December 12, 2003

**Submitted Electronically to [adoptionregs@state.gov]{.underline}**

And sent by overnight courier to:

United States Department of State

CA/OCS/PRI

Adoption Regulations Docket Room

2201 C Street, N.W.

Washington D.C. 20520

Re: Docket No. State/AR-01/96: Comments on Proposed Regulations 22 CFR
Part 96;

Gentlemen:

As the Secretary of the New Mexico Children, Youth and Families
Department ("the Department"), I respectfully submit the following
comments by the Department on the Department of State's Proposed
Regulations ("the Regulations") to implement the 1993 Hague Convention
on Protection of Children and Cooperation in Respect of Intercountry
Adoptions ("the Convention") and the Intercountry Adoption Act of 2000
("the IAA").

[Introduction]{.underline}

The stated purposes of the Convention, the IAA and the proposed
regulations are to protect the children, birth parents and adoptive
parents involved in intercountry adoptions and to prevent
child-trafficking and other abuses. Many of the proposed regulations
effectively promote these purposes. I applaud the Secretary of State and
the staff who worked on these regulations for their efforts in
attempting to improve the delivery of services in connection with
international adoptions, a goal which the State of New Mexico deeply
shares. However, the Department believes that certain provisions of the
regulations need reconsideration. We are particularly concerned with
provisions concerning liability, whose effects run counter to the goals
of the Convention and the IAA by increasing the risks and costs of
operation of adoption agencies to the point that smaller agencies may
not be able to participate in international adoptions. This would
operate to the ultimate detriment of prospective adoptive parents and
prospective adopted children around the world.

The following comments are respectfully offered in an effort to try and
improve the system which the proposed regulations are designed to
enhance. We recommend that the Department of State issue an interim
ruling on the Regulations, with a period for further public comment. We
hope that through a thorough process of public comment and discussion
among all those involved that the issues noted below will be
satisfactorily resolved.

[Preamble]{.underline}

The Proposed Regulations establish as a goal, at Preamble 54081, to give
"the adoptive parents legal recourse against a single entity." As
discussed below, the Proposed Regulations endeavor to accomplish this
goal by imposing strict liability on primary providers of adoption
services in the United States for all damages regardless of fault. This
proposed scheme would discard centuries of established principles of
tort and contract liability, and would have disastrous impact on the
availability of the very services the Hague Convention was designed to
promote. This proposed liability scheme exceeds the rule-making
authority of the Department of State, in the Department's opinion, and
is inconsistent with the Department of State's own expressed intention
at Preamble 54077 to "ensure that the standards do not unnecessarily or
adversely effect the currently sound practices of small agencies and
persons...."

[§ 96.4]{.underline}

The Department acknowledges that the IAA permits the Secretary of State
("the Secretary") to designate as few as one accrediting entity. The
Department submits, however, that the most effective way to implement
both the letter and the spirit of the Convention, IAA and these
Regulations would be for the Department of State to enter into
agreements with public agencies in each state, particular those agencies
which are already engaged in the licensing and oversight of adoption
agencies. A state agency, supported by public funds, can efficiently
provide the necessary services at the lowest possible cost to the
adoption agencies and persons who will be applying for accreditation and
approval. At least in states like New Mexico, which has the structure
and personnel in place to perform this function, and which is able to
fulfill the requirements of the IAA and the Regulations, an agreement
with a public agency to act as an accrediting entity is the best way to
meet the goals of the IAA in an expeditious and cost-effective manner.
This is of particular importance in smaller and less wealthy states like
New Mexico, where adoption agencies are often small and lacking in the
resources necessary to support a higher cost accreditation process. The
proposed regulations recognize the importance of the services provided
by these smaller agencies, in the Preamble, p. 54077

[§ 96.10]{.underline}

§ 96.10 provides that the Secretary will cancel or suspend an
accrediting entity's designation as such if the entity found to be
substantially out of compliance with the Convention, the IAA or the
accrediting agency Agreement with the Secretary of State. The Department
acknowledges that the relationship between an accrediting entity and the
State Department is one of contract or memorandum of agreement, and that
the Administrative Procedure Act, 5 USC §§ 501 et seq., probably does
not apply to these agreements. However, the Department would suggest
that the Regulations need to spell out in some detail (a) the process by
which the Secretary of State will investigate complaints against, or
concerns about, accrediting entities, (b) how the Secretary will
determine whether accrediting entities are or are not in "substantial
compliance" with the relevant laws and regulations, and (c) a process by
which accrediting entities will be given notice of any complaints or
concerns which may arise, so that they may have an opportunity to
respond to the concerns, and to correct any deficiencies in their
compliance. As currently written, the regulation appears to provide for
no consideration of, or even communication with an accrediting entity
with which the Secretary has a concern, nor for any opportunity for the
accrediting entity to respond or engage in corrective action. This is
notably inconsistent with the provisions of 42 USC § 14922, by which the
IAA gives agencies or persons against whom action is taken by an
accrediting entity an opportunity to respond and correct any
deficiencies which have been noted.

[§ 96.33(e)]{.underline}

§ 96.33(e) is not sufficiently clear about how (or how strictly) the
requirement that every agency or person maintain a three month reserve
of cash or other financial resources is to be enforced. The Regulation
states that an agency should operate on a sound financial basis, which
is certainly appropriate, and then says the agency should "generally"
maintain three months worth of operating expense reserves. The
Department does not disagree with this notion as a general reference
point for assessing an agency's or person's financial soundness, but
suggests that this Regulation should be clarified to make clear that an
agency or person will not be considered out of compliance with its
obligations if it simply falls below the suggested three month reserve
amount for a brief period of time, or if other aspects of its financial
situation make application of the three month reserve requirement
unnecessary or inappropriate. For example, there might be small agencies
which do little enough business, or agencies who have assets in the form
of accounts receivable from government agencies, that a three month cash
reserve requirement would be unnecessarily strict.

[§ § 96.33(g) and (h)]{.underline}

§ 96.33(g) requires that an agency or person use an "independent
professional assessment of its risks\... as the basis for determining
the type and amount of \... liability insurance to carry." The
regulations do not define what constitutes an "independent professional
assessment. " Such a definition would seem necessary to enforcement of
this requirement. In addition, while § 96.33(g) calls for agencies and
persons to determine their liability coverage by an assessment of their
actual risks, § 96.33(h) goes on to require that every agency and person
carry liability insurance in an amount of no less than \$1,000,000 per
occurrence, regardless of the actual risks as assessed. These two
provisions seem inconsistent with one another, and § 96.33(h) seems
unnecessarily strict without data to support it. The IAA, §
14923(b)(1)(E) calls for each agency to agree to have in force "adequate
liability insurance." The Secretary's designation of a specific minimum
amount of insurance would appear to exceed the requirements of the IAA,
and thus exceed the authority of the Secretary of State to make
regulations pursuant to the IAA. Furthermore, § 96.33(h) effectively
renders irrelevant the Secretary's own Regulation § 96.33(g), which
calls for an assessment of actual risks in determining the extent of
liability coverage needed, at least for small agencies for which minimum
liability coverage of \$1 million per occurrence seems clearly
excessive. The Department suggests that § 96.33(h) be deleted, and
replaced by language indicating that the risk assessment and resulting
insurance coverage under

§ 96.33(g) shall be subject to the approval of the accrediting entity as
to the sufficiency of the amount of insurance coverage carried by each
agency or person. In addition, the Department notes that obtaining the
kind and level of liability coverage required by the Proposed
regulations could well be impossible or prohibitively expensive under
proposed § 96.45 and § 96.46 as proposed, establishing a system of
strict liability which it is unlikely any insurance company would be
willing to insure against, at least at any but prohibitively high cost.

[§ § 96.37(d) and (f)]{.underline}

§ 96.37(d) requires a masters degree or higher graduate degree for
agency social work supervisors, but permits agency social work
supervisors to qualify by

substituting "incumbent" skills and experience in place of a master's
degree in the relevant field. The Department notes that these provisions
are similar New Mexico's current licensing laws and regulations, which
include "grandfather" provisions. The Department would suggest, however,
that § 96.37(d) specifically permit social work supervisors to be
qualified under the Hague/IAA regulations if they are licensed in a
relevant field under State law, including grandfather provisions.
Determination of what qualifications are necessary to ensure adequate
provision of services and supervision would seem to us to be a matter
best left to State law.

The Department recommends the same change to proposed § 96.37(f), which
for unexplained reasons does not presently include the "incumbent"
language found in § 96.37(d). The Department sees no reason for such a
distinction between the requirements for social work supervisors and
persons conducting home studies. Indeed, it would seem that if either
job called for a higher level of credentials it would be the
"supervisor." The Department suggests that state licensing laws are
sufficient to guarantee that individuals serving as social work
supervisors or performing home studies will have sufficient credentials
upon which to base confidence in their work. See Preamble, p. 54069.
This is of particular importance in less populated and less wealthy
states, where the available pool of people to do this important work is
often relatively small.

[§ 96.39(d)]{.underline}

§ 96.39(d) prohibits "blanket waivers" in agreements between agencies
and prospective adoptive parents. As discussed below in the context of
liability provisions, the Department agrees that agencies bear
responsibility for fulfilling their duties under the IAA and
regulations, and agrees that no waiver of these responsibilities should
be permitted. On the other hand, as discussed below, agencies should not
bear liability for matters beyond their ability to control. Liability
for intentional or negligent failure to fulfill an agency's duties
exists under present law. These regulations should not extend liability
beyond that imposed by the courts and statutes of the United States
under tort and contract law. There are risks involved in intercountry
adoptions which are beyond the control of United States adoption
agencies, and these regulations should not prohibit appropriate language
in adoption agreements which inform prospective adoptive parents that
there are such risks and that the agency assumes responsibility only for
its own good faith compliance with applicable laws and regulations.
*See, e.g. Ferenc v. World Child, Inc*., 977 F.Supp. 56 (D.D.C. 1997).

[§ 96.45(b)(8) and (c) and § 96.46 (b)(9) and (c)]{.underline}

As noted above, the Preamble establishes a promise of attempting to
minimize negative impact on the "currently sound practices of small
agencies and persons," but then proceeds to establish a system of strict
liability which virtually guarantees that many agencies and persons,
particularly smaller adoption agencies, will be forced out of the
business due to excessive cost and risk.

§ 96.45(b)(8) and (c) and § 96.46 (b)(9) and (c) purport to establish
strict liability for all damages on the part of U.S. adoption agencies,
a matter which creates serious concerns for the Children, Youth and
Families Department of New Mexico. We believe these proposed regulation
provisions impose unnecessary, excessive and unauthorized

liability and costs upon adoption agencies, beyond the liability
normally imposed by tort and contact law, and beyond the ability of
small agencies to bear. The ultimate result of a strict liability system
(for which liability insurance is unlikely to be available), will be to
drive small providers out of the field, increasing costs to prospective
adoptive parents and chilling the entire process by which international
adoptions are arranged and completed.

§ 96.45(b)(8) and (c) and § 96.46(b)(9) and (c) create strict liability
on the part of primary providers for any and all damages which might
result from the acts of all persons, agencies, individuals or entities
(other than public government entities) with which the primary provider
deals in the course of arranging a Convention adoption. This provision
is highly problematic, and would appear to be beyond the regulatory
power of the Department of State.

1\. The IAA does not establish or authorize specific standards for
provider liability under contract, tort or civil law. Civil liability
for the acts of agents is a matter which has developed in the courts,
and to some extent through legislation, over very long period of time.
It does not appear to be within the authority of the Secretary of State,
under its regulatory authority pursuant to the IAA, to establish rules
of civil liability in tort or contract, which rules would purport to
replace existing statutory and caselaw in this complex area of law. This
is an area reserved to the legislature and to the courts under the
United States Constitution, and which is not expressly delegated to the
Department of State by the IAA. *See, e.g. Chambers v. St. Mary's
School*, 82 Ohio St. 3d 563, 697 N.E.2d 198 (S.Ct.Ohio 1998).

2\. These provisions establish what amounts to strict liability for
damages which did not result from any act of negligence or bad faith by
the primary provider. This is nowhere suggested as a goal or even an
option by the IAA. The Department of State Summary and introduction to
the proposed regulations notes that §§ 96.45 and 96.46 are designed to
ensure each primary provider is "responsible for ensuring that the
supervised providers with whom it chooses to work comply with \[the\]
requirements" of the Regulations. (Preamble p. 54083) This is a laudable
goal, which the Department agrees with. The Department understands that
this stated goal is engendered by concerns over past failures to meet
performance standards on the part of some supervised providers,
particularly those in foreign countries. But there is a major difference
between requiring primary providers in the U.S. to exercise due
diligence and do everything they can to obtain complete and accurate
information and secure compliance with Hague requirements in
intercountry adoptions, and making such U.S. agencies strictly liable
for damages resulting from matters over which they have no possible
control. The Department of State's own introduction to the proposed
regulations notes that it is necessary to exclude foreign government
entities from any vicarious liability provision "because the primary
provider has no control over these entities." (Preamble, p. 54083) For
the same reason, it is unrealistic to create a legal presumption that
primary providers have complete control over all their supervised
providers under all circumstances, particularly those in foreign
countries. As an example: private providers in some foreign countries
could be subject at any time to

restrictions or obstacles to adoptions imposed by the governments of the
countries in which they are located. Such restrictions could prevent a
foreign provider from delivering on what was promised, through no fault
of the provider. Many eventualities are matters over which the primary
U.S. provider simply has no control. It is inappropriate, practically
and as a matter of law, to presume that a primary provider will always
be liable for damages caused by the actions or inactions of supervised
providers. Existing law takes issues of fault and duty into
consideration in distributing liability. There is no principled basis on
which the Department of State should do otherwise.

3\. Under existing tort and contract principles, established by common
law, case law and statute over literally hundreds of years, liability
for a person's negligence or for failure to fulfill a person's legal
duty may be established by evidence in a court of law. Liability for
one's agents is subject to the same scrutiny in court. *See, e.g. Ferenc
v. World Child, Inc.*, 977 F.Supp. 56 (D.D.C., 1997). A primary provider
of adoption services in the United States is certainly potentially
liable in a court of law for willfully or negligently failing to
exercise the supervisory and other duties imposed on it by these
Regulations. But to add to this existing liability a strict liability
regulatory provision, covering all damages caused by supervised
providers even where there is no showing of fault or bad faith by the
primary provider, is unnecessary, unreasonable, and would appear to us
to be beyond the legal authority of the Secretary of State under the
IAA. Such liability is beyond the resources of small agencies to bear,
and it seems unlikely that any insurance company will underwrite the
risk of strict liability for all damages regardless of fault (at least
not at a price any small agency could afford). The impact of this will
be that international adoptions will be left to large national companies
who can afford to self-insure, and whose prices to consumers will almost
certainly be higher than those which could be offered by small local
agencies. This proposed regulation can only discourage the diversity and
number of providers of international adoption services in the U.S.,
inevitably increasing costs to prospective adoptive parents. This is not
the result contemplated or sought by the letter or the spirit of the
IAA. The Department strongly urges the Secretary to reconsider proposed
Regulations § 96.45(b)(8) and (c) and § 96.46(b)(9) and (c), and replace
them with a provision that primary providers must be keenly aware of
their responsibility for ensuring compliance with the Convention, the
IAA and the Regulations by all their supervised providers, including
those in foreign countries, and must be aware that they bear potential
legal liability in court (as well as regulatory discipline) for any
willful or negligent failure to do so.

4\. In addition to the legal and Constitutional problems with the
liability imposed by §§ 96.45 and 96.46, the Secretary should reconsider
these proposed regulations on the basis of their negative practical
consequences. If adoption agencies and persons performing adoption
services were required to assume strict liability for the acts of all
supervised providers, most small adoption service providers would simply
have to stay out of this business. The extent and magnitude of the
potential liability created by these regulations is beyond the capacity
of small providers to absorb or risk, and insurance for such strict
liability, on an international basis, is unlikely to be found at all, or
at least not at a cost any small agency could afford. This problem is
not cured by § 96.46(d),

which allows primary providers to seek indemnification from foreign
supervised providers, because the time and expense involved in
attempting to do that would be prohibitive to all but the largest,
national-level providers. These regulations would appear to favor large
national providers, who can afford the risk, self-insurance or extremely
expensive insurance coverage involved. This is not only unfair, it would
have a significant economic impact on prospective adoptive parents,
especially in smaller,

poorer states. Small local agencies can often best and most
inexpensively serve the needs of prospective adoptive parents in these
states, including New Mexico.

[§ 96.10]{.underline}

As summarized in the preamble at 54087, under § 96.10 "If an agency or
person is challenging the imposition of a suspension, corrective action,
or other sanction by an accrediting entity in Federal court, it has no
avenue for reversing such action other than review by a United States
district court, which must review any challenged adverse actions in
accordance with the APA, 5 U.S.C. 706. For purposes of judicial review,
the accrediting entity will be treated as a Federal agency as defined in
5 U.S.C." We recognize that this provision is in the IAA, but the State
Department might want to consider amplifying on the meaning and
application of this provision, because the ability and willingness of
the New Mexico Children, Youth and Families Department, and, we believe,
other private and State entities, to serve as accrediting entities under
the IAA will be seriously impacted by this provision, especially in the
context of accrediting agencies which in turn are expected to assume
strict liability for all damages as discussed above.

[Summary]{.underline}

As stated above, the foregoing comments are offered respectfully and in
a spirit of cooperation with the efforts of the Department of State to
implement the goals of the Convention and the IAA. The changes suggested
above are necessary, we believe, to ensure that international adoptions
are available to prospective adoptive parents in America and that
children around the world receive the maximum benefit of that
availability. Thank you for your consideration.

Sincerely,

Mary-Dale Bolson, Ph.D.

Cabinet Secretary

New Mexico Children, Youth and Families Department