[Federal Register Volume 86, Number 9 (Thursday, January 14, 2021)]
[Rules and Regulations]
[Pages 3010-3015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00592]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 1

[HHS-OS-2021-0001]
RIN 0991-AC18


Department of Health and Human Services Transparency and Fairness 
in Civil Administrative Enforcement Actions

AGENCY: Office of the Secretary, Department of Health and Human 
Services.

ACTION: Final rule.

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SUMMARY: The Department of Health and Human Services is issuing 
regulations promoting transparency and fairness in civil enforcement 
actions. These regulations will help to ensure that regulated parties 
receive fair notice of laws and regulations they are subject to, and 
have an opportunity to contest an agency determination prior to the 
agency taking an action that has a legal consequence.

DATES: Effective January 12, 2021.

FOR FURTHER INFORMATION CONTACT: Brenna Jenny, Department of Health and 
Human Services, 200 Independence Avenue SW, Room 713F, Washington, DC 
20201. Email: <a href="/cdn-cgi/l/email-protection#d592babab1fb92a0bcb1b4bbb6b095bdbda6fbb2baa3"><span class="__cf_email__" data-cfemail="2a6d45454e046d5f434e4b44494f6a424259044d455c">[email protected]</span></a>. Telephone: (202) 690-7741.

I. Statutory and Regulatory Background

    The primary legal authority supporting this rulemaking is 5 U.S.C. 
301. That provision provides that the ``head of an Executive department 
or military department may prescribe regulations for the government of 
his department, the conduct of its employees, the distribution and 
performance of its business, and the custody, use, and preservation of 
its records, papers, and property.'' This statute authorizes an 
``agency to regulate its own affairs,'' and issue rules, such as this 
one, that are ``rules of agency organization[,] procedure or 
practice.'' Chrysler Corp. v. Brown, 441 U.S. 281, 309-10 (1979). 
Similarly, 42 U.S.C. 1302 provides that the Secretary ``shall make and 
publish such rules and regulations, not inconsistent with this chapter, 
as may be necessary to the efficient administration of the functions 
with which [he] is charged'' under Chapter 7 of the Social Security 
Act. Chapter 7 contains, among other things, statutory provisions 
governing Medicare, Medicaid, and the Health Insurance Portability and 
Accountability Act (HIPAA).
    The Administrative Procedure Act (``APA''), 5 U.S.C. 551 et seq., 
specifies the process by which such regulations are promulgated. 
Department heads generally must prescribe regulations through notice-
and-comment rulemaking, but there is an exception for ``rules of agency 
organization, procedure, or practice.'' The requirements for notice and 
comment prior to finalization also do not apply to regulations that 
involve ``a matter relating to agency management or personnel.'' 5 
U.S.C. 553(a)(2).
    Because this final rule only specifies procedures that agency 
personnel must follow or that will govern civil enforcement actions, it 
is exempt from the requirement for notice and comment prior to 
finalization. In determining whether notice-and-comment rulemaking is 
required, the ``critical feature is that [the rule] covers agency 
actions that do not themselves alter the rights or interests of the 
parties, although it may alter the manner in which the parties present 
themselves or their viewpoints to the agency.'' Nat'l Sec. Counselors 
v. CIA, 931 F. Supp. 2d 77, 106-07 (D.D.C. 2013) (quoting Batterton v. 
Marshall, 648 F.2d 694, 707 (D.C. Cir. 1980)). This rule is exempt from 
notice and comment because it does not ``put[ ] a stamp of approval or 
disapproval on a given type of behavior.'' Am. Hosp. Assoc. v. Bowen, 
834 F.2d 1037, 1047 (D.C. Cir. 1987). What had been a regulatory 
violation prior to finalization of this rule still is; the Department 
of Health and Human Services (``HHS'' or ``the Department'') is only 
modifying the procedures governing civil enforcement actions and the 
Department's civil enforcement action practices. To be sure, these 
procedural modifications, like most rules of agency procedure or 
personnel, might have some impact on the public. But agency rules that 
impose ``derivative,'' ``incidental,'' or ``mechanical'' burdens upon 
regulated individuals are considered procedural, rather than 
substantive, and are therefore exempt from the notice-and-comment 
requirement. Id. at 1051. Moreover, to the extent this rule has effects 
on the public, it only provides additional protections to the public, 
rather than depriving the public of any rights or interests it 
previously had.
    The APA requires that ``administrative policies affecting 
individual rights and obligations be promulgated pursuant to certain 
stated procedures so as to avoid the inherently arbitrary nature of 
unpublished ad hoc determinations.'' Morton v. Ruiz, 415 U.S. 199, 232 
(1974). The Freedom of Information Act amended the APA to advance this 
goal, and generally requires that agencies publish in the Federal 
Register their substantive rules of general applicability, statements 
of general policy, and interpretations of law that are generally 
applicable. 5 U.S.C. 552(a)(1)(D). Unless a party has actual and timely 
notice of the terms of a rule or policy, the Freedom of Information Act 
generally provides that a party may not be adversely affected by a rule 
or policy required to be published in the Federal Register that is not 
so published. 5 U.S.C. 552(a)(1)(flush language). This rule of agency 
procedure ensures that HHS actions comport with these requirements.

II. Summary of Transparency and Fairness Regulations

    To provide regulated parties with greater transparency and fairness 
in administrative actions, and consistent with the requirements of 
Executive Order 13892 of October 9, 2019, ``Promoting the Rule of Law 
Through Transparency and Fairness in Civil Administrative Enforcement 
and Adjudication,'' 84 FR 55239 (Oct. 15, 2019), HHS is setting forth 
policies that promote transparency and fairness in civil enforcement 
actions that will apply to all divisions of HHS. The requirements in 
this rule amend 45 CFR part 1.

[[Page 3011]]

    This rule is one component of the Department's broader regulatory 
reform initiative. The rule is designed to ensure accountability, 
fairness of how the Department uses guidance, proper use of guidance 
documents, and opportunities for third parties to be heard, and to 
safeguard the important principles underlying the United States 
administrative law system.

A. Scope (45 CFR 1.1)

    The requirements established pursuant to this rule in Sec. Sec.  
1.2(b) and 1.6 through 1.9 apply to civil enforcement actions by any 
component of the Department. Sections 1.3 through 1.5 (as well as the 
definitions in Sec.  1.2 that were added through the Good Guidance 
Practices final rule at 85 FR 78770 (Dec. 7, 2020), and that we will 
recodify in this rule at Sec.  1.2(a)) will continue to apply to all 
guidance documents until FDA amends its good guidance practices 
regulation to be consistent with the HHS Good Guidance Practices rule, 
at which point Sec. Sec.  1.2(a) and 1.3 through 1.5 shall apply to all 
divisions of HHS except FDA.
    Nothing in this rule shall apply:
    <bullet> To any action that pertains to foreign or military 
affairs, or to a national security or homeland security function of the 
United States (other than procurement actions and actions involving the 
import or export of nondefense articles and services);
    <bullet> To any action related to a criminal investigation or 
prosecution, including undercover operations, or any civil enforcement 
action or related investigation by the Department of Justice, including 
any action related to a civil investigative demand under 18 U.S.C. 
1968;
    <bullet> To any action related to detention, seizure, or 
destruction of counterfeit goods, pirated goods, or other goods that 
infringe intellectual property rights;
    <bullet> To any investigation of misconduct by an agency employee 
or any disciplinary, corrective, or employment action taken against an 
agency employee; or
    <bullet> In any other circumstance or proceeding to which 
application of this order, or any part of this order, would, in the 
judgment of the Secretary of HHS, undermine the national security.

B. Definitions (45 CFR 1.2)

    The definitions section at 45 CFR 1.2 is amended to include the 
following definitions at paragraph (b).
Civil Enforcement Action
    HHS defines ``civil enforcement action'' to mean an action with 
legal consequence taken by the Department based on an alleged violation 
of the law. Such actions include administrative enforcement proceedings 
and enforcement adjudication (which is the administrative process 
undertaken by any component of the Department to resolve the legal 
rights and obligations of specific parties with regard to a particular 
enforcement issue pending before it) but do not include actions taken 
in the normal course of the Department's regulatory communications or 
decision-making, for example, decisions on product applications (such 
as approvals or denials/withdrawals of approval), claims 
authorizations, responses to citizen petitions, food or color additive 
petitions, or public health notifications.
Legal Consequence
    HHS defines ``legal consequence'' as the result of an action that 
directly or indirectly affects substantive legal rights or obligations 
including by subjecting a regulated party to potential liability in an 
enforcement action. The meaning of this term is informed by the Supreme 
Court's discussion in U.S. Army Corps of Engineers v. Hawkes Co., 136 
S. Ct. 1807, 1813-16 (2016), and includes, for example, agency letters 
or orders establishing or increasing the probability of liability for 
regulated parties in a subsequent enforcement action, Ipsen 
Biopharmaceuticals, Inc. v. Azar, 943 F.3d 953, 956 (D.C. Cir. 2019); 
Rhea Lana, Inc. v. Dep't of Labor, 824 F.3d 1023, 1030 (D.C. Cir. 
2016). It does not include a warning letter or other communication, 
such as one describing inspectional observations, that pursuant to 
agency policy is intended to provide notice to a regulated party and 
elicit voluntary compliance. Such warning letters and inspectional 
observations have no immediate regulatory implications for the entity, 
are an interim step in the agency's compliance communications with an 
entity, and are not final agency action that has legal consequences for 
a party. See Orton Motor, Inc. v. HHS, 884 F.3d 1205, 1215 (D.C. Cir. 
2018); Holistic Candlers & Consumers Ass'n v. FDA, 664 F.3d 940 (D.C. 
Cir. 2012); see also Hi-Tech Pharm., Inc. v. Hahn, Civ. No. 19-
1268(RBW), 2020 WL 3498588, *5 (D.D.C. June 29, 2020); Lystn, LLC v. 
FDA, No. 19-cv-1943-PAB-KLM, 2020 WL 248962, *5 (D. Colo. Jan. 16, 
2020); Cody Labs., Inc. v. Sebelius, No. 10-CV-00147-ABJ, 2010 WL 
3119279, *11 (D. Wyo. July 26, 2010), aff'd, 446 F. App'x 964, 969 
(10th Cir. 2011); Gomperts v. Azar, No. 1:19-cv-00345-DCN, 2020 WL 
3963864, *4-5 (D. Idaho July 13, 2020).
Unfair Surprise
    HHS defines ``unfair surprise'' to mean a lack of reasonable 
certainty or fair warning, from the perspective of a reasonably prudent 
member of regulated industry, of what a legal standard administered by 
an agency requires, or the initiation of litigation by HHS following 
``a very lengthy period of conspicuous inaction,'' in other words 
deliberate inaction, suggesting the agency previously had a different 
interpretation. Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 
156 (2012). However, an agency does not create unfair surprise when it 
proceeds with a new interpretation that it established in notice-and-
comment rulemaking. See Martin v. Occupational Safety & Health Review 
Comm'n, 499 U.S. 144, 158 (1991) (identifying ``adequacy of notice to 
regulated parties'' as one factor relevant to the reasonableness of the 
agency's interpretation).
    The definitions currently at 45 CFR 1.2 will be moved into a new 
paragraph (a). All definitions at paragraph (a) apply to all components 
of HHS until FDA amends its good guidance practices regulation, at 
which point the definitions at 45 CFR 1.2(a) shall apply to all 
divisions of HHS except FDA. The definitions at Sec.  1.2(b) will apply 
to all components of the Department, including FDA.

C. Proper Department Reliance on Guidance Documents (45 CFR 1.6)

    This rule reiterates the application of certain existing legal 
principles to HHS's use of guidance documents: When the Department 
takes a civil enforcement action or otherwise makes a determination 
based on an alleged violation of law that has legal consequence for a 
person or state, it must allege or establish the violation of law by 
applying statutes or regulations. HHS may not use guidance documents to 
impose binding requirements or prohibitions on persons outside of the 
executive branch except as authorized by law or expressly incorporated 
into a contract. Noncompliance with a standard or practice that is not 
in a statute or regulation and announced solely in a guidance document 
may not be treated as itself a violation of applicable statutes or 
regulations, unless expressly authorized by statute.
    This rule also explains the appropriate circumstances when the 
Department may use a guidance document in civil enforcement actions. 
The Department may use a guidance document to explain the legal 
applicability of a statute or regulation

[[Page 3012]]

with regard to prohibition of conduct, but when it does so, HHS may 
only use the guidance document to articulate the Department's 
understanding of how a statute or regulation applies to particular 
circumstances. Except when referring to a guidance document for 
historical facts, the Department may reference a guidance document in a 
civil enforcement action only if it has notified the public of such 
document to convey that understanding in advance. The Department must 
notify the public in advance of a guidance document through publication 
in the Department's guidance repository (as described in Sec.  1.4 and 
available at hhs.gov/guidance).

D. Fairness and Notice in Civil Enforcement Actions and Administrative 
Inspections (45 CFR 1.7)

    This rule would require the Department to only apply standards or 
practices that have been publicly stated in a manner that would not 
cause unfair surprise when HHS takes a civil enforcement action or 
otherwise makes a determination based on an alleged violation of law 
that has legal consequence for a person or state, unless a statutory 
exception applies. See, e.g., 42 U.S.C. 1395hh(e). For purposes of this 
regulation, the Department would consider standards or practices to be 
publicly stated if available in paper publications or on the internet.
    HHS avoids unfair surprise not only when it imposes penalties but 
also whenever it adjudges past conduct to have violated the law. For 
example, the Department generally cannot retroactively impose liability 
on a party for conduct that violates a new agency interpretation. But 
see 42 U.S.C. 1395hh(e). The Department also may not alter its 
interpretation during an adjudicative proceeding if doing so would 
impose new liability on parties who have acted in good faith on the 
prior interpretation. SmithKline Beecham, 567 U.S. at 156 & n.15.
    Section 7 of Executive Order 13892 requires that each agency that 
conducts civil administrative inspections must publish a rule of agency 
procedure governing such inspections, if such a rule does not already 
exist. The Department is adding a requirement at 45 CFR 1.7 that HHS 
shall only conduct civil administrative inspections according to 
published rules of agency procedure. While the Administrative Procedure 
Act exempts these subsequently issued rules of agency procedure 
themselves from notice-and-comment rulemaking, see 5 U.S.C. 
553(b)(3)(A), each agency must make the rules governing its civil 
administrative inspections, including audits, publicly available and 
readily accessible, such as by posting them on a website.

E. Fairness and Notice in Jurisdictional Determinations (45 CFR 1.8)

    The requirement for fairness and notice also extends to 
jurisdictional determinations. If the Department relies on a decision 
previously issued by an agency within the Department in an agency 
adjudication (i.e., proceedings before and decided by the agency), 
administrative order, or agency document to assert a new or expanded 
claim of jurisdiction (e.g., a claim to regulate a new subject matter 
or a new basis for liability, or a relinquishment of a claim of 
jurisdiction), the Department must give fair notice by publishing the 
initial decision in the Federal Register or the Department's guidance 
repository. See 45 CFR 1.4. The Department should not rely on the new 
claim of jurisdiction to take a civil enforcement action regarding 
conduct that occurred before such publication. A claim of jurisdiction 
is not ``new or expanded'' simply because it involves a new or novel 
set of facts so long as it is based on an established principle of 
general applicability.
    If the Department intends to rely on a document arising out of 
litigation (other than a publicly published opinion of an adjudicator) 
such as a brief, a consent decree, or a settlement agreement, to 
establish jurisdiction in future civil enforcement actions involving 
persons who were not parties to the litigation, the Department must 
also publish that document in the Federal Register or on the 
Department's guidance repository. Alongside publication of the 
document, the Department must also provide an explanation of the 
document's jurisdictional implications. Publication of a document 
discussed in this paragraph may either be in full or by citation, if 
the document is publicly available.
    HHS is also proposing that if the Department seeks judicial 
deference to its interpretation of a document arising out of litigation 
(other than a publicly published opinion of an adjudicator) in order to 
establish a new or expanded claim of jurisdiction, HHS must, before 
seeking judicial deference, publish the document or a notice of 
availability in the Federal Register or on the Department's guidance 
repository, along with an explanation of the document's jurisdictional 
implications.

F. Opportunity To Contest Agency Determinations (45 CFR 1.9)

    Providing regulated parties with the opportunity to be heard, 
including through informal oral or written communications, prior to the 
Department taking any civil enforcement action that has legal 
consequence is critical to ensuring that the Department operates with 
transparency and fairness. This rule will require that, before any 
component of the Department takes any civil enforcement action with 
respect to a particular entity that has legal consequence for that 
entity--including by issuing to such a person a notice of noncompliance 
or other similar notice that has immediate regulatory consequence or 
the immediate effect of subjecting the person to potential liability--
the Department must afford that person an opportunity to be heard, 
either orally or in writing, as deemed appropriate at the Department's 
election. The rule will require HHS to provide the person with its 
proposed legal and factual determinations and then give the person a 
reasonable amount of time to respond to those determinations. The 
specific timeframe shall be in the discretion of the agency but must be 
long enough to provide a meaningful opportunity to be heard. Certain 
circumstances may warrant a time period of 30 days, while other 
circumstances may warrant a shorter period, such as 15 days or fewer, 
particularly where existing agency procedures already offer a shorter 
period in which to respond. Unless the Department withdraws the action, 
the Department must then respond in writing to the regulated party and 
articulate the final basis for the Department's action. This written 
response may be issued contemporaneous to the Department taking the 
action with legal consequence. We anticipate that generally, existing 
HHS procedures will already satisfy these standards, and where they do, 
those existing procedures will continue in effect unchanged. This 
rulemaking is not intended to preempt existing rules of agency 
procedure that are already consistent with this rule. Furthermore, 
where the Department takes an action based on a predicate finding that 
was reached following notice, an opportunity to be heard, and a written 
response, for example, where the Department revokes Medicare enrollment 
based on a prior exclusion or felony conviction, these procedural 
requirements are considered to have already been satisfied.

[[Page 3013]]

    These procedures regarding fair notice and an opportunity to 
respond would not apply where the agency, in its discretion, determines 
there is a serious threat to health, safety, or similar emergency, or 
where a statute specifically authorizes proceedings that are 
inconsistent with this section, including proceedings without a prior 
opportunity to be heard. Where such a threat arises and a statute does 
not specifically authorize proceedings without a prior opportunity to 
be heard, HHS would still provide an affected entity with an 
opportunity to be heard and a written response as soon as practicable. 
In this context, a serious threat means that, as reasonably determined 
by the Department, there is a non-negligible likelihood of the threat 
materializing.
    We anticipate that the exception from Sec.  1.9 for actions taken 
in the context of threats to health, safety, or similar emergencies 
will apply broadly to public health agencies acting in furtherance of 
their missions. Actions will be considered to fall into this exception 
regardless of whether there is a showing of actual, imminent risk or 
harm, either to persons or animals. The agency has sole discretion to 
determine when an action falls into this exception. An agency may 
invoke this exception regardless of whether agency action is taken 
reactively (e.g., to address an unsafe item currently on the market) or 
proactively (e.g., to enforce regulations needed to protect public 
health prior to actual exposure by the public to unsafe items). Actions 
that fall into this exception include, for example, enforcing age 
restrictions or other controls around access to certain regulated 
products, enforcing manufacturer recordkeeping or reporting 
requirements, enforcing premarket requirements where there is an 
absence of or insufficient data concerning the product, protecting 
beneficiary data privacy or a federal healthcare program beneficiary 
from harm, and taking action to remove unapproved, misbranded, or 
adulterated human or animal products from the market.
    Because of this exception, the procedures in Sec.  1.9 generally 
will not impact, for example, the administrative detention process for 
foods, drugs, devices, and tobacco products (21 U.S.C. 334(g), (h)), 
the detention, refusal, and where authorized, destruction of imported 
products regulated by FDA (21 U.S.C. 381), disqualification (21 CFR 
parts 56, 58, 312, 511, 812), administrative detention, recall 
requests, import alerts, or other public notifications about food, 
drug, device, or tobacco products, or other actions related to 
investigating adulterated or misbranded products.
    These procedures would also not apply to settlement negotiations 
between agencies and regulated parties, to notices of a prospective 
legal action, where a statute specifically precludes review of agency 
action, or to litigation before courts. Examples of situations where 
statutes specifically authorize differently structured proceedings 
include, but are not limited to, the hospital cost report appeals 
process (42 U.S.C. 1395oo), the individual benefit claims appeals 
process (42 U.S.C. 1395ff), and the process for the review of 
disallowances of Medicaid expenditures by the Secretary (42 U.S.C. 
1316(e)). In such circumstances, the process and substantive standards 
governing review of claims arising under a relevant statute or 
regulation remain governed by those more specific procedures. The 
procedures would also not apply to any action related to a criminal 
investigation or prosecution, including undercover operations that may 
be used in a criminal investigation or prosecution, or any civil 
enforcement action either related to an investigation by the Department 
of Justice, or referred to the Department of Justice.

III. Rulemaking Analyses and Notices

A. Executive Orders 12866 and 13563

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if the regulation is necessary, to select 
regulatory approaches that maximize net benefits. The Department does 
not believe that this rulemaking is a significant regulatory action 
under these Executive Orders. This rule describes an update to the 
Department's current processes to ensure that it operates with 
transparency and fairness. The requirements in 45 CFR 1.6 through 1.9 
relating to the proper use of guidance documents and fairness and 
notice in enforcement actions generally already exist in law. The 
requirements set forth in Section 6 of Executive Order 13892 and 
codified at 45 CFR 1.6 may exceed the requirements imposed by the Due 
Process clause of the Constitution and may impose a burden by delaying 
the time until HHS can take actions with legal consequence. However, 
this process will also offer important procedural safeguards and 
potentially reduce economic costs borne by regulated entities, which 
will have an opportunity to respond in writing before the Department 
takes an action that has (potentially costly) legal consequence.
    The Department anticipates that the public, and, in particular, 
regulated parties, would benefit from greater efficiencies and more 
transparency in how the Department regulates, including facilitating 
smoother operations within HHS by clearly defining how guidance can be 
used.

B. Executive Order 13771

    This final rule is neither a regulatory nor a deregulatory action 
under Executive Order 13771, ``Reducing Regulation and Controlling 
Regulatory Costs,'' 82 FR 9339 (Feb. 3, 2017), because this rule is 
estimated to impose no more than de minimis costs on regulated 
entities.

C. Regulatory Flexibility Act

    The Department has examined the economic implications of this rule 
as required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et 
seq. The RFA requires an agency to describe the impact of a rulemaking 
on small entities by providing an initial regulatory flexibility 
analysis, unless the agency expects that the rule will not have a 
significant impact on a substantial number of small entities, provides 
a factual basis for this determination, and proposes to certify the 
statement. 5 U.S.C. 603(a), 605(b). The Department considers a proposed 
or final rule to have a significant impact on a substantial number of 
small entities if it has at least a three percent impact on revenue on 
at least five percent of small entities. The Department anticipates 
that this rule will allow small entities to operate more efficiently, 
by increasing the transparency of government regulation. As a result, 
the Department has determined, and the Secretary certifies, that this 
final rule would not have a significant impact on the operations of a 
substantial number of small entities.

D. Executive Order 13132 (Federalism)

    Executive Order 13132, ``Federalism,'' establishes certain 
requirements that an agency must meet when it promulgates a rule that 
imposes substantial direct requirement costs on State and local 
governments or has Federalism implications. The Department has 
determined that this final rule will not impose such costs or have any 
federalism implications.

E. Paperwork Reduction Act of 1995

    In accordance with the Paperwork Reduction Act of 1995 and its 
implementing regulations, 44 U.S.C. 3501-3521; 5 CFR part 1320, the

[[Page 3014]]

Department has reviewed this rule and has determined that it imposes no 
new collections of information.

List of Subjects in 45 CFR Part 1

    Guidance, Government employess.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR Part I as set forth below:

PART 1--TRANSPARENCY AND FAIRNESS IN CIVIL ADMINISTRATIVE 
ENFORCEMENT AND ADJUDICATION

0
1. The authority citation for part 1 continues to read as follows:


    Authority:  42 U.S.C. 1302, 5 U.S.C. 301, 551 et seq.

0
2. Section 1.1 is revised to read as follows:


Sec.  1.1  Scope.

    Sections 1.2(a) and 1.3 through 1.5 of this part shall apply to 
guidance documents issued by all components of the Department, until 
the Secretary amends the Food and Drug Administration's good guidance 
regulations at 21 CFR 10.115 to bring them into conformance with the 
requirements of this part, at which point, such amended regulations 
shall apply to the Food and Drug Administration, and Sec. Sec.  1.2(a) 
and 1.3 through 1.5 shall apply to all divisions of the Department 
except the Food and Drug Administration. Sections 1.2(b) and 1.6 
through 1.9 of this part shall apply to all components of the 
Department.

0
3. Section 1.2 is amended by designating the existing text as paragraph 
(a) followed by the alphabetical ordered definitions, revising newly 
designated paragraph (a) introductory text, and adding paragraph (b).
    The revision and addition read as follows:


Sec.  1.2  Definitions.

    (a) The following definitions apply to all components of the 
Department until the Secretary amends the Food and Drug 
Administration's good guidance regulations at 21 CFR 10.115 to bring 
them into conformance with the requirements of Sec. Sec.  1.3 through 
1.5 of this part:
* * * * *
    (b) The following definitions apply to all components of the 
Department:
    Civil enforcement action means an action with legal consequence 
taken by the Department based on an alleged violation of the law. Such 
actions include administrative enforcement proceedings and enforcement 
adjudication (which is the administrative process undertaken by any 
component of the Department to resolve the legal rights and obligations 
of specific parties with regard to a particular enforcement issue 
pending before it) but do not include actions taken in the normal 
course of the Department's regulatory communications or decision-
making, for example, decisions on product applications (such as 
approvals, denials, or withdrawals of approval), claims authorizations, 
citizen petitions, food or color additive petitions, or public health 
notifications.
    Legal consequence means the result of an action that directly or 
indirectly affects substantive legal rights or obligations, including 
by subjecting a regulated party to potential liability in an 
enforcement action. This includes agency letters or orders establishing 
greater liability for regulated parties in a subsequent enforcement 
action, but excludes communications that have no immediate regulatory 
implications for a person or entity, such as letters (e.g., warning 
letters) or inspectional observations that serve as an interim step in 
the agency's compliance communications with a person or entity or that 
are intended to encourage voluntary compliance.
    Unfair surprise means a lack of reasonable certainty or fair 
warning, from the perspective of a reasonably prudent member of 
regulated industry, of what a legal standard administered by an agency 
requires.

0
4. Section 1.6 is added to read as follows:


Sec.  1.6  Proper Department reliance on guidance documents.

    (a) Overview. A civil enforcement action must have an appropriate 
legal basis. When the Department takes a civil enforcement action or 
makes a determination based on an alleged violation of law that has 
legal consequence for a person or state, it must allege or establish 
the violation of law by applying statutes or regulations.
    (b) Limitations on the use of guidance documents. (1) The 
Department may not use guidance documents to impose binding 
requirements or prohibitions on persons outside the executive branch 
except as expressly authorized by law or as expressly incorporated into 
a contract.
    (2) The Department may not treat noncompliance with a standard or 
practice announced solely in a guidance document as itself a violation 
of applicable statutes or regulations except as expressly authorized by 
law.
    (3) If the Department uses a guidance document to explain the legal 
applicability of a statute or regulation, that document can do no more, 
with respect to prohibition of conduct, than articulate the 
Department's understanding of how a statute or regulation applies to 
particular circumstances.
    (4) The Department may cite to a guidance document in a civil 
enforcement action only if it has notified the public of such document 
in advance through publication, in the Department's guidance 
repository, as described in Sec.  1.4.

0
5. Section 1.7 is added to read as follows:


Sec.  1.7  Fairness and notice in civil enforcement actions and 
administrative inspections.

    (a) When the Department takes a civil enforcement action, the 
Department may only apply standards or practices that have been 
publicly stated in a manner that would not cause unfair surprise.
    (b) The Department must avoid unfair surprise when it imposes 
penalties and whenever it adjudges past conduct to have violated the 
law.
    (c) The Department shall only conduct civil administrative 
inspections according to published rules of agency procedure.

0
6. Section 1.8 is added to read as follows:


Sec.  1.8  Fairness and notice in jurisdictional determinations.

    (a) If the Department relies on a decision in an agency 
adjudication, administrative order, or agency document to assert a new 
or expanded claim of jurisdiction (e.g., a claim to regulate a new 
subject matter or a new basis for liability, or a relinquishment of a 
claim of jurisdiction), the Department must give fair notice by 
publishing the initial decision before the conduct over which 
jurisdiction is sought occurs. It must publish the initial decision in 
full or by citation, if publicly available, in the Federal Register or 
the Department's guidance repository described in Sec.  1.4. A claim of 
jurisdiction is not ``new or expanded'' simply because it involves a 
new or novel set of facts so long as it is based on an established 
principle of general applicability.
    (b) If the Department intends to rely on a document arising out of 
litigation (other than a publicly published opinion of an adjudicator), 
such as a brief, a consent decree, or a settlement agreement, to 
establish jurisdiction in future civil enforcement actions

[[Page 3015]]

involving persons who were not parties to the litigation, the 
Department must--
    (1) Publish that document, either in full or by citation if 
publicly available, in the Federal Register or on the Department's 
guidance repository described in Sec.  1.4, and
    (2) Publish an explanation of the document's jurisdictional 
implications.
    (c) Before seeking judicial deference to the Department's 
interpretation of a document arising out of litigation (other than a 
publicly published opinion of an adjudicator) in order to establish a 
new or expanded claim of jurisdiction in a different case, the 
Department must--
    (1) Publish the document or a notice of availability in the Federal 
Register or on the Department's guidance repository described in Sec.  
1.4, and
    (2) Publish an explanation of the document's jurisdictional 
implications.

0
7. Section 1.9 is added to read as follows:


Sec.  1.9  Opportunity to contest agency determination.

    (a) Departmental overview. Except as provided in paragraph (c) of 
this section, prior to the Department taking any civil enforcement 
action with respect to a particular entity that has legal consequence 
for that entity, including by issuing to such a person a notice of 
noncompliance, or other similar notice that has immediate regulatory 
consequence, but excluding communications that have no immediate 
regulatory implications for the entity, such as those that serve as an 
interim step in the agency's compliance communications with the entity 
or that are intended to encourage voluntary compliance, the Department 
shall provide--
    (1) Written notice to the affected entity of the initial legal and 
factual determinations underpinning the initial adverse determination;
    (2) An opportunity for the affected entity to respond in writing 
and, if determined appropriate by the Department, orally; and
    (3) A written response from the Department to the affected entity 
after receiving a timely request from the affected entity under 
paragraph (a)(2) of this section.
    (b) Timing and content of written responses. (1) The Department 
will select a meaningful amount of time in which the affected entity 
must submit a written response to the Department. This writing must be 
submitted within the time period specified by the Department, unless 
the Department concludes an extension is warranted, and state the 
reasons for the entity's disagreement with the Department's proposed 
action for purposes of requiring a response in accordance with 
paragraph (a)(3) of this section.
    (2) The Department's written response must respond to the affected 
entity and articulate the basis for its final decision. This written 
response may be issued contemporaneous to the Department taking the 
action with legal consequence.
    (c) Exceptions. The procedures in paragraphs (a) and (b) of this 
section do not apply where the Department, in its discretion, 
determines there is a serious threat to health, safety, or similar 
emergency, or where a statute specifically authorizes proceeding 
without a prior opportunity to be heard. In such event, HHS would still 
provide an affected entity with an opportunity to be heard and a 
written response as soon as practicable. The procedures in paragraphs 
(a) and (b) do not apply to settlement negotiations between agencies 
and regulated parties, to notices of a prospective legal action, to 
litigation before courts, or any action related to a criminal 
investigation or prosecution, including undercover operations that may 
be used in a criminal investigation or prosecution, or any civil 
enforcement action either related to an investigation by the Department 
of Justice, or referred to the Department of Justice.

    Dated: January 7, 2021.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2021-00592 Filed 1-12-21; 4:15 pm]
BILLING CODE 4150-26-P


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