[Federal Register Volume 89, Number 186 (Wednesday, September 25, 2024)]
[Rules and Regulations]
[Pages 78241-78245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21936]


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DEPARTMENT OF THE TREASURY

United States Mint

31 CFR Part 100


Exchange of Coin

AGENCY: United States Mint, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This final rule removes Treasury regulations relating to the 
exchange of bent, partial, fused, and mixed coins. The removal will end 
the exchange program for bent and partial coin.

DATES: Effective Date: October 25, 2024.

FOR FURTHER INFORMATION CONTACT: Apryl Whitaker, Senior Legal Counsel, 
Office of the Chief Counsel, United States Mint, at (202) 354-7938 or 
<a href="/cdn-cgi/l/email-protection#d4a6a1b8b1b9b5bfbdbab394a1a7b9bdbaa0faa0a6b1b5a7fab3bba2"><span class="__cf_email__" data-cfemail="c3b1b6afa6aea2a8aaada483b6b0aeaaadb7edb7b1a6a2b0eda4acb5">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Treasury regulations appearing at 31 CFR 100.11 are promulgated 
under 31 U.S.C. 321 and relate to the exchange of bent and partial 
coin. The last amendment to 31 CFR part 100, subpart C, was on December 
20, 2017. In August 2018, the United States Mint suspended the 
redemption program due to the possibility of unlawful material being 
submitted for redemption. On May 5, 2021, the United States Mint issued 
a notice of proposed rulemaking proposing certain revisions to these 
regulations (86 FR 23877), which was withdrawn on May 3, 2024 (89 FR 
36721). The United States Mint subsequently decided to close the bent 
and partial coin exchange program.
    For many years, the United States Mint has redeemed bent and 
partial coins for full face value. However, circumstances surrounding 
the redemption program have materially changed. Today submissions must 
be carefully evaluated to ensure that counterfeit coins are not 
accepted to the program, and the condition of many coins, particularly 
large volumes of coins damaged by recycling or industrial processes, 
makes authentication increasingly difficult and time-consuming. In 
addition, the volume of coins submitted for possible redemption has 
greatly increased, and counterfeits have been increasingly identified 
in imported coins intercepted by law enforcement, as well as in several 
large submissions to the redemption program. The result of these 
changes is that there is no financially responsible way to ensure the 
integrity of the redemption program and to the meet the full level of 
demand. The United States Mint's capacity to process mutilated coins is 
limited by physical storage capacity, caseload complexity, and 
workload. Authentication procedures require extensive time and 
resources. The United States Mint has dedicated substantial time and 
resources to the bent and partial coin exchange program, in addition to 
operating the program at a loss by paying out face value for 
redemptions.
    In 89 FR 36721, May 3, 2024, the United States Mint issued a notice 
of proposed rulemaking (NPRM) to remove regulations relating to the 
exchange of bent and partial coins, and it requested comments on the 
proposed revisions. In the NPRM, the Mint proposed to end the exchange 
program for bent and partial coin. As discussed below, the United 
States Mint has considered the comments received and has concluded that 
the proposed regulations will be adopted as a final rule.

II. Public Participation

    The United States Mint received 35 comments in response to the NPRM 
proposing to end the Mutilated Coin Redemption Program. Eight of these 
comments were provided by organizations that identified as businesses, 
two identified as a trade association, and the remainder of the 
comments were provided by unknown, anonymous, or individual persons. 
The comments are available at www.regulations.gov.

Disposing of Coins

    Some commenters were concerned about the disposal of dimes, 
quarters, half-dollar, and dollar coins. The proposed rule indicated 
correctly that the melting of dimes, quarters, half-dollar, and dollar 
coins is not regulated by the United States Mint. There is no 
prohibition on melting dimes, quarters, half-dollar, and dollar coins 
for non-fraudulent purposes. Some commenters expressed concern that 18 
U.S.C. 331 criminalizes the melting of all U.S. coins. This statute, 
however, specifically addresses certain behavior that is conducted with 
the intent to defraud and does not address coins melted without 
fraudulent intent and consistent with 31 CFR part 82.
    While there is a prohibition against melting pennies and nickels, 
there is a specific exception at 31 CFR 82.2 for coins melted or 
treated incidental to recycling other materials if (1) the coins were 
not added to the other materials for their metallurgical value, (2) the 
volumes of the 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 coins from the other 
materials would be impracticable or cost prohibitive. See 31 CFR 
82.2(c). This exception extends to the melting of coins that become 
mutilated due to treatment that is itself within the scope of the 
exception. If an exception does not apply, then applications for 
licenses to melt pennies and nickels should be transmitted to the 
Director, United States Mint; 801 9th Street NW, Washington, DC 20220. 
See 31 CFR 82.2(f).
    Some individuals were concerned about how they can dispose of their 
bent or partial coins. Individuals can inquire of their local scrap 
metal dealers.

Lack of Capacity

    Some commenters indicated that the United States Mint's assertion 
that it lacks the capacity to process large volumes of bent or partial 
coin is disingenuous, because, in the past, large submissions of bent 
or partial coin were delivered directly to a third-party contractor, 
not to the United States Mint. However, after the program was suspended 
in 2018, the United States Mint developed new authentication techniques 
and procedures as recommended by the Treasury Department's Office of 
Inspector General to test and authenticate the genuineness of coins. To 
effectively authenticate the material with the new counterfeit 
detection methods that the United States Mint developed, the

[[Page 78242]]

United States Mint could no longer accept redemption submissions at a 
third-party site. The United States Mint's coin authentication methods 
are time-consuming and can only be performed using specialized 
equipment at the United States Mint's Philadelphia location.

Prior Participants

    Some commenters suggested that the United States Mint develop a 
``trusted,'' ``preferred,'' or ``qualified'' participant program 
whereby certain participants that meet additional requirements could be 
allowed to submit large volumes of coins for possible redemption. Many 
of these commenters did not specify the types of additional 
requirements that would qualify these participants as ``trusted,'' 
merely suggesting that certain participants should be allowed to redeem 
large amounts of coin. Other participants suggested site visits, 
background checks, a certification process, or compliance with industry 
standards. None of these controls separately or together, however, are 
sufficient to detect counterfeit coins. Every submission must be 
properly authenticated by the United States Mint to detect counterfeit 
coins, and background checks or site visits, for example, would not 
eliminate the need for this crucial step in the process.
    A few commenters suggested that coins that were stockpiled during 
the program suspension should be exempted, essentially allowing these 
coins to be redeemed with no restrictions. In August 2018, the United 
States Mint stopped processing submissions to the redemption program 
due to the possibility of unlawful material being submitted for 
redemption and later formally suspended the redemption program in July 
2019 (84 FR 35181). Members of the public have been on notice that the 
exchange program is subject to suspension and those who have stockpiled 
coins during its suspension assumed the risk of doing so.

Office of Inspector General Recommendations for the Redemption Program

    Some commenters indicated that the United States Mint has not 
complied with the recommendations contained in the Department of the 
Treasury's Office of Inspector General's August 18, 2020, Audit Report 
on ``Mint Controls Over Raw Materials and Coin Exchange Programs Need 
Improvement.'' Following the issuance of these audit recommendations, 
the United States Mint hired additional staff and developed improved 
authentication procedures and testing methodology to detect counterfeit 
coins. To implement the new procedures, the United States Mint can no 
longer accept redemption submissions at a third-party site. The United 
States Mint's coin authentication methods are time-consuming and can 
only be performed using specialized equipment and processes developed 
and installed at the United States Mint's Philadelphia location.

Environmental Concerns

    Some commenters were concerned that unredeemable bent or partial 
coins would end up in landfills. Although the melting of pennies and 
nickels is prohibited in certain instances, the melting of dimes, 
quarters, and half-dollar coins, which historically have made up the 
majority of bent or partial coin redemptions, is not prohibited. The 
public may melt and reuse coins consistent with 31 CFR part 82, which 
reduces the likelihood that unredeemable coins will be landfilled. At 
least one commenter indicated that, if the program were closed, bent or 
partial coin would end up recycled as scrap metal sold on the secondary 
metals market.
    Some commenters were concerned that closing the redemption program 
would lead to increased metals mining by requiring the United States 
Mint to purchase more virgin metal. The amount of metal contained in 
bent or partial coin redeemed is very small in the context of the 
larger metals market. In addition, melted coinage scrap must always be 
supplemented with pure nickel and copper to re-alloy the material for 
reuse. For example, quarters are made with a pure copper core and two 
cupronickel outer layers. These coins are permanently bonded in three 
layers, and the individual layers cannot be separated for reclamation. 
When quarters and other clad coins are melted, the resulting coinage 
scrap metal cannot be re-used for the core component, and significant 
amounts of nickel must be added to the scrap to create the alloy for 
the outer layer. The United States Mint's suppliers are limited in the 
amount of scrap that can be used to manufacture new coin roll. Roughly 
25% of the material that the United States Mint purchases for 
circulating strip is returned to the strip supplier as ``web-scrap.'' 
This material must be recycled, along with submissions from the 
Uncurrent Coin Redemption Program, which leaves very little use for 
additional scrap material. The United States Mint suppliers that redeem 
scrap are not required to re-use coin scrap material to make new 
coinage material and may--and do--sell the excess coin scrap material 
as scrap. At least one commenter indicated that, if the program were 
closed, bent or partial coin would end up recycled as scrap metal sold 
on the secondary metals market. Therefore, the proposed limitations on 
submissions will not lead to an appreciable increase in the use of 
primary nickel or copper.
    Some commenters suggested evaluating the environmental impact of 
the redemption program's closure under the National Environmental 
Policy Act (NEPA). It is the determination of the United States Mint 
that the final rule does not constitute a major Federal action 
significantly affecting the quality of the human environment, and, in 
accordance with the NEPA, neither an Environmental Assessment nor an 
Environmental Impact Statement is required.

Discretionary Program

    Some commenters indicated that the redemption program is not a 
discretionary program and is instead mandated by law. The relevant 
statutes and regulations pertaining to the U.S. Department of Treasury 
and the overall statutory framework applicable to the program give 
broad discretion to the Secretary of the Treasury. The regulations at 
31 CFR part 100, subpart C, are promulgated under 31 U.S.C. 321. By 
law, the Secretary of the Treasury ``shall melt obsolete and worn 
United States coins withdrawn from circulation.'' See 31 U.S.C. 5120. 
This statute simply prescribes the method of destruction that the 
Secretary is to employ when the Secretary withdraws obsolete and worn 
coins from circulation. There is no statutory requirement for the 
redemption of mutilated coins. Nor does the statute say how the 
Secretary shall acquire those coins, how the Secretary shall go about 
withdrawing those coins from circulation, or how the Secretary shall go 
about melting coins that have been withdrawn. These details are 
entirely committed to the Secretary's discretion, and pursuant to that 
discretion, the Mutilated Coin Redemption Program was established. See 
31 CFR 100.11.
    The expenses of the Mutilated Coin Redemption Program are entirely 
paid for through the United States Mint Public Enterprise Fund (PEF), a 
revolving fund that was created to fund all United States Mint 
operations in lieu of any appropriations from Congress. See 31 U.S.C. 
5136. The PEF legislation makes clear that ``all expenses incurred by 
the Secretary of the Treasury for operations and programs of the United 
States Mint that the Secretary of the Treasury determines, in the 
Secretary's

[[Page 78243]]

sole discretion, to be ordinary and reasonable incidents of Mint 
operations and programs . . . shall be paid out of the Fund.'' Id. 
(emphasis added). In other words, the Secretary of the Treasury is 
given sole discretion to decide whether the Mutilated Coin Redemption 
Program will operate and be funded. This issue was specifically 
considered by the court in Bramlett v. United States Dep't of the 
Treasury, No. 16-257 and 16-270, 2017 WL 1048366 at *5 (E.D. Pa. March 
20, 2017), which held that the suspension or termination of the 
redemption program is committed to agency discretion by law.

Existence of Counterfeits

    Some commenters suggested that the United States Mint has no 
evidence of any counterfeit coins. There are indicators of current 
counterfeit coin fraud schemes aimed at the Mutilated Coin Redemption 
Program, the details of which are law enforcement sensitive. The United 
States Government was successful in forfeiting counterfeit coins in 
United States of America v. 5 Crates of Counterfeit Coins, CV 20-08487, 
in the United States District Court in the Central District of 
California. In declaring the coins in this case to be counterfeit and 
forfeited to the U.S., the court specifically relied on the United 
States Mint's counterfeit determination.

Impact on Circulating Coins

    Some commenters expressed concern that closing the program would 
impact the quality of coins in circulation and thus undermine the 
public's confidence and trust in the currency system. Commenters, 
however, did not provide information supporting their belief that bent 
or partial coins will no longer be removed from circulation if the 
redemption program were closed. For example, bent and partial coins 
that are recovered from trash or recycling have already been removed 
from circulation, and there is no information available to the United 
States Mint or in the record to support the premise that somehow these 
coins will continue to circulate if the redemption program were closed. 
Likewise, individuals and business will continue to remove bent or 
partial coins from circulation.
    Additional commenters suggested that closing the program will 
impact the United States Mint's Uncurrent Coin Redemption Program, due 
to bent or partial coins being diverted to the Uncurrent Coin 
Redemption Program. The United States Mint's Uncurrent Coin Redemption 
Program will continue in accordance with 31 CFR 100.10 and the Federal 
Reserve's Operating Circular 2. The Uncurrent Coin Redemption Program 
allows financial institutions to redeem whole U.S. coins which are 
merely worn or reduced in weight by natural abrasion, are readily and 
clearly recognizable as to genuineness and denomination, are machine 
countable, and do not include bent or partial coins. See 31 CFR 100.10. 
Neither the U.S. Mint nor the Federal Reserve will redeem any bent or 
partial coins.

Operating Losses

    Some commenters indicated that operating losses are not a valid 
reason for the United States Mint to end the redemption program, 
because the program has always operated at a loss. Commenters requested 
specific numbers detailing the program's operating losses. Costs to run 
the program in the past have included the payout of the face value of 
the coins being reimbursed, less the scrap credit the United States 
Mint receives from its suppliers for raw material, and the cost to 
travel to the suppliers to witness the melt, in addition to the 
resource costs for the various support personnel. In 2014--the last 
year the program was fully operational--the United States Mint paid out 
roughly $30 million in reimbursement and received roughly $5 million in 
scrap credit, for a total cost of about $25 million (not including the 
cost of travel, resources expended, and other costs of operating the 
program).
    The United States Mint's programs are self-sustaining and operate 
at no cost to the taxpayer. The United States Mint has a fiduciary 
responsibility to be a prudent steward of its funds and to minimize 
expenses. The expenses of the Mutilated Coin Redemption Program are 
considered part of the United States Mint's circulating coin expenses 
and are paid from the United States Mint Public Enterprise Fund, a 
revolving fund that was created to fund all United States Mint 
operations in lieu of any appropriations from Congress. See 31 U.S.C. 
5136. Circulating operations are financed by the sale of circulating 
coins to the Federal Reserve Bank. In recent years, the United States 
Mint's seigniorage, which is the difference between the face value and 
cost of producing circulating coinage, has significantly declined. For 
example, as of June 2024, year-to-date seigniorage has decreased 92% 
compared to June 2023 due to lower coin orders from the Federal Reserve 
Bank. In view of this decline, continued operation of the redemption 
program would not be financially responsible.

Congressional Intent

    Some commenters point to a 2023 House Appropriations Committee 
report that indicated that the United States Mint should work with 
stakeholders to redeem mutilated coin within the existing regulations 
and expressed their concern that the United States Mint's proposed 
closure of the program is contrary to the intent of Congress. See H.R. 
Rep No. 118-145 (2023). In that report, the Committee indicated that it 
expects that the United States Mint will work with entities to recover 
coin to redeem bent and partial coin through the redemption program, 
because, according to the report, there was no other reasonable way to 
manage recovered coin. Consistent with the recommendations in the 
report, the United States Mint engaged with its program stakeholders 
through this formal rulemaking process. The United States Mint has 
addressed the concern regarding disposal of recovered coin to the 
extent possible by providing information on avenues for the disposal of 
coins following the program's closure. The comments received on the 
proposed rule closing the program recommended that the redemption 
program should re-open without any limitations on the amount of coin 
submitted. While the United States Mint has carefully considered these 
comments, as described above, there is no financially responsible way 
to ensure the integrity of the redemption program and to meet the full 
level of demand.

Low Denomination Coins

    Several commenters suggested that the program should remain open 
for low denomination coins, such as pennies and nickels, because, in 
their view, the risk of counterfeiting lower denominations is lower or 
non-existent given the lack of economic incentive to counterfeit low 
denominations. While low denomination coins may be less likely to be 
counterfeited, this would not eliminate the need for the United States 
Mint to sample, inspect, and test coins submitted to be redeemed, 
regardless of denomination. Given these procedural constraints, the 
United States Mint could no longer accept redemption submissions at a 
third-party site and, as described above, does not have the capacity to 
do so in Philadelphia.

Fees

    A couple of commenters suggested that the United States Mint 
develop a small administrative fee for bent or partial coin redemption. 
As discussed above, the redemption program's operating expenses are 
significant. A small administrative fee (one commenter suggested 1% of 
the value of each submission) would cover only a

[[Page 78244]]

very small portion of the redemption program's operating costs.

Extension of Comment Period

    Several commenters requested an extension of time to comment on the 
proposed rule. The United States Mint found the 60-day comment period 
length appropriate and provided a meaningful opportunity for interested 
parties to comment on the proposed rule. Of the commenters that 
submitted extension requests, most were able to provide substantive 
responses by the deadline.

III. Procedural Analysis

Regulatory Planning and Review

    The Office of Management and Budget has determined that this rule 
does not constitute a ``significant regulatory action'' under Executive 
Order 12866, as amended.

Regulatory Flexibility Act Analysis

    Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et 
seq.), it is hereby certified that the revisions will not have a 
significant economic impact on a substantial number of small entities. 
First and foremost, the regulations do not directly regulate any 
entities. The redemption of bent or partial coins is a discretionary 
service offered to the public; participation is voluntary.
    In accordance with section 3(a) of the Regulatory Flexibility Act, 
the United States Mint has reviewed the proposed regulation. While the 
United States Mint certifies that the final rule--or in this case--the 
removal thereof, will not have a significant economic impact on a 
substantial number of small entities given that the regulations do not 
directly regulate any entities, the United States Mint has prepared a 
Final Regulatory Flexibility Analysis in accordance with 5 U.S.C. 604.
1. Statement of the Need for, Objectives of, and Legal Basis for, the 
Rule
    The regulations at 31 CFR part 100, subpart C, are promulgated 
under 31 U.S.C. 321, and provide for the exchange of uncurrent, bent, 
partial, fused, and mixed coins. For the reasons herein, the United 
States Mint has decided to close the bent and partial coin exchange 
program, which is a discretionary program that is not mandated by law.
2. Significant Comments in Response to the Initial Regulatory 
Flexibility Analysis
    One commenter that appeared to be a small business indicated that 
closing the program would lead to closing their business but did not 
quantify the specific economic impact of the proposed changes to this 
voluntary and discretionary program. One of the commenters stated that 
they worked for the City of Juneau, Alaska, a small entity as defined 
by the RFA, and inquired about how to dispose of ``several mutilated 
coins [accumulated] over the years.'' The commenter did not express 
opposition to the program's closure and merely requested information 
about where to dispose of what appears to be a very small number of 
coins. The United States Mint has carefully considered the impact of 
the redemption program's closure on small businesses; however, for the 
reasons discussed herein, there is no financially responsible way for 
the United States Mint to expand the resources devoted to the program 
necessary to meet the full level of demand. The United States Mint has 
carefully reviewed all the comments that were submitted and, based on 
the data available, has analyzed the regulatory flexibility impact 
using reasonable assumptions.
3. Small Entities Affected by the Rule
    The number of entities tendering significant quantities of coins 
for redemption in the past has been small. A large number of entities 
redeeming coins in the past were individuals--not businesses. A wide 
variety of businesses, such as municipal entities, recyclers, coin 
processors, amusement parks, auto shops, and waste management companies 
have applied for coins to be redeemed in the past. Data on the number 
of small entities voluntarily submitting coins to the redemption 
program was not provided by the commenters or within the public docket. 
Likewise, the United States Mint does not have data within its 
possession regarding the numbers of small entities submitting coins. 
The United States Mint has carefully reviewed all the comments that 
have been submitted and, based on the data available, has analyzed the 
regulatory flexibility impact using reasonable assumptions.
4. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    The United States Mint has not identified any reporting, 
recordkeeping, or other compliance requirements associated with the 
rule.
5. Steps Taken To Minimize Impacts on Small Entities and Alternatives 
Considered
    The United States Mint considered alternatives in promulgating this 
final rule. For example, the United States Mint considered re-opening 
the program under the parameters identified in the May 5, 2021, Federal 
Register document (86 FR 23877), proposing certain revisions to these 
regulations that would establish weight and shipment limits per 
participant and would prohibit the submission of certain kinds of coins 
or coins with certain kinds of damage. However, re-opening the 
program--even with these restrictions--would entail significant costs 
to the United States Mint. Further, the volume of coins submitted for 
possible redemption has greatly increased over the years, and there is 
no financially responsible way for the United States Mint to expand the 
resources devoted to the program necessary to meet the full level of 
demand. In response to the United States Mint's May 5, 2021, Federal 
Register document (86 FR 23877), several commenters expressed concern 
with the proposed 1,000 lb. per month submission limit, indicating that 
businesses have large volumes of coins to be redeemed that well exceed 
the monthly or annual limit. For example, one vendor alone indicated 
that at a rate of 1,000 lbs. per month, it would take over seven years 
just to redeem a portion of its inventory. The prior rulemaking 
indicated that, under these limits, participants would not be 
guaranteed the right to submit 1,000 lbs. per month; nor would the 
United States Mint have capacity even at this low rate to evaluate more 
than a small number of submissions per month.
    The United States Mint considered re-opening the program for a 
short, limited time under the new parameters identified in the May 5, 
2021, Federal Register document (86 FR 23877) with a published sunset 
date to allow those that have stored their mutilated coins in 
anticipation of the program reopening to submit their mutilated coins. 
It is clear, however, that there is no financially responsible way for 
the United States Mint to expand the resources devoted to the program 
necessary to meet the full level of demand, even for a limited time.

List of Subjects in 31 CFR Part 100

    Coins.

    For the reasons set forth in the preamble, the United States Mint 
amends 31 CFR part 100 as follows:

PART 100--EXCHANGE OF PAPER CURRENCY AND COIN

0
1. The authority citation for part 100 continues to read as follows:

    Authority: 31 U.S.C. 321.


Sec.  100.11  [Removed and Reserved]

0
2. Remove and reserve Sec.  100.11.

[[Page 78245]]


0
3. Amend Sec.  100.12 by revising paragraph (b) to read as follows:


Sec.  100.12  Exchange of fused or mixed coin.

* * * * *
    (b) Fused and mixed coins. The United States Mint will not accept 
fused or mixed coins for redemption.


Sec.  100.13  [Amended]

0
4. Amend Sec.  100.13 by:
0
a. Removing paragraph (a);
0
b. Redesignating paragraphs (b) through (d) as paragraphs (a) through 
(c), respectively; and
0
c. In newly redesignated paragraph (b), removing the phrase ``to any 
bent or partial''.

Ventris C. Gibson,
Director, United States Mint.
[FR Doc. 2024-21936 Filed 9-24-24; 8:45 am]
BILLING CODE 4810-37-P


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