41260 Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Rules and Regulations 

1 7 U.S.C. 6(c). 

2Section 712(d)(1) provides: ‘‘Notwithstanding 

any other provision of this title and subsections (b) 

and (c), the Commodity Futures Trading 

Commission and the Securities and Exchange 

Commission, in consultation with the Board of 

Governors [of the Federal Reserve System], shall 

further define the terms ‘swap’, ‘security-based 

swap’, ‘swap dealer’, ‘security-based swap dealer’, 

‘major swap participant’, ‘major security-based 

swap participant’, and ‘security-based swap 

agreement’ in section 1a(47)(A)(v) of the 

Commodity Exchange Act (7 U.S.C. 1a(47)(A)(v)) 

and section 3(a)(78) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)(78)).’’ 

3Section 721(c) provides: ‘‘To include 

transactions and entities that have been structured 

to evade this subtitle (or an amendment made by 

this subtitle), the Commodity Futures Trading 

Commission shall adopt a rule to further define the 

terms ‘swap’, ‘swap dealer’, ‘major swap 

participant’, and ‘eligible contract participant’.’’ 

4Effective Date for Swap Regulation, 76 FR 42508 

(issued and made effective by the Commission on 

July 14, 2011; published in the Federal Register on 

July 19, 2011). Section 712(f) of the Dodd-Frank Act 

states that ‘‘in order to prepare for the effective 

dates of the provisions of this Act,’’ including the 

general effective date set forth in section 754, the 

Commission may ‘‘exempt persons, agreements, 

contracts, or transactions from provisions of this 

Act, under the terms contained in this Act.’’ Section 

754 specifies that unless otherwise provided in 

Title VII, provisions requiring a rulemaking become 

effective ‘‘not less than 60 days after publication of 

the final rule’’ (but not before July 16, 2011). 

5Concurrent with the July 14 Order, the 

Commission’s Division of Clearing and 

Intermediary Oversight (which is now two 

divisions—the Division of Clearing and Risk 

(‘‘DCR’’) and the Division of Swap Dealer and 

Intermediary Oversight (‘‘DSIO’’)) and the Division 

of Market Oversight (‘‘DMO’’) (together ‘‘the 

Divisions’’) identified certain provisions of the 

Dodd-Frank Act and CEA as amended that would 

take effect on July 16, 2011, but that may not be 

eligible for the exemptive relief provided by the 

Commission in its July 14 Order—specifically, the 

amendments made to the CEA by Dodd-Frank Act 

sections 724(c), 725(a), and 731. On July 14, 2011, 

the Divisions issued Staff No-Action Relief 

addressing the application of these provisions after 

July 16, 2011. Available at: http://www.cftc.gov/

ucm/groups/public/@lrlettergeneral/documents/

letter/11-04.pdf. 

6 76 FR at 42522 (July 19, 2011). 

7Amendment to July 14, 2011 Order for Swap 

Regulation, 76 FR 80233 (Dec. 23, 2011). 

Designations and Reporting Points, 

dated August 9, 2011, and effective 

September 15, 2011 is amended as 

follows: 

Paragraph 6005 Class E airspace areas 

extending upward from 700 feet or more 

above the surface of the earth. 

* * * * * 

ANM MT E5 Plentywood, MT [Modified] 

Plentywood Sher-Wood Airport, MT 

(Lat. 48°47′20′′ N., long. 104°31′23′′ W.) 

That airspace extending upward from 700 

feet above the surface within a 6.8-mile 

radius of Plentywood Sher-Wood Airport; 

and that airspace extending upward from 

1,200 feet above the surface bounded by a 

line beginning at lat. 49°00′00′′ N., long. 

105°02′00′′ W.; to lat. 49°00′00′′ N., long. 

104°02′00′′ W.; to lat. 48°32′35′′ N., long. 

104°02′00′′ W.; to lat. 48°27′00′′ N., long. 

104°11′12′′ W.; to lat. 48°26′00′′ N., long. 

104°41′00′′ W.; to lat. 48°17′00′′ N., long. 

104°43′00′′ W.; to lat. 48°17′00′′ N., long. 

105°52′00′′ W.; to lat. 48°32′00′′ N., long. 

105°51′00′′ W.; thence to the point of origin. 

Issued in Seattle, Washington, on July 3, 

2012. 

John Warner, 

Manager, Operations Support Group, Western 

Service Center. 

[FR Doc. 2012–16946 Filed 7–12–12; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Chapter I 

Second Amendment to July 14, 2011 

Order for Swap Regulation 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final order. 

SUMMARY: On May 16, 2012, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’ or the 

‘‘Commission’’) published in the 

Federal Register a Notice of Proposed 

Amendment (‘‘Notice’’) to extend the 

temporary exemptive relief the 

Commission granted on July 14, 2011 

(‘‘July 14 Order’’) from certain 

provisions of the Commodity Exchange 

Act (‘‘CEA’’) that otherwise would have 

taken effect on the general effective date 

of title VII of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (‘‘the Dodd-Frank Act’’)—July 16, 

2011. This final order extends the July 

14 Order with certain modifications. 

Specifically, it removes references to the 

entities terms, including ‘‘swap dealer,’’ 

‘‘major swap participant,’’ and ‘‘eligible 

contract participant’’ in light of the final 

joint rulemaking of the CFTC and 

Securities and Exchange Commission 

(‘‘SEC’’) further defining those terms 

issued on April 18, 2012; extends the 

potential latest expiration date of the 

July 14 Order to December 31, 2012, or, 

depending on the nature of the relief, 

such other compliance date as may be 

determined by the Commission; allows 

the clearing of agricultural swaps, as 

described herein; and removes any 

reference to the exempt commercial 

market (‘‘ECM’’) and exempt board of 

trade (‘‘EBOT’’) grandfather relief 

previously issued by the Commission. 

DATES: This final order is effective July 

3, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Mark D. Higgins, Counsel, (202) 418– 

5864, mhiggins@cftc.gov, Office of the 

General Counsel; David Aron, Counsel, 

(202) 418–6621, daron@cftc.gov, Office 

of the General Counsel; David Van 

Wagner, Chief Counsel, (202) 418–5481, 

dvanwagner@cftc.gov, Division of 

Market Oversight; Ali Hosseini, Special 

Counsel, (202) 418–6144, 

ahosseini@cftc.gov, Division of Market 

Oversight, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW., Washington, DC 

20581; or Anne Polaski, Special 

Counsel, (312) 596–0575, 

apolaski@cftc.gov, Division of Clearing 

and Risk; Commodity Futures Trading 

Commission, 525 West Monroe, 

Chicago, Illinois 60661. 

SUPPLEMENTARY INFORMATION: 

Background 

On July 14, 2011, the Commission 

exercised its exemptive authority under 

CEA section 4(c) 1 and its authority 

under section 712(f) of the Dodd-Frank 

Act by issuing the July 14 Order that 

addressed the potential that the final, 

joint CFTC–SEC rulemakings further 

defining the terms in sections 712(d) 2

and 721(c) 3 would not be in effect as of 

July 16, 2011 (i.e., the general effective 

date set forth in section 754 of the 

Dodd-Frank Act).4 In so doing, the 

Commission sought to address concerns 

that had been raised about the 

applicability of various regulatory 

requirements to certain agreements, 

contracts, and transactions after July 16, 

2011, and thereby ensure that current 

practices would not be unduly 

disrupted during the transition to the 

new regulatory regime.5 The July 14 

Order provided that the relief granted 

thereunder would expire no later than 

December 31, 2011.6

On December 23, 2011, the 

Commission published in the Federal 

Register a final order (the ‘‘First 

Amended July 14 Order’’) amending the 

July 14 Order in two ways.7 First, the 

Commission extended the potential 

latest expiry date from December 31, 

2011 to July 16, 2012 or, depending on 

the nature of the relief, such other 

compliance date as may be determined 

by the Commission, to address the 

potential that, as of December 31, 2011, 

the aforementioned joint CFTC–SEC 

joint rulemakings would not be 

effective. Second, the Commission 

included within the relief set forth in 

the First Amended July 14 Order any 

agreement, contract or transaction that 

fully meets the conditions in part 35 as 

in effect prior to December 31, 2011. 

This amendment addressed the fact that 

such transactions, which were not 

included within the scope of the 

original July 14 Order because the 

exemptive rules in part 35 covered them 


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Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Rules and Regulations 41261 

8The Commission promulgated a rule pursuant to 

section 723(c)(3) of the Dodd-Frank Act, and CEA 

sections 4(c) and 4c(b), that, effective December 31, 

2011, repealed the existing part 35 relief and 

replaced it with new § 35.1 of the Commission’s 

regulations. See Agricultural Swaps, 76 FR 49291 

(Aug. 10, 2011). Rule 35.1 generally provides that 

‘‘agricultural swaps may be transacted subject to all 

provisions of the CEA, and any Commission rule, 

regulation or order thereunder, that is otherwise 

applicable to swaps. [It] also clarifies that by issuing 

a rule allowing agricultural swaps to transact 

subject to the laws and rules applicable to all other 

swaps, the Commission is allowing agricultural 

swaps to transact on [designated contract markets 

(‘‘DCMs’’), swap execution facilities (‘‘SEFs’’)], or 

otherwise to the same extent that all other swaps 

are allowed to trade on DCMs, SEFs, or otherwise.’’ 

Id. at 49296. 

9CFTC–SEC, Further Definition of ‘‘Swap 

Dealer’’, ‘‘Security-Based Swap Dealer’’, ‘‘Major 

Swap Participant’’, ‘‘Major Security-Based Swap 

Participant’’, and ‘‘Eligible Contract Participant’’ 

(issued Apr. 18, 2012) (to be codified at 17 CFR pt. 

1), 77 FR 30596 (May 23, 2012), available at: 

http://www.cftc.gov/ucm/groups/public/@

newsroom/documents/file/federalregister

041812b.pdf. 

10One notable exception to this general approach 

was the heightened regulatory requirements for 

ECM-listed contracts that served a significant price 

discovery function under the pre-Dodd-Frank CEA. 

It is generally recognized, however, that the 

regulatory regime for ECM significant price 

discovery function contracts, which included nine 

core principles, was less rigorous than those 

applicable to either DCMs (pre- or post-Dodd-Frank) 

or SEFs. See CEA Section 2(h)(7)(C)(ii)(I)–(IX) 

(2008) amended by the Dodd-Frank Act. 

11See December 23 Order, 76 FR at 80236, note 

11 (Dec. 23, 2011). 

12See 17 CFR 35.1(b). 

13See 76 FR at 80236, note 22 (Dec. 23, 2011). 

14 17 CFR 40.2. 

15 17 CFR 40.3. 

16See 7 U.S.C. 5(d)(11)(A). 

17 17 CFR 39.5(a). 

18 17 CFR 39.5(b). 

19The Commission issued the ECM/EBOT 

Grandfather Order pursuant to sections 723(c) and 

734(c) of the Dodd-Frank Act which authorized the 

Commission to permit ECMs and EBOTs, 

respectively, to continue to operate pursuant to 

CEA sections 2(h)(3) and 5d for no more than one 

year after the general effective date of the DoddFrank Act’s amendments to the CEA. 

20For these purposes, an application is 

‘‘provisionally approved’’ on the date that such 

provisional approval becomes effective such that 

the ECM, EBOT, or 2(d)(2) Market may then rely on 

such provisional approval to operate as a DCM or 

SEF, as applicable. 

21Letter from Diana L. Preston, Vice President 

and Senior Counsel, Center for Securities, Trust & 

Investments, American Bankers Association, to 

David Stawick, Secretary, Commodity Futures 

Trading Commission (May 30, 2012); Letter from 

Continued 

at that time, required temporary relief 

because part 35 would not be available 

as of December 31, 2011.8 In so doing, 

the Commission clarified that new part 

35 and the exemptive relief issued in 

the First Amended July 14 Order, and 

any interaction of the two, do not 

operate to expand the pre-Dodd-Frank 

Act scope of transactions eligible to be 

transacted on either an ECM or EBOT to 

include transactions in agricultural 

commodities. 

Discussion of the Notice of Proposed 

Amendment 

On May 16, 2012, the Commission 

published in the Federal Register a 

Notice of Proposed Amendment 

(‘‘Notice’’) that would further amend the 

First Amended July 14 Order in the 

following four ways. First, in light of the 

final, joint CFTC–SEC rulemaking 

further defining the entities terms in 

sections 712(d), including ‘‘swap 

dealer,’’ ‘‘major swap participant,’’ and 

‘‘eligible contract participant,’’ issued 

on April 18, 2012,9 the Notice proposed 

to remove references to those terms. 

Second, the Notice proposed to extend 

the latest potential expiry date from July 

16, 2012 to December 31, 2012 or, 

depending on the nature of the relief, 

such other compliance date as may be 

determined by the Commission. The 

Notice stated that the extension would 

ensure that market practices will not be 

unduly disrupted during the transition 

to the new regulatory regime. 

Third, the Notice proposed to further 

amend the First Amended July 14 Order 

to provide that agricultural swaps, 

whether entered into bilaterally, on a 

DCM, or a SEF, may be cleared in the 

same manner that any other swap may 

be cleared and without the need for the 

Commission to issue any further 

exemption under section 4(c) of the 

CEA. The Notice stated that this 

amendment is intended to harmonize 

the First Amended July 14 Order and 

the final rules amending part 35 of the 

Commission’s regulations, to the extent 

that the July 14 Order, as amended, 

maintained the pre-Dodd-Frank Act part 

35 prohibition against the clearing of 

agricultural swaps. The Notice clarified 

that while the proposed Second 

Amended July 14 Order would remove 

the clearing prohibition for agricultural 

swaps, it would not permit agricultural 

swaps to be entered into or executed on 

an ECM or EBOT. 

The Commission noted that ECMs and 

EBOTs both operate some form of 

trading facility without any selfregulatory responsibilities. The 

Commission stated its general belief that 

any form of exchange trading in 

agricultural swaps should only be 

permitted in a self-regulated 

environment. In other words, unlike 

exempt and excluded commodities, 

which were generally allowed to be 

transacted on a trading facility (i.e., 

platform-traded) in an unregulated 

environment under the CEA prior to the 

Dodd-Frank Act 10 and now during the 

transition to the Dodd-Frank Act 

regulatory regime, agricultural swaps, 

which were not allowed to be platformtraded on an ECM or EBOT under the 

CEA prior to Dodd-Frank Act, may not 

be platform-traded during the transition 

to the Dodd-Frank Act regulatory 

regime. Accordingly, under the Notice 

and in conjunction with 17 CFR part 35, 

as effective on and after December 31, 

2011, the Notice stated that agricultural 

swaps may only be entered into or 

executed bilaterally, on a DCM,11 or on 

a SEF.12

In connection with swaps executed on 

a DCM (whether agricultural swaps or 

otherwise), the Commission clarified 

that a DCM may list such swaps for 

trading under the DCM’s rules related to 

futures contracts without exemptive 

relief.13 As required for futures, a DCM 

must submit such swaps to the 

Commission under either § 40.2 (listing 

products for trading by certification) 14

or § 40.3 (voluntary submission of new 

products for Commission review and 

approval) 15 of the Commission’s 

regulations. Swaps that are traded on a 

DCM are required to be cleared by a 

DCO.16 In order for a DCO to be able to 

clear a swap listed for trading on a 

DCM, the DCO must be eligible to clear 

such swap pursuant to § 39.5(a)(1) or 

(2),17 and must submit the swap to the 

Commission pursuant to § 39.5(b).18

Fourth, the Notice proposed to further 

amend the First Amended July 14 Order 

to remove any reference to the ECM/ 

EBOT Grandfather Order, which expires 

on July 16, 2012.19 The Notice stated 

that after July 16, 2012, ECMs and 

EBOTs, as well as markets that rely on 

pre-Dodd-Frank CEA section 2(d)(2) 

(‘‘2(d)(2) Markets’’), would only be able 

to rely on the Second Amended July 14 

Order, as proposed therein. The Notice 

proposed that the relief for ECMs and 

EBOTs, as well as for 2(d)(2) Markets, 

granted under the proposed Second 

Amended July 14 Order shall expire 

upon the effective date of the DCM or 

SEF final rules, whichever is later, 

unless the ECM or EBOT, or 2(d)(2) 

Markets, files a DCM or SEF application 

on or before the effective date of the 

DCM or SEF final rules, in which case 

the relief shall remain in place during 

the pendency of the application. The 

Notice clarified that for these purposes, 

an application will be considered no 

longer pending upon the application 

being approved, provisionally 

approved,20 withdrawn, or denied. 

The Commission sought comment on 

all aspects of the Notice. 

Discussion of the Final Order 

The Commission received five 

comments that related to the 

Notice.21 While generally supportive of 


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41262 Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Rules and Regulations 

Kathleen Cronin, Senior Managing Director, General 

Counsel and Corporate Secretary, CME Group Inc., 

to David Stawick, Secretary, Commodity Futures 

Trading Commission (May 30, 2012); Letter from 

David M. Perlman, Partner, Bracewell & Giuliani, 

LLP on behalf of the Coalition of Physical Energy 

Companies, to David Stawick, Secretary, 

Commodity Futures Trading Commission (May 30, 

2012); Letter from Richard W. Holmes, Jr., Vice 

President and Counsel, Fifth Third Bank, to David 

Stawick, Secretary, Commodity Futures Trading 

Commission (May 30, 2012); Letter from Paul 

Cusenza, Chief Executive Officer, Nodal Exchange, 

LLC, to David Stawick, Secretary, Commodity 

Futures Trading Commission (May 30, 2012). The 

comment letters are on file with the CFTC and are 

available via the Commission’s Web site at: 

http://comments.cftc.gov/PublicComments/ 

CommentList.aspx?id=1201. 

22See CME Group Letter at 2. In discussing this 

aspect of the proposed Second Amended July 14 

Order, CME Group noted that for agricultural swaps 

listed on a DCM, ‘‘a DCM will have the flexibility 

either to self-certify a new agricultural swap 

contract under Rule 40.2, or to submit the contract 

for CFTC approval pursuant to Rule 40.3.’’ Id. In 

adopting, as proposed, the provisions relating to 

agricultural swaps, the Commission is affirming the 

discussion of agricultural swaps contained in the 

Notice, which included the explanation that in 

addition to a DCM submitting swaps to the 

Commission under either § 40.2 or § 40.3, ‘‘In order 

for a DCO to be able to clear a swap listed for 

trading on a DCM, the DCO must be able to clear 

such swap pursuant to § 39.5(a)(1) or (2), [footnote 

omitted] and must submit the swap to the 

Commission pursuant to § 39.5(b).’’ See 77 FR at 

28820–21. 

23COPE Letter at 1–2. 

24CME Group Letter at 2. 

25 Id. 

26 Id. 

27Nodal Exchange Letter at 1–2. 

28 Id. 

29 Id. 

30The Commission currently receives notice 

filings from ECMs and EBOTs, and thus has a 

general familiarity with the nature and number of 

markets operating pursuant to ECM and EBOT 

exemptive relief. See 17 CFR 36.2(b) and 17 CFR 

36.3(a). In order for the Commission to gain a 

similar familiarity with 2(d)(2) Markets, and to 

facilitate their eventual transition to registered DCM 

or registered SEF status, 2(d)(2) Markets operating 

or intending to operate pursuant to the exemptive 

relief in this Second Amended Order must provide 

the Commission with notice of their operations (or 

intent to so operate) on or before July 16, 2012, or 

as reasonably soon thereafter as is practicable. 

Notices should be sent to the Commission’s 

Division of Market Oversight, 1155 21st St. NW., 

Washington, DC 20581 (or electronically, to 

DMOLetters@cftc.gov), and should include the 

name and address of the 2(d)(2) Market, and the 

name and telephone number of a contact person. 

Such notice will assist the Commission in preparing 

to review any subsequent application for 

registration, or provisional registration, as a SEF or 

DCM submitted by such 2(d)(2) Market. 

Notwithstanding the provision of such notice, the 

Commission notes that any subsequent SEF or DCM 

registration application by a 2(d)(2) Market will still 

undergo a separate, complete, and independent 

evaluation by the Commission, just as will every 

SEF and/or DCM application submitted by an ECM 

and/or EBOT. 

the Notice, the comments raised two 

issues for the Commission’s 

consideration in this final order: (1) The 

expiry date applicable to ECMs 

currently operating pursuant to 

grandfather relief authorized by section 

723(c)(l)–(2) of the Dodd-Frank Act and 

their market participants and clearing 

organizations; and (2) the effectiveness 

of CEA section 2(e) in light of the 

further definition of the term ‘‘eligible 

contract participant’’ (‘‘ECP’’). In 

addition, one commenter specifically 

supported the Commission’s proposal to 

permit the clearing of agricultural swaps 

without further exemption.22 The 

Coalition of Physical Energy Companies 

also supported the Proposed 

Amendment and believed that the 

Commission should undertake its 

implementation of the Dodd-Frank Act 

in a deliberative manner that carefully 

establishes necessary regulations and 

avoids inadvertent impacts and overbroad application of the statute.23

The comments and Commission 

determinations regarding the two 

substantive issues raised by commenters 

are discussed in the sections that follow. 

1. Duration of Relief Available to ECM/ 

EBOTs 

a. Comments 

While supportive of the Notice, CME 

Group, on behalf of its four DCMs, 

requested that the Commission clarify 

one ambiguity it perceived with the 

Notice—that is, the provision of the 

Notice stating that the relief proposed 

shall expire on the earlier of (1) 

December 31, 2012 or (2) ‘‘the effective 

date of the DCM or SEF final rules, 

whichever is later,’’ unless the ECM or 

EBOT files a DCM or SEF application 

‘‘on or before the effective date of the 

DCM or SEF final rules, in which case 

the relief shall remain in place during 

the pendency of the application.’’ 24

According to CME Group, the second 

part of the proposed expiration date is 

ambiguous because it fails to specify 

which of the numerous rule proposals 

concerning SEFs and DCMs must be 

finalized before relief will terminate.25

CME Group stated that one way to 

remove this perceived ambiguity would 

be for the Commission to list each 

rulemaking that must take effect before 

the relief will terminate. CME Group 

also stated that, at a minimum, the ECM 

and EBOT relief should remain in place 

until at least the effective date of CFTC 

implementing rules concerning: (1) All 

DCM and SEF core principles and (2) 

block trade size requirements for swaps. 

Alternatively, CME Group stated that 

the Commission could address the 

concern by stating in a final order that 

the relief remains in effect until a future 

date the Commission will specify in a 

future order that will provide at least 60 

days notice to market participants and 

other affected parties.26

Nodal Exchange, which is currently 

operating as an ECM, sought assurance 

that the proposed relief would remain in 

place if an ECM applies to be a DCM 

after the effective date of the DCM rules, 

yet still on or before the effective date 

of the SEF rules.27 To that end, Nodal 

Exchange offered a change to the 

operative language of the draft order. 

Specifically, Nodal Exchange 

recommended that the phrase at the end 

of Section (3) of the proposed order be 

modified to include a second 

‘‘whichever is later’’ clause, as 

emphasized below: 

or (ii) the effective date of the designated 

contract market (‘‘DCM’’) or swap execution 

facility (‘‘SEF’’) final rules, whichever is 

later, unless the ECM, EBOT, or 2(d)(2) 

Market files a DCM or SEF registration 

application on or before the effective date of 

the DCM or SEF final rules, whichever is 

later, in which case the relief shall remain in 

place during the pendency of the application. 

Nodal Exchange explained that this 

change is necessary because it must file 

a DCM or SEF registration application 

on or before the effective date of the 

DCM or SEF final rules, but to date, the 

final rules for DCMs that defer 

implementation of Core Principle 9 and 

the proposed rules for SEFs would 

significantly impact Nodal Exchange 

such that a determination of which 

registration will be most appropriate is 

not possible until both the DCM and 

SEF final rules are published.28 Before 

submitting the appropriate application, 

Nodal Exchange stated that it will need 

to assess (1) how the final regulations 

implement DCM Core Principle 9 and 

(2) the finalized rules for SEFs, 

especially with regard to how the 

Commission addresses the SEF rules 

regarding ‘‘pre-trade price 

transparency.’’ 29

b. Commission Determination 

The Commission has determined to 

amend the draft order to include a 

‘‘whichever is later’’ clause in provision 

(b) of section 3 of the Second Amended 

July 14 Order. That qualifying provision 

will read as follows: ‘‘or (ii) the effective 

date of the designated contract market 

(‘‘DCM’’) or swap execution facility 

(‘‘SEF’’) final rules, whichever is later, 

unless the ECM, EBOT, or 2(d)(2) 

Market files a DCM or SEF registration 

application on or before the effective 

date of the DCM or SEF final rules, 

whichever is later, in which case the 

relief shall remain in place during the 

pendency of the application.’’ 30 To be 

clear, the phrase ‘‘DCM or SEF final 

rules’’ in that provision refers to the 

following rulemakings: (1) Core 

Principles and Other Requirements for 


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31Core Principles and Other Requirements for 

Designated Contract Markets, 77 FR 36612 (June 19, 

2012) (‘‘Final DCM Core Principles Release’’). 

32 76 FR 1214 (January 7, 2011). 

33 In the Final DCM Core Principles Release, the 

Commission stated that additional time is 

appropriate before finalizing the proposed rules for 

DCM Core Principle 9 and that the Commission 

plans and expects to consider the final rule for DCM 

Core Principle 9 when it considers the final rule for 

the SEF Core Principles. 

The phrase ‘‘DCM or SEF final rules’’ does not 

include the Commission’s rulemaking on block 

trade size requirements for swaps or its rulemaking 

on the process for a DCM or SEF to make a swap 

available to trade. See Procedures To Establish 

Appropriate Minimum Block Sizes for Large 

Notional Off-Facility Swaps and Block Trades, 77 

FR 15460 (March 15, 2012); Process for a 

Designated Contract Market or Swap Execution 

Facility to Make a Swap Available to Trade, 76 FR 

77728 (December 14, 2011). Those rules will be 

uniformly applied to both DCM- and SEF-traded 

swaps and, accordingly, their respective 

requirements should not have a bearing on whether 

an ECM, EBOT, or 2(d)(2) Market chooses to apply 

to become a DCM or a SEF. 

34Fifth Third Bank Letter at 2. 

35 Id. 

36 Id. at 4–5. 

37 Id. at 5. 

38American Bankers Association Letter at 1–2. 

39See Further Definition of ‘‘Swap Dealer,’’ 

Security-Based Swap Dealer,’’ ‘‘Major Swap 

Participant,’’ ‘‘Major Security-Based Swap 

Participant’’ and ‘‘Eligible Contract Participant’’, 77 

FR 30596 (May 23, 2012) (‘‘Final ECP Definition 

Release’’). 

40See 17 CFR 1.3(m)(7). 

41See Final ECP Definition Release at 30596, 

30700 (setting forth the compliance dates for 

Commission regulations 1.3(m)(5), (6) and (8)(iii)). 

42Because CEA section 2(e) refers both to ECPs 

and swaps, both of which, per Dodd-Frank Act 

section 754, must be further defined before CEA 

section 2(e) could take effect, now that ECP has 

been further defined, the further definition of the 

term ‘‘swap’’ is the sole remaining trigger for the 

effectiveness of CEA section 2(e). 

43 In that regard, see generally Business Conduct 

Standards for Swap Dealers and Major Swap 

Participants With Counterparties, 77 FR 9734 (Feb. 

17, 2012) (‘‘External Business Conduct Standards 

Final Release’’). See also Final ECP Definition 

Release at 30646 n. 585 (noting that ‘‘market 

participants must make the determination of ECP 

status with respect to the parties to transactions in 

security-based swaps and mixed swaps prior to the 

offer to sell or the offer to buy or purchase the 

security-based swap or mixed swap’’), 30652 (with 

respect to determining the ECP status of Forex Pools 

and referring to the External Business Conduct 

Standards Final Release), and 30653 n. 656 (with 

respect to determining the ECP status of Forex 

Pools) 

44For example, an entity could demonstrate goodfaith compliance by first seeking, including in 

connection with the design of its policies and 

procedures, additional guidance from counsel or 

from Commission staff, which could address 

questions on a case-by-case basis with the benefit 

of specific facts and circumstances. 

Designated Contract Markets; 31 (2) Core 

Principles and Other Requirements for 

Swap Execution Facilities; 32 and (3) a 

rulemaking on DCM Core Principle 9.33

The Commission believes that these 

changes and clarifications are necessary 

and in the public interest because 

finalization of the aforementioned rules 

is integral to the business decision of 

whether entities currently operating as 

ECMs, EBOTs, or 2(d)(2) Markets will 

transition to DCM or SEF status. 

2. Status of CEA Section 2(e) and ECPs 

a. Comments 

According to Fifth Third Bank, 

compliance with the Dodd-Frank Act 

requirements should not become 

mandatory until the CFTC and SEC 

provide further guidance as to the 

meaning of the ‘‘revised definition of 

ECP.’’ 34 Fifth Third Bank stated that 

section 2(e) of the CEA, as amended by 

the Dodd-Frank Act, which makes it 

unlawful for non-ECPs to enter into 

over-the-counter swaps, together with 

the rescission of the Commission’s 1989 

Policy Statement Concerning Swap 

Transactions, represent a major change 

in the rules under which banks have 

been operating for many years.35 Fifth 

Third Bank contended that banks (and 

other swap counterparties) will need to 

know how to determine whether or not 

a person is an ECP with a considerable 

degree of certainty well before the 

mandatory compliance date for CEA 

section 2(e) so that they can (1) prepare 

compliance procedures, questionnaires, 

and other forms, and (2) train their 

personnel how to determine whether a 

person is or is not an ECP. Fifth Third 

Bank expressed particular concern 

regarding how to interpret the phrase 

‘‘amounts invested on a discretionary 

basis’’ in the context of CEA section 

1a(18)(A)(xi).36 For these reasons, Fifth 

Third Bank stated that the proposed 

Second Amended July 14 Order should 

not assume that the term ‘‘ECP’’ has 

been adequately defined. In its view, 

compliance with CEA section 2(e) 

should not become mandatory until at 

least 60 days after the CFTC and SEC 

have provided further guidance 

regarding the meaning of the term 

‘‘ECP.’’ 37

Similarly, citing some of the same 

issues as Fifth Third Bank, the 

American Bankers Association urged 

the Commission to amend the proposed 

order to provide for a continuation of 

the existing temporary exemption 

‘‘solely with respect to Section 2(e) until 

the later of (i) the Proposed Revised 

Effective Date, or (ii) no less than 60 

days after a substantive rule or 

interpretive guidance on Section 2(e) 

becomes effective for such purpose 

(issued either by the Commission or 

jointly with the SEC).’’ 38

b. Commission Determination 

On April 18, 2012, the Commission 

and the SEC adopted final rules jointly 

further defining, among other terms, 

‘‘eligible contract participant.’’ 39 In 

those rules, the Commissions provided 

both new categories of ECPs, including 

a new category based in part on the line 

of business element of the Commission’s 

Policy Statement Concerning Swap 

Transactions,40 and interpretations 

regarding the further definition of the 

term ‘‘ECP.’’ The Commission and the 

SEC also delayed compliance with 

certain aspects of the ECP definition 

until December 31, 2012.41

While the Commissions or their staff 

may, from time to time, issue additional 

guidance regarding the definition of the 

term ‘‘ECP,’’ the Commission and the 

SEC jointly have further defined the 

term ‘‘eligible contract participant,’’ 

fulfilling their mandate under DoddFrank Act section 712(d)(1) to jointly 

further define the term ‘‘ECP.’’ In light 

of the foregoing, the Commission 

declines requests to modify this final 

order to delay the effectiveness of 

section 2(e) beyond the relief already 

provided. 

Nevertheless, because the 

Commission and the SEC may issue 

additional guidance concerning, among 

other issues of concern to commenters, 

the term ‘‘amounts invested on a 

discretionary basis’’ in the context of 

CEA section 1a(18)(A)(xi) after the 

effective date of section 2(e), the 

Commission provides the following 

guidance as to how it intends to exercise 

its enforcement discretion with respect 

to certain unintentional violations of 

section 2(e) by swap counterparties who 

are making good faith efforts to comply 

with section 2(e).42 More specifically, 

where a person finds that it has entered 

into a swap with a counterparty that the 

Commission and SEC later further 

define or interpret as not an ECP, absent 

other material factors, the Commission 

will not bring an enforcement action for 

violation of section 2(e) if the person 

has implemented and followed 

reasonably designed policies and 

procedures to verify the ECP status of a 

swap counterparty 43 and, 

notwithstanding good faith compliance 

with such policies and procedures,44 the 

person enters into a swap with a nonECP counterparty. 

One example of a fact pattern that the 

Commission does not believe would 

exhibit good faith compliance would be 

treating as an ECP an individual who 

has total assets, excluding personal 

property (which the Commission does 

not expect to treat as ‘‘assets invested on 

a discretionary basis’’), that are less than 

the relevant CEA section 1a(18)(A)(xi) 

dollar threshold. Conversely, if the 

individual swap counterparty could be 


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41264 Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Rules and Regulations 

45 44 U.S.C. 3507(d). 46 7 U.S.C. 19(a). 

47American Bankers Association Letter at 4. 

48 Id. 

an ECP if the Commission and the SEC 

further define or interpret some or all of 

the individual’s assets, other than 

personal property, to be ‘‘assets invested 

on a discretionary basis,’’ absent other 

material factors, the CFTC would not 

expect to bring an enforcement action 

against the counterparty for entering 

into a swap in contravention of CEA 

section 2(e). Of course, once the 

Commission and the SEC further define 

or interpret a counterparty to be a nonECP, CEA section 2(e) would prohibit 

entering into new swaps with such 

ineligible counterparties. This 

compliance guidance does not apply to 

any aspect of the ECP definition that 

was: (1) Not amended by the DoddFrank Act; (2) covered by a regulation 

promulgated in the Final ECP Definition 

Release; or (3) the subject of an 

interpretation or other guidance set 

forth in the Final ECP Definition 

Release. 

Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 45 imposes certain 

requirements on Federal agencies 

(including the Commission) in 

connection with conducting or 

sponsoring any collection of 

information as defined by the PRA. 

These amendments to the July 14 Order 

will not require a new collection of 

information from any persons or entities 

that will be subject to the final order. 

B. Cost-Benefit Considerations 

Section 15(a) of the CEA46 requires 

the Commission to consider the costs 

and benefits of its action before issuing 

an order under the CEA. CEA section 

15(a) further specifies that costs and 

benefits shall be evaluated in light of 

five broad areas of market and public 

concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

section 15(a) factors. 

The Commission requested comments 

on the consideration of costs and 

benefits of the proposed amendments 

discussed in the Notice. One 

commenter, the American Bankers 

Association, stated that the 

Commission’s consideration of costs 

and benefits in the July 14 Order did not 

take into account the costs that would 

result if CEA section 2(e) were made 

effective in the absence of further 

interpretive or regulatory guidance from 

the Commission.47 American Bankers 

Association states that these costs 

include the chilling effect on legitimate 

hedging activity and reduced credit 

availability, particularly for end users. 

American Bankers Association further 

stated that this chilling effect would be 

compounded by another major concern 

of its member banks—whether swaps 

could potentially be subject to 

challenges for invalidity under state 

laws. According to the American 

Bankers Association, a significant 

benefit of providing temporary relief 

under section 2(e) in the manner 

suggested would be the legal certainty 

this would create under state law for 

swaps that currently qualify for the line 

of business provision, and the provision 

of such temporary relief would be 

consistent with the Commission’s goal 

of striving to ‘‘ensure that current 

practices will not be unduly disrupted 

during the transition to the new 

regulatory regime,’’ and allow 

additional time for its member banks to 

find solutions to their CEA section 2(e) 

concerns.48

As stated above, the rules further 

defining the term ‘‘ECP’’ were finalized 

by the Commissions on April 18, 2012. 

In those rules, the Commissions 

considered the costs and benefits of the 

further definitions and guidance 

regarding the same, including the costs 

and benefits of legal certainty. Further, 

the American Bankers Association 

comment regarding the costs and 

benefits of the amendments to CEA 

section 2(e) made by the Dodd-Frank 

Act are beyond the scope of this final 

order, which is limited to amending the 

temporary exemptive relief first granted 

by the Commission in the July 14 Order. 

Regarding benefits, this final order 

continues the primary benefit described 

in the July 14 Order, which is to 

facilitate an orderly transition to the 

comprehensive regulatory framework 

for swaps regulation set out in Title VII 

of the Dodd-Frank Act. More 

specifically, this final order temporarily 

extends the time market participants 

and the public have to comply with 

certain provisions of the CEA that 

reference one or more of the terms to be 

further defined, and provides guidance 

with respect to the same in response to 

various comments. Accordingly, as this 

final order is an amendment to the July 

14 Order, the Commission’s 

consideration of costs and benefits, as 

set forth in the July 14 Order, may be 

incorporated here by reference. 

Second Amended July 14 Order 

The Second Amended July 14 Order 

shall read as follows: 

The Commission, to provide for the 

orderly implementation of the 

requirements of Title VII of the DoddFrank Act, pursuant to sections 4(c) and 

4c(b) of the CEA and section 712(f) of 

the Dodd-Frank Act, hereby issues this 

Order consistent with the 

determinations set forth above, which 

are incorporated in this final Order, as 

amended, by reference, and: 

(1) Exempts, subject to the conditions 

set forth in paragraph (4), all 

agreements, contracts, and transactions, 

and any person or entity offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction, from the provisions of the 

CEA, as added or amended by the DoddFrank Act, that reference one or more of 

the terms regarding instruments subject 

to further definition under sections 

712(d) and 721(c) of the Dodd-Frank 

Act, which provisions are listed in 

Category 2 of the Appendix to this 

Order; provided, however, that the 

foregoing exemption: 

a. Applies only with respect to those 

requirements or portions of such 

provisions that specifically relate to 

such referenced terms; and 

b. With respect to any such provision 

of the CEA, shall expire upon the earlier 

of: (i) the effective date of the applicable 

final rule further defining the relevant 

term referenced in the provision; or (ii) 

December 31, 2012. 

(2) Agricultural Commodity Swaps. 

Exempts, subject to the conditions set 

forth in paragraph (4), all agreements, 

contracts, and transactions in an 

agricultural commodity, and any person 

or entity offering, entering into, or 

rendering advice or rendering other 

services with respect to, any such 

agreement, contract, or transaction, from 

the provisions of the CEA, if the 

agreement, contract, or transaction 

complies with part 35 of the 

Commission’s regulations as in effect 

prior to December 31, 2011, including 

any agreement, contract, or transaction 

that complies with such provisions then 

in effect notwithstanding that: 

a. The agreement, contract, or 

transaction may be part of a fungible 

class of agreements that are 

standardized as to their material 

economic terms; and/or 

b. The creditworthiness of any party 

having an actual or potential obligation 

under the agreement, contract, or 

transaction would not be a material 


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Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Rules and Regulations 41265 

consideration in entering into or 

determining the terms of the agreement, 

contract, or transaction i.e., the 

agreement, contract, or transaction may 

be cleared. 

This exemption shall expire upon the 

earlier of (i) December 31, 2012; or (ii) 

such other compliance date as may be 

determined by the Commission. 

(3) Exempt and Excluded Commodity 

Swaps. Exempts, subject to the 

conditions set forth in paragraph (4), all 

agreements, contracts, and transactions, 

and any person or entity offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction, from the provisions of the 

CEA, if the agreement, contract, or 

transaction complies with part 35 of the 

Commission’s regulations as in effect 

prior to December 31, 2011, including 

any agreement, contract, or transaction 

in an exempt or excluded (but not 

agricultural) commodity that complies 

with such provisions then in effect 

notwithstanding that: 

a. The agreement, contract, or 

transaction may be executed on a 

multilateral transaction execution 

facility; 

b. The agreement, contract, or 

transaction may be cleared; 

c. Persons offering or entering into the 

agreement, contract or transaction may 

not be eligible swap participants, 

provided that all parties are eligible 

contract participants as defined in the 

CEA prior to the date of enactment of 

the Dodd-Frank Act; 

d. The agreement, contract, or 

transaction may be part of a fungible 

class of agreements that are 

standardized as to their material 

economic terms; and/or 

e. No more than one of the parties to 

the agreement, contract, or transaction is 

entering into the agreement, contract, or 

transaction in conjunction with its line 

of business, but is neither an eligible 

contract participant nor an eligible swap 

participant, and the agreement, contract, 

or transaction was not and is not 

marketed to the public; 

Provided, however, that: 

a. Such agreements, contracts, and 

transactions in exempt or excluded 

commodities (and persons offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction) fall within the scope of any 

of the CEA sections 2(d), 2(e), 2(g), 2(h), 

and 5d provisions or the line of business 

provision as in effect prior to July 16, 

2011; and 

b. This exemption shall expire upon 

the earlier of: (i) December 31, 2012; or 

(ii) such other compliance date as may 

be determined by the Commission; 

except that, for agreements, contracts, 

and transactions executed on an exempt 

commercial market (‘‘ECM’’), exempt 

board of trade (‘‘EBOT’’), or pursuant to 

CEA section 2(d)(2) as in effect prior to 

July 16, 2011 (‘‘2(d)(2) Market’’), this 

exemption shall expire upon the earlier 

of (i) December 31, 2012; or (ii) the 

effective date of the designated contract 

market (‘‘DCM’’) or swap execution 

facility (‘‘SEF’’) final rules, whichever is 

later, unless the ECM, EBOT, or 2(d)(2) 

Market files a DCM or SEF registration 

application on or before the effective 

date of the DCM or SEF final rules, 

whichever is later, in which case the 

relief shall remain in place during the 

pendency of the application. For these 

purposes, an application will be 

considered no longer pending when the 

application has been approved, 

provisionally approved, withdrawn, or 

denied. 

(4) Provided that the foregoing 

exemptions in paragraphs (1), (2), and 

(3) above shall not: 

a. Limit in any way the Commission’s 

authority with respect to any person, 

entity, or transaction pursuant to CEA 

sections 2(a)(1)(B), 4b, 4o, 6(c), 6(d), 6c, 

8(a), 9(a)(2), or 13, or the regulations of 

the Commission promulgated pursuant 

to such authorities, including 

regulations pursuant to CEA section 

4c(b) proscribing fraud; 

b. Apply to any provision of the 

Dodd-Frank Act or the CEA that became 

effective prior to July 16, 2011; 

c. Affect any effective or compliance 

date set forth in any rulemaking issued 

by the Commission to implement 

provisions of the Dodd-Frank Act; 

d. Limit in any way the Commission’s 

authority under section 712(f) of the 

Dodd-Frank Act to issue rules, orders, or 

exemptions prior to the effective date of 

any provision of the Dodd-Frank Act 

and the CEA, in order to prepare for the 

effective date of such provision, 

provided that such rule, order, or 

exemption shall not become effective 

prior to the effective date of the 

provision; and 

e. Affect the applicability of any 

provision of the CEA to futures 

contracts or options on futures 

contracts, or to cash markets. 

In its discretion, the Commission may 

condition, suspend, terminate, or 

otherwise modify this Order, as 

appropriate, on its own motion. This 

final Order, as amended, shall be 

effective immediately. 

Issued in Washington, DC, on July 3, 2012 

by the Commission. 

Sauntia S. Warfield, 

Assistant Secretary of the Commission. 

Note: The following appendix will not be 

published in the Code of Federal Regulations. 

Appendix 1—Statement of Chairman 

Gary Gensler 

I support the exemptive order regarding the 

effective dates of certain Dodd-Frank Wall 

Street Reform and Consumer Protection Act 

(Dodd-Frank Act) provisions. 

Today’s exemptive order makes five 

changes to the exemptive order issued on 

December 19, 2011. 

First, the proposed exemptive order 

extends the sunset date from July 16, 2012, 

to December 31, 2012. 

Second, the Commodity Futures Trading 

Commission (CFTC) and the Securities and 

Exchange Commission (SEC) have now 

completed the rule further defining the term 

‘‘swap dealer’’ and ‘‘securities-based swap 

dealer.’’ Thus, the exemptive order no longer 

provides relief as it once did until those 

terms were further defined. 

The Commissions are also mandated by the 

Dodd-Frank Act to further define the term 

‘‘swap’’ and ‘‘securities-based swap.’’ The 

staffs are making great progress, and I 

anticipate the Commissions will take up this 

final definitions rule in the near term. Until 

that rule is finalized, the exemptive order 

appropriately provides relief from the 

effective dates of certain Dodd-Frank 

provisions. 

Third, in advance of the completion of the 

definitions rule, market participants 

requested clarity regarding transacting in 

agricultural swaps. The exemptive order 

allows agricultural swaps cleared through a 

derivatives clearing organization or traded on 

a designated contract market to be transacted 

and cleared as any other swap. This is 

consistent with the agricultural swaps rule 

the Commission already finalized, which 

allows farmers, ranchers, packers, processors 

and other end-users to manage their risk. 

Fourth, unregistered trading facilities that 

offer swaps for trading were required under 

Dodd-Frank to register as swap execution 

facilities (SEFs) or designated contract 

markets (DCM) by July of this year. These 

facilities include exempt boards of trade, 

exempt commercial markets and markets 

excluded from regulation under section 

2(d)(2). Given the Commission has yet to 

finalize rules on SEFs, this order gives these 

platforms additional time for such a 

transition. 

Fifth, the Commission is providing 

guidance regarding enforcement of rules that 

require that certain off-exchange swap 

transactions only be entered into by eligible 

contract participants (ECPs). The guidance 

provides that if a person takes reasonable 

steps to verify that its counterparty is an ECP, 

but the counterparty turns out not to be an 

ECP based on subsequent Commission 

guidance, absent other material factors, the 


tkelley on DSK3SPTVN1PROD with RULES
41266 Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Rules and Regulations 

1Formally, the Agreement is a Memorandum of 

Understanding, but the term Agreement is used in 

this document. 

CFTC will not bring an enforcement action 

against the person. 

[FR Doc. 2012–16987 Filed 7–12–12; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

U.S. Customs and Border Protection 

DEPARTMENT OF THE TREASURY 

19 CFR Part 12 

[CBP Dec. 12–13] 

RIN 1515–AD90 

Extension of Import Restrictions on 

Archaeological Objects and 

Ecclesiastical and Ritual Ethnological 

Materials From Cyprus 

AGENCIES: U.S. Customs and Border 

Protection, Department of Homeland 

Security; Department of the Treasury. 

ACTION: Final rule. 

SUMMARY: This document amends U.S. 

Customs and Border Protection (CBP) 

regulations to reflect the extension of 

import restrictions on Pre-Classical and 

Classical archaeological objects and 

Byzantine ecclesiastical and ritual 

ethnological materials from Cyprus. 

These restrictions, which were last 

extended by CBP Dec. 07–52, are due to 

expire on July 16, 2012, unless 

extended. The Assistant Secretary for 

Educational and Cultural Affairs, United 

States Department of State, has 

determined to extend the bilateral 

Agreement between the Republic of 

Cyprus and the United States to 

continue the imposition of import 

restrictions on cultural property from 

Cyprus. The Designated List of cultural 

property described in CBP Dec. 07–52 is 

revised in this document to reflect that 

the types of ecclesiastical and ritual 

ethnological articles dating from the 

Byzantine period previously listed on 

the CBP Dec. 07–52 Designated List as 

protected are now protected also if 

dating from the Post-Byzantine period 

(c. 1500 A.D. to 1850 A.D.) The revised 

Designated List also clarifies that certain 

mosaics of stone and wall hangings 

(specifically, to include images of Saints 

among images of Christ, Archangels, 

and the Apostles) are covered under the 

import restrictions published today. The 

import restrictions imposed on the 

archaeological and ethnological 

materials covered under the Agreement 

will remain in effect for a 5-year period, 

and the CBP regulations are being 

amended accordingly. These restrictions 

are being extended pursuant to 

determinations of the State Department 

under the terms of the Convention on 

Cultural Property Implementation Act 

in accordance with the United Nations 

Educational, Scientific and Cultural 

Organization (UNESCO) Convention on 

the Means of Prohibiting and Preventing 

the Illicit Import, Export and Transfer of 

Ownership of Cultural Property. 

DATES: Effective Date: July 16, 2012. 

FOR FURTHER INFORMATION CONTACT: For 

legal aspects, George F. McCray, Esq., 

Chief, Cargo Security, Carriers and 

Immigration Branch, Regulations and 

Rulings, Office of International Trade, 

(202) 325–0082. For operational aspects, 

Virginia McPherson, Interagency 

Requirements Branch, Trade Policy and 

Programs, Office of International Trade, 

(202) 863–6563. 

SUPPLEMENTARY INFORMATION: 

Background 

Pursuant to the provisions of the 1970 

UNESCO Convention, codified into U.S. 

law as the Convention on Cultural 

Property Implementation Act (hereafter, 

the Cultural Property Implementation 

Act or the Act) (Pub. L. 97–446, 19 

U.S.C. 2601 et seq.), signatory nations 

(State Parties) may enter into bilateral or 

multilateral agreements to impose 

import restrictions on eligible 

archaeological and ethnological 

materials under procedures and 

requirements prescribed by the Act. 

Under the Act and applicable CBP 

regulations (19 CFR 12.104g), the 

restrictions are effective for no more 

than five years beginning on the date on 

which the agreement enters into force 

with respect to the United States (19 

U.S.C. 2602(b)). This period may be 

extended for additional periods, each 

such period not to exceed five years, 

where it is determined that the factors 

justifying the initial agreement still 

pertain and no cause for suspension of 

the agreement exists (19 U.S.C. 2602(e); 

19 CFR 12.104g(a)). 

In certain limited circumstances, the 

Cultural Property Implementation Act 

authorizes the imposition of restrictions 

on an emergency basis upon the request 

of a State Party (19 U.S.C. 2603(c)(1)). 

Under the Act and applicable CBP 

regulations (19 CFR 12.104g(b)), 

emergency restrictions are effective for 

no more than five years from the date 

of the State Party’s request and may be 

extended for three years where it is 

determined that the emergency 

condition continues to apply with 

respect to the covered materials (19 

U.S.C. 2603(c)(3)). 

On April 12, 1999, under the 

authority of the Cultural Property 

Implementation Act, the former U.S. 

Customs Service published Treasury 

Decision (T.D.) 99–35 in the Federal 

Register (64 FR 17529) imposing 

emergency import restrictions on certain 

Byzantine ecclesiastical and ritual 

ethnological materials from Cyprus and 

accordingly amending 19 CFR 

12.104g(b) pertaining to emergency 

import restrictions. These restrictions 

were effective for a period of 5 years 

from September 4, 1998, the date the 

Republic of Cyprus made the request for 

emergency protection. On August 29, 

2003, these restrictions were extended, 

by publication of CBP Dec. 03–25 in the 

Federal Register (68 FR 51903), for an 

additional 3-year period, to September 

4, 2006. 

In a separate action, on July 16, 2002, 

the United States entered into a bilateral 

Agreement with the Republic of Cyprus 

concerning the imposition of import 

restrictions on certain archaeological 

materials of Cyprus representing the 

Pre-Classical and Classical periods of its 

cultural heritage (the 2002 Agreement).1

On July 19, 2002, the former United 

States Customs Service published T.D. 

02–37 in the Federal Register (67 FR 

47447), which amended 19 CFR 

12.104g(a) to reflect the imposition of 

these restrictions and included a list 

designating the types of archaeological 

materials covered by the restrictions. 

These restrictions were to be effective 

through July 16, 2007. 

On August 17, 2006, the Republic of 

Cyprus and the United States amended 

the 2002 Agreement (covering the PreClassical and Classical archaeological 

materials) to include the list of 

Byzantine ecclesiastical and ritual 

ethnological materials that had been 

(and, at that time, were still) protected 

pursuant to the emergency action 

described above. The amendment of the 

2002 Agreement to cover both the 

subject archaeological materials and the 

subject ethnological materials was 

reflected in CBP Dec. 06–22, which was 

published in the Federal Register (71 

FR 51724) on August 31, 2006. CBP Dec. 

06–22 contains the list of Byzantine 

ecclesiastical and ritual ethnological 

materials from Cyprus previously 

protected pursuant to emergency action 

and announced that import restrictions, 

as of August 31, 2006, were imposed on 

this cultural property pursuant to the 

amended Agreement (19 U.S.C. 

2603(c)(4)). Thus, as of that date, the 

restrictions covering both the 

archaeological materials and the 

ethnological materials described in CBP 

Dec. 06–22 were set to be effective 


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