**(BILLING CODE:  4810-02-P)**

**DEPARTMENT OF THE TREASURY**

**Monetary Offices**

**31 CFR Part 82**

Prohibition on the Exportation, Melting, or Treatment of 5-Cent and
One-Cent Coins 

**\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **

**AGENCY: ** United States Mint, Treasury.

**ACTION: ** Final Rule.

**SUMMARY: ** To protect the coinage of the United States, the United
States Mint is adopting a final rule that prohibits the exportation,
melting, and treatment of 5-cent and one-cent coins. This rule is issued
pursuant to 31 U.S.C. 5111(d), which authorizes the Secretary of the
Treasury to prohibit or limit the exportation, melting, or treatment of
United States coins when the Secretary decides the prohibition or
limitation is necessary to protect the coinage of the United States. 
This rule's purpose is to ensure that sufficient quantities of 5-cent
and one-cent coins remain in circulation to meet the needs of the United
States.

**DATES:**  [Effective Date]{.underline}: This final rule is effective
\[INSERT DATE OF PUBLICATION IN THE FEDERAL REGISTER\].

**FOR FURTHER INFORMATION CONTACT: ** Kristie Bowers, Attorney-Advisor,
United States Mint at (202) 354-7631 (not a toll-free call).

**SUPPLEMENTARY INFORMATION:**

### 

### I. Background 

### 

Section 5111(d) of title 31, United States Code, authorizes the
Secretary of the Treasury to prohibit or limit the exportation, melting,
or treatment of United States coins when the Secretary decides the
prohibition or limitation is necessary to protect the coinage of the
United States. In enacting 31 U.S.C. 5111(d), Congress has conferred
upon the Secretary of the Treasury broad discretion to ensure that he
can effectively carry out his statutory duties to protect the nation's
coinage and to ensure that sufficient quantities of coins are in
circulation to meet the needs of the United States.

Pursuant to this authority, the Secretary of the Treasury has determined
that, to protect the coinage of the United States, it is necessary to
generally prohibit the exportation, melting, or treatment of 5-cent and
one-cent coins minted and issued by the United States.  The Secretary
has made this determination because the values of the metal contents of
5-cent and one-cent coins are in excess of their respective face values,
raising the likelihood that these coins will be the subject of recycling
and speculation. The prohibitions contained in this final rule apply
only to 5-cent and one-cent coins. It is anticipated that this
regulation will be a temporary measure that will be rescinded once
actions are taken, or conditions change, to abate concerns that
sufficient quantities of 5-cent and one-cent coins will remain in
circulation to meet the needs of the United States. The Secretary of the
Treasury has delegated to the Director of the United States Mint the
authority to issue these regulations and to approve exceptions by
license.

**II. Interim Rule.**

This final rule is based on the interim rule published Wednesday,
December 20, 2006 (71 FR 76148). The interim rule sought public comment
on the proposed final rule.

The comment period for the interim rule ended on January 19, 2007. The
United States Mint received 31 comments from members of the public,
businesses and trade associations. 

**III. Summary of Comments**

*General Overview*

Two commenters fully supported the regulation. One trade association
supported the regulation as long as its proposed exception was included
in the final regulation. Three commenters stated that the regulation
should only be a temporary measure until a solution could be attained on
the underlying issue. One commenter supported the regulation as it
applies to 5-cent coins, but opposed the regulation as it applies to
one-cent coins. Eighteen commenters generally opposed the regulation.
Six commenters did not state whether they supported or opposed the
regulation, but instead suggested an amendment to the regulation or
proposed a solution to the underlying issue.

*Comments on Eliminating the 5-Cent Coin or One-Cent Coin and Altering
Their Composition*

One bank and three individuals suggested that the United States
government should eliminate the 5-cent coin and the one-cent coin as
circulating coinage. The bank stated, "The cost associated with the
creating and handling of these low denomination coins far exceeds their
value." Five commenters suggested that the United States Mint change the
content of the 5-cent and one-cent coins to less expensive alloys. Two
commenters suggested that the United States Mint eliminate the one-cent
coin and alter the composition of the 5-cent coin. Commenters stated
that the United States government should eliminate one-cent coins
because they "waste pocket space" and people "throw them away." A few of
the commenters suggested that one-cent coins be eliminated after the
2009 Abraham Lincoln Bicentennial One-Cent Coin Redesign, provided for
by Title III of the Presidential \$1 Coin Act of 2005, Public Law
109-145 (Dec. 22, 2005). Two commenters suggested that existing 5-cent
and one-cent coins be physically altered; one suggested punching holes
in the center to decrease their melt value, and the other suggested
encasing them in a ring of metal and increasing the denomination of the
coins. Two commenters suggested the United States Mint begin producing a
two-cent coin or a three-cent coin.

The changes suggested by these comments are outside the scope of the
interim rule, which is limited to implementation of the Secretary of the
Treasury's authority under 31 U.S.C. § 5111(d) to prohibit the
exportation, melting, or treatment of coins when necessary to protect
the coinage of the United States. We note, however, that under Article
I, section 8, clause 5, of the United States Constitution, only Congress
has the power to coin money and regulate its value. Congress determines
the denominations, specifications, and design of United States coins.
Under 31 U.S.C. 5112(c), Congress has delegated to the Secretary of the
Treasury the authority to "prescribe the weight and the composition of
copper and zinc in the alloy of the one-cent coin that the Secretary
decides are appropriate when the Secretary decides that a different
weight and alloy of copper and zinc are necessary to ensure an adequate
supply of one-cent coins to meet the needs of the United States."
However, Congress has not delegated to the Secretary the authority to
alter the composition of the one-cent coin to a metal, or an alloy of
metals, other than copper and zinc. The United States Mint has ongoing
research into alternative metals for the Nation's coinage. Changing the
metal content or the denomination of United States coins requires
legislation passed by Congress and approved by the President.

*Comments on Increasing the Face Value Limit on the Exporting Exception
for One-Cent and 5-Cent Coins Carried on Individual or in Personal
Effects*

Three commenters suggested that the aggregate face-value limit on the
number of 5-cent and one-cent coins that can be exported by an
individual carried on his or her person or in his or her personal
effects should be increased. One of the commenters gave the example of
Americans crossing the border into Canada to play "nickel slot" machines
or "penny-ante" poker. The other commenter pointed out that a person
would not be able to carry on his or her person one roll containing
5-cent coins bearing each of the five United States Mint Westward
Journey Nickel Series™ designs without exceeding the \$5 face-value
limit, and would have to ship them out of the country instead.

The aggregate face-value limit selected for the interim rule was the
same face-value limit used when the Secretary invoked the standby
authority of 31 U.S.C. 5111(d) for the periods 1967-1969 and 1974-1978.
The United States Mint recognizes that some 30 years have passed since
this authority was last invoked and, based on the consumer price index,
the \$5 limit in the previous regulations would be equivalent to about
\$20 today. However, the face values of 5-cent coins and one-cent coins
obviously have not changed over this time period and there is no
evidence to suggest that an average individual carries any more 5-cent
or one-cent coins in his or her pocket change today, than in 1974 or
1967. Accordingly, the United States Mint has kept the aggregate
face-value limit for the exception provided for in the current
regulation at section 82.2(a)(2) at \$5.

The United States Mint nevertheless acknowledges the concerns raised by
the commenters. Therefore, the exception provided for in the current
regulation at section 82.2(a)(2) has been amended to reasonably
accommodate these concerns by allowing exportation of 5-cent and
one-cent coins having an aggregate face value of up to \$25 when it is
clear that the purpose for exporting such coins is for legitimate
personal numismatic, amusement, or recreational use.

*Comments on Redeeming or Reclaiming One-Cent Coins*

Two commenters suggested the United States Mint should redeem existing
5-cent and one-cent coins and alter their physical form, as discussed
above. One commenter suggested that the United States Mint and the
Federal Reserve should encourage the public to redeem their unused
one-cent coins and pay a small premium over their face value, and then
the United States Mint could reclaim the pre-1982 copper one-cent coins
for their metal content. One commenter stated that recycling the 5-cent
and one-cent coins should not be prohibited because, if the coins are
recycled for their metal content, it would increase the supply of
copper, nickel and zinc, with the ensuing market forces resulting in a
price decrease for those metals.

The purpose of this regulation is to protect 5-cent and one-cent coins
in circulation from being the subject of recycling and speculation in
order to ensure that sufficient quantities of the coins remain in
circulation to meet the needs of the United States. This regulation is
not intended to address the cost and supply of metals used in, or the
specifications for, the production of future 5-cent and one-cent coins.
Further, the authorizing statute, 31 U.S.C. 5111(d), permits the
Secretary of the Treasury only to prohibit or limit the exportation,
melting, or treatment of United States coins. It does not authorize the
Secretary to redeem current United States coin.

*Comments on the Constitutionality of the Regulation*

Twelve commenters stated that coins are the personal property of the
holder and the Department of the Treasury does not have the authority to
regulate what a person does with his or her own property. Although it is
generally recognized that money is the property of its bearer under
common law, Congress has the power to regulate the coins and currency of
the United States pursuant to its authority under Article I, section 8,
clause 5, of the United States Constitution. For instance, Congress has
relied on that authority to regulate the use of coins by making it
illegal to alter, deface, or mutilate United States coins with
fraudulent intent, *see* 18 U.S.C. § 331; to debase United States coins
with fraudulent intent, *see* 18 U.S.C. § 332; and to attach any
business or professional card, notice, or advertisement on any United
States coin, *see* 18 U.S.C. § 475. There are many other examples of
personal property whose use is regulated by the Federal government.
These include controlled drugs; firearms; copyrighted books, electronic
recordings; United States postage stamps; Federal Reserve notes; and
uniforms and service medals of the Armed Forces. Such regulations are
generally enacted to protect competing ownership interests in the same
property, to protect the health and safety of the public, or to protect
a special governmental interest in property otherwise privately owned.
In this case, the Federal Government has an interest in ensuring that
sufficient quantities of 5-cent and one-cent coins remain in circulation
to meet the needs of the United States.

Moreover, while several provisions of the Constitution protect property
rights, a statute or regulation is not unconstitutional merely because
it has some effect on those rights. *See, e.g.,* *Penn Central Transp.
Corp. v. New York City,* 438 U.S. 104 (1978) (Government restrictions on
the use of private property are legal when substantially related to the
promotion of the general welfare and do not prohibit reasonable
beneficial use). The regulation here is necessary to protect the United
States coinage. In addition, the standby authority that the Secretary of
the Treasury possesses under 31 U.S.C. § 5111(d) has been in effect
since 1965; therefore, members of the public generally have been on
notice that they accept and use U.S. coinage subject to this potential
limitation. None of the comments set forth any specific theory under
which the regulation is asserted to be unconstitutional, and we continue
to believe that this is not the case.

*Comments on Debasement and Devaluation*

Eleven commenters discussed inflation and the debasement and devaluation
of United States currency. However, this issue is beyond the scope of
this regulation. Pursuant to the authorizing statute, 31 § U.S.C. 5111,
this regulation's purpose is to protect the nation's coinage by ensuring
there are sufficient 5-cent and one-cent coins in circulation to meet
the needs of the United States.

*Comments on Enforcement of the Regulation*

One commenter stated that the penalties provided in the regulation are
too harsh. However, the statute that enables the Secretary of the
Treasury to issue this regulation, 31 U.S.C. § 5111(d), mandates the
penalties for engaging in the prohibited activities, as follows:

> \(d\) (1) The Secretary may prohibit or limit the exportation,
> melting, or treatment of United States coins when the Secretary
> decides the prohibition or limitation is necessary to protect the
> coinage of the United States.\
>     (2) A person knowingly violating an order or license issued or
> regulation prescribed under paragraph (1) of this subsection, shall be
> fined not more than \$ 10,000, imprisoned not more than 5 years, or
> both.

Three commenters stated that the cost of enforcing the regulation would
exceed the minting costs that the regulation is intended to save, or
that enforcing the regulation is a waste of law enforcement resources.
The Secretary of the Treasury has weighed the enforcement costs
associated with the enactment of this regulation against the potential
costs of not enacting this regulation and has determined that it is in
the public's best interest to enact this regulation as a temporary
measure until actions are taken, or conditions change, to abate concerns
that sufficient quantities of 5-cent and one-cent coins will remain in
circulation to meet the needs of the United States.

Two commenters voiced concern that the Federal Government could arrest
or fine a science teacher for experimenting with a one-cent coin during
a classroom demonstration, or could arrest or fine a child for using a
penny pressing machine at an amusement park. However, the regulation
includes an exception for the treatment of 5-cent and one-cent coins for
educational, amusement, novelty, jewelry, and similar purposes as long
as the volumes treated and the nature of the treatment makes it clear
that such treatment is not intended as a means by which to profit solely
from the value of the metal content of the coins.

Six commenters stated that the public would hoard the coins and remove
them from circulation. The United States Mint is aware that 5-cent and
one-cent coins may be hoarded. However, the legislative history of 31
U.S.C. § 5111(d) indicates that when Congress passed the Coinage Act of
1965, section 105 (the predecessor provision to 31 U.S.C. 5111(d)), it
did not intend on prohibiting hoarding because of concerns that such
prohibitions would be difficult to enforce and that citizens might
unknowingly violate the regulations. The United States Mint does not
intend to prohibit the hoarding of 5-cent and one-cent coins but,
consistent with the legislative intent of 31 U.S.C. § 5111(d), has
implemented these prohibitions on exportation, melting, and treatment to
reduce the incentive to hoard these coins.

*Comments from Trade Associations and Businesses*

The Institute of Scrap Recycling Industries, Inc. (Institute), a trade
association for the recycling industry, submitted a comment suggesting
that an exception be added for the unintended exportation, melting, and
treatment of 5-cent and one-cent coins that occurs incidental to the
recycling of other materials, such as scrap automobiles and construction
and demolition debris. We agree that such melting should not be
prohibited, and have added an exception for coins incidentally present
in recycled scrap. In doing so, we express no view as to whether the
melting or export of coins under the circumstances described by the
Institute would otherwise violate the regulation.

The Industry Council for Tangible Assets (Council), a trade association
for rare coin and precious metals dealers, submitted a comment
suggesting that an exception be added for the exportation, melting, or
treatment of "war nickels." War nickels were 5-cent coins produced
during World War II, from 1942 through 1945, from a special alloy of
copper, silver, and manganese in order to conserve nickel for the war
effort. The Council points out that the war nickels are traded for their
numismatic value, they are melted for the value of their metal
composition, and that few, if any, remain as circulating coins. Because
it appears that covering war nickels under the regulation would disrupt
longstanding practices and would not further the protection of
circulating coinage, we have added an exception for such coins.

*Advice From the Cash Product Office of the Federal Reserve*

The Cash Product Office of the Federal Reserve advised that some
depository institutions export 5-cent and one-cent coins, as well as
other U.S. circulating coins, to foreign countries that have so-called
"dollarized" monetary systems. Central banks in these countries purchase
U.S. circulating coinage from domestic depository institutions for use
as circulating money in their own countries. To accommodate this
legitimate requirement to permit the exportation of 5-cent and one-cent
coins, we have added an additional exception to the final regulation.

**IV. Conclusion**

Based on the comments received and the analysis of those comments as set
forth above, and based on the additional considerations discussed above,
the Department of the Treasury, United States Mint, has concluded that
the interim regulation will be adopted as a final rule, with certain
changes as discussed above and set forth below.

**V. Procedural Requirements**

This rule is not a significant regulatory action for the purposes of
Executive Order 12866. 

Because a notice of proposed rulemaking was not required prior to the
implementation of the interim rule, the provisions of the Regulatory
Flexibility Act (5 U.S.C. chapter 6), do not apply.

The final rule does not impose a "collection of information" requirement
within the meaning of the Paperwork Reduction Act of 1995.

The final rule will be effective upon publication. The final rule
relieves some of the restrictions in the interim rule by providing for
new exceptions and for the expansion of existing exceptions.
Accordingly, because the final rule grants or recognizes an exemption or
relieves a restriction currently in place, 5 U.S.C. § 553(d)(1) exempts
the final rule from the requirement in 5 U.S.C. § 553(d) that the
publication or service of a substantive rule shall be made not less than
30 days before its effective date.

**VI. Format**

The format of the final rule is generally consistent with the format of
the interim rule.

# List of Subjects in 31 CFR Part 82

# 

Administrative Practice and Procedure, Currency, Exports, Penalties.

**Amendments to the Regulation**

For the reasons set forth above, the interim rule amending Chapter 1 of
Subtitle B of Title 31 of the Code of Federal Regulations, which was
published at 71 FR 76148 on December 20, 2006, is adopted as a final
rule with certain changes as discussed above and set forth below.

**PART 82 -- 5-CENT AND ONE-CENT COIN REGULATIONS**

1\. The general authority citation for part 82 continues to read as
follows:

Authority:  31 U.S.C. 5111(d).

2\. Section 82.2 is amended by revising subparagraph (a)(2),
redesignating current paragraph (c) as paragraph (f), and adding new
paragraphs (c), (d), and (e) as follows:

**§ 82.2 Exceptions.**

\(a\) The prohibition contained in § 82.1 against the exportation of
5-cent coins and one-cent coins of the United States shall not apply
to:   

\* \* \*

\(2\) The exportation of 5-cent coins and one-cent coins carried on an
individual, or in the personal effects of an individual, departing from
a place subject to the jurisdiction of the United States, when the
aggregate face value is not more than \$5, or when the aggregate face
value is not more than \$25 and it is clear that the purpose for
exporting such coins is for legitimate personal numismatic, amusement,
or recreational use.

\* \* \* \* \*

\(c\) The prohibition contained in § 82.1 against the exportation,
melting, or treatment of 5-cent and one-cent coins of the United States
shall not apply to coins exported, melted, or treated incidental to the
recycling of other materials so long as---

\(i\) such 5-cent and one-cent coins were not added to the other
materials for their metallurgical value;

\(ii\) the volumes of the 5-cent coins and one-cent coins, relative to
the volumes of the other materials recycled, makes it clear that the
presence of such coins is merely incidental; and

\(iii\) the separation of the 5-cent and one-cent coins from the other
materials would be impracticable or cost prohibitive.

\(d\) The prohibition contained in § 82.1 against the exportation,
melting, or treatment of 5-cent coins shall not apply to 5-cent coins
inscribed with the years 1942, 1943, 1944, or 1945 that are composed of
an alloy comprising copper, silver and manganese.

\(e\) The prohibition contained in § 82.1 against the exportation of
5-cent coins and one-cent coins shall not apply to 5-cent coins and
one-cent coins exported by a Federal Reserve Bank or a domestic
depository institution, or to a foreign central bank, when the
exportation of such 5-cent coins and one-cent coins is for use as
circulating money.

\(f\) (1) The prohibition contained in § 82.1 against exportation,
melting, or treatment of 5-cent coins and one-cent coins of the United
States shall not apply to coins exported, melted, or treated under a
written license issued by the Secretary of the Treasury (or designee).

\(2\) Applications for licenses should be transmitted to the Director,
United States Mint, 801 9th Street, N.W., Washington, DC 20220.

 

 

 Dated: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 2007

 

 

Edmund C. Moy

[Director, United States Mint]{.underline}.