * *
Beam trawl means gear consisting of a twine bag attached to a beam
attached to a towing wire designed so that the beam does not contact
the bottom. The beam is constructed with sinkers or shoes on either
side that support the beam above the bottom or any other modification
so that the beam does not contact the bottom. The beam trawl is
designed to slide along the bottom rather than dredge the bottom.
* * * * *
Dredge or dredge gear means gear consisting of a mouth frame
attached to a holding bag constructed of metal rings, or any other
modification to this design, that can be or is used in the harvest of
Atlantic sea scallops.
* * * * *
Fixed gear means lobster pot trawls.
* * * * *
Mobile gear means trawls, beam trawls, and dredges that are
attached to a vessel at all times and which maneuver with that vessel.
* * * * *
Trawl means gear consisting of a net that is towed, including but
not limited to beam trawls, pair trawls and Danish and Scottish seine
gear.
* * * * *
3. In Sec. 649.8, paragraphs (c)(11) and (c)(12) are added to read
as follows:
Sec. 649.8 Prohibitions.
* * * * *
(c) * * *
(11) Enter or be in the areas described in Sec. 649.23 (a)(1) and
(b)(1) on a mobile gear fishing vessel, during the time periods
specified in Sec. 649.23 (a)(2) and (b)(2), except as provided in
Sec. 649.23 (a)(3) and (b)(3).
(12) Enter or be in, and no fixed gear may be deployed or remain
in, the areas described in Sec. 649.23(c)(1) on a fixed gear fishing
vessel, during the time periods specified in Sec. 649.23(c)(2), except
as provided in Sec. 649.23(c)(3).
* * * * *
4. Section 649.23 is added to subpart B to read as follows:
Sec. 649.23 Restricted gear areas.
(a) Restricted Gear Area I. (1) No mobile gear fishing vessel or
person on a mobile gear fishing vessel, may enter, fish, or be in the
following areas during the time period specified in paragraph (a)(2) of
this section (Figure 4 to part 649), as defined by straight lines
connecting the following points in the order stated, except as
specified in paragraph (a)(3) of this section:
------------------------------------------------------------------------
Point Latitude Longitude
------------------------------------------------------------------------
Inshore Boundary
------------------------------------------------------------------------
to 120.
69.......................... 40 deg.07.9' N. 68 deg.36.0' W.
70.......................... 40 deg.07.2' N. 68 deg.38.4' W.
71.......................... 40 deg.06.9' N. 68 deg.46.5' W.
72.......................... 40 deg.08.7' N. 68 deg.49.6' W.
73.......................... 40 deg.08.1' N. 68 deg.51.0' W.
74.......................... 40 deg.05.7' N. 68 deg.52.4' W.
75.......................... 40 deg.03.6' N. 68 deg.57.2' W.
76.......................... 40 deg.03.65' N. 69 deg.00.0' W.
77.......................... 40 deg.04.35' N. 69 deg.00.5' W.
78.......................... 40 deg.05.2' N. 69 deg.00.5' W
79.......................... 40 deg.05.3' N. 69 deg.01.1' W.
80.......................... 40 deg.08.9' N. 69 deg.01.75' W.
81.......................... 40 deg.11.0' N. 69 deg.03.8' W.
82.......................... 40 deg.11.6' N. 69 deg.05.4' W.
83.......................... 40 deg.10.25' N. 69 deg.04.4' W.
84.......................... 40 deg.09.75' N. 69 deg.04.15' W.
85.......................... 40 deg.08.45' N. 69 deg.03.6' W.
86.......................... 40 deg.05.65' N. 69 deg.03.55' W.
87.......................... 40 deg.04.1' N. 69 deg.03.9' W.
88.......................... 40 deg.02.65' N. 69 deg.05.6' W.
89.......................... 40 deg.02.00' N. 69 deg.08.35' W.
90.......................... 40 deg.02.65' N. 69 deg.11.15' W.
91.......................... 40 deg.00.05' N. 69 deg.14.6' W.
92.......................... 39 deg.57.8' N. 69 deg.20.35' W.
93.......................... 39 deg.56.65' N. 69 deg.24.4' W.
94.......................... 39 deg.56.1' N. 69 deg.26.35' W.
95.......................... 39 deg.56.55' N. 69 deg.34.1' W.
96.......................... 39 deg.57.85' N. 69 deg.36.5' W.
97.......................... 40 deg.00.65' N. 69 deg.36.5' W.
98.......................... 40 deg.00.9' N. 69 deg.37.3' W.
99.......................... 39 deg.59.15' N. 69 deg.37.3' W.
100......................... 39 deg.58.8' N. 69 deg.38.45' W.
102......................... 39 deg.56.2' N. 69 deg.40.2' W.
103......................... 39 deg.55.75' N. 69 deg.41.4' W.
104......................... 39 deg.56.7' N. 69 deg.53.6' W.
105......................... 39 deg.57.55' N. 69 deg.54.05' W.
106......................... 39 deg.57.4' N. 69 deg.55.9' W.
107......................... 39 deg.56.9' N. 69 deg.57.45' W.
108......................... 39 deg.58.25' N. 70 deg.03.0' W.
110......................... 39 deg.59.2' N. 70 deg.04.9' W.
111......................... 40 deg.00.7' N. 70 deg.08.7' W.
112......................... 40 deg.03.75' N. 70 deg.10.15' W.
115......................... 40 deg.05.2' N. 70 deg.10.9' W.
116......................... 40 deg.02.45' N. 70 deg.14.1' W.
119......................... 40 deg.02.75' N. 70 deg.16.1' W.
to 181.
------------------------------------------------------------------------
Offshore Boundary
------------------------------------------------------------------------
to 69.
120......................... 40 deg.06.4' N. 68 deg.35.8' W.
121......................... 40 deg.05.25' N. 68 deg.39.3' W.
122......................... 40 deg.05.4' N. 68 deg.44.5' W.
123......................... 40 deg.06.0' N. 68 deg.46.5' W.
124......................... 40 deg.07.4' N. 68 deg.49.6' W.
125......................... 40 deg.05.55' N. 68 deg.49.8' W.
126......................... 40 deg.03.9' N. 68 deg.51.7' W.
127......................... 40 deg.02.25' N. 68 deg.55.4' W.
128......................... 40 deg.02.6' N. 69 deg.00.0' W.
129......................... 40 deg.02.75' N. 69 deg.00.75' W.
130......................... 40 deg.04.2' N. 69 deg.01.75' W.
131......................... 40 deg.06.15' N. 69 deg.01.95' W.
132......................... 40 deg.07.25' N. 69 deg.02.0' W.
133......................... 40 deg.08.5' N. 69 deg.02.25' W.
134......................... 40 deg.09.2' N. 69 deg.02.95' W.
135......................... 40 deg.09.75' N. 69 deg.03.3' W.
136......................... 40 deg.09.55' N. 69 deg.03.85' W.
137......................... 40 deg.08.4' N. 69 deg.03.4' W.
138......................... 40 deg.07.2' N. 69 deg.03.3' W.
139......................... 40 deg.06.0' N. 69 deg.03.1' W.
140......................... 40 deg.05.4' N. 69 deg.03.05' W.
141......................... 40 deg.04.8' N. 69 deg.03.05' W.
142......................... 40 deg.03.55' N. 69 deg.03.55' W.
143......................... 40 deg.01.9' N. 69 deg.03.95' W.
144......................... 40 deg.01.0' N. 69 deg.04.4' W.
146......................... 39 deg.59.9' N. 69 deg.06.25' W.
147......................... 40 deg.00.6' N. 69 deg.10.05' W.
148......................... 39 deg.59.25' N. 69 deg.11.15' W.
149......................... 39 deg.57.45' N. 69 deg.16.05' W.
150......................... 39 deg.56.1' N. 69 deg.20.1' W.
151......................... 39 deg.54.6' N. 69 deg.25.65' W.
152......................... 39 deg.54.65' N. 69 deg.26.9' W.
153......................... 39 deg.54.8' N. 69 deg.30.95' W.
154......................... 39 deg.54.35' N. 69 deg.33.4' W.
155......................... 39 deg.55.0' N. 69 deg.34.9' W.
156......................... 39 deg.56.55' N. 69 deg.36.0' W.
157......................... 39 deg.57.95' N. 69 deg.36.45' W.
158......................... 39 deg.58.75' N. 69 deg.36.3' W.
159......................... 39 deg.58.8' N. 69 deg.36.95' W.
[[Page 13457]]
160......................... 39 deg.57.95' N. 69 deg.38.1' W.
161......................... 39 deg.54.5' N. 69 deg.38.25' W.
162......................... 39 deg.53.6' N. 69 deg.46.5' W.
163......................... 39 deg.54.7' N. 69 deg.50.0' W.
164......................... 39 deg.55.25' N. 69 deg.51.4' W.
165......................... 39 deg.55.2' N. 69 deg.53.1' W.
166......................... 39 deg.54.85' N. 69 deg.53.9' W.
167......................... 39 deg.55.7' N. 69 deg.54.9' W.
168......................... 39 deg.56.15' N. 69 deg.55.35' W.
169......................... 39 deg.56.05' N. 69 deg.56.25' W.
170......................... 39 deg.55.3' N. 69 deg.57.1' W.
171......................... 39 deg.54.8' N. 69 deg.58.6' W.
172......................... 39 deg.56.05' N. 70 deg.00.65' W.
173......................... 39 deg.55.3' N. 70 deg.02.95' W.
174......................... 39 deg.56.9' N. 70 deg.11.3' W.
175......................... 39 deg.58.9' N. 70 deg.11.5' W.
176......................... 39 deg.59.6' N. 70 deg.11.1' W.
177......................... 40 deg.01.35' N. 70 deg.11.2' W.
178......................... 40 deg.02.6' N. 70 deg.12.0' W.
179......................... 40 deg.00.4' N. 70 deg.12.3' W.
180......................... 39 deg.59.75' N. 70 deg.13.05' W.
181......................... 39 deg.59.3' N. 70 deg.14.0' W.
to 119.
------------------------------------------------------------------------
(2) Duration. No mobile gear fishing vessel or person on a mobile
gear fishing vessel may enter, fish, or be in Restricted Gear Area I
from April 1, 1996 through June 25, 1996, except as specified in
paragraph (a)(3) of this section.
(3) Transiting. Vessels may transit Restricted Gear Area I as
defined in paragraph (a)(1) of this section, provided that gear is
stowed and not available for immediate use in accordance with the
provisions of paragraph (d)(1) of this section.
(b) Restricted Gear Area II. (1) No mobile gear fishing vessel or
person on a mobile gear fishing vessel may enter, fish, or be in the
following areas during the time period specified in paragraph (b)(2) of
this section (Figure 5 to part 649), as defined by straight lines
connecting the following points in the order stated, except as
specified in paragraph (b)(3) of this section:
------------------------------------------------------------------------
Point Latitude Longitude
------------------------------------------------------------------------
Inshore Boundary
------------------------------------------------------------------------
to 1.
49............................ 40 deg.02.75' N. 70 deg.16.1' W.
50............................ 40 deg.00.7' N. 70 deg.18.6' W.
51............................ 39 deg.59.8' N. 70 deg.21.75' W.
52............................ 39 deg.59.75' N. 70 deg.25.5' W.
53............................ 40 deg.03.85' N. 70 deg.28.75' W.
54............................ 40 deg.00.55' N. 70 deg.32.1' W.
55............................ 39 deg.59.15' N. 70 deg.34.45' W.
56............................ 39 deg.58.9' N. 70 deg.38.65' W.
57............................ 40 deg.00.1' N. 70 deg.45.1' W.
58............................ 40 deg.00.5' N. 70 deg.57.6' W.
59............................ 40 deg.02.0' N. 71 deg.01.3' W.
60............................ 39 deg.59.3' N. 71 deg.18.4' W.
61............................ 40 deg.00.7' N. 71 deg.19.8' W.
62............................ 39 deg.57.5' N. 71 deg.20.6' W.
63............................ 39 deg.53.1' N. 71 deg.36.1' W.
64............................ 39 deg.52.6' N. 71 deg.40.35' W.
65............................ 39 deg.53.1' N. 71 deg.42.7' W.
66............................ 39 deg.46.95' N. 71 deg.49.0' W.
67............................ 39 deg.41.15' N. 71 deg.57.1' W.
68............................ 39 deg.35.45' N. 72 deg.02.0' W.
69............................ 39 deg.32.65' N. 72 deg.06.1' W.
70............................ 39 deg.29.75' N. 72 deg.09.8' W.
to 48.
------------------------------------------------------------------------
Offshore Boundary
------------------------------------------------------------------------
to 49.
1............................. 39 deg.59.3' N. 70 deg.14.0' W.
2............................. 39 deg.58.85' N. 70 deg.15.2' W.
3............................. 39 deg.59.3' N. 70 deg.18.4' W.
4............................. 39 deg.58.1' N. 70 deg.19.4' W.
5............................. 39 deg.57.0' N. 70 deg.19.85' W.
6............................. 39 deg.57.55' N. 70 deg.21.25' W.
7............................. 39 deg.57.5' N. 70 deg.22.8' W.
8............................. 39 deg.57.1' N. 70 deg.25.4' W.
9............................. 39 deg.57.65' N. 70 deg.27.05' W.
10............................ 39 deg.58.58' N. 70 deg.27.7' W.
11............................ 40 deg.00.65' N. 70 deg.28.8' W.
12............................ 40 deg.02.2' N. 70 deg.29.15' W.
13............................ 40 deg.01.0' N. 70 deg.30.2' W.
14............................ 39 deg.58.58' N. 70 deg.31.85' W.
15............................ 39 deg.57.05' N. 70 deg.34.35' W.
16............................ 39 deg.56.42' N. 70 deg.36.8' W.
21............................ 39 deg.58.15' N. 70 deg.48.0' W.
24............................ 39 deg.58.3' N. 70 deg.51.1' W.
25............................ 39 deg.58.1' N. 70 deg.52.25' W.
26............................ 39 deg.58.05' N. 70 deg.53.55' W.
27............................ 39 deg.58.4' N. 70 deg.59.6' W.
28............................ 39 deg.59.8' N. 71 deg.01.05' W.
29............................ 39 deg.58.2' N. 71 deg.05.85' W.
30............................ 39 deg.57.45' N. 71 deg.12.15' W.
31............................ 39 deg.57.2' N. 71 deg.15.0' W.
32............................ 39 deg.56.3' N. 71 deg.18.95' W.
33............................ 39 deg.51.4' N. 71 deg.36.1' W.
34............................ 39 deg.51.75' N. 71 deg.41.5' W.
35............................ 39 deg.50.05' N. 71 deg.42.5' W.
36............................ 39 deg.50.0' N. 71 deg.45.0' W.
37............................ 39 deg.48.95' N. 71 deg.46.05' W.
38............................ 39 deg.46.6' N. 71 deg.46.1' W.
39............................ 39 deg.43.5' N. 71 deg.49.4' W.
40............................ 39 deg.41.3' N. 71 deg.55.0' W.
41............................ 39 deg.39.0' N. 71 deg.55.6' W.
42............................ 39 deg.36.72' N. 71 deg.58.25' W.
43............................ 39 deg.35.15' N. 71 deg.58.55' W.
44............................ 39 deg.34.5' N. 72 deg.00.75' W.
45............................ 39 deg.32.2' N. 72 deg.02.25' W.
46............................ 39 deg.32.15' N. 72 deg.04.1' W.
47............................ 39 deg.28.5' N. 72 deg.06.5' W.
48............................ 39 deg.29.0' N. 72 deg.09.25' W.
to 70.
------------------------------------------------------------------------
(2) Duration. No mobile gear fishing vessel or person on a mobile
gear fishing vessel may enter, fish, or be in Restricted Gear Area II
from April 1, 1996 through June 25, 1996, except as specified in
paragraph (b)(3) of this section.
(3) Transiting. Vessels may transit Restricted Gear Area II as
defined in paragraph (b)(1) of this section, provided that gear is
stowed and not available for immediate use in accordance with the
provisions of paragraph (d)(1) of this section.
(c) Restricted Gear Area III. (1) No fixed gear fishing vessel or
person on a fixed gear fishing vessel may enter, fish, or be in, and no
fixed gear may be deployed or remain in, the following areas during the
time period specified in paragraph (c)(2) of this section (Figure 6 to
part 649), as defined by straight lines connecting the following points
in the order stated, except as specified in paragraph (c)(3) of this
section:
------------------------------------------------------------------------
Point Latitude Longitude
------------------------------------------------------------------------
Inshore Boundary
------------------------------------------------------------------------
to 49.
182......................... 40 deg.05.6' N. 70 deg.17.7' W.
183......................... 40 deg.06.5' N. 70 deg.40.05' W.
184......................... 40 deg.11.05' N. 70 deg.45.8' W.
185......................... 40 deg.12.75' N. 70 deg.55.05' W.
186......................... 40 deg.10.7' N. 71 deg.10.25' W.
187......................... 39 deg.57.9' N. 71 deg.28.7' W.
188......................... 39 deg.55.6' N. 71 deg.41.2' W.
189......................... 39 deg.55.85' N. 71 deg.45.0' W.
190......................... 39 deg.53.75' N. 71 deg.52.25' W.
191......................... 39 deg.47.2' N. 72 deg.01.6' W.
192......................... 39 deg.33.65' N. 72 deg.15.0' W.
to 70.
------------------------------------------------------------------------
Offshoe Boundary
------------------------------------------------------------------------
to 182.
49.......................... 40 deg.02.75' N. 70 deg.16.1' W.
50.......................... 40 deg.00.7' N. 70 deg.18.6' W.
51.......................... 39 deg.59.8' N. 70 deg.21.75' W.
52.......................... 39 deg.59.75' N. 70 deg.25.5' W.
53.......................... 40 deg.03.85' N. 70 deg.28.75' W.
54.......................... 40 deg.00.55' N. 70 deg.32.1' W.
55.......................... 39 deg.59.15' N. 70 deg.34.45' W.
56.......................... 39 deg.58.9' N. 70 deg.38.65' W.
57.......................... 40 deg.00.1' N. 70 deg.45.1' W.
58.......................... 40 deg.00.5' N. 70 deg.57.6' W.
59.......................... 40 deg.02.0' N. 71 deg.01.3' W.
60.......................... 39 deg.59.3' N. 71 deg.18.4' W.
61.......................... 40 deg.00.7' N. 71 deg.19.8' W.
62.......................... 39 deg.57.5' N. 71 deg.20.6' W.
63.......................... 39 deg.53.1' N. 71 deg.36.1' W.
64.......................... 39 deg.52.6' N. 71 deg.40.35' W.
65.......................... 39 deg.53.1' N. 71 deg.42.7' W.
66.......................... 39 deg.46.95' N. 71 deg.49.0' W.
67.......................... 39 deg.41.15' N. 71 deg.57.1' W.
68.......................... 39 deg.35.45' N. 72 deg.02.0' W.
69.......................... 39 deg.32.65' N. 72 deg.06.1' W.
70.......................... 39 deg.29.75' N. 72 deg.09.8' W.
to 192.
------------------------------------------------------------------------
(2) Duration. No fixed gear fishing vessel or person on a fixed
gear fishing vessel may enter, fish, or be in, and no fixed gear may be
deployed or remain in, Restricted Gear Area III from April 1, 1996
through April 30, 1996, except as specified in paragraph (c)(3) of this
section.
(3) Transiting. Vessels may transit Restricted Gear Area III as
defined in paragraph (c)(1) of this section, provided that their gear
is stowed in accordance with the provisions of paragraph (d)(2) of this
section.
(d) Gear stowage requirements. (1) Mobile gear vessels transiting
Restricted Gear Area I and Restricted Gear Area II specified under
paragraphs (a)(1) and
[[Page 13458]]
(b)(1) of this section must stow their gear so it is not available for
immediate use as follows:
(i) Trawl vessel net stowage requirements. A net that is stowed and
is not available for immediate use conforms to one of the following
specifications:
(A) A net stowed below deck, provided:
(1) It is located below the main working deck from which the net is
deployed and retrieved;
(2) The towing wires, including the leg wires, are detached from
the net; and
(3) It is fan-folded (flaked) and bound around its circumference;
or
(B) A net stowed and lashed down on deck, provided:
(1) It is fan-folded (flaked) and bound around its circumference;
(2) It is securely fastened to the deck or rail of the vessel; and
(3) The towing wires, including the leg wires, are detached from
the net; or
(C) A net that is on a reel and is covered and secured, provided:
(1) The entire surface of the net is covered with canvas or other
similar material that is securely bound;
(2) The towing wires, including the leg wires, are detached from
the net; and
(3) The codend is removed from the net and stored below deck; or
(D) Nets that are secured in a manner authorized in writing by the
Regional Director.
(ii) Scallop dredge and beam trawl stowage requirements. A scallop
dredge and beam trawl that is stowed and is not available for immediate
use must:
(A) Detach the towing wire from the scallop dredge or beam trawl;
(B) Reel the wire up onto the winch; and
(C) Secure and cover the dredge or beam trawl so that it is
rendered unusable for fishing.
(2) Fixed gear stowage requirements. Fixed gear vessels transiting
Restricted Gear Area III specified under paragraphs (c)(1) of this
section must stow their gear as follows so it is not available for
immediate use:
(i) Secure all pots, buoys, and high flyers so that the gear is not
available for immediate use and
(ii) The pots must not have trawl warps connected to the bridles
and must be unbaited.
5. Figures 4, 5 and 6 are added to part 649 to read as follows:
BILLING CODE 3510-22-P
[[Page 13459]]
[GRAPHIC] [TIFF OMITTED] TR27MR96.002
Restricted Gear Area I; Closed to Mobile Gear Towed From a Vessel
Figure 4 to Part 649--Restricted Gear Area I
[[Page 13460]]
[GRAPHIC] [TIFF OMITTED] TR27MR96.003
Restricted Gear Area II; Closed to Mobile Gear Towed From a Vessel
Figure 5 to Part 649--Restricted Gear Area II
[[Page 13461]]
[GRAPHIC] [TIFF OMITTED] TR27MR96.004
Restricted Gear Area III, Closed to Lobster Trap Gear
Figure 6 to Part 649--Restricted Gear Area III
[FR Doc. 96-7317 Filed 3-22-96; 3:45 pm]
BILLING CODE 3510-22-C
Complete official Federal Register PDF
FR Doc. 96-7316 Groundfish of the Gulf of Alaska; Deep-water Species Fishery by Vessels using Trawl Gear in the Gulf of Alaska
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13461-13462]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7316]
-----------------------------------------------------------------------
[[Page 13462]]
DEPARTMENT OF COMMERCE
50 CFR Part 672
[Docket No. 960129018-6018-01; I.D. 032096B]
Groundfish of the Gulf of Alaska; Deep-water Species Fishery by
Vessels using Trawl Gear in the Gulf of Alaska
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Closure.
-----------------------------------------------------------------------
SUMMARY: NMFS is prohibiting directed fishing for species that comprise
the deep-water species fishery by vessels using trawl gear in the Gulf
of Alaska (GOA). This action is necessary because the first seasonal
bycatch allowance of Pacific halibut apportioned to the deep-water
species fishery in the GOA has been caught.
EFFECTIVE DATE: 12 noon, Alaska local time (A.l.t.), March 21, 1996,
until 12 noon, A.l.t., April 1, 1996.
FOR FURTHER INFORMATION CONTACT: Thomas Pearson, 907-486-6919.
SUPPLEMENTARY INFORMATION: The groundfish fishery in the GOA exclusive
economic zone is managed by NMFS according to the Fishery Management
Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North
Pacific Fishery Management Council under authority of the Magnuson
Fishery Conservation and Management Act. Fishing by U.S. vessels is
governed by regulations implementing the FMP at 50 CFR parts 620 and
672.
In accordance with Sec. 672.20(f)(1)(i) the deep-water species
fishery, which is defined at Sec. 672.20(f)(1)(i)(B)(2) was apportioned
100 mt of Pacific halibut prohibited species catch for the first
season, the period January 20, 1996, through March 31, 1996 (61 FR
4304, February 5, 1996) .
The Director, Alaska Region, NMFS, has determined, in accordance
with Sec. 672.20(f)(3)(i), that vessels participating in the trawl
deep-water species fishery in the GOA have caught the first seasonal
bycatch allowance of Pacific halibut apportioned to that fishery.
Therefore, NMFS is prohibiting directed fishing for each species and
species group that comprise the deep-water species fishery by vessels
using trawl gear in the GOA. The species and species groups that
comprise the deep-water species fishery are: All rockfish of the genera
Sebastes and Sebastolobus, Greenland turbot, Dover sole, Rex sole,
arrowtooth flounder, and sablefish.
After the effective date of this closure the maximum retainable
bycatch amounts, calculated using the retainable percentages at
Sec. 672.20(g), apply at any time during a trip.
Classification
This action is taken under 50 CFR 672.20 and is exempt from review
under E.O. 12866.
Authority: 16 U.S.C. 1801 et seq.
Dated: March 21, 1996.
Richard W. Surdi,
Acting Director, Office of Fisheries Conservation and Management,
National Marine Fisheries Service.
[FR Doc. 96-7316 Filed 3-21-96; 4:56 pm]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 96-7313 Records and Reports Regulations for Radiation Emitting Electronic Products; Correction
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13421-13424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7313]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Parts 1000 and 1002
[Docket No. 82N-0273]
RIN 0910-AA15
Records and Reports Regulations for Radiation Emitting Electronic
Products; Correction
AGENCY: Food and Drug Administration, HHS.
ACTION: Final rule; correction.
-----------------------------------------------------------------------
SUMMARY: The Food and Drug Administration (FDA) is correcting a final
rule that appeared in the Federal Register of September 19, 1995 (60 FR
48374). The document amended FDA regulations regarding the requirements
for recordkeeping and reporting of adverse experiences and other
information relating to radiation emitting electronic products. The
document was published with inadvertent typographical errors. This
document corrects those errors.
EFFECTIVE DATE: October 19, 1995.
FOR FURTHER INFORMATION CONTACT: Joanne Barron, Center for Devices and
Radiological Health (HFZ-300), Food and Drug Administration, 2094
Gaither Rd., Rockville, MD 20850, 301-594-4654.
In FR Doc. 95-23130, appearing on page 48374 in the Federal
Register of Tuesday, September 19, 1995, the following corrections are
made:
1. On page 48381, ``Figure 1'' is republished to correct some
inadvertent errors, as follows:
BILLING CODE 4160-01-F
[[Page 13422]]
[GRAPHIC] [TIFF OMITTED] TR27MR96.001
BILLING CODE 4160-01-C
[[Page 13423]]
2. Beginning on page 48383, in table 1, is being republished to
correct some inadvertent typographical errors, as follows:
Table 1.--Record and Reporting Requirements By Product
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Dealer &
----------------------------------------------------------------------------------------------------------------------------------------- Distributor
---------------
Product Supplemental Abbreviated Distribution Distribution
Products reports Sec. reports Sec. reports Sec. Annual reports Test records Sec. records Sec. records
1002.10 1002.11 1002.12 Sec. 1002.13 1002.30(a)1 1002.30(b)2 1002.40 and
1002.41
--------------------------------------------------------------------------------------------------------------------------------------------------------
DIAGNOSTIC X-RAY3 (1020.30, ............... ............... ............... ............... .................. .................. ..............
1020.31, 1020.32, 1020.33)
Computed tomography X X ............... X X X X
X-ray system4 X X ............... X X X X
Tube housing assembly X X ............... X X X ..............
X-ray control X X ............... X X X X
X-ray high voltage generator X X ............... X X X X
X-ray table or cradle ............... ............... X ............... X X X
X-ray film changer ............... ............... X ............... X X ..............
Vertical cassette holders ............... ............... X ............... X X X
mounted in a fixed location
and cassette holders with
front panels
Beam-limiting devices X X ............... X X X X
Spot-film devices and image X X ............... X X X X
intensifiers manufactured
after April 26, 1977
Cephalometric devices ............... ............... X ............... X X ..............
manufactured after February
25, 1978
Image receptor support ............... ............... X ............... X X X
devices for mammographic X-
ray systems manufactured
after September 5, 1978
CABINET X RAY (Sec. ............... ............... ............... ............... .................. .................. ..............
1020.40)
Baggage inspection X X ............... X X X X
Other X X ............... X X X ..............
PRODUCTS INTENDED TO PRODUCE ............... ............... ............... ............... .................. .................. ..............
PARTICULATE RADIATION OR X-
RAYS OTHER THAN DIAGNOSTIC
OR CABINET DIAGNOSTIC X-RAY
Medical ............... ............... X X X X ..............
Analytical ............... ............... X X X X ..............
Industrial ............... ............... X X X X ..............
TELEVISION PRODUCTS (Sec. ............... ............... ............... ............... .................. .................. ..............
1020.10)
<25 kilovolt (kV) and <0.1 ............... ............... X X6 .................. .................. ..............
milliroentgen per hour (mR/
hr IRLC5,6
25kV and <0.1mR/ X X ............... X .................. .................. ..............
hr IRLC5
0.1mR/hr IRLC5 X X ............... X X X ..............
MICROWAVE/RF ............... ............... ............... ............... .................. .................. ..............
MW ovens (Sec. 1030.10) X X ............... X X X ..............
MW diathermy ............... ............... X ............... .................. .................. ..............
MW heating, drying, security ............... ............... X ............... .................. .................. ..............
systems
RF sealers, electromagnetic ............... ............... X ............... .................. .................. ..............
induction and heating
equipment, dielectric
heaters (2-500 megahertz)
OPTICAL ............... ............... ............... ............... .................. .................. ..............
Phototherapy products X X ............... ............... .................. .................. ..............
Laser products (Secs. ............... ............... ............... ............... .................. .................. ..............
1040.10, 1040.11)
Class I lasers and products X ............... ............... X X .................. ..............
containing such lasers7
Class I laser products X ............... ............... X X X ..............
containing class IIa, II,
IIIa, lasers7
Class IIa, II, IIIa lasers X X ............... X X X X
and products other than
class I products containing
such lasers7
Class IIIb and IV lasers and X X ............... X X X X
products containing such
lasers7
Sunlamp products (Sec. ............... ............... ............... ............... .................. .................. ..............
1040.20)
Lamps only X ............... ............... ............... .................. .................. ..............
Sunlamp products X X ............... X X X X
Mercury vapor lamps (Sec. ............... ............... ............... ............... .................. .................. ..............
1040.30)
T lamps X X ............... X .................. .................. ..............
R lamps ............... ............... X ............... .................. .................. ..............
ACOUSTIC ............... ............... ............... ............... .................. .................. ..............
Ultrasonic therapy (1050.10) X X ............... X X X X
[[Page 13424]]
Diagnostic ultrasound ............... ............... X ............... .................. .................. ..............
Medical ultrasound other X X ............... ............... .................. .................. ..............
than therapy or diagnostic
Nonmedical ultrasound ............... ............... X ............... .................. .................. ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\However, authority to inspect all appropriate documents supporting the adequacy of a manufacturer's compliance testing program is retained.
\2\The requirement includes Secs. 1002.31 and 1002.42, if applicable.
\3\Report of Assembly (Form FDA 2579) is required for diagnostic x-ray components; see 21 CFR 1020.30(d)(1) through (d)(3).
\4\Systems records and reports are required if a manufacturer exercises the option and certifies the system as permitted in 21 CFR 1020.30(c).
\5\Determined using the isoexposure rate limit curve (IRLC) under phase III test conditions (1020.10(c)(3)(iii)).
\6\Annual report is for production status information only.
\7\Determination of the applicable reporting category for a laser product shall be based on the worst-case hazard present within the laser product.
Sec. 1002.3 [Corrected]
3. On page 48385, in the first column, in Sec. 1002.3, in line 6,
the comma is removed after the word ``product'' and in line 7, a comma
is added after the word ``purchaser''.
Dated: March 19, 1996.
William K. Hubbard,
Associate Commissioner for Policy Coordination.
[FR Doc. 96-7313 Filed 3-26-96; 8:45 am]
BILLING CODE 4160-01-F
Complete official Federal Register PDF
FR Doc. 96-7280 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Interstate Land Sales Registration Program; Streamlining Final Rule
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13596-13611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7280]
[[Page 13595]]
_______________________________________________________________________
Part IV
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 1700, 1710, and 1715
Interstate Land Sales Registration Programs: Streamlining; Final Rule
Federal Register / Vol. 61, No. 60 / Wednesday, March 27, 1996 /
Rules and Regulations
[[Page 13596]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Interstate Land Sales Registration Program; Streamlining
Final Rule
24 CFR Parts 1700, 1710, and 1715
[Docket No. FR-3987-F-01]
RIN 2502-AG63
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule amends HUD's regulations for the Interstate
Land Sales Registration Program. In an effort to comply with the
President's regulatory reform initiatives, this rule will streamline
the Interstate Land Sales Registration Program regulations by
eliminating provisions that are repetitive of statutes or are otherwise
unnecessary. This final rule will make the Interstate Land Sales
Registration Program regulations clearer and more concise. Guidelines
applicable to the program are available from the Department, as
provided in an uncodified attachment to this rule.
EFFECTIVE DATE: April 26, 1996.
FOR FURTHER INFORMATION CONTACT: David R. Williamson, Director, Office
of Consumer and Regulatory Affairs, Department of Housing and Urban
Development, 451 7th Street SW., Room 5241, Washington, DC 20410-8000);
telephone number: (202) 708-4560 (this is not a toll-free number). For
hearing- and speech-impaired persons, this number may be accessed via
TDD by calling the Federal Information Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
On March 4, 1995, President Clinton issued a memorandum to all
Federal departments and agencies regarding regulatory reinvention. In
response to this memorandum, the Department of Housing and Urban
Development conducted a page-by-page review of its regulations to
determine which can be eliminated, consolidated, or otherwise improved.
HUD has determined that the regulations for the Interstate Land Sales
Registration Program can be improved and streamlined by eliminating
unnecessary provisions.
Several provisions in the regulations repeat statutory language
from the Interstate Land Sales Full Disclosure Act, 15 U.S.C. 1701 et
seq. It is unnecessary to maintain statutory requirements in the Code
of Federal Regulations (CFR), because those requirements are otherwise
fully accessible and binding. Furthermore, if regulations contain
statutory language, HUD must amend the regulations whenever Congress
amends the statute. Therefore, this final rule will remove repetitious
statutory language and replace it with a citation to the specific
statutory section for easy reference.
Many provisions of part 1720 in the regulations are based on
requirements that apply to more than one program, and therefore HUD
repeated these provisions in different subparts. This repetition is
unnecessary, and updating these scattered provisions is cumbersome and
often creates confusion. Therefore, some of part 1720 has been removed,
and a consolidated rule of investigation procedures that are in a new
part 3800 has been made applicable to the Interstate Land Sales
Registration program by cross-reference (see 61 FR 10440, March 13,
1996). In addition, the Department is developing a separate rule to
consolidate certain procedures into a uniform rule on hearings. When
that separate rule is final, the Department expects to revise
Sec. 1710.45 to include certain provisions of subpart D of part 1720
that will not be removed by the consolidated hearing procedures rule.
This final rule also removes from codification part 1700,
Sec. 1710.501, Sec. 1710.502, and Appendix A to 1710 (which are
maintained in an uncodified appendix accompanying this final rule). The
information contained in the material to be removed is informational
and will be available through separately issued guidance, which is
available from the Department (see uncodified attachment to this rule)
and may be updated from time to time and published in the Federal
Register.
Copies of this rule and related notices are available
electronically from HUD or other sources. You can access this material
through the World Wide Web at http://www.hud.gov or telenet to
hudclips.aspensys.com. You also may subscribe separately to HUDClips (a
source of all of HUD's directives) by calling 301/251-5757 or e-mailing
to [email protected].
Justification for Final Rulemaking
HUD generally publishes a rule for public comment before issuing a
rule for effect, in accordance with its own regulations on rulemaking
in 24 CFR part 10. However, part 10 provides for exceptions to the
general rule if the agency finds good cause to omit advance notice and
public participation. The good cause requirement is satisfied when
prior public procedure is ``impracticable, unnecessary, or contrary to
the public interest'' (24 CFR 10.1). HUD finds that good cause exists
to publish this rule for effect without first soliciting public
comment. This rule primarily removes unnecessary regulatory provisions.
Although the rule also contain some clarification of policy, it does
not make substantive changes in the program regulations. Therefore,
prior public comment is unnecessary.
Other Matters
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this final rule, and in so
doing certifies that this rule will not have a significant economic
impact on a substantial number of small entities. This rule merely
streamlines regulations by removing unnecessary provisions. The rule
will have no adverse or disproportionate economic impact on small
businesses.
Environmental Impact
This rulemaking does not have an environmental impact. This
rulemaking simply amends an existing regulation by consolidating and
streamlining provisions and does not alter the environmental effect of
the regulations being amended. A Finding of No Significant Impact with
respect to the environment was made in accordance with HUD regulations
in 24 CFR part 50 that implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332) at the time of
development of regulations implementing the Interstate Land Sales
Registration Program. That finding remains applicable to this rule, and
is available for public inspection between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk, Office of General
Counsel, Room 10276, Department of Housing and Urban Development, 451
Seventh Street, SW., Washington, DC.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this rule
will not have substantial direct effects on States or their political
subdivisions, or the relationship between the Federal government and
the States, or on the distribution of power and responsibilities among
the various levels of government. No programmatic or policy changes
will result from this rule that would affect the relationship
[[Page 13597]]
between the Federal Government and State and local governments.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule will not have
the potential for significant impact on family formation, maintenance,
or general well-being, and thus is not subject to review under the
Order. No significant change in existing HUD policies or programs will
result from promulgation of this rule.
List of Subjects
24 CFR Part 1700
Consumer protection, Freedom of information, Land sales, Reporting
and recordkeeping requirements.
24 CFR Part 1710
Administrative practice and procedure, Consumer protection, Freedom
of information, Land sales, Reporting and recordkeeping requirements.
24 CFR Part 1715
Advertising, Consumer protection, Fraud, Land sales.
Accordingly, under the authority of 42 U.S.C. 3535(d), parts 1700,
1710, and 1715 of title 24 of the Code of Federal Regulations are
amended as follows:
PART 1700--[REMOVED]
1. Part 1700 is removed.
PART 1710--INTERSTATE LAND SALES REGISTRATION PROGRAM
1a. The authority citation for part 1710 is revised to read as
follows:
Authority: 15 U.S.C. 1718; 42 U.S.C. 3535(d).
2. Section 1710.1 is revised to read as follows:
Sec. 1710.1 Definitions.
(a) Statutory terms. All terms are used in accordance with their
statutory meaning in 15 U.S.C. 1702 or with part 5 of this title,
unless otherwise defined in paragraph (b) of this section or elsewhere
in this part.
(b) Other terms. As used in this part:
Act means the Interstate Land Sales Full Disclosure Act, 15 U.S.C.
1701.
Advisory opinion means the formal written opinion of the Secretary
as to jurisdiction in a particular case or the applicability of an
exemption under Secs. 1710.5 through 1710.15, based on facts submitted
to the Secretary.
Available for use means that in addition to being constructed, the
subject facility is fully operative and supplied with any materials and
staff necessary for its intended purpose.
Beneficial property restrictions means restrictions that are
enforceable by the lot owners and are designed to control the use of
the lot and to preserve or enhance the environment and the aesthetic
and economic value of the subdivision.
Date of filing means the date a Statement of Record, amendment, or
consolidation, accompanied by the applicable fee, is received by the
Secretary.
Good faith estimate means an estimate based on documentary
evidence. In the case of cost estimates, the documentation may be
obtained from the suppliers of the services. In the case of estimates
of completion dates, the documentation may be actual contracts let,
engineering schedules, or other evidence of commitments to complete the
amenities.
Lot means any portion, piece, division, unit, or undivided interest
in land located in any State or foreign country, if the interest
includes the right to the exclusive use of a specific portion of the
land.
OILSR means the Interstate Land Sales Registration program.
Owner means the person or entity who holds the fee title to the
land and has the power to convey that title to others.
Parent corporation means that entity which ultimately controls the
subsidiary, even though the control may arise through any series or
chain of other subsidiaries or entities.
Principal means any person or entity holding at least a 10 percent
financial or ownership interest in the developer or owner, directly or
through any series or chain of subsidiaries or other entities.
Rules means all rules adopted pursuant to the Act, including the
general requirements published in this part.
Sale means any obligation or arrangement for consideration to
purchase or lease a lot directly or indirectly. The terms ``sale'' or
``seller'' include in their meanings the terms ``lease'' and
``lessor''.
Senior Executive Officer means the individual of highest rank
responsible for the day-to-day operations of the developer and who has
the authority to bind or commit the developing entity to contractual
obligations.
Site means a group of contiguous lots, whether such lots are
actually divided or proposed to be divided. Lots are considered to be
contiguous even though contiguity may be interrupted by a road, park,
small body of water, recreational facility, or any similar object.
Start of construction means breaking ground for building a
facility, followed by diligent action to complete the facility.
Sec. 1710.2 [Removed]
3. Section 1710.2 is removed.
4. Section 1710.5 is revised to read as follows:
Sec. 1710.5 Statutory exemptions from the provisions of this chapter.
A listing of the statutory exemptions is contained in 15 U.S.C.
1703. In accordance with 15 U.S.C. 1703(a)(2), if the sale involves a
condominium or multi-unit construction, a presale clause conditioning
the sale of a unit on a certain percentage of sales of other units is
permissible if it is legally binding on the parties and is for a period
not to exceed 180 days. However, the 180-day provision cannot extend
the 2-year period for performance. The permissible 180 days is
calculated from the date the first purchaser signs a sales contract in
the project or, if a phased project, from the date the first purchaser
signs the first sales contract in each phase.
Secs. 1710.501, 1710.502, and Appendix A to part 1710 [Removed]
5. Sections 1710.501 and 1710.502 and Appendix A to Part 1710 are
removed.
PART 1715--PURCHASERS' REVOCATION RIGHTS, SALES PRACTICES, AND
STANDARDS
6. The authority citation for part 1715 is revised to read as
follows:
Authority: 15 U.S.C. 1718; 42 U.S.C. 3535(d).
7. Section 1715.1 is revised to read as follows:
Sec. 1715.1 General.
The purpose of this subpart A is to elaborate on the revocation
rights in 15 U.S.C. 1703, by enumerating certain conditions under which
purchasers may exercise revocation rights. Generally, whenever
revocation rights are available, they apply to promissory notes, as
well as traditional agreements.
8. Section 1715.2 is revised to read as follows:
Sec. 1715.2 Revocation regardless of registration.
All purchasers have the option to revoke a contract or lease with
regard to a lot not exempt under Secs. 1710.5 through 1710.11 and
1710.14 until midnight of the seventh day after the day that the
purchaser signs a contract or lease. If a purchaser is entitled to a
[[Page 13598]]
longer revocation period under State law, that period is deemed the
Federal revocation period rather than the 7 days, and all contracts and
agreements (including promissory notes) shall so state.
Sec. 1715.3 [Removed]
9. Section 1715.3 is removed.
10. Section 1715.4 is revised to read as follows:
Sec. 1715.4 Contract requirements and revocation.
(a) In accordance with 15 U.S.C. 1703(d)(3), the refund to the
purchaser is calculated by subtracting from the amount described in 15
U.S.C. 1703(d)(3)(B), the greater of:
(1) Fifteen percent of the purchase or lease price of the lot
(excluding interest owed) at the time of the default or breach of
contract or agreement; or
(2) The amount of damages incurred by the seller or lessor due to
the default or breach of contract.
(b) For the purposes of this section:
Damages incurred by the seller or lessor means actual damages
resulting from the default or breach, as determined by the law of the
jurisdiction governing the contract. However, no damages may be
specified in the contract or agreement, except a liquidated damages
clause not exceeding 15 percent of the purchase price of the lot,
excluding any interest owed.
Purchase price means the cash sales price of the lot shown on the
contract.
(c) The contractual requirements of 15 U.S.C. 1703(d) do not apply
to the sale of a lot for which, within 180 days after the signing of
the sales contract, the purchaser receives a warranty deed or, where
warranty deeds are not commonly used, its equivalent under State law.
11. Section 1715.5 is revised to read as follows:
Sec. 1715.5 Reimbursement.
If a purchaser exercises rights under 15 U.S.C. 1703(b), (c) or
(d), but cannot reconvey the lot in substantially similar condition,
the developer may subtract from the amount paid by the purchaser, and
otherwise due to the purchaser under 15 U.S.C. 1703, any diminished
value in the lot caused by the acts of the purchaser.
12. Section 1715.15 is revised to read as follows:
Sec. 1715.15 Unlawful sales practices--statutory provisions.
The statutory prohibitions against fraudulent or misleading sales
practices are set forth at 15 U.S.C. 1703(a). With respect to the
prohibitions against representing that certain facilities will be
provided or completed unless there is a contractual obligation to do so
by the developer:
(a) The contractual covenant to provide or complete the services or
amenities may be conditioned only upon grounds that are legally
sufficient to establish impossibility of performance in the
jurisdiction where the services or amenities are being provided or
completed;
(b) Contingencies such as acts of God, strikes, or material
shortages are recognized as permissible to defer completion of services
or amenities; and
(c) In creating these contractual obligations developers have the
option of incorporating by reference the Property Report in effect at
the time of the sale or lease. If a developer chooses to incorporate
the Property Report by reference, the effective date of the Property
Report being incorporated by reference must be specified in the
contract of sale or lease.
13. Section 1715.27 is revised to read as follows:
Sec. 1715.27 Fair housing.
Title VIII of the Civil Rights Act of 1968, 42 U.S.C. 3601, et
seq., and its implementing regulations and guidelines apply to land
sales transactions to the extent warranted by the facts of the
transaction.
Dated: March 13, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
(Note: The following guidelines will not be codified in the Code of
Federal Regulations.)
Guidelines to the Interstate Land Sales Registration Program
A copy of these guidelines applicable to the Interstate Land
Sales Registration Program may be obtained by writing to: Interstate
Land Sales Registration Program, HUD, 451 7th Street SW.,
Washington, DC 20410-8000 or by electronic access on the World Wide
Web, at: http://www.hud.gov
These guidelines were previously published as appendix A to Part
1710; Part 1700, Introduction; Part 1700.501, Certification
criteria; and Part 1700.502, Application for certification of State
land sales program, in title 24 of the Code of Federal Regulations
(CFR) (1995 edition).
Part IV(b), Improved Lots (which pertains to Appendix A to Part
1710) is revised to reflect recent court actions on this matter, as
discussed below.
Section 1702(a)(2) of Title 15 of the United States Code exempts
(1) the sale or lease of any improved land on which there is a
residential, commercial, condominium, or industrial building; or (2)
the sale or lease of land under a contract obligating the seller or
lessor to erect such a building on the lot within a period of 2
years.
Although there is virtually no legislative history regarding
this exemption at the time Congress passed the Interstate Land Sales
Full Disclosure Act, institutional memory within the Department is
to the effect that this exemption was added by an amendment offered
late in the course of passage. The reason for the amendment was to
exclude traditional homebuilders from the Act's requirements since
they did not comprise the class of persons Congress sought to
regulate. Nor were traditional home buyers, whose purchases tend to
be reasoned and deliberative, the class of consumers for whom the
Act's protections were intended.
HUD's first set of Guidelines, denoted ``Condominium And Other
Construction Contracts,'' was published on February 28, 1974, in
response to inquiries as to the applicability of the Act and this
exemption to condominiums. The Department published expanded
Guidelines on October 8, 1975, April 23, 1979, and August 6, 1984.
The 1984 Guidelines (which had appeared as an appendix to 24 CFR
part 1710) remained applicable until the effective date of these
Guidelines on April 26, 1996.
HUD consistently has taken the position that for a lot sale to
be eligible for the exemption under section 1702(a)(2), the seller's
obligation to construct must be real and not illusory, and must be
obligatory except for the conditions described in these guidelines.
On July 11, 1995, the United States Court of Appeals for the
Eighth Circuit issued an opinion that from HUD's perspective
effectively nullified the seller's obligation to construct. In fact,
it effectively nullified the exemption.
In Attebury v. Maumelle Company, 60 F.3d 415 (8th Cir. 1995), a
case in which HUD appeared as amicus curiae as to the exemption
issue only, the developer, Maumelle, used a sales contract that
initially recited its obligation to build within two years after the
lot sale. The contract then went on to recite a number of
conditions, the effect of which was to shift the obligation to build
onto the buyer.
HUD argued these guidelines and several cases that have
recognized an unconditional requirement on the seller to build. In
part, the case law adhered to the rule of construction that
exemptions from a remedial statute should be narrowly construed. The
court, which observed that the plaintiffs had not relied on the HUD
Guidelines in the district court, dismissed the government's
arguments primarily based on the language in this section that says:
``* * * the contract must specifically obligate the seller to
complete the building within two years'' (emphasis added), by
distinguishing the Guidelines' literal requirement that the
obligation to build be ``specific'' from the argument in this case
that the requirement be ``unconditional.''
At the time of the decision the language in question read:
If a seller (or developer) is relying on this exemption and the
residential, commercial, condominium or industrial building is not
complete, the contract must specifically obligate the seller to
complete the building within two years. If the contractual
obligation
[[Page 13599]]
is not present, the sale is not exempt. The two-year period begins
on the date the purchaser signs the sales contract. The use of a
contract that obligates the buyer to build within two years would
not exempt the sale.
As amended, the above paragraph will read:
If a seller (developer) is relying on this exemption and the
residential, commercial, condominium or industrial building is not
complete, the contract must obligate the seller to complete the
building within two years. If the contractual obligation is not
present, the sale is not exempt. The two-year period normally begins
on the date the purchaser signs the sales contract. A contract that
conditions construction upon acts of a buyer will not exempt the
sale. The essence of this exemption is that it applies to the sale
of a house (if not built at the time of sale, then to be built
within two years after the sale).
HUD's interpretation of what constitutes an obligation to
construct a building relies on general principles of contract law.
Provisions for purchaser financing and remedies clauses are matters
to be decided by the parties to the contract under the laws of the
jurisdiction in which the construction project is located. However,
such clauses may not alter the obligation of the seller to build.
(Another reason the court appears to have ruled in favor of
Maumelle is that the plaintiffs based much of their case on
allegations of fraudulent conduct, conduct which the court found
wanting of proof.)
The court also refused to accept the argument that by
recognizing the Maumelle contract as eligible for the exemption it
essentially abolished the reasons for the exemption. The purpose of
the exemption was to eliminate homebuilders from the ambit of the
Interstate Land Sales Full Disclosure Act. The rationale was that a
person who buys a house is much more attentive to the transaction
than one who is buying a lot. Moreover, the methods and practices of
selling the two products usually differs with a ``heavier sell''
being employed for lot sales.
Obviously, a buyer in a non-exempt transaction will shoulder any
responsibility for building a house. If the conditions in the
Maumelle contract create a similar result, which is the effect of
the ruling, there would be no reason for the exemption. (The fact
that fewer than 200 houses had been built on approximately 2,000
lots sold over a multi-year period was not a factor that the court
considered; the district court had found this fact not probative, a
finding that the Department found puzzling, given the purpose of
this exemption.)
For the above reasons HUD is amending the third, fourth and
fifth paragraphs of this section to make it clear that the seller's
obligation to build must be unconditional, except for the conditions
HUD recognizes as acceptable for exemption eligibility. HUD also is
amending the eighth and ninth paragraphs to update the discussion of
case law.
HUD is bound by the Maumelle decision within the jurisdiction of
the Eighth Circuit but not in other federal judicial circuits.
Moreover, since the Guidelines that the court considered when making
its decision are being changed to clarify the Department's position
that the obligation to build must be that of the developer, subject
only to the conditions recognized by HUD, HUD will not recognize the
Maumelle decision as controlling within the Eighth Circuit as to
lots offered after the publication of these amendments to the
Interstate Land Sales Guidelines.
Therefore, the Interstate Land Sales Guidelines are revised as
follows:
Guidelines to the Interstate Land Sales Registration Program
Public Information
In general. The identifiable records of the Office of Interstate
Land Sales Registration are subject to the provisions of 5 U.S.C.
552, as implemented by 24 CFR part 15--Public Information, subtitle
A.
Availability of information and records. Information concerning
land sales registrations and copies of statements of record may be
obtained from the following address: Interstate Land Sales
Registration Program, Department of Housing and Urban Development,
451 Seventh Street, SW., Washington, DC 20410-8000.
In addition, statements of record may be reviewed at such
address on any business day from 9 a.m. to 4:15 p.m.
Nonapplicability of exemptions authorized by 5 U.S.C. 552. With
the exception of information exempt from disclosure under 5 U.S.C.
552(b)(7) and 24 CFR 15.21(a)(7), all information contained in or
filed with any statement of record shall be made available to the
public as provided by 15 U.S.C. 1704(d).
Duplication fee--property report. Notwithstanding the provisions
of 24 CFR 15.14, Schedule of Fees, copies of a Property Report on
file with the Office of Interstate Land Sales Registration will be
provided upon request for a fixed fee of $2.50 per copy regardless
of the number of pages duplicated. Payment may be made in cash or by
check or money order payable to the Department of Housing and Urban
Development. Personal checks are acceptable.
Duplication and certification fee-required documents to the
several States that accept Federal filings. Notwithstanding the
provisions of 24 CFR 15.14, Schedule of Fees, copies of documents on
file with the Office of Interstate Land Sales Registration that are
provided for certification to the several states that accept Federal
filings will be provided upon request for a fixed fee of $12.00 per
filing regardless of the number of pages duplicated.
Methods of payment. The fees set forth above may be paid by
cash, by personal check, or by company check; or by U.S. money
orders; or by certified check payable to the Treasurer of the United
States or to the Department of Housing and Urban Development.
Postage stamps will not be accepted. All other fees must be paid as
set forth in 24 CFR 15.14(g).
Supplemental Information on Part 1710, Subpart C--Certification of
Substantially Equivalent State Law
Certification Criteria
(a) Certification of States requiring full disclosure. The
Secretary shall certify a state when--
(1) It is determined that the laws and regulations of the state
applicable to the sale or lease of lots not otherwise exempt under
section 1403 of the Act require the seller of lots to disclose
information which is substantially equivalent to or greater than the
information required to be disclosed in the Federal Statement of
Record; and
(2) The state's administration of such laws and regulations
shall provide that the information disclosed is current and
accurate. The means for administering the disclosure requirements
must include considerations of ample staffing, budgetary provisions
for policing functions and that the requisite legal authority be
vested in the state agency or agencies responsible for enforcing the
laws and regulations of the State land program.
(b) Certification of States providing sufficient protection. The
Secretary shall certify a state when--
(1) It can be demonstrated that the laws and regulations of the
state applicable to the sale or lease of lots not otherwise exempt
under section 1403 provide the purchasers and lessees with
protection commensurate with that which is provided by the Federal
disclosure requirements. That is, a State must develop substantive
measures plus disclosure which provides a level of protection that
is, at a minimum, comparable to the protection provided by the
Federal disclosure standard; and
(2) The administration of the laws and regulations provide that
all information disclosed is accurate and current. The means for
administering the requirements of sufficient protection must include
considerations of ample staffing, budgetary provisions for policing
functions and that the requisite legal authority be vested in the
state agency or agencies responsible for enforcing the laws and
regulations of the State land program.
(c) Applicability to Federal exemptions. To be certified a state
need not provide protections with regard to the sale or lease of
lots that would qualify for a Federal exemption. The state may
choose at its discretion to provide protections on the sale of lots
exempt under the Act. However, for certification a state's laws
should, in general, apply to the same lots as would be required to
be registered under the Act.
(d) Equivalency with Federal disclosure. In order to be
determined as substantially equivalent under paragraph (a) or (b) of
this section, a state must provide protection either through
disclosure, substantive development standards or some combination
thereof in the topics delineated in paragraph (e) of this section.
In addition, a state must satisfy requirements of paragraphs (f),
(g), (h), (i), (j) and (k) of this section.
(e) Areas of required protection. In order to be certified, a
state must require specific protections for consumers with regard to
[[Page 13600]]
paragraphs (e) (1) through (10) of this section. Protection in these
areas can be secured through disclosure, substantive development
standards or some combination thereof. Establishing protection
provisions in these areas is to be considered essential to the
granting of certification to a state. Paragraphs (e) (11) through
(15) of this section are considered to be complementary protection
provisions which would give additional strength to a state's land
program if combined with the required provisions for protection. If
the protection which is required by the items listed below is
provided through substantive standards rather than solely
disclosure, it is expected that the state will buttress those
substantive standards with requirements of performance that are
enforceable against developers. The state will designate who shall
be responsible for enforcing the commitments made by developers and
the method of enforcement to be used.
(1) Subdivision and developer information. The name of the
subdivision, the name and address of the developer or owner, the
nature of the offering and the number of lots in the subdivision
must be given to the purchaser.
(2) Method of sale or lease. Information with regard to the:
developer's method of sale, type of contract used, type and time
frame for delivery of the deed, recordation of contract and deed,
whether there is a security arrangement and its description, any
escrow arrangement for monies received, title insurance,
prepayments, defaults, developer's resale and lot exchange program,
time sharing and membership sales must be given to the purchaser.
(3) Condition of title. Information about all liens,
encumbrances or mortgages affecting purchasers in the subdivision,
the lots covered and the impact on purchasers and lessees in a
subdivision should a developer default, and mortgage release
provisions must be given to the purchaser.
(4) Condition and use of property. Information regarding land
reservations, unusual or restrictive easements, mineral
reservations, land use restrictions, special zoning permits,
environmental impact studies which may have been conducted and their
results, topographical characteristics, including any subsurface
conditions and potentially hazardous natural conditions must be
given to purchasers.
(5) Financial and legal information. Information about the net
income and worth of the developer, condition of financial operations
at present and in the preceding fiscal year, bankruptcy litigation
or other litigation to which the developer is a party or action
taken against the developer by a governmental agency which may have
a material adverse impact upon its financial condition or its
ability to transfer title to a purchaser or to complete promised
facilities must be given to purchasers.
(6) Roads. Information about access and subdivision roads, type
of surface (present and final), completion dates, percentage of
completion, buyer's cost and assessment, who is responsible for
completion and maintenance and financial assurance of completion
must be given to purchasers.
(7) Water. Information as to how water is to be supplied,
supplier, completion dates, percentage of completion, any financial
assurance of completion, buyer's cost and assessment including hook-
up and water hauling costs, who is responsible for completion,
quality and quantity, source, capacity of the water system, any
intention to transfer the water system and the cost to lot owners or
property owners association and any permits or approvals required
must be given to purchasers.
(8) Sewerage facilities. Information as to the method used,
supplier, completion dates, percentage of completion, any financial
assurance of completion, buyer's cost and assessment including hook-
up and sewage pumping and hauling, capacity of central system, who
is responsible for completion, approvals and permits required,
transfer of system to lot owners or property owners association must
be given to purchasers.
(9) Utilities (gas, electric, phone). Information as to the
availability, supplier, purchaser's or lessee's cost, completion
date, percentage of completion must be given to purchasers.
(10) Recreational facilities. A list of the facilities and
information about estimated date available for use, percentage of
completion, any financial assurance or completion, buyer's or
lessee's cost and assessment, who is responsible for completion,
maintenance, disclosures on facilities which will be leased and/or
transferred to the lot owners or property owners' association and
who may use the facilities must be given to purchasers.
(11) Lots being sold or leased. Information about the legal
descriptions of the offering by lot, block and unit number may be
given to purchasers.
(12) Location, size surrounding communities. Information which
describes the county seat, surrounding communities of significant
size and services offered, population of the area, road systems and
the potential size of the subdivision may be given to purchasers.
(13) Taxes and assessments. Information about payments to
property owners' associations, the property owners' association's
functions and responsibilities, management of the association,
extent of developer control and the purpose of any special
improvement district may be given to purchasers.
(14) Community facilities. Information about the availability of
schools, medical and dental services, postal services, fire and
police protection, shopping facilities and public transportation may
be given to purchasers.
(15) Platting. Information which reports whether the
subdivision's plats have been approved by regulatory authorities,
whether the plats have been recorded and whether the survey and
staking of each lot has been done and the cost that may be passed on
to purchasers may be given to purchasers.
(f) The disclosure law of the State must be consistent with, but
not necessarily identical to, the requirements of 15 U.S.C.
1703(a)(2)(D). This provision makes it unlawful for a developer to
represent in any manner that it will provide or complete roads,
sewers, water, gas or electric service or recreational amenities
without stipulating in the contract of sale or lease that such
services or amenities will be provided. Developers registered with
the Secretary through a certified state are subject to this
requirement. Consequently, the State may itself impose this
substantive requirement upon developers. In any event, the
disclosure documents approved by any certified state must meet the
federal standard with respect to subdivision improvements.
Developers are not allowed to represent that they will provide or
complete roads, water, sewer, gas or electric facilities or
recreational facilities unless the contract or agreement for sale
obligates the developer to complete the facilities.
(g) In order to be determined substantially equivalent to the
federal disclosure requirement, the state law and regulations must
require that prospective purchasers and lessees receive, prior to or
at the time of the signing any contract or agreement for purchase or
lease, the applicable disclosure document containing complete and
accurate information on the subdivision and the developer. In
addition, state law or regulation must require developers to file
amendments if any change occurs in any representation of material
fact required to be stated in the disclosure materials filed with
the state. The state law or regulation regarding amendments should
entail requirements equivalent to those stated in 24 CFR 1710.23.
(h) For a state to be certified, it must be demonstrated that
the state has or will have adequate full-time professional and
clerical staff in its regulatory agency or agencies responsible for
regulating the sale or lease of lots within its jurisdiction; that
there is a budget approved for that staff which will permit them to
fulfill the administrative and enforcement responsibilities; and
that the staff have adequate legal authority to take official action
in cases falling within the purview of state law and regulation.
(i)(1) If a certified state modifies or amends any law,
regulation or administrative procedure with regard to subdivision
development standards, it shall so notify HUD by registered or
certified mail within 30 days after the modification or amendment
has been enacted or promulgated. The state must submit to HUD new
copies of its laws, regulations, rulings, administrative provisions
and legal opinions, as amended, mandating the disclosure of
information or establishment of development standards regarding land
sales.
(2) Should any changes occur as set forth above and result in a
measurable alteration of the protection provided to consumers by the
state, the Secretary may, upon examination of those changes, re-
evaluate the certification status of the state's land program.
(j) Once a state is certified and the state's disclosure
document has become the Federal Property Report, the Secretary may
require, as a condition of certification, a cover page, similar to
the one presently used for federal filings, to be attached to the
certified state filings. The form and substance of the federal cover
page is explained in 24 CFR 1710.105. If a certified state filing
does not have a cover page, the Secretary may require that, as a
condition of certification, the state include
[[Page 13601]]
information regarding the federal revocation period within the body
of the state disclosure document.
(k) The Secretary shall require all certified states to submit
to the Secretary a copy of any notice of suspension which the state
has issued to a developer at the time the notice is sent to the
developer.
Application for Certification of State Land Sales Program
(a) In order to be certified, a state must submit an application
to the Office of Interstate Land Sales Registration, Department of
Housing and Urban Development, 451 7th Street, SW., Washington, DC
20410. The application should be titled ``Application for
Certification of State Land Sales Program.'' The application should
use the section format and contain the information set out below:
Application for Certification of State Land Sales Program Submitted by:
(Name, Address and Telephone Number of State Agency and Person To
Contact.)
Section 1. Legal Authorities. This section should contain copies
of all laws and regulations (including rulings and legal opinions
having the effect of law) establishing and interpreting disclosure
requirements or substantive development standards with regard to
land sales and leases including all administrative provisions and
all provisions establishing exemptions from the rule. Only those
legal authorities which deal with land sales and leases subject to
the federal disclosure requirements need be submitted.
Section 2. Sample Copies of Material to be Submitted by
Developers to the State. This section should contain sample copies
of all materials required to be filed with the agency responsible
for regulating the sale of lots in subdivisions and sample copies of
all material required to be provided to purchasers and lessees and
prospective purchasers and lessees.
Section 3. Methods of Administration and Enforcement. This
section should contain a detailed statement on the methods and scope
of the state's administration and enforcement procedures to include:
(a) The name and address of the agency responsible for
regulating the sale or lease of lots in subdivisions.
(b) The staffing capacity of the responsible State Regulatory
Agency. There should be included:
(1) An organizational chart which describes not only the
internal structure of the regulatory agency (agencies) but also the
relationship of that agency to other decision-making centers;
(2) a description of the functions and duties of the full-time
staff;
(3) the eligibility criteria, i.e., training, education and
experience, for principal members of the staff; and
(4) the formula used in calculating the necessary number of
staff members to fulfill administrative, investigative and
enforcement responsibilities. The state should submit for the
Secretary's review the actual number of complaints received,
enforcement actions taken, and investigations initiated for the past
three years.
(C) A description of the anticipated additional staff, if any,
and their duties and qualifications.
(D) The method and scope of investigation and enforcement to be
used. The state should demonstrate the procedures to be followed
from the time a complaint is received until the completion of action
on that complaint and the kinds of sanctions which may be involved.
(E) Included should be an accounting of the number of new
filings received per year for the past three years, the number of
amendments received per year, and the total number of active
filings.
Section 4. Assertion of Equivalency. This section should contain
a detailed statement supporting the state's claim that its land
program provides purchasers and lessees through disclosure,
substantive development standards or combination thereof, protection
substantially equivalent to the protection provided for them by
Federal law.
(b) Upon receiving an application for certification, the
Secretary will publish a Notice of Application in the Federal
Register. The purpose of this public notice is to give other
certified states and other interested parties an opportunity to
review and comment on applications and to enhance consistency among
states which are certified. Person(s) interested in receiving
application materials for review and comment purposes may request
them from the Secretary. Comments should be submitted no later than
30 days after the Notice of Application has been published.
Supplemental Information to Part 1710: Guidelines for Exemptions
Available Under the Interstate Land Sales Full Disclosure Act
Table of Contents
Part I Introduction
Part II Definitions
(a) Anti-Fraud Provisions
(b) Common Promotional Plan
(c) Delivery of Deed
(d) Lot
(e) Sale
(f) Site
(g) Subdivision
Part III Exclusions from the Act
(a) Reservation
(b) Undivided Interest
Part IV Statutory Exemptions from the Title Requiring No
Determination by HUD
(a) Twenty-Five Lots
(b) Improved Lots
(c) Evidences of Indebtedness
(d) Securities
(e) Government Sales
(f) Cemetery Lots
(g) Sales to Builders
(h) Industrial or Commercial Developments
Part V Statutory Exemptions From Registration Requiring No HUD
Determination
(a) One Hundred Lot Exemption
(b) Twelve Lot Exemption
(c) Scattered Site Exemption
(d) Twenty Acre Lots Exemption
(e) Single-Family Residence Exemption
(f) Mobile Home Exemption
(g) Intrastate Exemption
(h) Metropolitan Statistical Area (MSA) Exemption
Part VI Regulatory Exemptions From Registration Requiring No HUD
Determination
(a) General
(b) Eligibility Requirements
(1) Inexpensive Lots
(2) Five Year Lease
(3) Lot Sales to Developers
(4) Adjoining Lot
(5) Lot Sales to a Government
(6) Sales of Leased Lots
Part VII Regulatory Exemption. HUD Determination Required
Part VIII Advisory Opinion
(a) General
(b) Requirements
Part IX No Action Letter
Part I--Introduction
The Interstate Land Sales Registration Division (also known as
OILSR) is offering these Guidelines to clarify agency policies and
positions with regard to the exemption provisions of the Interstate
Land Sales Full Disclosure Act (the Act), Pub. L. 90-448 (15 U.S.C.
1701 through 1720), and its implementing regulations, 24 CFR parts
1710 through 1730. The regulations comply with the Paperwork
Reduction Act of 1980, as evidenced by Office of Management and
Budget approval number 2502-0243. These Guidelines are intended to
assist a developer in determining whether or not a real estate
offering is exempt from any or all of the requirements of the Act.
They supersede any Guidelines previously issued by this Office.
This is an interpretive rule, not a substantive regulation. Not
every conceivable factor of the exemption process is covered in
these Guidelines and variations may occur in unique situations.
Examples are given, but the examples do not in any way exhaust the
myriad possibilities occurring in land development and land sales
activity, nor do they set absolute standards.
To understand the exemptions, the jurisdictional scope of the
Act must be understood. Any use of the mails, including intrastate
use, or advertising in media which have interstate circulation is
sufficient to establish jurisdiction. Generally, if a real estate
offering falls under the jurisdiction established by the Act, a
developer of a subdivision containing 100 or more lots must register
the subdivision. Registration includes filing a Statement of Record
and supporting documentation with HUD and providing to prospective
purchasers an effective Property Report containing important facts
about the subdivision and the developer.
Effective June 21, 1980, the provisions of the Act that prohibit
misrepresentations or practices that would result in defrauding
purchasers generally apply to sales or lease programs of 25 or more
lots offered pursuant to a common promotional plan where any means
or instruments of transportation or communication in interstate
commerce, or the mails, are used.
Real estate offerings that meet the eligibility requirements or
an exemption are exempt from all or some of the Act's requirements
unless the method of operation
[[Page 13602]]
has been adopted for the purpose of evading the requirements of the
law. The exemptions are available for subdivisions with particular
characteristics, for certain individual lot sales transactions or
for real estate meeting specific criteria. In addition, the Act
gives the Secretary authority to exempt subdivisions or lots in a
subdivision if, because of the small amount involved or the limited
character of the offering, enforcement of the Act (i.e., full
registration and disclosure) is not necessary in the public interest
and for the protection of purchasers.
If the offering is subject to the Act and does not qualify for
an exemption, it must be registered. The requirement of registration
does not imply that the real estate value is questioned or the
integrity of a business is suspect. The law simply provides that
prospective purchasers have the right to adequate disclosure of
facts about a subdivision so that an informed decision about the
potential purchase can be made.
As exceptions to the registration and full disclosure
requirements of the Act, the exemption provisions are strictly
construed. The exemption requirements do not prescribe a method of
operation or dictate how a subdivision should be developed.
A developer is not required to submit any documentation or
obtain a determination from HUD to operate under any exemption
except the one provided under 24 CFR 1710.16 (part VI of these
Guidelines). However, if there is any question whatsoever concerning
whether or not a real estate offering qualifies for any of the
exemptions, developers are encouraged to seek legal counsel or
obtain an Advisory Opinion from the Department before making any
sales or leases. Experience has shown that developers are sometimes
misinformed as to the applicability of the Act to their offering and
that such misunderstanding can result in violative sales and the
disruption of business. The instructions and format for obtaining an
Advisory Opinion are contained in Sec. 1710.17 of the regulations
and in part VIII of these Guidelines.
Part II--Definitions
The following definitions are included here because of the
importance each has to the explanation and understanding of HUD's
interpretations of the exemption requirements. Furthermore, with the
exception of ``lot'', ``sale'', ``common promotional plan'', and
``subdivision'', these definitions are not set forth elsewhere. The
definitions of ``lot'' and ``sale'' are repeated here because of
their extraordinary importance to the exemptions.
(a) Anti-Fraud Provisions means the provisions of the Act that
prohibit the use of any sales practices, advertising or promotional
materials that: would be misleading to purchasers; contain any
misrepresentation of material facts or untrue statements; or would
operate as a fraud or deceit upon a purchaser. Also prohibited are
representations that roads, sewer, water, gas or electric services
or recreational amenities will be provided or completed by the
developer without so stipulating in the contract. The relevant
provisions are set forth in 15 U.S.C. 1703(a)(2). The regulations
that implement the anti-fraud provisions are set forth in 24 CFR
part 1715, subpart B.
(b) Common Promotional Plan means any plan undertaken by a
single developer or a group of developers acting together to offer
lots for sale or lease. A common promotional plan is presumed to
exist if land is offered by a developer or a group of developers
acting in concert and the land is contiguous or is known,
designated, or advertised as a common development or by a common
name. The number of lots covered by each individual offering has no
bearing on whether or not there is a common promotional plan.
Other characteristics that are evaluated in determining whether
or not a common promotional plan exists include, but are not limited
to: a 10% or greater common ownership; same or similar name or
identity; common sales agents; common sales facilities; common
advertising; and common inventory. The presence of one or more of
the characteristics does not necessarily denote a common promotional
plan. Conversely, the absence of a characteristic does not
demonstrate that there is no common promotional plan.
Two essential elements of a common promotional plan are a thread
of common ownership or developers acting in concert. However, common
ownership alone would not constitute a common promotional plan. HUD
considers the involvement of all principals holding a 10 percent or
greater interest in the subdivision to determine whether there is a
thread of common ownership. If there is common ownership or if the
developers are acting in concert, and there is common advertising,
sales agents or sales office, a common promotional plan is presumed
to exist. Experience has led to the conclusion that sales agents
generally will direct a prospective purchaser to any or all
properties in inventory to make a sale.
The phrase ``common promotional plan'' is most often
misunderstood by those who believe that ``promotion'' implies an
enthusiastic sales campaign. Any method used to attract potential
purchasers is, in fact, the ``promotional plan''. For example,
direct mail campaigns and free dinners may be the promotional plan
of one developer while another developer's promotion may be limited
to classified advertisements in a local newspaper.
Brokers selling lots as an agent for any person who is required
to register are required to comply with the requirements of the Act
for those sales. Brokers selling lots for different individuals who
do not own enough lots to come within the jurisdiction established
by the Act generally would not be considered to be offering lots
pursuant to a common promotional plan as long as they are merely
receiving the usual real estate commission for such sales. If the
broker has an ownership interest in the lots or is receiving a
greater than normal real estate commission, the broker may be
offering lots pursuant to common promotional plan and may be
required to comply with the requirements of the Act.
(c) Delivery of Deed means the physical transfer of a recordable
deed, executed by the seller to the purchaser, to the purchaser's
agent or to the appropriate governmental recording office. If the
transfer (i.e., delivery) is to an agent or to a recording office,
there must not be any conditions imposed upon the purchaser or any
further action to be taken by either the purchaser or the seller. If
delivery is to the place of recordation, it must be accompanied by
the proper recordation fees.
(d) Lot means any portion, piece, division, unit or undivided
interest in land if such interest includes the right to the
exclusive use of a specific portion of the land or unit. This
applies to the sale of a condominium or cooperative unit or a
campsite as well as a traditional lot.
If the purchaser of an undivided interest or a membership has
exclusive repeated use or possession of a specific designated lot
even for a portion of the year, a lot, as defined by the
regulations, exists. For purposes of definition, if the purchaser
has been assigned a specific lot on a recurring basis for a defined
period of time and could eject another person during the time he has
the right to use that lot, then the purchaser has an exclusive use.
(e) Sale means any obligation or agreement for consideration to
purchase or lease a lot directly or indirectly. The time of sale is
measured from when a purchaser signs a contract, even if the
contract contains contingencies beyond the control of the seller.
For example, if a developer uses a contract which states that the
sale is contingent upon obtaining an exemption from HUD, a sale, for
the purposes of this definition, occurred when the purchaser signed
the contract. The terms ``sale'' and ``seller'' include the terms
``lease'' and ``lessor'' for the purposes of the regulations and
these Guidelines.
(f) Site means a group of contiguous lots whether such lots are
actually divided or proposed to be divided. Lots are considered to
be contiguous even though contiguity may be interrupted by a road,
park, small body of water, recreational facility or any similar
object.
(g) Subdivision means any land that is located in any state or
in a foreign country and is divided or is proposed to be divided
into lots, whether contiguous or not, for the purpose of sale or
lease as part of a common promotional plan. Any number of lots,
whether divided by the previous owner, divided by the current owner,
or merely proposed to be divided may constitute a subdivision.
``Proposed to be divided'' includes the developer's intention to
subdivide land, as well as the developer's intention to add
additional land or units.
Part III--Exclusions From the Act
The following items are excluded from the coverage of the Act:
(a) Reservation. A reservation is a non-binding agreement used
to gauge market feasibility for a developer through which a
potential purchaser expresses an interest to buy or lease a lot or
unit at some time in the future. A deposit may be accepted from the
interested person provided that the money is placed in escrow with
an independent institution having trust powers and is refundable in
full at any time at the option
[[Page 13603]]
of the potential purchaser. To be excluded from the Act, in no case
may a reservation become a binding obligation to purchase a lot; the
potential purchaser must take some subsequent affirmative action,
typically the signing of a sales contract, to create a binding
obligation. An option agreement is an arrangement for consideration
in which a potential purchaser could forfeit money; therefore, an
option agreement is not a reservation. In no event may a document
purporting to be a Property Report or other evidence of compliance
with the Act be delivered to an interested party when entering a
reservation agreement for a lot or proposed condominium unit which
is neither effectively registered nor exempt.
(b) Undivided interests. The sale of undivided interests that do
not carry with them the right of exclusive use of a specific lot
does not establish jurisdiction. For example, a camping subdivision
sold as 400 undivided interests to tenants in common, where
purchasers have a co-extensive, non-exclusive right to the use and
enjoyment of all campsites on a space available basis and no
purchaser has an expressed or implied exclusive right to repeatedly
use or occupy any specific campsite, would not be covered by the
Act.
Part IV--Statutory Exemptions Requiring No Determination by HUD
The discussions that immediately follow pertain to 15 U.S.C.
1702(a) (1) through (8). The exemptions are set forth in the
regulations at 24 CFR 1710.5 (a) through (h). These provisions
exempt sales from both the anti-fraud and the registration
provisions of the Act.
(a) Twenty-five Lots. (15 U.S.C. 1702(a)(10) and 24 CFR
1710.5(a)).
This section exempts the sale or lease of lots in a subdivision
(i.e., lots offered pursuant to the same common promotional plan)
that contains fewer than 25 lots. If a subdivision contains 25 or
more lots, but fewer than 25 of those lots are offered for sale
under a common promotional plan, those sales would be exempt. Thus,
in a subdivision of 28 lots in which 4 lots are not offered for sale
because, for example, they are permanently dedicated to the public
for a park, the sale of the remaining 24 lots is exempt.
If fewer than 25 lots are acquired in a larger subdivision, the
offer of these lots may be subject to the Act if the acquiring party
is in any way acting in concert with the previous or current
developer of the balance of the subdivision. Correspondingly, if
fewer than 25 lots are acquired in a larger subdivision, the offer
of the lots may be exempt if there is neither an identity of
interest between the acquiring party and the previous or current
developer nor any form of concerted action that constitutes a common
promotional plan.
Since the fewer than 25 lots exemption is based upon the number
of lots as opposed to the number of sales, resales of a lot will not
be counted toward the fewer than 25 lots limit.
(b) Improved Lots, 15 U.S.C. 1702(a)(2).
Section 1702(a)(2) of Title 15 of the United States Code exempts
(1) the sale or lease of any improved land on which there is a
residential, commercial, condominium, or industrial building; or (2)
the sale or lease of land under a contract obligating the seller or
lessor to erect such a building on the lot within a period of two
years.
For a building or unit to be considered complete, it must be
physically habitable and usable for the purpose for which it was
purchased. A residential structure, for example, must be ready for
occupancy and have all necessary and customary utilities extended to
it before it can be considered complete. Manufactured home lots with
pads but no structure, even if improved with utilities and roads,
will not qualify for this exemption. Recreational vehicles are not
considered buildings.
If a seller (developer) is relying on this exemption and the
residential, commercial, condominium or industrial building is not
complete, the contract must obligate the seller to complete the
building within two years. If the contractual obligation is not
present, the sale is not exempt. The two-year period normally begins
on the date the purchaser signs the sales contract. A contract that
conditions construction upon acts of a buyer will not exempt the
sale. The essence of this exemption is that it applies to the sale
of a house (if not built at the time of sale, then to be built
within two years after the sale).
HUD's interpretation of what constitutes an obligation to
construct a building relies on general principles of contract law.
Provisions for purchaser financing and remedies clauses are matters
to be decided by the parties to the contract under the laws of the
jurisdiction in which the construction project is located. However,
such clauses may not alter the obligation of the seller to build.
For example, if the type and terms of financing are subject to
negotiation between buyer and seller, but the buyer is unable to
obtain financing as a condition of the obligation to build, then the
sale fails for exemption purposes. The inability of the buyer to
obtain construction financing will not relieve the seller from the
obligation to build, thereby leaving the buyer with a lot free of a
construction obligation. Since the nature of the transaction is the
sale of a house (or other structure), there should be no reason for
separate construction financing in the normal course of business.
The contract must not allow nonperformance by the seller at the
seller's discretion. Contracts that permit the seller to breach
virtually at will are viewed as unenforceable because the
construction obligation is not an obligation in reality. Thus, for
example, a clause that provides for a refund of the buyer's deposit
if the seller is unable to close for reasons normally within the
seller's control is not acceptable for use under this exemption.
Similarly, contracts that directly or indirectly waive the buyer's
right to specific performance are treated as lacking a realistic
obligation to construct. HUD's position is not that a right to
specific performance of construction must be expressed in the
contract, but that any such right that purchasers have must not be
negated. For example, a contract that provides for a refund or a
damage action as the buyer's sole remedy would not be acceptable.
Contract provisions which allow for nonperformance or for delays
of construction completion beyond the two-year period are acceptable
if such provisions are legally recognized as defenses to contract
actions in the jurisdiction where the building is being erected. For
example, provisions to allow time extensions for events or
occurrences such as acts of God, casualty losses or material
shortages are generally permissible. Also permissible, in the case
of multi-unit construction, is a clause conditioning the completion
of construction or closing of title on a certain percentage of sales
of other units. The presale period cannot exceed 180 days from the
date the first purchaser signs a contract in the project or, in a
phased project, from the date the first purchaser signs a sales
contract in a phase. Such a clause may not extend the overall two-
year obligation to construct.
Although the factual circumstances upon which nonperformance or
a delay in performance is based may vary from transaction to
transaction, as a general rule delay or nonperformance must be based
on grounds cognizable in contract law such as impossibility or
frustration and on events which are beyond the seller's reasonable
control.
Because of the variations in applicable contract law among the
states and the many different provisions that are used by sellers in
construction contracts, HUD may condition its advisory opinions
regarding this exemption on representations by local counsel as to
the current status of state law on the relevant issues. For example,
the Florida Supreme Court has ruled that there must be an
unconditional commitment to complete construction within two years
and that the remedies available to the purchaser must not be
limited. Samara Development Corp. v. Marlow, 556 So.2d 1097 (Fla.
1990). See also Schatz v. Jockey Club Phase III, Ltd., 604 F. Supp.
537 (S.D. Fla. 1985). Developers, especially those in Florida,
should be aware of these decisions, as well as decisions in other
jurisdictions, e.g., Markowitz v. Northeast Land Co., 906 F.2d 100
(3d Cir. 1990).
For a different view, readers should refer to Attebury v.
Maumelle Company, 60 F.3d 415 (8th Cir. 1995), in which the court
upheld a contractual provision to build as sufficient to qualify for
the exemption despite the fact that the contract then shifted that
responsibility to the buyer. This revision of the Guidelines dealing
with the ``Improved lot'' exemption is in reaction to the Maumelle
decision. At the time of this writing another case of interest was
pending in the United States District Court for the Eastern District
of Michigan. Whether it ultimately will result in a decision on the
Land Sales issues is unknown, as it is the understanding of the
Department that settlement negotiations are ongoing. The court is
considering those issues on remand from the Court of Appeals for the
Sixth Circuit. See Becherer v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 43 F.3d 1054 (6th Cir. 1995).
Since questions about this exemption most often arise in
connection with condominiums, developers and others should be aware
of the decision in the case
[[Page 13604]]
of Winter v. Hollingsworth Properties Inc., 777 F.2d 1444 (11th Cir.
1985), in which the court held that the Interstate Land Sales Full
Disclosure Act applied to the sale or lease of condominium units.
This ruling is in consonance with the Department's longstanding
position on the condominium issue. The weight of authority of other
cases, both Federal and State, supports the Department's position.
Therefore, it continues to be the Department's policy that the mere
use of the condominium form of ownership does not determine
jurisdiction of the Act and that developers should look to the
specific requirements of the statutory and regulatory exemptions as
amplified in these Guidelines to determine the applicability of the
Act.
(c) Evidence of Indebtedness. (15 U.S.C. 1702(a)(3) and 24 CFR
1710.5(c)).
This section exempts the sale or lease of evidences of
indebtedness (typically a note) secured by a mortgage or deed of
trust on real estate. The sale of such notes, which is common in the
industry, is exempt; however, the underlying sale of the land is not
exempt under this provision.
(d) Securities. (15 U.S.C. 1702(a)(4) and 24 CFR 1710.5(d)).
This section exempts the sale of securities issued by a real
estate investment trust.
(e) Government Sales. (15 U.S.C. 1702(a)(5) and 24 CFR
1710.5(e)).
This section exempts the sale or lease of real estate by any
government or government agency. This exemption extends to the sale
or lease of land by a city, state, or foreign government as well as
the sale of land by the U.S. Government. However, it does not exempt
sales or leases of lots by Federal or state chartered and regulated
institutions such as banks or savings and loan associations, nor
does the fact that the development is assisted, insured or
guaranteed under a Federal or state program exempt the lot sales.
Municipal Utility Districts and Special Improvement Districts may or
may not be considered a qualified government agency under this
exemption depending on the legal basis and operation of the
District.
(f) Cemetery Lots. (15 U.S.C. 1702(a)(6) and 24 CFR 1710.5(f)).
This section exempts the sale or lease of cemetery lots.
(g) Sales to Builders. (15 U.S.C. 1702(a)(7) and 24 CFR
1710.5(g)).
This section exempts the sale or lease of lots to any person who
acquires the lots for the purpose of engaging in the business of
constructing residential, commercial, or industrial buildings or for
the purpose of resale or lease of the lots to persons engaged in
such a business. The term business is viewed as an activity of some
continuity, regularity, and permanency, or means of livelihood.
The sale or lease of lots to an individual who purchases the
lots to have his or her own home built is not exempt under this
provision. The sale to a non-broker who is buying a lot for
investment with indefinite plans for resale also is not exempt.
(h) Industrial or Commercial Developments. (15 U.S.C. 1702(a)(8)
and 24 CFR 1710.10(h)).
This section exempts the sale or lease of real estate which is
zoned for industrial or commercial development. If there is no
zoning ordinance, the exemption is available only if the real estate
is restricted to industrial or commercial development by a
declaration of covenants, conditions, and restrictions which have
been recorded in the official records of the city or county in which
the real estate is located. In addition, the following five
conditions must exist in order to establish eligibility for this
exemption:
(1) Local authorities have approved access from the real estate
to a public street or highway. The approved access to a public
street or highway must run to the legal boundary of the subdivision,
but need not run to each and every lot;
(2) The purchaser or lessee of the real estate is a duly
organized corporation, partnership, trust or business entity engaged
in commercial or industrial business. To be considered ``duly
organized'', a purchaser or lessee must have set up an
administrative structure to conduct business, such as: checking
accounts; licenses and permits, if required; evidence of intent; and
a set of accounting records. The phrase ``engaged in business''
implies an activity of some continuity, regularity and permanency,
or means of livelihood. A new entity or individual starting a
business must be authorized to conduct such business in the
jurisdiction in which the subdivision is located;
(3) The purchaser or lessee of the real estate is represented in
the transaction of sale or lease by a representative of its own
selection. The term ``representative'' is not limited to attorneys
and does not exclude sole proprietors from representing themselves.
Any person can serve as the representative of the purchaser or
lessee so long as sufficient evidence can be produced to prove
authority to act in that capacity;
(4) The purchaser or lessee of the real estate affirms in
writing to the seller that: it is either purchasing or leasing the
real estate substantially for its own use or it has a binding
commitment to sell, lease or sublease the real estate to an entity
which meets the requirements of (2) above; it is engaged in
commercial or industrial businesses; and it is not affiliated with
the seller or agent. These affirmations should be retained by the
developer in accordance with the statute of limitations of the local
jurisdiction or for a period of three years, whichever is longer. If
the affirmation is included in the contract, a space must be
provided for the purchaser to initial immediately following the
affirmation clause; and
(5) A title insurance policy or a title opinion is issued in
connection with the transaction showing that title to the real
estate purchased or leased is vested in the seller or lessor,
subject only to such exceptions as are approved in writing by the
purchaser or lessee, preferably in a separate document, prior to the
recordation of the instrument of conveyance or execution of the
lease. The recordation of a lease is not required. Any purchaser or
lessee may waive, in writing in a separate document, the requirement
that a title insurance policy or title opinion be issued in
connection with the transaction.
Part V--Statutory Exemptions From Registration Requiring No HUD
Determination
The discussions that immediately follow pertain to 15 U.S.C.
1701(b) (1
FR Doc. 96-7280 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Interstate Land Sales Registration Program; Streamlining Final Rule
) through (8) and 24 CFR 1710.6 through 1710.13.
The developer must comply with the Act's anti-fraud provisions
(15 U.S.C. 1703(a)(2)) for sales of lots in the subdivision that are
exempt under these provisions. Developers should be particular aware
of the requirements of 15 U.S.C. 1703(a)(2)(D).
(a) One Hundred Lot Exemption. (15 U.S.C. 1702(b)(1) and 24 CFR
1710.6).
This section exempts the sale of lots in a subdivision if: the
subdivision contained fewer than 100 lots on April 28, 1969; has,
since that date, contained fewer than 100 lots; and will continue to
contain fewer than 100 lots. The 100 lot count for purposes of the
exemption excludes lots that are exempt from jurisdiction under 24
CFR 1710.5 (b) through (h). It should be noted that the ``25 lot''
exemption under Sec. 1710.5(a) cannot be used in connection with the
``100 lot'' exemption.
For example, a developer of a subdivision containing a total of
129 lots since April 28, 1969, qualifies for this exemption if at
least 30 lots are sold in transactions that are exempt because the
lots had completed homes erected on them. The 30 exempt transactions
may fall within any one exemption or a combination of exemptions
noted in Sec. 1710.5 (b) through (h) and may be either past or
future sales. In the above example, the developer also could qualify
if twelve lots had been sold with residential structures already
erected on them, nine lots had been sold to building contractors and
at least nine lots were reserved for either the construction of
homes by the developer or for sales to building contractors. The
reserved lots need not be specifically identified.
Developers of subdivisions containing more than 99 lots who wish
to operate under this exemption must assure themselves that all lots
in excess of 99 have been and will be sold in transactions exempt
under 24 CFR 1710.5 (b) through (h). The sale of more than 99 lots
in transactions not exempt under Sec. 1710.5 (b) through (h) would
nullify this exemption for prior and future sales and might result
in prior sales being voidable at the purchaser's option.
Since the ``100 lot'' exemption applies to the number of the
lots as opposed to the number of sales, resales of a lot will not be
counted toward the 100 lot limit. However, any sale or resale of a
lot must comply with the anti-fraud provisions.
If fewer than 100 lots are acquired in a larger subdivision, the
offer of these lots will not be exempt if the acquiring party is, in
any way, acting in concert with the previous or current developer of
the balance of the subdivision so as to create a common promotional
plan for 100 or more lots unless sales of the other lots are exempt
under Sec. 1710.5. However, if fewer than 100 lots are acquired in a
larger subdivision, the offer of the lots may be exempt if there is
neither an identity of interest between the acquiring party and the
previous or current developer nor a form of concerted action
constituting a common promotional plan.
[[Page 13605]]
(b) Twelve Lot Exemption. (15 U.S.C. 1702(b)(2) and 24 CFR
1710.7).
This section exempts the sale of lots from the registration
requirements of the Act if, beginning with the first sale after June
20, 1980, no more than twelve lots in the subdivision are sold in
the subsequent 12-month period. Thereafter, the sale of the first
twelve lots each period is exempt from the registration requirements
if no more than twelve lots were sold in each previous 12-month
period that began with the anniversary date of the first sale after
June 20, 1980. For example, if a developer's first lot sale after
June 20, 1980 occurred on August 5, 1980 and no more than eleven
additional lots in the subdivision were sold through August 4, 1981,
the sales would be exempt.
During the second year of operation under this exemption
(beginning on August 5, 1981 in the example) at least the first
twelve lot sales would be exempt. However, if lot sales exceed
twelve in the second or any subsequent year, the exemption would
terminate on the sale of the thirteenth lot. Once eligibility has
been terminated, the exemption is no longer available and cannot be
recaptured by the same developer for the same subdivision even if
there are fewer than twelve lots sold in subsequent years.
A developer may apply to the Secretary to establish a different
twelve-month period for use in determining eligibility for the
exemption, and the Secretary may allow the change if it is for good
cause and consistent with the purpose of this section. An example
would be to change the year to coincide with the developer's fiscal
or tax year.
In determining eligibility for this exemption, all lots sold or
leased in the subdivision after June 20, 1980 are counted, whether
or not the lot is registered or the transaction is otherwise exempt,
such as the sale of a home and lot package. This exemption extends
to twelve lots, not twelve sales. Each lot would be counted in the
sale or lease of multiple lots.
Since the ``twelve lot'' exemption applies to the number of lots
as opposed to the number of sales, resales of a lot will not be
counted toward the twelve lot limit. The sale and resale of a lot
must qualify for the exemption and comply with the anti-fraud
provisions. However, lot sales exempt under Sec. 1710.5 (b) through
(h), while counted toward the total of twelve, are not required to
comply with the anti-fraud provisions.
(c) Scattered Site Exemption. (15 U.S.C. 1702(b)(3) and 24 CFR
1710.8).
This section exempts from the Act's registration requirements
the sale of lots in a subdivision consisting of noncontiguous parts
if: (1) each noncontiguous part of the subdivision contains twenty
or fewer lots; and (2) each purchaser or purchaser's spouse makes a
personal, on-the-lot inspection of the lot purchased before signing
a contract.
This exemption is intended to relieve the developers of small,
scattered offerings of the requirement to register their
subdivisions. The exemption may also apply to real estate brokers
who have an ownership interest in more than one site, each
containing 20 or fewer lots.
If a developer intends to rely on this exemption, it is
important that the developer understand the definition of
subdivision, how a common promotional plan is determined and what
constitutes a site. These terms are defined in part II of these
Guidelines.
Lots that are contiguous when they are originally platted or
developed are considered to remain contiguous. For purposes of this
exemption, interruptions such as roads, parks, small bodies of water
or recreational facilities do not serve to break the contiguity of
parts of a subdivision.
(d) Twenty Acre Lots Exemption. (15 U.S.C. 1702(b)(4) and 24 CFR
1710.9).
This section exempts the sale of lots in a subdivision from the
registration requirements of the Act if, since April 28, 1969, each
lot in the subdivision has contained at least twenty acres. In
determining eligibility for the exemption, easements for ingress and
egress or public utilities are considered part of the total acreage
of the lot if the purchaser retains ownership of the property
affected by the easement.
This exemption applies to the entire subdivision and requires
that each lot in the subdivision be twenty acres or larger in order
for the subdivision to qualify. If a single lot offered in the
subdivision is less than twenty acres in size, no lot in the
subdivision qualifies for the exemption. If a developer has two
sites which comprise the subdivision and only one of the sites
contains lots that are all greater than twenty acres in size, the
offering of these lots would not be exempt under this provision. All
lots offered pursuant to a common promotional plan must be
considered.
A subdivision which is platted of record and contains a single
lot that is less than twenty acres cannot qualify for the exemption
even if the lots are offered in multiples that aggregate twenty
acres or more. Further, if the platted lots are all twenty acres or
more in size, but a lot is divided and a portion that is less than
twenty acres is offered for sale, the exemption would not be
available to the subdivision.
(e) Single-Family Residence Exemption. (15 U.S.C. 1702(b)(5) and
24 CFR 1710.10).
(1) General. This section provides an exemption for the sale of
lots that are limited to single-family residential use. Developers
are advised to carefully review the eligibility requirements listed
below before proceeding with sales. Note especially that some of the
eligibility requirements pertain to the entire subdivision while
others apply to individual lots.
(2) Subdivision Requirements. All lots offered under the same
common promotional plan must comply with the two eligibility
requirements listed below in order for any lot to be eligible for
this exemption.
(i) The subdivision must meet all local codes and standards. If
local codes expressly permit incremental development, then only the
portions of the subdivision being offered at any given time are
required to meet the codes and standards to satisfy this
requirement. Otherwise, the entire subdivision must comply with the
local standards.
(ii) In the promotion of the subdivision, there cannot be
offers, by direct mail or telephone solicitation, of gifts, trips,
or dinners or the use of similar promotional techniques to induce
prospective purchasers to visit the subdivision or to purchase a
lot. There is no prohibition against using the mails, telephone or
other advertising media to promote or advertise the offering or to
respond to inquiries from potential purchasers. The only prohibition
is that these media cannot contain offers of gifts, trips, dinners
or other inducement.
In order to qualify for this exemption, the subdivision must
have complied with the requirements pertaining to advertising and
promotional methods since June 13, 1980, the date the exemption
became effective.
(3) Lot Requirements. Having met the edibility requirements for
a subdivision, each lot offered under the exemption also must comply
with the eight requirements listed below. Lots within a subdivision
that do not comply with these additional requirements must either be
registered or sold in compliance with another exemption, even though
the two subdivision requirements have been met.
(i) The lot must be located within a municipality or county
where a unit of local government or the State specifies minimum
standards for the development of subdivision lots taking place
within its boundaries. Each lot must comply with these standards.
The following is a list of the areas which must be regulated:
(A) Lot dimensions.
(B) Plat approval and recordation.
(C) Roads and access.
(D) Drainage.
(E) Flooding.
(F) Water supply.
(G) Sewage disposal.
(ii) Each lot sold under the exemption must be either zoned for
single-family residence or, in the absence of a zoning ordinance,
limited exclusively by enforceable covenants or restrictions to
single-family residences or, in the absence of a zoning ordinance,
limited exclusively by enforceable covenants or restrictions to
single-family residences. Manufactured homes, townhouses, and
residences for one to four family use are considered single-family
residences for purposes of this exemption. Recreational vehicles are
not considered to be residential buildings. Manufactured homes must
be affixed to the real estate to be eligible, e.g., connected to
water, sewer and electrical sources and on blocks with skirts.
The phrase ``* * * in the absence of a zoning ordinance'' is
interpreted in its literal sense. The existence of a zoning
ordinance other than single-family residence zoning is considered to
be disqualifying even if there are covenants or restrictions limited
construction to single-family residences. Situations such as the
foregoing would, however, be a candidate for a ``substantial
compliance'' exemption (24 CFR 1710.16) if all other eligibility
requirements of the exemption are satisfied substantially.
``Substantial compliance'' is discussed in part VII of these
Guidelines.
[[Page 13606]]
(iii) The lot must be situated on a paved street or highway
which has been built to standards prescribed by a unit of local
government in which the subdivision is located and be acceptable to
that local unit. If the street or highway is not complete, the
developer must post a bond or other surety acceptable to the
municipality or county in the full amount of the cost of completing
the street or highway to assure its completion to local standards.
For the purposes of this exemption, paved means concrete or pavement
with a bituminous wearing surface that is impervious to water,
protects the base and is durable under the traffic load and
maintenance contemplated.
(iv) The unit of local government or a homeowners' association
must have accepted or be obligated to accept the responsibility for
maintaining the street or highway upon which the lot is situated.
The obligation of the local government entity to accept this
responsibility may be evidenced by an ordinance which binds the
government to maintain the streets or by a written statement signed
by the appropriate government official. Maintenance independently
provided by a developer is not acceptable under this exemption.
In any case in which a homeowners' association has accepted or
is obligated to accept maintenance responsibility, the developer
must, prior to a purchaser signing a contract or agreement to
purchase, provide the purchaser with a good faith written estimate
of the cost of maintenance over the first ten years of ownership. A
good faith estimate means a current estimate based on documentary
evidence, usually obtainable from the suppliers of the necessary
services.
(v) At the time of closing, potable water, sanitary sewage
disposal, and electricity must be extended to the lot or the unit of
local government must be obligated to install the facilities within
180 days following closing.
The obligation may be in the form of a local statute or written
agreement signed by the appropriate government authority. A local
code or statute that obligates the subdivider or developer to
complete installation of water and sewage disposal systems within a
certain time does not satisfy this requirement of the exemption.
For subdivisions that will not have a central water system,
there must be assurances that an adequate potable water supply is
available year-round to service the subdivision. Assurances of an
adequate, drinkable water supply can be obtained from a hydrologist
or the local health department.
For subdivisions that will not have a central sewage disposal
system, there also must be assurances that each lot is approved for
the installation of a septic tank. If the individual lot is not
approved for the installation of a septic tank at time of sale, the
developer may provide in the contract that approval will be obtained
prior to closing provided that any purchaser deposits and/or
payments are placed in an escrow account with an institution having
trust powers in the jurisdiction where the subdivision is located.
All such monies must be refunded to the purchaser if the approval is
not obtained prior to closing. Closing must occur within 180 days.
The approval for the installation of a septic tank must come from
the appropriate government authority, usually the local health
department, local governmental engineer or county sanitarian.
Developers selling lots prior to obtaining approval for installation
of a septic tank on the individual lot are proceeding at their own
risk. The sale will not qualify for the exemption if the approval is
not obtained and the closing does not occur within 180 days.
(vi) The contract of sale must require delivery of a warranty
deed to the purchaser within 180 days after the signing of the sales
contract. The deed must be free from monetary liens and encumbrances
at the time of delivery. If a warranty deed is not commonly used in
the jurisdiction where the lot is located, a deed or grant that
warrants that the seller has not conveyed the lot to another person
may be delivered in lieu of a warranty deed. The deed or grant used
must also warrant that the lot is free from encumbrances made by the
seller or any other person claiming by, through or under the seller.
(vii) At the time of closing, a current title insurance binder,
policy or title opinion reflecting the condition of title must be
issued or presented to the purchaser showing that, subject only to
exceptions which are approved in writing by the purchaser at the
time of closing, marketable title to the lot is vested in the
seller. In order to satisfy this requirement, a developer may want
to obtain the purchaser's written approval of exceptions to title
prior to closing, although the actual title binder, policy or
opinion must be current at the time of closing and show that title
is vested in the seller. If closing occurs and the purchaser has not
approved the exceptions to title in writing, the sale would not be
exempt under this provision. The party that bears the cost of the
title binder, policy or opinion is not relevant to eligibility for
the exemption. Unless otherwise defined by state law, the time of
closing is the date that legal title to the property is transferred
from seller to buyer.
(viii) The purchaser or purchaser's spouse must make a personal,
on-the-lot inspection of the lot purchased prior to signing a
contract or agreement to purchase.
(f) Mobile home exemption. (15 U.S.C. 1702(b)(6) and 24 CFR
1710.11)
For purposes of this exemption, a mobile home is a unit
receiving a label in conformance with HUD Regulations implementing
the National Manufactured Housing Construction and Safety Standards
Act of 1974 (42 U.S.C. 5401, et seq.).
This section exempts the sale of a mobile home lot from the
registration requirements of the Act when all eligibility
requirements listed below are met:
(1) The lot is sold as a homesite by one party and a mobile home
is sold by another party, and the individual contracts of sale:
(i) Obligate the sellers to perform, contingent upon the other
seller carrying out its obligations, so that a completed mobile home
will be placed on a completed homesite within two years after the
date the purchaser signs the contract to purchase the lot (see part
IV(b) of these guidelines for HUD's position on two year completion
requirements);
(ii) Provide that all funds received by the sellers are to be
deposited in escrow accounts independent of the sellers until the
transactions are completed;
(iii) Provide that funds received by the sellers will be
released to the buyer upon demand if either of the sellers do not
perform; and
(iv) Contain no provisions that restrict the purchaser's right
to specific performance under state law.
(2) The homesite is developed in conformance with all local
codes and standards, if any, for mobile home subdivisions.
(3) At the time of closing:
(i) Potable water and sanitary sewage disposal are available to
the homesite and electricity has been extended to the lot line:
(ii) The homesite is accessible by roads;
(iii) The purchaser receives marketable title to the lot; and
(iv) Other common facilities represented in any manner by the
developer or agent to be provided are completed or, in the
alternative, there are letters of credit, cash escrows or surety
bonds in a form acceptable to the local government in an amount
equal to 100 percent of the estimated cost of completion. Corporate
bonds are not acceptable for purposes of the exemption.
(g) Intrastate Exemption. (15 U.S.C. 1702(b)(7) and 24 CFR
1710.12).
This section exempts the sale or lease of real estate in a sales
operation that is intrastate in nature. The lot must be free and
clear of all liens, encumbrances and adverse claims. The following
six eligibility requirements must be met before a lot qualifies for
this exemption:
(1) The sale of lots in the subdivision after December 20, 1979,
must have been and must continue to be restricted solely to
residents of the state in which the subdivision is located, unless
the sale is exempt under 24 CFR 1710.5, 1710.11 or 1710.13. Sales of
lots exempt under Sec. 1710.5, Sec. 1710.11 or Sec. 1710.13 may be
to out-of-state purchasers without affecting the eligibility of the
overall subdivision for the intrastate exemption. Any other sales to
out-of-state purchasers, even if the lots were registered or
otherwise exempt under any other section, would make the entire
subdivision ineligible for the intrastate exemption.
Residency is determined by state law. For purposes of this
exemption, a developer may rely on a statement signed by the
purchaser or lessee as to the state of residence. Obviously, the
prospective purchaser must be an actual resident of the state at the
time of signing the sales contract as opposed to a person visiting
the state or planning to move into the state. However, service
personnel
[[Page 13607]]
may, at their option, claim the state in which they are stationed.
(2) The purchaser or purchaser's spouse must make a personal on-
the-lot inspection of the lot to be purchased before signing a
contract. Evidence of this inspection should be retained by the
developer.
(3) Each contract must:
(i) Specify the developer's and purchaser's responsibilities for
providing and maintaining roads, water and sewer facilities and any
existing or promised amenities. If the developer is not responsible
for providing or completing a particular service or amenity, the
contract should make it clear that it is up to the buyer to make the
necessary arrangements for the desired services. If a third party is
involved, the contract must specify whether the buyer or seller is
responsible for making the required arrangements;
(ii) Contain a good faith estimate of the year in which the
roads, water and sewer facilities and promised amenities will be
completed.
This estimate is required for any facility the developer
promises or indicates will be completed. Estimates should be based
on documentary evidence, such as contracts, engineering schedules or
other evidence of commitments to complete the facilities and
amenities; and
(iii) Contain a non-waivable provision giving the purchaser the
right to revoke the contract until at least midnight of the seventh
calendar day following the date the purchaser signed the contract.
This revocation right cannot be restricted to a specific method of
notification such as requiring notification to be in writing. If the
purchaser is entitled to a longer revocation period by operation of
state law, that period automatically becomes the Federal revocation
period and the contract must reflect the longer period. If the
purchaser revokes the contract during this ``cooling-off period,''
he or she is entitled to a full refund of all money paid.
(4) The lot being sold must be free and clear of all liens,
encumbrances and adverse claims. To remain exempt, the real estate
must remain free and clear of all liens, encumbrances and adverse
claims, with the exception of those placed on the property by the
purchaser. Thus, real estate that is sold under a installment
contract prior to conveyance by deed cannot be burdened by a lien
and still qualify for the exemption. If a lien is placed on the
property, the exemption is automatically terminated at the time the
lien is perfected.
The fact that a title company will insure against a lien,
encumbrance or adverse claim has no bearing in determining whether
or not the sale qualifies for the exemption. Except as noted below,
the existence of a lien, encumbrance or adverse claim disqualifies
the affected lot or lots for this exemption. The only exceptions to
this requirement are listed below:
(i) Mortgages or deeds of trust containing release provisions
for the individual lot purchased if:
(A) The contract of sale obligates the developer to deliver a
free and clear warranty deed or its equivalent under local law
within 180 days (constructive delivery is acceptable); and
(B) The purchaser's payments are deposited in an escrow account
independent of the developer until a deed is delivered. The escrow
account must be with an institution which has trust powers or in an
established bank, title insurance, abstract or escrow company that
is doing business in the jurisdiction in which the property is
located. The purchaser's earnest money payment or any other payment
by the purchaser cannot be used to obtain a release from the
mortgage and may not be released from escrow until the deed is
delivered.
(ii) Liens that are subordinate to the leasehold interest and do
not affect the lessee's right to use or enjoy the lot.
(iii) Property reservations that are for the purpose of bringing
public services to the land being developed, such as easements for
water and sewer lines.
Other acceptable property reservations are easements for roads
and electric lines to serve the subdivision as well as certain
drainage easements. The reservation of subsurface oil, gas or
mineral rights is acceptable unless the reservation expressly or
impliedly includes the right of ingress and egress upon the
property. Examples of the types of reservations and easements that
are unacceptable and disqualify the burdened property for the
exemption include easements for high power transmission lines,
telephone long lines, pipelines and bridle trails.
(iv) Taxes or assessments which constitute liens before they are
due and payable if imposed by a state or other public body having
authority to assess and tax property or by a property owners'
association.
(v) Beneficial property restrictions that are mutually
enforceable by all lot owners in the subdivision.
Developers who wish to maintain control of a subdivision
indefinitely through a Property Owners' Association, Architectural
Control Committee, and/or restrictive covenants will find the
requirements of this exemption unsuitable.
In recognition of the fact that developer control is unavoidable
until lots are sold, for the purpose of this exemption, a developer
must provide an opportunity for the transfer of control to all lot
owners at or before the time when the developer no longer owns a
majority of total lots in, or planned for, the subdivision.
Relinquishment of developer control must require affirmative action,
usually in the form of an election based upon one vote per lot.
The developer may continue to participate in the control of the
subdivision to the extent that lots remain unsold. For example, a
developer who still owns thirty percent of the lot inventory has a
thirty percent voting block on issues regarding the subdivision.
It is acceptable for the developer to appoint, during the
initial stages of development, a governing body (panel, commission,
etc.) whose members subsequently are elected and re-elected by all
the lot owners to administer subdivision control.
To be enforceable, restrictions must be part of a general plan
of development. Restrictions, whether separately recorded or
incorporated into individual deeds, must be applied uniformly to
every applicable lot or group of lots. To be considered beneficial
and enforceable, any restriction or covenant that imposes an
assessment on lot owners must apply to the developer on the same
basis as other lot owners.
(vi) Reservations contained in United States land patents and
similar Federal grants or reservations are excepted from the term
``liens'' but must be disclosed in the Intrastate Exemption
Statement.
Many of the land patents by which land west of the Mississippi
River was originally conveyed contain reservations to the United
States for minerals and water rights-of-way for canals and ditches.
These reservations as well as any other Federal grants or
reservations must be disclosed but are not disqualifying factors.
(5) Before the sale the developer must disclose in a written
statement (see sample below) to the purchaser all liens,
reservations, taxes, assessments and restrictions applicable to the
lot purchased. The developer must obtain a written receipt from the
purchaser acknowledging that the statement required by this
subparagraph was delivered.
Neither the statement nor the written receipt have to be
submitted to HUD, but copies of the purchaser receipts should be
available for review upon demand by the Secretary or his or her
designee. It is suggested that the developer retain the purchaser
receipts for at least three years.
(6) The written statement (see sample below) also must include
good faith cost estimates for providing electric, water, sewer, gas
and telephone service to the lot. Estimates must include all costs
associated with obtaining the services. For example, if private
wells are the water source, the estimate should include the cost of
the well, pump, casing, etc. Likewise, if butane or propane gas is
used, the statement must include the cost of installing a tank and
the per gallon cost of the gas.
The estimates for services applicable to unsold lots must be
updated every two years or more frequently if the developer has
reasons to believe that at least a $100 increase or decrease for a
particular item has occurred. The dates on which the estimates were
made must be included in the statement.
Effective state property reports or disclosure statements
containing all the information required in the Intrastate Exemption
Statement may be used in lieu of a separate statement. State
property reports which do not contain all the information required
in the Intrastate Exemption Statement may be used only of they are
supplemented with the missing information.
Sample Intrastate Exemption Statement
Intrastate Exemption Statement
Name of Developer------------------------------------------------------
Address----------------------------------------------------------------
Name of Subdivision----------------------------------------------------
Location---------------------------------------------------------------
[[Page 13608]]
-----------------------------------------------------------------------
Liens
(Provide a clear and concise listing of all liens on the
property. As used in this statement, liens are security interests
such as mortgages or deeds of trust, tax liens, mechanics liens or
judgments. Liens which are acceptable for purposes of the exemption
are those which contain release provisions for the individual lot
purchased but only if the contract of sale obligates the developer
to deliver a deed within 180 days and the purchaser's payments are
held in an independent escrow account until a deed is delivered and,
in the case of leases, liens which are subordinate to the lease hold
interest and do not affect the lessee's right to enjoy or use the
lot.) A chart similar to the following may be used:
------------------------------------------------------------------------
Amount
Type of lien of lien Lots subject to lien.
------------------------------------------------------------------------
........ ..............................
........ ..............................
------------------------------------------------------------------------
Reservations
(Disclose all easements and reservations affecting the lots that
are offered for sale. The preceding narrative contains examples of
easements and reservations which are acceptable.)
Taxes
(Provide sufficient information to enable a purchaser to
estimate the annual taxes due on the lot purchased.)
Assessments
(Disclose all assessments, fees and dues that have been imposed
or may be imposed. The list of assessments, fees and dues must show
the rates and amounts and explain who has the authority for imposing
the listed assessments, fees and dues.)
Restrictions
(Recite verbatim all restrictions that apply to the lots being
offered. In the alternative, the developer may attach a complete
copy of all restrictions affecting the lots. If the restrictions do
not apply to all the lots in the offering, the developer should
specify which lots are affected by the restrictions. In addition,
the developer should explain who has the authority to enforce the
restrictions and indicate whether or not the restrictions are
recorded.)
Utility Cost Estimates
(Disclose a good faith estimate of the cost to the purchaser of
providing water, electric, telephone, sewage disposal and gas
service to each lot offered under the exemption. The estimate must
include all costs associated with obtaining the services.) A chart
similar to the following may be used.
----------------------------------------------------------------------------------------------------------------
Sewage
Lot No. Water Electric Telephone disposal Gas
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Under each heading list the estimated cost to the purchaser and
the date the estimate was made.
I affirm that to the best of my knowledge the above information
is accurate and complete.
----------------------------------------------------------------------
(Signature of Developer or Authorized Agent)
----------------------------------------------------------------------
(Date)
----------------------------------------------------------------------
(Title)
Purchaser's Acknowledgement
(The developer must obtain a written receipt from the purchaser
acknowledging that the purchaser received a written statement(s) of
all liens, reservations, taxes, assessments and restrictions
applicable to the lot and good faith estimates of the cost of
providing electric, water, sewer, gas and telephone service to the
lot.)
The receipt may be in the following form:
Sample Receipt
I acknowledge that I have received an Intrastate Exemption
Statement listing all liens, reservations, taxes, assessments,
restrictions and estimates of utility costs applicable to (identify
the subdivision and its location) from (name of developer). I have
made a personal on-the-lot inspection of (identify the lot), which
is the lot I am interested in buying or leasing.
----------------------------------------------------------------------
(Signature of Purchaser)
----------------------------------------------------------------------
(Date)
(h) Metropolitan Statistical Area (MSA) Exemption. (15 U.S.C.
1702(b)(8) and 24 CFR 1710.13).
This section exempts the sale or lease of lots in a subdivision
located in a Metropolitan Statistical Area (MSA). The eligibility
criteria for the MSA Exemption are the same as that of the
Intrastate Exemption with the following exceptions:
(1) The subdivision must have contained fewer than 300 lots on
and since April 28, 1969, and continue at or below that quantity in
the future;
(2) The lot(s) must be located in a MSA as defined and
designated by the U.S. Office of Management and Budget;
(3) The principal residence of each purchaser must be within the
same MSA;
(4) Adverse claims that are disqualifying for the Intrastate
Exemption are acceptable for the MSA Exemption. The only requirement
in this regard is for the adverse claim to be disclosed in the MSA
Exemption Statement. The party making the claim, the basis of the
claim and the property affected by the claim must be identified; and
(5) Although the MSA exemption is self-determining, a written
affirmation must be submitted by developers relying on this
exemption. The due date is January 31 of each year. Failure to
submit the affirmations will disqualify the subdivision for this
exemption. The written affirmation must be in the following format:
Affirmation
Developer's Name-------------------------------------------------------
Developer's Address----------------------------------------------------
Purchaser's Name(s)----------------------------------------------------
Purchaser's Address(es) (including county)-----------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Name of Subdivision----------------------------------------------------
Legal Description of Lot(s) Purchased----------------------------------
----------------------------------------------------------------------
I hereby affirm that all of the requirements of the MSA
exemption as set forth in 15 U.S.C. 1702(b)(8) and 24 CFR 1710.13
have been met in the sale or lease of the lot(s).
I also affirm that I submit to the jurisdiction of the
Interstate Land Sales Full Disclosure Act with regard to the sale or
lease cited above.
----------------------------------------------------------------------
(Date)
----------------------------------------------------------------------
(Signature of Developer or Authorized Agent)
(Title)
The sample Intrastate Exemption Statement shown above may be
used as a guide in preparing the MSA Exemption Statement. Simply
substitute references to the MSA Exemption in lieu of references to
the Intrastate Exemption and add a provision for disclosure of
``Adverse Claims'' after the discussion of ``Restrictions'' and
before the caption ``Utility Cost Estimates''.
Part VI--Regulatory Exemptions From Registration Requiring No HUD
Determination--(24 CFR 1710.14)
(a) General.
The Secretary has established several regulatory exemptions from
the registration and full disclosure requirements of the Act (i.e.,
filing a Statement of Record and furnishing a Property Report).
These exemptions are self-determining and do not require a
submission to HUD.
To qualify, a developer must satisfy the eligibility criteria at
all times. Exempt status ends when a developer fails to immediately
comply with the eligibility criteria. Furthermore, if there are
reasonable grounds to believe that the use of any of these
regulatory exemptions is not in the public interest in a particular
case, the Secretary may deny the use of the exemption by an
otherwise eligible subdivision, site or lot. The developers will be
given notice and an opportunity for hearing before a final
determination is made. Proceedings under this provision follow the
requirements set forth in the regulations (24 CFR 1720.105, et seq.)
and are patterned after the notice and
[[Page 13609]]
time requirements of a proceeding pursuant to 24 CFR 1710.45(b)(1).
If a sale meets any one of the following requirements, it
qualifies for exemption from the registration requirements of the
Act. However, qualifying sales must comply with the anti-fraud
provisions.
(b) Eligibility Requirements.
(1) Inexpensive Lots (24 CFR 1710.14(a)(1))
The sale or lease of a lot for less than $100, including closing
costs, is exempt if the purchaser or lessee is not required to
purchase or lease more than one lot. This exemption is available on
a lot-by-lot basis. The entire subdivision need not qualify.
(2) Leases for Limited Duration (24 CFR 1710.14(a)(2))
The lease of a lot for a term of five years or less is exempt if
the terms of the lease do not obligate the lessee to renew. This
exemption is available on a lot-by-lot basis. The entire subdivision
need not qualify.
The use of an arrangement that is called a lease but is
tantamount to the sale or long-term lease of a lot would not qualify
for this exemption; i.e., a lease with a large initial payment or
substantial payments over five years and token payments thereafter.
A five-year lease with an option to purchase or renew would be
suspect under this exemption and might or might not qualify
depending on the overall transaction. In these cases, a request for
an Advisory Opinion is strongly recommended.
(3) Lots Sold to Developers (24 CFR 1710.14(a)(3))
The sale or lease of lots to a person who is engaged in a bona
fide land sales business is exempt. For a transaction to qualify for
this exemption, the purchaser must be a person who plans to
subsequently sell or lease the lot(s) in the normal course of
business. The term business refers to an activity of some
continuity, regularity and permanency, or means of livelihood. The
sale or lease of lots to an individual who is buying the property
for investment, to be sold at some unforeseeable time in the future,
would not be exempt under this provision. This exemption is
available on a lot-by-lot basis, although most transactions would
include more than one lot. The entire subdivision need not qualify.
(4) Adjoining Lot (24 CFR 1710.14(a)(4))
The sale or lease of a lot to a purchaser who owns a contiguous
lot that has a residential, commercial, or industrial building on it
is exempt. This exemption permits a developer to sell or lease
unimproved lots to persons wishing to enlarge the property on which
their home or business is located. This exemption is available on a
lot-by-lot basis.
(5) Lot Sales to a Government (24 CFR 1710.14(a)(5))
The sale or lease of real estate to a government or government
agency is exempt. This exemption is available on a lot-by-lot basis.
The entire subdivision need not qualify.
(6) Sales of Leased Lots (24 CFR 1710.14(a)(6))
The sale of a lot or lots on which the purchaser has maintained
his or her primary residence for at least one year is exempt.
Typically, these sales will occur in a mobile home subdivision. This
exemption is available on a lot-by-lot basis. The entire subdivision
need not qualify.
(c) Termination.
If HUD has reasonable grounds to believe that exemption from
registration in a particular case is not in the public interest, HUD
may terminate the exemption as to a subdivision or as to particular
lots in a subdivision. Termination could be ordered only after the
developer is notified of HUD's intention to terminate and is
afforded a hearing opportunity. The reasons for termination will
vary from case to case but could include unlawful sales practices by
the developer or its agents, insolvency or adverse information about
the lots or the subdivision that should be disclosed to purchasers.
Part VII--Regulatory Exemption HUD Determination Required--(24 CFR
1710.16)
An Exemption Order is available for a subdivision or certain
lots in a subdivision that technically do not comply with the
eligibility requirements of one of the other available exemptions.
However, to qualify for an Exemption Order, the offering must
substantially comply with the eligibility requirements.
In evaluating the circumstances of an Exemption Order request,
HUD examines the basic intent and legislative history of the
exemption that the developer claims to substantially meet. If the
offering is not consistent with the basic intent, an Exemption Order
will not be issued even though some of the technical requirements of
that exemption are met.
Offerings that involve circumstances that are equal to or better
than the technical requirements, or that are consistent with the
basic intent of the exemption, will be judged to be in substantial
compliance and an Exemption Order will be issued. It should be noted
that an Exemption Order applies only to sales after the date of the
Order and has no retroactive effect. This is the only exemption that
requires submission of a request and a determination by HUD before
it is effective. Developers wishing to request an Exemption Order
must submit the information listed below:
(a) A detailed statement describing how the proposed sales of
lots meet, or substantially meet, each of the eligibility
requirements of the exemption that the developer claims to
substantially meet.
(b) A copy of the contract to be used. The contract must:
(1) Specify the developer's and purchaser's responsibilities for
providing and maintaining roads, water and sewer facilities and any
existing or promised amenities. If the developer is not responsible
for providing or completing a particular service, the contract
should make it clear that it is up to the buyer to make the
necessary arrangements for desired services; and
(2) Contain a good faith estimate of the year in which the
roads, water and sewer facilities and promised amenities will be
completed. This estimate is required for any facility the developer
promises or indicates will be completed. Estimates should be based
on documentary evidence, such as contracts, engineering schedules or
other evidence of commitments to complete facilities and amenities;
and
(3) Contain a non-waivable provision giving the purchaser the
opportunity to revoke the contract until at least midnight of the
seventh calendar day following the date the purchaser signed the
contract. If the purchaser is entitled to a longer revocation period
by operation of state law, that period becomes the Federal
revocation period and the contract must reflect the requirements of
the longer period; and
(4) Contain a provision that obligates the developer to deliver
to the purchaser within 180 days of the date the purchaser signed
the sales contract, a warranty deed, or its equivalent under local
law, which at the time of delivery is free from any monetary liens
or encumbrances.
(c) A plat of the entire subdivision with the lots subject to
the exemption delineated.
(d) A description of how the lots have been and will be promoted
and to which population centers the promotion has been and will be
directed.
(e) Documentation to establish that each purchaser or
purchaser's spouse will make an on-the-lot inspection of the lot to
be purchased before the contract is signed.
(f) A filing fee in the amount set forth in Sec. 1710.35(c) in
the form of a certified check, cashier's check or postal money order
made payable to the U.S. Treasury.
If, after an Exemption Order has been issued, HUD has reasonable
grounds to believe that the exempt status of the subdivision or
individual lots is not in the public interest, the Exemption Order
may be terminated. Such an action would be preceded by a notice
giving the developer an opportunity to request a hearing on the
allegations leading to termination. For example, proceedings may be
initiated because of the apparent omissions or misrepresentations in
the information upon which the Exemption Order was based, the
unethical conduct of the developer or the developer's agent or the
presence of adverse conditions at or about the real estate which
should be brought to the attention of purchasers by way of a
disclosure document.
Some examples of substantial compliance are listed below. These
are examples only and presume that all other applicable eligibility
requirements of the exemption are either fully met or substantially
met. It should be remembered that substantial compliance can occur
with virtually any of the twenty-two available exemptions.
(1) One of the eligibility requirements for the Single-Family
Residence Exemption is that the lots be zoned as single-family
residential or, in the absence of a zoning ordinance, restricted to
single-family residence development by enforceable covenants or
restrictions. As stated before, the phrase ``* * * in the absence of
a zoning ordinance * * *'' is interpreted in its most literal sense.
Therefore, the existence of any zoning ordinance other than single-
family
[[Page 13610]]
residence zoning is a disqualifying factor for the exemption.
However, substantial compliance would be considered if a
different zoning ordinance existed and the enforceable covenants or
restrictions limited development to single-family residences.
(2) Another eligibility requirement for the Single-Family
Residence Exemption states that, at the time of closing, potable
water, sanitary sewage disposal and electricity must be extended to
each lot or the unit of local government must be obligated to
install these facilities within 180 days following closing.
Substantial compliance with this provision would be considered
in those cases where one or more of these utilities is not available
but the developer has a contract with a publicly regulated utility
to install the facilities within 180-days following closing or upon
demand of the purchaser.
Furthermore, substantial compliance would be considered if the
utility trunk lines are ``reasonably close'' to the lots instead of
at each lot line.
(3) An eligibility requirement for the Intrastate Exemption is
that the lot sold must be free and clear of all liens, encumbrances
and adverse claims. Mineral reservations have been deemed to be
acceptable so long as the reservation does not include the right of
ingress or egress upon the property. If the right of ingress or
egress exists, substantial compliance will be considered if there
are written, recorded provisions from the owner(s) of the mineral
rights for compensating the lot owner for loss of the use or
enjoyment of the property when such rights are exercised.
Part VIII--Advisory Opinion--Secretary's Opinion May Be Requested--
(24 CFR 1710.17)
(a) General
When it is not clear that an offering is either exempt under the
self-determined statutory or regulatory provisions or whether
jurisdiction exists, an Advisory Opinion may be requested to clarify
the situation. The filing requirements are found in 24 CFR 1710.17
of the regulations and are described in (b) and (c) below.
The material to be submitted with all requests for Advisory
Opinions is described under (b) below. In most cases, depending on
the provision under which an exemption is claimed, additional
documentation is needed before an opinion can be given. Review (c)
below to determine what additional documentation is customarily
needed before submitting a request.
HUD's Advisory Opinions are based upon and limited to the
representations made by the developer. Therefore, if a favorable
Advisory Opinion is issued based upon incomplete, improper or
incorrect representations, the Opinion has no binding effect.
(b) Basic Requirements For Submission
(1) A filing fee in the amount required by Sec. 1710.35(c) in
form a certified check, cashier's check or postal money order made
payable to the U.S. Treasury.
(2) A comprehensive description of the conditions and operations
of the offering. Specify the provision(s) of the Act or regulations
under which sales are believed to be exempt or why there is no
jurisdiction.
(c) Additional Requirements For Submission
Depending on the provision under which an exemption is claimed,
a developer may be required to submit additional information.
Beginning with the exemption under 24 CFR 1710.5(a) of the
regulations and ending with 24 CFR 1710.14, the additional
information that should be submitted with a request for an Advisory
Opinion is listed below. In some cases, information or documentation
other than that specified may be requested after a submission has
been reviewed by HUD.
(1) To obtain an Advisory Opinion pertaining to 24 CFR
1710.5(a), the ``25 lot'' exemption, submit a plat of the
subdivision. Submit a listing of any other properties in which the
developer has an interest and the geographic relationship of those
properties to the subdivision for which the exemption is claimed. If
other properties are divided or proposed to be divided, indicate the
total number of lots planned. Indicate those properties which will
be offered by the same sales personnel or through the same sales
office as the subdivision for which the exemption is claimed.
Describe how the lots are marketed, i.e., who sells the lots, how
the lots are advertised, whether prospective purchasers are referred
between subdivisions, etc.
(2) To obtain an Advisory Opinion pertaining to 24 CFR
1710.5(b), the ``improved lot'' exemption, submit a copy of the
contract of sale or lease and an opinion of local counsel with
respect to whether the contract meets the exemption's requirements
under the law in the jurisdiction in which the subdivision is
located.
(3) To obtain an Advisory Opinion pertaining to 24 CFR
1710.5(c), the ``evidences of indebtedness'' exemption, describe the
security arrangement and submit a copy of the evidence of
indebtedness.
(4) To obtain an Advisory Opinion pertaining to 24 CFR
1710.5(d), the ``securities'' exemption, no additional documentation
is customarily required to be submitted with the request.
(5) To obtain an Advisory Opinion pertaining to 24 CFR
1710.5(e), the ``government sales'' exemptions, specify the
government agency selling the property and submit the enabling
legislation.
(6) To obtain an Advisory Opinion pertaining to 24 CFR
1710.5(f), the ``cemetery lots'' exemption, no additional
documentation is customarily required to be submitted with the
request.
(7) To obtain an Advisory Opinion pertaining to 24 CFR
1710.5(g), the ``sales to builders'' exemption, submit specific
information showing that the purchaser or lessee is engaged in the
business of building or is acquiring the real estate for resale or
lease to a builder.
(8) To obtain an Advisory Opinion pertaining to 24 CFR
1710.5(h), the ``industrial or commercial development'' exemption
submit a plat and supporting documentation, including a copy of the
instrument containing the purchaser or lessee affirmation and
evidence of the zoning or, in the absence of zoning, restrictive
covenants.
(9) To obtain an Advisory Opinion pertaining to 24 CFR 1710.6,
the ``100 lot'' exemption, submit a plat of the subdivision. In
addition, submit a listing of any other properties in which the
developer has an interest and the geographic relationship of those
properties to the subdivision for which the exemption is claimed. If
other properties are divided or proposed to be divided, indicate the
total number of lots planned. Indicate those properties that will be
offered by the same sales personnel or through the same sales office
as the subdivision for which the exemption is claimed. Describe how
the lots are marketed, i.e., who sells the lots, how the lots are
advertised, whether prospective purchasers are referred between
subdivisions, etc.
(10) To obtain an Advisory Opinion pertaining to 24 CFR 1710.7,
the ``12 lot'' exemption, submit a list of all lots sold under the
same common promotional plan since June 20, 1980. (Review Part II(b)
of these Guidelines for an explanation of common promotional plan.)
Indicate the date of each sale. State whether the developer has been
involved in the sale of any other real estate since June 20, 1980
and indicate how it is intended that future sales will be
restricted.
(11) To obtain an Advisory Opinion pertaining to 24 CFR 1710.8,
the ``scattered sites'' exemption, submit a plat of the site and
list the name and geographic location of all other properties in
which the developer has an interest. State the extent of the
developer's interest.
(12) To obtain an Advisory Opinion pertaining to 24 CFR 1710.9,
the ``20 acre lots subdivision'' exemption, submit a plat of the
subdivision with the acreage of each lot clearly delineated. In
addition, substantiate that all lots offered under the same common
promotional plan are greater than 20 acres in size and have been
that size since April 29, 1969. Describe all properties in which the
developer has an interest and the geographic relationship of such
properties to the subdivision for which the exemption is claimed.
Indicate those properties which will be offered by the same sales
personnel or through the same sales office as the subdivision for
which the exemption is claimed. Describe how the properties are
marketed, i.e., who sells the lots, how the lots are advertised,
whether purchasers are referred between subdivisions, etc.
(13) To obtain an Advisory Opinion pertaining to 24 CFR 1710.10,
the ``single-family residence'' exemption, address each of the
subdivision requirements and the eight lot requirements as set forth
in Part V(e) of these Guidelines. For example, the developer should
specifically state how the condition of title will be demonstrated,
that the purchaser's approval of exceptions to title will be
obtained prior to closing and that the purchasers will make a
personal on-the-lot inspection prior to signing the contract. The
submission should describe how the standards are being enforced by
the local authorities. The submission must also describe the
marketing and promotion of the subdivision.
The submission should be accompanied by documentation including
a copy of the contract of sale and a copy of the state or
[[Page 13611]]
local minimum standards. The documents submitted must include
minimum standards for each of the eight areas listed in the
regulations. The documentation should clearly show that the
standards are being enforced and are not merely discretionary. If
the developer states that the local authorities will take over
responsibility for the roads, submit documentation evidencing that
intent. If the developer represents that water is the purchaser's
responsibility, submit a copy of the appropriate report assuring
that an adequate year-around water supply is available. If septic
tanks are to be used, submit a copy of the approval for their
installation and a statement of how approval will be obtained for
each lot.
The above listing is not comprehensive. It is designed to give
the developer an idea of the type of statements and documentation
which will be requested before an opinion will be issued.
(14) To obtain an Advisory Opinion pertaining to 24 CFR 1710.11,
the ``manufactured home'' exemption, identify who is selling the lot
and who is selling the manufactured home. Submit a copy of the
contracts to be used.
(15) To obtain an Advisory Opinion pertaining to 24 CFR 1710.12,
the ``intrastate'' exemption, submit a copy of the contract of sale,
the Intrastate Exemption Statement, the restrictive covenants, a
statement of the status of mineral right ownership and the enabling
document(s) of the Property Owners' Association or condominium
association including the by-laws, if any. If sales have been made
since December 20, 1979, submit a list of such sales with the
purchaser's name, address at the time of sale, date of sale and lot
number(s).
(16) To obtain an Advisory Opinion pertaining to 24 CFR 1710.13,
the ``MSA'' exemption, submit a copy of the contract of sale, plat,
and MSA Exemption Statement. If sales have been made, submit a list
of such sales with the purchaser's name, address at the time of
sale, date of sale and lot number(s).
(17) To obtain an Advisory Opinion pertaining to 24 CFR
1710.14(a)(1), the ``inexpensive lots'' exemption, submit a copy of
the proposed promotional materials and the documents to be used in
the sale.
(18) To obtain an Advisory Opinion pertaining to 24 CFR
1710.14(a)(2), the ``limited term leases'' exemption, submit a copy
of the lease and other documentation relevant to the lease
transaction.
(19) To obtain an Advisory Opinion pertaining to 24 CFR
1710.14(a)(3), which exempts sales of lots to developers, submit
information to substantiate the claim that the purchaser is in the
land sales business.
(20) To obtain an Advisory Opinion pertaining to 24 CFR
1710.14(a)(4), the ``adjoining lot'' exemption, submit a map showing
the lot on which the purchaser owns a residential, commercial or
industrial building and the lot to be purchased.
(21) To obtain an Advisory Opinion pertaining to 24 CFR
1710.14(a)(5), the ``sales to government'' exemption, name the
Government entity and submit a copy of the legal document by which
the entity was created or a document evidencing the governmental
decision to purchase.
(22) To obtain an Advisory Opinion pertaining to 24 CFR
1710.14(a)(6), the ``sales of leased lots'' exemption, state the
circumstances which the purchaser has lived on or will have lived on
the lot for one year or more and submit a copy of the lease or other
agreement entitling the purchaser to occupy the lot. State whether
the purchaser is using the lot as his or her primary residence.
Part IX--No-Action Letter--(24 CFR 1710.18)
The availability of expanded regulatory exemptions has resulted
in the exemption of most transactions which may previously have
warranted the issuance of a No-Action Letter. Nevertheless, there
may be instances when one or more sales or leases fall within the
purview of the Act but do not qualify for an exemption, although the
circumstances of the sales or leases may be such that no affirmative
action is needed to protect the public interest and prospective
purchasers.
In such instances, a No-Action Letter may be requested. The
request should include a thorough explanation of the proposed
transaction(s) and the facts and supporting documentation necessary
to demonstrate that no affirmative action is needed in the
particular situation. If a request for a No-Action Letter is based
upon a belief that the offering is ineligible for an exemption due
to a minor technicality, demonstrate how other provisions of the
particular exemption are met. The issuance of a No-Action Letter
will not affect any right or remedy that the purchaser may have
under the Act, including the right to rescind a contract for a
period of two years. A No-Action Letter simply signifies that HUD
will not take any affirmative action to require registration.
However, the issuance of a No-Action Letter does not preclude any
future agency action which may become necessary because of new
information or a change in the circumstances.
HUD's No-Action Letters are based upon and limited to
representations made by the developer. Therefore, if a favorable No-
Action Letter is issued based upon incomplete, improper or incorrect
representations, the Letter has no binding effect.
In no event will a No-Action Letter be issued if the sale or
lease has already occurred.
There is no prescribed format for requesting a No-Action Letter.
Therefore, describe the circumstances as fully as possible following
a general rule that too much information is better than too little.
Upon review of the information submitted, additional clarification
may be required to permit a final determination.
[FR Doc. 96-7280 Filed 3-26-96; 8:45 am]
BILLING CODE 4210-27-P
Complete official Federal Register PDF
FR Doc. 96-7228 Medicare and Medicaid Programs; Requirements for Physician Incentive Plans in Prepaid Health Care Organizations
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13430-13450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7228]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 417 and 434
Office of Inspector General
42 CFR Part 1003
[OMC-010-FC]
RIN 0938-AF74
Medicare and Medicaid Programs; Requirements for Physician
Incentive Plans in Prepaid Health Care Organizations
AGENCY: Health Care Financing Administration (HCFA), HHS. Office of
Inspector General (OIG), HHS.
ACTION: Final rule with comment period.
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SUMMARY: This final rule amends the regulations governing Federally-
qualified health maintenance organizations and competitive medical
plans contracting with the Medicare program, and certain health
maintenance organizations and health insuring organizations contracting
with the Medicaid program. It implements requirements in sections
4204(a) and 4731 of the Omnibus Budget Reconciliation Act of 1990 that
concern physician incentive plans.
The provisions of this final rule will also have an effect on
certain entities subject to the physician referral rules in section
1877 of the Social Security Act (the Act) as amended by the Omnibus
Budget Reconciliation Act of 1993 (OBRA '93). Section 1877 provides
that, if a physician (or an immediate family member of the physician)
has a financial relationship with certain entities (that is, has an
ownership or investment interest in the entity or a compensation
arrangement with the entity), the physician may not make a referral to
the entity for the furnishing of certain health services for which
payment otherwise may be made under the Medicare program. Additionally,
effective December 31, 1994, section 1903(s) of the Act provides for
denial of Federal financial participation payment under the Medicaid
program to a State for expenditures for certain health services
furnished to an individual on the basis of a physician referral that
would result in denial of payment under the Medicare program if
Medicare covered the services in the same manner as they are covered
under the State plan.
Among other amendments, section 13562 of OBRA '93 sets forth an
exception to the physician referral prohibition that, in effect,
incorporates the provisions of this final rule. That is, it provides
that, under certain circumstances, compensation received under a
personal services arrangement that meets the physician incentive plan
requirements established by the Secretary does not trigger the ban on
referrals. Thus, the provisions of this final rule have implications
for entities that would not have been affected at the time we published
the proposed rule (December 14, 1992). (The proposed rule applied to
only prepaid health plans that contract with Medicare or Medicaid under
section 1876 or 1903(m) of the Act, respectively.) OBRA '93 applies the
requirements to any prepaid health care organization that bills
Medicare or Medicaid. The additional organizations that may be affected
include preferred provider organizations, health maintenance
organizations that do not contract with Medicare or Medicaid and are
not Federally qualified, prepaid health plans that contract with
Medicaid, and some States that contract with managed care organizations
under the Medicaid program (including those that operate under a
section 1115 waiver).
DATES: Effective dates. These regulations are effective on April 26,
1996.
Comment dates. To be considered, comments must be mailed or
delivered to the appropriate address, as provided below and must be
received by 5 p.m. on May 28, 1996.
Compliance dates. Affected organizations with contracts or
agreements on March 27, 1996 must comply with (1) the applicable
disclosure requirements at Sec. 417.479(h)(1)(i) through (h)(1)(v) or
with Sec. 434.70(a)(3) of this rule by May 28, 1996 or by the renewal
date of the contract or agreement, whichever is later, and (2) the
survey requirement at Sec. 417.479(g)(1)(iv) and the disclosure
requirement at Sec. 417.479(h)(1)(vi) by March 27, 1997. Affected
organizations must comply with all other requirements by May 28, 1996.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: OMC-010-FC, P.O. Box 26688,
Baltimore, MD 21207.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code OMC-010-FC. Comments received timely will be available for
public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 309-G of
the Department's offices at 200 Independence Avenue SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
FOR FURTHER INFORMATION CONTACT: Medicare: Tony Hausner, (410) 786-
1093. Medicaid: Beth Sullivan, (410) 786-4596. Office of Inspector
General: Joel Schaer, (202) 619-0089.
SUPPLEMENTARY INFORMATION:
I. Background
A. Introduction
Prepaid health care organizations, such as health maintenance
organizations (HMOs), competitive medical plans (CMPs), and health
insuring organizations (HIOs), are entities that provide enrollees with
comprehensive, coordinated health care in a cost-efficient manner. The
goal of prepaid health care delivery is to control health care costs
through preventive care and case management and provide enrollees with
affordable, coordinated, quality health care services. Titles XVIII and
XIX of the Social Security Act (the Act) authorize contracts with
prepaid health care organizations (hereinafter referred to as
``organizations'' or ``prepaid plans'') for the provision of covered
health services to Medicare beneficiaries and Medicaid recipients,
respectively. Such organizations may contract under either a risk-based
or cost-reimbursed contract.
[[Page 13431]]
B. Medicare
Section 1876 of the Act authorizes the Secretary to enter into
contracts with eligible organizations (HMOs that have been Federally
qualified under section 1310(d) of the Public Health Service Act and
CMPs that meet the requirements of section 1876(b)(2) of the Act) to
provide Medicare-covered services to beneficiaries and specifies the
requirements the organizations must meet. Section 1876 of the Act also
provides for Medicare payment at predetermined rates to eligible
organizations that have entered into risk-based contracts under
Medicare or for Medicare payment of reasonable costs to eligible
organizations that have entered into cost-reimbursed contracts under
Medicare. Implementing Federal regulations for the organization and
operation of Medicare prepaid health care organizations, contract
requirements, and conditions for payment are located at 42 CFR 417.400
through 417.694.
Risk-based organizations are paid a prospectively-determined per
capita monthly payment for each Medicare beneficiary enrolled in the
organization. This capitated payment is the projected actuarial
equivalence of 95 percent of what Medicare would have paid if the
beneficiaries had received services from fee-for-service providers or
suppliers. Organizations paid on a risk basis are liable for any
difference between the Medicare prepaid amounts and the actual costs
they incur in furnishing services, and they are therefore ``at risk.''
Cost-reimbursed organizations are paid monthly interim per capita
payments that are based on a budget. Later, a retrospective cost
settlement occurs to reflect the reasonable costs actually incurred by
the organization for the covered services it furnished to its Medicare
enrollees.
C. Medicaid
Section 1903(m) of the Act specifies requirements that must be met
for States to receive Federal financial participation (FFP) for their
contracts with organizations (HMOs or HIOs) to furnish, either directly
or through arrangements, specific arrays of services on a risk basis.
Federal implementing regulations for these contract requirements and
conditions for payment are located at 42 CFR part 434.
States determine the per capita monthly rates that are to be paid
to risk-based organizations. FFP is available for these payments at the
matching rate applicable in the State as long as HCFA determines that:
(1) The HMO or HIO rates are actuarially sound; (2) the rates do not
exceed the cost of providing the same scope of services, to an
actuarially equivalent nonenrolled population group, on a fee-for-
service basis; and (3) the contract meets the additional requirements
at 42 CFR part 434 (``Contracts'') and 45 CFR part 74 (``Administration
of Grants'').
II. Legislative History
Section 9313(c) of the Omnibus Budget Reconciliation Act of 1986
(OBRA '86), Public Law 99-509, prohibited, effective April 1, 1989,
hospitals and prepaid health care organizations with Medicare or
Medicaid risk contracts from knowingly making incentive payments to a
physician as an inducement to reduce or limit services to Medicare
beneficiaries or Medicaid recipients. Under the OBRA '86 provisions,
parties who knowingly made or accepted these payments would have been
subject to specified civil money penalties. Additionally, the
provisions required that the Secretary report on incentive arrangements
in HMOs and CMPs. Section 4016 of the Omnibus Budget Reconciliation Act
of 1987 (OBRA '87), Public Law 100-203, extended the original
implementation date for the OBRA '86 physician incentive provisions to
April 1, 1991. Subsequently, sections 4204(a) and 4731 of the Omnibus
Budget Reconciliation Act of 1990 (OBRA '90), Public Law 101-508,
repealed, effective November 5, 1990, the prohibition of physician
incentive plans in prepaid health care organizations and enacted
requirements, effective January 1, 1992, for regulating these plans.
Specifically, section 4204(a)(1) of OBRA '90 added paragraph (8) to
section 1876(i) of the Act to specify that each Medicare contract with
a prepaid health care organization must stipulate that the organization
must meet the following requirements if it operates a physician
incentive plan:
That it not operate a physician incentive plan that
directly or indirectly makes specific payments to a physician or
physician group as an inducement to limit or reduce medically necessary
services to a specific individual enrolled with the organization.
That it disclose to us its physician incentive plan
arrangements in detail that is sufficient to allow us to determine
whether the arrangements comply with Departmental regulations.
That, if a physician incentive plan places a physician or
physician group at ``substantial financial risk'' (as defined by the
Secretary) for services not provided directly, the prepaid health care
organization: (1) Provide the physician or physician group with
adequate and appropriate stop-loss protections (under standards
determined by the Secretary) and (2) conduct surveys of currently and
previously enrolled members to assess the degree of access to services
and the satisfaction with the quality of services.
Section 4204(a)(2) of OBRA '90 amended section 1876(i)(6)(A)(vi) of
the Act to add violations of the above requirements to the list of
violations that could subject a prepaid health care organization to
intermediate sanctions and civil money penalties.
Section 4731 of OBRA '90 enacted similar provisions for the
Medicaid program by amending sections 1903(m)(2)(A) and 1903(m)(5)(A)
of the Act.
As noted earlier (in the ``Summary'' section), subsequent to the
December 1992 publication of the proposed rule, the Omnibus Budget
Reconciliation Act of 1993 (OBRA '93), Public Law 103-66, was enacted.
Section 13562 of OBRA '93 amended section 1877 of the Act, which
prohibits physician referrals to entities with which the physician (or
an immediate family member) has a financial relationship (which can
consist of either (1) an ownership or investment interest or (2) a
compensation arrangement). OBRA '93 provides an exception to the
section 1877 physician referral prohibition that incorporates the
physician incentive plan rules implemented in this final rule. Under
this exception, compliance with these physician incentive rules is one
of several conditions that must be satisfied if a personal services
compensation arrangement involves compensation that varies based on the
volume or value of referrals.
This exception affects managed care organizations that were not
specified in the December 1992 proposed rule on physician incentive
plans. The proposed rule applied to only prepaid plans that contract
with Medicare or Medicaid under section 1876 or 1903(m) of the Act,
respectively. The OBRA '93 physician referral provisions, however,
apply to any entity with an incentive plan that bills Medicare or
Medicaid. The additional organizations that may be affected include
preferred provider organizations, HMOs that do not contract with
Medicare or Medicaid and are not Federally qualified, and prepaid
health plans'' (PHPs) that contract with Medicaid. (PHPs are
organizations that are exempt from section 1903(m) of the Act.) Some
States that contract with managed care organizations under the Medicaid
program (including those that operate under a section 1115 waiver)
[[Page 13432]]
may also be affected. We believe that most prepaid health care
organizations will not be affected by these provisions since they apply
only if (1) the physician incentive plan includes services not
furnished by the physician group, and (2) there is a compensation
arrangement between the physician group and the entity furnishing the
services.
III. Opportunity for Public Comment
Because there may be entities that were not affected by the
proposed rule at the time it was published but are now affected, we are
publishing this rule as a final rule with a 60-day comment period so
that these newly-affected entities have an opportunity to comment. Note
also, we will incorporate the OBRA '93 amendments to section 1877 of
the Act into a final rule with comment covering the physician referral
prohibition as it relates to referrals for clinical laboratory
services. We will also publish a proposed rule to interpret or clarify
these OBRA '93 amendments as they relate to referrals for all of the
health services designated in section 1877 of the Act, including
clinical laboratory services. Once these rules are published, entities
will have had several opportunities to comment on the interaction
between the physician referral prohibition in section 1877 and the
physician incentive rules.
We are also providing the 60-day comment period because we are
interested in receiving comments on the changes from the proposed rule.
For example, we are particularly interested in receiving comments on
the thresholds we have set for determining substantial financial risk
and for determining per-patient stop loss limits.
Because of the large number of items of correspondence we normally
receive on a rule, we are not able to acknowledge or respond to them
individually. We will, however, consider all comments that we receive
by the date specified in the DATES section of this preamble and, if we
publish a subsequent document, we will respond to the comments in that
document.
IV. Discussion of Physician Incentive Plans
Effective utilization control that identifies both underutilization
and overutilization is essential for the efficient operation of prepaid
health care organizations. A prepaid health care organization needs to
minimize overutilization of services not only to prevent unnecessary
spending, but also to reduce the risk of unnecessary and intrusive
procedures. Nonetheless, a prepaid health care organization also needs
to ensure that all medically necessary services are furnished both to
protect patient health and to avoid the need for more costly care
later. Medicare and Medicaid require both cost-reimbursed and risk
organizations to have internal quality assurance programs, external
quality review or medical audits, and other mechanisms to ensure proper
delivery of health care services. Medicare and Medicaid contracts also
are subject to periodic monitoring for compliance. In addition,
sections 1876(i)(6) and 1903(m)(5) of the Act provide for intermediate
sanctions and civil money penalties that may be imposed if an HMO or
CMP fails substantially to provide medically necessary services.
(Regulations implementing this authority were published on July 15,
1994 (59 FR 36072).
One mechanism many prepaid health care organizations use to
encourage proper utilization is a financial incentive as part of a
physician incentive plan. OBRA '90 defines a physician incentive plan
as any compensation arrangement between an eligible organization and a
physician or physician group that may directly or indirectly have the
effect of reducing or limiting services furnished with respect to
individuals enrolled in the organization.
A review and analysis of physician incentive plans in a sample of
HMOs was conducted and presented in the Department's 1990 report to the
Congress, ``Incentive Arrangements Offered by Health Maintenance
Organizations and Competitive Medical Plans to Physicians.'' The
results showed a wide variety of incentive plans. There were
differences in the types of incentive payments, the distribution of
incentives, the basis for determining the incentive payments, and the
parties or entities the incentives affected.
Physicians in prepaid health care organizations generally receive
fee-for-service payments, salary, or capitation payments (a set dollar
amount per patient) for the services they furnish. Financial incentives
may be used with the various types of physician payments to encourage
appropriate levels of referral services. Referral services are any
specialty, inpatient, outpatient, or laboratory services that a
physician arranges for but does not provide directly. Prepaid health
care organizations may hold physicians or physician groups at risk for
all or a portion of the cost of referral services so that they have a
financial incentive to arrange for the furnishing of only medically
necessary services. If the physician or physician group successfully
controls the levels of referral services, the physician or group may
receive additional compensation (an incentive payment) from the prepaid
health care organization. The incentive payment may take the form of
unused capitation, a returned withhold, or a bonus payment. Each of
these methods is described below.
A capitation payment is a set dollar amount per patient per month
that a prepaid health care organization pays to a physician or a
physician group to cover a specified set of services, without regard to
the actual number of services furnished to each person. The capitation
may cover the physician's own services, referral services, or all
medical services and/or administrative costs. If patient costs exceed
the capitation amount, the physician or physician group must absorb
these additional costs. If costs are below the capitation, the
physician or physician group may keep the additional money.
Withholds are percentages of payments or set dollar amounts that a
prepaid health care organization deducts from each physician's or
physician group's payment (salary, fees, or capitation). The amount
withheld is set aside in pools to pay for specialty referral services
and inpatient hospital services. If referral costs exceed a prepaid
health care organization's budget, part or all of the withhold may be
forfeited depending on the terms of the physician's contract. If
referral costs do not exceed the ceiling, part or all of the withhold
may be returned to a physician or a physician group. Some plans limit
the amount of the risk to the withhold; others hold the physician or
physician group liable for amounts beyond the amount withheld.
Bonuses are payments prepaid health care organizations make to a
physician or a physician group beyond the physician's set salary, fee-
for-service payments, or capitation. Bonuses may be based on a
physician's or physician group's level of referral services or may be
based on the overall performance of the organization.
If the physician or physician group has excessive referrals (as
defined by the prepaid health care organization), it may not receive
any incentive funds. In addition, the prepaid health care organization
may hold the physician or physician group liable for referral costs
that exceed a specified threshold. The prepaid health care organization
may also increase the physician's or physician group's withhold or make
other changes in its incentive arrangements.
[[Page 13433]]
Many physician incentive plans incorporate stop-loss protection to
limit the liability of the physician or physician group. Most often,
the stop-loss protection limits a physician's maximum liability per
patient to a specific dollar amount.
Other variables may affect the amount of risk or the effect of
financial incentives on physicians; for example, whether incentive
payments are calculated according to each individual physician's
performance or according to a physician group's performance; the size
of the physician group; the length of time over which performance is
evaluated; the number of enrollees; and the amount of total income at
risk. In addition, the relative health status of the patients involved
affects the level of risk. If because of their health status the
patients served require more services than the average enrollee, the
risk increases. Conversely, if they are healthier than the average
enrollee, the risk may be lower.
V. Provisions of the Proposed Regulations
On December 14, 1992, we published a proposed rule (57 FR 59024)
that set forth our proposal for implementing the requirements of
sections 1876(i) and 1903(m) of the Act as amended, respectively, by
sections 4204(a) and 4731 of OBRA '90. Sections 1876(i)(8) and
1903(m)(2)(A)(x) of the Act require that physician incentive plans be
regulated, and sections 1876(i)(6)(A) and 1903(m)(5)(A) provide
penalties for violation of the regulation. To implement these
provisions for Medicare, we proposed to impose new contract
requirements pertaining to physician incentive plans. For Medicaid, we
proposed new requirements for the granting of FFP for State Medicaid
agency contracts with HMOs and HIOs. The requirements address--
The scope of the regulation;
Disclosure requirements;
Criteria for the determination of substantial financial
risk;
Requirements for physician incentive plans that place
physicians at substantial financial risk;
Prohibition on certain physician payments; and
Enforcement.
Each proposed requirement is summarized individually below. Readers who
desire more specifics are referred to the proposed rule.
A. Scope
Because sections 4204(a)(2) and 4731 of OBRA '90 amended sections
that govern Medicare and Medicaid contracts, but did not amend title
XIII of the Public Health Service Act, which governs all Federally-
qualified HMOs, we proposed to apply these requirements to only
physician incentive plans that base incentive payments (in whole or in
part) on services provided to Medicare beneficiaries or Medicaid
recipients. Nonetheless, because relevant statutory language uses the
term ``individuals enrolled with the organization,'' which could be
interpreted as all of an organization's enrollees, not just Medicare or
Medicaid enrollees, we specifically sought comments regarding the
proposed scope of the regulations.
B. Disclosure
We proposed that an HMO, CMP, or HIO disclose to HCFA (for
Medicare) or to the State Medicaid agency (for Medicaid) information on
physician incentive plans that affect Medicare beneficiaries or
Medicaid recipients that is sufficient for us or the States to
determine whether the organization is in compliance with our
requirements. We also proposed when submittal of the information would
be required.
C. Substantial Financial Risk
We proposed that a physician or physician group is considered to be
at substantial financial risk if more than a specified percentage (the
risk threshold) of the prepaid health care organization's total
potential payments to the physician or physician group is at risk and
the risk is based on the costs of services the physician or physician
group does not provide (for example, referrals to specialists or the
cost of inpatient care).
For purposes of determining substantial financial risk, we proposed
to define payments as any amounts the organization pays physicians or
physician groups for services they provide, plus amounts paid for
administration and controlling levels or costs of referral services. We
proposed that payments do not include bonuses or other forms of
compensation that are not based on referral levels (such as bonuses
based solely on the quality of care provided, patient satisfaction, and
participation on committees).
Under our proposal, the risk threshold that determines substantial
financial risk would depend on the frequency with which the health plan
assesses or distributes incentive payments. We proposed that, for
prepaid health care organizations that assess or distribute incentive
payments no more often than annually, the risk threshold is 25 percent.
The risk threshold we proposed for prepaid health care organizations
that assess or distribute incentive payments more often than annually
was 15 percent.
Often, prepaid health care organizations use more than one type of
compensation arrangement. If more than one type of arrangement is used,
we proposed to consider all the different risk arrangements placed on
physicians or physician groups to determine whether they collectively
exceeded either of the thresholds.
D. Requirements for Physician Incentive Plans That Place Physicians at
Substantial Financial Risk
1. Enrollee Surveys
We proposed that HMOs, CMPs, and HIOs that place their physicians
or physician groups at substantial financial risk must conduct enrollee
surveys at least annually. We proposed that the surveys must--
Either survey all current Medicare/Medicaid enrollees in
the organization and those who have disenrolled (due to other than loss
of eligibility in Medicaid) in the past 12 months, or survey a
statistically valid sample of these same enrollees and disenrollees;
Be designed, conducted, and results analyzed in accordance
with commonly accepted principles of survey design and statistical
analysis; and
Address enrollees'/disenrollees' satisfaction with the
quality of the services furnished and their degree of access to the
services.
2. Stop-loss Protection
We proposed two levels of stop-loss protection depending on the
incentive plan's risk threshold. If the risk threshold is 25 percent,
the stop-loss protection must protect physicians and physician groups
from losses greater than 30 percent of the payments for services they
furnish, plus payments for administrative costs and controlling levels
of referral services. If the risk threshold is 15 percent, the stop-
loss protection must protect physicians and physician groups from
losses greater than 20 percent of payments.
We proposed that the organization may provide the stop-loss
protection directly or purchase it, or the physician or physician group
may purchase it.
E. Prohibited Physician Payments
We proposed language reflecting section 1876(i)(8)(A)(i) of the
Act, which provides that physician incentive plans may operate only if
no specific payment is made directly or indirectly under the plan as an
inducement to reduce or limit medically necessary services furnished to
a specific enrollee. We
[[Page 13434]]
proposed that indirect payments include offerings of monetary value
(such as stock options or waivers of debt) measured in the present or
future.
F. Enforcement
We proposed that noncompliance with the proposed requirements
discussed above could result in civil money penalties, intermediate
sanctions, and/or contract termination (for Medicare) or withholding of
FFP (for Medicaid). The civil money penalties would be limited to
$25,000 for each determination of noncompliance. Under the intermediate
sanctions provision, HCFA could (for Medicare) suspend the enrollment
of individuals into noncompliant plans and HCFA (for Medicare) or the
State (for Medicaid) could suspend payment for new enrollees until it
is satisfied that the basis for the determination is not likely to
recur. The process for applying civil money penalties and intermediate
sanctions would be the same process as that proposed in the July 22,
1991, proposed rule on civil money penalties and intermediate sanctions
(56 FR 33404).
VI. Analysis of and Responses to Public Comments
We received 41 timely comments on the December 1992 proposed rule.
(Comments related to the provisions that were proposed in the July 1991
proposed rule on civil money penalties and intermediate sanctions and
that were merely republished in the December 1992 proposed rule were
not considered timely.) Commenters included prepaid plans, State
agencies, national and local associations of managed care providers,
physician associations, consumer advocacy groups, and an insurance
industry trade association. This section of the preamble contains a
summary of the comments and our responses.
Note: This final rule changes the CFR designation of a number of
the proposed provisions. To aid the reader, we have provided in
section VI. of this preamble, a crosswalk between the proposed
provisions and the provisions of this final rule.
Scope of Regulation
Comment: Many commenters agreed with our position that the proposed
rule should apply to only Medicare and Medicaid risk contracts. In
contrast, one commenter believed protection should be extended to plans
governed by title XIII of the Public Health Service Act but conceded
that the scope of the authorizing legislation is not clear on this
point. This commenter recommended that we seek congressional
clarification of the intent of the statute.
Response: As indicated in the preamble to the proposed regulation
(hereinafter referred to as the ``proposed preamble''), the original
legislation amended only titles XVIII and XIX of the Act. Subsequent
legislation, however, applies to all physicians that furnish services
under the Medicare or Medicaid program.
Comment: One commenter suggested that we apply the proposed
requirements only if there is a greater risk for Medicare and Medicaid
contracts than for commercial contracts.
Response: The legislation requires us to develop these regulations
for Medicare and Medicaid prepaid plans but not for commercial plans.
It does not provide us with flexibility to make this determination.
Thus, we will examine only incentive plans between a prepaid plan and a
physician or physician group that apply to Medicare and Medicaid
enrollees. We will not examine the incentive plans as they relate to
commercial enrollees, even if the commercial enrollees are in addition
to Medicare and Medicaid enrollees. The only exception to this is if
the plan uses the pooling methods described later in this preamble.
Comment: One commenter suggested that the Department of Health and
Human Services should evaluate the feasibility of applying these
regulations to accountable health plans or other health care delivery
systems that may be created under health care reform.
Response: This suggestion does not fall within the scope of this
rulemaking, which implements enacted legislation in regulations.
Comment: Some commenters stated that there are no published studies
that link quality problems to physician incentive plans. They suggest,
therefore, that the regulation be dropped. In addition, some commenters
suggested that we are only responding to pressures from press reports.
Furthermore, some commenters believed this rule would not improve
quality of care and that it would only add to the cost of care.
One commenter believed that the proposed rule is too restrictive.
The commenter stated that it would make far more sense to monitor the
health outcomes of enrollees to ensure that they are receiving quality
health care services than to micromanage the administrative
arrangements within these health organizations.
Response: We reject these recommendations for the following
reasons:
OBRA '90 requires us to issue these regulations.
While we acknowledged in the proposed preamble that no
link between quality problems and incentive plans has been established,
the issue has not been sufficiently examined. In the report to the
Congress entitled ``Incentive Arrangements Offered by Health
Maintenance Organizations and Competitive Medical Plans to Physicians''
(hereinafter referred to as the ``Report''), no study is cited that
directly tests the link. Instead the Report cites studies that show no
differences in quality between prepaid plans and fee-for-service
arrangements. From this evidence, the Report infers that incentive
plans do not affect quality. It should be noted that studies to date
have used limited outcome measures.
Furthermore, the OBRA '90 provisions that require these regulations
were enacted after the submission of the Report, confirming legislative
intent subsequent to the Report.
HCFA is sponsoring quality assurance reform initiatives in
both Medicare and Medicaid that will begin to develop outcome measures
for HMOs. HCFA's first efforts contain some outcome measures. Future
projects will develop even more of these measures. The state of the art
in outcome measures is still in the early stages and, thus, at this
time, they cannot serve as a reliable measure of potential
underutilization.
While there is no guarantee that these requirements will result in
improvements in the quality of care, the Congress was concerned with
ensuring that underuse of necessary services does not occur. We are all
concerned with ensuring adequate protection of beneficiaries and
recipients so that they have access to all necessary and appropriate
care. As indicated in both the proposed preamble and later in this
document, we anticipate most prepaid plans will not incur significant
additional costs because most of them already meet the requirements
that are specified in this regulation.
Comment: A major organization suggested that we examine incentive
plans only if quality problems are detected.
Response: We rejected this recommendation for the following
reasons:
The legislation does not provide for an exception if there
is an absence of quality problems.
As indicated in the Report, there are limitations in the
quality studies and methodologies used to detect quality problems.
Prohibited Arrangements
Comment: One commenter recommended that we revise proposed
[[Page 13435]]
Sec. 417.479(c) (``Prohibited physician payments'') to clarify that
medically necessary services means medically necessary covered
services.
Response: In this final rule, we have revised proposed
Sec. 417.479(c) (now designated as Sec. 417.479(d)) to include all
medically necessary services covered by the prepaid plan contract. We
have included all services covered in the contract since some plans
contain services in their Medicare and Medicaid contracts that are in
addition to those covered under the regular Medicare or Medicaid
program. Furthermore, as established under title XIX of the Act, if a
plan contracts to provide early and periodic screening and diagnosis
and treatment services, the plan is responsible for any medically
necessary Medicaid covered services, regardless of whether these
services are covered under the State plan.
Disclosure
Comment: Several commenters, including major organizations,
requested that we require disclosure of the incentive plans to all
enrollees at the time of enrollment. They believed that disclosure is
necessary to protect patients and physicians.
In contrast, several commenters, also including major
organizations, stated that incentive plans are proprietary information
and, as such, should be exempt from disclosure under the Freedom of
Information Act (FOIA).
Response: We agree that disclosure of the incentive plans to
patients can aid them in ensuring that they receive needed services.
This information in the hands of Medicare beneficiaries and Medicaid
recipients will also help physicians to counter pressure from the
prepaid plans to reduce services. At the same time, we want to protect
the proprietary aspects of the information. To effectively balance
these conflicting goals, this final rule adds new Secs. 417.479(h)(3)
and 434.70(a)(4) to require that prepaid plans provide a summary of
three items of information to Medicare beneficiaries and Medicaid
recipients, respectively, when they request it. The three items are
identified in the next response. As the prepaid plans' experience with
physician incentive plans and disclosure increases, we encourage them
to voluntarily share summaries of the incentive plans with all
enrollees. We have not asked that more information be provided for the
following reasons:
We do not want to put an undue burden on the prepaid
plans.
We do not require fee-for-service physicians to provide a
notice that they have incentives to provide excessive services.
Certain information in the incentive plans is proprietary
information and is exempt from disclosure under the FOIA.
Comment: One commenter recommends we clarify what constitutes
``sufficient information'' for disclosure purposes.
Response: This final rule revises proposed Secs. 417.479(h) and
434.70(a) to provide for two types of disclosure. Disclosure to HCFA
and the States requires that prepaid plans submit information that
describes (1) whether services not furnished by the physician or
physician group are covered by the incentive arrangement (if only the
services furnished by the physician or physician group are covered by
the incentive plan, there is no need for disclosure of other aspects of
the plan); (2) the type of incentive arrangement, for example,
withhold, bonus, capitation; (3) the percent of the withhold or bonus,
if any; (4) the amount and type of stop-loss protection; (5) the panel
size and, if enrollees are pooled according to the principles discussed
later, the method of pooling used; (6) in the case of capitated
physicians or physician groups, capitation payments paid to primary
care physicians for the most recent year broken down by percent for
primary care services, referral services to specialists, hospital
services, and other types of provider (for example, nursing homes and
home health agencies) services; and (7) in the case of those prepaid
plans that are required to conduct beneficiary surveys, the survey
results. We are requesting the information described in item 6 so that
we can determine whether additional standards are necessary in the
future.
Disclosure to Medicare beneficiaries and Medicaid recipients
requires that only a summary of the above information be made available
if requested by the beneficiary. This information will indicate, 1)
whether the prepaid plan uses a physician incentive plan that affects
the use of referral services, 2) the type of incentive arrangement, 3)
and whether stop-loss protection is provided. In addition, those
prepaid plans that must conduct enrollee surveys must provide a summary
of the survey results to those beneficiaries and recipients who request
it.
Comment: One commenter stated that disclosure should not be needed
each time there is any change in the incentive plan. A second commenter
stated that we should require disclosure only initially and when
changes occur relative to rules.
Response: We agree with these recommendations. Therefore, we have
revised proposed Sec. 417.479(h)(3) and proposed Sec. 434.70(a)(2)(ii)
to specify that an organization must provide information concerning any
of the following changes in its incentive plan: A change as to the type
of incentive plan; a change in the amounts of risk or stop-loss
protection; or expansion of the risk formula to cover services not
provided by the physician group which the formula had not included
previously. We also specify that this information must be provided to
HCFA at least 45 days (rather than the proposed 30 days) before the
change takes effect. This latter change is made to make this rule
consistent with existing Sec. 417.428, which requires that HMOs and
CMPs submit to HCFA all marketing information 45 days in advance of
distribution. (Proposed Sec. 417.479(h)(3) is now
Sec. 417.479(h)(2)(C)(ii).)
Comment: One commenter recommended that the due date for submission
of the required information by organizations that have a contract with
us be extended from 30 days after publication of the final rule to 60
days after publication. The commenter stated that 30 days is not
sufficient for organizations to become aware of the rule, study its
details, analyze their incentive plans, and formulate disclosures that
meet the rule's requirements.
One commenter believed there should be a phase-in period for
organizations to comply with the regulations. The commenter suggested
that the phase-in period be the remainder of the term of the
organization's existing provider contract.
Response: We agree that organizations should be given more than 30
days to comply with the provisions of this rule. Since 60 days for
compliance is a standard time period used in many of our regulations,
particularly in the Medicaid program, we have extended the time period
in which organizations must comply with this rule to at least 60 days
from the date of publication. Further, we now require that
organizations with existing contracts with us comply with most of the
disclosure requirements by the date of the contract renewal or at least
60 days from the date of publication of this final rule, whichever is
later. We now require compliance with the disclosure requirement
related to capitation data within 1 year from the date of publication
of this rule. (See Dates section of this rule.)
Comment: One commenter believed that subcontracting poses an
[[Page 13436]]
impediment to an HMO's ability to comply with the disclosure
requirement. The commenter stated that subcontracting will result in
numerous contracts being subject to disclosure, particularly in the
case of larger HMOs. This commenter also pointed out that the proposed
rule does not address the extent to which subcontractors will be
compelled to disclose information concerning incentive arrangements.
The commenter stated that HMOs need to know the extent of the
disclosure obligation of the HMO where subcontracting has resulted in
incentive arrangements currently unknown to the HMO.
This same commenter believed that our estimate of 4 hours per
organization to meet disclosure requirements is a serious
underestimation given the complexity of current industry contracting
practices. The commenter did not offer an alternate estimate.
Response: Under this final rule, if the prepaid plan contracts with
a physician group that puts its individual physician members at
substantial financial risk for services not provided, the prepaid plan
must disclose to us (or in the case of Medicaid, to the State agency)
any physician incentive plans between the physician group and its
individual physicians that base compensation on the use or cost of
services furnished to beneficiaries or recipients.
Additionally, if a prepaid plan contracts with an ``intermediate
entity'' that, in turn, subcontracts with individual physicians or a
physician group, the prepaid plan, under all circumstances, must
disclose to us (or the State agency) any physician incentive plans
between the intermediate entity and the individual physician or
physician group that base compensation on the use or cost of services
furnished to beneficiaries. This information is necessary to ensure
that physicians are not placed at substantial financial risk for
services not provided.
For purposes of this requirement, we define intermediate entities
as organizations or individuals who contract with the prepaid plan and,
in turn, subcontract with one or more physician groups. Thus, for
example, an individual practice association (IPA) is an intermediate
entity if it subcontracts with one or more physician groups. (It is
simply a physician group when it is composed of a set of individual
physicians and has no subcontracts with physician groups.) A physician
hospital organization is also an example of an intermediate entity.
The information to be disclosed for each of the situations
described above includes the following:
Whether services not furnished by the physician or
physician group are covered by the incentive plan. If only the services
furnished by the physician or physician group are covered by the
incentive plan, disclosure of other aspects of the plan need not be
made.
The type of incentive arrangement; for example, withhold,
bonus, capitation.
If the incentive plan involves a withhold or bonus, the
percent of the withhold or bonus.
The amount and type of stop-loss protection.
The panel size and, if patients are pooled according to
one of the permitted methods, which method is used.
In the case of capitated physicians or physician group,
capitation payments paid to primary care physicians for the most recent
year broken down by percent for primary care services, referral
services to specialists, and hospital and other types of provider
services.
In the case of those prepaid plans that are required to
conduct beneficiary surveys, the survey results.
In subcontracting relations, if, under any circumstances, a
physician group and/or individual physicians are put at substantial
financial risk, the prepaid plan must conduct the beneficiary survey
required by this rule and provide adequate stop-loss protection to the
physician group and/or individual physicians. We have taken this
position because recent investigations by HCFA of HMOs in a number of
States has led us to conclude that, in subcontracting situations, some
physicians have been put at substantial financial risk without adequate
examination of the effect this has on the quality of care furnished to
the enrollees.
We have set forth the above requirements in this final rule by
adding a new paragraph (i) to Sec. 417.479 (for Medicare) and revising
proposed Sec. 434.70(a) (for Medicaid). We have also revised the
proposed definition of ``physician group'' at Sec. 417.479(b) to
clarify that an IPA is a physician group only if it is composed of
individual physicians and has no subcontracts with physician groups.
We believe these additional requirements will increase the burden
on prepaid health plans by an additional 4 hours, resulting in a total
of 8 hours per organization to meet the disclosure requirements. The
organization can either submit copies of its incentive plans or submit
information that addresses the required items listed in
Sec. 417.479(h)(1).
We would welcome comments on our estimate of the burden imposed by
the above requirements. We are particularly interested in receiving
empirical data supporting any estimates the commenter may offer.
Comment: One commenter believed the disclosure requirements are
excessively burdensome. This commenter noted that, as stated in the
preamble of the proposed rule, the justification for these disclosure
requirements is that, if the information is only disclosed during site
visits, an organization could change its physician incentive plan
shortly after the site visit, and we would not know of the new
arrangement for 2 years. The commenter pointed out that there are many
items of information that we review at site visits that could be
changed shortly thereafter without our knowledge; for example, HMO
marketing material, provider contracts, and quality assurance plans.
The commenter pointed out that these are reviewed during site visits
and not re-reviewed during the 2-year cycle. The commenter stated that
the proposed rule offered no explanation for different treatment for
incentive plans, and, therefore, the requirements are not based on an
acceptable justification.
Response: Section 1876(i)(8)(A)(iii) of the Act requires that we
obtain sufficient information to determine if substantial financial
risk occurs, adequate stop-loss protection is provided, etc. As
indicated in an earlier response, we have limited the amount of
information prepaid plans are required to submit to HCFA and the States
to information on just a few key items. As prescribed by legislation,
marketing materials are submitted to us every year. Further, as a
change from the proposed rule, we are requiring that we be notified of
only significant changes in the incentive plan, rather than each
change, thereby reducing the burden of this requirement.
Comment: One commenter suggested that HCFA use a simple disclosure
form that can quickly be completed by HMO personnel and reviewed
promptly by HCFA.
Response: HCFA will consider the feasibility of a form and, if it
decides to adopt the recommendation, in accordance with the Paperwork
Reduction Act of 1995, will publish a document in the Federal Register
soliciting public comments on a proposed form.
Comment: One commenter recommended that disclosure not be required
if the HMO essentially admits substantial financial risk by agreeing to
comply with enrollee survey and stop-loss requirements.
[[Page 13437]]
Response: The statute requires that organizations disclose their
incentive plan arrangements.
Comment: One commenter asked what timeframes an organization may
anticipate for HCFA's review of its incentive arrangements.
Response: Timeframes for the review of incentive plans will be
addressed in a forthcoming manual issuance. At this time, we anticipate
that the average review time will be 60 days.
Implementation
Comment: One commenter recommended that the final rules provide an
explicit mechanism for dealing with disputes arising from and during
the determination of whether physicians are at substantial financial
risk.
Response: We agree with the commenter that there should be
procedures for these disputes. Details on the dispute procedures will
be addressed in a forthcoming manual issuance.
Referral service
Comment: We proposed to define ``referral services'' as any
specialty, inpatient, outpatient, or laboratory services that a
physician or physician group orders or arranges, but does not provide
directly. One commenter believed that this definition is ambiguous. The
commenter questioned whether we intended to distinguish between the
services provided by the prepaid plan's physician employees and
services provided by independent contract physicians. The commenter
believed that absent knowing our position on this issue, the terms
``provide directly'' in the definition is ambiguous. The commenter
believed we should clarify that services provided by specialist
physicians through a contract with the physician group would not
constitute referral services. In addition, the commenter believed that
``referral services'' should be limited to services that a physician is
not licensed to provide, such as hospital services.
Response: We disagree that the definition is ambiguous. We believe
the problem the commenter had with this definition is related to the
understanding of another term used in the definition, that is, the
meaning of ``physician group.'' We assume that what the commenter is
really asking is ``If a physician group contracts for services of a
specialist, is the contract physician considered a member of the
physician group?'' We see this as the real issue because, if the
contract physician is a member of the physician group, then services
furnished by that physician would be services furnished directly by the
group. Thus, the services would not be referral services.
We proposed to define ``physician group'' as a partnership,
association, corporation, individual practice association, or other
group that distributes income from the practice among members according
to a prearranged plan unrelated to the members' referral levels. (For
reasons that will be discussed later in this preamble, this final rule
adopts a revised version of that definition. That is, we have deleted
from the definition the phrase ``according to a prearranged plan
unrelated to the members' referral levels''. We also no longer include
an individual practice association in the definition.) According to
this definition, a contract physician is not a member of the physician
group.
We disagree with the comment that referral services should be
limited to services that a physician is not licensed to provide. The
legislation requires the Secretary to determine if the plan places the
physicians at substantial financial risk for services not provided by
the physician group. Thus, referrals to specialists who are not part of
the group practice are considered referral services in the
determinations of risk. It is these services that the legislation
intended to address. Prepaid plans generally use primary care
physicians as gatekeepers. These models encourage the primary care
physician gatekeeper to not use specialist services if he or she can
perform the services. We support these models. The legislation,
however, is designed to prevent restrictions on necessary specialist
care.
Substantial Financial Risk
Comment: Several commenters believed the definition of
``substantial financial risk'' is overly restrictive. They believed it
fails to fulfill the goal of only identifying outliers because it fails
to address the variables that affect risk. One commenter suggested that
it be redrafted or, if HCFA is unwilling to redraft the definition,
that organizations be given the choice of either complying with the
regulation as written or demonstrating to HCFA that their incentive
plan does not put physicians at substantial financial risk.
A number of commenters recommended, more specifically, that HCFA
include the size of patient and physician pools (panels) in the risk
formula threshold as, in their view, required by the legislation. On
the other hand, one commenter stated that attempting to incorporate
patient panel size as a risk factor would prove unduly complex and less
workable than the approach contained in the proposed rule.
Response: We have reconsidered this issue and, in this final rule,
we take panel size into account in determining adequate stop-loss
requirements (See Sec. 417.479(g)(2)(ii).) Analyses by Rossiter and
Adamache (1990) (Health Care Financing Review, vol. 12, pp. 19-30) show
that there is no significant variation in costs from year to year for
counties with populations greater than 25,000. Based on these analyses,
we have determined that physician groups with more than 25,000 patients
are able to adequately spread risk and, therefore, are not at
substantial financial risk, even if 100 percent of the physician
group's income is at risk for referral services. This does not apply to
panels of more than 25,000 patients as a result of pooling. (See
Sec. 417.479(f).) Pooling of patients is discussed later in this
preamble.
As stated, our decision to set the threshold at 25,000 was based on
the analyses done by Rossiter and Adamache. We would welcome
information as to whether there are data that would support another
threshold.
With regard to the suggestion that we allow organizations the
choice of either complying with the regulation as written or
demonstrating that their incentive plan does not put physicians at
substantial financial risk, we would be interested in receiving
comments on how we might implement such an exception process.
The remainder of this response applies to panels of less than
25,000 patients. As stated in the proposed preamble, the size of the
patient or physician pool can have several theoretical effects on
substantial financial risk. Furthermore, there is no empirical evidence
that could guide us on the effects of these and other factors. We
requested information in this regard in the proposed preamble.
Nonetheless, while commenters suggested that size is a factor, none of
the commenters provided information on the exact relationship between
size and risk. Therefore, we have no basis for specifying this
relationship. Finally, the legislation discusses panel size only in
regard to stop-loss protection and not in regard to substantial
financial risk.
Comment: One major organization stated that, under the proposed
rule, prepaid plans that assess and/or distribute incentive payments
more often than annually are subject to lower risk thresholds. It
maintains that there are problems with this requirement as follows:
First, it contends that the term ``assess'' as used in this regard
is not
[[Page 13438]]
clear. It might, the organization suggests, be interpreted to bar plans
from communication with physicians as to their progress in meeting
annual goals. The organization stated that it disagrees with any
interpretation of this requirement that might prevent plans that
distribute incentive payments annually from working with their
physicians on their mutual cost containment goals on a more frequent
basis.
Second, the proposed regulation does not achieve its goal of using
an outlier approach in this area. Many organizations that use withhold
and distribute, or assess, incentive payments more often than once a
year exceed the 15 percent risk threshold. These organizations,
however, fall within the 25 percent threshold set for plans
distributing or assessing payments annually or less often.
Another commenter stated that the frequency of the assessment or
distribution should not affect the level or risk necessary to qualify
as substantial financial risk.
Response: The term ``assess'' is meant to refer to imposing a
charge. It is not used in the meaning of an evaluation or appraisal of
progress toward a goal.
We agree that a 15 percent threshold is not an outlier, since the
median withhold is between 10 and 20 percent. Also, there is no
evidence that making assessments or distributions more often than
annually affects the amount of risk placed on physicians. While our
rationale in the proposed rule was based upon reasonable assumptions as
to the impact of more frequent assessments or distributions, we now
agree that the 15 percent threshold is inconsistent with our intent to
use an outlier approach. Therefore, we have eliminated making a
distinction on the basis of the frequency of the assessment or
distribution. We establish the 25 percent threshold in all cases. The
25 percent threshold is an outlier since it exceeds the median withhold
of 10 to 20 percent. Proposed Sec. 417.479 has been revised to reflect
the elimination of the distinction.
Comment: One commenter stated that the proposed threshold for
combination of withholds and bonuses does not identify only outliers.
The commenter also stated that, in practice, physician performance will
be either in the bonus area or in the withhold area; therefore, to
limit the amount of financial risk that a physician will ultimately
accept, it is not necessary to limit the combination. The commenter
also pointed out that there is no evidence that upward variations on
physician payments (bonuses) have the same potential to cause
underutilization as downward variations (withholds).
Response: If organizations do not use a combination of withholds
and bonuses, there is no problem with setting the same limit for the
combinations as for withholds and bonuses individually. Since it is
possible for plans to use combinations of withholds and bonuses, it is
necessary to set a limit on the combination. As indicated in the
proposed preamble, to avoid putting physicians at substantial financial
risk, we determined it necessary to use the same threshold for the
combination.
With regard to the last comment, we are not aware of any data on
the effect of bonuses as opposed to withholds on physician behavior. We
would, therefore, appreciate receiving any information in this regard.
Comment: Several commenters recommended that we lower the
threshold.
Response: The proposed preamble had an extensive discussion of this
issue. As we stated, because of the limited information available on
this issue, the only logical approach is to use an outlier formula.
Given this decision, the threshold of 25 percent that we proposed is
consistent with the data that showed that the median withhold was
between 10 to 20 percent. It is also consistent with the concept of
substantial financial risk, which implies a greater than average risk.
As indicated, the threshold is based on withhold data. Averaging in the
organizations with capitation arrangements, which are the majority of
organizations, and treating them as equal to 100 percent withhold would
raise the threshold rather than lower it. We decided not to raise the
threshold because that would not make a difference to the capitation
arrangements. This would be so because, if capitation were considered
equal to 100 percent withhold, all plans using capitation would be
placing their physicians at substantial financial risk (unless the
threshold were set at 100 percent). Furthermore, as indicated in the
proposed preamble, the 25 percent withhold figure is within the range
of discounts that physician groups frequently provide to various
insurers. Physicians also lose similar amounts to bad debts.
Comment: One commenter suggested that we include the risk
arrangements between the physician groups and their individual
physicians, because the prepaid plan may use this strategy to
circumvent the process. The commenter maintained that the statute does
not specifically exclude these arrangements from scrutiny. The
commenter pointed out that the statute defines an incentive plan as
``any compensation arrangement between an eligible organization and a
physician that may directly or indirectly have the effect of reducing *
* *'' [Emphasis added.] The commenter believed that the use of the
words ``or indirectly'' indicates that the types of compensation
arrangements should be looked at broadly.
Response: As stated in an earlier response, we are requiring a
prepaid health plan that contracts with an intermediate entity to
disclose information about the physician incentive plans that the
entity has with physician groups or physicians. This will prevent a
prepaid plan from creating intermediate entities merely to evade the
requirements of this rule.
Furthermore, if the physician group subcontract with its physicians
places the latter at substantial financial risk, the prepaid health
plan must disclose the incentive arrangements. In order to minimize the
burden on prepaid plans, we are not requiring disclosure of every
incentive arrangement between physician groups and individual
physicians, only of those under which the physicians are placed at
significant financial risk.
In regard to the phrase ``indirectly have the effect of reducing or
limiting services,'' this phrase applies only to the arrangement
between the plan and physician group. It does not apply to the
relationship between the physician group and its individual physicians.
``Indirect'' as used in the statute refers to methods of compensation
to the physician groups that are not strictly monetary, but can be
considered the equivalent. Examples would include providing stocks,
waivers of debt, or equipment.
The commenter has raised the issue of physician groups that have
incentive arrangements with their individual physicians. As we examined
this issue, we noted that the definition of ``physician group'' in
proposed Sec. 417.479(b) technically would exclude such a physician
group, since it would not be a group that ``distributes income from
practice among members according to a * * * plan unrelated to the
members' referral levels.'' (Emphasis added.) It was not intended that
any physician group fall outside the scope of our definition, and thus
technically outside the scope of these regulations. We, accordingly,
are deleting ``according to a prearranged plan unrelated to the
member's referral levels'' from the definition of ``physician group.''
It is also for this reason that we did not adopt any existing
definitions of a physician group
[[Page 13439]]
or group practice that may similarly have contained provisions that
would exclude a group Congress intended to reach in this rule (for
example, the existing definition of ``medical group'' at 42 CFR 417.1
or ``group practice'' in section 1877 of the Act.
We are also taking this opportunity to point out that, although we
define a ``physician incentive plan'' as ``any compensation arrangement
between an organization and a physician or physician group that may
directly or indirectly have the effect of reducing or limiting services
furnished to Medicare beneficiaries or Medicaid recipients enrolled in
the organization'' [emphasis added], this definition also encompasses a
compensation arrangement between an entity with which the organization
contracts and physicians/physician groups and a compensation
arrangement between a physician group and its individual physicians.
This is because, although not a direct relationship, a linkage between
the organization and the physician group or individual physicians has
been established through the entity or physician group with which the
organization contracts.
Comment: One commenter suggested that we not apply substantial
financial risk to individual practice association (IPA) and direct
contracting models. The commenter stated that there would be no loss if
a few providers drop out.
Response: While the organization may not feel a loss, the enrollees
may be concerned about the loss. Furthermore, this may be an indication
that the incentive plans are having an undesired effect. The
legislation requires us to apply these regulations to all prepaid
plans. There is no justification for treating IPA and direct
contracting models differently. If anything, since these models
frequently involve contracts with individual physicians, these
physicians are less in a position to spread risk and may be at even
greater risk than other models.
Comment: Several commenters, including a major organization, raised
the concern that they do not know the total payments and patient loads
until the end of the year. They suggested that we substitute total
potential payments, based on the most recent year's utilization and
experience, in the substantial financial risk and stop-loss formulas.
Response: We agree that this option is acceptable, unless the
organization has information that suggests a significantly different
situation; for example, the addition of a major new contract.
Appropriate revisions have been made to proposed Sec. 417.479 to
clarify this.
Comment: A major organization suggested that we substitute an
actuarially derived threshold instead of an outlier approach.
Response: We reviewed this recommendation with several actuaries,
including staff from HCFA's Office of the Actuary. We concluded that it
is not feasible to make such an analysis. Actuaries can perform
analyses for certain kinds of losses, such as loss of life or loss of
income. However, the determination of what is a substantial loss of
income to a physician or physician group is more of a subjective or
policy decision than a measurable amount.
The actuaries also indicated that they could not perform such an
analysis because there are no empirical data to indicate how physicians
respond to different levels of financial risk.
Actuaries have supplied us with recommendations as to stop-loss
protection, discussed later in this preamble. The recommendations
result in different stop-loss requirements for different panel sizes.
Also, as discussed earlier, we have determined that physicians or
physician groups serving panels of over 25,000 patients are not at
substantial financial risk. We are, however, interested in receiving
current data on how physicians respond to different levels of financial
risk.
Comment: One commenter raised a concern that the Internal Revenue
Service (IRS) is developing policy on withholds that defines them as
discounts that would not be tax-exempt.
Response: We have held discussions with the IRS to coordinate
consistent policies and will continue to work with them.
Comment: One organization commented that the threshold should only
apply to the aggregate group of physicians and not to individual
physicians. It stated that its incentive plan is within the specified
limits for physician groups, but will exceed the limits for individual
physicians whose behavior exceeds certain norms.
Response: The legislation is concerned with whether a plan puts
physicians or physician groups at substantial financial risk. Thus, the
threshold policy applies to contracts between an organization and
individual physicians, but only if the contract is specifically between
the organization and an individual physician. As indicated earlier, we
have not interpreted the legislation to apply to subcontracts between
the physician group and its individual physicians.
Comment: A major organization asked if a contract for primary care
services outside the service area equals referral services.
Response: Primary care services outside the service area are not
``referral services.'' The prepaid plan, however, must ensure that all
necessary services are available and accessible within the service
area.
Comment: A major organization commented that the proposed
regulation poses a problem for staff model HMOs in medically
underserved areas (MUAs). The commenter stated that, because the
salaries of many physicians in community health centers (CHCs) are low
(because they are often working under a Federal student loan repayment
program), the formula we use to determine the risk threshold results in
a threshold that is artificially low for these HMO programs. The
commenter added that, to impose additional administrative obligations
on these community programs, because of their bonus payment
arrangements for salaried physicians, would divert time, energy, and
resources away from their mission of providing health services in MUAs.
Response: We share the concerns raised by this commenter. The low
salaries do create an artificially lower threshold, and the centers
have much more limited administrative resources. Nevertheless, these
circumstances result in even greater pressures on these physicians to
contain costs. With lower salaries, the physicians are more sensitive
to factors that can affect their income. Therefore, it is even more
appropriate to have the policies in this regulation apply to these
centers. Unfortunately, we have not been able to develop a different
policy for these centers. Note, however, that if an HMO contracts with
a CHC, then, as indicated in an earlier response, these regulations
would not apply to contracts between the centers and their physicians
because they are subcontracts.
Capitation Arrangements With Physicians
Comment: Several commenters, including a major organization, stated
that the threshold should not apply to capitation. Their argument was
that the thresholds were based on withhold data and, further, that it
is difficult to separate services furnished by the physicians from
referral services. The commenters also claimed that we did not specify
that the capitation applies only to referral services.
The commenters raised the concern that the capitation payments may
include payments for services furnished directly by the physician
group. Thus, they point out, we are limiting the
[[Page 13440]]
amount of risk a physician can accept for his or her own services. The
commenters stated that to do so is beyond the mandate of the statute,
which is intended to apply only to services not provided by the
physician group.
Response: We gave this issue a great deal of thought. We decided,
however, to continue with our proposed policy of applying a 25 percent
threshold. To exempt capitation from the threshold could place
physicians who are compensated in this manner at substantial financial
risk, without subjecting the prepaid plans to the requirement either to
set limits to the risk in the form of maximums and minimums, or provide
adequate stop-loss protection and conduct beneficiary surveys as
required by the statute. Furthermore, the commenters are incorrect; the
proposed and final rules are concerned with referral services. If the
incentive plan applies only to the services furnished by the physician
group, these rules do not apply. The legislation specifies that we
address services not furnished by the physician group. If the incentive
plan applies to all services or just referral services, these rules
apply.
The commenters are correct on these two points: our policy does
affect services that the physician group directly provides if we are
dealing with capitation for
FR Doc. 96-7228 Medicare and Medicaid Programs; Requirements for Physician Incentive Plans in Prepaid Health Care Organizations
all services; and services furnished
directly by the physician group or physician are not covered by the
statute. However, when the capitation covers all services, we are not
able to separate those service furnished directly from the referral
services. And, since the referral services are our primary concern, we
need to be inclusive rather than exclusive.
Comment: One commenter recommended that we not require the maximum
and minimum formula for capitation arrangements if the organization can
show that a 25 percent differential had not occurred in the past.
Response: While there is merit to this recommendation, we have
decided to reject it. The legislation requires that organizations that
place their physicians at substantial financial risk, as determined by
the Secretary, provide stop-loss protection and conduct enrollee
surveys. Thus, the formula is necessary for us to determine if
substantial financial risk exists. Also, past behavior is no guarantee
of future behavior. Thus, physicians could still feel the pressure if
they are placed at substantial financial risk, regardless of past
payments.
Comment: One commenter believed the rule should distinguish between
a monthly capitation payment to a physician group that includes an
amount for referral services, and an incentive plan assessment or
payment.
Response: The applicability of the provisions of this rule depends
upon the specific arrangements in the incentive plan. As stated
earlier, if the incentive plan applies only to services directly
furnished by the physician or physician group and does not cover
referral services, the regulations do not apply. If the capitation
includes payment for referral services, the provisions of
Sec. 417.479(f)(5) apply. If the organization capitates its physicians
only for services they directly furnish and uses withholds or bonuses
(or a combination of withholds and bonuses) as incentives to control
referrals, the requirements of Sec. 417.479(f)(5) concerning capitation
do not apply. In this case, however, if the withholds or bonuses or
combination of withholds and bonuses exceed the 25 percent risk
threshold, the stop-loss and survey requirements of this rule apply.
Comment: One commenter suggested that, if a physician group
achieves a patient population of approximately 250 members from a
single capitated HMO, there is no longer a need for the risk
protection.
Response: There is no evidence that supports this number. As
indicated later in this preamble, we have set an exception for the
stop-loss requirements that is based on panel size.
Comment: A number of commenters stated that the proposed rules, as
they relate to capitated payment arrangements, do not accommodate
common, longstanding contractual arrangements and should be withdrawn
to permit additional study.
Response: The Group Health Association of America (GHAA) has
supplied us with updated data as of the Winter 1993-94. Furthermore,
Mathematica has published data from 1995. We took these data into
account as we revisited our decisions regarding specific risk
thresholds and issues concerning capitation and stop-loss protection.
These data support the approach we have taken in this final rule. If
more recent data exists, we would appreciate receiving it.
Comment: Several commenters stated that they capitate their
physicians but also provide adequate stop-loss protection. They
believed that these physicians are not at risk, because of the stop-
loss protection.
Response: We agree in principle with this view. If an HMO has stop-
loss protection in place that ensures that no more than 25 percent of a
physician's or physician group's income is at risk, we would determine
that the plan does not involve substantial financial risk.
Stop-Loss
Comment: A commenter recommended that we put physicians at risk
beyond the stop-loss limit. The commenter believed that setting an
absolute limit on the amount of risk that physicians can accept (that
is, requiring stop-loss protection to cover the cost of referrals in
excess of 30 percent of payments) obstructs an organization's ability
to control physician behavior beyond that point. The commenter
suggested that the stop-loss requirement be constructed to allow for
continued, but limited, risk sharing. The commenter recommended that
the organization be allowed to hold physicians or physician groups
responsible for 20 percent of the cost of referrals beyond the point at
which the stop-loss protection begins. The commenter stated that it
does not believe the statute requires an absolute limit on the amount
of risk, but instead only ``adequate and appropriate'' stop-loss
protection.
Response: The approach suggested by this commenter is consistent
with the policy used by a number of HMOs. The practice of requiring
physicians to continue to share in the risk beyond a stop-loss limit
makes the physicians sensitive to the need to avoid furnishing
unnecessary services. Therefore, this final rule allows for continued,
but limited, risk sharing beyond the point at which the stop-loss
protection begins.
For those prepaid plans that provide an aggregate stop-loss policy,
we are setting the required stop-loss limit at 25 percent. The prepaid
plan will bear 90 percent of the losses beyond this level and the
physicians will bear 10 percent of the losses. (See
Sec. 417.479(g)(2)(i).) Because we are adding a 90/10 ratio to the
potential loss level, we believe it is necessary to reduce the proposed
30 percent stop-loss limit to 25 percent to compensate for the added
element of risk sharing. Furthermore, the 25 percent level is
consistent with the threshold we established for substantial financial
risk.
The 90/10 split also applies to those plans that provide per
patient stop-loss protection.
Comment: Several commenters, including major organizations, stated
that aggregate stop-loss policies are not currently used and would be
difficult to obtain. They recommended that patient, dollar, and/or
specific disease protections be substituted.
Response: We have decided to allow plans to provide either
aggregate or per-patient limit stop-loss policies. (See
[[Page 13441]]
Sec. 417.479(g)(2).) The amount of the per patient policy required to
be considered adequate and appropriate will vary with the patient panel
size and will be discussed later in this preamble. We reached this
decision on the following basis.
We agree that some organizations might have trouble purchasing
aggregate stop-loss policies or that it may be expensive to switch from
a per patient limit to an aggregate policy. Since most organizations do
not have such policies, this aggregate policy requirement would, at the
least, cause a significant change in policy, which could be very
difficult or expensive to implement. Furthermore, actuarial analyses
indicate that aggregate coverage is unlikely to be needed.
On the other hand, there are some organizations that do provide
aggregate stop-loss protection. Requiring them to switch to a per-
patient limit would also be expensive. There are advantages and
disadvantages to both aggregate and per-patient stop-loss coverage.
Aggregate policies provide greater overall protection, while per-
patient policies provide better protection at the individual patient
level.
Both of these options provide reasonable protection for physicians
and their patients. By providing an option, we have eliminated the
burden organizations might face to switch policies.
We considered the recommendation to include specific disease
protections. We reviewed the Department's preliminary plans for
implementing the Medicare Catastrophic Coverage Act of 1988 (Public Law
100-203), major provisions of which were repealed before being
implemented. The Department had not planned to specify any specific
diseases as catastrophic and instead planned to use specific dollar
levels to define ``catastrophic'' expenses.
Comment: Several commenters stated that the prepaid plans should
not be required to pay for the cost of stop-loss protection. They
believed they should be allowed to charge the physicians a reasonable
premium for stop-loss protection.
Response: Section 1876(i)(8)(ii) of the Act reads, in relevant
part, as follows:
(ii) If the plan places a physician or physician group at
substantial financial risk * * * the organization--(I) provides stop-
loss protection for the physician or group * * *.
In the case where the physician or physician group decides to purchase
its own stop-loss protection, we interpret ``provides'' to mean that
the organization either pays for the premium or reduces the level at
which the stop-loss protection applies by the cost of the stop-loss. We
also rejected the proposal of allowing HMOs to make available stop-loss
protection rather than paying for it. Making available is not
consistent with providing.
Thus, we provide, in Sec. 417.479(g)(2)(iii), that the prepaid plan
may either (1) Provide the stop-loss protection directly, (2) purchase
the stop-loss protection, or (3) if the physician or physician group
purchases the protection, pay the portion of the premium that covers
its enrollees or reduce the level at which the stop-loss protection
applies by the cost of the stop-loss. We are interested in any comments
on this provision and alternative proposals.
Comment: Several commenters suggested that we establish a case-by-
case exceptions process for stop-loss requirements.
Response: As stated previously for substantial financial risk, such
a process would be administratively burdensome. Further, it would be
difficult to make judgments.
Comment: One commenter, a major organization, disputed our
statement that there is little information available regarding the
impact of various factors on physician behavior.
Several commenters believed we should take patient panel size into
account and exclude large panels from this requirement. Other
commenters suggested that we have a higher stop-loss requirement, for
example, $200,000 per patient, for larger panels. They noted that the
legislation instructed us to take panel size into account for stop-loss
protection. The commenters argued that, with a sufficiently large
patient panel (generally a clinic), the physicians are able to spread
the risk across all the patients.
In addition, several commenters pointed out that a number of
physician groups have contracts with many different HMOs, particularly
IPA models, and have the equivalent of a large panel spread out among
the HMOs. The commenters recommended that HMOs that contract with these
groups be exempt from the stop-loss requirements.
Response: Analyses by several actuarial firms and data from several
HMOs support the position that having a large panel does reduce the
level of risk. The data is also consistent with the findings of
Rossiter and Adamache (1990) discussed previously. Based on these
analyses, we have determined the limits specified in the following
table (Table 1) for different panel sizes and have revised proposed
Sec. 417.479(g)(2) accordingly. Providing a higher stop-loss
requirement (a higher stop-loss level is a lower level of protection)
is consistent with the legislation, which specified that we take panel
size into account.
Table 1.--Stop Loss Limits Per Patient Panel Size
------------------------------------------------------------------------
Number of patients Stop-loss limits per patient
------------------------------------------------------------------------
Less than 1,000........................... $10,000
1,000 to 10,000........................... $30,000
10,000 to 25,001.......................... $200,000
Greater than 25,000 (unpooled)............ None
Greater than 25,000 (as a result of $200,000
pooling).
------------------------------------------------------------------------
There are two ways physician groups can pool patients to meet the
panel size requirements specified in the table: (1) Including
commercial, Medicare, and/or Medicaid enrollees in the calculation of
panel size, and (2) Pooling together, by the organization, of several
physician groups into a single panel. Each method may lead to a panel
size large enough to reduce the financial risk. These methods may be
used to pool patients, provided they are consistent with the relevant
contract between the physician or physician group and the prepaid plan.
(For instance, if there are separate contracts for commercial,
Medicare, and/or Medicaid enrollees, then, absent contractual
provisions to the contrary, pooling would be precluded).
We consider physician groups whose panels are greater than 25,000
patients without pooling of patients as not at substantial financial
risk. Thus, the organization would be exempt from stop-loss protection
and beneficiary survey requirements.
For those groups whose panel size is greater than 25,000 patients
as a result of pooling, the organization is required to provide stop-
loss protection at the same level that is required if the panel size is
between 10,000 to 25,000 patients ($200,000 per patient). This policy
is adopted so that plans will not use pools to circumvent the stop-loss
requirements. Furthermore, physicians may be at higher risk for panels
that are pooled than panels that are not pooled since the former may
experience greater variability in costs than the latter.
We have not established an increasing scale for the aggregate stop-
loss option, except that those panels over 25,000 patients without
pooling do not need aggregate stop-loss coverage. The scale does not
need to increase because, since a percentage formula is used, the
dollar
[[Page 13442]]
amount represented by the threshold rises as the panel size increases.
We are willing to consider policy alternatives that are supported
by empirical data. We are interested in receiving public comments in
this regard.
Surveys
Comment: Several commenters believed a survey of enrollee
satisfaction should be required of all prepaid plans, not just those
where there is substantial financial risk.
Response: While most prepaid plans do conduct surveys, there is no
legislative requirement to do so except as prescribed by this
regulation.
Comment: One commenter, a major organization, stated that the
proposed rule is silent about what HCFA must do with the survey
results. This organization proposed that the regulations explicitly
require HCFA to (1) Annually review the results as they are filed, (2)
share the complete results with the appropriate PRO, (3) take
appropriate action if the results indicate a problem; and (4) ensure
public access to the survey results by requiring that they be published
and disseminated to interested parties by the PRO, the organization, or
HCFA.
Response: We partially addressed this comment earlier in this
preamble. The survey results will be submitted to plan managers in
HCFA's central and regional offices. They will review the results in
conjunction with PRO results, disenrollment data, reconsiderations, and
related information, as part of ongoing compliance monitoring
activities. As HCFA develops performance measures and report cards over
the next several years, it will consider the best way to make the
survey results available to consumers and providers.
Comment: One commenter suggested that disenrollees that move be
excluded from the surveys.
Response: We agree with this recommendation since it may be very
hard to locate these beneficiaries. Therefore, we have revised proposed
Sec. 417.479(g) accordingly.
Comment: One commenter, a major organization, requested that we
specify that surveys do not need to be done more often than annually.
Response: This final rule, at Sec. 417.479(g)(1)(iv), revises the
requirement to specify that the survey must be conducted no later than
1 year from the effective date of the incentive plan, and at least
every 2 years thereafter. As noted in the DATES section of this
preamble, compliance with Sec. 417.479(g)(1)(iv) is not required until
1 year after the effective date of this rule.
Medicaid
Comment: One commenter asked whether States have the option to
prohibit incentive plans that place providers at a substantial
financial risk. The commenter believed this option would eliminate the
need to obtain and monitor stop-loss requirements and a member survey.
Response: Nothing in OBRA '90 prohibits States from placing more
restrictive requirements under State law on the physician incentive
plans of their HMO and HIO contractors. As a result, States do have the
option of under State law prohibiting altogether incentive plans that
place providers at substantial financial risk, regardless of any stop-
loss arrangements and member satisfaction surveys used by the
contractor. We point out, however, that the sanctions and penalties
provided for under this final rule would apply only with respect to
violations of the Federal requirements in this rule.
Comment: One commenter asked whether, if annual member surveys are
already required under quality assurance standards, an additional
member survey is necessary for those plans placing providers at
substantial financial risk.
Response: No additional survey is required, as long as the survey
conducted under the quality assurance standards meets the requirements
specified at Sec. 417.479(g) of this rule.
Comment: One commenter stated that sufficient time must be allowed
for States to incorporate the new provisions in program rules and
existing provider agreements.
Response: We agree with this comment. As a result, as stated in the
DATES section of this preamble, the compliance date for most provisions
is 60 days after publication of this final rule. This time period is
the standard commonly used for implementation under Medicaid.
Comment: One commenter stated that incentive plans for physicians
serving Medicaid recipients need to address access to primary and
preventive services and quality of care services. The commenter stated
that these plans must include incentives based on specific health
outcomes, timely access to primary care, and enrollee satisfaction
based on specific health outcomes.
Response: OBRA '90: (1) Prohibits certain physician incentive
arrangements and (2) specifies two requirements to be met if other
types of arrangements that place physicians at substantial financial
risk are used. The statute does not go beyond these prohibitions and
requirements to mandate the use of any particular type of incentive
arrangements, including those described by the commenter. Accordingly,
the rule does not include any requirements that certain types of
incentives be used.
Comment: One State agency stated that incentive plans for
physicians serving Medicaid must limit the payment of any incentives to
once annually. The commenter believed this would decrease the
possibility that physicians will cut back on services or refuse to
treat individual patients because of fear of financial losses.
Response: OBRA '90 prohibited only one type of incentive
arrangement: those that make specific payments, ``directly or
indirectly under the plan to a physician or physician group as an
inducement to reduce or limit medically necessary services provided
with respect to a specific individual enrolled with the organization.''
All other types of incentive arrangements are allowed, including those
that place physicians at ``substantial financial risk.'' (Those that
place physicians at substantial financial risk must meet certain
requirements for the provision of stop-loss protection for physicians
and periodic enrollee satisfaction surveys.) The statute makes no
provision, including the one recommended by the commenter, for banning
other types of incentive plans. We cannot impose the restrictions on
the incentive program that were recommended by the commenter. As noted
above, however, OBRA '90 would not prohibit a State from imposing such
a restriction under State law.
Comment: One commenter recommended that the reporting and other
requirements for physician incentive plans be limited to only those
HMOs, CMPs, or HIOs that institute percentage risk levels that are
greater for the Medicaid and Medicare populations than for their
commercial contracts.
Response: With respect to Medicaid, OBRA '90 amended section
1903(m)(2)(A) of the Act to condition a State's receipt of FFP for
expenditures in prepaid capitation or other risk-based reimbursement
contracts upon a contractor's adherence to the requirements for
physician incentive plans also described in OBRA '90. The statute does
not authorize the Secretary to exempt certain plans or State Medicaid
contracts from compliance with these reporting and other requirements.
Therefore, we cannot change the regulation as the commenter has
proposed.
[[Page 13443]]
Comment: One commenter stated that the definitions of ``substantial
risk,'' ``withhold,'' and ``bonus'' are too inflexible to meet the
special needs related to the Medicaid program. Citing monthly
eligibility variation and differences in payments based on varying
Medicaid eligibility categories as examples of variables that can
affect payment to a provider in any given period, the commenter
questioned how, if incentive payments are based on end of year results
and a percent sharing arrangement, a plan can know in advance if its
providers will be at substantial risk.
Response: The maximum potential (as opposed to the actual) amount
of withhold or bonus lost or awarded, respectively, determines whether
a prepaid plan has placed a physician or physician group at substantial
financial risk. If the plan places the practitioner at risk of losing
more than 25 percent of his/her potential earnings, then the plan has
placed the physician or physician group at substantial financial risk.
The actual amount of withhold returned or not returned or bonus awarded
or not awarded at the end of the assessment and disbursement period is
not the determinant of substantial financial risk because money
returned or awarded after care has already been delivered does not
serve as an inducement. It is the promise of potential earnings (or the
prospect of loss thereof) that serves as the inducement. Therefore, a
prepaid plan does not need to know its end of year results in order to
determine if it is placing its physicians and physician groups at
substantial financial risk.
The minimum and maximum potential earnings, including the portions
that are the result of incentive arrangements, should be known both to
the plan and the physician or physician group under contract at the
beginning of each risk assessment period. As a result, the regulation
states that capitation arrangements in which the maximum and minimum
possible payments are not clearly explained in the physician's or
physician group's contract constitute substantial financial risk.
Comment: One commenter stated that the rules are not very clear on
defining a number of terms. As examples, the commenter asked the
following questions:
What does ``risk based on the levels or costs of referral
services'' mean? Are the ``levels or costs'' applied to an individual
capitated physician, physician group, or organization?
What if the amount allocated to cover referral services is
placed in a pool account for debiting patient costs and the amount from
these services that might be paid as part of the incentive plan depends
on the performance of the larger pool formed by a number of separate
physicians and these physicians pool accounts?
What if the ``capitation'' amount actually paid to a
physician is meant to cover that physician's services and involves a 15
percent withhold?
Response: In response to the first question, the term ``referral
services'' is defined in Sec. 417.479(c) of the regulation. In
addition, the word ``level'' has been changed to ``use'' for greater
clarity.
In response to the first two questions, it is important to note
that, in general, the regulation does not attempt to address how a
prepaid plan chooses to design or implement its physician incentive
plan. Rather, it attempts to regulate one of the final products, that
is, the maximum financial risk to which a physician or physician group
may be exposed for referral services. Plans may use a variety of
incentive arrangements, including those identified by the commenter, in
structuring their physician incentive plans. However, prepaid plans
should be able to determine or establish, as part of their physician
incentive plans, the maximum financial risk, when the risk is based on
referral services, to which a physician or physician group may be
exposed under the physician incentive plan. If a plan is unable, based
on the structure and operation of its incentive plan, to determine the
amount of the financial risk, then, according to
Sec. 417.479(f)(5)(ii), we would determine that the plan places
physicians or physician groups at ``substantial financial risk'' and
the plan would be required to implement stop-loss protection and
conduct enrollee surveys. As indicated previously, we have decided to
allow a plan to pool patients for different physician groups.
In response to the third question, the threshold for withhold
arrangements is established in Sec. 417.479(f) of this final rule. This
section would apply only if the withhold is based in part or in its
entirety on utilization or costs of referral services. If the return of
the withhold is based solely on the physicians' own services, then,
under Sec. 417.479(f) of this final rule, these regulations would not
apply.
Comment: One commenter stated that the proposed rule does not allow
for the differences found in HIOs, specifically that they have
mandatory enrollment in a specific area, may be at-risk for
retroactively eligible individuals, and may be responsible for an
ongoing category of special members who are not capitated to a
particular physician. The commenter noted that the cost of services to
this population affects the incentive plan (withhold payment and
surplus sharing). The commenter also specifically noted that the HIOs
in California which are Medicaid only were not specifically addressed
in the proposed rule.
Response: The Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA '85) generally subjected HIOs which were operational on or
after January 1, 1986, to the same requirements as other organizations
contracting with Medicaid agencies on a risk basis to provide or
arrange for comprehensive services (HMOs). (Certain exceptions to this
are allowed under the law.) Therefore, this proposed rule did not
reiterate the fact that HIOs subject to the same requirements for HMOs
are also subject to these requirements for physician financial
incentive plans.
Further, OBRA '90 did not contain any provisions calling for the
differential treatment of HIOs. Because of this, and the historical
interest of the Congress in subjecting HIOs to the same standards as
HMOs, we did not identify the need for differential treatment of HIOs
in this regulation.
Comment: One commenter stated that the proposal on enrollee surveys
excludes only those Medicaid enrollees who have disenrolled because of
a loss of Medicaid eligibility. The commenter recommended we consider
excluding those who disenroll from a prepaid plan because they moved
from the plan's service area.
Response: As stated earlier, we agree that individuals who have
disenrolled from the plan because they have moved outside of a plan's
service area may be omitted from the plan's enrollee survey. The
regulations text at Sec. 417.479(g)(1) has been appropriately modified.
Comment: One commenter stated that, in addition to an enrollee
survey, monitoring of the complaint/appeals process for the plan and
the State's Medicaid fair hearing process would be another check on the
quality of care and the denial of needed service.
Response: OBRA '90 does not address monitoring the complaint/
appeals process for the plan and the State Medicaid fair hearing
process in the State. However, monitoring the plan's complaint hearing
process is the responsibility of the State Medicaid agency as part of
its routine monitoring of its managed care contractors. In addition,
HCFA routinely monitors a State's fair hearing process as part of the
monitoring of each State's Medicaid plan. As a result, these areas are
not included in these regulations.
[[Page 13444]]
Miscellaneous
Comment: One commenter recommended that we clarify the definition
of ``medically necessary services'' as it applies in the prohibition on
specific payment as an inducement to reduce or limit medically
necessary services to a specific enrollee.
Response: We are preparing a final rule entitled ``Medicare
Program: Criteria and Procedures for Making Medical Services Coverage
Decisions that Relate to Health Care Technology.'' This rule will
specify the definition of medically necessary services that will apply
for purposes of the prohibition in question. (The rule will be in
response to a notice we published in the Federal Register on April 29,
1987, at 52 FR 15559, that requested comments on procedures for medical
services coverage decisions.)
Comment: One commenter stated that managed care plans should be
specifically directed to provide for effective physician participation
in the development of incentive plans and other elements of the
organization's management.
Response: Physicians have the opportunity for input before they
sign a contract with the organization. Physicians have the opportunity
to negotiate all aspects of the contract. Since the contract specifies
the nature of the incentive arrangements, the physicians have an
opportunity for input through the negotiation process.
Comment: Some commenters recommended that patients be allowed
direct access to specialists and/or that the prepaid plan explain, as
part of the enrollment contract, that patients have limited access to
specialists.
Response: HCFA supports the practice of HMOs using gatekeepers to
limit patients from direct access to specialists. HMOs have found this
to be an effective way to limit inappropriate utilization and
expenditures. HMOs are required to explain this practice as part of the
enrollment.
Comment: Several commenters suggested that there be an appeals
process for physicians and patients.
Response: HCFA requires prepaid plans to provide an appeals process
for enrollees. For physicians, there are several arrangements. All
physicians have an opportunity to informally appeal decisions through
the plan's medical review board and through the contract negotiation
process. In addition, for Medicare risk contractors, unaffiliated
physicians can represent a Medicare beneficiary in an appeal to the
prepaid plan. In the case of a cost contract, the physician can
represent a beneficiary in an appeal to whichever entity (prepaid plan,
carrier, or intermediary) made the determination.
VII. Provisions of the Final Regulations
The proposed rule is adopted, with the changes listed below. Many
of these changes are discussed in section V. of this preamble. If the
change is not discussed in section V, the reason for the change is
given below.
Changes to Proposed Sec. 417.479
We add a new paragraph (a); and designated proposed
paragraph (a) as paragraph (b). New paragraph Sec. 417.479(a) is added
to reflect the requirement at section 1876(i)(8) of the Act that each
contract between HCFA and an eligible organization contain provisions
related to physician incentive plans. This new paragraph also makes it
clear why this provision is placed in part 417, subpart L (Medicare
Contract Requirements).
We designate paragraph (b) as paragraph (c) and revise the
definition of ``physician group'' so that it no longer inadvertently
excludes physician groups that pay their physicians using a methodology
under which the amount of payment is affected by referrals. We also
clarify, in that definition, that an IPA is a physician group only if
it is composed of individual physicians and has no subcontracts with
physician groups.
We designate proposed (c) as paragraph (d). We also revise
this paragraph to remove language that, because of the addition of new
paragraph (a), became redundant. Also, in response to a comment, we
change ``to reduce or limit medically necessary services'' to ``to
reduce or limit medically necessary services covered under the
organization's contract''.
Proposed paragraph (d) is designated as paragraph (e).
Additionally, the difference in risk threshold based on the frequency
of distribution or assessment of incentive payments is removed.
Proposed paragraph (e) is designated as paragraph (f) and
is revised to--
+ Provide a definition of ``potential payments'' and clarify that
it is these payments that are used in the calculation of the level of
risk.
+ Provide that substantial financial risk does not exist if,
without pooling, the patient panel size is 25,000 patients or more.
Proposed paragraph (g) is revised to--
+ Specify that individuals who disenroll from a prepaid plan
because they relocate outside the plan's service area need not be
included in the enrollee survey.
+ Provide that, in the case of aggregate stop-loss protection, the
protection must cover 90 percent of the costs of referral services
(beyond allocated amounts) that exceed 25 percent of potential
payments.
+ Establish, in the case of stop-loss protection based on a per-
patient limit, requirements as to the amount of stop-loss protection
that are based on patient panel size.
Proposed paragraph (h) is revised to-
+ Specify the items of information that must be disclosed to HCFA
and to Medicare beneficiaries and, in accordance with Sec. 434.70(a)(3)
and (a)(4), to the State Medicaid agency or recipient, respectively.
+ Include methods that may be used in the calculation of panel
size.
+ Specify those types of changes in the incentive plan that must be
reported to HCFA and require that this information be submitted to HCFA
45 days before implementing the changes.
+ Remove proposed paragraph (h)(5). The proposed paragraph
addressed when organizations with existing contracts must comply with
the disclosure requirements. Because that provision would become
quickly irrelevant, we have decided to address this issue in the DATES
section of this final rule, rather than by incorporation into the CFR.
+ Require that organizations provide Medicare beneficiaries a
summary of the disclosure information, if they request it.
We designate proposed Sec. 417.479(i) as Sec. 417.479(j).
We add a new Sec. 417.479(i) to specify requirements related to
subcontracting arrangements.
Changes to Proposed Sec. 434.70
Proposed paragraph (a)(2) is revised to--
+ Require compliance with Secs. 417.479(d) through (g) and the
requirements related to subcontracts set forth at Sec. 417.479(i) if
the subcontract is for the provision of services to Medicaid
recipients.
+ Specify the items of information that must be disclosed to the
State agency.
+ Require that the organization provide certain information
concerning the physician incentive plan to any Medicaid recipient who
requests it.
+ Remove proposed paragraph (a)(2)(iv). The proposed paragraph
addressed when organizations with existing contracts (agreements) must
comply with the disclosure requirements. Because that provision
[[Page 13445]]
would quickly become irrelevant, we have decided to address this issue
in the DATES section of this final rule, rather than by incorporation
into the CFR.
Crosswalk Between Proposed Rule and This Final Rule
Note that those provisions related to civil money penalties and
intermediate sanctions that were included in the July 22, 1991,
proposed rule and that were merely republished in the December 1992
proposed rule on physician incentive plans are not included in this
final rule or in the following crosswalk.
------------------------------------------------------------------------
Proposed This rule
------------------------------------------------------------------------
Sec. 417.479(a)--new
contents.
Sec. 417.479(a).......................... Sec. 417.479(b).
Sec. 417.479(b).......................... Sec. 417.479(c).
Sec. 417.479(c).......................... Sec. 417.479(d).
Sec. 417.479(d).......................... Sec. 417.479(e).
Sec. 417.479(e).......................... Sec. 417.479(f).
Sec. 417.479(f).......................... Content deleted.
Sec. 417.479(g).......................... Sec. 417.479(g).
Sec. 417.479(h).......................... Sec. 417.479(h).
Sec. 417.479(i)--new
contents.
Sec. 417.479(i).......................... Sec. 417.479(j).
Sec. 417.495(a)(7)....................... Sec. 417.500(a)(9).
Sec. 434.44(a)........................... Sec. 434.44(a).
Sec. 434.70(a)(3) and
(a)(4)--added.
Sec. 1003.100(b)(vi)..................... Sec. 1003.100(b)(vi).
Sec. 1003.101 (definitions).............. Sec. 1003.101--only
definition of ``physician
incentive plan'' added by
this rule.
Sec. 1003.103(e)(iv) through (e)(vi)..... Sec. 1003.103(e)(iv)
through (e)(vi).
Sec. 1003.106(a)(4)(vii)................. Sec. 1003.106(a)(4)(vii).
------------------------------------------------------------------------
VIII. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comment on each of these issues
for the following sections of this document that contain information
collection requirements:
The information collection requirements in Sec. 417.479(g)(1) (and
Sec. 434.70(a)(3) for Medicaid) concern organizations that operate
incentive plans that place physicians or physician groups at
substantial financial risk and require them to conduct annual enrollee
surveys that include either all current Medicare/Medicaid enrollees in
the organization and those who have disenrolled (other than because of
loss of eligibility in Medicaid or relocation outside the
organization's service area) in the past 12 months, or a sample of
these same enrollees and disenrollees. These surveys must be designed,
implemented, and analyzed in accordance with commonly accepted
principles of survey design and statistical analysis. They must address
enrollees/disenrollees satisfaction with the quality of services
furnished and their degree of access to the services. We estimate that
200 organizations will conduct the surveys each year. We estimate that
a total of approximately 90,000 enrollees will respond to the survey.
The information collection requirements in Secs. 417.479(h)(1) and
(h)(2), 417.479(i), and 434.70(a)(3) specify that disclosure concerning
physician incentive plans must be made to HCFA or to the State, as
appropriate. The requirements apply to physician incentive plans
between eligible organizations and individual physicians or physician
groups with whom they contract to furnish medical services to
enrollees. The requirements apply only to physician incentive plans
that base compensation on the use or cost of services furnished to
Medicare beneficiaries or Medicaid recipients.
The disclosure must contain the following information:
(1) Whether services not furnished by the physician or physician
group are covered by the incentive plan. (If not, disclosure of other
aspects of the plan need not be made.)
(2) The type of incentive arrangement.
(3) If the incentive plan involves a withhold or bonus, the percent
of the withhold or bonus.
(4) The amount and type of stop-loss protection.
(5) The patient panel size and, if patients are pooled, the pooling
method used.
(6) In the case of capitated physicians or physician groups,
capitation payments paid to primary care physicians for the most recent
year broken down by percent for primary care services, referral
services to specialists, and hospital and other types of provider
services.
(7) In the case of prepaid plans that must conduct beneficiary/
recipient surveys, the survey results.
An organization must provide the information upon application for a
contract; upon application for a service area expansion; at least 45
days before implementing certain changes in its incentive plan, and
within 30 days of a request by HCFA or the State. The respondents that
will provide the information are HMOs, CMPs, HIOs, and certain
subcontractor entities that contract with the Medicare program or
States and have physician incentive plans. We estimate that
approximately 600 organizations will submit the information.
Sections 417.479(h)(3) and 434.70(a)(4) require that the following
information be provided to any Medicare beneficiary or Medicaid
recipient, respectively, who requests it: Whether the plan uses a
physician incentive plan that affects the use of referral services; if
so, the type of incentive arrangement; whether stop-loss protection is
provided; and, if a survey is required, a summary of the survey
results. The respondents who will provide this information will be
HMOs, CMPs, HIOs, that contract with the Medicare program or States and
have physician incentive plans. We estimate that approximately 300
organizations will provide this information to a total of approximately
1,500 Medicare beneficiaries and 1,500 Medicaid recipients.
The table below indicates the annual number of responses for each
regulation section in this final rule containing information collection
requirements, the average burden per response in minutes or hours, and
the total annual burden hours.
----------------------------------------------------------------------------------------------------------------
Annual No. Annual
CFR section of Annual Average burden per response burden
responses frequency hours
----------------------------------------------------------------------------------------------------------------
417.479(g)(1).............................. 90,000 1 10 minutes.................... 15,000
417.479(h) (1) and (2) and 417.479(I)...... 600 1 1 hour........................ 600
[[Page 13446]]
417.479(h)(3).............................. 1,500 1 10 minutes.................... 250
434.70(a)(4)............................... 1,500 1 10 minutes.................... 250
----------------------------------------------------------------------------------------------------------------
We have submitted a copy of this final rule with comment period to
OMB for its review of the above information requirements. A document
will be published in the Federal Register when OMB approval is
obtained.
If you comment on these information collection and recordkeeping
requirements, please mail your comments to the following address:
Health Care Financing Administration, Office of Financial and Human
Resources, Management Planning and Analysis Staff, Room C2-26-17, 7500
Security Boulevard, Baltimore, MD 21244-1850.
IX. Regulatory Impact Statement
Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612), we prepare a regulatory flexibility analysis unless the
Secretary certifies that a rule will not have a significant economic
impact on a substantial number of small entities. For purposes of the
RFA, all HMOs, CMPs, and HIOs are considered to be small entities.
In addition, section 1102(b) of the Act requires the Secretary to
prepare a regulatory impact analysis if a rule may have a significant
impact on the operations of a substantial number of small rural
hospitals. This analysis must conform to the provisions of section 604
of the RFA. For purposes of section 1102(b) of the Act, we define a
small rural hospital as a hospital that is located outside of a
Metropolitan Statistical Area and has fewer than 50 beds.
This final rule with comment period will amend the regulations
governing prepaid health care organizations with Medicare or Medicaid
risk contracts. Sections 4204(a) and 4731 of OBRA 1990 repealed the
prohibition of physician incentive plans in prepaid health care
organizations and enacted requirements, effective January 1, 1992, for
regulating these plans.
One of the requirements imposed was that each Medicare contract
with a prepaid health care organization stipulate that, if a physician
incentive plan places a physician or physician group at ``substantial
financial risk'' for services not provided directly, the prepaid health
plan organization must: (1) Provide the physician or physician group
with adequate and appropriate stop-loss protection, and (2) conduct
surveys of currently and previously enrolled members to assess the
degree of access to services and the satisfaction with the quality of
services.
We received one comment that dealt with the impact statement in the
proposed rule published in the Federal Register on December 14, 1992
(57 FR 59034). The commenter believed that the proposed rule would have
a substantial impact on prepaid health care organizations. The
commenter stated that it would be required to make significant changes
to limit physician group participation in incentive programs. The
commenter also believed the proposed rule would limit its ability to
control costs and also result in higher administrative expenses. We
believe most plans already meet a majority of our requirements, as
indicated by the survey data collected by GHAA and Mathematica
discussed in the preamble. We strongly believe that if physicians are
at substantial financial risk, organizations must provide stop-loss
protection to ensure that essential health care services are received
by Medicare beneficiaries and Medicaid enrollees.
All of the approximately 600 HMOs, CMPs, and HIOs could be affected
by the revised incentive plan disclosure requirements. We believe,
however, that few incentive plans will require changes to comply with
the regulations. In addition, since we expect that most current
incentive plans already comply with the regulations, we believe that we
will rarely need to impose intermediate sanctions or civil money
penalties on prepaid health plan organizations that fail to provide
covered medically necessary services. Further, we expect few additional
surveys of currently and previously enrolled members will be necessary
to assess the degree of access to services and the satisfaction with
the quality of services. Thus, we believe that additional costs will be
incurred by only a small number of organizations.
We are not preparing analyses for either the RFA or section 1102(b)
of the Act because we have determined, and the Secretary certifies,
that this rule will not have a significant economic impact on a
substantial number of small entities or a significant impact on the
operations of a substantial number of small rural hospitals. We will,
however, publish a regulatory flexibility analysis and regulatory
impact analysis if we receive comments and data that would enable us to
do so.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 417
Administrative practice and procedure, Health maintenance
organization (HMO), Medicare, Reporting and recordkeeping requirements.
42 CFR Part 434
Grant programs--Health, Health maintenance organization (HMO),
Medicaid, Reporting and recordkeeping requirements.
42 CFR Part 1003
Administrative practice and procedure, Fraud, Grant programs--
Health, Health facilities, Health profession, Maternal and child
health, Medicaid, Medicare, Penalties.
CHAPTER IV--HEALTH CARE FINANCING ADMINISTRATION, DEPARTMENT OF HEALTH
AND HUMAN SERVICES
I. Chapter IV of title 42 is amended as set forth below:
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
A. Part 417 is amended as follows:
1. The authority citation for part 417 is revised to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
2. A new Sec. 417.479 is added to read as follows:
Sec. 417.479 Requirements for physician incentive plans.
(a) The contract must specify that an organization may operate a
physician incentive plan only if--
(1) No specific payment is made directly or indirectly under the
plan to a physician or physician group as an inducement to reduce or
limit medically necessary services furnished to an individual enrollee;
and
[[Page 13447]]
(2) The stop-loss protection, enrollee survey, and disclosure
requirements of this section are met.
(b) Applicability. The requirements in this section apply to
physician incentive plans between eligible organizations and individual
physicians or physician groups with whom they contract to provide
medical services to enrollees. These requirements apply only to
physician incentive plans that base compensation (in whole or in part)
on the use or cost of services furnished to Medicare beneficiaries or
Medicaid recipients.
(c) Definitions. For purposes of this section:
Bonus means a payment an organization makes to a physician or
physician group beyond any salary, fee-for-service payments,
capitation, or returned withhold.
Capitation means a set dollar payment per patient per unit of time
(usually per month) that an organization pays a physician or physician
group to cover a specified set of services and administrative costs
without regard to the actual number of services provided. The services
covered may include the physician's own services, referral services, or
all medical services.
Payments means any amounts the organization pays physicians or
physician groups for services they furnish directly, plus amounts paid
for administration and amounts paid (in whole or in part) based on use
and costs of referral services (such as withhold amounts, bonuses based
on referral levels, and any other compensation to the physician or
physician group to influence the use of referral services). Bonuses and
other compensation that are not based on referral levels (such as
bonuses based solely on quality of care furnished, patient
satisfaction, and participation on committees) are not considered
payments for purposes of this subpart.
Physician group means a partnership, association, corporation,
individual practice association, or other group that distributes income
from the practice among members. An individual practice association is
a physician group only if it is composed of individual physicians and
has no subcontracts with physician groups.
Physician incentive plan means any compensation arrangement between
an organization and a physician or physician group that may directly or
indirectly have the effect of reducing or limiting services furnished
to Medicare beneficiaries or Medicaid recipients enrolled in the
organization.
Referral services means any specialty, inpatient, outpatient, or
laboratory services that a physician or physician group orders or
arranges, but does not furnish directly.
Risk threshold means the maximum risk, if the risk is based on
referral services, to which a physician or physician group may be
exposed under a physician incentive plan without being at substantial
financial risk.
Withhold means a percentage of payments or set dollar amounts that
an organization deducts from a physician's service fee, capitation, or
salary payment, and that may or may not be returned to the physician,
depending on specific predetermined factors.
(d) Prohibited physician payments. No specific payment of any kind
may be made directly or indirectly under the incentive plan to a
physician or physician group as an inducement to reduce or limit
covered medically necessary services covered under the organization's
contract furnished to an individual enrollee. Indirect payments include
offerings of monetary value (such as stock options or waivers of debt)
measured in the present or future.
(e) General rule: Determination of substantial financial risk.
Substantial financial risk occurs when the incentive arrangements place
the physician or physician group at risk for amounts beyond the risk
threshold, if the risk is based on the use or costs of referral
services. Amounts at risk based solely on factors other than a
physician's or physician group's referral levels do not contribute to
the determination of substantial financial risk. The risk threshold is
25 percent.
(f) Arrangements that cause substantial financial risk. For
purposes of this paragraph, potential payments means the maximum
anticipated total payments (based on the most recent year's utilization
and experience and any current or anticipated factors that may affect
payment amounts) that could be received if use or costs of referral
services were low enough. The following physician incentive plans cause
substantial financial risk if risk is based (in whole or in part) on
use or costs of referral services and the patient panel size is not
greater than 25,000 patients or is greater than 25,000 patients only as
a result of pooling patients using a method set forth in paragraph
(h)(1)(v) of this section:
(1) Withholds greater than 25 percent of potential payments.
(2) Withholds less than 25 percent of potential payments if the
physician or physician group is potentially liable for amounts
exceeding 25 percent of potential payments.
(3) Bonuses that are greater than 33 percent of potential payments
minus the bonus.
(4) Withholds plus bonuses if the withholds plus bonuses equal more
than 25 percent of potential payments. The threshold bonus percentage
for a particular withhold percentage may be calculated using the
formula--
Withhold %=-0.75 (Bonus %)+25%.
(5) Capitation arrangements, if--
(i) The difference between the maximum possible payments and
minimum possible payments is more than 25 percent of the maximum
possible payments; or
(ii) The maximum and minimum possible payments are not clearly
explained in the physician's or physician group's contract.
(6) Any other incentive arrangements that have the potential to
hold a physician or physician group liable for more than 25 percent of
potential payments.
(g) Requirements for physician incentive plans that place
physicians at substantial financial risk. Organizations that operate
incentive plans that place physicians or physician groups at
substantial financial risk must do the following:
(1) Conduct enrollee surveys. These surveys must--
(i) Include either all current Medicare/Medicaid enrollees in the
organization and those who have disenrolled (other than because of loss
of eligibility in Medicaid or relocation outside the organization's
service area) in the past 12 months, or a sample of these same
enrollees and disenrollees;
(ii) Be designed, implemented, and analyzed in accordance with
commonly accepted principles of survey design and statistical analysis;
(iii) Address enrollees/disenrollees satisfaction with the quality
of the services provided and their degree of access to the services;
and
(iv) Be conducted no later than 1 year after the effective date of
the incentive plan, and at least every 2 years thereafter.
(2) Ensure that all physicians and physician groups at substantial
financial risk have either aggregate or per-patient stop-loss
protection in accordance with the following requirements:
(i) If aggregate stop-loss protection is provided, it must cover 90
percent of the costs of referral services (beyond allocated amounts)
that exceed 25 percent of potential payments.
(ii) If the stop-loss protection provided is based on a per-patient
limit, the stop-loss limit per patient must be determined based on the
size of the
[[Page 13448]]
patient panel. In determining patient panel size, the patients may be
pooled using one of the methods set forth in paragraph (h)(1)(v) of
this section if pooling is consistent with the relevant contract
between the physician or physician group and the organization. Stop-
loss protection must cover 90 percent of the costs of referral services
that exceed the per patient limit. The per-patient stop-loss limit is
as follows:
(A) Less than 1,000 patients--$10,000.
(B) 1,000 to 10,000 patients--$30,000.
(C) 10,000 to 25,001 patients--$200,000.
(D) Greater than 25,000 patients--
(1) Without pooling patients--none; and
(2) As a result of pooling patients--$200,000.
(iii) The organization may provide the stop-loss protection
directly or purchase the stop-loss protection, or the physician or
physician group may purchase the stop-loss protection. If the physician
or physician group purchases the stop-loss protection, the organization
must pay the portion of the premium that covers its enrollees or reduce
the level at which the stop-loss protection applies by the cost of the
stop-loss.
(h) Disclosure requirements for organizations with physician
incentive plans--(1) Disclosure to HCFA. Each organization must provide
to HCFA information concerning its physician incentive plans as
required or requested. The disclosure must contain the following
information in detail sufficient to enable HCFA to determine whether
the incentive plan complies with the requirements specified in this
section:
(i) Whether services not furnished by the physician or physician
group are covered by the incentive plan. If only the services furnished
by the physician or physician group are covered by the incentive plan,
disclosure of other aspects of the plan need not be made.
(ii) The type of incentive arrangement; for example, withhold,
bonus, capitation.
(iii) If the incentive plan involves a withhold or bonus, the
percent of the withhold or bonus.
(iv) The amount and type of stop-loss protection.
(v) The panel size and, if patients are pooled according to one of
the following permitted methods, the method used:
(A) Including commercial, Medicare, and/or Medicaid patients in the
calculation of the panel size.
(B) Pooling together, by the organization, of several physician
groups into a single panel.
(vi) In the case of capitated physicians or physician groups,
capitation payments paid to primary care physicians for the most recent
year broken down by percent for primary care services, referral
services to specialists, and hospital and other types of provider (for
example, nursing home and home health agency) services.
(vii) In the case of those prepaid plans that are required to
conduct beneficiary surveys, the survey results.
(2) When disclosure must be made to HCFA. (i) An organization must
provide the information required by paragraph (h)(1) of this section to
HCFA--
(A) Upon application for a contract;
(B) Upon application for a service area expansion; and
(C) Within 30 days of a request by HCFA.
(ii) An organization must notify HCFA at least 45 days before
implementing any of the following changes in its incentive plan:
(A) A change as to the type of incentive plan.
(B) A change in the amounts of risk or stop-loss protection.
(C) Expansion of the risk formula to cover services not furnished
by the physician group that the formula had not included previously.
(3) Disclosure to Medicare beneficiaries. An organization must
provide the following information to any Medicare beneficiary who
requests it:
(i) Whether the prepaid plan uses a physician incentive plan that
affects the use of referral services.
(ii) The type of incentive arrangement.
(iii) Whether stop-loss protection is provided.
(iv) If the prepaid plan was required to conduct a survey, a
summary of the survey results.
(i) Requirements related to subcontracting arrangements--(1)
Physician groups. An organization that contracts with a physician group
that places the individual physician members at substantial financial
risk for services they do not furnish must do the following:
(i) Disclose to HCFA any incentive plan between the physician group
and its individual physicians that bases compensation to the physician
on the use or cost of services furnished to Medicare beneficiaries or
Medicaid recipients. The disclosure must include the information
specified in paragraphs (h)(1)(i) through (h)(1)(vii) of this section
and be made at the times specified in paragraph (h)(2) of this section.
(ii) Provide adequate stop-loss protection to the individual
physicians.
(iii) Conduct enrollee surveys as specified in paragraph (g)(1) of
this section.
(2) Intermediate entities. An organization that contracts with an
entity (other than a physician group) for the provision of services to
Medicare beneficiaries must do the following:
(i) Disclose to HCFA any incentive plan between the entity and a
physician or physician group that bases compensation to the physician
or physician group on the use or cost of services furnished to Medicare
beneficiaries or Medicaid recipients. The disclosure must include the
information required to be disclosed under paragraphs (h)(1)(i) through
(h)(1)(vii) of this section and be made at the times specified in
paragraph (h)(2) of this section.
(ii) If the physician incentive plan puts a physician or physician
group at substantial financial risk for the cost of services the
physician or physician group does not furnish--
(A) Meet the stop-loss protection requirements of this subpart; and
(B) Conduct enrollee surveys as specified in paragraph (g)(1) of
this section.
(3) For purposes of paragraph (i)(2) of this section, an entity
includes, but is not limited to, an individual practice association
that contracts with one or more physician groups and a physician
hospital organization.
(j) Sanctions against the organization. HCFA may apply intermediate
sanctions, or the Office of Inspector General may apply civil money
penalties described at Sec. 417.500, if HCFA determines that an
eligible organization fails to comply with the requirements of this
section.
3. In Sec. 417.500, the introductory text of paragraph (a) is
republished, and a new paragraph (a)(9) is added to read as follows:
Sec. 417.500 Sanctions against HMOs and CMPs.
(a) Basis for imposition of sanctions. HCFA may impose the
intermediate sanctions specified in paragraph (d) of this section, as
an alternative to termination, if HCFA determines that an HMO or CMP
does one or more of the following:
* * * * *
(9) Fails to comply with the requirements of Secs. 417.479(d)
through (i) relating to physician incentive plans.
* * * * *
PART 434--CONTRACTS
B. Part 434 is amended as follows:
1. The authority citation for part 434 continues to read as
follows:
Authority: Secs. 1102 of the Social Security Act (42 U.S.C.
1302).
[[Page 13449]]
2. In Sec. 434.44, the introductory text of paragraph (a) is
republished, and paragraph (a)(1) is revised to read as follows:
Sec. 434.44 Special rules for certain health insuring organizations.
(a) A health insuring organization that first enrolls patients on
or after January 1, 1986, and arranges with other providers (through
subcontract, or through other arrangements) for the delivery of
services (as described in Secs. 434.21(b)) to Medicaid enrollees on a
prepaid capitation risk basis is--
(1) Subject to the general requirements set forth in Sec. 434.20(d)
concerning services that may be covered and Sec. 434.20(e) which sets
forth the requirements for all contracts, the additional requirements
set forth in Secs. 434.21 through 434.38 and the Medicaid agency
responsibilities specified in subpart E of this part; and
* * * * *
3. In Sec. 434.67, the introductory text of paragraph (a) is
republished, and a new paragraph (a)(5) is added to read as follows:
Sec. 434.67 Sanctions against HMOs with risk comprehensive contracts.
(a) Basis for imposition of sanctions. The agency may recommend
that the intermediate sanction specified in paragraph (e) of this
section be imposed if the agency determines that an HMO with a risk
comprehensive contract does one or more of the following:
* * * * *
(5) Fails to comply with the requirements of Secs. 417.479(d)
through (g) of this chapter relating to physician incentive plans, or
fails to submit to the State Medicaid agency its physician incentive
plans as required or requested in Sec. 434.70.
* * * * *
4. Section 434.70 is revised to read as follows:
Sec. 434.70 Condition for FFP.
(a) FFP is available in expenditures for payments to contractors
only for the periods that--
(1) The contract--
(i) Meets the requirements of this part;
(ii) Meets the appropriate requirements of 45 CFR part 74; and
(iii) Is in effect;
(2) The HMO or HIO complies with the physician incentive plan
requirements specified in Secs. 417.479(d) through (g) of this chapter
and the requirements related to subcontracts set forth at
Sec. 417.479(i) of this chapter if the subcontract is for the provision
of services to Medicaid recipients;
(3) The HMO or HIO (or, in accordance with Sec. 417.479(i) of this
chapter, the subcontracting entity) has supplied the information on its
physician incentive plan listed in Secs. 417.479(h)(1) of this chapter
to the State Medicaid agency. The information must contain detail
sufficient to enable the State to determine whether the plan complies
with the requirements of Secs. 417.479(d) through (g) of this chapter.
The HMO or HIO must supply this information to the State Medicaid
agencies as follows:
(i) Upon application for a contract.
(ii) At least 45 days before implementing any of the following
changes in its incentive plan:
(A) A change as to the type of incentive plan.
(B) A change in the amounts of risk or stop-loss protection.
(C) Expansion of the risk formula to cover services not furnished
by the physician group that the formula had not included previously.
(iii) Within 30 days of a request by the State or HCFA; and
(4) The HMO or HIO has provided the information on physician
incentive plans listed in Sec. 417.479(h)(3) of this chapter to any
Medicaid recipient who requests it.
(b) HCFA may withhold FFP for any period during which--
(1) The State fails to meet the State plan requirements of this
part;
(2) Either party to a contract substantially fails to carry out the
terms of the contract; or
(3) The State fails to obtain from each HMO or HIO contractor proof
that it meets the requirements for physician incentive plans specified
in Secs. 417.479(d) through (g) and (i) of this chapter.
CHAPTER V--OFFICE OF INSPECTOR GENERAL--HEALTH CARE, DEPARTMENT OF
HEALTH AND HUMAN SERVICES
II. 42 CFR part 1003 is amended as set forth below:
PART 1003--CIVIL MONEY PENALTIES, ASSESSMENTS AND EXCLUSIONS
1. The authority citation for part 1003 continues to read as
follows:
Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7a, 1320b-10, 1395mm,
1395ss(d), 1395u(j), 1395u(k), 1396b(m), 11131(c) and 11137(b)(2).
2. In Sec. 1003.100, paragraph (b)(1) introductory text is revised
and paragraph (b)(1)(vii) is revised to read as follows:
Sec. 1003.100 Basis and purpose.
* * * * *
(b) Purpose. * * *
(1) Provides for the imposition of civil money penalties and, as
applicable, assessments against persons who--
* * * * *
(vii) Substantially fail to provide an enrollee with required
medically necessary items and services, or who engage in certain
marketing, enrollment, reporting, claims payment, employment or
contracting abuses, or that do not meet the requirements for physician
incentive plans for Medicare specified in Secs. 417.479 (d) through (i)
of this title;
* * * * *
3. Section 1003.101 is amended by adding, in alphabetical order, a
definition for the term ``Physician incentive plan'' to read as
follows:
Sec. 1003.101 Definitions.
* * * * *
Physician incentive plan means any compensation arrangement between
a contracting organization and a physician group that may directly or
indirectly have the effect of reducing or limiting services provided
with respect to enrollees in the organization.
* * * * *
4. In Sec. 1003.103, paragraph (f)(1) introductory text is
republished, paragraphs (f)(1)(iv) and (f)(1)(v) are revised, and a new
paragraph (f)(1)(vi) is added, to read as follows:
Sec. 1003.103 Amount of penalty.
* * * * *
(f)(1) The OIG may, in addition to or in lieu of other remedies
available under law, impose a penalty of up to $25,000 for each
determination by HCFA that a contracting organization has--
* * * * *
(iv) Misrepresented or falsified information furnished to an
individual or any other entity under section 1876 or section 1903(m) of
the Act;
(v) Failed to comply with the requirements of section 1876(g)(6)(A)
of the Act, regarding prompt payment of claims; or
(vi) Failed to comply with the requirements of Secs. 417.479 (d)
through (i) of this title for Medicare, and Secs. 417.479 (d) through
(g) and (i) of this title for Medicaid, regarding certain prohibited
incentive payments to physicians.
* * * * *
5. In Sec. 1003.106, paragraph (a)(5) introductory text is
republished; paragraphs (a)(5)(vii) and (a)(5)(viii) are redesignated
as paragraphs (a)(5)(viii) and (a)(5)(ix), respectively; and a new
paragraph (a)(5)(vii) is added to read as follows:
[[Page 13450]]
Sec. 1003.106 Determinations regarding the amount of the penalty and
assessment.
(a) * * *
(5) In determining the appropriate amount of any penalty in
accordance with Sec. 1003.103(f), the OIG will consider, as
appropriate--
* * * * *
(vii) The extent to which the failure to provide medically
necessary services could be attributed to a prohibited inducement to
reduce or limit services under a physician incentive plan and the harm
to the enrollee which resulted or could have resulted from such
failure. It would be considered an aggravating factor if the
contracting organization knowingly or routinely engaged in any
prohibited practice which acted as an inducement to reduce or limit
medically necessary services provided with respect to a specific
enrollee in the organization;
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.733--
Medicare--Hospital Insurance Program; No. 93.774--Medicare
Supplementary Medical Insurance Program; No. 93.778--Medical
Assistance Program)
Dated: April 20, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: May 19, 1995.
June G. Brown,
Inspector General, Department of Health and Human Services.
Dated: November 2, 1995.
Donna E. Shalala,
Secretary.
[FR Doc. 96-7228 Filed 3-25-96; 8:45 am]
BILLING CODE 4120-01-P
Complete official Federal Register PDF
FR Doc. 96-7188 Consolidation and Streamlining of the Restrictions on Assistance to Noncitizens
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13614-13627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7188]
[[Page 13613]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Secretary
_______________________________________________________________________
24 CFR Part 5, et al.
Consolidation and Streamlining of the Restrictions on Assistance to
Noncitizens; Final Rule
Federal Register / Vol. 61, No. 60 / Wednesday, March 27, 1996 /
Rules and Regulations
[[Page 13614]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
24 CFR Parts 5, 200, 236, 247, 812, 882, 887, 904, 912, 960, and
982
[Docket No. FR-3988-F-01]
RIN 2501-AC12
Consolidation and Streamlining of the Restrictions on Assistance
to Noncitizens
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: On March 20, 1995, HUD issued its final rule implementing
Section 214 of the Housing and Community Development Act of 1980, as
amended. Section 214 prohibits HUD from making financial assistance
available to persons other than United States citizens, nationals, or
certain categories of eligible noncitizens in HUD's Public Housing and
Indian Housing programs (including homeownership); the Section 8
housing assistance payments programs; the Housing Development Grants
program; the Section 236 interest reduction and rental assistance
programs; the Rent Supplement program; and the Section 235
homeownership program. HUD's March 20, 1995 final rule, which became
effective on June 19, 1995, promulgated virtually identical
``noncitizen'' regulations for the HUD programs covered by Section 214.
This final rule eliminates the redundancy of these duplicative
regulations by consolidating noncitizens requirements and relocating
them to a single location in 24 CFR part 5. This rule does not
consolidate or revise the noncitizens requirements for HUD's Indian
Housing programs.
EFFECTIVE DATE: April 26, 1996.
FOR FURTHER INFORMATION CONTACT: For the covered programs, the
following persons should be contacted:
(1) For Public Housing, Section 8 Rental Certificate, Rental
Voucher, and Moderate Rehabilitation (except Single Room Occupancy--
``SRO'') programs--Linda Campbell, Office of Public Housing, Department
of Housing and Urban Development, 451 Seventh Street, SW., Washington,
DC 20410-5000, telephone (202) 708-0744;
(2) For Indian Housing programs--Deborah Lalancette, Office of
Native American Programs, Department of Housing and Urban Development,
451 Seventh Street, SW., Washington, DC 20410-5000, telephone (202)
755-0088;
(3) For the Section 8 Moderate Rehabilitation SRO program--Dave
Pollack, Office of Special Needs Assistance Programs, Department of
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC
20410-7000, telephone (202) 708-4300;
(4) For the other Section 8 programs, the Section 236 programs,
Housing Development Grants and Rent Supplement--Barbara Hunter, Office
of Multifamily Management, Department of Housing and Urban Development,
451 Seventh Street, SW., Washington, DC 20410-8000, telephone (202)
708-3944; and
(5) For the Section 235 homeownership program--William Heyman,
Office of Lender Activities and Land Sales Registration, Office of
Single Family Housing, Department of Housing and Urban Development, 451
Seventh Street, SW., Washington, DC 20410-8000, telephone (202) 708-
1824.
For persons with hearing or speech impairment, the TTY number is 1-
800-877-8339 (Federal Information Relay Service TTY). With the
exception of the ``800'' number, none of the foregoing telephone
numbers are toll-free.
SUPPLEMENTARY INFORMATION:
I. Background
A. The March 20, 1995 Final Rule
On March 20, 1995 (60 FR 14816), HUD issued its final rule
implementing Section 214 of the Housing and Community Development Act
of 1980, as amended (42 U.S.C. 1436a). Section 214 prohibits HUD from
making financial assistance available to persons other than United
States citizens, nationals, or certain categories of eligible
noncitizens in HUD's: (1) Public Housing and Indian Housing programs
(including homeownership); (2) the Section 8 housing assistance
payments programs; (3) the Housing Development Grants program; (4) the
Section 236 interest reduction and rental assistance programs; (5) the
Rent Supplement program; and (6) the Section 235 homeownership program.
B. Regulatory Reform
President Clinton's Regulatory Reform Initiative calls for
immediate, comprehensive regulatory reform. The President has directed
all Federal departments and agencies to undertake an exhaustive review
of their regulations. This initiative, which is part of the National
Performance Review, calls for the elimination of redundant,
unnecessary, or obsolete regulatory requirements, and the modification
of others to increase flexibility and reduce burden.
On February 9, 1996 (61 FR 5198), HUD, as part of its continuing
regulatory reform efforts, published a final rule creating a new 24 CFR
part 5. HUD established part 5 to set forth those requirements which
are applicable to one or more program regulations. Consolidation in
part 5 of requirements applicable to one or more programs will
eliminate redundancy in title 24 and assist in HUD's overall efforts to
streamline the content of its regulations.
HUD's March 20, 1995 final rule implementing Section 214, which
became effective on June 19, 1995, promulgated virtually identical
noncitizen regulations for the HUD programs covered by Section 214.
Subpart G of part 200, subpart B of part 812, and subpart B of part
912, contain, with minor exceptions, the same noncitizen requirements.
This final rule eliminates the repetitiveness of these duplicative
regulations by consolidating the noncitizens requirements and
relocating them to a single location in 24 CFR part 5. This rule does
not consolidate the noncitizens requirements for HUD's Indian Housing
programs. These provisions will continue to be located in 24 CFR part
950, which sets forth the consolidated regulatory requirements for the
Indian Housing programs.
Although HUD is consolidating its noncitizen requirements, it is
not revising the requirements nor is it modifying any differences in
the requirements among the program regulations. This final rule
eliminates redundancy in the existing noncitizen requirements wherever
possible, but it retains those provisions which are specific to certain
of the Section 214 covered programs.
C. Technical Corrections/Clarifying Changes
Additionally, although HUD is not making substantive changes, it is
making certain clarifying changes. These changes are as follows. First,
this streamlining rule clarifies that a noncitizen student alien's
family may be eligible for assistance if the family meets the
conditions for prorated assistance for mixed families. Second, this
rule removes from the text of the regulation those INS documents that
are required to show proof of immigration status. Because INS may
change these documents from time to time, notification of the documents
that are required to show proof of immigration status is best
accomplished through notice in the Federal Register. The INS uses the
Federal Register frequently to list appropriate documents for various
immigration categories. Third, the rule also provides increased
flexibility on when verification of immigration status
[[Page 13615]]
is to occur for public housing projects. Fourth, the rule clarifies
that for tenants receiving assistance under the Section 8 Moderate
Rehabilitation assistance, Section 8 tenant-based assistance, and the
Section 8 project-based certificate assistance programs, that the
applicable hearing procedures are found in parts 882, 982, and 983,
respectively. Section 812.9(f)(3) of the March 20, 1995 rule
incorrectly referred to the procedures in part 966, which are the
public housing hearing procedures. This rule does not revise the
noncitizens requirements for HUD's Indian Housing programs in 24 CFR
part 950.
Additionally, this rule makes one technical change unrelated to the
noncitizens requirements. On February 13, 1996, HUD published a final
rule which consolidated HUD's general requirements for assistance under
the United States Housing Act of 1937 in a new subpart D of part 5.
This final rule amends paragraph (c)(2) of Sec. 5.405 to add the phrase
``as determined by the HA subsidy standard.'' The addition of this
phrase will clarify how the limitations on housing assistance for
single persons is applied under the tenant-based assistance programs.
With regard to more substantive changes to HUD's noncitizens
regulations, HUD is aware that some housing providers desire certain
changes be made to the noncitizen requirements set forth in the March
20, 1995 rule. In some cases, the types of changes requested cannot be
made because the changes would affect statutory requirements not
regulatory ones. Other changes which could possibly be made are not
those that can be addressed by this streamlining final rule, but
rather, would need to be addressed through rulemaking that provides for
advance notice and public comment. Because the March 20, 1995 final
rule became effective June 19, 1995, implementation of Section 214
remains fairly recent. HUD is monitoring implementation of Section 214
and will consider making changes to the regulations (to the extent that
HUD can give the statutory requirements) after opportunity to review
the results of the procedures provided in the March 20, 1995 rule.
D. New Immigration Legislation and Changes to Noncitizen Requirements
HUD is also aware of several immigration bills that have been
proposed by House and Senate committees that would possibly amend
Section 214. As of the date of publication of this rule, no changes
have been made to Section 214. If and when changes are made to Section
214 that may require changes to the regulations issued on March 20,
1995, HUD will undertake whatever regulatory action may be required in
accordance with any new immigration legislation or by the
Administrative Procedures Act.
E. Nondiscrimination in the Implementation of Section 214
HUD reiterates the statement made in the March 20, 1995 final rule
that all regulatory procedures involved in implementation of Section
214 must be administered in the uniform manner prescribed without
regard to race, national origin, or personal characteristics (e.g.,
accent, language spoken, or familial association with a noncitizen).
II. Justification for Final Rulemaking
It is HUD's policy to publish rules for public comment before their
issuance for effect in accordance with its own regulations on
rulemaking found at 24 CFR part 10. However, part 10 provides that
prior public procedure will be omitted if HUD determines that it is
``impracticable, unnecessary, or contrary to the public interest.'' (24
CFR 10.1). HUD finds that in this case prior comment is unnecessary
since this final rule does not affect or establish policy. This rule
merely consolidates HUD's noncitizen requirements in 24 CFR part 5.
Where consolidation is not possible, this rule retains those provisions
which are applicable to several, but not all, Section 214 covered
programs. This final rule does not add or remove program requirements,
but merely relocates them to a single part of HUD's regulations.
III. Other Matters
Environmental Review. This rulemaking does not have an
environmental impact. This rulemaking simply amends existing
regulations by consolidating and streamlining provisions and does not
alter the environmental effect of the regulations being amended. A
Finding of No Significant Impact with respect to the environment was
made in accordance with HUD regulations in 24 CFR part 50 that
implement section 102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4332) at the time of development of regulations
implementing Section 214 of the Housing and Community Development Act
of 1980. That Finding remains applicable to this rule, and is available
for public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the
Office of the Rules Docket Clerk, Room 10276, Department of Housing and
Urban Development, 451 Seventh Street, SW., Washington, DC 20410.
Regulatory Flexibility Act. The Secretary, in accordance with the
Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this final
rule before publication, and by approving it, certifies that this rule
does not have a significant economic impact on a substantial number of
small entities. This rule is limited to consolidating and streamlining
existing regulations.
Executive Order on Federalism. The General Counsel, as the
Designated Official under section 6(a) of Executive Order 12612,
Federalism, has determined that the policies contained in this final
rule will not have substantial direct effects on States or their
political subdivisions, or the relationship between the Federal
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Specifically,
this final rule merely consolidates HUD's noncitizen requirements which
are currently repeated throughout title 24 of the Code of Federal
Regulations.
Executive Order on The Family. The General Counsel, as the
Designated Official under Executive Order 12606, The Family, has
determined that this rule does not have potential significant impact on
family formation, maintenance, and general well-being. This final rule
merely consolidates HUD's noncitizen requirements which are currently
repeated throughout title 24 of the Code of Federal Regulations.
List of Subjects
24 CFR Part 5
Administrative practice and procedure, Aged, Grant programs--
housing and community development, Individuals with disabilities, Loan
programs--housing and community development, Low and moderate income
housing, Mortgage insurance, Pets, Public housing, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Home improvement, Housing standards,
Incorporation by reference, Lead poisoning, Loan programs--housing and
community development, Minimum property standards, Mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social security, Unemployment
compensation, Wages.
[[Page 13616]]
24 CFR Part 236
Grant programs--housing and community development, Low and moderate
income housing, Mortgage insurance, Rent subsidies, Reporting and
recordkeeping requirements.
24 CFR Part 247
Grant programs--housing and community development, Loan programs--
housing and community development, Low and moderate income housing,
Rent subsidies.
24 CFR Part 812
Low and moderate income housing, Reporting and recordkeeping
requirements.
24 CFR Part 882
Grant programs--housing and community development, Homeless, Lead
poisoning, Manufactured homes, Rent subsidies, Reporting and
recordkeeping requirements.
24 CFR Part 887
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 904
Grant programs--housing and community development, Loan programs--
housing and community development, Public housing.
24 CFR Part 912
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
24 CFR Part 960
Aged, Grant programs--housing and community development,
Individuals with disabilities, Public housing.
24 CFR Part 982
Grant programs--housing and community development, Housing, Rent
subsidies, Reporting and recordkeeping requirements.
Accordingly, under the authority of 42 U.S.C. 3535(d), parts 5,
200, 236, 247, 812, 882, 887, 904, 912, 960, and 982 of title 24 of the
Code of Federal Regulations, are amended as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
1. The authority citation for part 5 is revised to read as follows:
Authority: 12 U.S.C. 101r-1; 42 U.S.C. 1436a, 3535(d), 3543, and
3544.
2. Section 5.405 is amended by revising paragraph (c)(2) to read as
follows:
Sec. 5.405 Basic eligibility; preference over single persons; and
housing assistance limitation for single persons.
* * * * *
(c) * * *
(2) For tenant-based assistance, housing assistance for which the
family unit size as determined by the HA subsidy standard exceeds the
one bedroom level.
* * * * *
3. A new subpart E is added to read as follows:
Subpart E--Restrictions on Assistance to Noncitizens
Sec.
5.500 Applicability.
5.502 Requirements concerning documents.
5.504 Definitions.
5.506 General provisions.
5.508 Submission of evidence of citizenship or eligible immigration
status.
5.510 Documents of eligible immigration status.
5.512 Verification of eligible immigration status.
5.514 Delay, denial, reduction or termination of assistance.
5.516 Availability of preservation assistance to mixed families and
other families.
5.518 Types of preservation assistance to mixed families and other
families.
5.520 Proration of assistance.
5.522 Prohibition of assistance to noncitizen students.
5.524 Compliance with nondiscrimination requirements.
5.526 Protection from liability for responsible entities and State,
and local government agencies and officials.
5.528 Liability of ineligible tenants for reimbursement of
benefits.
Subpart E--Restrictions on Assistance to Noncitizens
Sec. 5.500 Applicability.
(a) Covered programs/assistance. This subpart E implements Section
214 of the Housing and Community Development Act of 1980, as amended
(42 U.S.C. 1436a). Section 214 prohibits HUD from making financial
assistance available to persons who are not in eligible status with
respect to citizenship or noncitizen immigration status. This subpart E
is applicable to financial assistance provided under:
(1) Section 235 of the National Housing Act (12 U.S.C. 1715z) (the
Section 235 Program);
(2) Section 236 of the National Housing Act (12 U.S.C. 1715z-1)
(tenants paying below market rent only) (the Section 236 Program);
(3) Section 101 of the Housing and Urban Development Act of 1965
(12 U.S.C. 1701s) (the Rent Supplement Program); and
(4) The United States Housing Act of 1937 (42 U.S. C. 1437 et seq.)
which covers:
(i) HUD's Public Housing Programs;
(ii) The Section 8 Housing Assistance Programs; and
(iii) The Housing Development Grant Programs (with respect to low
income units only).
(b) Covered individuals and entities. (1) Covered individuals/
persons and families. The provisions of this subpart E apply to both
applicants for assistance and persons already receiving assistance
covered under this subpart E.
(2) Covered entities. The provisions of this subpart E apply to
Public Housing Agencies (PHAs), project (or housing) owners, and
mortgagees under the Section 235 Program. The term ``responsible
entity'' is used in this subpart E to refer collectively to these
entities, and is further defined in Sec. 5.504.
Sec. 5.502 Requirements concerning documents.
For any notice or document (decision, declaration, consent form,
etc.) that this subpart E requires the responsible entity to provide to
an individual, or requires the responsible entity to obtain the
signature of an individual, the responsible entity, where feasible,
must arrange for the notice or document to be provided to the
individual in a language that is understood by the individual if the
individual is not proficient in English. (See 24 CFR 8.6 of HUD's
regulations for requirements concerning communications with persons
with disabilities.)
Sec. 5.504 Definitions.
(a) The definitions ``1937 Act'', ``HUD'', ``Public Housing Agency
(PHA)'', and ``Section 8'' are defined in subpart A of this part.
(b) As used in this subpart E:
Child means a member of the family other than the family head or
spouse who is under 18 years of age.
Citizen means a citizen or national of the United States.
Evidence of citizenship or eligible status means the documents
which must be submitted to evidence citizenship or eligible immigration
status. (See Sec. 5.508(b).)
Family has the same meaning as provided in the program regulations
of the relevant Section 214 covered program.
Head of household means the adult member of the family who is the
head of the household for purposes of determining income eligibility
and rent.
Housing covered programs means the following programs administered
by the Assistant Secretary for Housing:
[[Page 13617]]
(1) Section 235 of the National Housing Act (12 U.S.C. 1715z) (the
Section 235 Program);
(2) Section 236 of the National Housing Act (12 U.S.C. 1715z-1)
(tenants paying below market rent only) (the Section 236 Program); and
(3) Section 101 of the Housing and Urban Development Act of 1965
(12 U.S.C. 1701s) (the Rent Supplement Program).
INS means the U.S. Immigration and Naturalization Service.
Mixed family means a family whose members include those with
citizenship or eligible immigration status, and those without
citizenship or eligible immigration status.
National means a person who owes permanent allegiance to the United
States, for example, as a result of birth in a United States territory
or possession.
Noncitizen means a person who is neither a citizen nor national of
the United States.
Project owner means the person or entity that owns the housing
project containing the assisted dwelling unit.
Public Housing covered programs means the public housing programs
administered by the Assistant Secretary for Public and Indian Housing
under title I of the 1937 Act. This definition does not encompass HUD's
Indian Housing programs administered under title II of the 1937 Act.
Further, this term does not include those programs providing assistance
under section 8 of the 1937 Act. (See definition of ``Section 8 Covered
Programs'' in this section.)
Responsible entity means the person or entity responsible for
administering the restrictions on providing assistance to noncitizens
with ineligible immigrations status. The entity responsible for
administering the restrictions on providing assistance to noncitizens
with ineligible immigration status under the various covered programs
is as follows:
(1) For the Section 235 Program, the mortgagee.
(2) For Public Housing, the Section 8 Rental Certificate, the
Section 8 Rental Voucher, and the Section 8 Moderate Rehabilitation
programs, the PHA administering the program under an ACC with HUD.
(3) For all other Section 8 programs, the Section 236 Program, and
the Rent Supplement Program, the owner.
Section 8 covered programs means all HUD programs which assist
housing under Section 8 of the 1937 Act, including Section 8-assisted
housing for which loans are made under section 202 of the Housing Act
of 1959.
Section 214 means section 214 of the Housing and Community
Development Act of 1980, as amended (42 U.S.C. 1436a).
Section 214 covered programs is the collective term for the HUD
programs to which the restrictions imposed by Section 214 apply. These
programs are set forth in Sec. 5.500.
Tenant means an individual or a family renting or occupying an
assisted dwelling unit. For purposes of this subpart E, the term tenant
will also be used to include a homebuyer, where appropriate.
Sec. 5.506 General provisions.
(a) Restrictions on assistance. Financial assistance under a
Section 214 covered program is restricted to:
(1) Citizens; or
(2) Noncitizens who have eligible immigration status under one of
the categories set forth in Section 214 (see 42 U.S.C. 1436a(a)).
(b) Family eligibility for assistance. (1) A family shall not be
eligible for assistance unless every member of the family residing in
the unit is determined to have eligible status, as described in
paragraph (a) of this section, or unless the family meets the
conditions set forth in paragraph (b)(2) of this section.
(2) Despite the ineligibility of one or more family members, a
mixed family may be eligible for one of the three types of assistance
provided in Secs. 5.516 and 5.518. A family without any eligible
members and receiving assistance on June 19, 1995 may be eligible for
temporary deferral of termination of assistance as provided in
Secs. 5.516 and 5.518.
Sec. 5.508 Submission of evidence of citizenship or eligible
immigration status.
(a) General. Eligibility for assistance or continued assistance
under a Section 214 covered program is contingent upon a family's
submission to the responsible entity of the documents described in
paragraph (b) of this section for each family member. If one or more
family members do not have citizenship or eligible immigration status,
the family members may exercise the election not to contend to have
eligible immigration status as provided in paragraph (e) of this
section, and the provisions of Secs. 5.516 and 5.518 shall apply.
(b) Evidence of citizenship or eligible immigration status. Each
family member, regardless of age, must submit the following evidence to
the responsible entity.
(1) For citizens, the evidence consists of a signed declaration of
U.S. citizenship;
(2) For noncitizens who are 62 years of age or older or who will be
62 years of age or older and receiving assistance under a Section 214
covered program on June 19, 1995, the evidence consists of:
(i) A signed declaration of eligible immigration status; and
(ii) Proof of age document.
(3) For all other noncitizens, the evidence consists of:
(i) A signed declaration of eligible immigration status;
(ii) One of the INS documents referred to in Sec. 5.510; and
(iii) A signed verification consent form.
(c) Declaration. (1) For each family member who contends that he or
she is a U.S. citizen or a noncitizen with eligible immigration status,
the family must submit to the responsible entity a written declaration,
signed under penalty of perjury, by which the family member declares
whether he or she is a U.S. citizen or a noncitizen with eligible
immigration status.
(i) For each adult, the declaration must be signed by the adult.
(ii) For each child, the declaration must be signed by an adult
residing in the assisted dwelling unit who is responsible for the
child.
(2) For Housing covered programs: The written declaration may be
incorporated as part of the application for housing assistance or may
constitute a separate document.
(d) Verification consent form. (1) Who signs. Each noncitizen who
declares eligible immigration status (except certain noncitizens who
are 62 years of age or older as described in paragraph (b)(2) of this
section) must sign a verification consent form as follows.
(i) For each adult, the form must be signed by the adult.
(ii) For each child, the form must be signed by an adult residing
in the assisted dwelling unit who is responsible for the child.
(2) Notice of release of evidence by responsible entity. The
verification consent form shall provide that evidence of eligible
immigration status may be released by the responsible entity without
responsibility for the further use or transmission of the evidence by
the entity receiving it, to:
(i) HUD, as required by HUD; and
(ii) The INS for purposes of verification of the immigration status
of the individual.
(3) Notice of release of evidence by HUD. The verification consent
form also shall notify the individual of the possible release of
evidence of eligible immigration status by HUD. Evidence of eligible
immigration status shall only be released to the INS for purposes of
establishing eligibility for financial assistance and not for any other
[[Page 13618]]
purpose. HUD is not responsible for the further use or transmission of
the evidence or other information by the INS.
(e) Individuals who do not contend that they have eligible status.
If one or more members of a family elect not to contend that they have
eligible immigration status, and other members of the family establish
their citizenship or eligible immigration status, the family may be
eligible for assistance under Secs. 5.516 and 5.518, or Sec. 5.520,
despite the fact that no declaration or documentation of eligible
status is submitted for one or more members of the family. The family,
however, must identify in writing to the responsible entity, the family
member (or members) who will elect not to contend that he or she has
eligible immigration status.
(f) Notification of requirements of Section 214. (1) When notice is
to be issued. Notification of the requirement to submit evidence of
citizenship or eligible immigration status, as required by this
section, or to elect not to contend that one has eligible status as
provided by paragraph (e) of this section, shall be given by the
responsible entity as follows:
(i) Applicant's notice. The notification described in paragraph
(f)(1) of this section shall be given to each applicant at the time of
application for assistance. Applicants whose applications are pending
on June 19, 1995, shall be notified of the requirement to submit
evidence of eligible status as soon as possible after June 19, 1995.
(ii) Notice to tenants. The notification described in paragraph
(f)(1) of this section shall be given to each tenant at the time of,
and together with, the responsible entity's notice of regular
reexamination of income, but not later than one year following June 19,
1995.
(iii) Timing of mortgagor's notice. A mortgagor receiving Section
235 assistance must be provided the notification described in paragraph
(f)(1) of this section and any additional requirements imposed under
the Section 235 Program.
(2) Form and content of notice. The notice shall:
(i) State that financial assistance is contingent upon the
submission and verification, as appropriate, of evidence of citizenship
or eligible immigration status as required by paragraph (a) of this
section;
(ii) Describe the type of evidence that must be submitted, and
state the time period in which that evidence must be submitted (see
paragraph (g) of this section concerning when evidence must be
submitted); and
(iii) State that assistance will be prorated, denied or terminated,
as appropriate, upon a final determination of ineligibility after all
appeals have been exhausted (see Sec. 5.514 concerning INS appeal, and
informal hearing process) or, if appeals are not pursued, at a time to
be specified in accordance with HUD requirements. Tenants also shall be
informed of how to obtain assistance under the preservation of families
provisions of Secs. 5.516 and 5.518.
(g) When evidence of eligible status is required to be submitted.
The responsible entity shall require evidence of eligible status to be
submitted at the times specified in paragraph (g) of this section,
subject to any extension granted in accordance with paragraph (h) of
this section.
(1) Applicants. For applicants, responsible entities must ensure
that evidence of eligible status is submitted not later than the date
the responsible entity anticipates or has knowledge that verification
of other aspects of eligibility for assistance will occur (see
Sec. 5.512(a)).
(2) Tenants. For tenants, evidence of eligible status is required
to be submitted as follows:
(i) For financial assistance under a Section 214 covered program,
with the exception of Section 235 assistance payments, the required
evidence shall be submitted at the first regular reexamination after
June 19, 1995, in accordance with program requirements.
(ii) For financial assistance in the form of Section 235 assistance
payments, the mortgagor shall submit the required evidence in
accordance with requirements imposed under the Section 235 Program.
(3) New occupants of assisted units. For any new occupant of an
assisted unit (e.g., a new family member comes to reside in the
assisted unit), the required evidence shall be submitted at the first
interim or regular reexamination following the person's occupancy.
(4) Changing participation in a HUD program. Whenever a family
applies for admission to a Section 214 covered program, evidence of
eligible status is required to be submitted in accordance with the
requirements of this subpart unless the family already has submitted
the evidence to the responsible entity for a Section 214 covered
program.
(5) One-time evidence requirement for continuous occupancy. For
each family member, the family is required to submit evidence of
eligible status only one time during continuously assisted occupancy
under any Section 214 covered program.
(h) Extensions of time to submit evidence of eligible status. (1)
When extension must be granted. The responsible entity shall extend the
time, provided in paragraph (g) of this section, to submit evidence of
eligible immigration status if the family member:
(i) Submits the declaration required under Sec. 5.508(a) certifying
that any person for whom required evidence has not been submitted is a
noncitizen with eligible immigration status; and
(ii) Certifies that the evidence needed to support a claim of
eligible immigration status is temporarily unavailable, additional time
is needed to obtain and submit the evidence, and prompt and diligent
efforts will be undertaken to obtain the evidence.
(2) Prohibition on indefinite extension period. Any extension of
time, if granted, shall be for a specific period of time. The
additional time provided should be sufficient to allow the individual
the time to obtain the evidence needed. The responsible entity's
determination of the length of the extension needed shall be based on
the circumstances of the individual case.
(3) Grant or denial of extension to be in writing. The responsible
entity's decision to grant or deny an extension as provided in
paragraph (h)(1) of this section shall be issued to the family by
written notice. If the extension is granted, the notice shall specify
the extension period granted. If the extension is denied, the notice
shall explain the reasons for denial of the extension.
(i) Failure to submit evidence or to establish eligible status. If
the family fails to submit required evidence of eligible immigration
status within the time period specified in the notice, or any extension
granted in accordance with paragraph (h) of this section, or if the
evidence is timely submitted but fails to establish eligible
immigration status, the responsible entity shall proceed to deny,
prorate or terminate assistance, or provide continued assistance or
temporary deferral of termination of assistance, as appropriate, in
accordance with the provisions of Secs. 5.514, 5.516, and 5.518.
(ii) [Reserved]
Sec. 5.510 Documents of eligible immigration status.
(a) General. A responsible entity shall request and review original
documents of eligible immigration status. The responsible entity shall
retain photocopies of the documents for its own records and return the
original documents to the family.
[[Page 13619]]
(b) Acceptable evidence of eligible immigration status. Acceptable
evidence of eligible immigration status shall be the original of a
document designated by INS as acceptable evidence of immigration status
for the specific immigration status claimed by the individual.
Sec. 5.512 Verification of eligible immigration status.
(a) When verification is to occur. The responsible entity is
encouraged to commence verification of immigration status at a date
that the responsible entity believes will allow for verification of
immigration status, including any appeals or informal hearings, to be
completed by the time that verification of other aspects of eligibility
for assistance under a Section 214 covered program will be completed.
In no case may verification of immigration status occur later than the
date the responsible entity commences verification of other aspects of
eligibility for assistance under a Section 214 covered program. The
responsible entity shall verify eligible immigration status in
accordance with the INS procedures described in this section.
(b) Primary verification. (1) Automated verification system.
Primary verification of the immigration status of the person is
conducted by the responsible entity through the INS automated system
(INS Systematic Alien Verification for Entitlements (SAVE)). The INS
SAVE system provides access to names, file numbers and admission
numbers of noncitizens.
(2) Failure of primary verification to confirm eligible immigration
status. If the INS SAVE system does not verify eligible immigration
status, secondary verification must be performed.
(c) Secondary verification. (1) Manual search of INS records.
Secondary verification is a manual search by the INS of its records to
determine an individual's immigration status. The responsible entity
must request secondary verification, within 10 days of receiving the
results of the primary verification, if the primary verification system
does not confirm eligible immigration status, or if the primary
verification system verifies immigration status that is ineligible for
assistance under a Section 214 covered program.
(2) Secondary verification initiated by responsible entity.
Secondary verification is initiated by the responsible entity
forwarding photocopies of the original INS documents required for the
immigration status declared (front and back), attached to the INS
document verification request form G-845S (Document Verification
Request), or such other form specified by the INS to a designated INS
office for review. (Form G-845S is available from the local INS
Office.)
(3) Failure of secondary verification to confirm eligible
immigration status. If the secondary verification does not confirm
eligible immigration status, the responsible entity shall issue to the
family the notice described in Sec. 5.514(d), which includes
notification of the right to appeal to the INS of the INS finding on
immigration status (see Sec. 5.514(d)(4)).
(d) Exemption from liability for INS verification. The responsible
entity shall not be liable for any action, delay, or failure of the INS
in conducting the automated or manual verification.
Sec. 5.514 Delay, denial, reduction or termination of assistance.
(a) General. Assistance to a family may not be delayed, denied,
reduced or terminated because of the immigration status of a family
member except as provided in this section.
(b) Restrictions on delay, denial, reduction or termination of
assistance. (1) Restrictions on reduction, denial or termination of
assistance. Assistance to an applicant or tenant shall not be delayed,
denied, reduced, or terminated, on the basis of ineligible immigration
status of a family member if:
(i) The primary and secondary verification of any immigration
documents that were timely submitted has not been completed;
(ii) The family member for whom required evidence has not been
submitted has moved from the assisted dwelling unit;
(iii) The family member who is determined not to be in an eligible
immigration status following INS verification has moved from the
assisted dwelling unit;
(iv) The INS appeals process under Sec. 5.514(e) has not been
concluded;
(v) For a tenant, the informal hearing process under Sec. 5.514(f)
has not been concluded;
(vi) Assistance is prorated in accordance with Sec. 5.520;
(vii) Assistance for a mixed family is continued in accordance with
Secs. 5.516 and 5.518; or
(viii) Deferral of termination of assistance is granted in
accordance with Secs. 5.516 and 5.518.
(2) When delay of assistance to an applicant is permissible.
Assistance to an applicant may be delayed after the conclusion of the
INS appeal process, but not denied until the conclusion of the informal
hearing process, if an informal hearing is requested by the family.
(c) Events causing denial or termination of assistance. (1)
General. Assistance to an applicant shall be denied, and a tenant's
assistance shall be terminated, in accordance with the procedures of
this section, upon the occurrence of any of the following events:
(i) Evidence of citizenship (i.e., the declaration) and eligible
immigration status is not submitted by the date specified in
Sec. 5.508(g) or by the expiration of any extension granted in
accordance with Sec. 5.508; or
(ii) Evidence of citizenship and eligible immigration status is
timely submitted, but INS primary and secondary verification does not
verify eligible immigration status of a family member; and
(A) The family does not pursue INS appeal or informal hearing
rights as provided in this section; or
(B) INS appeal and informal hearing rights are pursued, but the
final appeal or hearing decisions are decided against the family
member.
(2) Termination of assisted occupancy. For termination of assisted
occupancy, see paragraph (i) of this section.
(d) Notice of denial or termination of assistance. The notice of
denial or termination of assistance shall advise the family:
(1) That financial assistance will be denied or terminated, and
provide a brief explanation of the reasons for the proposed denial or
termination of assistance;
(2) That the family may be eligible for proration of assistance as
provided under Sec. 5.520;
(3) In the case of a tenant, the criteria and procedures for
obtaining relief under the provisions for preservation of families in
Secs. 5.514 and 5.518;
(4) That the family has a right to request an appeal to the INS of
the results of secondary verification of immigration status and to
submit additional documentation or a written explanation in support of
the appeal in accordance with the procedures of paragraph (e) of this
section;
(5) That the family has a right to request an informal hearing with
the responsible entity either upon completion of the INS appeal or in
lieu of the INS appeal as provided in paragraph (f) of this section;
(6) For applicants, the notice shall advise that assistance may not
be delayed until the conclusion of the INS appeal process, but
assistance may be delayed during the pendency of the informal hearing
process.
(e) Appeal to the INS. (1) Submission of request for appeal. Upon
receipt of
[[Page 13620]]
notification by the responsible entity that INS secondary verification
failed to confirm eligible immigration status, the responsible entity
shall notify the family of the results of the INS verification, and the
family shall have 30 days from the date of the responsible entity's
notification, to request an appeal of the INS results. The request for
appeal shall be made by the family communicating that request in
writing directly to the INS. The family must provide the responsible
entity with a copy of the written request for appeal and proof of
mailing. For good cause shown, the responsible entity shall grant the
family an extension of the time within which to request an appeal.
(2) Documentation to be submitted as part of appeal to INS. The
family shall forward to the designated INS office any additional
documentation or written explanation in support of the appeal. This
material must include a copy of the INS document verification request
form G-845S (used to process the secondary verification request) or
such other form specified by the INS, and a cover letter indicating
that the family is requesting an appeal of the INS immigration status
verification results.
(3) Decision by INS. (i) When decision will be issued. The INS will
issue to the family, with a copy to the responsible entity, a decision
within 30 days of its receipt of documentation concerning the family's
appeal of the verification of immigration status. If, for any reason,
the INS is unable to issue a decision within the 30 day time period,
the INS will inform the family and responsible entity of the reasons
for the delay.
(ii) Notification of INS decision and of informal hearing
procedures. When the responsible entity receives a copy of the INS
decision, the responsible entity shall notify the family of its right
to request an informal hearing on the responsible entity's
ineligibility determination in accordance with the procedures of
paragraph (f) of this section.
(4) No delay, denial, reduction, or termination of assistance until
completion of INS appeal process; direct appeal to INS. Pending the
completion of the INS appeal under this section, assistance may not be
delayed, denied, reduced or terminated on the basis of immigration
status.
(f) Informal hearing. (1) When request for hearing is to be made.
After notification of the INS decision on appeal, or in lieu of request
of appeal to the INS, the family may request that the responsible
entity provide a hearing. This request must be made either within 14
days of the date the responsible entity mails or delivers the notice
under paragraph (d) of this section, or within 14 days of the mailing
of the INS appeal decision issued in accordance with paragraph (e) of
this section (established by the date of postmark).
(2) Extension of time to request hearing. The responsible entity
shall extend the period of time for requesting a hearing (for a
specified period) upon good cause shown.
(3) Informal hearing procedures. (i) Tenants assisted under a
Section 8 covered program: For tenants assisted under a Section 8
covered program, the procedures for the hearing before the responsible
entity are set forth in:
(A) For Section 8 Moderate Rehabilitation assistance: 24 CFR part
882;
(B) For Section 8 tenant-based assistance: 24 CFR part 982; or
(C) For Section 8 project-based certificate program: 24 CFR part
983.
(ii) Tenants assisted under any other Section 8 covered program or
a Public Housing covered program: For tenants assisted under a Section
8 covered program not listed in paragraph (f)(3)(i) of this section or
a Public Housing covered program, the procedures for the hearing before
the responsible entity are set forth in 24 CFR part 966.
(iii) Families under Housing covered programs and applicants for
assistance under all covered programs. For all families under Housing
covered programs (applicants as well as tenants already receiving
assistance) and for applicants for assistance under all covered
programs, the procedures for the informal hearing before the
responsible entity are as follows:
(A) Hearing before an impartial individual. The family shall be
provided a hearing before any person(s) designated by the responsible
entity (including an officer or employee of the responsible entity),
other than a person who made or approved the decision under review, and
other than a person who is a subordinate of the person who made or
approved the decision;
(B) Examination of evidence. The family shall be provided the
opportunity to examine and copy at the individual's expense, at a
reasonable time in advance of the hearing, any documents in the
possession of the responsible entity pertaining to the family's
eligibility status, or in the possession of the INS (as permitted by
INS requirements), including any records and regulations that may be
relevant to the hearing;
(C) Presentation of evidence and arguments in support of eligible
status. The family shall be provided the opportunity to present
evidence and arguments in support of eligible status. Evidence may be
considered without regard to admissibility under the rules of evidence
applicable to judicial proceedings;
(D) Controverting evidence of the responsible entity. The family
shall be provided the opportunity to controvert evidence relied upon by
the responsible entity and to confront and cross-examine all witnesses
on whose testimony or information the responsible entity relies;
(E) Representation. The family shall be entitled to be represented
by an attorney, or other designee, at the family's expense, and to have
such person make statements on the family's behalf;
(F) Interpretive services. The family shall be entitled to arrange
for an interpreter to attend the hearing, at the expense of the family,
or responsible entity, as may be agreed upon by the two parties to the
proceeding; and
(G) Hearing to be recorded. The family shall be entitled to have
the hearing recorded by audiotape (a transcript of the hearing may, but
is not required to, be provided by the responsible entity).
(4) Hearing decision. The responsible entity shall provide the
family with a written final decision, based solely on the facts
presented at the hearing, within 14 days of the date of the informal
hearing. The decision shall state the basis for the decision.
(g) Judicial relief. A decision against a family member, issued in
accordance with paragraphs (e) or (f) of this section, does not
preclude the family from exercising the right, that may otherwise be
available, to seek redress directly through judicial procedures.
(h) Retention of documents. The responsible entity shall retain for
a minimum of 5 years the following documents that may have been
submitted to the responsible entity by the family, or provided to the
responsible entity as part of the INS appeal or the informal hearing
process:
(1) The application for financial assistance;
(2) The form completed by the family for income reexamination;
(3) Photocopies of any original documents (front and back),
including original INS documents;
(4) The signed verification consent form;
(5) The INS verification results;
(6) The request for an INS appeal;
(7) The final INS determination;
(8) The request for an informal hearing; and
(9) The final informal hearing decision.
(i) Termination of assisted occupancy. (1) Under Housing covered
programs,
[[Page 13621]]
and in the Section 8 covered programs other than the Section 8 Rental
Certificate, Rental Voucher, and Moderate Rehabilitation programs,
assisted occupancy is terminated by:
(i) If permitted under the lease, the responsible entity notifying
the tenant that because of the termination of assisted occupancy the
tenant is required to pay the HUD-approved market rent for the dwelling
unit.
(ii) The responsible entity and tenant entering into a new lease
without financial assistance.
(iii) The responsible entity evicting the tenant. While the tenant
continues in occupancy of the unit, the responsible entity may continue
to receive assistance payments if action to terminate the tenancy under
an assisted lease is promptly initiated and diligently pursued, in
accordance with the terms of the lease, and if eviction of the tenant
is undertaken by judicial action pursuant to State and local law.
Action by the responsible entity to terminate the tenancy and to evict
the tenant must be in accordance with applicable HUD regulations and
other HUD requirements. For any jurisdiction, HUD may prescribe a
maximum period during which assistance payments may be continued during
eviction proceedings and may prescribe other standards of reasonable
diligence for the prosecution of eviction proceedings.
(2) In the Section 8 Rental Certificate, Rental Voucher, and
Moderate Rehabilitation programs, assisted occupancy is terminated by
terminating assistance payments. (See provisions of this section
concerning termination of assistance.) The PHA shall not make any
additional assistance payments to the owner after the required
procedures specified in this section have been completed. In addition,
the PHA shall not approve a lease, enter into an assistance contract,
or process a portability move for the family after those procedures
have been completed.
Sec. 5.516 Availability of preservation assistance to mixed families
and other families.
(a) Assistance available for tenant mixed families. (1) General.
Preservation assistance is available to tenant mixed families,
following completion of the appeals and informal hearing procedures
provided in Sec. 5.514. There are three types of preservation
assistance:
(i) Continued assistance (see paragraph (a) of Sec. 5.518);
(ii) Temporary deferral of termination of assistance (see paragraph
(b) of Sec. 5.518); or
(iii) Prorated assistance (see Sec. 5.520, a mixed family must be
provided prorated assistance if the family so requests).
(2) Availability of assistance. (i) For Housing covered programs:
One of the three types of assistance described is available to tenant
mixed families assisted under a National Housing Act or 1965 HUD Act
covered program, depending upon the family's eligibility for such
assistance. Continued assistance must be provided to a mixed family
that meets the conditions for eligibility for continued assistance.
(ii) For Section 8 or Public Housing covered programs. One of the
three types of assistance described may be available to tenant mixed
families assisted under a Section 8 or Public Housing covered program.
(b) Assistance available for applicant mixed families. Prorated
assistance is also available for mixed families applying for assistance
as provided in Sec. 5.520.
(c) Assistance available to other families in occupancy. Assistance
may be available to families receiving assistance under a Section 214
covered program on June 19, 1995, and who have no members with eligible
immigration status, as set forth in paragraphs (c)(1) and (c)(2) of
this section.
(1) For Housing covered programs: Temporary deferral of termination
of assistance is available to families assisted under a Housing covered
program.
(2) For Section 8 or Public Housing covered programs: The
responsible entity may make temporary deferral of termination of
assistance to families assisted under a Section 8 or Public Housing
covered program.
(d) Section 8 covered programs: Discretion afforded to provide
certain family preservation assistance. (1) Project owners. With
respect to assistance under a Section 8 Act covered program
administered by a project owner, HUD has the discretion to determine
under what circumstances families are to be provided one of the two
statutory forms of assistance for preservation of the family (continued
assistance or temporary deferral of assistance). HUD is exercising its
discretion by specifying the standards in this section under which a
project owner must provide one of these two types of assistance to a
family. However, project owners and PHAs must offer prorated assistance
to eligible mixed families.
(2) PHAs. The PHA, rather than HUD, has the discretion to determine
the circumstances under which a family will be offered one of the two
statutory forms of assistance (continued assistance or temporary
deferral of termination of assistance). The PHA must establish its own
policy and criteria to follow in making its decision. In establishing
the criteria for granting continued assistance or temporary deferral of
termination of assistance, the PHA must incorporate the statutory
criteria, which are set forth in paragraphs (a) and (b) of Sec. 5.518.
However, the PHA must offer prorated assistance to eligible families.
Sec. 5.518 Types of preservation assistance available to mixed
families and other families.
(a) Continued assistance. A mixed family may receive continued
housing assistance if all of the following conditions are met (a mixed
family assisted under a Housing covered program must be provided
continued assistance if the family meets the following conditions):
(1) The family was receiving assistance under a Section 214 covered
program on June 19, 1995;
(2) The family's head of household or spouse has eligible
immigration status as described in Sec. 5.506; and
(3) The family does not include any person (who does not have
eligible immigration status) other than the head of household, any
spouse of the head of household, any parents of the head of household,
any parents of the spouse, or any children of the head of household or
spouse.
(b) Temporary deferral of termination of assistance. (1)
Eligibility for this type of assistance. If a mixed family qualifies
for prorated assistance (and does not qualify for continued
assistance), but decides not to accept prorated assistance, or if a
family has no members with eligible immigration status, the family may
be eligible for temporary deferral of termination of assistance if
necessary to permit the family additional time for the orderly
transition of those family members with ineligible status, and any
other family members involved, to other affordable housing. Other
affordable housing is used in the context of transition of an
ineligible family from a rent level that reflects HUD assistance to a
rent level that is unassisted; the term refers to housing that is not
substandard, that is of appropriate size for the family and that can be
rented for an amount not exceeding the amount that the family pays for
rent, including utilities, plus 25 percent.
(2) Housing covered programs: Conditions for granting temporary
deferral of termination of assistance. The responsible entity shall
grant a
[[Page 13622]]
temporary deferral of termination of assistance to a mixed family if
the family is assisted under a Housing covered program and one of the
following conditions is met:
(i) The family demonstrates that reasonable efforts to find other
affordable housing of appropriate size have been unsuccessful (for
purposes of this section, reasonable efforts include seeking
information from, and pursuing leads obtained from the State housing
agency, the city government, local newspapers, rental agencies and the
owner);
(ii) The vacancy rate for affordable housing of appropriate size is
below five percent in the housing market for the area in which the
project is located; or
(iii) The consolidated plan, as described in 24 CFR part 91 and if
applicable to the covered program, indicates that the local
jurisdiction's housing market lacks sufficient affordable housing
opportunities for households having a size and income similar to the
family seeking the deferral.
(3) Time limit on deferral period. If temporary deferral of
termination of assistance is granted, the deferral period shall be for
an initial period not to exceed six months. The initial period may be
renewed for additional periods of six months, but the aggregate
deferral period shall not exceed a period of three years.
(4) Notification requirements for beginning of each deferral
period. At the beginning of each deferral period, the responsible
entity must inform the family of its ineligibility for financial
assistance and offer the family information concerning, and referrals
to assist in finding, other affordable housing.
(5) Determination of availability of affordable housing at end of
each deferral period. (i) Before the end of each deferral period, the
responsible entity must satisfy the applicable requirements of either
paragraph (b)(5)(i) (A) or (B) of this section. Specifically, the
responsible entity must:
(A) For Housing covered programs: Make a determination that one of
the three conditions specified in paragraph (b)(2) of this section
continues to be met (note: affordable housing will be determined to be
available if the vacancy rate is five percent or greater), the owner's
knowledge and the tenant's evidence indicate that other affordable
housing is available; or
(B) For Section 8 or Public Housing covered programs: Make a
determination of the availability of affordable housing of appropriate
size based on evidence of conditions which when taken together will
demonstrate an inadequate supply of affordable housing for the area in
which the project is located, the consolidated plan (if applicable, as
described in 24 CFR part 91), the responsible entity's own knowledge of
the availability of affordable housing, and on evidence of the tenant
family's efforts to locate such housing.
(ii) The responsible entity must also:
(A) Notify the tenant family in writing, at least 60 days in
advance of the expiration of the deferral period, that termination will
be deferred again (provided that the granting of another deferral will
not result in aggregate deferral periods that exceed three years), and
a determination was made that other affordable housing is not
available; or
(B) Notify the tenant family in writing, at least 60 days in
advance of the expiration of the deferral period, that termination of
financial assistance will not be deferred because either granting
another deferral will result in aggregate deferral periods that exceed
three years, or a determination has been made that other affordable
housing is available.
(c) Option to select proration of assistance at end of deferral
period. A family who is eligible for, and receives temporary deferral
of termination of assistance, may request, and the responsible entity
shall provide proration of assistance at the end of the deferral period
if the family has made a good faith effort during the deferral period
to locate other affordable housing.
(d) Notification of decision on family preservation assistance. A
responsible entity shall notify the family of its decision concerning
the family's qualification for family preservation assistance. If the
family is ineligible for family preservation assistance, the
notification shall state the reasons, which must be based on relevant
factors. For tenant families, the notice also shall inform the family
of any applicable appeal rights.
Sec. 5.520 Proration of assistance.
(a) Applicability. This section applies to a mixed family other
than a family receiving continued assistance, or other than a family
who is eligible for and requests and receives temporary deferral of
termination of assistance. An eligible mixed family who requests
prorated assistance must be provided prorated assistance.
(b) Method of prorating assistance for Housing covered programs.
(1) Proration under Rent Supplement Program. If the household
participates in the Rent Supplement Program, the rent supplement paid
on the household's behalf shall be the rent supplement the household
would otherwise be entitled to, multiplied by a fraction, the
denominator of which is the number of people in the household and the
numerator of which is the number of eligible persons in the household;
(2) Proration under Section 235 Program. If the household
participates in the Section 235 Program, the interest reduction
payments paid on the household's behalf shall be the payments the
household would otherwise be entitled to, multiplied by a fraction the
denominator of which is the number of people in the household and the
numerator of which is the number of eligible persons in the household;
(3) Proration under Section 236 Program without the benefit of
additional assistance. If the household participates in the Section 236
Program without the benefit of any additional assistance, the
household's rent shall be increased above the rent the household would
otherwise pay by an amount equal to the difference between the market
rate rent for the unit and the rent the household would otherwise pay
multiplied by a fraction the denominator of which is the number of
people in the household and the numerator of which is the number of
ineligible persons in the household;
(4) Proration under Section 236 Program with the benefit of
additional assistance. If the household participates in the Section 236
Program with the benefit of additional assistance under the rent
supplement, rental assistance payment or Section 8 programs, the
household's rent shall be increased above the rent the household would
otherwise pay by:
(i) An amount equal to the difference between the market rate rent
for the unit and the basic rent for the unit multiplied by a fraction,
the denominator of which is the number of people in the household, and
the numerator of which is the number of ineligible persons in the
household, plus;
(ii) An amount equal to the rent supplement, housing assistance
payment or rental assistance payment the household would otherwise be
entitled to multiplied by a fraction, the denominator of which is the
number of people in the household and the numerator of which is the
number of ineligible persons in the household.
(c) Method of prorating assistance for Section 8 covered programs.
(1) Section 8 assistance other than Section 8 rental
[[Page 13623]]
voucher assistance. For Section 8 assistance other than assistance
provided under the Section 8 Rental Voucher Program, the PHA shall
prorate the family's assistance as follows:
(i) Step 1. Determine gross rent for the unit. (Gross rent is
contract rent plus any allowance for tenant paid utilities).
(ii) Step 2. Determine total tenant payment in accordance with 24
CFR 813.107(a). (Annual income includes income of all family members,
including any family member who has not established eligible
immigration status.)
(iii) Step 3. Subtract amount determined in paragraph (c)(1)(ii),
(Step 2), from amount determined in paragraph (c)(1)(i), (Step 1).
(iv) Step 4. Multiply the amount determined in paragraph
(c)(1)(iii), (Step 3) by a fraction for which:
(A) The numerator is the number of family members who have
established eligible immigration status; and
(B) The denominator is the total number of family members.
(v) Prorated housing assistance. The amount determined in paragraph
(c)(1)(iv), (Step 4) is the prorated housing assistance payment for a
mixed family.
(vi) No effect on contract rent. Proration of the housing
assistance payment does not affect contract rent to the owner. The
family must pay as rent the portion of contract rent not covered by the
prorated housing assistance payment.
(2) Section 8 Rental Voucher assistance. For assistance under the
Section 8 Rental Voucher Program, the PHA shall prorate the family's
assistance as follows:
(i) Step 1. Determine the amount of the pre-proration voucher
housing assistance payment in accordance with 24 CFR part 887. (Annual
income includes income of all family members, including any family
member who has not established eligible immigration status.)
(ii) Step 2. Multiply the amount determined in paragraph (c)(2)(i),
(Step 1) by a fraction for which:
(A) The numerator is the number of family members who have
established eligible immigration status; and
(B) The denominator is the total number of family members.
(iii) Prorated housing assistance. The amount determined in
paragraph (c)(2)(ii), (Step 2) is the prorated housing assistance
payment for a mixed family.
(iv) No effect on rent to owner. Proration of the voucher housing
assistance payment does not affect rent to the owner. The family must
pay as rent the portion of rent not covered by the prorated housing
assistance payment.
(d) Method of prorating assistance for Public Housing covered
programs. The PHA shall prorate the family's assistance by:
(1) Step 1. Determining total tenant payment in accordance with 24
CFR 913.107(a). (Annual income includes income of all family members,
including any family member who has not established eligible
immigration status.)
(2) Step 2. Subtracting the total tenant payment from a HUD-
supplied ``public housing maximum rent'' applicable to the unit or the
PHA. (This ``maximum rent'' shall be determined by HUD using the 95th
percentile rent for the PHA.) The result is the maximum subsidy for
which the family could qualify if all members were eligible (``family
maximum subsidy'').
(3) Step 3. Dividing the family maximum subsidy by the number of
persons in the family (all persons) to determine the maximum subsidy
per each family member who has citizenship or eligible immigration
status (``eligible family member''). The subsidy per eligible family
member is the ``member maximum subsidy''.
(4) Step 4. Multiplying the member maximum subsidy by the number of
family members who have citizenship or eligible immigration status
(``eligible family members'').
(5) Step 5. The product of steps 1 through 4, as set forth in
paragraph (d)(2) of this section is the amount of subsidy for which the
family is eligible (``eligible subsidy''). The family's rent is the
``public housing maximum rent'' minus the amount of the eligible
subsidy.
Sec. 5.522 Prohibition of assistance to noncitizen students.
(a) General. The provisions of Secs. 5.516 and 5.518 permitting
continued assistance or temporary deferral of termination of assistance
for certain families do not apply to any person who is determined to be
a noncitizen student as in paragraph (c)(2)(A) of Section 214 (42
U.S.C. 1436a(c)(2)(A)). The family of a noncitizen student may be
eligible for prorated assistance, as provided in paragraph (b)(2) of
this section.
(b) Family of noncitizen students. (1) The prohibition on providing
assistance to a noncitizen student as described in paragraph (a) of
this section extends to the noncitizen spouse of the noncitizen student
and minor children accompanying the student or following to join the
student.
(2) The prohibition on providing assistance to a noncitizen student
does not extend to the citizen spouse of the noncitizen student and the
children of the citizen spouse and noncitizen student.
Sec. 5.524 Compliance with nondiscrimination requirements.
The responsible entity shall administer the restrictions on use of
assisted housing by noncitizens with ineligible immigration status
imposed by this part in conformity with all applicable
nondiscrimination and equal opportunity requirements, including, but
not limited to, title VI of the Civil Rights Act of 1964 (42 U.S.C.
2000d-2000d-5) and the implementing regulations in 24 CFR part 1,
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and the
implementing regulations in 24 CFR part 8, the Fair Housing Act (42
U.S.C. 3601-3619) and the implementing regulations in 24 CFR part 100.
Sec. 5.526 Protection from liability for responsible entities and
State and local government agencies and officials.
(a) Protection from liability for responsible entities. Responsible
entities are protected from liability as set forth in paragraph (e) of
section 214.
(b) Protection from liability for State and local government
agencies and officials. State and local government agencies and
officials shall not be liable for the design or implementation of the
verification system described in Sec. 5.512 and the informal hearings
provided under Sec. 5.514, as long as the implementation by the State
and local government agency or official is in accordance with
prescribed HUD rules and requirements.
Sec. 5.528 Liability of ineligible tenants for reimbursement of
benefits.
Where a tenant has received the benefit of HUD financial assistance
to which the tenant was not entitled because the tenant intentionally
misrepresented eligible status, the ineligible tenant is responsible
for reimbursing HUD for the assistance improperly paid. If the amount
of the assistance is substantial, the responsible entity is encouraged
to refer the case to the HUD Inspector General's office for further
investigation. Possible criminal prosecution may follow based on the
False Statements Act (18 U.S.C. 1001 and 1010).
PART 200--INTRODUCTION
4. The authority citation for 24 CFR part 200 is revised to read as
follows:
Authority: 12 U.S.C. 1701-1715z-18; 42 U.S.C. 3535(d).
[[Page 13624]]
Subpart G--[Removed and Reserved]
5. Subpart G, consisting of Secs. 200.180 through 200.192, is
removed and reserved.
PART 235--MORTGAGE INSURANCE AND ASSISTANCE PAYMENTS FOR HOME
OWNERSHIP AND PROJECT REHABILITATION
6. The authority citation for part 235 continues to read as
follows:
Authority: 12 U.S.C. 1715b and 1715z; 42 U.S.C. 3535(d).
7. Section 235.1 is revised to read as follows:
Sec. 235.1 Applicability of regulations.
The regulations regarding eligibility requirements (including
eligibility requirements for noncitizens) for homes for lower income
families in force before December 8, 1995, will continue to govern the
rights and obligations of mortgagors, mortgagees, and the Department of
Housing and Urban Development with respect to loans insured under
section 235(i) of the National Housing Act.
8. Section 235.375 is amended by revising paragraph (b)(6) to read
as follows:
Sec. 235.375 Termination, suspension, or reinstatement of the
assistance payments contract.
* * * * *
(b) * * *
(6) Failure to provide evidence of citizenship or eligible
immigration status in accordance with 24 CFR part 5:
(i) For a new member of the family, except with respect to a
mortgagor described under Sec. 235.1.
(ii) At the first recertification of an assistance contract, except
with respect to a mortgagor described under Sec. 235.1; or
(iii) Upon modification of an existing assistance contract.
* * * * *
PART 236--MORTGAGE INSURANCE AND INTEREST REDUCTION PAYMENTS FOR
RENTAL PROJECTS
9. The authority citation for part 236 continues to read as
follows:
Authority: 12 U.S.C. 1715b and 1715z-1; 42 U.S.C. 3535(d).
10. Section 236.2 is amended by revising paragraph (3) of the
definition of ``Qualified Tenant'' to read as follows:
Sec. 236.2 Definitions.
* * * * *
Qualified Tenant.
* * * * *
(3) For restrictions on financial assistance to noncitizens with
ineligibl
FR Doc. 96-7188 Consolidation and Streamlining of the Restrictions on Assistance to Noncitizens
e immigration status, see 24 CFR part 5.
* * * * *
11. In Sec. 236.70, paragraph (a)(1) is revised to read as follows:
Sec. 236.70 Occupancy requirements.
(a)(1) The housing owner shall determine eligibility following
procedures prescribed by the Commissioner when processing applications
for admission. The restrictions on assistance to noncitizens set forth
in 24 CFR part 5 govern the submission and verification of information
related to citizenship and eligible immigration status for those
applicants who seek admission at a below market rent.
* * * * *
12. Section 236.80 is amended by revising:
a. The two sentences at the end of paragraph (a);
b. The last sentence of paragraph (b); and
c. The last two sentences at the end of paragraph (c), to read as
follows:
Sec. 236.80 Reexamination of income.
(a) * * * At the first regular reexamination after June 19, 1995,
the owner shall follow the requirements of 24 CFR part 5, concerning
obtaining and processing information on the citizenship or eligible
immigration status of all family members. Thereafter, at each regular
reexamination, the owner shall follow the requirements of 24 CFR part 5
concerning obtaining and processing information on the citizenship or
eligible immigration status of any new family member.
(b) * * * At any interim reexamination after June 19, 1995 when
there is a new family member, the owner shall follow the requirements
of 24 CFR part 5 concerning obtaining and processing information on the
citizenship or eligible immigration status of the new family member.
(c) * * * When termination is based upon a determination that the
tenant does not have eligible immigration status, the procedures of 24
CFR part 5 apply. The procedures include the provision of assistance to
certain mixed families (families whose members include those with
eligible immigration status, and those without eligible immigration
status) in lieu of termination.
13. Section 236.710 is amended by revising the sentence at the end
of the section to read as follows:
Sec. 236.710 Qualified tenant.
* * * For restrictions on financial assistance to noncitizens with
ineligible immigration status, see 24 CFR part 5.
14. Section 236.715 is amended by revising the sentence at the end
of paragraph (a) to read as follows:
Sec. 236.715 Determination of eligibility.
(a) * * * The requirements of 24 CFR part 5 govern the submission
and verification of information related to citizenship and eligible
immigration status for applicants, and the procedures for denial of
assistance based upon a failure to establish eligible immigration
status.
* * * * *
15. Section 236.765 is revised to read as follows:
Sec. 236.765 Determination of eligible immigration status of
applicants and tenants; protection from liability.
(a) Housing owner's obligation to make determination. A housing
owner shall obtain and verify information regarding the citizenship or
immigration status of applicants and tenants in accordance with the
procedures of 24 CFR part 5.
(b) Protection from liability. HUD will not take any compliance,
disallowance, penalty or other regulatory action against a housing
owner with respect to any error in its determination to make an
individual eligible for financial assistance based upon citizenship or
eligible immigration status, as provided in 24 CFR part 5.
PART 247--EVICTIONS FROM CERTAIN SUBSIDIZED AND HUD-OWNED PROJECTS
16. The authority citation for part 247 continues to read as
follows:
Authority: 12 U.S.C. 1701q, 1701s, 1715b, 1715l, 1715z-1; 42
U.S.C. 1437a, 1437c, 1437f, 3535(d).
17. Section 247.3 is amended by revising paragraph (c)(3), to read
as follows:
Sec. 247.3 Entitlement of tenants to occupancy.
* * * * *
(c) * * *
(3) If the tenant:
(i) Fails to supply on time all required information on the income
and composition, or eligibility factors, of the tenant household, as
provided in 24 CFR part 5; or
(ii) Knowingly provides incomplete or inaccurate information as
required under these provisions; and
* * * * *
[[Page 13625]]
PART 812--[REMOVED]
18-19. Part 812 is removed.
PART 882--SECTION 8 CERTIFICATE AND MODERATE REHABILITATION
PROGRAMS
20. The authority citation for part 882 continues to read as
follows:
Authority: 42 U.S.C. 1437f and 3535(d).
21. In Sec. 882.118, paragraph (a)(1) is revised to read as
follows:
Sec. 882.118 Obligations of the Family.
(a) * * *
(1) Supply such certification, release, information or
documentation as the PHA or HUD determine to be necessary, including
submission of required evidence of citizenship or eligible immigration
status (as provided by 24 CFR part 5), submission of Social Security
Numbers and verifying documentation (as provided by 24 CFR part 5),
submission of signed consent forms for the obtaining of wage and claim
information from State Wage Information Collection Agencies (as
provided by 24 CFR part 5), and submissions required for an annual or
interim reexamination of family income and composition.
* * * * *
22. Section 882.212 is amended by revising the two sentences at the
end of paragraph (a), and the sentence at the end of paragraphs (b) and
(c), to read as follows:
Sec. 882.212 Reexamination of Family income and composition.
(a) * * * At the first regular reexamination after June 19, 1995
the PHA shall follow the requirements of 24 CFR part 5 concerning
obtaining and processing evidence of citizenship or eligible
immigration status of all family members. Thereafter, at each regular
reexamination, the PHA shall follow the requirements of 24 CFR part 5
concerning verification of the immigration status of any new family
member.
(b) * * * At any interim reexamination after June 19, 1995 when
there is a new family member, the PHA shall follow the requirements of
24 CFR part 5, subpart E concerning obtaining and processing evidence
of citizenship or eligible immigration status of the new family member.
(c) * * * For provisions requiring termination of housing
assistance payments when the PHA determines that a member is not a U.S.
citizen or does not have eligible immigration status, see 24 CFR parts
5 and 982 for provisions concerning certain assistance for mixed
families (families whose members include those with eligible
immigration status, and those without eligible immigration status) in
lieu of termination of assistance, and for provisions concerning
deferral of termination of assistance.
* * * * *
23. Section 882.514 is amended by revising the sentence at the end
of paragraph (f) to read as follows:
Sec. 882.514 Family participation.
* * * * *
(f) * * * The informal hearing requirements for denial and
termination of assistance on the basis of ineligible immigration status
are contained in 24 CFR part 5.
* * * * *
24. Section 882.515 is amended by revising the two sentences at the
end of paragraph (a), and by revising the sentence at the end of
paragraphs (b) and (c), to read as follows:
Sec. 882.515 Reexamination of family income and composition.
(a) * * * At the first regular reexamination after June 19, 1995,
the PHA shall follow the requirements of 24 CFR part 5 concerning
obtaining and processing evidence of citizenship or eligible
immigration status of all family members. Thereafter, at each regular
reexamination, the PHA shall follow the requirements of 24 CFR part 5
concerning verification of immigration status of any new family member.
(b) * * * At any interim reexamination after June 19, 1995 when
there is a new family member, the PHA shall follow the requirements of
24 CFR part 5 concerning obtaining and processing evidence of
citizenship or eligible immigration status of the new family member.
(c) * * * For provisions requiring termination of assistance when
the PHA determines that a family member is not a U.S. citizen or does
not have eligible immigration status, see 24 CFR parts 5 and 982 for
provisions concerning certain assistance for mixed families (families
whose members include those with eligible immigration status, and those
without eligible immigration status) in lieu of termination of
assistance, and for provisions concerning deferral of termination of
assistance.
25. Section 882.808 is amended by revising the two sentences at the
end of paragraph (i)(1), the sentence at the end of paragraph (i)(2),
and the sentence at the end of paragraph (l), to read as follows:
Sec. 882.808 Management.
* * * * *
(i) * * *
(1) * * * At the first regular reexamination after June 19, 1995,
the PHA shall follow the requirements of 24 CFR part 5 concerning
obtaining and processing evidence of citizenship or eligible
immigration status of all family members. Thereafter, at each regular
reexamination, the PHA shall follow the requirements of 24 CFR part 5
concerning verification of immigration status of any new family member.
(2) * * * At any interim reexamination after June 19, 1995 when
there is a new family member, the PHA shall follow the requirements of
24 CFR part 5 concerning obtaining and processing evidence of
citizenship or eligible immigration status of the new family member.
* * * * *
(l) * * * For provisions requiring termination of assistance when
the PHA determines that a family member is not a U.S. citizen or does
not have eligible immigration status, see 24 CFR parts 5 and 982 for
provisions concerning certain assistance for mixed families (families
whose members include those with eligible immigration status, and those
without eligible immigration status) in lieu of termination of
assistance, or for provisions concerning deferral of termination of
assistance.
* * * * *
PART 887--HOUSING VOUCHERS
26. The authority citation for part 887 continues to read as
follows:
Authority: 42 U.S.C. 1437f(o) and 3535(d).
27. Section 887.355 is amended by revising paragraph (b) to read as
follows:
Sec. 887.355 Regular reexamination of family income and composition.
* * * * *
(b) At the first regular reexamination after June 19, 1995, the PHA
shall follow the requirements of 24 CFR part 5 concerning obtaining and
processing evidence of citizenship or eligible immigration status of
all family members. Thereafter, at each regular reexamination, the PHA
shall follow the requirements of 24 CFR part 5 concerning verification
of the immigration status of any new family member.
* * * * *
28. Section 887.357 is amended by revising the sentence at the end
of the section to read as follows:
[[Page 13626]]
Sec. 887.357 Interim reexamination of family income and composition.
* * * At any interim reexamination after June 19, 1995 that
involves the addition of a new family member, the PHA shall follow the
requirements of 24 CFR part 5 concerning obtaining and processing
evidence of citizenship or eligible immigration status of the new
family member.
PART 904--LOW RENT HOUSING HOMEOWNERSHIP OPPORTUNITIES
29. The authority citation for part 904 continues to read as
follows:
Authority: 42 U.S.C. 1437-1437ee and 3535(d).
30. Section 904.104 is amended by revising the first sentence of
paragraph (b)(1) and the first sentence of paragraph (g)(2)(iii), to
read as follows:
Sec. 904.104 Eligibility and selection of homebuyers.
* * * * *
(b) Eligibility and standards for admission. (1) Homebuyers shall
be lower income families that are determined to be eligible for
admission in accordance with the provisions of 24 CFR parts 5 and 913,
which prescribe income definitions, income limits, and restrictions
concerning citizenship or eligible immigration status. * * *
* * * * *
(g) * * *
(2) * * *
(iii) For denial of assistance for failure to establish citizenship
or eligible immigration status, the applicant may request, in addition
to the informal hearing, an appeal to the INS, in accordance with 24
CFR part 5.
* * * * *
31. In Sec. 904.107, paragraphs (j)(2) and (m)(1) are revised to
read as follows:
Sec. 904.107 Responsibilities of homebuyer.
* * * * *
(j) * * *
(2) For purposes of determining eligibility of an applicant (see 24
CFR parts 5 and 913, as well as this part) and the amount of Homebuyer
payments under paragraph (j)(1) of this section, the LHA shall examine
the family's income and composition and follow the procedures required
by 24 CFR part 5 for determining citizenship or eligible immigration
status before initial occupancy. Thereafter, for the purposes stated in
this paragraph and to determine whether a Homebuyer is required to
purchase the home under Sec. 904.104(h)(1), the LHA shall reexamine the
Homebuyer's income and composition regularly, at least once every 12
months, and shall undertake such further determination and verification
of citizenship or eligible immigration status as required by 24 CFR
part 5. The Homebuyer shall comply with the LHA's policy regarding
required interim reporting of changes in the family's income and
composition. If the LHA receives information from the family or other
source concerning a change in the family income or other circumstances
between regularly scheduled reexaminations, the LHA, upon consultation
with the family and verification of the information (in accordance with
24 CFR parts 5 and 913 of this chapter) shall promptly make any
adjustments determined to be appropriate in the Homebuyer payment
amount or take appropriate action concerning the addition of a family
member who is not a citizen with eligible immigration status. Any
change in the family's income or other circumstances that results in an
adjustment in the Total Tenant Payment and Tenant Rent must be
verified.
* * * * *
(m) Termination by LHA. (1) In the event the homebuyer breaches the
Homebuyers Ownership Opportunity Agreement by failure to make the
required monthly payment within ten days after its due date, by
misrepresenting or withholding of information in applying for admission
or in connection with any subsequent reexamination of income and family
composition (including the failure to submit any required evidence of
citizenship or eligible immigration status, as provided by 24 CFR part
5; the failure to meet the disclosure and verification requirements for
Social Security Numbers, as provided by 24 CFR part 5; or the failure
to sign and submit consent forms for the obtaining of wage and claim
information from State Wage Information Collection Agencies, as
provided by 24 CFR part 5), or by failure to comply with any of the
other homebuyer obligations under the Agreement, the LHA may terminate
the Agreement. No termination under this paragraph may occur less than
30 days after the LHA gives the homebuyer notice of its intention to do
so, in accordance with paragraph (m)(3) of this section. For
termination of assistance for failure to establish citizenship or
eligible immigration status under 24 CFR part 5, the requirements of 24
CFR parts 5 and 966 shall apply.
* * * * *
PART 912--[REMOVED]
32-33. Part 912 is removed.
PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING
34. The authority citation for part 960 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, and 3535(d).
35. Section 960.204 is amended by revising paragraph (a) to read as
follows:
Sec. 960.204 Tenant selection policies.
(a) Selection policies. (1) The PHA shall establish and adopt
written policies for admission of tenants.
(2) These policies shall be designed:
(i) To attain, to the maximum extent feasible, a tenant body in
each project that is composed of families with a broad range of incomes
and to avoid concentrations of the most economically deprived families
with serious social problems;
(ii) To preclude admission of applicants whose habits and practices
reasonably may be expected to have a detrimental effect on the
residents or the project environment;
(iii) To give a preference in selection of tenants to applicants
who qualify for a federal preference, ranking preference, or local
preference, in accordance with 24 CFR part 5; and
(iv) To establish objective and reasonable policies for selection
by the PHA among otherwise eligible applicants.
(3) The PHA tenant selection policies shall include the following:
(i) Requirements for applications and waiting lists (see 24 CFR
1.4);
(ii) Description of the policies for selection of applicants from
the waiting list that includes the following:
(A) How the ``federal preferences'' (described in 24 CFR part 5)
will be used;
(B) How any ``ranking preferences'' (described in 24 CFR part 5)
will be used;
(C) How any ``local preferences'' (described in 24 CFR part 5) will
be used; and
(D) How any residency preference will be used;
(iii) Policies for verification and documentation of information
relevant to acceptance or rejection of an applicant, including
documentation and verification of citizenship and eligible immigration
status under 24 CFR part 5; and
(iv) Policies for participant transfer between units, projects, and
programs. For example, a PHA could adopt a criterion for voluntary
transfer that the tenant had met all obligations under the current
program, including payment of charges to the PHA.
* * * * *
[[Page 13627]]
36. Section 960.206 is amended by revising paragraph (a) to read as
follows:
Sec. 960.206 Verification procedures.
(a) General. Adequate procedures must be developed to obtain and
verify information with respect to each applicant. (See 24 CFR parts 5
and 913.) Information relative to the acceptance or rejection of an
applicant or the grant or denial of a ranking preference, or a local
preference under 24 CFR part 5 must be documented and placed in the
applicant's file.
* * * * *
37. Section 960.209 is amended by revising the two sentences at the
end of paragraph (a), revising the sentence at the end of paragraph
(b), and by revising paragraph (c), to read as follows:
Sec. 960.209 Reexamination of family income and composition.
(a) * * * At the first regular reexamination after June 19, 1995,
the PHA shall follow the requirements of 24 CFR part 5 concerning
obtaining and processing information on the citizenship or eligible
immigration status of all family members. Thereafter, at each regular
reexamination, the PHA shall follow the requirements of 24 CFR part 5
concerning verification of the immigration status of any new family
member.
(b) * * * At any interim reexamination after June 19, 1995 when
there is a new family member, the PHA shall follow the requirements of
24 CFR part 5 concerning obtaining and processing information on the
citizenship or eligible immigration status of the new family member.
(c) Termination. For provisions requiring termination of
participation for failure to establish citizenship or eligible
immigration status, see 24 CFR part 5 for provisions concerning
assistance to certain mixed families (families whose members include
those with citizenship and eligible immigration status and those
without eligible immigration status) in lieu of termination of
assistance.
PART 982--SECTION 8 TENANT-BASED ASSISTANCE: UNIFIED RULE FOR
TENANT-BASED ASSISTANCE UNDER THE SECTION 8 RENTAL CERTIFICATE
PROGRAM AND THE SECTION 8 RENTAL VOUCHER PROGRAM
38. The authority citation for part 982 continues to read as
follows:
Authority: 42 U.S.C. 1437f and 3535(d).
39. Section 982.153 is amended by revising paragraph (b)(9) to read
as follows:
Sec. 982.153 HA responsibilities.
* * * * *
(b) * * *
(9) Obtain and verify evidence of citizenship and eligible
immigration status in accordance with 24 CFR part 5.
* * * * *
39a. Section 982.201 is amended by revising the second sentence in
paragraph (a) to read as follows:
Sec. 982.201 Eligibility.
(a) * * * To be eligible, the applicant must be a ``family'', must
be income-eligible, and must be a citizen or a noncitizen who has
eligible immigration status as determined in accordance with 24 CFR
part 5.
* * * * *
40. Section 982.551 is amended by revising paragraph (b)(1) to read
as follows:
Sec. 982.551 Obligations of participant.
* * * * *
(b) * * *
(1) The family must supply any information that the HA or HUD
determines is necessary in the administration of the program, including
submission of required evidence of citizenship or eligible immigration
status (as provided by 24 CFR part 5). ``Information'' includes any
requested certification, release or other documentation.
* * * * *
41. Section 982.552 is amended by revising paragraph (e) to read as
follows:
Sec. 982.552 HA denial or termination of assistance for family.
* * * * *
(e) Restrictions on assistance to noncitizens. The family must
submit required evidence of citizenship or eligible immigration status.
See 24 CFR part 5 for a statement of circumstances in which the HA must
deny or terminate assistance because a family member does not establish
citizenship or eligible immigration status, and the applicable informal
hearing procedures. See 24 CFR part 5 for provisions on assistance for
mixed families (families whose members include those with eligible
immigration status, and those without eligible immigration status)
instead of denial or termination of assistance, and for provisions on
deferral of termination of assistance.
* * * * *
42. Section 982.554 is amended by revising paragraph (d) to read as
follows:
Sec. 982.554 Informal review for applicant.
* * * * *
(d) Restrictions on assistance for noncitizens. The informal
hearing provisions for the denial of assistance on the basis of
ineligible immigration status are contained in 24 CFR part 5.
43. Section 982.555 is amended by revising paragraph (g) to read as
follows:
Sec. 982.555 Informal hearing for participant.
* * * * *
(g) Restrictions on assistance to noncitizens. The informal hearing
provisions for the denial of assistance on the basis of ineligible
immigration status are contained in 24 CFR part 5.
Dated: March 12, 1996.
Henry G. Cisneros,
Secretary.
[FR Doc. 96-7188 Filed 3-26-96; 8:45 am]
BILLING CODE 4210-32-P
Complete official Federal Register PDF
FR Doc. 96-6755 Operating Procedures
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13450-13452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6755]
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UTAH RECLAMATION MITIGATION AND CONSERVATION COMMISSION
43 CFR Part 10001
Operating Procedures
AGENCY: Utah Reclamation Mitigation and Conservation Commission.
ACTION: Final rule.
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SUMMARY: This part establishes the final rule that describes the
operating procedures of the agency established by the Central Utah
Project Completion Act. The rule meets the requirement of the
Administrative Procedure Act that directs each agency to publish its
organizational structure and functions in the Federal Register for the
guidance of the public.
EFFECTIVE DATE: February 5, 1996.
FOR FURTHER INFORMATION CONTACT:
Michael C. Weland, Executive Director, Utah Reclamation Mitigation and
Conservation Commission, 111 East Broadway, Suite 310, Salt Lake City,
Utah, 84111. Telephone (801) 524-3146.
SUPPLEMENTARY INFORMATION: The final rule was adopted by the Utah
Reclamation Mitigation and Conservation Commission in public session
February 5, 1996.
List of Subjects in 43 CFR Part 10001
Administrative practice and procedures, Organization and functions
(Government Agencies).
Chapter III of title 43 of the Code of Federal Regulations is
amended to add new part as follows:
PART 10001--OPERATING PROCEDURES
Sec.
10001.1 Commissioners.
10001.2 Meetings.
Authority: Sec. 301, Pub. L. 102-575, 106 Stat 4625.
Sec. 10001.1 Commissioners.
(a) Three members of the Commission shall constitute a quorum.
(b) The affirmative vote of at least three members of the
Commission in attendance at a meeting at which a quorum is present, on
any matter within their duties and responsibilities, shall constitute
the Commission's action, except as otherwise provided herein.
(1) The Commission may not take action on a matter not appearing on
the published agenda for a particular meeting except upon the unanimous
vote of the members present.
(2) Any proposed Commission action must be moved by a Commission
member and seconded by another member before a vote may be taken by the
Commission. Other questions of procedure will be decided by reference
to generally accepted principles of parliamentary procedure, as
determined by the Chairman or the Chairman's designee.
(3) A member who is present at a meeting of the Commission at which
action on any matter is taken shall be presumed to have assented to the
action taken unless that member's abstention or dissent shall have been
entered into the minutes of the meeting or unless that member shall
file a written dissent to such action with the Chairman before the
adjournment of the meeting. A written dissent shall not apply to a
member who voted in favor of such action.
(4) In a case where a member is recused due to a conflict in a
particular matter, the member shall not be present during, nor take any
part in, the proceedings on that matter and shall not be counted as
having voted.
(5) No member of the Commission may appoint another individual,
including another member, by proxy or otherwise, to assume his or her
responsibilities or vote on his or her behalf as a member of the
Commission.
(c) There shall be one office of Chairman of the Commission to be
held by a member of the Commission.
(1) The Chairman shall be elected by an affirmative vote by at
least three members of the Commission and shall hold office for one
year, commencing immediately upon election, or until resignation from
the office or the Commission.
(2) The Chairman shall be the presiding officer of the Commission
and shall perform the following duties and responsibilities:
(i) Preside at all meetings of the Commission;
(ii) Vote on all matters requiring Commission action;
(iii) Execute all contracts, agreements, resolutions, and other
documents approved and authorized by the Commission, except as
otherwise delegated by the Commission;
(iv) Preside at ceremonial activities sponsored by the Commission
and represent the Commission at other ceremonial activities upon
invitation;
(v) Appoint any other member of the Commission to serve as Acting
Chairman in the absence of the Chairman and Vice-Chairman; and
(vi) Serve as spokesperson for the Commission, unless otherwise
directed by the Commission. When the Chairman or any other member of
the Commission speaks as an individual member of the Commission, the
Chairman or member shall state when he or she is representing his or
her own views and not the consensus of the Commission as a whole.
(3) A member may not serve as Chairman for more than four
consecutive full one-year terms.
(4) Whenever a vacancy occurs in the office of Chairman, the
members shall at their next meeting elect a successor to fill the
vacancy for the unexpired term.
(d) The Commission may, upon an affirmative vote by at least three
members, elect one of its members to serve as Vice-Chairman.
(1) The Vice-Chairman, whenever such office may from time to time
be established, shall perform all of the duties of the Chairman of the
Commission when the Chairman is unable for any reason to act or when
for any reason there is a vacancy in the office of Chairman.
[[Page 13451]]
(2) The term of office for the Vice-Chairman shall be one year,
commencing immediately upon election unless otherwise established by
the Commission.
(e) The Chairman or Vice-Chairman may be removed from office by an
affirmative vote of at least four members of the Commission whenever in
its judgment the best interests of the Commission would be served.
(f) Except as provided in paragraph (f) (1), of this section
members of the Commission shall each be paid at a rate equal to the
daily equivalent of the maximum of the annual rate of basic pay in
effect for grade GS-15 of the General Schedule for each day (including
travel time) during which they are engaged in the actual performance of
duties vested in the Commission.
(1) Members of the Commission who are full-time officers or
employees of the United States or the State of Utah shall receive no
additional pay by reason of their service on the Commission.
(2) Members of the Commission who are eligible for compensation
under this paragraph shall be paid for the performance of the following
activities:
(i) Preparation for and attendance at regularly scheduled meetings
of the Commission or Commission meetings called pursuant to
Sec. 10001.2(a);
(ii) Preparation for and attendance at Commission inspections of
mitigation and conservation projects;
(iii) Preparation for and attendance at ceremonial activities
sponsored by the Commission; and
(iv) Upon the prior or subsequent approval of the Commission,
preparation for and attendance at other meetings, or the performance of
any activities assigned by the Commission.
(g) All members of the Commission, as special or intermittent
Federal employees, shall be entitled to advances or reimbursement of
expenses incurred in the performance of the activities described in
paragraph (f) of this section in accordance with the applicable Federal
regulations.
Sec. 10001.2 Meetings.
(a) The Commission shall meet at least quarterly each year and may
meet at the call of the Chairman or upon the request of a majority of
its members.
(1) Commission members may participate in a Commission meeting
through the use of conference telephone or similar communications
equipment with the consent of the Chairman, provided that all members
so participating, members at the meeting, and attending members of the
public, can hear each other clearly at all times.
(2) All meetings of the Commission shall be open and public, and
all persons are permitted to attend except when the Commission meets in
executive or work session.
(i) Site visits by a quorum of the Commission are not considered to
be meetings of the Commission; however, whenever feasible, interested
members of the press will be invited to accompany the Commission on
site visits.
(ii) Paragraph (a)(2) of this section shall not be interpreted so
as to prohibit the removal of any person who willfully disrupts a
meeting.
(3) The Commission may meet in executive session at any time and
for any purpose authorized by law.
(i) It is the intention of the Commission that its meetings should
generally be open and public, and that executive sessions should be
held only when permitted by law or when the reasons for the executive
session clearly exceed the merits of public disclosure.
(ii) A unanimous vote of the members present is required to move
into executive session.
(iii) The Commission shall not authorize or approve any mitigation
or conservation plan, amendment, or project while in executive session,
and shall report a summary of all non-exempt information from such
sessions at the next open meeting.
(iv) In the course of an executive session, any member may request
that the matter under discussion be moved into an open meeting. Upon
receiving such a request, the Chairman shall poll the members present
in the executive session. If a majority agree to move the matter into
an open meeting, the Chairman will close the discussion of the matter
and schedule it for consideration at the next open meeting of the
Commission.
(b) The agenda for each Commission meeting shall be established by
the Chairman upon recommendation from any member of the Commission or
the Executive Director and shall briefly set out all items of business
expected to come before the Commission at the meeting for action,
consideration, or information, and identify items upon which the
Commission will accept public comment.
(1) The agenda shall specify the time and location of the meeting.
(2) At least seven calendar days prior to a Commission meeting, the
Executive Director shall publish the agenda for the upcoming meeting by
providing copies to all members of the Commission, to major news media,
and to all individuals, agencies, and organizations who have requested
in writing to be given notice of Commission meetings.
(3) The deadline for submission to the Executive Director of items
for Commission meetings shall be ten business days prior to the date of
the meeting as previously set by the Commission.
(4) Any person appearing before the Commission to comment on an
agenda item shall do so only when called by the Chairman. They shall
state their name clearly for the record and may then address the
Commission on the issue then under consideration, subject to reasonable
time limits on the issue and individual speakers as established by the
Chairman.
(5) The Executive Director shall make available for inspection by
the public, at the commencement of and during a Commission meeting,
copies of the meeting agenda and of any written material that is not
exempt from public disclosure and that has been distributed in advance
of the meeting to the Commission members for action, consideration, or
information at the meeting. If non-exempt written material is
distributed to the members during the meeting, copies thereof shall be
made available for public inspection at the same time or as soon
thereafter as practicable.
(6) Any person desiring to appear and present an item for
Commission consideration shall file a written request to do so with the
Executive Director. The request shall state the nature of the matter to
be considered by the Commission. The Chairman shall then determine
whether the matter should be placed on the agenda for a Commission
meeting or should be referred to the Executive Director.
(c) The Executive Director shall record, or have recorded, by tape
recording and stenographic notes, official minutes of all open portions
of Commission meetings.
(1) The written minutes shall contain the following information:
(i) the date, time, and location of the meeting, together with the
names of all members present and absent, the names of all staff
present, and a copy of the registration list of others attending the
meeting;
(ii) the substance of all matters proposed, considered, or decided,
including actions to go into executive session and summaries of non-
exempt information from executive sessions;
(iii) the names of all individuals who appeared before the
Commission and the substance in brief of their comments;
(iv) all motions (including the identity of the moving and
seconding members),
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votes, and major decisions of the Commission; and
(v) any other information a member requests be entered in the
minutes.
(2) The draft of the written minutes shall be prepared and
forwarded to the members by the Executive Director in a reasonable time
after the meeting. The members shall inform the Executive Director or
his or her designee of any proposed additions or corrections prior to
the final draft being sent to the members with the packet of materials
for the next Commission meeting.
(3) The Commission shall approve the written minutes at its next
regularly scheduled meeting. Upon such approval, the Chairman shall
certify the approval of the minutes by signing the original document.
One year after adoption of the minutes, the Executive Director shall
cause the tape recording of the meeting to be erased and all
stenographic notes to be destroyed, unless otherwise directed by the
Commission.
(4) Within a reasonable time after approval of the minutes by the
Commission, the Executive Director shall make the approved minutes
available for public inspection.
(5) The Executive Director shall provide copies of the certified
minutes to each member and maintain the original of the certified
minutes in the agency files and archives.
Joan Degiorgio,
Acting Executive Director.
[FR Doc. 96-6755 Filed 3-26-96; 8:45 am]
BILLING CODE 4310-05-M
Complete official Federal Register PDF
FR Doc. 96-6535 Cooperative Agreements With Commercial Firms
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13395-13418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6535]
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[[Page 13396]]
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
14 CFR Part 1274
RIN 2700-AC07
Cooperative Agreements With Commercial Firms
AGENCY: Office of Procurement, Contract Management Division, NASA.
ACTION: Final rule.
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SUMMARY: Current NASA regulations at 14 CFR part 1260 describe the use
of cooperative agreements with educational institutions and non-profit
organizations. This final regulation establishes the requirements for
cooperative agreements with commercial firms.
EFFECTIVE DATE: March 27, 1996.
FOR FURTHER INFORMATION CONTACT: Mr. T. Deback, (202) 358-0431.
SUPPLEMENTARY INFORMATION:
Background
NASA published a proposed rule in the Federal Register on June 27,
1995 (60 FR 33163). Interested parties were invited to submit comments.
Almost 100 comments were received. All comments were considered in
developing this final revision. The following section presents a
summary of the major comments received and a response to each comment.
Other changes have been made to improve clarity and readability.
Comment: The draft coverage requires synopsizing cooperative
agreements awarded as a result of unsolicited proposals. This is not
required by statute and may result in informing competitors of planned
R&D and give them an opportunity to submit competing proposals thereby
discouraging submission of innovative proposals from industry.
Response: As a general rule, it is important to be as open as
possible about the expenditure of public funds and this principal led
to requiring synopses of unsolicited proposals. It is recognized,
however, that innovative proposals must be protected; therefore the
policy allows the same exclusions as FAR 5.202(a)(8) which addresses a
waiver to synopses requirements in the case of unique or innovative
concepts.
Comment: The coverage requires that FAR cost principles be utilized
for cooperative agreements. There is no statutory requirement for this
and it will require commercial firms to establish special accounting
procedures. Recommend flexible tracking of costs.
Response: Government policy is expressed in OMB Circular A-110
which states in Paragraph 27 that ``The allowability of costs incurred
by commercial organizations and those nonprofit organizations listed in
Attachment C to Circular A-122 is determined in accordance with the
provisions of the Federal Acquisition Regulation (FAR) at 48 CFR part
31''.
Comment: Proposed rule appears to incorporate many features of a
contract vs an assistance instrument. Proposed rule should be
substantially rewritten.
Response: The proposed rule does contain some contractual aspects,
but only those that are required by law or to ensure that public funds
are appropriately expended. For example, the preaward certification
requirements, treatment of property in a cooperative agreement, and
much of the intellectual property coverage are required by law. Other
aspects of the policy such as milestone payments, technical officer
responsibilities, and liability and risk of loss are adaptations of
contract language deemed necessary to protect both the recipient and
NASA.
Comment: We note that the proposed rule provides for milestone
billings. While this is a reasonable approach to managing the flow of
funds, we are concerned that some may view these milestones as ``go-no-
go'' decision points rather than a measure of progress against a
recipient's best efforts. This area of the proposed regulation requires
careful crafting so as to avoid inadvertently introducing a level of
certainty that is not appropriate to cooperative agreements.
Response: The milestones are, in fact, ``go-no-go'' decision
points. If a milestone cannot be met, the recipient should carefully
consider revoking the agreement.
Comment: The proposed rule should be further clarified to provide
that IR&D can be used for work performed under subcontracts issued
pursuant to the cooperative agreement. This clarification is required
to eliminate potential IR&D unallowability due to the interpretation
that second tier work is required by contract. The definition should
also recognize the possibility that the company's contribution may be
Manufacturing and Production Engineering (M&PE) costs.
Response: IR&D costs may be recovered under other Government awards
as an allowable cost only by the recipient (an individual firm or
members of a consortium). While these costs of the recipient may be
expended under subcontracts, the subcontractor may not recover any
expenditures as IR&D costs.
Costs incurred by a recipient which may be classified as M&PE costs
will generally not be permitted to be recovered under other Government
awards.
Comment: ``Resource Contribution'' This term includes ``in-kind
contributions'' which is not defined elsewhere, even though ``cash
contributions'' are defined. The term ``in-kind'' is also used
elsewhere in the proposed rule. This is an area where significant
misunderstandings can arise and the term should be defined. We suggest
that NASA use the definition in the now superseded OMB Circular A-110,
Attachment E, Paragraph 2.d. (1976).
Response: The term ``in-kind contribution'' has been removed from
the regulation and replaced with ``non-cash'' to avoid
misunderstanding.
Comment: ``Revocation'' This definition needs to recognize
mutuality as opposed to the proposed version which describes
cancellation of NASA sponsorship, inferring one-sided activity.
Response: Agree. The definition has been amended.
Comment: A number of comments were received regarding the treatment
of patent rights issues. For the most part, the treatment of patent
rights is controlled by legislation and not within the purview of the
agency to amend.
Response: NA
Comment: Section 1274.204 Evaluation and Selection. (a) As written,
the regulation states that a typical CAN will have only one technical
evaluation factor, e.g., technology transfer, enhancing U.S.
competitiveness, etc. It then describes any number of more detailed
``subfactors'' which should be used, e.g., ``level of commitment
(contribution of private resources to the project)''. In our view the
``single'' evaluation factor described is really not an evaluation
factor, but rather the objective of the cooperative agreement. The
``subfactors'' appear to be the real evaluation factors. We recommend
the regulation be revised accordingly.
Response: Many of the subfactors stated for evaluation could be
consideration for any type of award (contract, grant, or cooperative
agreement). It is the single evaluation factor that establishes
cooperative agreement nature of the evaluation and ensures that the
subfactors are evaluated within the scope and intent of a cooperative
agreement structure.
Comment: When the total value of the agreement is less than $5m,
the regulation says ``Cost and [sic] pricing data should not normally
be required.'' We strongly recommend that the word ``normally'' be
deleted. Cost or pricing data should never be required for a
[[Page 13397]]
cooperative agreement. Such a requirement is totally inappropriate for
this type of financial arrangement.
Response: The cooperative agreement policy is structured to
minimize the bureaucratic impact on the recipient during the course of
performance. Minimal reporting of any kind is required and no cost
reporting is required (except in the event of termination). We still
must ensure that Government funds are being expended wisely. This is
accomplished through two specific means. The first is a careful
analysis of the proposed cost. The second is ensuring that the
milestones are accomplished. Other than cost or pricing data may be an
integral part of ensuring that the proposed cost is reasonable since no
other adequate means may be available. The guidance has been changed to
indicate that cost or pricing data (i.e., certified cost and pricing
data in accordance with FAR 15.8 following the changes required by
FASA) should never be required.
Comment: Section 1274.401 Government Property. The guidance
regarding the acquisition of property for use on a cooperative
agreement further shows the ``contract'' nature of this proposed rule.
This requirement indicates a NASA belief that a recipient will
structure the costing for the cooperative agreement in such a way that
NASA dollars fund certain work and the recipient's dollars will fund
other work. In reality, many recipients will account for the costs of a
total agreement, including purchases of equipment, billing only its
share of the total. In this scenario, NASA does not fund specific work,
but funds a percentage of the total. The proposed Cooperative
Agreements language would require separation of tasks that is
unnecessary for any other purpose of the recipient and only increases
costs of all work.
Response: Statutorily, equipment purchased with Government funds is
Government equipment. Since NASA has no interest in acquiring equipment
procured under a cooperative agreement, it is in both the recipient's
and NASA's best interests that equipment be provided as a non-cash
contribution of the recipient.
Comment: Section 1274.701 Suspension or Revocation. We strongly
support the language in this section which provides that either party
may revoke the agreement if acceptable technical progress is not made
or there is a shift in technical emphasis. We recommend this same
bilateral treatment be provided for suspension. The cooperative
agreement should provide like rights to both parties.
Response: Sections 1274.701 and 1274.922 have been amended to state
that either party may suspend the cooperative agreement.
Comment: Section 1274.903 Responsibilities. (b) NASA
Responsibilities. NASA must not contract with other than the recipient
without the recipient reaching a non-disclosure agreement with the
proposed NASA contractor prior to the placing of the contract.
Notification to the recipient is insufficient to protect recipient's
intellectual property.
Response: It is preferred that NASA contractors not perform NASA
duties and responsibilities under a cooperative agreement, but at
times, that may be unavoidable. Protection of the recipient's trade
secrets and other confidential data is covered by Sec. 1274.905(b)(2)
and (b)(3). A separate non-disclosure agreement should not be required.
Any inventions made by a NASA contractor as a result of doing work for
NASA will not be disclosed if doing so would compromise Recipient's
trade secrets. However, the contractor has the first option to retain
title to inventions made while doing work for NASA that do not
compromise Recipient's trade secrets.
Comment: The limitation on disputes to those arising three (3)
months prior to the written notification of paragraph (d) is too
limiting and should be expanded to six to twelve months to correct
this. It is suggested that paragraph (c) be modified to clarify when
the three (3) month period begins.
Response: Disagreements between NASA and its contractors and
recipients occur on a regular basis, but are resolved at low levels
within the respective organizations as they should be. This provision
attempts to provide another avenue for disputes in those extremely rare
instances where resolution at the lower levels fails. The clause has
been rewritten to clarify when the three (3) month period begins.
Comment: We strongly disagree with this paragraph which states that
``all preceding payment milestones must be completed before payment can
be made for the next payment milestone''. Activities captured in
milestones are not necessarily sequential in nature. Payment milestones
are supposed to provide a mechanism for triggering payment of the NASA
pre-agreed contribution at the accomplishment of the particular
milestone.
Response: In order to ensure that a cooperative agreement is
completed and that neither party ``games'' the other, it is critical
that payment for milestones be made in the order that the milestones
are established. It is important to note that the milestones are
primarily established by the recipient and negotiated with NASA, so the
recipient is able to establish milestones which represent the work to
be accomplished sequentially under the cooperative agreement.
Comment: Section 1274.911(b)(4)(i)--In this paragraph the term
``Administrator'' is used. If it is to mean the same as that in
Sec. 1272.102, then the term should be included in the ``Definition''
section of the provision. If another person is intended, the paragraph
should be revised.
Response: The definition of ``Administrator'' in
Sec. 1274.912(a)(1) has been added to the Definitions in 1274.911.
Comment: Section 1274.911(b)(6)--In line 10 it is unclear who in
NASA can approve the waiver. This should be clarified.
Response: The Associate Administrator for Procurement has been
substituted for NASA.
Comment: Section 1274.915--Restrictions on Sale or Transfer of
Technology to Foreign Firms or Institutions. This clause gives NASA the
right to, in effect, block the sale of a company to a foreign firm. We
strongly recommend this clause be deleted.
Response: The purpose of cooperative agreements is to enhance US
competitiveness, create jobs, improve the balance of payments, etc.
These objectives may or may not be advanced by sale to a foreign firm
but would form the basis of NASA's decision. The clause does not give
NASA the right to prevent the sale; it only provides for consultation
between the parties to determine how to best protect the Government's
interests. If an acceptable solution cannot be reached, the agreement
could be terminated.
Regulatory Flexibility Act
NASA certifies that this regulation will not have a significant
economic effect on a substantial number of small entities under the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Paperwork Reduction Act
Under 5 CFR 1320.5(b)(2)(i), NASA is required to inform potential
persons who are to respond to the collection of information that such
persons are not required to respond to the collection of information
unless it displays a currently valid OMB control number. Under 5 CFR
1320.5(b)(2)(ii)(C), this paragraph meets that requirement as follows:
information collection has been approved under OMB control number 2700-
0092.
[[Page 13398]]
List of Subjects in 14 CFR Part 1274
Grant programs, Business and industry.
Tom Luedtke,
Deputy Associate Administrator for Procurement.
Accordingly, part 1274 is added to 14 CFR chapter V to read as
follows:
PART 1274--COOPERATIVE AGREEMENTS WITH COMMERCIAL FIRMS
Subpart A--General
1274.101 Purpose.
1274.102 Definitions.
1274.103 Effect on other issuances.
1274.104 Deviations.
1274.105 Approval of Cooperative Agreement Notices (CANs) and
cooperative agreements.
Subpart B--Pre-Award Requirements
1274.201 Purpose.
1274.202 Solicitations and proposals.
1274.203 Intellectual property.
1274.204 Evaluation and selection.
1274.205 Award procedures.
1274.206 Document format and numbering.
1274.207 Distribution of cooperative agreements.
Subpart C--Administration
1274.301 Delegation of administration.
1274.302 Transfers, novations, and change of name agreements.
Subpart D--Government Property
1274.401 Government property.
Subpart E--Procurement Standards
1274.501 Subcontracts.
Subpart F--Reports and Records
1274.601 Retention and access requirements for records.
Subpart G--Suspension or Termination
1274.701 Suspension or termination.
Subpart H--After-the-Award Requirements
1274.801 Purpose.
1274.802 Closeout procedures.
1274.803 Subsequent adjustments and continuing responsibilities.
Subpart I--Other Provisions and Special Conditions
1274.901 Other provisions and special conditions.
1274.902 Purpose.
1274.903 Responsibilities.
1274.904 Resource Sharing Requirements.
1274.905 Rights in Data.
1274.906 Designation of New Technology Representative and Patent
Representative.
1274.907 Disputes.
1274.908 Milestone Payments.
1274.909 Term of this Agreement.
1274.910 Authority.
1274.911 Patent Rights.
1274.912 Patent Rights--Retention by the Recipient (Large
Business).
1274.913 Patent Rights--Retention by the Recipient (Small
Business).
1274.914 Requests for Waiver of Rights--Large Business.
1274.915 Restrictions on Sale or Transfer of Technology to Foreign
Firms or Institutions.
1274.916 Liability and Risk of Loss.
1274.917 Additional Funds.
1274.918 Incremental Funding.
1274.919 Cost Principles and Accounting Standards.
1274.920 Responsibilities of the NASA Technical Officer.
1274.921 Publications and Reports: Non-Proprietary Research
Results.
1274.922 Suspension or Termination.
1274.923 Equipment and Other Property.
1274.924 Civil Rights.
1274.925 Subcontracts.
1274.926 Clean Air-Water Pollution Control Acts.
1274.927 Debarment and Suspension and Drug-Free Workplace.
1274.928 Foreign National Employee Investigative Requirements.
1274.929 Restrictions on Lobbying.
1274.930 Travel and Transportation.
1274.931 Electronic Funds Transfer Payment Methods.
1274.932 Retention and Examination of Records.
Appendix A to Part 1274--Contract Provisions
Appendix B to Part 1274--Reports
Appendix C to Part 1274--Listing of Exhibits
Authority: 31 U.S.C. 6301 to 6308; 42 U.S.C. 2451 et seq.
Subpart A--General
Sec. 1274.101 Purpose.
(a) This part establishes uniform administrative requirements for
NASA cooperative agreements awarded to commercial firms. Cooperative
agreements are ordinarily entered into with commercial firms to--
(1) Support research and development,
(2) Provide technology transfer from the Government to the
recipient, or
(3) Develop a capability among U.S. firms to potentially enhance
U.S. competitiveness.
(b) An award may not be made to a foreign government. Award to
foreign firms is not precluded. The approval of the Associate
Administrator for Procurement is required to exclude foreign firms from
submitting proposals.
Sec. 1274.102 Definitions.
Administrator. The Administrator or Deputy Administrator of NASA.
Associate Administrator for Procurement. The head of the Office of
Procurement, NASA Headquarters (Code H).
Cash contributions. The recipient's cash outlay, including the
outlay of money contributed to the recipient by third parties.
Closeout. The process by which a NASA determines that all
applicable administrative actions and all required work of the award
have been completed by the recipient and NASA.
Commercial item. The definition in 48 CFR 2.101 (FAR) is
applicable.
Cooperative agreement. As defined by 31 U.S.C. 6305, cooperative
agreements are financial assistance instruments used to stimulate or
support activities for authorized purposes and in which the Government
participates substantially in the performance of the effort. This
regulation covers only cooperative agreements with commercial firms.
Cooperative agreements with universities and non-profit organizations
are covered by 14 CFR part 1260.
Cost sharing or matching. That portion of project or program costs
not borne by the Federal Government except that the recipient's
contribution may be reimbursable under other Government awards as
allowable IR&D costs pursuant to 48 CFR 1831.205-18 (NFS).
Date of completion. The date on which all work under an award is
completed or the date on the award document, or any supplement or
amendment thereto, on which NASA sponsorship ends.
Days. Calendar days, unless otherwise indicated.
Government furnished equipment. Equipment in the possession of, or
acquired directly by, the Government and subsequently delivered, or
otherwise made available, to a Recipient and equipment procured by the
Recipient with Government funds under a cooperative agreement.
Grant Officer. A Government employee who has been delegated the
authority to negotiate, award, or administer grants or cooperative
agreements. A Contracting Officer may serve as a Grant Officer if
authorized by installation procurement regulations.
Incremental funding. A method of funding a cooperative agreement
where the funds initially allotted to the cooperative agreement are
less than the award amount. Additional funding is added as described in
Sec. 1274.918.
Recipient. An organization receiving financial assistance under a
cooperative agreement to carry out a project or program. A recipient
may be an individual firm, a consortium, a partnership, etc.
Resource contribution. The total value of resources provided by
either party to the cooperative agreement including both cash and non-
cash contributions.
[[Page 13399]]
Support contractor means a NASA contractor performing part or all
of the NASA responsibilities under a cooperative agreement.
Suspension. An action by NASA or the recipient that temporarily
discontinues efforts under an award, pending corrective action or
pending a decision to terminate the award. Suspension of an award is a
separate action from suspension under Federal agency regulations
implementing Executive Order 12549, 51 FR 6370, 3 CFR, 1986 Comp., p.
189 and Executive Order 12689, 54 FR 34131, 3 CFR, 1989 Comp., p. 235,
``Debarment and Suspension.''
Technical Officer. The official of the cognizant NASA office who is
responsible for monitoring the technical aspects of the work under a
cooperative agreement. A Contracting Officer's Technical Representative
may serve as a Technical Officer.
Termination. The cancellation of a cooperative agreement in whole
or in part, by either party at any time prior to the date of
completion.
Sec. 1274.103 Effect on other issuances.
For awards subject to this part, all administrative requirements of
codified program regulations, program manuals, handbooks and other
nonregulatory materials which are inconsistent with the requirements of
this part shall be superseded, except to the extent they are required
by statute, or authorized in accordance with the deviations provision
in Sec. 1274.104.
Sec. 1274.104 Deviations.
(a) Exceptions. The Associate Administrator for Procurement may
grant exceptions for classes of or individual cooperative agreements
from the requirements of this part when exceptions are not prohibited
by statute.
(b) Applicability. A deviation is required for any of the
following:
(1) When a prescribed provision set forth in this regulation for
use verbatim is modified or omitted.
(2) When a provision is set forth in this part, but not prescribed
for use verbatim, and the installation substitutes a provision which is
inconsistent with the intent, principle, and substance of the
prescribed provision.
(3) When a NASA form or other form is prescribed by this part, and
that form is altered or another form is used in its place.
(4) When limitations, imposed by this regulation upon the use of a
provision, form, procedure, or any other action, are not adhered to.
(c) Request for deviations. Requests for authority to deviate from
this regulation will be forwarded to Headquarters, Program Operations
Division (Code HS). Such requests, signed by the Procurement Officer,
shall contain as a minimum:
(1) A full description of the deviation and identification of the
regulatory requirement from which a deviation is sought.
(2) Detailed rationale for the request, including any pertinent
background information.
(3) The name of the recipient and identification of the cooperative
agreement affected, including the dollar value.
(4) A statement as to whether the deviation has been requested
previously, and, if so, circumstances of the previous request(s).
(5) A description of the intended effect of the deviation.
(6) A copy of legal counsel's concurrence or comments.
Sec. 1274.105 Approval of Cooperative Agreement Notices (CANs) and
cooperative agreements.
(a) As soon as possible after the initial decision is made by a
Headquarters program office or Center procurement personnel to use the
CAN process, the cognizant program office or procurement office shall
notify the Associate Administrator for Procurement (Code HS) of the
intent to use a CAN in all cases where the total Government funds to be
awarded in response to CAN proposals is expected to equal or exceed $10
million. All such notifications, as described below, shall be concurred
in by the Procurement Officer. This requirement also applies in those
cases where an unsolicited proposal is received and a decision is made
to award a cooperative agreement in which the recipient (or one or more
members of a ``team'' of recipients) is a commercial firm and the total
Government funds are expected to equal or exceed $10 million.
(b) The required notification is to be accomplished by sending an
electronic mail (e-mail) message to the following address at NASA
Headquarters: [email protected]. The notification must include
the following information, as a minimum:
(1) Identification of the cognizant center and program office;
(2) Description of the proposed program for which proposals are to
be solicited;
(3) Rationale for decision to use a CAN rather than other types of
solicitations;
(4) The amount of Government funding to be available for awards;
(5) Estimate of the number of cooperative agreements to be awarded
as a result of the CAN;
(6) The percentage of cost-sharing to be required; and
(7) Tentative schedule for release of CAN and award of cooperative
agreements.
(c) Code HS will respond by e-mail message to the sender, with a
copy of the message to the Procurement Officer, within 5 working days
of receipt of this initial notification. The response will address the
following:
(1) Whether Code HS agrees or disagrees with the appropriateness
for using a CAN for the effort described;
(2) Whether Code HS will require review and approval of the CAN
before its issuance;
(3) Whether Code HS will require review and approval of the
selected offeror's cost sharing arrangement (e.g., cost sharing
percentage; type of contribution (cash, labor, etc.)); and
(4) Whether Code HS will require review and approval of the
resulting cooperative agreement(s).
(d) If a response from Code HS is not received within 5 working
days of notification, the program office or center may proceed with
release of the CAN and award of the cooperative agreements as
described.
Subpart B--Pre-Award Requirements
Sec. 1274.201 Purpose.
Sections 1274.202 through 1274.207 prescribe forms and instructions
and address other pre-award matters.
Sec. 1274.202 Solicitations and proposals.
(a) Consistent with 31 U.S.C. 6301(3), NASA uses competitive
procedures to award cooperative agreements whenever possible. An award
will normally be made as a result of a Cooperative Agreement Notice
(CAN) which envisions a cooperative agreement as the award instrument.
A Commerce Business Daily synopsis or a synopsis on the NASA
Acquisition Internet Service will be used to publicize the CAN.
(b) Unsolicited Proposals. (1) An award may be made as a result of
an unsolicited proposal. The unsolicited proposal must evidence a
unique and innovative idea or approach which is not the subject of a
current or anticipated solicitation. When a cooperative agreement is
awarded as a result of an unsolicited proposal, a Commerce Business
Daily synopsis or a synopsis on the NASA Acquisition Internet Service
will be used to provide an opportunity for other firms/consortia to
express an interest in the agreement
[[Page 13400]]
unless the exception in 48 CFR 5.202(a)(8) (FAR) applies. Respondents
should be given a minimum of thirty days to respond. If interest is
expressed, a decision must be made to proceed with the award or to
issue a solicitation for competitive proposals.
(2) Prior to an award made as the result of an unsolicited
proposal, the award must be approved by the Procurement Officer if
NASA's total resource contribution is below $5 million. Center Director
approval is required if NASA's total resource contribution is $5
million or more. For Headquarters cooperative agreements, approval by
the Associate Administrator for Procurement is required if NASA's total
resource contribution is $5 million or more.
(c) Cost and payment matters. (1) The expenditure of Government
funds by the Recipient and the allowability of costs recognized as a
resource contribution by the Recipient shall be governed by the FAR
cost principles, 48 CFR part 31. If the Recipient is a consortium which
includes non-commercial entities as members, cost allowability for
those members will be determined as follows: Allowability of costs
incurred by State, local or federally-recognized Indian tribal
governments is determined in accordance with the provisions of OMB
Circular A-87, ``Cost Principles for State and Local Governments.'' The
allowability of costs incurred by non-profit organizations is
determined in accordance with the provisions of OMB Circular A-122,
``Cost Principles for Non-Profit Organizations.'' The allowability of
costs incurred by institutions of higher education is determined in
accordance with the provisions of OMB Circular A-21, ``Cost Principles
for Educational Institutions.'' The allowability of costs incurred by
hospitals is determined in accordance with the provisions of Appendix E
of 45 CFR part 74, ``Principles for Determining Costs Applicable to
Research and Development Under Grants and Contracts with Hospitals.''
Recipient's method for accounting for the expenditure of funds must be
consistent with Generally Accepted Accounting Principles.
(2) A substantial resource contribution on the part of the
Recipient is required. The Recipient is expected to contribute at least
50% of the total resources required to accomplish the cooperative
agreement. Recipient contributions may be either cash or non-cash or
both. In those cases in which a contribution of less than 50% is
anticipated from the Recipient, approval of the Associate Administrator
for Procurement (Code HS) is required prior to award. The request for
approval should address the evaluation factor in the solicitation and
how the proposal accomplishes those objectives to such a degree that a
share ratio of less than 50% is warranted.
(3) Cooperative agreements are funded by NASA in a fixed amount.
Payments in fixed amounts will be made by NASA in accordance with
``Milestone Billings'' which are discussed in paragraph (c)(4) of this
section. If the Recipient completes the final milestone, final payment
is made, and NASA will have completed its financial responsibilities
under the agreement. However, if the cooperative agreement is
terminated prior to achievement of all milestones, NASA's funding will
be limited to milestone payments already made plus NASA's share of
costs required by the Recipient to meet commitments which had in the
judgment of NASA become firm prior to the effective date of termination
and are otherwise appropriate. In no event shall these additional costs
or payment exceed the amount of the next payable milestone billing
amount.
(4) Milestone billings is the method of payment to the Recipient
under cooperative agreements. Performance based milestones are used as
the basis of establishing a set of verifiable milestones for payment
purposes. Each milestone payment shall be established so that the
Government payment is at the same share ratio as the cooperative
agreement share ratio. If the Recipient is a consortium, the Articles
of Collaboration is required to contain an extensive list of
performance based milestones that the consortium has agreed to.
Generally, payments should not be made more than once monthly; ideally,
payments will be made about every 60 to 90 days but in all cases should
be made on the basis of verifiable, significant events as opposed to
the passage of time. The last payment milestone should be large enough
to ensure that the Recipient completes its responsibilities under the
cooperative agreement (or funds should be reserved for payment until
after completion of the cooperative agreement). The Government
technical officer must verify completion of each milestone to the
Grants Officer as part of the payment process. If the Government's
projected cash contribution to a cooperative agreement exceeds $5
million, approval of the Milestone Payment clause, including the
milestones and anticipated payments, by the Associate Administrator for
Procurement (Code HS) is required prior to award. The request for
approval should contain substantially the same information required by
48 CFR (NFS) 1832.7006.
(5) Cooperative agreements may be incrementally funded subject to
the following:
(i) The total value of the NASA cash contribution is $50,000 or
more.
(ii) The period of performance overlaps the succeeding fiscal year.
(iii) The funds are not available to fully fund the cooperative
agreement at the time of award.
(6) Cost sharing requirements on cooperative agreements with
commercial firms are based on section 23 of OMB Circular A-110,
November 23, 1993. Only cash or certain non-cash resources are
acceptable sources for the Recipient contribution to a cooperative
agreement. Acceptable non-cash resources include such items as
purchased equipment, equipment, labor, office space, etc. The actual or
imputed value of intellectual property such as patent rights, data
rights, trade secrets, etc., are not acceptable as sources for the
Recipient contribution.
(7) Recipients shall not be paid a profit under cooperative
agreements. Profit may be paid by the Recipient to subcontractors, if
the subcontractor is not part of the offering team and the subcontract
is an arms-length relationship.
(8) The Recipient's resource share of the cooperative agreement may
be allocated as part of its IR&D program in accordance with a class
deviation pursuant to 48 CFR 1831.205-18 (NFS).
(9) The CAN must provide a description of the non-cash Government
contribution (personnel, equipment, facilities, etc.) as part of the
Government's contribution to the cooperative agreement in addition to
funding. The offeror may propose that additional non-cash Government
resources be provided under two conditions. First, the offeror is
responsible for verifying the availability of the resources and their
suitability for their intended purpose and, second, those resources are
part of the Government contribution (which must be matched by the
Recipient) and paid for directly by the awarding organization.
(d) Consortia as recipients. (1) The use of consortia as Recipients
for cooperative agreements is encouraged. Consortia will tend to bring
to a cooperative agreement a broader range of capabilities and
resources. A consortium is a group of organizations that enter into an
agreement to collaborate for the purposes of the cooperative agreement
with NASA. The agreement to collaborate can take the form of a legal
entity such as a
[[Page 13401]]
partnership or joint venture but it is not necessary that such an
entity be created. A consortium may be made up of firms which normally
compete for commercial or Government business or may be made up of
firms which perform complementary functions in a given industry. The
inclusion of non-profit or educational institutions, small businesses,
or small disadvantaged businesses in the consortium could be
particularly valuable in ensuring that the results of the consortium's
activities are disseminated.
(2) Key to the success of the cooperative agreement with a
consortium is the consortium's Articles of Collaboration, which is a
definitive description of the roles and responsibilities of the
consortium's members. It should also address to the extent appropriate:
commitments of financial, personnel, facilities and other resources, a
detailed milestone chart of consortium activities, accounting
requirements, subcontracting procedures, disputes, term of the
agreement, insurance and liability issues, internal and external
reporting requirements, management structure of the consortium,
obligations of organizations withdrawing from the consortia, allocation
of data and patent rights among the consortia members, agreements, if
any, to share existing technology and data, the firm which is
responsible for the completion of the consortium's responsibilities
under the cooperative agreement and has the authority to commit the
consortium and receive payments from NASA, employee policy issues, etc.
(3) An outline of the Articles of Collaboration should be required
as part of the proposal and evaluated during the source selection
process.
(e) Metric system of measurement. The Metric Conversion Act, as
amended by the Omnibus Trade and Competitiveness Act (15 U.S.C. 205)
declares that the metric system is the preferred measurement system for
U.S. trade and commerce.
Sec. 1274.203 Intellectual property.
(a) A cooperative agreement covers the disposition of rights
relating to inventions and patents between NASA and the Recipient. If
the Recipient is a consortium or partnership, rights flowing between
multiple organizations in a consortium must be negotiated separately
and formally documented, preferably in the Articles of Collaboration.
(b) Patent rights clauses are required by statute and regulation.
The clauses exist for Recipients of the Agreement whether they are:
(1) Other than small business or nonprofit organizations (generally
referred to as large businesses) or
(2) Small businesses or nonprofit organizations.
(c) There are five situations in which inventions may arise under a
cooperative agreement: Recipient Inventions, Subcontractor Inventions,
NASA Inventions, NASA Support Contractor Inventions, and Joint
Inventions with Recipient.
(d)(1) Recipient inventions. (i) A Recipient, if a large business,
is subject to section 305 of the National Aeronautics and Space Act of
1958 (42 U.S.C. 2457) relating to property rights in inventions. The
term ``invention'' includes any invention, discovery, improvement, or
innovation. Title to an invention made under a cooperative agreement by
a large business Recipient initially vests with NASA. The Recipient may
request a waiver under the NASA Patent Waiver Regulations to obtain
title to inventions made under the Agreement. Such a request may be
made in advance of the Agreement (or 30 days thereafter) for all
inventions made under the Agreement. Alternatively, requests may be
made on a case by case basis any time an individual invention is made.
Such waivers are liberally and expeditiously granted after review by
NASA's Invention and Contribution Board and approval by NASA's General
Counsel. When a waiver is granted, any inventions made in the
performance of work under the Agreement are subject to certain
reporting, election and filing requirements, a royalty-free license to
the Government, march-in rights, and certain other reservations.
(ii) A Recipient, if a small business or nonprofit organization,
may elect to retain title to its inventions. The term ``nonprofit
organization'' is defined in 35 U.S.C. 201(i) and includes universities
and other institutions of higher education or an organization of the
type described in section 501(c)(3) of the Internal Revenue Code. The
Government obtains an irrevocable, nonexclusive, royalty-free license.
(2) Subcontractor inventions. (i) Large business. If a Recipient
enters a subcontract (or similar arrangement) with a large business
organization for experimental, developmental, research, design or
engineering work in support of the Agreement to be done in the United
States, its possessions, or Puerto Rico, section 305 of the Space Act
applies. The clause applicable to large business organizations is to be
used (suitably modified to identify the parties) in any subcontract.
The subcontractor may request a waiver under the NASA Patent Waiver
Regulations to obtain rights to inventions made under the subcontract
just as a large business Recipient can (see paragraph (d)(1)(i) of this
section). It is strongly recommended that a prospective large business
subcontractor contact the NASA installation Patent Counsel or
Intellectual Property Counsel to assure that the right procedures are
followed. Just like the Recipient, any inventions made in the
performance of work under the Agreement are subject to certain
reporting, election and filing requirements, a royalty-free license to
the Government, march-in rights, and certain other reservations.
(ii) Non-profit organization or small business. In the event the
Recipient enters into a subcontract (or similar arrangement) with a
domestic nonprofit organization or a small business firm for
experimental, developmental, or research work to be performed under the
Agreement, the requirements of 35 U.S.C. 200 et seq. regarding ``Patent
Rights in Inventions Made With Federal Assistance,'' apply. The
subcontractor has the first option to elect title to any inventions
made in the performance of work under the Agreement, subject to
specific reporting, election and filing requirements, a royalty-free
license to the Government, march-in rights, and certain other
reservations that are specifically set forth.
(iii) Work outside the United States. If the Recipient subcontracts
for work to be done outside the United States, its possessions or
Puerto Rico, the NASA installation Patent Counsel or Intellectual
Property Counsel should be contacted for the proper patent rights
clause to use and the procedures to follow.
(iv) Additional rights. Notwithstanding paragraphs (d)(1) and
(d)(2) (i) through (iii) of this section, and in recognition of the
Recipient's substantial contribution, the Recipient is authorized,
subject to rights of NASA set forth elsewhere in the Agreement, to:
(A) Acquire by negotiation and mutual agreement rights to a
subcontractor's subject inventions as the Recipient may deem necessary,
or
(B) If unable to reach agreement pursuant to paragraph
(d)(2)(iv)(A) of this section, request that NASA invoke exceptional
circumstances as necessary pursuant to 37 CFR 401.3(a)(2) if the
prospective subcontractor is a small business firm or nonprofit
organization, or for all other organizations, request that such rights
for the Recipient be included as an additional reservation in a waiver
granted pursuant to 14 CFR 1245.1. The exercise of this exception does
not change the flow down of the
[[Page 13402]]
applicable patent rights clause to subcontractors. Applicable laws and
regulations require that title to inventions made under a subcontract
must initially reside in either the subcontractor or NASA, not the
Recipient. This exception does not change that. The exception does
authorize the Recipient to negotiate and reach mutual agreement with
the subcontractor for the grant-back of rights. Such grant-back could
be an option for an exclusive license or an assignment, depending on
the circumstances.
(3) NASA inventions. NASA will use reasonable efforts to report
inventions made by its employees as a consequence of, or which bear a
direct relation to, the performance of specified NASA activities under
an Agreement. Upon timely request, NASA will use its best efforts to
grant Recipient first option to acquire either an exclusive or
partially-exclusive, revocable, royalty-bearing license, on terms to be
negotiated, for any patent applications and patents covering such
inventions. This exclusive or partially-exclusive license to the
Recipient will be subject to the retention of rights by or on behalf of
the Government for Government purposes.
(4) NASA support contractor inventions. It is preferred that NASA
support contractors be excluded from performing any of NASA's
responsibilities under the Agreement since the rights obtained by a
NASA support contractor could work against the rights needed by the
Recipient. In the event NASA support contractors are tasked to work
under the Agreement and inventions are made by support contractor
employees, the support contractor will normally obtain rights in such
inventions. However, if NASA has the right to acquire or has acquired
title to such inventions, upon timely request, NASA will use its best
efforts to grant Recipient first option to acquire either an exclusive
or partially exclusive, revocable, royalty-bearing license, upon terms
to be negotiated, for any patent applications and patents covering such
inventions. This exclusive or partially-exclusive license to the
Recipient will be subject to the retention of rights by or on behalf of
the Government for Government purposes.
(5) Joint inventions. (i) NASA and the Recipient agree to use
reasonable efforts to identify and report to each other any inventions
made jointly between NASA employees (or employees of NASA support
contractors) and employees of Recipient. For large businesses, the
Associate General Counsel (Intellectual Property) may agree that the
United States will refrain, for a specified period, from exercising its
undivided interest in a manner inconsistent with Recipient's commercial
interest. For small business firms and nonprofit organizations, the
Associate General Counsel (Intellectual Property) may agree to assign
or transfer whatever rights NASA may acquire in a subject invention
from its employee to the Recipient as authorized by 35 U.S.C. 202(e).
The grant officer negotiating the Agreement with small business firms
and nonprofit organizations can agree, up front, that NASA will assign
whatever rights it may acquire in a subject invention from its employee
to the small business firm or nonprofit organization. Requests under
this paragraph shall be made through the Center Patent Counsel.
(ii) NASA support contractors may be joint inventors. If a NASA
support contractor employee is a joint inventor with a NASA employee,
the same provisions apply as those for NASA Support Contractor
Inventions. The NASA support contractor will retain or obtain
nonexclusive licenses to those inventions in which NASA obtains title.
If a NASA support contractor employee is a joint inventor with a
Recipient employee, the NASA support contractor and Recipient will
become joint owners of those inventions in which they have elected to
retain title or requested and have been granted waiver of title. Where
the NASA support contractor has not elected to retain title or has not
been granted waiver of title, NASA will jointly own the invention with
the Recipient.
(e) Licenses to recipient(s). (1) Any exclusive or partially
exclusive commercial licenses are to be royalty-bearing consistent with
Government-wide policy in licensing its inventions. It also provides an
opportunity for royalty-sharing with the employee-inventor, consistent
with Government-wide policy under the Federal Technology Transfer Act.
(2) Upon application in compliance with 37 CFR part 404--Licensing
of Government Owned Inventions, all Recipients shall be granted a
revocable, nonexclusive, royalty-free license in each patent
application filed in any country on a subject invention and any
resulting patent in which the Government obtains title. Because
cooperative agreements are cost sharing cooperative arrangements with a
purpose of benefiting the public by improving the competitiveness of
the Recipient and the Government receives an irrevocable, nonexclusive,
royalty-free license in each Recipient subject invention, it is only
equitable that the Recipient receive, at a minimum, a revocable,
nonexclusive, royalty-free license in NASA inventions and NASA
contractor inventions where NASA has acquired title.
(3) Notice requirements. Once a Recipient has exercised its option
to apply for an exclusive or partially exclusive license, a notice,
identifying the invention and the Recipient, is published in the
Federal Register, providing the public opportunity for filing written
objections for 60 days.
(f) Preference for United States manufacture. Despite any other
provision, the Recipient agrees that any products embodying subject
inventions or produced through the use of subject inventions shall be
manufactured substantially in the United States. The intent of this
provision is to support manufacturing jobs in the United States
regardless of the status of the Recipient as a domestic or foreign
controlled company. However, in individual cases, the requirement to
manufacture substantially in the United States, may be waived by the
Associate Administrator for Procurement (Code HS) upon a showing by the
Recipient that under the circumstances domestic manufacture is not
commercially feasible.
(g) Space Act agreements. Invention and patent rights in
cooperative agreements must comply with statutory and regulatory
provisions. Where circumstances permit, a Space Act Agreement is
available as an alternative instrument which can be more flexible in
the area of invention and patent rights.
(h) Data rights. Data rights provisions can and should be tailored
to best achieve the needs and objectives of the respective parties
concerned.
(1) The data rights clause at Sec. 1274.905 assumes a substantially
equal cost sharing relationship where collaborative research,
experimental, developmental, engineering, demonstration, or design
activities are to be carried out, such that it is likely that
``proprietary'' information will be developed and/or exchanged under
the agreement. If cost sharing is unequal or no extensive research,
experimental, developmental, engineering, demonstration, or design
activities are likely, a different set of clauses may be appropriate.
(2) The primary question that must be answered when developing data
clauses is what does each party need or intend to do with the data
developed under the agreement. Accordingly, the data rights clauses may
be tailored to fit the circumstances. Where conflicting goals of the
parties result in incompatible data provisions, grant officers for the
[[Page 13403]]
Government must recognize that private companies entering into
cooperative agreements bring resources to that relationship and must be
allowed to reap an appropriate benefit for the expenditure of those
resources. However, since serving a public purpose is a major objective
of a cooperative agreement, care must be exercised to ensure the
Recipient is not established as a long term sole source supplier of an
item or service and is not in a position to take unfair advantage of
the results of the cooperative agreement. Therefore, a reasonable time
period (depending on the technology, two to five years after production
of the data) may be established after which the data first produced by
the Recipient in the performance of the agreement will be made public.
(3) Data can be generated from different sources and can have
various restrictions placed on its dissemination. Recipient data
furnished to NASA can exist prior to, or be produced outside of, the
agreement or be produced under the agreement. NASA can also produce
data in carrying out its responsibilities under the agreement. Each of
these areas need to be covered.
(4) For data, including software, first produced by the Recipient
under the agreement, the Recipient may assert copyright. Data exchanged
with a notice showing that the data is protected by copyright must
include appropriate licenses in order for NASA to use the data as
needed.
(5) Recognizing that the dissemination of the results of NASA's
activities is a primary objective of a cooperative agreement, the
parties should specifically delineate what results will be published
and under what conditions. This should be set forth in the clause of
the cooperative agreement entitled ``Publication and Reports.'' Any
such agreement on the publication of results should be stated to take
precedence over any other clause in the cooperative agreement.
(6) In accordance with section 303(b) of the Space Act, any data
first produced by NASA under the agreement which embodies trade secrets
or financial information that would be privileged or confidential if it
had been obtained from a private participant, will be marked with an
appropriate legend and maintained in confidence for an agreed to period
of up to five years (the maximum allowed by law). This does not apply
to data other than that for which there has been agreement regarding
publication or distribution. The period of time during which data first
produced by NASA is maintained in confidence should be consistent with
the period of time determined in accordance with paragraph (h)(2) of
this section, before which data first produced by the Recipient will be
made public. Also, NASA itself may use the marked data (under suitable
protective conditions) for agreed-to purposes.
Sec. 1274.204 Evaluation and selection.
(a) General. A single technical evaluation factor is typically used
for CANs. That evaluation factor should be one of the following:
providing research and development or technology transfer, enhancing
U.S. competitiveness, or developing a capability among U.S. firms.
Award to foreign firms is not precluded if the evaluation factor is
satisfied. Subfactors could include such things as fostering U.S.
leadership, potential to advance technologies anticipated to enhance
U.S. competitiveness, timeliness of proposed accomplishments, private
sector commitment to commercialization, identification of specific
potential commercial markets, appropriateness of business risk,
potential for broad impact on the U.S. technology and knowledge base,
level of commitment (contribution of private resources to the project),
appropriateness of team member participation and relationships,
appropriateness of management planning, relevant experience,
qualifications and depth of management and technical staff, quality and
appropriateness of resources committed to the project, performance
bench marks, technical approach, business approach/resource sharing,
past performance, the articles of collaboration, etc.
(b) Technical evaluation. (1) Competitive technical proposal
information shall be protected in accordance with 48 CFR 15.411 (FAR),
Receipt of Proposals and quotations. Unsolicited proposals shall be
protected in accordance with 48 CFR 15.508 (FAR), Prohibitions, and 48
CFR 15.509 (FAR), Limited use of data.
(2) The technical officer will evaluate proposals in accordance
with the criteria in the CAN. Proposals selected for award will be
supported by documentation as described in paragraph (c)(1) of this
section. When evaluation results in a proposal not being selected, the
proposer will be notified in accordance with the CAN.
(3) The technical evaluation of proposals may include peer reviews.
Since the business sense of a cooperative agreement proposal is
critical to its success, NASA should reserve the right to utilize
appropriate outside evaluators to assist in the evaluation of such
proposal elements as the business base projections, the market for
proposed products, and/or the impact of anticipated product price
reductions. The use of outside evaluators shall be approved in
accordance with 48 CFR 1815.413-2(c)(2) (NFS). It is strongly
recommended that a numerical scoring system be established to rank
proposals. Data provided to outside evaluators should be protected in
accordance with 48 CFR 1815.413-2(e) (NFS).
(4) Evaluation of unsolicited proposals must consider whether: the
subject of the proposal is available to NASA from another source
without restriction; the proposal closely resembles a pending
competitive acquisition; and the research proposed demonstrates an
innovative and unique method, approach, or concept. Organizations
submitting unaccepted proposals will be notified in writing.
(c) Documentation requirements. For proposals selected for award,
the technical officer will prepare and furnish to the grant officer the
following documentation:
(1) For a competitively selected proposal, a signed selection
statement and technical evaluation based on the evaluation criteria
stated in the solicitation.
(2) For an unsolicited proposal, a justification for acceptance of
an unsolicited proposal (JAUP) prepared by the cognizant technical
office. The JAUP shall be submitted for the approval of the grant
officer after review and concurrence at a level above the technical
officer. The evaluator shall consider the following factors, in
addition to any others appropriate for the particular proposal:
(i) Unique and innovative methods, approaches or concepts
demonstrated by the proposal.
(ii) Overall scientific or technical merits of the proposal.
(iii) The offeror's capabilities, related experience, facilities,
techniques, or unique combinations of these which are integral factors
for achieving the proposal objectives.
(iv) The qualifications, capabilities, and experience of the
proposed key personnel who are critical in achieving the proposal
objectives.
(v) Current, open solicitations under which the unsolicited
proposal could be evaluated.
(d) Cost evaluation. (1) The grant officer and technical team will
determine whether the overall proposed cost of the project is
reasonable and that the Recipient's contribution is valid, verifiable,
and available. Commitments should be obtained and verified to the
extent practical from the offeror or
[[Page 13404]]
members of the consortia that the proposed contributions can and will
be made as specified in the proposal or statement of work.
(i) If the Recipient's verified share on a cooperative agreement
equals or exceeds 50% of the total cost of the agreement and the total
value of the agreement is less than $5 million, the cost evaluation of
the offeror's proposal should focus on the overall reasonableness and
timing of the proposer's contribution. Cost or pricing data should not
be required and information other than cost or pricing data (defined in
48 CFR 15.801) (FAR) should not normally be required.
(ii) If the Recipient's share is projected to be less than 50% or
the total value of the agreement is more than $5 million, a more in-
depth analysis of the proposed costs should be undertaken. Only
information other than cost or pricing data should be required. An
analysis consistent with 48 CFR 15.805-3 through 15.805-5 (FAR) should
be performed.
(2) As part of the evaluation of the cost proposal, the source of
the recipient's contribution should be determined. Each of the cost
elements contributed by the recipient and their amounts should be
identified. If the contribution will consist at least in part of IR&D,
the extent to which the IR&D may be recoverable from Government awards
should be established. This will involve using the estimated Government
participation rate of the recipient's General and Administrative
indirect cost base for the period of the cooperative agreement. The
results of the evaluation are to be documented in the cooperative
agreement file.
(e) Consortium. If the cooperative agreement is to be awarded to a
consortium, a completed, formally executed Articles of Collaboration is
required prior to award.
(f) Printing, binding, and duplicating. Proposals for effort which
involve printing, binding, and duplicating in excess of 25,000 pages
are subject to the Government Printing and Binding Regulations, No. 26,
February 1990, S. Pub. 101-9, U.S. Government Printing Office,
Washington, DC 20402, (202) 512-1800, published by the Congressional
Joint Committee on Printing. The technical office will refer such
proposals to the Installation Central Printing Management Officer
(ICPMO). The grant officer will be advised in writing of the results of
the ICPMO review.
Sec. 1274.205 Award procedures.
(a) General. Multiple year cooperative agreements are encouraged,
but normally they should not extend beyond two years.
(b) Award above proposed amount. Awards of cooperative agreements
in response to competitive solicitations will not result in providing
more NASA funds or resources than was anticipated in the Recipient's
proposal. If additional funds or resources are deemed necessary, they
will be provided by the Recipient and the Government cost share
percentage will be adjusted downward.
(c) Changes to cooperative agreements. Cost growth or in-scope
changes shall not increase the amount of NASA's contribution.
Additional costs which arise during the performance of the cooperative
agreement are the responsibility of the Recipient. Funding for work
required beyond the scope of the cooperative agreement must be sought
through the submission of a proposal which will be treated as an
unsolicited proposal.
(d) Bilateral award. All cooperative agreements awarded under this
regulation will be awarded on a bilateral basis.
(e) Certifications and representations. (1) General. Unless
prohibited by statute or codified regulation, Recipients will be
encouraged to submit certifications and representations required by
statute, executive order, or regulation on an annual basis, if the
Recipients have ongoing and continuing relationships with the agency.
Annual certifications and representations shall be signed by
responsible officials with the authority to ensure Recipients'
compliance with the pertinent requirements.
(2) Civil rights requirements--nondiscrimination in certain
Federally-funded programs. Recipients must furnish assurances of
compliance with civil rights statutes specified in 14 CFR parts 1250
through 1252. Such assurances are not required for each cooperative
agreement, if they have previously been furnished and remain current
and accurate. Certifications to NASA are normally made on NASA Form
1206, which may be obtained from the grant officer. Upon acceptance,
the grant officer will forward assurances to the NASA Office of Equal
Opportunity Programs for recording and retention purposes.
(3) Debarment certification. NASA cooperative agreements are
subject to the provisions of 14 CFR part 1265, Governmentwide Debarment
and Suspension (Nonprocurement) and Governmentwide requirements for
Drug-Free Workplace (Grants), unless excepted by Secs. 1265.110 and
1265.610.
(4) Lobbying certification. A Lobbying Certification in accordance
with 14 CFR part 1271 will be obtained prior to award.
(f) Indemnification. Indemnification under Public Law 85-804, as
amended (50 U.S.C. 1431 et seq.) is not authorized for cooperative
agreements.
Sec. 1274.206 Document format and numbering.
(a) Formats. Grant officers are authorized to use the format in
Exhibit A of Appendix C of this part for the award of all cooperative
agreements. Computer-generated versions and omission of inapplicable
items are allowed.
(b) Cooperative agreement numbering. The identification numbering
system for all cooperative agreements shall conform to 48 CFR
1804.7102-3 (NFS), except that a NCC prefix will be used in lieu of the
NAS prefix.
Sec. 1274.207 Distribution of cooperative agreements.
Copies of cooperative agreements and modifications will be provided
to: payment office, technical officer, administrative grant officer
when delegation has been made, NASA Center for Aerospace Information
(CASI), Attn: Document Processing Section, 800 Elkridge Landing Road,
Linthicum Heights, Maryland 21090-2934, and any other appropriate
recipient. Copies of the statement of work, contained in the
Recipient's proposal and accepted by NASA, will be provided to the
administrative grant officer and CASI. The cooperative agreement file
will contain a record of the addresses for distributing agreements and
supplements.
Subpart C--Administration
Sec. 1274.301 Delegation of administration.
Normally, cooperative agreements will be administered by the
awarding activity.
Sec. 1274.302 Transfers, novations, and change of name agreements.
(a) Transfer of cooperative agreements. Novation is the only means
by which a cooperative agreement may be transferred from one Recipient
to another.
(b) Novation and change of name. All novation agreements and change
of name agreements of the Recipient, prior to execution, shall be
reviewed by NASA legal counsel for legal sufficiency prior to approval.
Subpart D--Government Property
Sec. 1274.401 Government property.
The accomplishment of a cooperative agreement may require the
purchase of
[[Page 13405]]
equipment for a wide range of purposes. If this equipment is purchased
with Government funds, i.e., as part of the Government contribution to
the cooperative agreement, it becomes Government property and must be
disposed of in accordance with 48 CFR part 45 (FAR) at the conclusion
of the cooperative agreement. In some cases, this may meet the needs of
the parties. If, however, the Recipient may need the equipment to
continue commercial efforts following the cooperative agreement, it
should be purchased by the Recipient and included as a non-cash
contribution of the Recipient. In this way, it is not procured, not
even in part, with Government funds and the Government acquires no
ownership interest. Procurement by the Recipient may be before or
during the performance of the cooperative agreement.
Subpart E--Procurement Standards
Sec. 1274.501 Subcontracts.
Recipients are not authorized to issue grants or cooperative
agreements to subrecipients. All contracts, including small purchases,
awarded by Recipients and their contractors shall contain the
procurement provisions of Appendix A to this part, as applicable and
may be subject to approval requirements cited in Sec. 1274.925.
Subpart F--Reports and Records
Sec. 1274.601 Retention and access requirements for records.
(a) This subpart sets forth requirements for record retention and
access to records for awards to Recipients.
(b) Financial records, supporting documents, statistical records,
and all other records pertinent to an award shall be retained for a
period of three years from the date of submission of the final invoice.
The only exceptions are the following:
(1) If any litigation, claim, or audit is started before the
expiration of the 3-year period, the records shall be retained until
all litigation, claims or audit findings involving the records have
been resolved and final action taken.
(2) Records for real property and equipment acquired with Federal
funds shall be retained for 3 years after final disposition.
(3) When records are transferred to or maintained by NASA, the 3-
year retention requirement is not applicable to the Recipient.
(4) Indirect cost rate proposals, cost allocations plans, etc. as
specified in paragraph (g) of this section.
(c) Copies of original records may be substituted for the original
records if authorized by NASA.
(d) NASA shall request transfer of certain records to its custody
from Recipients when it determines that the records possess long term
retention value. However, in order to avoid duplicate record keeping,
NASA may make arrangements for Recipients to retain any records that
are continuously needed for joint use.
(e) NASA, the Inspector General, Comptroller General of the United
States, or any of their duly authorized representatives, have the right
of timely and unrestricted access to any books, documents, papers, or
other records of Recipients that are pertinent to the awards, in order
to make audits, examinations, excerpts, transcripts and copies of such
documents. This right also includes timely and reasonable access to a
Recipient's personnel for the purpose of interview and discussion
related to such documents. The rights of access in this paragraph are
not limited to the required retention period, but shall last as long as
records are retained.
(f) Unless required by statute, NASA shall not place restrictions
on Recipients that limit public access to the records of Recipients
that are pertinent to an award, except when NASA can demonstrate that
such records shall be kept confidential and would have been exempted
from disclosure pursuant to the Freedom of Information Act (5 U.S.C.
552) if the records had belonged to NASA.
(g) This paragraph (g) applies to the following types of documents,
and their supporting records: indirect cost rate computations or
proposals, cost allocation plans, and any similar accounting
computations of the rate at which a particular group of costs is
chargeable (such as computer usage chargeback rates or composite fringe
benefit rates).
(1) If submitted for negotiation. If the Recipient submits to NASA
or the subrecipient submits to the Recipient the proposal, plan, or
other computation to form the basis for negotiation of the rate, then
the 3-year retention period for its supporting records starts on the
date of such submission.
(2) If not submitted for negotiation. If the Recipient is not
required to submit to NASA or the subrecipient is not required to
submit to the Recipient the proposal, plan, or other computation for
negotiation purposes, then the 3-year retention period for the
proposal, plan, or other computation and its supporting records starts
at the end of the fiscal year (or other accounting period) covered by
the proposal, plan, or other computation.
Subpart G--Suspension or Termination
Sec. 1274.701 Suspension or termination.
A cooperative agreement provides both NASA and the Recipient the
ability to terminate the agreement if it is in their best interests to
do so. For example, NASA may terminate the agreement if the Recipient
is not making anticipated technical progress, if the Recipient
materially fails to comply with the terms of the agreement, if the
Recipient materially changes the objective of the agreement, or if
appropriated funds are not available to support the program. Similarly,
the Recipient may terminate the agreement if, for example, technical
progress is not being made, if the firms are shifting their technical
emphasis, or if other technological advances have made the effort
obsolete. NASA or the Recipient may also suspend the cooperative
agreement for a short period of time if an assessment needs to be made
as to whether the agreement should be terminated.
Subpart H--After-the-Award Requirements
Sec. 1274.801 Purpose.
Sections 1274.802 and 1274.803 contain closeout procedures and
other procedures for subsequent disallowances and adjustments.
Sec. 1274.802 Closeout procedures.
(a) Recipients shall submit, within 90 calendar days after the date
of completion of the cooperative agreement, all financial, performance,
and other reports as required by the terms and conditions of the award.
Extensions may be approved when requested by the Recipient.
(b) The Recipient shall account for any real and personal property
acquired with Federal funds or received from the Federal Government in
accordance with subpart D of this part.
Sec. 1274.803 Subsequent adjustments and continuing responsibilities.
The closeout of an award does not affect any of the following:
(a) Audit requirements in Sec. 1274.933.
(b) Property management requirements in subpart D of this part.
(c) Records retention as required in Sec. 1274.601.
[[Page 13406]]
Subpart I--Other Provisions and Special Conditions
Sec. 1274.901 Other provisions and special conditions.
The provisions set forth in this subpart are to be incorporated in
and made a part of all cooperative agreements. The provisions at
Secs. 1274.902 through 1274.909 are to be incorporated in full text
substantially as stated in this part. The provisions at Secs. 1274.910
through 1274.933 will be by reference incorporated in an enclosure to
each cooperative agreement (see Exhibit A of Appendix C of this part).
For inclusion of provisions in subcontracts, see Subpart E--Procurement
Standards of this part.
Sec. 1274.902 Purpose.
Purpose (FEB 1996)
The purpose of this cooperative agreement is to conduct a shared
resource project that will lead to ____________. This cooperative
agreement will advance the technology developments and research
which have been performed on ______________. The specific objective
is to ______________. This work will culminate in ____________.
[End of provision]
Sec. 1274.903 Responsibilities.
Responsibilities (FEB 1996)
(a) This cooperative agreement will include substantial NASA
participation during performance of the effort. NASA and the
Recipient agree to the following Responsibilities, a statement of
cooperative interactions to occur during the performance of this
effort. NASA and the Recipient shall exert all reasonable efforts to
fulfill the responsibilities stated below.
(b) NASA responsibilities. Since NASA contractors may obtain
certain intellectual property rights arising from work for NASA in
support of this agreement, NASA will inform Recipient whenever NASA
intends to use NASA contractors to perform technical engineering
services in support of this agreement. The following
responsibilities are hereby set forth with anticipated start and
ending dates, as appropriate:
Responsibility Start End
(c) Recipient responsibilities. The Recipient shall be
responsible for particular aspects of project performance as set
forth in the technical proposal dated ____________, attached hereto
(or Statement of Work dated ____________, attached hereto.). The
following responsibilities are hereby set forth with anticipated
start and ending dates, as appropriate:
Responsibility Start End
[End of provi
FR Doc. 96-6535 Cooperative Agreements With Commercial Firms
sion]
Sec. 1274.904 Resource Sharing Requirements.
Resource Sharing Requirements (FEB 1996)
(a) NASA and the Recipient will share in providing the resources
necessary to perform the agreement. NASA funding and non-cash
contributions (personnel, equipment, facilities, etc.) and the
dollar value of the Recipient's cash and/or non-cash contribution
will be on a ____ (NASA) - ____ (Recipient) basis. Criteria and
procedures for the allowability and allocability of cash and non-
cash contributions shall be governed by section 23, ``Cost Sharing
or Matching,'' of OMB Circular A-110. The ``applicable federal cost
principles'' cited in OMB Circular A-110 shall be determined in
accordance with Sec. 1274.919.
(b) The Recipient's share shall not be charged to the Government
under this agreement or under any other contract, grant, or
cooperative agreement, except to the extent that the Recipient's
contribution may be allowable IR&D costs pursuant to 48 CFR
1831.205-18 (NFS).
Sec. 1274.905 Rights in Data.
Rights in Data (FEB 1996)
(a) Definitions.
Data, means recorded information, regardless of form, the media
on which it may be recorded, or the method of recording. The term
includes, but is not limited to, data of a scientific or technical
nature, computer software and documentation thereof, and data
comprising commercial and financial information.
(b) Data categories--(1) General. Data exchanged between NASA
and Recipient under this cooperative agreement will be exchanged
without restriction as to its disclosure, use or duplication except
as otherwise provided in paragraphs (b)(2) through (6) of this
provision.
(2) Background data. In the event it is necessary for Recipient
to furnish NASA with Data which existed prior to, or produced
outside of, this cooperative agreement, and such Data embodies trade
secrets or comprises commercial or financial information which is
privileged or confidential, and such Data is so identified with a
suitable notice or legend, the Data will be maintained in confidence
and disclosed and used by NASA and its contractors (under suitable
protective conditions) only for the purpose of carrying out NASA's
responsibilities under this cooperative agreement. Upon completion
of activities under this agreement, such Data will be disposed of as
requested by Recipient.
(3) Data first produced by Recipient. In the event Data first
produced by Recipient in carrying out Recipient's responsibilities
under this cooperative agreement is furnished to NASA, and Recipient
considers such Data to embody trade secrets or to comprise
commercial or financial information which is privileged or
confidential, and such Data is so identified with a suitable notice
or legend, the Data will be maintained in confidence for a period of
[insert ``two'' to ``five''] years after development of the data and
be disclosed and used by [``NASA'' or ``the Government,'' as
appropriate] and its contractors (under suitable protective
conditions) only for [insert appropriate purpose; for example:
experimental; evaluation; research; development, etc.] by or on
behalf of [``NASA'' or ``the Government'' as appropriate] during
that period. In order that [``NASA'' or the ``Government'', as
appropriate] and its contractors may exercise the right to use such
Data for the purposes designated above, NASA, upon request to the
Recipient, shall have the right to review and request delivery of
Data first produced by Recipient. Delivery shall be made within a
time period specified by NASA.
(4) Data first produced by NASA. As to Data first produced by
NASA in carrying out NASA's responsibilities under this cooperative
agreement and which Data would embody trade secrets or would
comprise commercial or financial information that is privileged or
confidential if it had been obtained from the Recipient, will be
marked with an appropriate legend and maintained in confidence for
an agreed to period of up to (--) years [INSERT A PERIOD UP TO 5
YEARS] after development of the information, with the express
understanding that during the aforesaid period such Data may be
disclosed and used (under suitable protective conditions) by or on
behalf of the Government for Government purposes only, and
thereafter for any purpose whatsoever without restriction on
disclosure and use. Recipient agrees not to disclose such Data to
any third party without NASA's written approval until the
aforementioned restricted period expires.
(5) Copyright. (i) In the event Data is exchanged with a notice
indicating the Data is protected under copyright as a published
copyrighted work, or are deposited for registration as a published
work in the U.S. Copyright Office, the following paid-up licenses
shall apply:
(A) If it is indicated on the Data that the Data existed prior
to, or was produced outside of, this agreement, the receiving party
and others acting on its behalf, may reproduce, distribute, and
prepare derivative works for the purpose of carrying out the
receiving party's responsibilities under this cooperative agreement;
and
(B) If the furnished Data does not contain the indication of
paragraph (b)(5)(i)(A) of this provisiion, it will be assumed that
the Data was first produced under this agreement, and the receiving
party and others acting on its behalf, shall be granted a paid up,
nonexclusive, irrevocable, world-wide license for all such Data to
reproduce, distribute copies to the public, prepare derivative
works, distribute copies to the public, and perform publicly and
display publicly, by or on behalf of the receiving party. For Data
that is computer software, the right to distribute shall be limited
to potential users in the United States.
(ii) When claim is made to copyright, the Recipient shall affix
the applicable copyright notice of 17 U.S.C. 401 or 402 and
acknowledgment of Government sponsorship to the data when and if the
data are delivered to the Government.
(6) Oral and visual information. If information which the
Recipient considers to embody trade secrets or to comprise
commercial or financial information which is privileged or
confidential is disclosed orally or visually to NASA, such
information must be reduced to tangible, recorded form (i.e.,
converted into Data as defined herein),
[[Page 13407]]
identified and marked with a suitable notice or legend, and
furnished to NASA within 10 days after such oral or visual
disclosure, or NASA shall have no duty to limit or restrict, and
shall not incur any liability for, any disclosure and use of such
information.
(7) Disclaimer of Liability. Notwithstanding paragraphs (6)(2)
through (6) of this provision, NASA shall not be restricted in, nor
incur any liability for, the disclosure and use of:
(i) Data not identified with a suitable notice or legend as set
in paragraph (b)(2) of this provision; nor
(ii) Information contained in any Data for which disclosure and
use is restricted under paragraphs (b)(2) or (3) of this provision,
if such information is or becomes generally known without breach of
the above, is known to or is generated by NASA independently of
carrying out responsibilities under this agreement, is rightfully
received from a third party without restriction, or is included in
data which Participant has, or is required to furnish to the U.S.
Government without restriction on disclosure and use.
(c) Marking of data. Any Data delivered under this cooperative
agreement, by NASA or the Recipient, shall be marked with a suitable
notice or legend indicating the data was generated under this
cooperative agreement.
(d) Lower Tier Agreements. The Recipient shall include this
provision, suitably modified to identify the parties, in all
subcontracts or lower tier agreements, regardless of tier, for
experimental, developmental, or research work.
[End of provision]
Sec. 1274.906 Designation of New Technology Representative and Patent
Representative.
Designation of New Technology Representative and Patent Representative
(FEB 1996)
(a) For purposes of administration of the clause of this
cooperative agreement entitled ``PATENT RIGHTS--RETENTION BY THE
CONTRACTOR (LARGE BUSINESS)'' or ``PATENT RIGHTS--RETENTION BY THE
CONTRACTOR (SMALL BUSINESS)'' the following named representatives
are hereby designated by the Grant Officer to administer such
clause:
Title Office Code Address
New Technology
Representative
Patent
Representative
(b) Reports of reportable items, and disclosure of subject
inventions, interim reports, final reports, utilization reports, and
other reports required by the clause, as well as any correspondence
with respect to such matters, should be directed to the New
Technology Representative unless transmitted in response to
correspondence or request from the Patent Representative. Inquiries
or requests regarding disposition of rights, election of rights, or
related matters should be directed to the Patent Representative.
This clause shall be included in any subcontract hereunder requiring
``PATENT RIGHTS--RETENTION BY THE CONTRACTOR (LARGE BUSINESS)''
clause or ``PATENT RIGHTS--RETENTION BY THE CONTRACTOR (SMALL
BUSINESS)'' clause, unless otherwise authorized or directed by the
Grant Officer. The respective responsibilities and authorities of
the above-named representatives are set forth in 48 CFR 1827.375-3
(NFS).
[End of provision]
Sec. 1274.907 Disputes.
Disputes (FEB 1996)
(a) In the event that a disagreement arises, representatives of
the parties shall enter into discussions in good faith and in a
timely and cooperative manner to seek resolution. If these
discussions do not result in a satisfactory solution, the aggrieved
party may seek a decision from the Dispute Resolution Official under
paragraph (b) of this provision. This request must be presented no
more than (3) three months after the events giving rise to the
disagreement have occurred.
(b) The aggrieved party may submit a written request for a
decision to the ________________ [Suggest this be the Center
Director], who is designated as the Dispute Resolution Official. The
written request shall include a statement of the relevant facts, a
discussion of the unresolved issues, and a specification of the
clarification, relief, or remedy sought. A copy of this written
request and all accompanying materials must be provided to the other
party at the same time. The other party shall submit a written
position on the matters in dispute within thirty (30) calendar days
after receiving this notification that a decision has been
requested. The Dispute Resolution Official shall conduct a review of
the matters in dispute and render a decision in writing within
thirty (30) calendar days of receipt of such written position. Such
resolution is not subject to further administrative review and, to
the extent permitted by law, shall be final and binding.
[End of provision]
Sec. 1274.908 Milestone Payments.
Milestone Payments (FEB 1996)
(a) By submission of the first invoice, the Recipient is
certifying that it has an established accounting system which
complies with generally accepted accounting principles, with the
requirements of this agreement, and that appropriate arrangements
have been made for receiving, distributing, and accounting for
Federal funds received under this agreement.
(b) Payments will be made upon the following milestones: [The
schedule for payments may be based upon the Recipient's completion
of specific tasks, submission of specified reports, or whatever is
appropriate.] Date Payment Milestone Amount
(c) Upon submission by the Recipient of invoices in accordance
with the provisions of the agreement and upon certification by NASA
of completion of the payable milestone, the grant officer shall
authorize payment.
(d) A payment milestone may be successfully completed in advance
of the date appearing in paragraph (b) of this provision. However,
payment shall not be made prior to that date without the written
consent of the Grant Officer.
(e) The Recipient is not entitled to partial payment for partial
completion of a payment milestone.
(f) All preceding payment milestones must be completed before
payment can be made for the next payment milestone.
(g) Invoices hereunder shall be submitted in the original and
five copies to the Grant Officer for certification.
[End of provision]
Sec. 1274.909 Term of this Agreement.
Term of this Agreement (FEB 1996)
The agreement commences on the effective date indicated on the
attached cover sheet and continues until the expiration date
indicated on the attached cover sheet unless terminated by either
party. If all resources are expended prior to the expiration date of
the agreement, the parties have no obligation to continue
performance and may elect to cease at that point. The parties may
extend the expiration date if additional time is required to
complete the milestones at no increase in Government resources.
Provisions of this Agreement, which, by their express terms or by
necessary implication, apply for periods of time other than that
specified as the agreement term, shall be given effect,
notwithstanding expiration of the term of the agreement.
[End of provision]
Sec. 1274.910 Authority.
Authority (FEB 1996)
This is a cooperative agreement as defined in 31 U.S.C. 6305
(the Chiles Act) and is entered into pursuant to the authority of 42
U.S.C. 2451 et seq. (the Space Act).
[End of provision]
Sec. 1274.911 Patent Rights.
Patent Rights (FEB 1996)
(a) Definitions.
(1) Administrator means the Administrator or Deputy
Administrator of NASA.
(2) Invention means any invention or discovery which is or may
be patentable or otherwise protectable under title 35 of the United
States Code.
(3) Made when used in relation to any invention means the
conception or first actual reduction to practice such invention.
(4) Nonprofit organization means a domestic university or other
institution of higher education or an organization of the type
described in section 501(c)(3) of the Internal Revenue Code of 1954
(26 U.S.C. 501(c)) and exempt from taxation under section 501(a) of
the Internal Revenue Code (26 U.S.C. 501(a)), or any domestic
nonprofit scientific or educational organization qualified under a
State nonprofit organization statute.
(5) Practical application means to manufacture, in the case of a
composition or product; to practice, in the case of a process
[[Page 13408]]
or method; or to operate, in the case of a machine or system; and,
in each case, under such conditions as to establish that the
invention is being utilized and that its benefits are, to the extent
permitted by law or Government regulations, available to the public
on reasonable terms.
(6) Recipient means: (i) The signatory Recipient party or
parties; or (ii) The Consortium, where a Consortium has been formed
for carrying out Recipient responsibilities under this agreement.
(7) Small business firm means a domestic small business concern
as defined at 15 U.S.C. 632 and implementing regulations of the
Administrator of the small Business Administration. (For the purpose
of this definition, the size standard contained in 13 CFR 121.901
through 121.911 will be used.)
(8) Subject invention means any invention of a Recipient and/or
Government employee conceived or first actually reduced to practice in
the performance of work under this Agreement.
(b) Allocation of principal rights. (1) Recipient inventions.
For other than Small Business Firm or Nonprofit organization
Recipients, the ``PATENT RIGHTS--RETENTION BY RECIPIENT (LARGE
BUSINESS)'' provision applies. For Small Business Firm and Nonprofit
organization Recipients, the ``PATENT RIGHTS--RETENTION BY RECIPIENT
(SMALL BUSINESS)'' provision applies.
(2) NASA inventions. NASA will use reasonable efforts to report
inventions made by NASA employees as a consequence of, or which bear
a direct relation to, the performance of specified NASA activities
under this cooperative agreement and, upon timely request, NASA will
use its best efforts to grant the Recipient or designated Consortium
Member (if applicable) the first option to acquire either an
exclusive or partially exclusive, revocable, royalty-bearing
license, on terms to be subsequently negotiated, for any patent
applications and patents covering such inventions, and subject to
the license reserved in paragraph (b)(5)(i) of this provision. Upon
application in compliance with 37 CFR Part 404--Licensing of
Government Owned Inventions, the Recipient or each Consortium Member
(if applicable), shall be granted a revocable, nonexclusive,
royalty-free license in each patent application filed in any country
on a subject invention and any resulting patent in which the
Government acquires title. Each nonexclusive license may extend to
subsidiaries and affiliates, if any, within the corporate structure
of the licensee and includes the right to grant sublicenses of the
same scope to the extent the licensee was legally obligated to do so
at the time the cooperative agreement was signed.
(3) NASA contractor inventions. In the event NASA contractors
are tasked to perform work in support of specified NASA activities
under this cooperative agreement and inventions are made by
contractor employees, and NASA has the right to acquire or has
acquired title to such inventions, NASA will use reasonable efforts
to report such inventions and, upon timely request, NASA will use
its best efforts to grant the Recipient or designated Consortium
Member (if applicable) the first option to acquire either an
exclusive or partially exclusive, revocable, royalty-bearing
license, upon terms to be subsequently negotiated, for any patent
applications and patents covering such inventions, and subject to
the license reserved in paragraph (b)(5)(ii) of this provision. Upon
application in compliance with 37 CFR Part 404--Licensing of
Government Owned Inventions, the Recipient or each Consortium Member
(if applicable), shall be granted a revocable, nonexclusive,
royalty-free license in each patent application filed in any country
on a subject invention and any resulting patent in which the
Government acquires title. Each nonexclusive license may extend to
subsidiaries and affiliates, if any, within the corporate structure
of the licensee and includes the right to grant sublicenses of the
same scope to the extent the licensee was legally obligated to do so
at the time the cooperative agreement was signed.
(4) Joint NASA and recipient inventions. NASA and Recipient
agree to use reasonable efforts to identify and report to each other
any inventions made jointly between NASA employees (or employees of
NASA contractors) and employees of Recipient.
(i) For other than small business firms and nonprofit
organizations the Administrator may agree that the United States
will refrain from exercising its undivided interest in a manner
inconsistent with Recipient's commercial interest and to cooperate
with Recipient in obtaining patent protection on its undivided
interest on any waived inventions subject, however, to the condition
that Recipient makes its best efforts to bring the invention to the
point of practical application at the earliest practicable time. In
the event that the Administrator determines that such efforts are
not undertaken, the Administrator may void NASA's agreement to
refrain from exercising its undivided interest and grant licenses
for the practice of the invention so as to further its development.
In the event that the Administrator decides to void NASA's agreement
to refrain from exercising its undivided interest and grant licenses
for this reason, notice shall be given to the Inventions and
Contributions Board as to why such action should not be taken.
Either alternative will be subject to the applicable license or
licenses reserved in paragraph (b)(5) of this provision.
(ii) For small business firms and nonprofit organizations, NASA
may assign or transfer whatever rights it may acquire in a subject
invention from its employee to the Recipient as authorized by 35
U.S.C. 202(e).
(5) Minimum rights reserved by the Government. Any license or
assignment granted Recipient pursuant to paragraph (b)(2), (b)(3),
or (b)(4) of this provision will be subject to the reservation of
the following licenses:
(i) As to inventions made solely or jointly by NASA employees,
the irrevocable, royalty-free right of the Government of the United
States to practice and have practiced the invention by or on behalf
of the United States; and
(ii) As to inventions made solely by, or jointly with, employees
of NASA contractors, the rights in the Government of the United
States as set forth in paragraph (b)(5)(i) of this provision, as
well as the revocable, nonexclusive, royalty-free license in the
contractor as set forth in 14 CFR 1245.108.
(6) Preference for United States manufacture. The Recipient
agrees that any products embodying subject inventions or produced
through the use of subject inventions shall be manufactured
substantially in the United States. However, in individual cases,
the requirement to manufacture substantially in the United States
may be waived by the Associate Administrator for Procurement (Code
HS) with the concurrence of the Associate General Counsel for
Intellectual Property upon a showing by the Recipient that under the
circumstances domestic manufacture is not commercially feasible.
(7) Work performed by the Recipient under this cooperative
agreement is considered undertaken to carry out a public purpose of
support and/or stimulation rather than for acquiring property or
services for the direct benefit or use of the Government.
Accordingly, such work by the Recipient is not considered ``by or
for the United States'' and the Government assumes no liability for
infringement by the Recipient under 28 U.S.C. 1498.
[End of provision]
Sec. 1274.912 Patent Rights--Retention by the Recipient (Large
Business).
Patent Rights--Retention by the Recipient (Large Business) (FEB 1996)
(a) Definitions.
(1) Administrator means the Administrator of the National
Aeronautics and Space Administration (NASA) or duly authorized
representative.
(2) Invention means any invention or discovery which is or may
be patentable or otherwise protectable under title 35 of the U.S.C.
(3) Made, as used in relation to any invention, means the
conception or first actual reduction to practice such invention.
(4) Nonprofit organization means a domestic university or other
institution of higher education or an organization of the type
described in section 501(c)(3) of the Internal Revenue Code of 1954
(26 U.S.C. 501(c)) and exempt from taxation under section 501(a) of
the Internal Revenue Code (26 U.S.C. 501(a)), or any domestic
nonprofit scientific or educational organization qualified under a
State nonprofit organization statute.
(5) Practical application means to manufacture, in the case of a
composition or product; to practice, in the case of a process or
method; or to operate, in case of a machine or system; and, in each,
case, under such conditions as to establish that the invention is
being utilized and that its benefits are, to the extent permitted by
law or Government regulations, available to the public on reasonable
terms.
(6) Reportable item means any invention, discovery, improvement,
or innovation of the Recipient, whether or not the same is or may be
patentable or otherwise protectable under title 35 of the United
States Code, conceived
[[Page 13409]]
or first actually reduced to practice in the performance of any work
under this contract or in the performance of any work that is
reimbursable under any clause in this contract providing for
reimbursement of costs incurred prior to the effective date of this
contract.
(7) Small business firm means a domestic small business concern
as defined at 15 U.S.C. 632 and implementing regulations of the
Administrator of the Small Business Administration. (For the purpose
of this definition, the size standard contained in 13 CFR 121.901
through 121.911 will be used.)
(8) Subject invention means any reportable item which is or may
be patentable or otherwise protectable under title 35 of the United
States Code, or any novel variety of plant that is or may be
protectable under the Plant Variety Protection Act (7 U.S.C. 2321 et
seq).
(b) Allocation of principal rights--(1) Presumption of title--
(i) Any reportable item that the Administrator considers to be a
subject invention shall be presumed to have been made in the manner
specified in paragraph (1) or (2) of section 305(a) of the National
Aeronautics and Space Act of 1958 (42 U.S.C. 2457(a)) (hereinafter
called ``the Act''), and the above presumption shall be conclusive
unless at the time of reporting the reportable item the Recipient
submits to the Grants Officer a written statement, containing
supporting details, demonstrating that the reportable item was not
made in the manner specified in paragraph (1) or (2) of section
305(a) of the Act.
(ii) Regardless of whether title to a given subject invention
would otherwise be subject to an advance waiver or is the subject of
a petition for waiver, the Recipient may nevertheless file the
statement described in paragraph (b)(1)(i) of this provision. The
Administrator will review the information furnished by the Recipient
in any such statement and any other available information relating
to the circumstances surrounding the making of the subject invention
and will notify the Recipient whether the Administrator has
determined that the subject invention was made in the manner
specified in paragraph (1) or (2) of section 305(a) of the Act.
(2) Property rights in subject inventions. Each subject
invention for which the presumption of paragraph (b)(1)(i) of this
provision is conclusive or for which there has been a determination
that it was made in the manner specified in paragraph (1) or (2) of
section 305(a) of the Act shall be the exclusive property of the
United States as represented by NASA unless the Administrator waives
all or any part of the rights of the United States, as provided in
paragraph (b)(3) of this section.
(3) Waiver of rights--(i) Section 305(f) of the Act provides for
the promulgation of regulations by which the Administrator may waive
the rights of the United States with respect to any invention or
class of inventions made or that may be made under conditions
specified in paragraph (1) or (2) of section 305(a) of the Act. The
NASA Patent Waiver Regulations, 14 CFR part 1245, subpart 1, have
adopted the Presidential memorandum on Government Patent Policy of
February 18, 1983, as a guide in acting on petitions (requests) for
such waiver of rights.
(ii) As provided in 14 CFR part 1245, subpart 1, Recipients may
petition, either prior to execution of the contract or within 30
days after execution of the Agreement, for advance waiver of rights
to any or all of the inventions that may be made under an Agreement.
If such a petition is not submitted, or if after submission it is
denied, the Recipient (or an employee inventor of the Recipient may
petition for waiver of rights to an identified subject invention
within eight months of first disclosure of invention in accordance
with paragraph (e)(2) of this provision or within such longer period
as may be authorized in accordance with 14 CFR 1245.105. Further
procedures are provided in the REQUESTS FOR WAIVER OF RIGHTS--LARGE
BUSINESS provision.
(c) Minimum rights reserved by the Government. (1) With respect
to each Recipient subject invention for which a waiver of rights is
applicable in accordance with 14 CFR part 1245, subpart 1, the
Government reserves--
(i) An irrevocable, royalty-free license for the practice of
such invention throughout the world by or on behalf of the United
States or any foreign government in accordance with any treaty or
agreement with the United States; and
(ii) Such other rights as stated in 14 CFR 1245.107.
(2) Nothing contained in this paragraph (c) shall be considered
to grant to the Government any rights with respect to any invention
other than a subject invention.
(d) Minimum rights to the Recipient. (1) The Recipient is hereby
granted a revocable, nonexclusive, royalty-free license in each
patent application filed in any country on a Recipient subject
invention and any resulting patent in which the Government acquires
title, unless the Recipient fails to disclose the subject invention
within the times specified in paragraph (e)(2) of this provision.
The Recipient's license extends to its domestic subsidiaries and
affiliates, if any, within the corporate structure of which the
Recipient is a party and includes the right to grant sublicenses of
the same scope to the extent the Recipient was legally obligated to
do so at the time the contract was awarded. The license is
transferable only with the approval of the Administrator except when
transferred to the successor of that part of the Recipient's
business to which the invention pertains.
(2) The Recipient's domestic license may be revoked or modified
by the Administrator to the extent necessary to achieve expeditious
practical application of the subject invention pursuant to an
application for an exclusive license submitted in accordance with 14
CFR part 1245, subpart 2, Licensing of NASA Inventions. This license
will not be revoked in that field of use or the geographical areas
in which the Recipient has achieved practical application and
continues to make the benefits of the invention reasonably
accessible to the public. The license in any foreign country may be
revoked or modified at the discretion of the Administrator to the
extent the Recipient, its licensees, or its domestic subsidiaries or
affiliates have failed to achieve practical application in that
foreign country.
(3) Before revocation or modification of the license, the
Recipient will be provided a written notice of the Administrator's
intention to revoke or modify the license, and the Recipient will be
allowed 30 days (or such other time as may be authorized by the
Administrator for good cause shown by the Recipient) after the
notice to show cause why the license should not be revoked or
modified. The Recipient has the right to appeal, in accordance with
14 CFR 1245.211, any decision concerning the revocation or
modification of its license.
(e) Invention identification, disclosures, and reports. (1) The
Recipient shall establish and maintain active and effective
procedures to assure that reportable items are promptly identified
and disclosed to Recipient personnel responsible for the
administration of this clause within six months of conception and/or
first actual reduction to practice, whichever occurs first in the
performance of work under this contract. These procedures shall
include the maintenance of laboratory notebooks or equivalent
records and other records as are reasonably necessary to document
the conception and/or the first actual reduction to practice of the
reportable items, and records that show that the procedures for
identifying and disclosing reportable items are followed. Upon
request, the Recipient shall furnish the Grants Officer a
description of such procedures for evaluation and for determination
as to their effectiveness.
(2) The Recipient will disclose each reportable item to the
Grants Officer within two months after the inventor discloses it in
writing to Recipient personnel responsible for the administration of
this clause or, if earlier, within six months after the Recipient
becomes aware that a reportable item has been made, but in any event
for subject inventions before any on sale, public use, or
publication of such invention known to the Recipient. The disclosure
to the agency shall be in the form of a written report and shall
identify the contract under which the reportable item was made and
the inventor(s) or innovator(s). It shall be sufficiently complete
in technical detail to convey a clear understanding, to the extent
known at the time of the disclosure, of the nature, purpose,
operation, and physical, chemical, biological, or electrical
characteristics of the reportable item. The disclosure shall also
identify any publication, on sale, or public use of any subject
invention and whether a manuscript describing such invention has
been submitted for publication and, if so, whether it has been
accepted for publication at the time of disclosure. In addition,
after disclosure to the agency, the Recipient will promptly notify
the agency of the acceptance of any manuscript describing a subject
invention for publication or of any on sale or public use planned by
the Recipient for such invention.
(3) The Recipient shall furnish the Grants Officer the
following:
(i) Interim reports every 12 months (or such longer period as
may be specified by the Grants Officer) from the date of the
contract, listing reportable items during that period, and
certifying that all reportable items have been disclosed (or that
there are no such
[[Page 13410]]
inventions) and that the procedures required by paragraph (e)(1) of
this provision have been followed.
(ii) A final report, within three months after completion of the
contracted work, listing all reportable items or certifying that
there were no such reportable items, and listing all subcontracts at
any tier containing a patent rights clause or certifying that there
were no such subcontracts.
(4) The Recipient agrees, upon written request of the Grants
Officer, to furnish additional technical and other information
available to the Recipient as is necessary for the preparation of a
patent application on a subject invention and for the prosecution of
the patent application, and to execute all papers necessary to file
patent applications on subject inventions and to establish the
Government's rights in the subject inventions.
(5) The Recipient agrees, subject to 48 CFR 27.302(j) (FAR),
that the Government may duplicate and disclose subject invention
disclosures and all other reports and papers furnished or required
to be furnished pursuant to this clause.
(f) Examination of records relating to inventions. (1) The
Grants Officer or any authorized representative shall, pursuant to
the Retention and Examination of Records provision of this
cooperative agreement, have the right to examine any books
(including laboratory notebooks), records, and documents of the
Recipient relating to the conception or first actual reduction to
practice of inventions in the same field of technology as the work
under this contract to determine whether--
(i) Any such inventions are subject inventions;
(ii) The Recipient has established and maintained the procedures
required by paragraph (e)(1) of this provision; and
(iii) The Recipient and its inventors have complied with the
procedures.
(2) If the Grants Officer learns of an unreported Recipient
invention that the Grants Officer believes may be a subject
inventions, the Recipient may be required to disclose the invention
to the agency for a determination of ownership rights.
(3) Any examination of records under this paragraph will be
subject to appropriate conditions to protect the confidentiality of
the information involved.
(g) Subcontracts. (1) Unless otherwise authorized or directed by
the Grants Officer, the Recipient shall--
(i) Include this Clause Patent Rights--Retention by the
Recipient--(Large Business) (suitably modified to identify the
parties) in any subcontract hereunder (regardless of tier) with
other than a small business firm or nonprofit organization for the
performance of experimental, developmental, or research work; and
(ii) Include the clause Patent Right--Retention by the
Recipient--(Small Business) (suitably modified to identify the
parties) in any subcontract hereunder (regardless of tier) with a
small business firm or nonprofit organization for the performance of
experimental, developmental, or research work.
(2) In the event of a refusal by a prospective subcontractor to
accept such a clause the Recipient--
(i) Shall promptly submit a written notice to the Grants Officer
setting forth the subcontractor's reasons for such refusal and other
pertinent information that may expedite disposition of the matter;
and
(ii) Shall not proceed with such subcontract without the written
authorization of the Grants Officer.
(3) The Recipient shall promptly notify the Grants Officer in
writing upon the award of any subcontract at any tier containing a
patent rights clause by identifying the subcontractor, the
applicable patent rights clause, the work to be performed under the
subcontract, and the dates of award and estimated completion. Upon
request of the Grants Officer, the Recipient shall furnish a copy of
such subcontract, and, no more frequently than annually, a listing
of the subcontracts that have been awarded.
(4) The subcontractor will retain all rights provided for the
Recipient in the clause of paragraph (g)(1)(i) or (1)(ii) of this
provision, whichever is included in the subcontract, and the
Recipient will not, as part of the consideration for awarding the
subcontract, obtain rights in the subcontractor's subject
inventions.
(5) Notwithstanding paragraph (g)(4) of this provision, and in
recognition of the contractor's substantial contribution of funds,
facilities and/or equipment to the work performed under this
cooperative agreement, the Recipient is authorized, subject to the
rights of NASA set forth elsewhere in this clause, to:
(i) Acquire by negotiation and mutual agreement rights to a
subcontractor's subject inventions as the Recipient may deem
necessary to obtaining and maintaining of such private support; and
(ii) Request, in the event of inability to reach agreement
pursuant to paragraph (g)(5)(i) of this provision, that NASA invoke
exceptional circumstances as necessary pursuant to 37 CFR
401.3(a)(2) if the prospective subcontractor is a small business
firm or organization, or for all other organizations, request that
such rights for the Recipient be included as an additional
reservation in a waiver granted pursuant to 14 CFR part 1245,
subpart 1. Any such requests to NASA should be prepared in
consideration of the following guidance and submitted to the
contract officer.
(A) Exceptional circumstances. A request that NASA make an
``exceptional circumstances'' determination pursuant to 37 CFR
401.3(a)(2) must state the scope of rights sought by the Recipient
pursuant to such determination; identify the proposed subcontractor
and the work to be performed under the subcontract; and state the
need for the determination.
(B) Waiver petition. The subcontractor should be advised that
unless it requests a waiver of title pursuant to the NASA Patent
Waiver Regulations (14 CFR part 1245, subpart 1), NASA will acquire
title to the subject invention (42 U.S.C. 2457). If a waiver is not
requested or granted, the Recipient may request a license from NASA
(see licensing of NASA inventions, 14 CFR part 1245, subpart 2). A
subcontractor requesting a waiver must follow the procedures set
forth in the attached clause REQUESTS FOR WAIVER OF RIGHTS--LARGE
BUSINESS.
(h) Preference for United States manufacture. The Recipient
agrees that any products embodying subject inventions or produced
through the use of subject inventions shall be manufactured
substantially in the United States. However, in individual cases,
the requirement to manufacture substantially in the United States
may be waived by the Associate Administrator for Procurement (Code
HS) with the concurrence of the Associate General Counsel for
Intellectual Property upon a showing by the Recipient that under the
circumstances domestic manufacture is not commercially feasible.
(i) March-in rights. The Recipient agrees that, with respect to
any subject invention in which it has acquired title, NASA has the
right in accordance with the procedures in 37 CFR 401.6 and any
supplemental regulations of the agency to require the Recipient, an
assignee or exclusive licensee of a subject invention to grant a
nonexclusive, partially exclusive, or exclusive license in any field
of use to a responsible applicant or applicants, upon terms that are
reasonable under the circumstances, and if the Subcontractor,
assignee, or exclusive licensee refuses such a request NASA has the
right to grant such a license itself if the Federal agency
determines that--
(1) Such action is necessary because the Recipient or assignee
has not taken, or is not expected to take within a reasonable time,
effective steps to achieve practical application of the subject
invention in such field of use;
(2) Such action is necessary to alleviate health or safety needs
which are not reasonably satisfied by the Recipient, assignee, or
their licensees;
(3) Such action is necessary to meet requirements for public use
specified by Federal regulations and such requirements are not
reasonably satisfied by the Recipient, assignee, or licensees; or
(4) Such action is necessary because the agreement required by
paragraph (i) of this provision has not been obtained or waived or
because a licensee of the exclusive right to use or sell any subject
invention in the United States is in breach of such agreement.
[End of provision]
Sec. 1274.913 Patent Rights--Retention by the Recipient (Small
Business).
Patent Rights--Retention by the Recipient (Small Business) (FEB 1996)
(a) Definitions.
(1) Invention means any invention or discovery which is or may
be patentable or otherwise protectable under title 35 of the U.S.C.
(2) Made when used in relation to any invention means the
conception or first actual reduction to practice such invention.
(3) Nonprofit organization means a university or other
institution of higher education or an organization of the type
described in section 501(c)(3) of the Internal
[[Page 13411]]
Revenue Code of 1954 (26 U.S.C. 501(c)) and exempt from taxation
under section 501(a) of the Internal Revenue Code (26 U.S.C. 501(a))
or any nonprofit scientific or educational organization qualified
under a state nonprofit organization statute.
(4) Practical application means to manufacture, in the case of a
composition of product; to practice, in the case of a process or
method, or to operate, in the case of a machine or system; and, in
each case, under such conditions as to establish that the invention
is being utilized and that its benefits are, to the extent permitted
by law or Government regulations, available to the public on
reasonable terms.
(5) Small business firm means a small business concern as
defined at section 2 of Pub. L. 85-536 (15 U.S.C. 632) and
implementing regulations of the Administrator of the Small Business
Administration. For the purpose of this clause, the size standards
for small business concerns involved in Government procurement and
subcontracting at 13 CFR 121.901 through 121.911 will be used.
(6) Subject invention means any invention of the Subcontractor
conceived or first actually reduced to practice in the performance
of work under this Agreement.
(b) Allocation of principal rights. The Recipient may retain the
entire right, title, and interest throughout the world to each
subject invention subject to the provisions of this clause and 35
U.S.C. 203. With respect to any subject invention in which the
Recipient retains title, the Federal Government shall have a
nonexclusive, nontransferable, irrevocable, paid-up license to
practice or have practiced for or on behalf of the United States the
subject invention throughout the world.
(c) Invention disclosure, election of title, and filing of
patent application by Recipient. (1) The Recipient will disclose
each subject invention to NASA within two months after the inventor
discloses it in writing to Recipient personnel responsible for
patent matters. The disclosure to the agency shall be in the form of
a written report and shall identify the contract under which the
invention was made and the inventor(s). It shall be sufficiently
complete in technical detail to convey a clear understanding to the
extent known at the time of the disclosure, of the nature, purpose,
operation, and the physical, chemical, biological or electrical
characteristics of the invention. The disclosure shall also identify
any publication, on sale or public use of the invention and whether
a manuscript describing the invention has been submitted for
publication and, if so, whether it has been accepted for publication
at the time of disclosure. In addition, after disclosure to the
agency, the Recipient will promptly notify the agency of the
acceptance of any manuscript describing the invention for
publication or of any sale or public use planned by the Recipient.
(2) The Recipient will elect in writing whether or not to retain
title to any such invention by notifying NASA within two years of
disclosure to the Federal agency. However, in any case where
publication, on sale or public use has initiated the one-year
statutory period wherein valid patent protection can still be
obtained in the United States, the period for election of title may
be shortened by the agency to a date that is no more than 60 days
prior to the end of the statutory period.
(3) The Recipient will file its initial patent application on a
subject invention to which it elects to retain title within one year
after election of title or, if earlier, prior to the end of any
statutory period wherein valid patent protection can be obtained in
the United States after a publication, on sale, or public use. The
Recipient will file patent applications in additional countries or
international patent offices within either 10 months of the
corresponding initial patent application of six months from the date
permission is granted by the Commissioner of Patents and Trademarks
to file foreign patent applications where such filing has been
prohibited by a Secrecy Order.
(4) Requests for extension of the time for disclosure election,
and filing under paragraphs (c)(1), (2), and (3) of this provision
may, at the discretion of the agency, be granted.
(d) Conditions when the Government may obtain title. The
Recipient will convey to NASA, upon written request, title to any
subject invention--
(1) If the Recipient fails to disclose or elect title to the
subject invention within the times specified in paragraph (c) of
this provision, or elects not to retain title; provided, that the
agency may only request title within 60 days after learning of the
failure of the Recipient to disclose or elect within the specified
times.
(2) In those countries in which the Recipient fails to file
patent applications within the times specified in paragraph (c) of
this provision; provided, however, that if the Recipient has filed a
patent application in a country after the times specified in
paragraph (c) of this provision, but prior to its receipt of the
written request of the Federal agency, the Recipient shall continue
to retain title in that country.
(3) In any country in which the Recipient decides not to
continue the prosecution of any application for, to pay the
maintenance fees on, or defend in reexamination or opposition
proceeding on, a patent on a subject invention.
(e) Minimum rights to Recipient and protection of the Recipient
right to file. (1) The Recipient will retain a nonexclusive,
royalty-free license throughout the world in each subject invention
to which the Government obtains title, except if the Recipient fails
to disclose the invention within the times specified in paragraph
(c) of this provision. The Recipient's license extends to its
domestic subsidiary and affiliates, if any, within the corporate
structure of which the Recipient is a party and includes the right
to grant sublicenses of the same scope to the extent the Recipient
was legally obligated to do so at the time the agreement was
awarded. The license is transferable only with the approval of NASA,
except when transferred to the successor of that part of the
Recipient's business to which the invention pertains.
(2) The Contractor's domestic license may be revoked or modified
by NASA to the extent necessary to achieve expeditious practical
application of subject invention pursuant to an application for an
exclusive license submitted in accordance with applicable provisions
at 37 CFR part 404 and agency licensing regulations (if any). This
license will not be revoked in that field of use or the geographical
areas in which the Subcontractor has achieved practical application
and continues to make the benefits of the invention reasonable
accessible to the public. The license in any foreign country may be
revoked or modified at the discretion of NASA to the extent the
Subcontractor, its licensees, or the domestic subsidiaries or
affiliates have failed to achieve practical application in that
foreign country.
(3) Before revocation or modification of the license, NASA will
furnish the Recipient a written notice of its intention to revoke or
modify the license, and the Recipient will be allowed 30 days (or
such other time as may be authorized by NASA for good cause shown by
the Recipient) after the notice to show cause why the license should
not be revoked or modified. The Recipient has the right to appeal,
in accordance with applicable regulations in 37 CFR part 404 and 14
CFR part 1245, subpart 2, concerning the licensing of Government-
owned inventions, any decision concerning the revocation or
modification of the license.
(f) Recipient action to protect the Government's interest. (1)
The Recipient agrees to execute or to have executed and promptly
deliver to NASA all instruments necessary to:
(i) Establish or confirm the rights the Government has
throughout the world in those subject inventions to which the
Subcontractor elects to retain title; and
(ii) Convey title to the Federal agency when requested under
paragraph (d) of this provision and to enable the Government to
obtain patent protection throughout the world in that subject
invention.
(2) The Recipient agrees to require, by written agreement, its
employees, other than clerical and nontechnical employees, to
disclose promptly in writing to personnel identified as responsible
for the administration of patent matters and in a format suggested
by the Recipient each subject invention made under contract in order
that the Recipient can comply with the disclosure provisions of
paragraph (c) of this provision, and to execute all papers necessary
to file patent applications on subject inventions and to establish
the Government's rights in the subject inventions. This disclosure
format should require, as a minimum, the information required by
paragraph (c)(1) of this provision. The Recipient shall instruct
such employees, through employee agreements or other suitable
educational programs, on the importance of reporting inventions in
sufficient time to permit the filing of patent applications prior to
U.S. or foreign statutory bars.
(3) The Recipient will notify NASA of any decisions not to
continue the prosecution of a patent application, pay maintenance
fees, or defend in a reexamination or opposition proceeding on a
patent, in any country, not
[[Page 13412]]
less than 30 days before the expiration of the response period
required by the relevant patent office.
(4) The Recipient agrees to include, within the specification of
any United States patent application and any patent issuing thereon
covering a subject invention the following statement, ``This
invention was made with Government support under (identify the
agreement) awarded by NASA. The Government has certain rights in the
invention.''
(5) The Recipient shall provide the Grants Officer the
following:
(i) A listing every 12 months (or such longer period as the
Grants Officer may specify) from the date of the Agreement, of all
subject inventions required to be disclosed during the period.
(ii) A final report prior to closeout of the Agreement listing
all subject inventions or certifying that there were none.
(iii) Upon request, the filing date, serial number, and title, a
copy of the patent application, and patent number and issue date for
any subject invention in any country in which the Recipient has
applied for patents.
(iv) An irrevocable power to inspect and make copies of the
patent application file, by the Government, when a Federal
Government employee is a co-inventor.
(g) Subcontracts. (1) Unless otherwise authorized or directed by
the Grants Officer, the Recipient shall--
(i) Include this clause (Patent Rights--Retention by the
Recipient (Small Business)), suitably modified to identify the
parties, in all subcontracts, regardless of tier, for experimental,
developmental, or research work to be performed by a small business
firm or domestic nonprofit organization.
(ii) Include in all other subcontracts, regardless of tier, for
experimental, developmental, or research work the patent rights
clause (Patent Rights--Retention by the Recipient (Large Business)).
(2) In the event of a refusal by a prospective subcontractor to
accept such a clause the Recipient--
(i) Shall promptly submit a written notice to the Grants Officer
setting forth the subcontractor's reasons for such refusal and other
pertinent information that may expedite disposition of the matter;
and
(ii) Shall not proceed with such subcontract without the written
authorization of the Grants Officer.
(3) The Recipient shall promptly notify the Grants Officer in
writing upon the award of any subcontract at any tier containing a
patent rights clause by identifying the subcontractor, the
applicable patent rights clause, the work to be performed under the
subcontract, and the dates of award and estimated completion. Upon
request of the Grants Officer, the Recipient shall furnish a copy of
such subcontract, and, no more frequently than annually, a listing
of the subcontracts that have been awarded.
(4) The subcontractor will retain all rights provided for the
Recipient in the clause under paragraph (g)(1)(i) or (g)(1)(ii) of
this provision, whichever is included in the subcontract, and the
Recipient will not, as part of the consideration for awarding the
subcontract, obtain rights in the subcontractor's subject
inventions.
(5) Notwithstanding paragraph (g)(4) of this provision, and in
recognition of the contractor's substantial contribution of funds,
facilities and/or equipment to the work performed under this
cooperative agreement, the Recipient is authorized, subject to the
rights of NASA set forth elsewhere in this clause, to:
(i) Acquire by negotiation and mutual agreement rights to a
subcontractor's subject inventions as the Recipient may deem
necessary to obtaining and maintaining of such private support; and
(ii) Request, in the event of inability to reach agreement
pursuant to paragraph (g)(5)(i) of this provision that NASA invoke
exceptional circumstances as necessary pursuant to 37 CFR
401.3(a)(2) if the prospective subcontractor is a small business
firm or organization, or for all other organizations, request that
such rights for the Recipient be included as an additional
reservation in a waiver granted pursuant to 14 CFR part 1245,
subpart 1. Any such requests to NASA should be prepared in
consideration of the following guidance and submitted to the
contract officer.
(A) Exceptional circumstances. A request that NASA make an
``exceptional circumstances'' determination pursuant to 37 CFR
401.3(a)(2) must state the scope of rights sought by the Recipient
pursuant to such determination; identify the proposed subcontractor
and the work to be performed under the subcontract; and state the
need for the determination.
(B) Waiver petition. The subcontractor should be advised that
unless it requests a waiver of title pursuant to the NASA Patent
Waiver Regulations (14 CFR part 1245, subpart 1), NASA will acquire
title to the subject invention (42 U.S.C. 2457). If a waiver is not
requested or granted, the Recipient may request a license from NASA
(see licensing of NASA inventions, 14 CFR part 1245, subpart 2). A
subcontractor requesting a waiver must follow the procedures set
forth in the REQUESTS FOR WAIVER OF RIGHTS--LARGE BUSINESS
provision.
(h) Reporting on utilization of subject inventions. The
Recipient agrees to submit, on request, periodic reports no more
frequently than annually on the utilization of a subject invention
or on efforts at obtaining such utilization that are being made by
the Recipient or its licensees or assignees. Such reports shall
include information regarding the status of development, date of
first commercial sale or use, gross royalties received by the
Recipient, and such other data and information as the agency may
reasonably specify. The Recipient also agrees to provide additional
reports as may be requested by the agency in connection with any
march-in proceeding under-taken by the agency in accordance with
paragraph (i) of this provision. As required by 35 U.S.C. 202(c)(5),
the agency agrees it will not disclose such information to persons
outside the Government without permission of the Recipient.
(i) Preference for United States manufacture. The Recipient
agrees that any products embodying subject inventions or produced
through the use of subject inventions shall be manufactured
substantially in the United States. However, in individual cases,
the requirement to manufacture substantially in the United States
may be waived by the Associate Administrator for Procurement (Code
HS) with the concurrence of the Associate General Counsel for
Intellectual Property upon a showing by the Recipient that under the
circumstances domestic manufacture is not commercially feasible.
(j) March-in rights. The Recipient agrees that, with respect to
any subject invention in which it has acquired title, NASA has the
right in accordance with the procedures in 37 CFR 401.6 and any
supplemental regulations of the agency to require the Recipient, an
assignee or exclusive licensee of a subject invention to grant a
nonexclusive, partially exclusive, or exclusive license in any field
of use to a responsible applicant or applicants, upon terms that are
reasonable under the circumstances, and if the Subcontractor,
assignee, or exclusive licensee refuses such a request NASA has the
right to grant such a license itself if the Federal agency
determines that----
(1) Such action is necessary because the Recipient or assignee
has not taken, or is not expected to take within a reasonable time,
effective steps to achieve practical application of the subject
invention in such field of use;
(2) Such action is necessary to alleviate health or safety needs
which are not reasonably satisfied by the Recipient, assignee, or
their licensees;
(3) Such action is necessary to meet requirements for public use
specified by Federal regulations and such requirements are not
reasonably satisfied by the Recipient, assignee, or licensees; or
(4) Such action is necessary because the agreement required by
paragraph (i) of this provision has not been obtained or waived or
because a licensee of the exclusive right to use or sell any subject
invention in the United States is in breach of such agreement.
(k) Special provisions for contracts with nonprofit
organizations. If the Recipient is a nonprofit organization, it
agrees that--
(1) Rights to a subject invention in the United States may not
be assigned without the approval of NASA, except where such
assignment is made to an organization which has one of its primary
functions the management of inventions; provided, that such assignee
will be subject to the same provisions as the Recipient;
(2) The Recipient will share royalties collected on a subject
invention with the inventor, including Federal employee co-inventors
(when NASA deems it appropriate) when the subject invention is
assigned in accordance with 35 U.S.C. 202(e) and 37 CFR 401.10;
(3) The balance of any royalties or income earned by the
Recipient with respect to subject inventions, after payment of
expenses (including payments to inventors) incidental to the
administration of subject inventions will be utilized for the
support of scientific research or education; and
(4) It will make efforts that are reasonable under the
circumstances to attract licensees
[[Page 13413]]
of subject inventions that are small business firms, and that it
will give a preference to a small business firm when licensing a
subject invention if the Recipient determines that the small
business firm has a plan or proposal for marketing the invention
which, if executed, is equally as likely to bring the invention to
practical application as any plans or proposals from applicants that
are not small business firms; provided that the Recipient is also
satisfied that the small business firm has the capability and
resources to carry out its plan or proposal. The decision whether to
give a preference in any specific case will be at the discretion of
the Recipient. However, the Recipient agrees that the Secretary of
Commerce may review the Contractor's licensing program and decisions
regarding small business applicants, and the Recipient will
negotiate changes to its licensing policies, procedures, or
practices with the Secretary of Commerce when the Secretary's review
discloses that the Recipient could take reasonable steps to more
effectively implement the requirements of this paragraph (k)(4).
(l) A copy of all submissions or requests required by this
clause, plus a copy of any reports, manuscripts, publications, or
similar material bearing on patent matters, shall be sent to the
installation Patent Counsel in addition to any other submission
requirements in the cooperative agreement. If any reports contain
information describing a ``subject invention'' for which the
Recipient has elected or may elect title, NASA will use reasonable
efforts to delay public release by NASA or publication by NASA in a
NASA technical series, in order for a patent application to be
filed, provided that the Recipient identify the information and the
``subject invention'' to which it relates at the time of submittal.
If required by the Grants Officer, the Recipient shall provide the
filing date, serial number and title, a copy of the patent
application, and a patent number and issue date for any ``subject
invention'' in any country in which the Recipient has applied for
patents.
[End of provision]
Sec. 1274.914 Requests for Waiver of Rights--Large Business.
Requests For Waiver of Rights--Large Business (FEB 1996)
(a) In accordance with the NASA Patent Waiver Regulations, 14
CFR part 1245, subpart 1, waiver of rights to any or all inventions
made or that may be made under a NASA contract or subcontract with
other than a small business firm or a domestic nonprofit
organization may be requested at different time periods. Advance
waiver of rights to any or all inventions that may be made under a
contract or subcontract may be requested prior to the execution of
the contract or subcontract, or within 30 days after execution by
the selected Recipient. In addition, waiver of rights to an
identified invention made and reported under a contract or
subcontract may be requested, even though a request for an advance
waiver was not made or, if made, was not granted.
(b) Each request for waiver of rights shall be by petition to
the Administrator and shall include an identification of the
petitioner; place of business and address; if petitioner is
represented by counsel, the name, address, and telephone number of
the counsel; the signature of the petitioner or authorized
representative; and the date of signature. No specific forms need be
used, but the request should contain a positive statement that
waiver of rights is being requested under the NASA Patent Waiver
Regulations; a clear indication of whether the request is for an
advance waiver or for a waiver of rights for an individual
identified invention; whether foreign rights are also requested and,
if so, the countries, and a citation of the specific Section or
Sections of the regulations under which such rights are requested;
and the name, address, and telephone number of the party with whom
to communicate when the request is acted upon. Requests for advance
waiver of rights should, preferably, be included with the proposal,
but in any event in advance of negotiations.
(c) Petitions for advance waiver, prior to contract execution,
must be submitted to the Grants Officer. All other petitions will be
submitted to the Patent Representative designated in the contract.
(d) Petitions submitted with proposals selected for negotiation
of a contract will be forwarded by the Grants Officer to the
installation Patent Counsel for processing and then to the
Inventions and Contributions Board. The Board will consider these
petitions and where the Board makes the findings to support the
waiver, the Board will recommend to the Administrator that waiver be
granted, and will notify the petitioner and the Grants Officer of
the Administrator's determination. The Grants Officer will be
informed by the Board whenever there is insufficient time or
information or other reasons to permit a decision to be made without
unduly delaying the execution of the contract. In the latter event,
the petitioner will be so notified by the Grants Officer. All other
petitions will be processed by installation Patent Counsel and
forwarded to the Board. The Board shall notify the petitioner of its
action and if waiver is granted, the conditions, reservations, and
obligations thereof will be included in the Instrument of Waiver.
Whenever the Board notifies a petitioner of a recommendation adverse
to, or different from, the waiver requested, the petitioner may
request reconsideration under procedures set forth in 14 CFR
1245.112(b).
[End of provision]
Sec. 1274.915 Restrictions on Sale or Transfer of Technology to
Foreign Firms or Institutions.
Restrictions on Sale or Transfer of Technology to Foreign Firms or
Institutions (FEB 1996)
(a) The parties agree that access to technology developments
under this Agreement by foreign firms or institutions must be
carefully controlled. For purposes of this clause, a transfer
includes a sale of the company, or sales or licensing of the
technology. Transfers do not include:
(1) Sales of products or components;
(2) Licenses of software or documentation related to sales of
products or components; or
(3) Transfers to foreign subsidiaries of the Recipient for
purposes related to this Agreement.
(b) The Recipient shall provide timely notice to the Grants
Officer in writing of any proposed transfer of technology developed
under this Agreement. If NASA determines that the transfer may have
adverse consequences to the national security interests of the
United States, or to the establishment of a robust United States
industry, NASA and the Recipient shall jointly endeavor to find
alternatives to the proposed transfer which obviate or mitigate
potential adverse consequences of the transfer.
[End of provision]
Sec. 1274.916 Liability and Risk of Loss.
Liability and Risk of Loss (FEB 1996)
(a) With regard to activities undertaken pursuant to this
agreement, neither party shall make any claim against the other,
employees of the other, the other's related entities (e.g.,
contractors, subcontractors, etc.), or employees of the other's
related entities for any injury to or death of its own employees or
employees of its related entities, or for damage to or loss of its
own property or that of its related entities, whether such injury,
death, damage or loss arises through negligence or otherwise, except
in the case of willful misconduct.
(b) To the extent that a risk of damage or loss is not dealt
with expressly in this agreement, each party's liability to the
other party arising out of this Agreement, whether or not arising as
a result of an alleged breach of this Agreement, shall be limited to
direct damages only, and shall not include any loss of revenue or
profits or other indirect or consequential damages.
[End of provision]
Sec. 1274.917 Additional Funds.
Additional Funds (FEB 1996)
Pursuant to this agreement, NASA is providing a fixed amount of
funding for activities to be undertaken under the terms of this
cooperative agreement. NASA is under no obligation to provide
additional funds. Under no circumstances shall the Recipient
undertake any action which could be construed to imply an increased
commitment on the part of NASA under this cooperative agreement.
[End of provision]
Sec. 1274.918 Incremental Funding.
Incremental Funding (FEB 1996)
(a) Of the award amount indicated on the cover page of this
agreement, only the obligated amount indicated on the cover page of
this agreement is available for payment. NASA anticipates making
additional allotments of funds as required,
(b) These funds will be obligated as appropriated funds become
available without any action required of the Recipient. NASA is not
obligated to make payments in excess of the total funds obligated.
[[Page 13414]]
[End of provision]
Sec. 1274.919 Cost Principles and Accounting Standards.
Cost Principles and Accounting Standards (FEB 1996)
The expenditure of Government funds by the Recipient and the
allowability of costs recognized as a resource contribution by the
Recipient (See clause entitled ``Resource Sharing Requirements'')
shall be governed by the FAR cost principles, 48 CFR part 31. (If
the Recipient is a consortium which includes non-commercial firm
members, cost allowability for those members will be determined as
follows: Allowability of costs incurred by State, local or
federally-recognized Indian tribal governments is determined in
accordance with the provisions of OMB Circular A-87, ``Cost
Principles for State and Local Governments.'' The allowability of
costs incurred by non-profit organizations is determined in
accordance with the provisions of OMB Circular A-122, ``Cost
Principles for Non-Profit Organizations.'' The allowability of costs
incurred by institutions of higher education is determined in
accordance with the provisions of OMB Circular A-21, ``Cost
Principles for Educational Institutions.'' The allowability of costs
incurred by hospitals is determined in accordance with the
provisions of Appendix E of 45 CFR part 74, ``Principles for
Determining Costs Applicable to Research and Development Under
Grants and Contracts with Hospitals.'') Recipient's method for
accounting for the expenditure of funds must be consistent with
Generally Accepted Accounting Principles.
[End of provision]
Sec. 1274.920 Responsibilities of the NASA Technical Officer.
Responsibilities of the NASA Technical Officer (FEB 1996)
(a) The NASA Grant Administrator and Technical Officer for this
cooperative agreement are identified on the cooperative agreement
cover sheet.
(b) The Grant Specialist shall serve as NASA's authorized
representative for the administrative elements of all work to be
performed under the agreement.
(c) The Technical Officer shall have the authority to issue
written Technical Advice which suggests redirecting the project work
(e.g., by changing the emphasis among different tasks), or pursuing
specific lines of inquiry likely to assist in accomplishing the
effort. The Technical Officer shall have the authority to approve or
disapprove those technical reports, plans, and other technical
information the Recipient is required to submit to NASA for
approval. The Technical Officer is not authorized to issue and the
Recipient shall not follow any Technical Advice which constitutes
work which is not contemplated under this agreement; which in any
manner causes an increase or decrease in the resource sharing or in
the time required for performance of the project; which has the
effect of changing any of the terms or conditions of the cooperative
agreement; or which interferes with the Recipient's right to perform
the project in accordance with the terms and conditions of this
cooperative agreement.
[End of provision]
Sec. 1274.921 Publications and Reports: Non-Proprietary Research
Results.
Publications and Reports: Non-Proprietary Research Results (FEB 1996)
(a) NASA encourages the widest practicable dissemination of
research results at all times during the course of the investigation
consistent with the other terms of this agreement.
(b) All information disseminated as a result of the cooperative
agreement, shall contain a statement which acknowledges NASA's
support and identifies the cooperative agreement by number.
(c) Prior approval by the NASA Technical Officer is required
only where the Recipient requests that the results of the research
be published in a NASA scientific or technical publication. Two
copies of each draft publication shall accompany the approval
request.
(d) Reports shall contain full bibliographic references,
abstracts of publications and lists of all other media in which the
research was discussed. The Recipient shall submit the following
technical reports:
(1) A performance report for every year of the cooperative
agreement (except the final year). Each report is due 60 days before
the anniversary date of the cooperative agreement and shall describe
research accomplished during the report period.
(2) A summary of
FR Doc. 96-6535 Cooperative Agreements With Commercial Firms
research, which is due by 90 days after the
expiration date of the cooperative agreement, regardless of whether
or not support is continued under another cooperative agreement.
This report is intended to summarize the entire research
accomplished during the duration of the cooperative agreement.
(e) Performance reports and summaries of research shall display
the following on the first page:
(1) Title of the cooperative agreement.
(2) Type of report.
(3) Period covered by the report.
(4) Name and address of the Recipient's organization.
(5) Cooperative agreement number.
(f) An original and two copies, one of which shall be of
suitable quality to permit micro-reproduction, shall be sent as
follows:
(1) Original--Grant Officer.
(2) Copy--Technical Officer.
(3) Micro-reproducible copy--NASA Center for Aerospace
Information (CASI), Attn: Accessioning Department, 800 Elkridge
Landing Road, Linthicum Heights, Maryland 21090-2934.
[End of provision]
Sec. 1274.922 Suspension or Termination.
Suspension or Termination (FEB 1996)
(a) This cooperative agreement may be suspended or terminated in
whole or in part by the Recipient or by NASA after consultation with
the other party. NASA may terminate the agreement, for example, if
the Recipient is not making anticipated technical progress, if the
Recipient materially fails to comply with the terms of the
agreement, if the Recipient materially changes the objective of the
agreement, or if appropriated funds are not available to support the
program.
(b) Upon fifteen (15) days written notice to the other party,
either party may temporarily suspend the cooperative agreement,
pending corrective action or a decision to terminate the cooperative
agreement. The notice should express the reasons why the agreement
is being suspended.
(c) In the event of termination by either party, the Recipient
shall not be entitled to additional funds or payments except as may
be required by the Recipient to meet NASA's share of commitments
which had in the judgment of NASA become firm prior to the effective
date of termination and are otherwise appropriate. In no event,
shall these additional funds or payments exceed the amount of the
next payable milestone billing amount.
[End of provision]
Sec. 1274.923 Equipment and Other Property. Equipment and Other
Property (FEB 1996)
(a) NASA cooperative agreements permit acquisition of technical
property required for the conduct of research. Acquisition of
property costing in excess of $5,000 and not included in the
approved proposal budget requires the prior approval of the Grant
Officer unless the item is merely a different model of an item shown
in the approved proposal budget.
(b) Recipients may not purchase, as a direct cost to the
cooperative agreement, items of non-technical property, examples of
which include but are not limited to office equipment and
furnishings, air conditioning equipment, reproduction and printing
equipment, motor vehicles, and automatic data processing equipment.
If the Recipient requests an exception, the Recipient shall submit a
written request for Grant Officer approval, prior to purchase by the
Recipient, stating why the Recipient cannot charge the property to
indirect costs.
(c) Under no circumstances shall cooperative agreement funds be
used to acquire land or any interest therein, to acquire or
construct facilities (as defined in 48 CFR 45.301 (FAR)), or to
procure passenger carrying vehicles.
(d) The government shall have title to equipment and other
personal property acquired with government funds. Such property
shall be disposed of pursuant to 48 CFR 45.603 (FAR). The Recipient
shall have title to equipment and other personal property acquired
with Recipient funds. Such property shall remain with the Recipient
at the conclusion of the cooperative agreement.
(e) Title to Government furnished equipment (including
equipment, title to which has been transferred to the Government
pursuant to 14 CFR 1260.408(d) prior to completion of the work) will
remain with the Government.
(f) The Recipient shall establish and maintain property
management standards for nonexpendable personal property and
otherwise manage such property as set forth in 14 CFR 1260.507.
[[Page 13415]]
(g) Annually by October 31, the Recipient shall submit 2 copies
of an inventory report which lists all Government furnished
equipment and equipment acquired with Government funds in their
custody as of September 30. The Recipient shall submit 2 copies of a
final inventory report by 60 days after the expiration date of the
cooperative agreement. The final inventory report shall contain a
list of all Recipient acquired equipment and a list of Government
furnished equipment. Annual and final inventory reports shall
reflect the elements required in 14 CFR 1260.507(a)(1) (i), (ii),
(iii), (v) through (viii) and beginning and ending dollar value
totals for the reporting period and be submitted to the grant
officer. When Government furnished equipment is no longer needed,
the Recipient shall notify the Grants Officer, who will provide
disposition instructions.
[End of provision]
Sec. 1274.924 Civil Rights.
Civil Rights (FEB 1996)
Work on NASA cooperative agreements is subject to the provisions
of Title VI of the Civil Rights Act of 1964 (Public Law 88-352; 42
U.S.C. 2000d-l), Title IX of the Education Amendments of 1972 (20
U.S.C. 1680 et seq.), section 504 of the Rehabilitation Act of 1973,
as amended (29 U.S.C. 794), the Age Discrimination Act of 1975 (42
U.S.C. 6101 et seq.), and the NASA implementing regulations (14 CFR
parts 1250, 1251, and 1252).
[End of provision]
Sec. 1274.925 Subcontracts.
Subcontracts (FEB 1996)
(a) Recipients are not authorized to issue grants or cooperative
agreements.
(b) NASA Grant Officer consent is required for subcontracts over
$100,000, if not accepted by NASA in the original proposal. The
Recipient shall provide the following information to the Grant
Officer:
(1) A copy of the proposed subcontract.
(2) Basis for subcontractor selection.
(3) Justification for lack of competition when competitive bids
or offers are not obtained.
(4) Basis for award cost or award price.
(c) The Recipient shall utilize small business concerns, small
disadvantaged business concerns, Historically Black Colleges and
Universities, minority educational institutions, and women-owned
small business concerns as subcontractors to the maximum extent
practicable.
[End of provision]
Sec. 1274.926 Clean Air-Water Pollution Control Acts.
Clean Air-Water Pollution Control Acts (FEB 1996)
If this cooperative agreement or supplement thereto is in excess
of $100,000, the Recipient agrees to notify the Grant Officer
promptly of the receipt, whether prior or subsequent to the
Recipient's acceptance of this cooperative agreement, of any
communication from the Director, Office of Federal Activities,
Environmental Protection Agency (EPA), indicating that a facility to
be utilized under or in the performance of this cooperative
agreement or any subcontract thereunder is under consideration to be
listed on the EPA ``List of Violating Facilities'' published
pursuant to 40 CFR 15.20. By acceptance of a cooperative agreement
in excess of $100,000, the Recipient:
(a) Stipulates that any facility to be utilized thereunder is
not listed on the EPA ``List of Violating Facilities'' as of the
date of acceptance;
(b) Agrees to comply with all requirements of section 114 of the
Clean Air Act, as amended (42 U.S.C. 7414) and section 308 of the
Federal Water Pollution Control Act, as amended (33 U.S.C. 1318)
relating to inspection, monitoring, entry, reports and information, and
all other requirements specified in the aforementioned sections, as
well as all regulations and guidelines issued thereunder after award of
and applicable to the cooperative agreement; and
(c) Agrees to include the criteria and requirements of this
provision in every subcontract hereunder in excess of $100,000, and to
take such action as the Grant Officer may direct to enforce such
criteria and requirements.
[End of provision]
Sec. 1274.927 Debarment and Suspension and Drug-Free Workplace.
Debarment and Suspension and Drug-Free Workplace (FEB 1996)
NASA cooperative agreements are subject to the provisions of 14
CFR part 1265, Government-wide Debarment and Suspension
(Nonprocurement) and Government-wide requirements for Drug-Free
Workplace, unless excepted by 14 CFR 1265.110 or 1265.610.
[End of provision]
Sec. 1274.928 Foreign National Employee Investigative Requirements.
Foreign National Employee Investigative Requirements (FEB 1996)
(a) The Recipient shall submit a properly executed Name Check
Request (NASA Form 531) and a completed applicant fingerprint card
(Federal Bureau of Investigation Card FD-258) for each foreign
national employee requiring access to a NASA Installation. These
documents shall be submitted to the Installation's Security Office
at least 75 days prior to the estimated duty date. The NASA
Installation Security Office will request a National Agency Check
(NAC) for foreign national employees requiring access to NASA
facilities. The NASA Form 531 and fingerprint card may be obtained
from the NASA Installation Security Office.
(b) The Installation Security Office will request from NASA
Headquarters, International Relations Division (Code IR), approval
for each foreign national's access to the Installation prior to
providing access to the Installation. If the access approval is
obtained from NASA Headquarters prior to completion of the NAC and
performance of the cooperative agreement requires a foreign national
to be given access immediately, the Technical Officer may submit an
escort request to the Installation's Chief of Security.
[End of provision]
Sec. 1274.929 Restrictions on Lobbying.
Restrictions on Lobbying (FEB 1996)
This award is subject to the provisions of 14 CFR part 1271
``New Restrictions on Lobbying.''
[End of provision]
Sec. 1274.930 Travel and Transportation.
Travel and Transportation (FEB 1996)
(a) For travel funded by the government under this agreement,
section 5 of the International Air Transportation Fair Competitive
Practices Act of 1974 (49 U.S.C. 40118) (Fly America Act) requires
the Recipient to use U.S.-flag air carriers for international air
transportation of personnel and property to the extent that service
by those carriers is available.
(b) Department of Transportation regulations, 49 CFR part 173,
govern Recipient shipment of hazardous materials and other items.
[End of provision]
Sec. 1274.931 Electronic Funds Transfer Payment Methods.
Electronic Funds Transfer Payment Methods (FEB 1996)
Payments under this cooperative agreement will be made by the
Government either by check or electronic funds transfer (through the
Treasury Fedline Payment System (FEDLINE) or the Automated Clearing
House (ACH)), at the option of the Government. After award, but no
later than 14 days before an invoice is submitted, the Recipient
shall designate a financial institution for receipt of electronic
funds transfer payments, and shall submit this designation to the
Grant Officer or other Government official, as directed.
(a) For payment through FEDLINE, the Recipient shall provide the
following information:
(1) Name, address, and telegraphic abbreviation of the financial
institution receiving payment.
(2) The American Bankers Association 9-digit identifying number
for wire transfers of the financing institution receiving payment if
the institution has access to the Federal Reserve Communication
System.
(3) Payee's account number at the financial institution where
funds are to be transferred.
(4) If the financial institution does not have access to the
Federal Reserve Communications System, name, address, and
telegraphic abbreviation of the correspondent financial institution
through which the financial institution receiving payment obtains
wire transfer activity. Provide the telegraphic abbreviation and
American Bankers Association identifying number for the
correspondent institution.
[[Page 13416]]
(b) For payment through ACH, the Recipient shall provide the
following information:
(1) Routing transit number of the financial institution
receiving payment (same as American Bankers Association identifying
number used for FEDLINE).
(2) Number of account to which funds are to be deposited.
(3) Type of depositor account (``C'' for checking, ``S'' for
savings).
(4) If the Recipient is a new enrollee to the ACH system, a
``Payment Information Form,'' SF 3881, must be completed before
payment can be processed.
(c) In the event the Recipient, during the performance of this
cooperative agreement, elects to designate a different financial
institution for the receipt of any payment made using electronic
funds transfer procedures, notification of such change and the
required information specified above must be received by the
appropriate Government official 30 days prior to the date such
change is to become effective.
(d) The documents furnishing the information required in this
clause must be dated and contain the signature, title, and telephone
number of the Recipient official authorized to provide it, as well
as the Recipient's name and contract number.
(e) Failure to properly designate a financial institution or to
provide appropriate payee bank account information may delay
payments of amounts otherwise properly due.
[End of Provision]
Sec. 1274.932 Retention and Examination of Records.
Retention and Examination of Records (FEB 1996)
Financial records, supporting documents, statistical records,
and all other records (or microfilm copies) pertinent to this
cooperative agreement shall be retained for a period of 3 years,
except that records for nonexpendable property acquired with
cooperative agreement funds shall be retained for 3 years after its
final disposition and, if any litigation, claim, or audit is started
before the expiration of the 3-year period, the records shall be
retained until all litigation, claims, or audit findings involving
the records have been resolved. The retention period starts from the
date of the submission of the final invoice. The Administrator of
NASA and the Comptroller General of the United States, or any of
their duly authorized representatives, shall have access to any
pertinent books, documents, papers, and records of the Recipient and
of subcontractors to make audits, examinations, excerpts, and
transcripts. All requirements of this provision shall apply to any
subcontractor performing substantive work under this cooperative
agreement.
[End of provisions]
Appendix A to Part 1274--Contract Provisions
All contracts awarded by a Recipient, including small purchases,
shall contain the following provisions if applicable:
1. Equal Employment Opportunity--All contracts shall contain a
provision requiring compliance with Executive Order 11246, 30 FR
12319, 12935, 3 CFR, 1964-1965 Comp., p. 339, Executive Order 11375,
32 FR 14199, 3 CFR, 1966-1970 Comp., p. 684, ``Amending Executive
Order 11246 Relating to Equal Employment Opportunity,'' and as
supplemented by regulations at 41 CFR part 60, ``Office of Federal
Contract Compliance Programs, Equal Employment Opportunity,
Department of Labor.''
2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C.
276c)--All contracts in excess of $50,000 for construction or repair
awarded by Recipients and subRecipients shall include a provision
for compliance with the Copeland ``Anti-Kickback'' Act (18 U.S.C.
874), as supplemented by Department of Labor regulations (29 CFR
part 3, ``Contractors and Subcontractors on Public Building or
Public Work Financed in Whole or in Part by Loans or Grants from the
United States''). The Act provides that each Recipient or
subRecipient shall be prohibited from inducing, by any means, any
person employed in the construction, completion, or repair of public
work, to give up any part of the compensation to which he is
otherwise entitled. The Recipient shall report all suspected or
reported violations to NASA.
3. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by Recipients in
excess of $2,000 for construction contracts and in excess of $50,000
for other contracts, other than contracts for commercial items, that
involve the employment of mechanics or laborers shall include a
provision for compliance with sections 102 and 107 of the Contract
Work Hours and Safety Standards Act (40 U.S.C. 327-333), as
supplemented by Department of Labor regulations (29 CFR part 5).
Under section 102 of the Act, each Recipient shall be required to
compute the wages of every mechanic and laborer on the basis of a
standard work week of 40 hours. Work in excess of the standard work
week is permissible provided that the worker is compensated at a
rate of not less than 1\1/2\ times the basic rate of pay for all
hours worked in excess of 40 hours in the work week. Section 107 of
the Act is applicable to construction work and provides that no
laborer or mechanic shall be required to work in surroundings or
under working conditions which are unsanitary, hazardous or
dangerous. These requirements do not apply to the purchases of
supplies or materials or articles ordinarily available on the open
market, or contracts for transportation or transmission of
intelligence.
4. Rights to Inventions Made Under a Contract or Agreement--
Contracts or agreements for the performance of experimental,
developmental, or research work shall provide for the rights of the
Federal Government and the Recipient in any resulting invention in
accordance with 37 CFR part 401, ``Rights to Inventions Made by
Nonprofit Organizations and Small Business Firms Under Government
Grants, Contracts and Cooperative Agreements,'' and any implementing
regulations issued by the awarding agency.
5. Clean Air Act, as amended (42 U.S.C. 7401 et seq.) and the
Federal Water Pollution Control Act as amended (33 U.S.C. 1251 et
seq.) Contracts, other than contracts for commercial items, of
amounts in excess of $100,000 shall contain a provision that
requires the Recipient to agree to comply with all applicable
standards, orders or regulations issued pursuant to the Clean Air
Act (42 U.S.C. 7401 et seq.) and the Federal Water Pollution Control
Act as amended (33 U.S.C. 1251 et seq.). Violations shall be
reported to NASA and the Regional Office of the Environmental
Protection Agency (EPA).
6. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors
who apply or bid for an award of $100,000 or more shall file the
required certification. Each tier certifies to the tier above that
it will not and has not used Federal appropriated funds to pay any
person or organization for influencing or attempting to influence an
officer or employee of any agency, a member of Congress, officer or
employee of Congress, or an employee of a member of Congress in
connection with obtaining any Federal contract, grant or any other
award covered by 31 U.S.C. 1352. Each tier shall also disclose any
lobbying with non-Federal funds that takes place in connection with
obtaining any Federal award. Such disclosures are forwarded from
tier to tier up to the Recipient.
7. Debarment and Suspension (Executive Orders 12549 and 12689)--
No contract shall be made to parties listed on the General Services
Administration's List of Parties Excluded from Federal Procurement
or Nonprocurement Programs in accordance with Executive Orders 12549
and 12689, ``Debarment and Suspension.'' This list contains the
names of parties debarred, suspended, or otherwise excluded by
agencies, and contractors declared ineligible under statutory or
regulatory authority other than Executive Order 12549. Contractors
with awards that exceed the small purchase threshold shall provide
the required certification regarding its exclusion status and that
of its principal employees.
Appendix B to Part 1274--Reports
1. Individual procurement action report (NASA Form 507). The
grant officer is responsible for submitting NASA Form 507 for all
cooperative agreement actions.
2. Inventory listings of equipment. As provided in paragraph (g)
of the provision in Sec. 1274.923, an annual inventory listing of
Government furnished equipment will be submitted by October 31 of
each year. Upon receipt of each annual inventory listing, the
administrative grant officer will provide 1 copy to the NASA
installation financial management officer and 1 copy to the NASA
installation industrial property officer. A final inventory report
of Government furnished equipment and grantee acquired equipment is
due 60 days after the end of the cooperative agreement, in
accordance with the provision in 31274.923. Upon receipt of the
final inventory report, the administrative grant officer will
provide 1 copy to the technical officer and 1 copy to the NASA
Installation industrial property officer.
3. Disclosure of lobbying activities (SF LLL). (a) Grant
officers shall provide one copy
[[Page 13417]]
of each SF LLL furnished under 14 CFR 1271.110 to the Procurement
Officer for transmittal to the Director, Analysis Division (Code
HC).
(b) Suspected violations of the statutory prohibitions
implemented by 14 CFR part 1271 shall be reported to the Director,
Contract Management Division (Code HK).
Appendix C to Part 1274--Listing of Exhibits
Exhibit A--Format for cooperative agreement
BILLING CODE 7510-01-P
[[Page 13418]]
[GRAPHIC] [TIFF OMITTED] TR27MR96.000
[FR Doc. 96-6535 Filed 3-26-96; 8:45 am]
BILLING CODE 7510-01-C
Complete official Federal Register PDF
FR Doc. 96-5990 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Consolidation of Regulations for Project-Based Section 8 Programs
[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Rules and Regulations]
[Pages 13586-13594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5990]
[[Page 13585]]
_______________________________________________________________________
Part III
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 880, et al.
Consolidation of Regulations for Project-Based Section 8 Programs;
Final Rule
Federal Register / Vol. 61, No. 60 / Wednesday, March 27, 1996 /
Rules and Regulations
[[Page 13586]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Consolidation of Regulations for Project-Based Section 8
Programs
24 CFR Parts 880, 881, 883, and 884
[Docket No. FR-3984-F-01]
RIN 2502-AG65
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner (HUD).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule removes obsolete provisions concerning development
of housing under regulations for the Section 8 project-based assistance
programs for New Construction, Substantial Rehabilitation, and State
Housing Agencies, and Rural Rental Housing now found in 24 CFR parts
880, 881, 883, and 884. It also consolidates into one part, the certain
nearly identical provisions concerning the housing assistance payments
contract and management for the New Construction, Substantial
Rehabilitation, and State Housing Agencies programs that are now found
in three parts.
EFFECTIVE DATE: April 26, 1996.
FOR FURTHER INFORMATION CONTACT: For development issues: Jane Luton,
Director, New Products Division (telephone: (202) 708-2556, ext. 2537)
or for management issues: Barbara D. Hunter, Director, Program
Management Division (telephone: (202) 708-4162, ext. 2632), Office of
Multifamily Housing, Department of Housing and Urban Development, 451
Seventh Street, SW, Washington, D.C. 20410. The above telephone numbers
may be accessed through TDD by calling the Federal Relay Service at
(202) 708-9300 or 1-800-877-TDDY (1-800-877-8389). (Other than the ``1-
800'' number, these telephone numbers are not toll-free.)
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act Statement
This rule does not alter existing information collection
requirements. An agency may not conduct or sponsor, and person is not
required to respond to a collection of information unless the
collection displays a valid control number.
Background
On March 4, 1995, President Clinton issued a memorandum to all
Federal departments and agencies regarding regulatory reinvention. In
response to this memorandum, the Department of Housing and Urban
Development conducted a page-by-page review of its regulations to
determine which can be eliminated, consolidated, or otherwise improved.
The authority for funding activity under the Section 8 project-
based assistance programs affected by this rule was repealed in 1983,
and there have been no projects in the development stage for a
substantial period. This rule, accordingly, removes from 24 CFR parts
880, 881, 883, and 884 obsolete provisions relating to the development
of projects under these parts. The removed provisions include but are
not limited to: part 880, subparts C and D; part 881, subparts C, D,
and G; and part 883, subparts B, D, and E. Section 883.106, added by
this rule, replaces current Sec. 883.201, which was in subpart B. In
part 884, individual sections have been removed.
This rule also consolidates into part 880, subparts E and F, the
closely-related housing assistance payments (HAP) contract and the
management regulations currently contained in parts 880, 881, and 883.
Because of the similarity of the two sets of HAP contract regulations,
Secs. 881.505 through 881.508 have been removed and replaced by a
cross-reference to the same sections in part 880, subpart E. (See
Sec. 881.503) In part 883, which is not as closely related to part 880,
Secs. 883.605 and 883.608 have been replaced by cross-reference to the
comparable Secs. 880.504 and 880.508 provisions in part 880, subpart E.
In both parts 881 and 883, the respective Management subparts have
been removed and replaced by cross-references to part 880, subpart F.
Part 880, subpart F has been revised to include certain part 883-
specific requirements, where the current part 883 requirements differ
from those applicable to part 880 and part 881 projects.
The New Construction Set-Aside for Section 515 Rural Rental Housing
Projects program, contained in part 884, is administered by the Rural
Housing and Community Development Service, successor agency to the
Farmers Home Administration, under a memorandum of understanding. The
part 884 provisions have not been consolidated into part 880.
Justification for Final Rulemaking
HUD generally publishes a rule for public comment before issuing a
rule for effect, in accordance with its own regulations on rulemaking
in 24 CFR part 10. However, part 10 provides for exceptions to the
general rule if the agency finds good cause to omit advance notice and
public participation. The good cause requirement is satisfied when
prior public procedure is ``impracticable, unnecessary, or contrary to
the public interest'' (24 CFR 10.1). HUD finds that good cause exists
to publish this rule for effect without first soliciting public
comment. This rule merely consolidates existing CFR parts and removes
obsolete regulatory provisions and does not establish or affect
substantive policy. Therefore, prior public comment is unnecessary.
Findings and Certifications
Impact on the Environment
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR Part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969. The Finding of No Significant Impact is available for
public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the
Office of the Rules Docket Clerk at the above address.
Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule do not have significant impact on States or
their political subdivisions since the rule merely consolidates
existing provisions into one part.
Impact on the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule does not have
potential for significant impact on family formation, maintenance, and
general well-being, since it only consolidates and streamlines existing
provisions. Therefore, the rule is not subject to review under the
Order.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule will not have a significant
impact on a substantial number of small entities, because it makes no
substantive changes in the regulations affected.
Catalog
The Catalog of Federal Domestic Assistance number for the programs
affected by this rule is 14.182.
[[Page 13587]]
List of Subjects
24 CFR Part 880
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 881
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 883
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 884
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements, Rural areas.
Accordingly, under the authority of 42 U.S.C. 3535(d), for the
reasons stated in the preamble, parts 880, 881, 883, and 884 of title
24 of the Code of Federal Regulations are amended as follows:
PART 880--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW
CONSTRUCTION
1. The authority citation for part 880 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and
13611-13619.
Subpart A--Summary and Applicability
2. Section 880.101 is revised to read as follows:
Sec. 880.101 General.
(a) The purpose of the Section 8 program is to provide low-income
families with decent, safe and sanitary rental housing through the use
of a system of housing assistance payments. This part contains the
policies and procedures applicable to the Section 8 new construction
program. The assistance may be provided to public housing agency owners
or to private owners either directly from HUD or through public housing
agencies.
(b) This part does not apply to projects developed under other
Section 8 program regulations, including 24 CFR parts 881, 882, 883,
884, and 885, except to the extent specifically stated in those parts.
Portions of subparts E and F of this part 880 have been cross-
referenced in 24 CFR parts 881 and 883.
Secs. 880.102 and 880.103 [Removed]
3. Sections 880.102 and 880.103 are removed.
4. Section 880.104 is revised to read as follows:
Sec. 880.104 Applicability of part 880 in effect as of November 5,
1979.
(a) Part 880, in effect as of November 5, 1979, applies to all
proposals for which a notification of selection was not issued before
the November 5, 1979 effective date of part 880. (See 24 CFR part 880,
revised as of April 1, 1980.) Where a notification of selection was
issued for a proposal before the November 5, 1979 effective date, part
880, in effect as of November 5, 1979, applies if the owner notified
HUD within 60 calendar days that the owner wished the provisions of
part 880, effective November 5, 1979, to apply and promptly brought the
proposal into conformance.
(b) Subparts E (Housing Assistance Payments Contract) and F
(Management) of this part apply to all projects for which an Agreement
was not executed before the November 5, 1979, effective date of part
880. Where an Agreement was so executed:
(1) The owner and HUD may agree to make the revised subpart E of
this part applicable and to execute appropriate amendments to the
Agreement and/or Contract.
(2) The owner and HUD may agree to make the revised subpart F of
this part applicable (with or without the limitation on distributions)
and to execute appropriate amendments to the Agreement and/or Contract.
(c) Section 880.607, Termination of Tenancy and Modification of
Leases, applies to new families who begin occupancy or execute a lease
on or after 30 days after the November 5, 1979, effective date of part
880. This section also applies to families not covered by the preceding
sentence, including existing families under lease, with respect to all
leases in which a renewal becomes effective on or after the 60th day
following the November 5, 1979 effective date of part 880. A lease is
considered to be renewed where both the landlord and the family fail to
terminate a tenancy under a lease permitting either party to terminate.
(d) Notwithstanding the provisions of paragraph (b) of this
section, the provisions of 24 CFR part 5 (concerning preferences for
selection of applicants) apply to all projects, regardless of when an
Agreement was executed.
Subpart B--Definitions and Other Requirements
5. The heading for subpart B of part 880 is revised as set forth
above.
6. Section 880.201 is amended by removing the definitions of
``Allocation area'', ``New Communities'', and ``Preliminary proposal''
and by adding in alphabetical order, the definition of ``Agency'', to
read as follows:
Sec. 880.201 Definitions.
* * * * *
Agency. As defined in 24 CFR part 883.
* * * * *
Secs. 880.202, 880.203, 880.204, 880.206, 880.209, and
880.210 [Removed]
7. Sections 880.202, 880.203, 880.204, 880.206, 880.209, and
880.210 are removed.
Subparts C and D--[Removed and Reserved]
8. Subpart C (Secs. 880.301 through 880.311) and subpart D
(Secs. 880.401 through 880.405) of part 880 are removed and reserved.
Subpart E--Housing Assistance Payments Contract
9. Section 880.501 is amended by revising paragraph (a), and by
removing and reserving paragraph (b), to read as follows:
Sec. 880.501 The contract.
(a) Contract. The Housing Assistance Payments Contract sets forth
rights and duties of the owner and the contract administrator with
respect to the project and the housing assistance payments. The owner
and contract administrator execute the Contract in the form prescribed
by HUD upon satisfactory completion of the project.
(b) [Reserved]
* * * * *
10. In Sec. 880.504, paragraphs (b), (c) introductory text, (c)(1),
and (e) are revised, to read as follows:
Sec. 880.504 Leasing to eligible families.
* * * * *
(b) Reduction of number of units covered by Contract. (1) Part 880
and 24 CFR part 881 projects. HUD (or the PHA at the direction of HUD,
as appropriate) may reduce the number of units covered by the Contract
to the number of units available for occupancy by eligible families if:
(i) The owner fails to comply with the requirements of paragraph
(a) of this section; or
(ii) Notwithstanding any prior approval by the contract
administrator to lease such units to ineligible families, HUD (or the
PHA at the direction of HUD, as appropriate) determines that the
inability to lease units to eligible families is not a temporary
problem.
(2) For 24 CFR part 883 projects. HUD and the Agency may reduce the
number
[[Page 13588]]
of units covered by the Contract to the number of units available for
occupancy by eligible families if:
(i) The owner fails to comply with the requirements of paragraph
(a) of this section; or
(ii) Notwithstanding any prior approval by the Agency to lease such
units to ineligible families, HUD and the Agency determine that the
inability to lease units to eligible families is not a temporary
problem.
(c) Restoration. For this part 880 and 24 CFR part 881 projects,
HUD will agree to an amendment of the ACC or the Contract, as
appropriate, to provide for subsequent restoration of any reduction
made pursuant to paragraph (b) of this section, and for 24 CFR part 883
projects, HUD will agree to an amendment of the ACC and the Agency may
agree to an amendment to the Contract to provide for subsequent
restoration of any reduction made pursuant to paragraph (b) of this
section, if:
(1) HUD determines (for 24 CFR part 883 projects, HUD and the
Agency determine) that the restoration is justified by demand,
* * * * *
(e) Termination of assistance for failure to submit evidence of
citizenship or eligible immigration status. If an owner who is subject
to paragraphs (a) and (b) of this section is required to terminate
housing assistance payments for the family in accordance with 24 CFR
part 5 because the owner determines that the entire family does not
have U.S. citizenship or eligible immigration status, the owner may
allow continued occupancy of the unit by the family without Section 8
assistance following the termination of assistance, or if the family
constitutes a mixed family, as defined in 24 CFR part 5, the owner
shall comply with the provisions of 24 CFR part 5 concerning assistance
to mixed families, and deferral of termination of assistance.
Subpart F--Management
11. Section 880.601 is amended by revising paragraphs (a)(4), (b),
(c), and (e), to read as follows:
Sec. 880.601 Responsibilities of owner.
(a) * * *
(4) At the time of Contract execution, the owner must submit a list
of leased and unleased units, with justification for the unleased
units, in order to qualify for vacancy payments for the unleased units.
(b) Management and maintenance. The owner is responsible for all
management functions, including determining eligibility of applicants
in accordance with 24 CFR parts 5 and 24 CFR part 813, provision of
Federal selection preferences in accordance with 24 CFR part 5,
selection of tenants, obtaining and verifying Social Security Numbers
submitted by families (as provided by 24 CFR part 5), obtaining signed
consent forms from families for the obtaining of wage and claim
information from State Wage Information Collection Agencies (as
provided by 24 CFR part 5), reexamination of family income, evictions
and other terminations of tenancy, and collection of rents, and all
repair and maintenance functions (including ordinary and extraordinary
maintenance and replacement of capital items). All these functions
shall be performed in compliance with applicable Equal Opportunity
requirements.
(c) Contracting for services. (1) For this part 880 and 24 CFR part
881 projects, with HUD approval, the owner may contract with a private
or public entity (except the contract administrator) for performance of
the services or duties required in paragraphs (a) and (b) of this
section.
(2) For 24 CFR part 883 projects, with approval of the Agency, the
owner may contract with a private or public entity (but not with the
Agency unless temporarily necessary for the Agency to protect its
financial interest and to uphold its program responsibilities where no
alternative management agent is immediately available) for performance
of the services or duties required in paragraphs (a) and (b) of this
section.
(3) However, such an arrangement does not relieve the owner of
responsibility for these services and duties.
* * * * *
(e) Use of project funds. (1) Project funds must be used for the
benefit of the project, to make required deposits to the replacement
reserve in accordance with Sec. 880.602 and to provide distributions to
the owner as provided in Sec. 880.205, Sec. 881.205 of this chapter, or
Sec. 883.306 of this chapter, as appropriate.
(2) For this part 880 and 24 CFR part 881 projects:
(i) Any remaining project funds must be deposited with the
mortgagee or other HUD-approved depository in an interest-bearing
residual receipts account. Withdrawals from this account will be made
only for project purposes and with the approval of HUD.
(ii) Partially-assisted projects are exempt from the provisions of
this section.
(iii) In the case of HUD-insured projects, the provisions of this
paragraph (e) will apply instead of the otherwise applicable mortgage
insurance provisions.
(3) For 24 CFR part 883 projects:
(i) Any remaining project funds must be deposited with the Agency,
other mortgagee or other Agency-approved depository in an interest-
bearing account. Withdrawals from this account may be made only for
project purposes and with the approval of the Agency.
(ii) In the case of HUD-insured projects, the provisions of this
paragraph will apply instead of the otherwise applicable mortgage
insurance provisions, except in the case of partially-assisted projects
which are subject to the applicable mortgage insurance provisions.
* * * * *
12. Section 880.602 is revised to read as follows:
Sec. 880.602 Replacement reserve.
(a) A replacement reserve must be established and maintained in an
interest-bearing account to aid in funding extraordinary maintenance
and repair and replacement of capital items.
(1) Part 880 and 24 CFR part 881 projects. (i) For this part 880
and 24 CFR part 811 projects, an amount equivalent to .006 of the cost
of total structures, including main buildings, accessory buildings,
garages and other buildings, or any higher rate as required by HUD from
time to time, will be deposited in the replacement reserve annually.
This amount will be adjusted each year by the amount of the automatic
annual adjustment factor.
(ii) The reserve must be built up to and maintained at a level
determined by HUD to be sufficient to meet projected requirements.
Should the reserve achieve that level, the rate of deposit to the
reserve may be reduced with the approval of HUD.
(iii) All earnings including interest on the reserve must be added
to the reserve.
(iv) Funds will be held by the mortgagee or trustee for
bondholders, and may be drawn from the reserve and used only in
accordance with HUD guidelines and with the approval of, or as directed
by, HUD.
(v) Partially-assisted part 880 and 24 CFR part 881 projects are
exempt from the provisions of this section.
(2) Part 883 of this chapter projects. (i) For 24 CFR part 883
projects, an amount equivalent to at least .006 of the cost of total
structures, including main buildings, accessory buildings, garages and
other buildings, or any higher rate as required from time to time by:
[[Page 13589]]
(A) The Agency, in the case of projects approved under 24 CFR part
883, subpart D; or
(B) HUD, in the case of all other projects, will be deposited in
the replacement reserve annually. For projects approved under 24 CFR
part 883, subpart D, this amount may be adjusted each year by up to the
amount of the automatic annual adjustment factor. For all projects not
approved under 24 CFR part 883, subpart D, this amount must be adjusted
each year by the amount of the automatic annual adjustment factor.
(ii) The reserve must be built up to and maintained at a level
determined to be sufficient by the Agency to meet projected
requirements. Should the reserve achieve that level, the rate of
deposit to the reserve may be reduced with the approval of the Agency.
(iii) All earnings, including interest on the reserve, must be
added to the reserve.
(iv) Funds will be held by the Agency, other mortgagee or trustee
for bondholders, as determined by the Agency, and may be drawn from the
reserve and used only in accordance with Agency guidelines and with the
approval of, or as directed by, the Agency.
(v) The Agency may exempt partially-assisted projects approved
under 24 CFR part 883, subpart D, from the provisions of this section.
All partially-assisted projects not approved under the Fast Track
Procedures formerly in 24 CFR part 883, subpart D, are exempt from the
provisions of this section.
(b) In the case of HUD-insured projects, the provisions of this
section will apply instead of the otherwise applicable mortgage
insurance provisions, except in the case of partially-assisted insured
projects which are subject to the applicable mortgage insurance
provisions.
13. Section 880.603 is revised to read as follow:
Sec. 880.603 Selection and admission of assisted tenants.
(a) Application. The owner must accept applications for admission
to the project in the form prescribed by HUD. Both the owner (or
designee) and the applicant must complete and sign the application. For
this part 880 and 24 CFR part 881 projects, on request, the owner must
furnish copies of all applications to HUD and the PHA, if applicable.
For 24 CFR part 883 projects, on request, the owner must furnish to the
Agency or HUD copies of all applications received.
(b) Determination of eligibility and selection of tenants. The
owner is responsible for obtaining and verifying information related to
income in accordance with 24 CFR part 813, and evidence related to
citizenship and eligible immigration status in accordance with 24 CFR
part 5, to determine whether the applicant is eligible for assistance
in accordance with the requirements of 24 CFR part 5, and 24 CFR part
813, and to select families for admission to the program, which
includes giving selection preferences in accordance with 24 CFR part 5,
subpart D.
(1) If the owner determines that the family is eligible and is
otherwise acceptable and units are available, the owner will assign the
family a unit of the appropriate size in accordance with HUD standards.
If no suitable unit is available, the owner will place the family on a
waiting list for the project and notify the family of when a suitable
unit may become available. If the waiting list is so long that the
applicant would not be likely to be admitted for the next 12 months,
the owner may advise the applicant that no additional applications are
being accepted for that reason, provided the owner complies with the
procedures for informing applicants about admission preferences as
provided in 24 CFR part 5, subpart D.
(2) If the owner determines that an applicant is ineligible on the
basis of income or family composition, or because of failure to meet
the disclosure and verification requirements for Social Security
Numbers (as provided by 24 CFR part 5), or because of failure by an
applicant to sign and submit consent forms for the obtaining of wage
and claim information from State Wage Information Collection Agencies
(as provided by 24 CFR parts 5 and 813), or that the owner is not
selecting the applicant for other reasons, the owner will promptly
notify the applicant in writing of the determination and its reasons,
and that the applicant has the right to meet with the owner or managing
agent in accordance with HUD requirements. Where the owner is a PHA,
the applicant may request an informal hearing. If the PHA determines
that the applicant is not eligible, the PHA will notify the applicant
and inform the applicant that he or she has the right to request HUD
review of the PHA's determination. The applicant may also exercise
other rights if the applicant believes that he or she is being
discriminated against on the basis of race, color, creed, religion,
sex, or national origin. See 24 CFR part 5 for the informal review
provisions for the denial of a Federal preference or the failure to
establish citizenship or eligible immigration status and for notice
requirements where assistance is terminated, denied, suspended, or
reduced based on wage and claim information obtained by HUD from a
State Wage Information Collection Agency.
(3) Records on applicants and approved eligible families, which
provide racial, ethnic, gender and place of previous residency data
required by HUD, must be maintained and retained for three years.
(c) Reexamination of family income and composition--(1) Regular
reexaminations. The owner must reexamine the income and composition of
all families at least every 12 months. After consultation with the
family and upon verification of the information, the owner must make
appropriate adjustments in the Total Tenant Payment in accordance with
24 CFR part 813 and determine whether the family's unit size is still
appropriate. The owner must adjust Tenant Rent and the Housing
Assistance Payment to reflect any change in Total Tenant Payment and
must carry out any unit transfer required by HUD. At the time of the
annual reexamination of family income and composition, the owner must
require the family to disclose the verify Social Security Numbers, as
provided by 24 CFR part 5. For requirements regarding the signing and
submitting of consent forms by families for the obtaining of wage and
claim information from State Wage Information Collection Agencies, see
24 CFR part 5. At the first regular reexamination after June 19, 1995,
the owner shall follow the requirements of 24 CFR part 5 concerning
obtaining and processing evidence of citizenship or eligible
immigration status of all family members. Thereafter, at each regular
reexamination, the owner shall follow the requirements of 24 CFR part 5
and verify the immigration status of any new family member.
(2) Interim reexaminations. The family must comply with provisions
in its lease regarding interim reporting of changes in income. If the
owner receives information concerning a change in the family's income
or other circumstances between regularly scheduled reexaminations, the
owner must consult with the family and make any adjustments determined
to be appropriate. Any change in the family's income or other
circumstances that results in an adjustment in the Total Tenant
Payment, Tenant Rent and Housing Assistance Payment must be verified.
See 24 CFR part 5 for the requirements for the disclosure and
verification of Social Security Numbers
[[Page 13590]]
at interim reexaminations involving new family members. For
requirements regarding the signing and submitting of consent forms for
the obtaining of wage and claim information from State Wage Information
Collection Agencies, see 24 CFR part 5. At any interim reexamination
after June 19, 1995, when a new family member has been added, the owner
shall follow the requirements of 24 CFR part 5 concerning obtaining and
processing evidence of the citizenship or eligible immigration status
of any new family member.
(3) Continuation of housing assistance payments. A family's
eligibility for Housing Assistance Payments continues until the Total
Tenant Payment equals the Gross Rent. The termination of eligibility at
such point will not affect the family's other rights under its lease,
nor will such termination preclude the resumption of payments as a
result of later changes in income, rents, or other relevant
circumstances during the term of the Contract. However, eligibility
also may be terminated in accordance with HUD requirements, for such
reasons as failure to submit requested verification information,
including failure to meet the disclosure and verification requirements
for Social Security Numbers, as provided by 24 CFR part 5, or failure
to sign and submit consent forms for the obtaining wage and claim
information from State Wage Information Collection Agencies, as
provided by 24 CFR part 5. See 24 CFR part 5 for provisions requiring
termination of assistance for failure to establish citizenship or
eligible immigration status and also for provisions concerning certain
assistance for mixed families (families whose members include those
with eligible immigration status, and those without eligible
immigration status) in lieu of termination of assistance, and for
provisions concerning deferral of termination of assistance.
(Approved by the Office of Management and Budget under control
number 2502-0204.)
14. In Sec. 880.606, paragraph (b) is revised to read as follows:
Sec. 880.606 Lease requirements.
* * * * *
(b) Form. (1) Part 880 and 24 CFR part 881 projects. For this part
880 and 24 CFR part 881 projects, the form of lease must contain all
required provisions, and none of the prohibited provisions specified in
the developer's packet, and must conform to the form of lease included
in the approved final proposal.
(2) 24 CFR part 883 projects. For 24 CFR part 883 projects, the
form of lease must contain all required provisions, and none of the
prohibited provisions specified below.
(i) Required provisions (Addendum to lease).
Addendum to Lease
The following additional Lease provisions are incorporated in
full in the Lease between ____ (Landlord) and ____ (Tenant) for the
following dwelling unit: ____. In case of any conflict between these
and any other provisions of the Lease, these provisions will
prevail.
a. The total rent will be $____ per month.
b. Of the total rent, $____ will be payable by the State Agency
(Agency) as housing assistance payments on behalf of the Tenant and
$____ will be payable by the Tenant. These amounts will be subject
to change by reason of changes in the Tenant's family income, family
composition, or extent of exceptional medical or other unusual
expenses, in accordance with HUD-established schedules and criteria;
or by reason of adjustment by the Agency of any applicable Utility
Allowance; or by reasons of changes in program rules. Any such
change will be effective as of the date stated in a notification to
the Tenant.
c. The Landlord will not discriminate against the Tenant in the
provision of services, or in any other manner, on the grounds of
race, color, creed, religion, sex, or national origin.
d. The Landlord will provide the following services and
maintenance: ____________
e. A violation of the Tenant's responsibilities under the
Section 8 Program, as determined by the Agency, is also a violation
of the lease.
Landlord---------------------------------------------------------------
By---------------------------------------------------------------------
Date-------------------------------------------------------------------
Tenant-----------------------------------------------------------------
Date-------------------------------------------------------------------
[End of addendum]
(ii) Prohibited provisions. Lease clauses which fall within the
classifications listed below must not be included in any Lease.
Lease Clauses
a. Confession of Judgment. Consent by the tenant to be sued, to
admit guilt, or to accept without question any judgment favoring the
landlord in a lawsuit brought in connection with the lease.
b. Seize or Hold Property for Rent or Other Charges.
Authorization to the landlord to take property of the tenant and/or
hold it until the tenant meets any obligation which the landlord has
determined the tenant has failed to perform.
c. Exculpatory Clause. Prior agreement by the tenant not to hold
the landlord or landlord's agents legally responsible for acts done
improperly or for failure to act when the landlord or landlord's
agent was required to do so.
d. Waiver of Legal Notice. Agreement by the tenant that the
landlord need not give any notices in connection with (1) a lawsuit
against the tenant for eviction, money damages, or other purposes,
or (2) any other action affecting the tenant's rights under the
lease.
e. Waiver of Legal Proceeding. Agreement by the tenant to allow
eviction without a court determination.
f. Waiver of Jury Trial. Authorization to the landlord's lawyer
to give up the tenant's right to trial by jury.
g. Waiver of Right to Appeal Court Decision. Authorization to
the landlord's lawyer to give up the tenant's right to appeal a
decision on the ground of judicial error or to give up the tenant's
right to sue to prevent a judgment being put into effect.
h. Tenant Chargeable with Cost of Legal Actions Regardless of
Outcome of Lawsuit. Agreement by the tenant to pay lawyer's fees or
other legal costs whenever the landlord decides to sue the tenant
whether or not the tenant wins. (Omission of such a clause does not
mean that the tenant, as a party to a lawsuit, may not have to pay
lawyer's fees or other costs if the court so orders.)
[End of clauses]
15. Section 880.607 is amended by:
a. Removing from paragraph (b)(3)(ii), the words ``part 812'',
``part 750'', ``part 760'', and by adding, in their respective places,
the words ``part 5''; and
b. Revising paragraphs (c)(4) and (d), to read as follows:
Sec. 880.607 Termination of tenancy and modification of lease.
* * * * *
(c) * * *
(4) See 24 CFR part 5 for provisions related to termination of
assistance because of failure to establish citizenship or eligible
immigration status, including informal hearing procedures and also for
provisions concerning certain assistance for mixed families (families
whose members include those with eligible immigration status, and those
without eligible immigration status) in lieu of termination of
assistance, and for provisions concerning deferral of termination of
assistance.
(d) Modification of Lease form. The owner, with the prior approval
of HUD or, for a 24 CFR part 883 project, the Agency, may modify the
terms and conditions of the lease form effective at the end of the
initial term or a successive term, by serving an appropriate notice on
the family, together with the offer of a revised lease or an addendum
revising the existing lease. This notice and offer must be received by
the family at least 30 days prior to the last date on which the family
has the right to terminate the tenancy without being bound by the
modified terms and conditions. The family may accept the modified terms
and conditions by executing the offered revised lease or addendum, or
may reject the modified terms and conditions by giving the owner
written notice in
[[Page 13591]]
accordance with the lease that the family intends to terminate the
tenancy. Any increase in rent must in all cases be governed by
Sec. 880.609 and other applicable HUD regulations.
* * * * *
Sec. 880.608 [Amended]
16. In Sec. 880.608, paragraph (f) introductory text is amended by
removing the words ``HUD or the PHA, as appropriate,'' and by adding,
in their place, the words ``the contract administrator''.
17. In Sec. 880.609, paragraph (b) is revised to read as follows:
Sec. 880.609 Adjustment of contract rents.
* * * * *
(b) Special additional adjustments. For all projects, special
additional adjustments will be granted, to the extent determined
necessary by HUD (for 24 CFR part 883 projects, by the Agency and HUD),
to reflect increases in the actual and necessary expenses of owning and
maintaining the assisted units which have resulted from substantial
general increases in real property taxes, assessments, utility rates,
and utilities not covered by regulated rates, and which are not
adequately compensated for by annual adjustments under paragraph (a) of
this section. The owner must submit to the contract administrator
required supporting data, financial statements and certifications.
* * * * *
18. In Sec. 880.611, the introductory text to paragraph (d)(3) is
revised to read as follows:
Sec. 880.611 Conditions for receipt of vacancy payments.
* * * * *
(d) * * *
(3) The owner has (for 24 CFR part 883 projects, the owner and the
Agency have) demonstrated to the satisfaction of HUD that:
* * * * *
19. In Sec. 880.612, paragraph (b) is revised to read as follows:
Sec. 880.612 Reviews during management period.
* * * * *
(b) In addition:
(1)(i) For this part 880 and 24 CFR part 881 private-owner/PHA
projects, HUD will review the PHA's administration of the Contract at
least annually to determine whether the PHA is in compliance with the
ACC; and
(ii) For 24 CFR part 883 projects, HUD will periodically review the
Agency's administration of the Contract to determine whether it is in
compliance with the Contract.
(2) HUD may independently inspect project operations and units at
any time.
* * * * *
PART 881--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR
SUBSTANTIAL REHABILITATION
20. The authority citation for part 881 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and
13611-13619.
Subpart A--Summary and Applicability
21. Section 881.101 is revised to read as follows:
Sec. 881.101 General.
(a) The purpose of the Section 8 program is to provide low-income
families with decent, safe and sanitary rental housing through the use
of a system of housing assistance payments. This part contains the
policies and procedures applicable to the Section 8 substantial
rehabilitation program. The assistance may be provided to public
housing agency owners or to private owners either directly from HUD or
through public housing agencies.
(b) This part does not apply to projects developed under other
Section 8 program regulations, including 24 CFR parts 880, 882, 883,
884, and 885, except to the extent specifically stated in those parts.
Secs. 881.102 and 881.103 [Removed]
22. Sections 881.102 and 881.103 are removed.
23. Section 881.104 is revised to read as follows:
Sec. 881.104 Applicability of part 881 in effect as of February 20,
1980.
(a) Part 881, in effect as of February 20, 1980, applies to all
proposals for which a notification of selection was not issued before
the February 20, 1980 effective date of part 881. (See 24 CFR part 881,
revised as of April 1, 1980). Where a notification of selection was
issued for a proposal before the February 20, 1980, effective date,
part 881 in effect as of February 20, 1980 applies if the owner
notified HUD within 60 calendar days that the owner wished the
provisions of part 881, effective February 20, 1980, to apply and
promptly brought the proposal into conformance.
(b) Subparts E (Housing Assistance Payments Contract) and F
(Management) of this part apply to all projects for which an Agreement
was not executed before the February 20, 1980, effective date of part
881. Where an Agreement was so executed:
(1) The owner and HUD may agree to make the revised subpart E of
this part applicable and to execute appropriate amendments to the
Agreement and/or Contract.
(2) The owner and HUD may agree to make the revised subpart F of
this part applicable (with or without the limitation on distributions)
and to execute appropriate amendments to the Agreement and/or Contract.
(c) Section 880.607 of this chapter, Termination of Tenancy and
Modification of Leases, applies to new families who begin occupancy or
execute a lease on or after 30 days after the February 20, 1980,
effective date of part 881. This section also applies to families not
covered by the preceding sentence, including existing families under
lease, with respect to all leases in which a renewal becomes effective
on or after the 60th day following the February 20, 1980 effective date
of part 881. A lease is considered to be renewed where both the
landlord and the family fail to terminate a tenancy under a lease
permitting either party to terminate.
(d) Notwithstanding the provisions of paragraph (b) of this
section, the provisions of 24 CFR part 5 (concerning preferences for
selection of applicants) apply to all projects, regardless of when an
Agreement was executed.
Subpart B--Definitions and Other Requirements
24. The heading for subpart B of part 881 is revised to read as set
forth above.
Sec. 881.201 [Amended]
25. Section 881.201 is amended by removing the definitions of
``Allocation area'', ``New Communities'', and ``Preliminary proposal''.
Secs. 881.202, 881.203, 881.204, 881.206, 881.209, and
881.210 [Removed]
26. Sections 881.202, 881.203, 881.204, 881.206, 881.209, and
881.210 are removed.
Subparts C and D--[Removed and Reserved]
27. Subpart C (Secs. 881.301 through 881.312) and subpart D
(Secs. 881.401 through 881.405) of part 881 are removed and reserved.
Subpart E--Housing Assistance Payments Contract
28. In Sec. 881.501, paragraph (a) is revised and paragraph (b) is
removed and reserved, to read as follows:
Sec. 881.501 The contract.
(a) Contract. The Housing Assistance Payments Contract sets forth
rights and duties of the owner and the contract administrator with
respect to the project
[[Page 13592]]
and the housing assistance payments. The owner and contract
administrator execute the Contract in the form prescribed by HUD upon
satisfactory completion of the project.
(b) [Reserved]
* * * * *
29. Section 881.503 is revised to read as follows:
Sec. 881.503 Cross-reference.
All of the provisions of Secs. 880.503, 880.504, 880.505, 880.506,
880.507, and 880.508 of this chapter apply to projects assisted under
this part, subject to the requirements of Sec. 881.104.
Secs. 881.504, 881.505, 881.506, 881.507, and 881.508 [Removed]
29a. Sections 881.504, 881.505, 881.506, 881.507, and 881.508 are
removed.
30. Subpart F of part 881 is revised to read as follows:
Subpart F--Management
Sec. 881.601 Cross-reference.
All of the provisions of part 880, subpart F, of this chapter apply
to projects assisted under this part, subject to the requirements of
Sec. 881.104.
Subpart G--[Removed]
31. Subpart G (Secs. 881.701 through 881.709) of part 881 is
removed.
PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE
HOUSING AGENCIES
32. The authority citation for part 883 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.
Subpart A--Summary and Guide
33. Section 883.101 is revised to read as follows:
Sec. 883.101 General.
(a) The purpose of the Section 8 program is to provide decent, safe
and sanitary housing for low-income families through the use of a
system of housing assistance payments. These needs may be met by
statewide or special purpose housing agencies established by the
various States.
(b) The regulations in this part 883 contain the policies and
procedures applicable to the Section 8 program for these State
agencies.
Secs. 883.102, 883.103, and 883.104 [Removed]
34. Sections 883.102, 883.103 and 883.104 are removed.
35. Section 883.105, is revised to read as follows:
Sec. 883.105 Applicability of part 883 in effect as of February 29,
1980.
(a) Part 883, in effect as of February 29, 1980, applies to
projects for which the initial application was submitted on or after
the February 29, 1980, effective date. (See 24 CFR part 883, revised as
of April 1, 1980.) Projects for which applications or proposals were
submitted before the February 29, 1980, effective date of part 883 have
been processed under the part 883 regulations and procedures in effect
at the date of submission. If, however, the agency notified HUD within
60 calendar days of the February 29, 1980, effective date of the part
883 regulations that they chose to have the provisions of part 883, in
effect as of February 29, 1980, apply to a specific case, it must have
promptly modified the application(s) and proposal(s) to comply.
(b) Subpart F of this part, dealing with the HAP contract and
subpart G of this part, dealing with management, apply to all projects
for which an Agreement was not executed before the February 29, 1980,
effective date of part 883. In cases where an Agreement has been
executed:
(1) The Agency, owner and HUD may agree to make the revised subpart
F of this part applicable and execute appropriate amendments to the
Agreement or Contract;
(2) The Agency, Owner and HUD may agree to make the revised subpart
G of this part applicable (with or without the limitation on
distributions) and execute appropriate amendments to the Agreement or
Contract.
(c) Section 883.708, Termination of Tenancy and Modifications of
Leases, applies to new families who begin occupancy or execute a lease
on or after 30 days following the February 29, 1980, effective date of
part 883. This section also applies to families not covered by the
preceding sentence, including families currently under lease, who have
a lease in which a renewal becomes effective on or after the 60th day
following the February 29, 1980 effective date of part 883. A lease is
considered renewed when both the landlord and the family fail to
terminate a tenancy under a lease permitting either to terminate.
(d) Notwithstanding the provisions of paragraph (b) of this
section, the provisions of 24 CFR part 5 (concerning preferences for
selection of applicants) apply to all projects, regardless of when am
Agreement was executed.
36. A new Sec. 883.106 is added to subpart A to read as follows:
Sec. 883.106 Applicability and relationships between HUD and State
agencies.
(a) Applicability. This subpart A applies to contract authority set
aside for a State Agency.
(b) General responsibilities and relationships. Subject to audit
and review by HUD to assure compliance with Federal requirements and
objectives, Housing Finance Agencies (HFAs) shall assume responsibility
for project development and for supervision of the development,
management and maintenance functions of owners.
(c) Certifications and HUD monitoring. (1) Generally, when
reviewing any of the certifications of an HFA required by this part,
HUD shall accept the certification as correct. If HUD has substantial
reason to question the correctness of any element in a certification,
HUD shall promptly bring the matter to the attention of the HFA and ask
it to provide documentation supporting the certifications. When the HFA
provides such evidence, HUD will act in accordance with the HFA's
judgment or evaluation unless HUD determines that the certification is
clearly not supported by the documentation.
(2) HUD will periodically monitor the activities of HFA's
participating under this part only with respect to Section 8 or other
HUD programs. This monitoring is intended primarily to ensure that
certifications submitted and projects operated under this part reflect
appropriate compliance with Federal law and requirements.
Subpart B--[Removed and Reserved]
37. Subpart B (Secs. 883.201 through 883.207) of part 883 is
removed and reserved.
Subpart C--Definitions and Other Requirements
38. The heading for subpart C of part 883 is revised to read as set
forth above.
Sec. 883.302 [Amended]
39. Section 883.302 is amended by removing the definitions of
``Allocation area'', ``Allocation plan'', ``Impacted jurisdiction'',
and ``New Communities''.
Secs. 883.303, 883.304, 883.305, 883.309, 883.311, and
883.312 [Removed]
40. Sections 883.303, 883.304, 885.305, 883.309, 883.311, and
883.312 are removed.
41. In Sec. 883.307, paragraph (a) is revised to read as follows:
Sec. 883.307 Financing.
(a) Types of financing. A State Agency that used the Fast Track
Procedures formerly in this part must provide
[[Page 13593]]
permanent financing for any new construction or substantial
rehabilitation project without Federal mortgage insurance, except
coinsurance under section 244 under the National Housing Act (12 U.S.C.
1701 et seq). Obligations issued by the HFA for this purpose may be
taxable under section 802 of the Housing and Community Development Act
of 1974 (42 U.S.C. 1440) or tax-exempt under section 103 of the
Internal Revenue Code (26 U.S.C. 103), 24 CFR part 811 or other Federal
Law.
* * * * *
Subparts D and E--[Removed and Reserved]
42. Subpart D (Secs. 883.401 through 883.412) and subpart E
(Sec. 883.501) of part 883 are removed and reserved.
Subpart F--Housing Assistance Payments Contract
Sec. 883.602 [Amended]
43. Section 883.602 is amended by:
a. Removing paragraph (b);
b. Redesignating paragraphs (c), (d), and (e) as paragraphs (b),
(c), and (d), respectively; and
c. By amending newly redesignated paragraphs (b)(2), (c)(2), and
(c)(3) by removing the words ``Sec. 883.712'' in each place they
appear, and by adding the words ``Sec. 880.611 of this chapter'', in
their place.
Sec. 883.604 [Amended]
44. In Sec. 883.604, paragraph (b)(2) is amended by removing the
words ``U.S. Housing Act of 1937'' and adding, in their place, the
words ``1937 Act''.
45. Section 883.605 is revised to read as follows:
Sec. 883.605 Leasing to eligible families.
The provisions of Sec. 880.504 of this chapter apply, subject to
the requirements of Sec. 883.105.
46. Section 883.608 is revised to read as follows:
Sec. 883.608 Notice upon contract expiration.
The provisions of Sec. 880.508 of this chapter apply, subject to
the requirements of Sec. 883.105.
47. Subpart G of part 883 is revised to read as follows:
Subpart G--Management
Sec. 883.701 Cross-reference.
All of the provisions of part 880, subpart F, of this chapter apply
to projects assisted under this part, subject to the requirements of
Sec. 883.105. For purposes of this subpart G, all references in part
880, subpart F, of this chapter to ``contract administrator'' shall be
construed to refer to ``Agency''.
PART 884--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM, NEW
CONSTRUCTION SET-ASIDE FOR SECTION 515 RURAL RENTAL HOUSING
PROJECTS
48. The authority citation for part 884 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.
Subpart A--Applicability, Scope and Basic Policies
49. In Sec. 884.101, paragraph (a) is revised to read as follows:
Sec. 884.101 Applicability and scope.
(a) The policies and procedures in subparts A and B of this part
apply to the making of Housing Assistance Payments on behalf of
Eligible Families leasing newly constructed housing pursuant to the
provisions of section 8 of the 1937 Act. They are applicable only to
proposals submitted by the Department of Agriculture/Farmers Home
Administration (now the Department of Agriculture/Rural Housing and
Community Development Service) that have been charged against the set-
aside of section 8 contract authority specifically established for
projects to be funded under section 515 of title V of the Housing Act
of 1949 (42 U.S.C. 1485).
* * * * *
Sec. 884.102 [Amended]
50. Section 884.102 is amended by:
a. Amending the definition of ``Agreement to enter into housing
assistance payments contract (`agreement')'', by removing the word
``FmHA'' in each place it appears in paragraphs (a) and (b), and by
adding, in each place, the word ``RHCDS'';
b. Removing the definition of ``FmHA'' and by adding, in
alphabetical order, the definition ``RHCDS''; and
c. Placing the definition of ``Proposal'' in alphabetical order and
amending it by removing the word ``FmHA'', and by adding in its place,
the word ``RHCDS'', to read as follows:
Sec. 884.102 Definitions.
* * * * *
RHCDS. The Rural Housing and Community Development Service.
* * * * *
Sec. 884.103 [Removed]
51. Section 884.103 is removed.
Sec. 884.105 [Amended]
52. Section 884.105 is amended by removing the word ``Act'' from
paragraphs (b)(1) and (b)(2) in each place it appears and adding, in
each place, the words ``1937 Act''.
Secs. 884.107, 884.111, 884.112, and, 884.113 [Removed]
53. Sections 884.107, 884.111, 884.112, and 884.113 are removed.
Secs. 884.108, 884.118, 884.119, and 884.120 [Amended]
54. Sections 884.108(a), 884.118(a)(9), 884.119(b), and
884.120(b)(3) are amended by removing the word ``FmHA'', each place it
appears, and by adding in each place the word ``RHCDS''.
Sec. 884.117 [Amended]
55. Section 884.117 is amended by removing the words ``part 705''
and adding, in their place, the words ``part 5''.
56. In Sec. 884.118, paragraphs (a)(3) and (a)(7) are revised, to
read as follows:
Sec. 884.118 Responsibilities of the owner.
(a) * * *
(3) Performance of all management functions, including the taking
of applications; determining eligibility of applicants in accordance
with 24 CFR parts 5 and 813; selection of families, including
verification of income, provision of Federal selection preferences in
accordance with 24 CFR part 5, obtaining and verifying Social Security
Numbers submitted by applicants (as provided by 24 CFR part 5),
obtaining signed consent forms from applicants for the obtaining of
wage and claim information from State Wage Information Collection
Agencies (as provided in 24 CFR part 5), and other pertinent
requirements; and determination of the amount of tenant rent in
accordance with HUD established schedules and criteria;
* * * * *
(7) Reexamination of family income and composition;
redetermination, as appropriate, of the amount of Tenant Rent and the
amount of housing assistance payment in accordance with 24 CFR part
813; obtaining and verifying Social Security Numbers submitted by
participants, as provided by 24 CFR part 5; and obtaining signed
consent forms from participants for the obtaining of wage and claim
information from State Wage Information Collection Agencies, as
provided by 24 CFR part 5;
* * * * *
[[Page 13594]]
Subpart B--Project Development and Operation
Secs. 884.201, 884.202, 884.203, 884.204, 884.205, 884.206, 884.207,
884.208, 884.209, 884.210, and 884.211 [Removed]
57. Sections 884.201, 884.202, 884.203, 884.204, 884.205, 884.206,
884.207, 884.208, 884.209, 884.210, and 884.211 are removed.
Sec. 884.214 [Amended]
58. In Sec. 884.214, paragraph (b)(1) is amended by removing the
phrase ``part 812,'' and adding, in its place, the phrase ``part 5,''.
Sec. 884.216 [Amended]
59. Section 884.216 is amended by:
a. Removing the words ``part 760,'' and adding in their place, the
words ``part 5,''; and
b. Removing the words ``24 CFR 812.9, and also 24 CFR 812.10'' and
adding, in their place, the words ``24 CFR part 5 and also''.
Sec. 884.218 [Amended]
60. Section 884.218 is amended by:
a. Amending paragraph (a) by removing the words ``part 750'' where
it appears, by removing ``part 760'' where it appears, and by removing
``part 812'' each place it appears, and by adding in each place the
words ``part 5'';
b. Amending paragraph (b) by removing the words ``part 760'', where
it appears, and by removing ``part 812'', where it appears, and by
adding in each place the words, ``part 5'';
c. Amending paragraph (c) by removing the words ``part 750'', where
it appears, and by removing the words ``part 760'', where it appears,
and by adding in each place the words, ``part 5''; and
d. Further amending paragraph (c), by removing the words ``24 CFR
812.9, and also 24 CFR 812.10'' and adding, in their place, the words
``24 CFR part 5 and also''.
Sec. 884.223 [Amended]
61-62. In Sec. 884.223(e), remove the words ``Sec. 812.9 of this
chapter'' and add, in their place, the words ``24 CFR part 5'' and
remove the words ``24 CFR 812.10'' in each place they occur and add, in
each place, the words ``24 CFR part 5''.
Dated: February 28, 1996.
Stephanie A. Smith,
Acting General Deputy, Assistant Secretary for Housing-Federal Housing
Commissioner.
[FR Doc. 96-5990 Filed 3-26-96; 8:45 am]
BILLING CODE 4210-27-P
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