[Federal Register Volume 72, Number 72 (Monday, April 16, 2007)]
[Rules and Regulations]
[Pages 18880-18884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-7088]


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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.

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SUMMARY: To protect the coinage of the United States, the United States 
Mint is adopting a final rule that prohibits the

[[Page 18881]]

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: This final rule is effective April 16, 2007.

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<SUP>TM</SUP> 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

[[Page 18882]]

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,

[[Page 18883]]

amusement, novelty, jewelry, and similar purposes as long as the 
volumes treated and the nature of the treatment make 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

0
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 the following changes.

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

0
1. The authority citation for part 82 continues to read as follows:

    Authority: 31 U.S.C. 5111(d).

0
2. Section 82.2 is amended by revising paragraph (a)(2), redesignating 
current paragraph (c) as paragraph (f), and adding new paragraphs (c), 
(d), and (e) as follows:


Sec.  82.2  Exceptions.

    (a) * * *
    (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 Sec.  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--
    (1) Such 5-cent and one-cent coins were not added to the other 
materials for their metallurgical value;
    (2) 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
    (3) 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 Sec.  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 Sec.  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

[[Page 18884]]

a foreign central bank, when the exportation of such 5-cent coins and 
one-cent coins is for use as circulating money.
* * * * *

    Dated: April 10, 2007.
Edmund C. Moy,
Director, United States Mint.
[FR Doc. E7-7088 Filed 4-13-07; 8:45 am]
BILLING CODE 4810-02-P