Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 27593 

prior to implementing the delay of the 

compliance dates for the 2011 final rule. 

In accordance with § 10.40(e)(1), 

however, interested parties may submit 

comments on whether the extension of 

compliance dates set forth in this 

document should subsequently be 

modified or revoked. 

III. Submission of Comments 

Interested persons may submit to the 

Division of Dockets Management (see 

ADDRESSES) either electronic or written 

comments regarding this document. It is 

only necessary to send one set of 

comments. Identify comments with the 

docket number found in brackets in the 

heading of this document. Received 

comments may be seen in the Division 

of Dockets Management between 9 a.m. 

and 4 p.m., Monday through Friday. 

IV. Analysis of Impacts 

The 2011 final rule includes a 

comprehensive examination of the 

economic impact of the 2011 final rule 

(76 FR 35620 at 35654 through 35657). 

A 6-month delay of the compliance 

dates for the 2011 final rule is unlikely 

to significantly affect the time or cost 

estimates made in that economic impact 

analysis. The 6-month delay allows 

additional time for testing and 

relabeling. However, the economic 

impact analysis in the 2011 final rule 

presumed that testing and relabeling 

could be fully implemented without the 

additional 6 months. Therefore, 

delaying the compliance dates by 6 

months should not increase the time 

and cost estimates in the 2011 final rule. 

We have examined the impacts of the 

final rule under Executive Order 12866, 

Executive Order 13563, the Regulatory 

Flexibility Act (5 U.S.C. 601–612), and 

the Unfunded Mandates Reform Act of 

1995 (Pub. L. 104–4). Executive Orders 

12866 and 13563 direct Agencies to 

assess all costs and benefits of available 

regulatory alternatives and, when 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety, and other advantages; 

distributive impacts; and equity). We 

have determined that this final rule is 

not a significant regulatory action under 

Executive Order 12866. Consistent with 

Executive Order 13563, the approach 

taken here maintains ‘‘flexibility and 

freedom of choice for the public,’’ above 

all by providing ‘‘information for the 

public in a form that is clear and 

intelligible.’’ 

The Regulatory Flexibility Act 

requires Agencies to analyze regulatory 

options that would minimize any 

significant impact of a rule on small 

entities. We concluded that the 2011 

final rule would have a significant 

economic impact on a substantial 

number of small entities. Our analysis of 

this economic impact is discussed at 76 

FR 35620 at 35657. However, delaying 

the compliance dates of the 2011 final 

rule does not affect any of the numerical 

estimates made in our analysis. 

Section 202(a) of the Unfunded 

Mandates Reform Act of 1995 requires 

that Agencies prepare a written 

statement, which includes an 

assessment of anticipated costs and 

benefits, before proposing ‘‘any rule that 

includes any Federal mandate that may 

result in the expenditure by State, local, 

and tribal governments, in the aggregate, 

or by the private sector, of $100,000,000 

or more (adjusted annually for inflation) 

in any one year.’’ The current threshold 

after adjustment for inflation is $139 

million, using the most current (2011) 

Implicit Price Deflator for the Gross 

Domestic Product. It is not expected that 

this final rule will result in any 1-year 

expenditure that would meet or exceed 

this amount. 

The purpose of this final rule is to 

delay the compliance dates for the 2011 

final rule by 6 months. The delay of the 

compliance dates is based upon 

information received after publication of 

the 2011 final rule that indicates that 

full implementation of the 2011 final 

rule’s requirements for all affected 

products will require an additional 6 

months. 

V. Environmental Impact 

The Agency has determined under 21 

CFR 25.31(a) that this action is of a type 

that does not individually or 

cumulatively have a significant effect on 

the human environment. Therefore, 

neither an environmental assessment 

nor an environmental impact statement 

is required. 

VI. References 

The following reference has been 

placed on display in the Division of 

Dockets Management (see ADDRESSES), 

and may be seen by interested persons 

between 9 a.m. and 4 p.m., Monday 

through Friday. (FDA has verified the 

Web site address, but we are not 

responsible for any subsequent changes 

to the Web site after this document 

publishes in the Federal Register.) 

1. ‘‘Personal Care Products Council— 

Comment, FDA–2011–N–0449–0003, 

10/06/2011,’’ http:// 

www.regulations.gov. 

List of Subjects in 21 CFR Part 310 

Administrative practice and 

procedure, Drugs, Labeling, Medical 

devices, Reporting and recordkeeping 

requirements. 

Therefore, under the Federal Food, 

Drug, and Cosmetic Act, the Public 

Health Service Act, and under authority 

delegated to the Commissioner of Food 

and Drugs, 21 CFR part 310 is amended 

as follows: 

PART 310—NEW DRUGS 

■ 1. The authority citation for 21 CFR 

part 310 continues to read as follows: 

Authority: 21 U.S.C. 321, 331, 351, 352, 

353, 355, 360b-360f, 360j, 361(a), 371, 374, 

375, 379e; 42 U.S.C. 216, 241, 242(a), 262, 

263b–263n. 

■ 2. Section 310.545 is amended by 

revising paragraph (d)(40) to read as 

follows: 

§ 310.545 Drug products containing 

certain active ingredients offered over-thecounter (OTC) for certain uses. 

* * * * * 

(d) * * * 

(40) December 17, 2012, for products 

subject to paragraph (a)(29)(ii) of this 

section. December 17, 2013, for 

products with annual sales less than 

$25,000. 

Dated: May 8, 2012. 

Leslie Kux, 

Assistant Commissioner for Policy. 

[FR Doc. 2012–11390 Filed 5–10–12; 8:45 am] 

BILLING CODE 4160–01–P 

DEPARTMENT OF STATE 

22 CFR Part 62 

RIN 1400–AD14 

[Public Notice 7875] 

Exchange Visitor Program—Summer 

Work Travel 

AGENCY: Department of State. 

ACTION: Interim final rule with request 

for comment. 

SUMMARY: The Department of State 

(Department) published an initial 

interim final rule with request for 

comment on April 26, 2011) (2011 IFR) 

to amend the regulatory requirements of 

the Summer Work Travel category of the 

Exchange Visitor Program. In this 

second interim final rule (2012 IFR), the 

Department expands upon and provides 

guidance on additional regulatory 

changes and bolsters portions of the 

regulations to both further to protect the 

health, safety, and welfare of Summer 

Work Travel Program participants and 

to reinforce the cultural exchange 

aspects of the Program to promote 

mutual understanding in accordance 

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27594 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

with the Mutual Educational and 

Cultural Exchange Act of 1961. The 

Department has reviewed the comments 

submitted in response to the 2011 IFR, 

and this rule reflects those comments. 

Also, this 2012 IFR reinforces the 

cultural exchange aspect of the Program 

through the addition of a cultural 

component, and provides additional 

protection to program participants by 

describing types of job placements that 

are appropriate and by expanding the 

list of jobs prohibited under the 

Summer Work Travel Program. The 

enforcement of parts of this IFR is 

delayed until November 1, 2012. 

DATES: This rule is effective May 11, 

2012, with the exception of 22 CFR 

62.32(h)(11) that will go into effect 

November 1, 2012. The Department will 

accept written comments from the 

public up to 60 days from July 10, 2012. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Online: Persons with access to the 

Internet may view this notice and 

provide comments by going to the 

regulations.gov Web site and searching 

on its RIN (1400–AD14) at: http:// 

www.regulations.gov/index.cfm. 

• Mail (paper, disk, or CD–ROM 

submissions): U.S. Department of State, 

Office of Designation, SA–5, Floor 5, 

2200 C Street NW., Washington, DC 

20522–0505. 

• Email: JExchanges@state.gov. You 

must include the RIN (1400–AD14) in 

the subject line of your message. 

FOR FURTHER INFORMATION CONTACT: 

Robin J. Lerner, Deputy Assistant 

Secretary for Private Sector Exchange, 

U.S. Department of State, SA–5, Floor 5, 

2200 C Street NW., Washington, DC 

20522–0505; phone (202) 632–2805; fax 

(202) 632–6442. 

SUPPLEMENTARY INFORMATION: 

Executive Summary 

Statement of Need. In recent years, 

the work component of the Summer 

Work Travel Program has too often 

overshadowed the core cultural 

component necessary for the Program to 

be consistent with the Fulbright-Hays 

Act. In addition, there have been 

complaints regarding job placements, 

work conditions, and participant 

accommodations. As a result, the 

Department initiated a comprehensive 

review of the Summer Work Travel 

Program in mid-2010, and issued the 

2011 IFR based on this review. 

However, events that occurred in the 

summer of 2011 confirmed to the 

Department that it needed to enhance its 

scrutiny of the Summer Work Travel 

Program and take additional steps to 

amend regulations to protect program 

participants. 

The Department is keenly aware, 

however, that the salutary foreign affairs 

goals of the Exchange Visitor Program, 

including the Summer Work Travel 

Program can be seriously jeopardized, 

when even a single participant has a 

harmful or abusive exchange 

experience, or is inappropriately placed 

without due regard for the core cultural 

requirements and intended benefits of 

the Program. Therefore, through this 

second IFR, the Department seeks to 

continue: (i) Reforming the Summer 

Work Travel Program; (ii) ensuring that 

the Program better protects the health, 

safety, and welfare of program 

participants; and (iii) fortifying the 

Program’s prestige as a world class U.S. 

public diplomacy initiative. 

Statement of Legal Authority. The 

Exchange Visitor Program (of which the 

Summer Work Travel Program is one of 

15 categories of program types) was 

authorized by the Mutual Educational 

and Cultural Exchange Act of 1961 (Pub. 

L. 87–256, 75 Stat. 527) (Fulbright-Hays 

Act or Act) and implemented through 

22 CFR part 62. Enacted by the 87th 

United States Congress on September 

21, 1961, the Act’s stated purpose was 

‘‘to increase mutual understanding 

between the people of the United States 

and the people of other countries by 

means of educational and cultural 

exchange; to strengthen the ties which 

unite us with other nations by 

demonstrating the educational and 

cultural interests, developments, and 

achievements of the people of the 

United States and other nations, and the 

contributions being made toward a 

peaceful and more fruitful life for 

people throughout the world. * * *’’ In 

the half century since the Act’s passage, 

millions of people—program 

participants, Americans with whom 

they interact, and friends and family of 

the participants with whom they share 

their experiences upon returning 

home—have benefitted from the mutual 

understanding and peaceful relations 

that can derive best from such personto-person contact. The Summer Work 

Travel Program embodies and carries 

forward the stated purpose and intent of 

the Act. 

Provisions of the 2011 IFR. The 2011 

IFR presented four major changes (and 

several minor changes) to the Summer 

Work Travel Program regulations that 

were designed to strengthen sponsors’ 

oversight of both their program 

participants and the third parties who 

assist them in performing the core 

administrative functions of the 

Exchange Visitor Program. Those 

changes were: 

1. Sponsors were required to vet and 

confirm the validity of all host 

employers and fully vet all job offers; 

2. Only Summer Work Travel Program 

participants from countries that 

participated in the Visa Waiver Program 

could depart their home countries 

without pre-placed jobs; 

3. Sponsors were required to fully vet 

all third parties who they engaged to 

assist in performing certain enumerated 

core functions; and 

4. Sponsors were required to contact 

active program participants on a 

monthly basis to monitor both their 

welfare and their geographical physical 

location. 

However, in spite of these changes, 

events that occurred in the summer of 

2011 confirmed the need to take 

additional steps to amend the 

regulations that safeguard program 

participants. 

Changes to the 2011 IFR. Following 

the publication of the 2011 IFR, the 

Department reviewed comments 

received from 35 parties. Effective 

immediately, this rule makes further 

changes to some provisions introduced 

in the 2011 IFR to reflect those 

comments, clarify ambiguities, and 

make necessary corrections. These 

changes include: 

1. The Department corrected two 

inadvertent changes to the regulations: 

Sponsors must continue to offer 

participants assistance in finding job 

placements starting one week (versus 

two) after participants initiate their job 

searches; and it reinserted language 

prohibiting employers from paying 

participants less than their American 

counterparts; 

2. Sponsors are not required to 

maintain listings of bona fide job offers 

(but must offer participants reasonable 

assistance in finding new jobs); 

3. Sponsors are not required to verify 

the Employee Identification Numbers 

(EIN) of host employers (although they 

must obtain them); 

4. Sponsors must obtain evidence that 

potential host employers are registered 

to do business in the jurisdictions where 

participants will be placed; 

5. Sponsors must input job titles and 

sites of activity in the Student and 

Exchange Visitor Information System 

(SEVIS) prior to participants’ visa 

interviews (and not prior to issuing 

Forms DS–2019); 

6. Host employers may not assist 

sponsors in the monthly monitoring of 

participants; and 

7. Acknowledging the Department 

does not have jurisdiction over host 

employers, the ‘‘host employer 

obligation’’ section is renamed ‘‘host 

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Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 27595 

employer cooperation’’ and refocused to 

urge sponsors to work only with host 

employers willing to make good faith 

efforts to comply with the requirements 

therein. 

The provisions of the 2011 IFR, as 

amended by the 2012 IFR, are 

considered final upon publication of 

this 2012 IFR. The Department is not 

soliciting further notice and comment 

on these provisions. 

New Provisions in the 2012 IFR. 

Additional changes to the Summer 

Work Travel Program regulations 

presented in the 2012 IFR allows the 

U.S. government to better regulate 

sponsors in order to protect 

participants, the program itself, and U.S. 

communities that support Summer 

Work Travel participants. The 2012 IFR 

implements new regulations to expand 

sponsors’ obligations with respect to the 

cultural component mandated by the 

Act, clarify characteristics of jobs that 

are consistent with the purpose of the 

Act, identify jobs that are inconsistent 

with the purpose of the Act, and 

otherwise provide guidance to sponsors 

to ensure appropriate administration of 

the Summer Work Travel Program, with 

one exception, starting with the 2012 

summer season. The 2012 IFR clarifies 

several issues that commenting parties 

raised: 

1. The requirement that participants 

contact sponsors within ten days 

following their arrivals does not conflict 

with the requirement that sponsors 

validate SEVIS records within 30 days 

of participants’ arrivals; 

2. Individuals enrolled full time in 

on-line universities are not eligible for 

the program; 

3. Sponsors and foreign entities 

cannot provide host employers cash or 

gift incentives (though they may host 

job fairs); 

4. Sponsors must provide itemized 

annual cost schedules for all fees 

participants pay for program 

participation (including fees charged by 

foreign entities); 

5. Sponsors must terminate (versus 

end) the programs of participants who 

do not comply with certain 

requirements that sponsors are obligated 

to enumerate during program 

orientation; 

6. Sponsor outreach to participants 

must be answered in order for the 

contacts to be considered monthly 

monitoring; 

7. Sponsors must annually vet host 

employers and third parties (foreign and 

domestic) and each season must 

reconfirm the number of jobs available 

with each host employer; and 

8. Sponsors must vet initial, 

subsequent, and additional jobs before 

participants start work. 

A significant enhancement presented 

in the 2012 IFR is the refocus of the 

program on the cultural experience of 

participants, which in recent years has 

been overshadowed by the goal of 

income production. In addition, the 

2012 IFR makes changes to better 

protect the health, safety, and welfare of 

participants. To this end, the 2012 IFR 

makes several changes including adding 

the following requirements: 

1. Sponsors must provide information 

to incoming participants explaining the 

cultural component of the Summer 

Work Travel Program, including 

guidance on how best to experience U.S. 

culture and/or descriptions of cultural 

opportunities that sponsors have 

arranged; 

2. Job placements must be seasonal or 

temporary and must provide 

opportunities for participants to interact 

regularly with U.S. citizens and 

experience U.S. culture during the work 

portion (i.e., not travel portion) of their 

programs; 

3. In addition to the job prohibitions 

expanded in the 2011 IFR, sponsors 

must not place participants: 

a. With employers that fill nonseasonal or non-temporary job openings 

with participants with staggered 

vacation schedules; 

b. In positions that require licensing 

or as operators or drivers of vehicles or 

vessels for which drivers’ licenses are 

required regardless of whether they 

carry passengers or not; 

c. In jobs for which there is another 

specific J visa category; 

d. In positions requiring work hours 

that fall predominantly between 10:00 

p.m. and 6:00 a.m.; 

e. In positions declared hazardous to 

youth by the Secretary of Labor at 

Subpart E of 29 CFR part 570; 

f. In positions that require sustained 

physical contact with other people and/ 

or adherence to the Center for Disease 

Control and Prevention’s Universal 

Blood and Body Fluid Precautions 

guidelines (e.g., body piercing, 

tattooing, massage, manicure); 

g. In positions that are substantially 

commission-based and thus do not 

guarantee that participants will be paid 

minimum wage in accordance with 

federal and state laws; 

h. In positions involved in gaming 

and gambling that include direct 

participation in wagering and/or betting; 

i. In positions in chemical pest 

control, warehousing, catalogue/online 

order distribution centers; 

j. In positions with travelling fairs or 

itinerant concessionaires; and 

k. After November 1, 2012, in 

positions in the North American 

Industry Classification System’s 

(NAICS) Goods-Producing Industries 

occupational categories industry sectors 

11, 21, 23, 31–33 (set forth at http:// 

www.bls.gov/iag/tgs/ 

iag_index_naics.htm). 

Sponsors are also required to take 

more active roles in ensuring that 

participants have access to suitable, 

affordable, and safe housing and reliable 

and affordable transportation between 

their residences and worksites. 

The 2012 IFR also includes new 

protections for U.S. workers. Each 

season, sponsors must confirm that the 

host employers with which they intend 

to place participants: 

1. Will not displace U.S. workers at 

worksites where they place program 

participants; 

2. Have not experienced layoffs in the 

past 120 days; and 

3. Do not have workers on lockout or 

on strike. 

The Department seeks comment on 

the new provisions presented in the 

2012 IFR. 

Background 

On April 26, 2011, the Department of 

State (Department) issued an interim 

final rule with request for comment 

modifying the regulations of the 

Summer Work Travel category of the 

Exchange Visitor Program (2011 IFR) 

(see 76 FR 23177). Those regulations 

became effective on July 15, 2011. The 

Department has reviewed the comments 

of 35 parties, and this rule modifies the 

regulations to reflect those comments. 

Effective immediately, this rule makes 

further changes on an interim final basis 

to the Summer Work Travel Program 

regulations and requests comments. 

The Department is aware of and 

appreciates the efforts the sponsor 

community has undertaken to adjust in 

a short timeframe to the new regulatory 

model presented in the 2011 IFR. It is 

imperative, however, to amend further 

the Summer Work Travel Program 

regulations before the next large wave of 

participants arrives. The changes 

included in the 2012 IFR bear most 

directly on the health, safety, and 

welfare of the participants and reinforce 

the cultural exchange aspects of the 

Program to promote mutual 

understanding in accordance with the 

Mutual Educational and Cultural 

Exchange Act of 1961, as amended; 22 

U.S.C. 2451 et seq. (Fulbright-Hays Act 

or Act). The Department will propose 

other modifications to the Summer 

Work Travel Program later in 2012 

through a Notice of Proposed 

Rulemaking (NPRM). 

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27596 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

The focus of the 2012 IFR is threefold. First, the Department will 

introduce new requirements to remind 

sponsors of the centrality of the cultural 

component of the Summer Work Travel 

Program and, in this regard, prescribe 

characteristics of certain job placements 

and types of cultural activities that can 

appropriately promote mutual 

understanding, a core purpose of the 

Fulbright-Hays Act. Second, the 

Department will discuss changes it 

adopted in the 2011 IFR in light of the 

comments it received and will 

announce the final regulatory changes 

associated with that effort. Finally, it 

will implement new regulations, most of 

which are effective with the publication 

of this rule, to expand sponsors’ 

obligations with respect to the cultural 

component, clarify characteristics of 

jobs that are consistent with the purpose 

of the Act, identify jobs that are 

inconsistent with the purpose of the 

Act, and otherwise provide guidance to 

sponsors to ensure appropriate 

administration of the Summer Work 

Travel Program starting with the 2012 

summer season, during which roughly 

80 percent of all program participants 

come to the United States. 

Summer Work Travel Program. The 

Summer Work Travel Program allows 

foreign post-secondary students (mostly 

between the ages of 18 and 30) to come 

to the United States—for a maximum of 

four months—during their major 

academic breaks to travel and work in 

largely unskilled jobs. For nearly 50 

years, this category of the Exchange 

Visitor Program has been a part of U.S. 

public diplomacy efforts, under the 

auspices of the Fulbright-Hays Act. As 

reflected in a Statement of Policy dated 

March 28, 1996 (see 61 FR 13760), this 

category of the Exchange Visitor 

Program was implemented to open the 

program to those persons who were 

otherwise financially unable to visit the 

United States. During the initial 50 

years of the program, more than one 

million foreign students have 

participated in the Sumer Work Travel 

Program. The popularity of this 

Program—both with participants and 

U.S. embassies and consulates abroad as 

part of their public diplomacy efforts— 

arises from the participants’ ability to 

enjoy cultural exchange experiences 

while offsetting at least a portion of 

their travel costs through temporary 

employment in the United States. 

However, despite its popularity, the 

Program is not without challenges. 

In recent years, the work component 

has too often overshadowed the core 

cultural component necessary for the 

Summer Work Travel Program to be 

consistent with the intent of the 

Fulbright-Hays Act. Also, the 

Department learned that criminal 

organizations were involving 

participants in incidents relating to the 

illegal transfer of cash, the creation of 

fraudulent businesses, and violations of 

immigration law. There also were 

increasing numbers of complaints 

related to the Program, such as reports 

of improper or unsafe job placements, 

fraudulent job offers, post-arrival job 

cancellations, inappropriate work hours, 

and problems regarding housing and 

transportation. 

In response, the Department initiated 

a comprehensive review of the Summer 

Work Travel Program in mid-2010, 

intended both to enhance the 

Department’s governance of the 

designated Summer Work Travel 

Program sponsors and to tighten the 

regulations these sponsors must follow. 

To this end, the Department has been reevaluating the regulations and making 

changes to the Summer Work Travel 

Program regulatory model. In January 

2011, following a series of meetings 

with law enforcement agencies, 

employers, industry associations, and 

sponsors, the Department adopted a 

pilot program for Summer Work Travel 

Program participants from certain 

countries with a higher prevalence of 

problems (Pilot Program). The second 

step to safeguarding and strengthening 

the Summer Work Travel Program was 

incorporating Pilot Program concepts as 

key elements of the 2011 IFR. The 2011 

IFR presented four major changes (and 

several minor changes) to the Summer 

Work Travel Program regulations that 

were designed to strengthen sponsors’ 

oversight of both their program 

participants and third parties who assist 

them in performing core functions that 

are inherent in the administration of the 

Exchange Visitor Program (i.e., 

participant screening, selection, 

orientation, placement, and monitoring; 

and the promotion of mutual 

understanding). First, sponsors were 

required to vet and confirm the 

legitimacy of all host employers and 

fully vet all job offers. Second, only 

Summer Work Travel Program 

participants from countries that 

participated in the Visa Waiver Program 

could depart their home countries 

without pre-placed jobs. Third, sponsors 

were required to vet fully all third 

parties whom they engaged to assist in 

performing certain enumerated core 

functions. Finally, sponsors were 

required to contact active program 

participants on a monthly basis to 

monitor both their welfare and their 

geographical physical location. The 

incorporation of these concepts into the 

overall Summer Work Travel Program 

regulations in the 2011 IFR formally 

ended the separate Pilot Program. 

Events that occurred in the summer of 

2011 confirmed the Department’s initial 

assessment that it needed to enhance 

further its scrutiny of the Summer Work 

Travel Program and take additional 

steps to amend regulations that 

safeguard program participants. While 

the 2011 IFR established procedures for 

confirming the existence of proposed 

job placements, it did not provide 

guidance for assessing the suitability of 

job offers or preventing the 

displacement of U.S. workers. In 

August, the Department learned of 

inappropriate job placements for 

Summer Work Travel Program 

participants who were staffing a 

packaging plant. Summer Work Travel 

Program participants: (1) Were 

concentrated in single locations for long 

hours in jobs that provided little or no 

opportunity to interact with U.S. 

citizens; (2) were exposed to workplace 

safety and health hazards; and (3) were 

subjected to predatory practices through 

wage deductions for housing costs. 

These circumstances informed the 

Department that additional regulatory 

changes were necessary in order better 

to regulate the sponsors to protect 

participants, the program itself and U.S. 

communities that support Summer 

Work Travel participants. 

As part of the overall Program review, 

in September 2011, the Department 

announced and initiated on-site reviews 

of 14 Summer Work Travel Program 

sponsors. (See 76 FR 59182 (Sept. 23, 

2011).) In addition to assessing sponsor 

compliance with the current 

regulations, these reviews allowed the 

Department to consult with sponsors 

regarding the impact of the 2011 IFR on 

their operations. The Department 

completed these site visits and is in the 

process of analyzing the results. 

Next, the Department announced a 

cap on the maximum number of 

Summer Work Travel Program 

participants for calendar year 2012 and 

a moratorium on the designation of 

additional organizations as sponsors in 

the Summer Work Travel Program 

category. (See 76 FR 68808 (Nov. 7, 

2011)) Peaking at just over 153,000 

participants in 2008, the Summer Work 

Travel Program will proceed for the near 

future at a level not to exceed 109,000 

participants annually. The cap is 

sponsor-specific and based on the 

number of participants for each sponsor 

with program start dates between 

January 1 and December 31, 2011 (i.e., 

for the calendar year). The Department 

intends to retain these restrictions until 

it is confident that the program 

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Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 27597 

regulations are sufficient to remedy 

identified concerns. 

In November 2011, the Department 

hosted an open meeting with the 

sponsor community, including the 

Alliance for International Educational 

and Cultural Exchange. On December 

13, 2011, the Department issued 

Guidance Directive 2011–05. See 

http://j1visa.state.gov/wp-content/ 

uploads/2012/01/2011-GD05- 

12_13_2011Summer-Work-Travel-A 

-Cultural-Experience.pdf. The 

Department used these forums to 

announce its heightened scrutiny of the 

Summer Work Travel Program and its 

intention to publish new program 

regulations through additional 

rulemakings, including the 2012 IFR. 

The Department invited comments on 

both occasions. A number of sponsors 

criticized the Department for opting to 

modify the Summer Work Travel 

Program regulations through another 

interim final rule. The Department 

concluded that it must issue another 

interim final rule in order to promptly 

improve its existing regulatory 

framework given the potential impact 

on individual participants’ health, 

safety, and well-being. The use of 

traditional notice and comment 

procedures would not allow for 

implementation of these important 

safeguards prior to the summer of 2012. 

Accordingly, the Department is making 

certain rule changes in the 2012 IFR and 

will publish additional modifications 

through NPRM procedures later this 

year. To further monitor and ensure the 

health, safety, and welfare of program 

participants, the Department of State is 

in discussion with the Department of 

Homeland Security and other federal 

agencies and enforcement authorities 

regarding the appropriateness of an 

information-sharing memorandum of 

understanding (MOU). Such MOU 

would establish guidelines and a 

protocol for the exchange of, analysis of, 

and appropriate action on, information 

indicating possible criminal abuse or 

misuse of the Summer Work Travel 

Program. 

Cultural exchange. The Summer Work 

Travel Program is intended to allow 

foreign nationals, who could not 

otherwise afford to visit the United 

States as tourists or students, the 

opportunity to experience U.S. culture 

by defraying part of their travel and 

living expenses by working while in the 

United States. Over time, however, 

some sponsors, participants, and host 

employers lost sight of the central 

cultural exchange focus of the Act. 

Additionally, many participants viewed 

the Program as an opportunity simply to 

work in jobs that allow them to earn 

more money than they would in their 

home countries. The Program’s 

evolution did not comport with the 

intentions of the Act or the purpose of 

international exchange programs to 

increase mutual understanding. 

Accordingly, the 2012 IFR refocuses the 

Summer Work Travel Program towards 

the U.S. cultural experience and away 

from its income and labor opportunities. 

The cultural dimension of the 

Summer Work Travel Program 

experience is essential to all 

participants. Sponsors must consider 

the cultural component in all placement 

decisions. Rather than mandating 

specific types of cultural programs, 

however, the Department offers as 

guidance two examples of ways 

sponsors can meet the cultural 

component requirement. Sponsors 

could organize activities that acquaint 

participants with recognized features of 

U.S. culture and history (e.g., national 

parks, historic sites, major cities, scenic 

areas) and/or offer activities that engage 

participants with the communities in 

which they work and live. A core 

presumption underlies the Department’s 

renewed focus on the cultural 

component of the Summer Work Travel 

Program: solely work-based cultural 

exposure is insufficient. Only those 

sponsors that demonstrate that their 

Summer Work Travel Program 

participants engage in cultural exchange 

activities outside of their places of 

employment will qualify to be 

considered for biannual re-designation. 

Summer Work Travel Program 

participants historically have been 

placed in a wide variety of jobs in all 

50 states and the District of Columbia. 

The Department recognizes that it 

would be difficult, at best, to prescribe 

specific cultural activities that the 

current 49 designated sponsors must 

offer to their program participants. With 

this in mind, the Department changes 

the Summer Work Travel Program 

regulations to ensure that participants 

are placed in jobs that are conducive to 

experiencing U.S. culture. To that end, 

the 2012 IFR enumerates criteria that 

sponsors must meet when approving job 

offers, and it expands the list of 

prohibited placements. More 

specifically, it requires sponsors to 

ensure participants have specific 

opportunities to interact with U.S. 

citizens and experience U.S. culture 

outside their workplaces. 

Many sponsors already provide 

cultural opportunities for their Summer 

Work Travel Program participants. The 

Department commends those sponsors 

and encourages them to share their 

‘‘best practices’’ when commenting on 

the 2012 IFR. Sponsors must focus their 

placements on jobs that are clearly 

appropriate under these new regulations 

and that offer opportunities to interact 

with U.S. citizens. Sponsors must also 

enable regular interaction with 

Americans during work and non-work 

hours. For example, a significant 

majority of Summer Work Travel 

Program participants work in vacation 

areas—in or near beach communities, 

amusement parks, and campgrounds in 

the summer and at or around ski resorts 

in the winter. These service industry 

jobs provide routine opportunities for 

participants to interact with U.S. 

citizens—both as customers and coworkers. 

Although the new placement criteria 

and prohibitions together establish that 

the participants’ jobs must provide them 

interactions with U.S. citizens (e.g., coworkers, customers), such exposure 

during the course of the work-day will 

not satisfy the cultural requirement of 

the Summer Work Travel Program. 

Sponsors must intentionally plan and 

implement cultural activities to 

augment this quotidian exposure in 

order to be in compliance with the 

purpose of the Act. The Department 

understands that the more widely 

participants are geographically 

dispersed, however, the more difficult it 

may be for sponsors to arrange and/or 

monitor directly these mandatory 

cultural events. Accordingly, the 

Department reassesses both the types of 

third parties that sponsors may use to 

assist them in performing core 

programmatic functions, e.g., promoting 

mutual understanding, as well as the 

specific functions third parties may 

perform. 

Specifically, this 2012 IFR allows 

sponsors to enlist third parties to 

oversee cultural activities designed to 

expose participants to U.S. citizens and 

U.S. culture. That is, domestic third 

parties—including employers—may 

assist sponsors in ‘‘the promotion of 

mutual understanding’’ by arranging 

sightseeing tours, trips to sporting 

events, local community activities, etc. 

As the 2012 IFR modifies the 2011 IFR 

to allow only sponsors to complete the 

monthly monitoring requirement, third 

party arranged cultural activities are not 

a substitute for the monthly monitoring 

requirement. The Department reminds 

sponsors that they are responsible for 

the actions of third parties they may 

engage to fulfill the cultural component 

requirement and that such actions will 

be imputed to the sponsors. The 

Department seeks comment on 

sponsors’ provision of cultural 

opportunities, especially with respect to 

best practices that can be shared with 

the sponsor community. 

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27598 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

Comment analysis received on the 

2011 IFR. Thirty-five parties submitted 

comments to the 2011 IFR. Of those, 12 

parties were designated sponsors and 

one was an association that represents 

designated sponsors. Most of the 

commenting parties recognized both the 

value of the Summer Work Travel 

Program and the need for modified 

regulations. However, both sponsors 

and small businesses who hire Summer 

Work Travel Program participants stated 

that the regulatory changes were 

administratively burdensome. Sponsors 

argued that the Department had 

understated the cost to implement the 

changes. Two research organizations 

and two individual citizens 

recommended shutting down or sharply 

reducing the Program’s size. The 14 

non-sponsor participants who 

supported the Summer Work Travel 

Program included small businesses, an 

amusement park industry association, 

and individual citizens. The small 

businesses noted that they often cannot 

find sufficient numbers of qualified 

Americans to fill the positions where J– 

1 exchange visitors are traditionally 

placed. The Department has carefully 

considered all comments and has 

accordingly made modifications to the 

regulations proposed in the 2011 IFR as 

described below. 

Purpose. One commenting party 

remarked on redundant language about 

program duration in the ‘‘Purpose’’ 

section of the regulations, and the 

Department has accordingly eliminated 

that language. However, the refocus of 

the cultural component of the Program 

has been added to this section. The 

Department has modified the language 

both to emphasize the cultural aspect of 

the Program and to call attention to the 

types of jobs that are appropriate for 

Summer Work Travel participants. 

Duration. Seven parties commented 

about the length and timing of 

participants’ Summer Work Travel 

programs. Several of them urged the 

Department to allow participants to stay 

past Labor Day, as seasonal employers 

may require their continued presence in 

order to meet this final concentration of 

demand. Others commented that the 

Department had adopted countrywide 

dates for program participation without 

regard for individual schools’ academic 

calendars. Some disputed the 

requirement that final year students be 

restricted to those schedules, citing no 

reason for them to have to return home. 

Other than final-year students who 

are expected to return home to start 

their careers, participants are expected 

to return to their studies following 

participation in the Summer Work 

Travel Program. Thus, these dates must 

necessarily reflect academic calendars— 

without regard for host employers’ 

specific needs. To facilitate appropriate 

participation in the Summer Work 

Travel Program, the Department has 

established country-specific program 

start and end dates according to the 

academic year calendars of each 

country’s universities. The Department 

may modify the list of country-specific 

program dates should a particular need 

arise (e.g., a shift in the academic year 

in a particular country). The Department 

notes that it does not allow final year 

participants to extend their programs 

beyond the country-specific end dates. 

Participant screening and selecting. 

The 2011 IFR reintroduced the concept 

of ‘‘core’’ programmatic functions (see 

61 FR 13760 (published March 28, 

1996)). Several parties commented on 

the concept of core functions, seeking 

further definition and clarification. The 

six core programmatic functions which 

are differentiated from more general 

business administrative functions are: 

participant screening, selection, 

orientation, placement, monitoring; and 

the promotion of mutual understanding. 

While the Department requires sponsors 

to undergo the rigorous designation and 

re-designation processes, it has 

correspondingly less influence and 

oversight over third parties who assist 

sponsors in the administration of their 

programs. Accordingly, the new 

Summer Work Travel Program paradigm 

prevents wholesale delegation of 

sponsor duties to parties unknown to 

the Department both by limiting the 

functions third parties can perform and 

by delineating steps sponsors must 

undertake to confirm the bona fides of 

such third parties. The Department 

continues to impute the actions of all 

third parties to the sponsors that engage 

them. 

The 2011 IFR states that ‘‘sponsors are 

solely responsible for adequately 

screening and making the final selection 

of their program participants. * * * ’’ 

The Department has since realized that 

third parties should not assist sponsors 

in the core function of selecting 

participants, and it modifies the 

regulations accordingly. However, the 

Department broadly construes activity 

of ‘‘screening’’ to include recruiting, 

interviewing, assessing English language 

proficiency, etc. While foreign entities 

may screen participants, sponsors 

remain solely—and ultimately— 

responsible both for setting the 

standards for screening and for making 

final participant selection, based upon 

information foreign entities gathered as 

part of the screening process. 

English language. Two parties 

commenting on the 2011 IFR remarked 

about the importance of participants 

being proficient in English (e.g., safety 

of students and success of program 

depend on English language skills). In 

the 2011 IFR, the Department allowed 

sponsors to interview participants via 

video conference, thereby providing 

sponsors with a low-cost means of 

interviewing participants ‘‘in person.’’ 

Despite this change, the Department 

continues to notice a significant number 

of Summer Work Travel Program 

applicants who are denied visas because 

their English proficiency is not 

sufficient to participate in the Program. 

Since the lack of adequate English 

ability may put participants at risk 

during their exchanges, the 2012 IFR 

establishes more explicit English 

proficiency standards that applicants to 

the Summer Work Travel Program must 

demonstrate to their sponsors’ 

satisfaction. Specifically, applicants 

must have sufficient English proficiency 

not just to perform their jobs, but also 

to navigate daily life; read and 

comprehend program materials; fully 

understand their job benefits and 

responsibilities and their rights and 

protections; and know how to obtain 

assistance, if necessary. The Department 

reminds sponsors that the addition of 

video-conferencing as an interview tool 

provided them a cost-effective means of 

conducting these interviews themselves 

should they find foreign entities not 

fully capable of accurately assessing 

applicants’ English proficiency. The 

Department will interpret inordinately 

high visa rejection rates because of 

insufficient English language 

proficiency as an indication that 

sponsors are not sufficiently screening 

potential applicants. 

Accredited academic institutions. The 

2011 IFR also added the requirement 

that participants in the Summer Work 

Travel Program be ‘‘enrolled full-time 

and pursuing studies at accredited postsecondary academic institutions located 

outside the United States’’ (emphasis 

added). One party commented on this 

change, specifically with respect to the 

absence in the language of a 

requirement that these institutions have 

a formal campus of the ‘‘bricks and 

mortar’’ variety, and not be on-line 

schools. The Department did not intend 

to open the door to students enrolled in 

purely Internet-based schools. Summer 

Work Travel participants must have an 

academic pull back in their home 

countries (or in the foreign countries 

where they are studying) that requires 

them to leave the United States at the 

end of their academic breaks. 

Accordingly, the Department clarifies 

that the post-secondary institutions in 

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which participants must be enrolled to 

participate in the Summer Work Travel 

Program must be classroom based, in 

addition to being accredited and 

academic in nature. 

Participant orientation. The 

Department adds to the list of required 

orientation materials and information 

that sponsors must provide Summer 

Work Travel Program participants 

before they depart their home countries. 

Sponsors must explain the importance 

of the cultural component of the 

Summer Work Travel Program. They 

must provide guidance on how best to 

experience U.S. culture and/or describe 

cultural opportunities they have 

arranged. For participants with preplaced jobs, sponsors must provide 

details on job offers and information 

about housing and transportation to and 

from work. Additionally, sponsors must 

inform participants that they risk 

program termination if they (1) fail 

timely to report their arrival and/or 

changes of residence; (2) start work at 

un-vetted jobs; and/or (3) fail timely to 

respond to sponsors’ monthly 

monitoring outreach contacts. Many 

commenting parties opined that it 

would be difficult to get college 

students to respond to sponsors’ 

outreach. The Department disagrees. By 

providing sufficient orientation and a 

clear understanding of the conditions of 

program participation at the outset, 

sponsors should be able to gain the 

cooperation of their participants to 

comply with program rules. The 

Department encourages sponsors that 

already achieve this level of cooperation 

from their participants to share their 

best practices with the Department 

during the comment period. 

Consequences of non-compliance by 

participants. With respect to how to 

respond to participants who fail to meet 

the obligations enumerated above, the 

preamble accompanying the 2011 IFR 

stated: ‘‘As a point of clarification of 

existing regulations, sponsors are 

obligated to end the exchange programs 

of participants who do not report their 

arrival within ten days following the 

program start date or who do not report 

changes in their U.S. addresses or sites 

of activity within ten days of such 

moves.’’ (76 FR 23177, 23180) (April 24, 

2011)) During the on-site reviews, at 

association meetings, and in comments 

filed in response to the 2011 IFR, many 

sponsors inquired whether they should 

simply ‘‘end’’ programs of noncompliant participants’ programs or 

actually terminate their status in the 

Student and Exchange Visitor 

Information System (SEVIS). The 

Department recognizes that this 

statement needs further clarification. 

Sponsors must inform participants that 

their non-compliance will result in their 

termination from the program, and that 

program termination puts at risk their 

ability to travel to the United States in 

the future. 

Many commenting parties expressed 

concern that the requirement that 

participants contact their sponsors 

within ten days of arrival in the United 

States conflicted with the requirement 

that sponsors validate participants’ 

records in the SEVIS within 30 days. 

The Department clarifies that this new 

notification requirement does not 

change the requirement in 22 CFR 

62.70(b) that sponsors update SEVIS 

records within 21 days of learning of 

changes of current U.S. addresses, or the 

requirement in 22 CFR 62.70(d) that 

sponsors validate SEVIS records of 

Summer Work Travel Program 

participants within 30 days of their 

program start dates. These are 

obligations of sponsors with respect to 

SEVIS maintenance; the new regulatory 

language imposes an obligation on 

participants to report their arrivals and 

any address changes promptly to their 

sponsors. Since implementing the 2011 

IFR, however, the Department has 

determined that participants cannot 

change or add jobs independently. If 

they wish to change or add jobs, they 

must first consult with their sponsors 

who must verify the terms and 

conditions of prospective jobs and fully 

vet potential host employers. This 

change has made unnecessary the 

previous requirement that participants 

inform sponsors within ten days of 

changing jobs. Accordingly, the 

Department modifies the regulations to 

make clear that the participants’ ten-day 

notification requirement applies only to 

reporting participants’ arrivals and 

changes of residences (including 

securing initial residences). It further 

clarifies that sponsors must inform 

participants that they may not start, 

change, or add jobs before their 

sponsors have vetted the host employers 

and the terms and conditions of the jobs 

pursuant to 22 CFR 62.32(n). The 

Department requires sponsors to act 

promptly (i.e., within 72 hours) to verify 

this information and to report back to 

the participants the results of such 

action. 

The Department considers 

participants starting work before their 

sponsors fully vet their jobs to be 

engaged in unauthorized employment 

and reminds sponsors of 22 CFR 

62.16(b), which states: ‘‘An exchange 

visitor who engages in unauthorized 

employment shall be deemed to be in 

violation of his or her program status 

and is subject to termination as a 

participant in an exchange visitor 

program.’’ The requirement that 

program participants not change jobs 

without permission from their sponsors 

in no way suggests that participants 

must remain in unsuitable positions 

such as those that are not consistent 

with written job offers or in other ways 

do not meet the expectations of 

participants or the purpose of the Act. 

The Department expects that sponsors 

will not unreasonably withhold their 

assistance or permission for participants 

who have valid reasons for wishing to 

change or add jobs. 

Employees at will. One sponsor 

sought clarification of the requirement 

that sponsors provide pre-placed 

participants with information about the 

‘‘contractual obligations’’ between the 

participants and their employers. This 

party asked what kind of information 

was required and how a ‘‘contract’’ 

could exist given that most 

participants—like their U.S. 

counterparts in these jobs—would be 

considered ‘‘employees at will.’’ The 

Department agrees that Summer Work 

Travel Program participants are 

employees at will, but nevertheless 

requires sponsors to inform participants 

about the terms and conditions of their 

job offers. This creates a degree of 

transparency that can ensure that the 

participants’ expectations are in line 

with the jobs and conditions that they 

will encounter upon their arrival in the 

United States. The Department is 

developing a Summer Work Travel 

Program Job Placement Form (i.e., Form 

DS–7007) to capture the information 

necessary for sponsors to demonstrate 

that they have fully vetted potential jobs 

(e.g., the name and address of the host 

employer, the hourly wage, benefits, the 

range of hours per week the participants 

likely will work, whether the host 

employer has arranged housing, and if 

so, its cost to the participant). The 

Department published the form in the 

Federal Register and sought comment 

on its design (see 76 FR 72996 (Nov. 28, 

2011)). Until such time as the DS–7007 

Form is finalized and adopted, as a 

‘‘best practice,’’ sponsors may 

voluntarily begin using forms similar to 

the Form DS–7007 for informing 

participants about the details of their 

vetted jobs. 

Cultural component. Sponsors are 

required to inform participants prior to 

their departure from their home 

countries about the importance of the 

cultural aspects of the Summer Work 

Travel Program. They must provide 

specific guidance on how participants 

can avail themselves of cultural 

opportunities in general as well as 

identify specific activities that the 

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27600 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

sponsors intend to arrange to further 

promote cultural exchange. Sponsors 

must screen out those applicants whose 

interests in the Summer Work Travel 

Program predominantly appear focused 

on earning income. Accordingly, the 

Department will view the lack of 

documented evidence of participants’ 

cultural activities required by Summer 

Work Travel Program regulation as, 

among other things, a deficiency by 

sponsors adequately to screen and 

orient program participants. The 

Department seeks comment on the 

Program’s refocus on the cultural 

component and encourages sponsors to 

share their best practices. 

Participant placement. In the 2011 

IFR, the Department established a new 

process by which sponsors must vet 

both potential job offers and potential 

host employers. The Department’s 

experience with this requirement—both 

for the Pilot Program this past summer 

and this most recent winter session— 

has demonstrated the benefits of this 

new model. No sponsor commenting on 

the 2011 IFR objected to this new 

requirement; accordingly, the 

Department makes no substantive 

changes to the job and employer vetting 

requirements. It does clarify, however, 

that sponsors must vet potential host 

employers annually and that prior to 

each season, sponsors must confirm the 

number of jobs each host employer 

seeks to fill with program participants. 

The Department clarifies, however, that 

placement is one of the core functions 

that sponsors may not enlist third 

parties to perform. In this context, 

placement means matching particular 

participants with specific job 

opportunities. In other words, third 

parties (foreign and domestic alike) may 

provide sponsors with leads for 

potential jobs, but sponsors must 

determine the suitability of individual 

participants for specific jobs and make 

all placements. 

In the 2011 IFR, the Department 

prohibited sponsors and foreign entities 

from providing incentives to employers 

to accept program participants for job 

placements. In the 2012 IFR, the 

Department clarifies that participant 

placement is the sole responsibility of 

sponsors, i.e., foreign entities may not 

match participants with available jobs. 

The Department, however, realizes that 

despite this restriction, both U.S. and 

foreign third parties could play an 

ancillary role in finding job placements, 

e.g., by informing sponsors or 

participants (who find their own jobs) 

about potential job openings. 

Accordingly, the 2012 IFR expands the 

prohibition to include the provision of 

incentives to employers by all third 

parties acting on behalf of sponsors. 

While the regulations continue to 

prohibit such third parties from actually 

placing participants, the Department 

wishes to ensure that third parties or 

sponsors in no way provide potential 

host employers with incentives to 

accept any participants for job 

placements. 

With respect to the definition of 

‘‘incentives’’ in this context, seven 

commenting parties urged the 

Department to clarify that it does not 

intend to prohibit sponsors from 

funding travel expenses for employers 

of Summer Work Travel Program 

participants to international job fairs 

that provide hiring entities the 

opportunity to meet their prospective 

workers. The Department understands 

that the cost of travel, accommodations, 

meetings, and meals would be included 

in the cost of such job fairs. It considers 

job fairs to be opportunities for potential 

host employers to meet their 

prospective employees and, therefore, 

not incentives to hire particular 

sponsors’ participants. Likewise, the 

Department does not seek to prohibit 

meetings between prospective or current 

host employers and sponsors at 

mealtimes. However, the Department 

does consider gifts, cash payments, and 

trips paid for by sponsors that do not 

include opportunities to meet 

prospective participants to be 

prohibited ‘‘incentives’’ to host 

employers. 

Confirm all jobs. Under the terms of 

the Pilot Program, sponsors were 

required to confirm all jobs prior to 

participants’ departures from their home 

countries by verifying both the bona 

fides of the potential employers and the 

terms and conditions of the job offers 

themselves. In the 2011 IFR, this 

requirement was extended to all 

participants from non-Visa Waiver 

Program countries. In comments on the 

2011 IFR, one party urged the 

Department to allow participants from 

Visa Waiver Program countries to begin 

work as soon as they obtained job offers 

and allow sponsors five days to vet the 

employers and the jobs in order to allow 

participants to start work immediately. 

Theoretically, this could apply also to 

participants from non-Visa Waiver 

Program countries who wanted to 

change or add jobs or to participants 

from Visa Waiver Program countries 

both under those circumstances and in 

the case of their initial employment. 

The Department respectfully rejects this 

recommendation because it believes it 

will cause unnecessary confusion as to 

which participants could start 

unverified jobs and under what 

conditions. Once participants have 

arrived in the United States and secured 

job offers, sponsors must vet initial, 

subsequent, and additional jobs within 

72 hours. The Department requires 

sponsors to have sufficient staff and 

resources to ensure the jobs of all 

participants to whom they offer 

exchange programs are timely and fully 

vetted. The Department seeks comment 

on potential barriers to sponsors 

meeting this 72 hour deadline. 

Obligation to work with participants 

seeking new or additional jobs. The 

2011 IFR proposed new requirements 

for vetting both host employers and the 

terms and conditions of individual job 

offers. The Department adopts those 

provisions with limited change. 

Although the text of the regulation has 

been slightly restructured to provide 

more clarity, the only substantive 

change the Department makes is in 

response to comments on the 2011 IFR 

and during the on-site reviews. There 

was widespread objection to retaining 

the requirement that sponsors maintain 

rosters of bona fide job listings for 

participants seeking job placements. 

Some commented that not only is it 

difficult to keep these lists updated, this 

requirement is also an anachronism in 

the Internet era. The Department agrees 

and eliminates the requirement that 

sponsors maintain such lists of available 

jobs. Instead, the Department now 

explicitly requires sponsors to offer 

reasonable assistance to participants 

seeking additional or subsequent jobs 

(regardless of whether participants were 

initially direct-placed or self-placed). 

The 2011 IFR incorrectly changed from 

one to two weeks the amount of time 

non-pre-placed participants must 

attempt to find work before obtaining 

assistance from their sponsors. The 

Department clarifies that sponsors are 

expected to undertake reasonable efforts 

to assist non-pre-placed participants 

(i.e., those from Visa Waiver Program 

countries) who have not found suitable 

employment within one week of 

commencing job searches. 

The Department recognizes that there 

are many reasons that participants may 

be unsatisfied with their initial jobs and 

that the expectations of some 

participants may differ from the reality 

of their placements. Although sponsors 

are required to make reasonable efforts 

to find replacement jobs for 

participants, under certain 

circumstances, it would be appropriate 

for sponsors to end (not terminate) 

programs of participants for whom 

subsequent suitable jobs cannot 

reasonably be arranged. While 

participants who end the work portion 

of their programs early may travel in the 

United States before returning home, 

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Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 27601 

those with terminated programs may 

not. 

New criteria for appropriate job 

placements. The Department adds new 

criteria that sponsors must consider 

when determining the suitability of job 

placements. In addition, it expands the 

list of prohibited job placements. The 

goal is further to ensure the placement 

of participants in appropriate jobs that 

provide them better opportunities to 

experience U.S. culture and to ensure 

that participants work in environments 

that are safe and appropriate for the 

Exchange Visitor Program. Jobs must be 

seasonal or temporary in nature. 

Employment is of a seasonal nature 

when the required services or labor are 

traditionally tied to a season of the year 

by an event or pattern, and employers 

require labor levels above and beyond 

existing worker levels. Employment is 

of a temporary nature when employers’ 

needs for duties to be performed are 

short-term, a one-time occurrence, a 

peak load need, or an intermittent need. 

It is the nature of employers’ needs, not 

the nature of the duties that is 

controlling. 

Sponsors must place participants only 

in jobs that offer opportunities to 

interact routinely with U.S. citizens and 

experience U.S. culture. Sponsors may 

place participants only in those jobs that 

adhere to the participant placement 

criteria listed in 22 CFR 62.32(g)(4–6), 

which among other things includes 

prohibited jobs found at 22 CFR 

62.32(h). Sponsors must use extra 

caution when placing participants in 

positions with host employers in lines 

of business that have been associated 

with trafficking in persons (e.g., 

modeling agencies, housekeeping, 

janitorial services). When sponsors 

follow the previously cited regulations 

and guidance, the result will be job 

placements that: 

D Do not have the effect of displacing 

U.S. workers, especially young U.S. 

citizens (18–25 years old), a group that 

is currently experiencing high 

unemployment levels; 

D Do not overly concentrate program 

participants or isolate program 

participants from interactions with U.S. 

citizens, both of which will diminish 

the cultural exchange component of the 

program; and 

D Permit participants to work 

alongside U.S. citizens in the same or 

similar jobs. 

Sponsors may place participants with 

employment or job placement agencies 

only under the following three 

circumstances: First, participants must 

be employees of and paid by the staffing 

agencies; second, staffing agencies must 

provide full-time, primary, on-site 

supervision of the participants; and 

third, staffing agencies must effectively 

control the work sites, e.g., have handson management responsibility for the 

participants. If these three conditions 

are not met, staffing agencies are not 

fulfilling the role of employers, and 

sponsors may not place participants 

with them. 

Program exclusions. Notwithstanding 

its development of this new guidance 

for identifying appropriate jobs, the 

Department retains and enhances the 

list of prohibited positions that have 

traditionally been incorporated in 

Summer Work Travel Program 

regulations. As the Department’s 

concern for the health, safety, and 

welfare of participants and the integrity 

of the Summer Work Travel Program 

remain of paramount importance, it 

views this approach to job selection 

guidance as both prudent and necessary. 

First, the Department clarified that 

sponsors cannot place participants in 

jobs as operators or drivers of vehicles 

or vessels, even if they are not carrying 

passengers. It also articulated additional 

examples of prohibited jobs in the adult 

entertainment industry. Moreover, due 

to concerns about participants’ health, 

safety and welfare, the Department 

further expanded this list to include 

jobs that have already been declared by 

the Secretary of Labor to be hazardous 

to youth; jobs that require adherence to 

the Center for Disease Control and 

Prevention’s Universal Blood and Body 

Fluid Precautions guidelines and/or 

require sustained physical human 

contact; jobs in warehouses; and 

chemical pest control jobs. Further, jobs 

that fall under the North American 

Industrial Classification System 

(NAICS) Goods-Producing Industries 

occupational categories industry sectors 

11, 21, 23, 31–33 are prohibited, 

specifically: Natural Resources and 

Mining (including Agriculture, Forestry, 

and Fishing and Hunting as well as 

Mining, Quarrying, and Oil and Gas 

Extraction); Construction; and 

Manufacturing. This prohibition is the 

only portion of the 2012 IFR that will 

be effective, not with publication of the 

2012 IFR, but on November 1, 2012. 

Two other job positions are now 

excluded. Sponsors may not place 

participants in positions for which the 

compensation is substantially 

commission-based because they do not 

guarantee that participants will be paid 

minimum wage in accordance with 

federal and state standards. Also, 

positions with traveling fairs or itinerant 

concessionaires are also now prohibited 

due to health and safety concerns 

associated with a nomadic lifestyle, as 

well as the resulting difficulty in 

tracking the locations of such 

participants in SEVIS. Finally, as part of 

its effort to refocus the program on its 

cultural purpose, the Department 

further expands the list of excluded 

positions in the 2012 IFR to include 

types of employment that are 

incompatible with a cultural exchange 

program: including positions requiring 

work hours that fall predominantly 

between the hours of 10:00 p.m. and 

6:00 a.m. and positions in catalogue/ 

online order distribution centers. 

Consistent with Executive Order 13563, 

and its particular emphasis on the 

importance of public participation, the 

Department requests comments on these 

expanded job prohibitions in this 

interim final rule. 

The Department recognizes that in 

light of the timing of this interim final 

rule, the immediate implementation of 

the NAICS prohibitions at this date may 

cause serious economic hardship for 

certain employers, sectors, or locations 

for the immediate summer 2012 season. 

For this reason, the Department is 

adopting a phased approach and 

implementation of those specific 

prohibitions will not go into effect until 

November 1, 2012, after the immediate 

summer season. On or before that date, 

sponsors that place participants in these 

jobs, must either end the participants’ 

programs or place the participants in 

permitted jobs. 

The Department emphasizes that all 

other provisions of the 2012 IFR are 

effective immediately upon publication. 

This means that the programs of 

participants placed this summer in jobs 

that will be prohibited starting 

November 1, 2012 are still subject to all 

program regulations during the 

upcoming summer season. For example, 

sponsors must ensure those positions 

provide participants opportunities to 

interact routinely with U.S. citizens 

during the day and after, do not fall 

predominantly between the hours of 

10:00 p.m. and 6:00 a.m., and do not 

prevent participants from actively and 

routinely taking part in cultural 

activities. In addition, such placements 

may not create over-concentration of 

participants in any one location, or 

displace U.S. citizen workers at the 

specific worksites. 

Housing and transportation. The 

regulations adopted in the 2011 IFR 

required sponsors to advise only 

participants from Visa Waiver Program 

countries how to find appropriate and 

reasonably priced housing. The 

Department now amends the regulations 

to include all Summer Work Travel 

Program participants. When evaluating 

the suitability of potential jobs, sponsors 

must consider the availability, 

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affordability, and suitability of local 

housing and transportation. When host 

employers do not offer housing and 

transportation or participants do not 

wish to avail themselves of employerprovided housing and transportation, 

sponsors must actively and immediately 

assist Summer Work Travel Program 

participants in arranging suitable, 

affordable, and safe housing, and 

ensuring that reliable and affordable 

transportation between their residences 

and work sites is available. To be 

considered safe, housing must, at a 

minimum, meet all applicable local 

laws and regulations, including with 

respect to ventilation, utilities, and 

occupancy rates. If it is difficult for 

sponsors to identify appropriate housing 

and/or transportation under certain 

circumstances, this should signal the 

sponsors to search for other jobs in other 

locations. The Department seeks 

comment on the expanded roles of 

sponsors in ensuring the availability of 

appropriate housing and transportation. 

Often, host employers provide 

housing and/or transportation to 

program participants and reduce their 

hourly pay or otherwise deduct from 

their pay to cover the cost of such 

housing and/or transportation. In these 

cases, job offers must explicitly describe 

such arrangements and specify the 

market value of the housing and/or 

transportation. In this way, it is clear 

whether the participants are being 

compensated in compliance with 

program regulations, including 

compliance with state wage 

requirements and section 531 of the Fair 

Labor Standards Act (FLSA), which 

requires that such deductions be 

voluntary and not include a profit to the 

employer or to any affiliated person. 

Forms DS–2019. Four parties objected 

to the requirement that sponsors enter 

the host employer sites of activities and 

job titles in SEVIS prior to issuing 

Forms DS–2019. One party commented 

that this requirement was unworkable 

because it forces employers to commit 

months before knowing their summer 

employment needs. It recommended 

that, instead, the language be changed to 

require collection of employment 

information in SEVIS before applicants’ 

visa interviews. Others expressed 

concern that employers do not know the 

sites of activity prior to the preparation 

of Forms DS–2019, and one stated that 

participants are often assigned specific 

job titles only after they report to work. 

The Department disagrees with 

respect to participants from non-visa 

waiver countries. Sponsors must vet 

their potential employers as set forth at 

62.32(n), confirm the terms and 

conditions of their job offers, and input 

complete and correct data into SEVIS 

prior to issuing Forms DS–2019 to 

participants from non-visa waiver 

countries. In the rare cases where 

sponsors do not know the sites of 

activity, they may initially enter the 

employers’ main addresses in the site of 

activity fields, noting that such 

information will change, and update 

SEVIS prior to the visa interview. 

Clearly, such job and employer 

information is available for participants 

from visa-waiver countries only if they 

opt to secure placements prior to 

departing their home countries—in 

which case, they will be treated as 

participants from visa-waiver countries 

for purposes of determining when such 

information must be entered into SEVIS. 

Accordingly, sponsors can issue Forms 

DS–2019 for non-pre-placed 

participants from visa waiver countries 

prior to entering any of this information 

into SEVIS. However, sponsors must 

always vet employers and job offers 

prior to entering the data into SEVIS. 

Participant compensation. Sponsors 

must ensure that host employers fairly 

compensate participants for their work. 

In the 2011 IFR, the Department 

adopted the requirement that Summer 

Work Travel Program participants, 

regardless of age, be compensated at the 

higher of the applicable state minimum 

wage or the federal minimum wage. One 

party commented that the broader and 

more protective language of the prior 

regulations (i.e., ‘‘shall ensure that 

participants receive pay and benefits 

commensurate with those offered to 

their American counterparts’’) should be 

retained. The Department notes that this 

language was unintentionally dropped 

from the 2011 IFR and hereby reinserts 

it. Another commenting party expressed 

concern that the regulations did not 

include the minimum wage exemption 

for jobs with amusement and 

recreational establishments found in the 

FLSA. By reinserting the dropped 

language, the regulations implicitly 

recognize the minimum wage 

exemption of the FLSA for such 

placements. If a sponsor has reason to 

suspect that a participant is not being 

compensated in accordance with 

Federal, State or local law, the sponsor 

must contact the appropriate 

authorities, including, but not limited to 

the U.S. Department of Labor’s Wage 

and Hour Division. 

Monitoring. There are numerous 

reasons for sponsors to stay in regular 

and direct communication with their 

participants. First, this type of contact 

allows sponsors to check on 

participants’ health, safety, and welfare. 

Also, it reinforces the primacy of the 

sponsor/participant relationship in the 

Summer Work Travel Program so that 

participants with concerns about their 

programs will reach out to their 

sponsors for assistance should they 

need it. Further, it provides sponsors 

with the opportunity to confirm that 

they have the participants’ correct 

‘‘Current U.S. Addresses’’ and ‘‘Sites of 

Activity’’ listed in SEVIS, so they may 

maintain accurate SEVIS records in the 

interest of National Security. It also 

allows sponsors to confirm that 

participants are enjoying the mandatory 

cultural experiences. For these reasons, 

the 2011 IFR expanded the obligations 

of sponsors to monitor their program 

participants by requiring personal 

contact with all participants on a 

monthly basis. Sponsors must document 

such monthly contacts, which can be inperson, by telephone, or via email 

exchange. Many sponsors commenting 

on the 2011 IFR objected to having to 

actually reach participants to meet this 

obligation, suggesting that it would be 

difficult if not impossible to compel 

participants to respond to sponsors’ 

outreach. The Department disagrees and 

subsequently clarifies that although 

broadcast or individual texts, emails, or 

voice messages, for example, may be 

considered attempts to initiate contact 

with participants, participants must 

respond to communications in order for 

such contacts to be considered 

complete. Sponsors must terminate the 

programs of participants who exhibit a 

pattern of failing to respond to the 

monthly monitoring. Accordingly, 

sponsors must not place participants in 

locations where it is difficult for them 

to access the normal forms of 

communications. 

Sponsors’ use of third parties. One 

commenting party urged the Department 

to allow foreign entities to participate in 

the monitoring function of participants, 

stating that foreign entities provide 

native language support, and the parents 

of participants appreciate their 

supportive roles. The Department 

recognizes the critical role that foreign 

entities can play in reaching out to 

participants when unusual 

circumstances require clear 

communication, and it clarifies that 

these regulations in no way prohibit 

foreign entities from contacting 

participants and/or their parents. Such 

contacts, however, do not count as part 

of the sponsors’ monthly monitoring 

requirement. The Department does not 

allow host employers or any other third 

party to assist in conducting monthly 

monitoring. If program participants are 

having problems with their employers 

or the conditions of their jobs, allowing 

employers to assist in monthly 

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monitoring effectively denies 

participants’ access to neutral 

advocates. In sum, sponsors may not 

delegate their monthly monitoring 

responsibilities to third parties, but 

must themselves initiate, complete, and 

document monthly contacts with all 

program participants. 

With renewed focus on the cultural 

component of the Summer Work Travel 

Program and the understanding that 

sponsors often place participants 

throughout the United States, the 

Department has determined that 

sponsors may have third parties assist 

them in the core programmatic function 

of promoting mutual understanding. 

That is, sponsors may engage third 

parties to arrange local activities, 

sightseeing trips, or other events that 

allow participants to interact with U.S. 

citizens and/or learn about U.S. culture. 

Sponsors may wish to work together to 

offer joint activities. Sponsors must vet 

these domestic third parties according 

to the requirements set forth in Sec. 

62.32(n). 

Vetting third parties (foreign entities). 

The 2011 IFR also required sponsors to 

vet all foreign entities (i.e., overseas 

agents or partners) that assist them in 

fulfilling the core programmatic 

functions that may be conducted 

outside the United States and to 

maintain current listings of such parties 

in a new ‘‘Foreign Entity Report.’’ 

Specifically, sponsors must obtain proof 

of these entities’ business licenses, 

disclosures of previous bankruptcies or 

pending legal actions, three written 

references, summaries of the entities’ 

prior J–1 experience, criminal 

background check reports, and copies of 

sponsor-approved advertising materials. 

After sponsors have successfully vetted 

foreign entities, they must provide the 

Department with this information to 

allow the Department to update the 

Foreign Entity Report. Although 

applicants do not need to work with 

foreign entities, they may not work with 

those foreign entities who are not 

included in the Report. If any material 

information (e.g., contact information, 

financial status, criminal backgrounds 

of principals, relationship with sponsor) 

changes, sponsors must promptly 

provide this information to the 

Department. 

Eight parties commented on these 

requirements, voicing almost 

unanimous concern that it would be too 

expensive to maintain English 

translations of foreign entities’ 

marketing materials, especially given 

the Internet-focus of today’s advertising 

environment. They requested that 

instead, sponsors approve the major 

marketing themes of their foreign 

entities. The Department disagrees. The 

foreign entities’ initial outreach to 

potential program participants sets the 

stage for participants’ expectations 

about the Summer Work Travel 

Program. Sponsors must be aware of 

what the foreign entities are posting on 

web sites, communicating through 

social media, and distributing in printed 

materials to ensure the information 

conforms to the purpose and intent of 

the program and meets regulatory 

requirements. It is important, for 

example, that the cultural exchange 

aspects of the program are accentuated, 

and that students’ expectations about 

how much money they can earn are 

realistic. 

During its on-site reviews, the 

Department had the opportunity to 

assess several sponsors’ compliance 

with foreign entity verification 

requirements for the winter 2011–2012 

season. Overall, the Department found 

that sponsors were readily able to obtain 

almost all the requested documents 

without undue cost or burden. 

Accordingly, the Department makes 

only minor changes to the provisions 

enumerated in this section of the 

regulations to correct for errors in the 

text that allowed foreign entities to 

select participants and failed to require 

annual vetting of foreign third parties. 

Although not included in the 

regulations, the preamble to the 2011 

IFR mentioned that sponsors must 

obtain notarized financial statements to 

demonstrate the financial solvency of 

potential foreign entities (See 76 FR 

23177–23179). Two parties commenting 

on this language suggested that it would 

be difficult to obtain notarized financial 

statements and recommended that the 

Department require sponsors to obtain 

copies of bank statements instead. The 

Department does not believe that a 

single view of an entity’s bank account 

provides sufficient evidence of its 

financial viability, while it believes 

notarized statements are a step in fraud 

prevention. The Department also 

clarifies that sponsors must annually 

update the records and credentials of 

the foreign entities they engage to help 

administer their Summer Work Travel 

Programs. Additionally, pursuant to 22 

CFR 62.32(p)(2), the Department takes 

this requirement one step further and 

now requires sponsors to inform the 

Department when and why particular 

foreign entities are no longer under 

contract with them. 

Vetting third parties (domestic 

entities). The 2011 IFR limited the 

domestic entities that could assist 

sponsors in performing core 

programmatic functions to host 

employers of participants. However, the 

broad range of structured and planned 

cultural events that can satisfy the 

cultural component requires flexibility 

with respect to the types of third parties 

sponsors can engage. For example, 

sponsors may partner with individuals 

who voluntarily assist in arranging local 

community events or major 

international corporations in the 

tourism line-of-business. As a result, 

there can be no one-size-fits-all process 

for vetting such third parties. 

Accordingly, sponsors who engage 

business entities to provide cultural 

events or activities for which 

participants must pay (either directly or 

through the sponsors) must vet these 

entities according to the standards 

required for host employers set forth in 

the 2011 IFR and clarified in the 2012 

IFR. In addition, they must enter into 

written agreements with such parties, 

and these agreements must explicitly 

describe the activities or events and 

itemize all costs. Private individuals or 

local groups (e.g., local consortia created 

to assist with the assimilation of 

Summer Work Travel Participants into 

the community, including church 

groups) that do not charge for 

participation need not be similarly 

vetted or enter into such written 

agreements. For this purpose, the 

Department would not consider, e.g., 

participants buying their own tickets to 

or food at local sporting events to be 

paying for participation, even if an 

individual or group made the 

arrangements. Sponsors should engage 

in assisting the provision of cultural 

events only with local individuals or 

groups that are known and reputable in 

the community. 

The 2011 IFR requires that sponsors 

directly contact potential employers to 

verify key information as well as utilize 

publicly available information to 

confirm the existence and legitimacy of 

the potential host employers. Nine 

parties commented on this proposed 

rule change, with most of them either 

seeking clarification of the requirement 

that they verify potential host 

employers’ Employer Identification 

Numbers (EINs) or opposing altogether 

the requirement to obtain EINs. One 

party recommended that the Department 

alternatively require sponsors to obtain 

copies of employers’ current business 

licenses. The Department agrees and 

replaces the requirement that sponsors 

verify EINs with the requirement that 

they obtain proof that the businesses 

(e.g., corporations, partnerships) are 

authorized to operate in the state or 

jurisdiction. Such information is 

generally available from the Web sites of 

each state’s Secretary of State. Copies of 

such registration documents should 

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27604 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

sufficiently demonstrate that potential 

host employers are active and registered 

businesses in the locations where they 

will place participants. 

Commenting parties sought guidance 

on what constitutes sufficient 

verification of host employer’s worker’s 

compensation coverage. First, sponsors 

must be aware of current state-specific 

requirements. Second, sponsors must 

obtain each host employer’s workers’ 

compensation policy identification 

number and a copy of the policy’s Cover 

Page and/or Deck Sheet, confirming that 

the coverage is sufficient and active 

during the period of placement. Third, 

sponsors must determine whether the 

host employer has been recently 

sanctioned by the U.S. Department of 

Labor’s Occupational Safety and Health 

Administration or Wage and Hour 

Division. Sponsors can check the 

Department of Labor’s sanctioned list at: 

http://ogesdw.dol.gov/. Sponsors should 

hesitate to place participants with 

recently sanctioned employers. 

One sponsor inquired whether there 

were certain conditions under which 

verification of an employer would be 

unnecessary (e.g., a previously vetted 

host employer or a host employer with 

whom the sponsor has worked for more 

than two years). The Department 

understands that many sponsors place 

program participants with the same host 

employers year after year. However, the 

cost and effort required to reconfirm the 

bona fides of past host employers are 

modest enough to warrant annual 

reconfirmation of all organizations’ 

basic information. Also, the Department 

has observed too many job offers that 

were used in the summer and again in 

the winter season even though those 

host employers had no need for winter 

seasonal employees. Accordingly, the 

Department hereby modifies the 

regulations to require sponsors to vet 

host employers annually, and each 

season to verify the actual number of job 

placements available. 

Host employer cooperation. The 2011 

IFR also added a new section on host 

employer obligations. Nine parties 

commented on these new regulations, 

noting that the Department has no 

jurisdiction over employers, rendering 

unenforceable this entire new section of 

the rules. There also was concern about 

the inability of host employers to 

guarantee that participants would work 

a certain number of hours each week. 

Some commented that many seasonal 

and temporary jobs are dependent upon 

weather and customer demand, and 

employers do not guarantee U.S. 

summer workers a minimum number of 

hours. While the Department 

acknowledges these comments, it 

believes that sponsors should work only 

with employers who agree to make good 

faith efforts to comply with certain 

terms of employment. Accordingly, the 

Department changed the title of the 

section ‘‘Host employer obligations’’ to 

‘‘Host employer cooperation,’’ thereby 

removing language suggesting it has 

jurisdiction over employers and has 

placed the obligation on sponsors to 

work only with those employers who 

would voluntarily commit to comply 

with these requirements. 

With respect to ensuring participants 

are working sufficient hours to cover 

their basic expenses and meet their 

program expectations, sponsors should 

avail themselves of the monthly contact 

with participants to inquire about their 

job satisfaction and financial state. If 

conditions are such that participants 

simply are not earning enough money to 

cover their basic expenses, it is 

incumbent upon the sponsors to assist 

them in finding new or additional jobs. 

Reporting requirements. Three parties 

opposed the Department’s requirement 

that sponsors submit semi-annual 

placement reports. They contended that 

there is no value in identifying second 

or subsequent jobs or that the 

information is already available in 

SEVIS. The Department disagrees: 

SEVIS does not retain such information. 

Moreover, the Department believes that 

the more carefully sponsors screen 

participants and match their 

expectations to vetted job placements, 

the less frequently participants will 

change jobs, and such improved 

screening will be reflected in these 

reports. Accordingly, it retains this 

requirement to monitor participant job 

change rates and other program 

statistics. 

Annual price lists. In the 2011 IFR, 

the Department adopted a requirement 

that written agreements between 

sponsors and foreign entities contain 

annually updated price lists. During the 

on-site reviews, Department staff 

reviewed many such sponsor 

agreements and determined that the 

inconsistent formats sponsors used to 

present program costs made it necessary 

for the Department to request 

information in a more standardized 

format. Accordingly, the Department 

has qualified this requirement so that 

sponsors specify the itemized costs that 

participants must pay to both foreign 

agents and sponsors to participate in the 

Summer Work Travel Program. Recent 

criticism of the program has included 

alleged exorbitant costs that program 

participants must pay to work in 

minimum wage jobs. The Department 

requests this information in order to 

protect participants, sponsors, and the 

integrity of the program. 

Cultural exchange. While legitimate 

employment is an important component 

that defrays a portion of participants’ 

program costs, it is neither the only 

element nor the primary element of the 

J–1 Exchange Visitor Program. Instead of 

merely lining up summer jobs for 

participants, sponsors must also 

consider—at the outset of any job 

placement consideration—the 

availability of housing and 

transportation, as well as the location of 

the position and the opportunities for 

cultural activities and community 

engagement. The balance between work 

time and free time, including the nature 

of the work itself and the opportunities 

for interaction with U.S. citizens during 

the workday, are also key 

considerations. 

With this in mind, sponsors must 

place students in jobs that provide daily 

and ongoing interaction with U.S. 

citizens. Additionally, sponsors must 

ensure that participants have 

opportunities to engage in cultural 

exchange outside of work. During the 

biannual re-designation of sponsors as 

well as in the day-to-day oversight and 

monitoring of program sponsors, the 

Department will look specifically for 

evidence that sponsors are actively 

facilitating or offering non-work cultural 

opportunities for participants. Clearly, 

sponsors should consider the 

accessibility of cultural opportunities as 

an important factor in determining 

whether specific jobs are suitable for 

program participants. Implementation of 

cultural activities is further facilitated 

by group excursions to sporting events, 

establishing local volunteer networks 

that pair exchange visitors with local 

citizens, or otherwise making 

intentional efforts to integrate program 

participants into local communities. 

Finally, as noted above, sponsors may 

engage third parties to assist in 

providing this cultural component to 

their program participants. 

Sponsors are not permitted to use 

cultural opportunities associated with 

the participants’ employment to fulfill 

this requirement (e.g., amusement park 

visits are not acceptable cultural 

offerings for participants working at 

amusement parks). Registering 

participants on publicly available 

listserves of events is not sufficient by 

itself to meet this requirement; nor does 

the Department consider exclusively online interactions to be satisfactory 

cultural offerings. How well sponsors 

develop and implement the program’s 

cultural component will carry 

significant weight in the Department’s 

biannual re-designation process for 

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sponsors. The Department will presume 

that participants’ significant nonparticipation in organized cultural 

activities is caused by inadequacies in 

the sponsors’ cultural offerings, their 

inability to adequately calibrate 

participants’ work/non-work 

experiences, and/or sponsors’ failure to 

select participants who are seeking 

cultural exchange. 

Sponsors are permitted to use cultural 

offerings as part of the required monthly 

contact with participants as long as any 

issues affecting the participants’ health, 

safety, and welfare identified through 

such contacts are promptly and 

appropriately addressed. Sponsors 

should maintain evidence of 

participants’ attendance in cultural 

events in their program files (e.g., event 

sign-up lists or emails confirming 

attendance at cultural events, signed 

and executed agreements with local 

organizations for volunteer service 

opportunities, cultural or educational 

excursions, group participation in 

cultural events). 

Regulatory Analysis 

Administrative Procedure Act 

The Department of State is of the 

opinion that administration of the 

Exchange Visitor Program, including the 

Summer Work Travel Program, is a 

foreign affairs function of the U.S. 

Government and that rules 

implementing this function are exempt 

from Sec. 553 (Rulemaking) and Sec. 

554 (Adjudications) of the 

Administrative Procedure Act (APA). As 

reflected in the Fulbright-Hays Act, the 

purpose of such programs is to increase 

mutual understanding between the 

people of the United States and those of 

other countries, ‘‘unite us with other 

nations’’, and ‘‘to promote international 

cooperation’’. Pursuant to law, policy, 

and longstanding practice, the 

Department of State has supervised 

either directly or through private sector 

program sponsors or grantee 

organizations, those foreign nationals 

who come to the United States as 

participants in exchange visitor 

programs, one of which is the Summer 

Work Travel Program. Summer Work 

Travel participants come to the United 

States from over 190 countries and 

when problems occur in a program such 

as this, foreign governments often 

directly engage the Department of State 

regarding the treatment of their 

nationals, regardless of who is 

responsible for the problems. 

The Department emphasizes that 

many provisions of this interim final 

rule—indeed, the majority—reflect 

careful consideration of public 

comments received on a previous 

interim final rule, issued on April 26, 

2011. Those provisions have been 

subject to detailed comments and this 

interim final rule has greatly benefited 

from those comments. At the same time, 

some provisions of this interim final 

rule are new. Some of these provisions 

will be enforced immediately, but others 

will not be enforced until November 1, 

2012. 

The Department has two overriding 

purposes for issuing this interim final 

rule. One purpose is to put in place 

urgently needed measures to protect the 

health, safety, and welfare of foreign 

nationals entering the United States to 

participate in the Summer Work Travel 

Program for a finite period of time (up 

to four months) and then return to their 

countries of nationality or last legal 

permanent residence upon completion 

of their programs. 

The need for such efforts was made 

evident by a situation where Summer 

Work Travel participants were placed in 

nightshift jobs requiring long work 

hours in a packing warehouse and did 

not have free time available or the 

ability to interact daily with Americans, 

an experience in its totality that is 

contrary to a cultural exchange program. 

It is critical that Summer Work Travel 

sponsors currently planning for the 

summer of 2012 cycle of Summer Work 

Travel participants are now informed by 

regulation that exposure to such 

placements, and other jobs contrary to a 

cultural exchange program, are now 

strictly prohibited henceforth, starting 

with the summer 2012 cycles of 

Summer Work Travel participants. 

Failure to act swiftly and decisively 

with an interim final rule to protect the 

health, safety, and welfare of these 

program participants will have direct, 

foreseeable, and substantial adverse 

effects on the foreign affairs and 

relations of the United States. 

The incidents were sufficiently of 

concern to cause the Department to 

engage in outreach to concerned 

officials from foreign affairs ministries 

around the world both to assuage them 

about our response to those incidents 

and to reaffirm the Department’s intent 

to continue the Summer Work Travel 

program, but with necessary repairs (as 

was done in recent discussions the 

Department had with the governments 

of four of the largest countries sending 

Summer Work Travel participants). In 

short, a number of foreign governments 

have unequivocally informed the 

Department that they regard this 

program as important to their bilateral 

relationship with the United States and 

also important to their nationals who 

seek to participate in that program. 

Participating countries, therefore, look 

to the Department to keep the program 

alive but to fix it in a way that helps 

protect their nationals. 

The second overriding purpose of this 

interim final rule is to help restore the 

Summer Work Travel program to its 

original raison d’eˆtre as a U.S. public 

diplomacy program intended to promote 

international cultural understanding in 

line with the overall purposes of the 

Fulbright-Hays Act, as discussed above. 

These two overriding goals are mutually 

reinforcing and provide the requisite 

foreign affairs function basis on which 

to adopt this interim final rule. 

Although the Department is of the 

opinion that this interim final rule is 

exempt from the rulemaking provisions 

of the APA, the Department is aware of 

the importance of public comment 

consistent with Executive Order 13563 

and is publishing this rule as an interim 

final rule, with a discretionary 60-day 

provision for public comment and 

without prejudice to its judgment that 

the Exchange Visitor Program is a 

foreign affairs function. As noted above 

and discussed below, certain provisions 

of this interim final rule will not be 

enforced immediately, and will be 

delayed until November 1, 2012; 

comments are specifically invited on 

those provisions. 

In addition, and without prejudice to 

its determination that the function 

discussed herein is a foreign affairs 

function of the United States, the 

Department also finds that there is 

‘‘good cause’’ under 5 U.S.C. 553(b) and 

(d) for forgoing prior publication of an 

NPRM and for making this interim final 

rule effective upon publication, for the 

reasons summarized in this analysis, 

above, and explained more fully in the 

preamble. 

Small Business Regulatory Enforcement 

Fairness Act of 1996 

This interim final rule is not a major 

rule as defined by 5 U.S.C. 804 for the 

purposes of Congressional review of 

agency rulemaking under the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (5 U.S.C. 801 et 

seq.). This interim final rule will not 

result in an annual effect on the 

economy of $100 million or more; a 

major increase in costs or prices; or 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of U.S.-based companies to 

compete with foreign-based companies 

in domestic and export markets. 

Unfunded Mandates Reform Act of 1995 

This interim final rule will not result 

in the expenditure by State, local and 

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27606 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

tribal governments, in the aggregate, or 

by the private sector, of $100 million in 

any year and it will not significantly or 

uniquely affect small governments. 

Therefore, no actions were deemed 

necessary under the provisions of the 

Unfunded Mandates Reform Act of 

1995. 

Executive Order 13175—Consultation 

and Coordination With Indian Tribal 

Governments 

The Department has determined that 

this rulemaking will not have tribal 

implications, will not impose 

substantial direct compliance costs on 

Indian tribal governments, and will not 

pre-empt tribal law. Accordingly, the 

requirements of Executive Order 13175 

do not apply to this rulemaking. 

Regulatory Flexibility Act/Executive 

Order 13272: Small Business Impacts 

Since this interim final rule (2012 

IFR) is exempt from 5 U.S.C. 553, and 

no other law requires the Department of 

State to give notice of such rulemaking, 

it is not subject to the Regulatory 

Flexibility Act (5 U.S.C. 601, et seq.) 

and Executive Order 13272, Sec. 3(b). 

However, to better inform the public as 

to the costs and burdens of this rule 

upon designated program sponsors, the 

Department notes that the 2012 IFR will 

affect the operations of 49 corporate, 

academic, and tax-exempt program 

sponsors designated by the Department 

to conduct Summer Work Travel 

Programs. Further information follows. 

Numbers of Small Businesses 

Of the 49 currently designated 

Summer Work Travel Program sponsors, 

33 sponsors have annual revenues of 

less than $7 million. These 33 small 

program sponsors accounted for 

approximately 36,000 of the 109,000 

Summer Work Travel Program 

participants in 2011. 

Prohibited Job Placements 

The 2012 IFR specifically expands the 

list of prohibited job placements (at 22 

CFR 62.32(h) Program Exclusions) to 

now include: positions declared 

hazardous to youth by the Secretary of 

Labor at 29 CFR 570.50 through 570.72; 

positions that require sustained physical 

contact with other people and/or 

adherence to the Center for Disease 

Control and Prevention Universal Blood 

and Body Fluid Precautions guidelines 

(e.g., body piercing, tattooing, massage, 

manicure); positions that are 

substantially commission-based and 

thus do not guarantee that participants 

will be paid minimum wage in 

accordance with federal and state 

standards; positions in the North 

American Industry Classification 

System’s (NAICS) Goods-Producing 

Industries (set forth at http:// 

www.bls.gov/iag/tgs/ 

iag_index_naics.htm), specifically 

NAICS Sectors 11, 21, 23, and 31–33: 

Natural Resources and Mining 

(including Agriculture, Forestry, and 

Fishing and Hunting as well as Mining, 

Quarrying, and Oil and Gas Extraction); 

Construction; and Manufacturing (e.g., 

industrial food processing); positions 

requiring work hours that fall 

predominantly between the hours of 10 

p.m. and 6 a.m.; positions directly 

involved in gaming and gambling that 

include direct participation in wagering 

and/or betting; positions in chemical 

pest control, warehousing, or catalogue/ 

online order distribution centers; and in 

positions with travelling fairs or 

itinerant concessionaires. 

Collectively, these positions 

accounted for approximately eight 

percent (8%) of all Summer Work 

Travel Program placements in 2011. A 

single large program sponsor, which 

voluntarily terminated its Summer 

Work Travel Program designation in 

2012, sponsored approximately 40% of 

2011 participants placed in jobs 

prohibited by the 2012 IFR. Of the 

remaining placements last year in 

prohibited jobs, 24% were sponsored by 

small program sponsors. The 

Department estimates the cost of 

transferring participants scheduled for 

prohibited jobs to new placements at 

approximately $6,000 to $18,000 (one to 

three man hours at $20 per hour for the 

approximately 300 new positions to be 

arranged) for the 24 sponsors that made 

placements last year that will be 

prohibited by the 2012 IFR. 

The Department notes that there will 

be some indirect impact in the short-run 

on the U.S. businesses that have 

historically employed Summer Work 

Travel Program participants in positions 

prohibited by the 2012 IFR. However, 

the Department is not imposing any 

direct regulatory requirements on these 

U.S. businesses. 

Cultural Requirement 

The 2012 IFR requires program 

sponsors to ensure that all participants 

have opportunities to interact regularly 

with U.S. citizens and experience U.S. 

culture during the work portion of their 

Summer Work Travel Programs and to 

participate in organized events, trips, or 

other activities outside of work. The 

Department estimates that the new 

cultural component requirement will 

cost, on average, $20 per participant, or 

approximately $2.2 million for the 

program. The Department notes that the 

actual cost of this requirement is likely 

less than $20 per participant: Many 

sponsors already provide such cultural 

activities for their participants and a 

significant majority of Summer Work 

Travel Program participants work in 

touristic areas where such activities may 

be organized for less than this estimated 

cost. The Department also emphasizes 

that it desires the cost of the cultural 

component not to be a burden on 

sponsors, and reiterates the number and 

variety of ways this requirement may be 

achieved. The Department accordingly 

estimates that approximately $720,000 

of the cultural component cost of the 

2012 IFR would fall upon small program 

sponsors. Collectively, the 2012 IFR will 

impose new costs of no more than 

$738,000 on the 33 small program 

sponsors. These costs as a percentage of 

small sponsor revenue are as follows: 

for 26 sponsors, the cost of these new 

requirements are between one and five 

percent (1–5%) of their annual 

revenues; for six sponsors the cost of 

these new requirements are between 

five and ten percent (5–10%) of their 

annual revenues; and for one small 

sponsor, the cost of these new 

requirements is approximately 20% of 

its annual revenue. 

The Department determines that costs 

of the 2012 IFR are not significant to 26 

of the 33 small program sponsors. The 

Department thus certifies that it does 

not believe that these regulatory changes 

will have a significant economic impact 

on a substantial number of small 

entities. 

Executive Order 13563 and Executive 

Order 12866 

As discussed above, the Department is 

of the opinion that the subject of this 

rulemaking constitutes a foreign affairs 

function of the United States, and thus 

is exempt from the provisions of 

Executive Order 12866. The Department 

has nevertheless reviewed this 

rulemaking to ensure its consistency 

with the regulatory philosophy and 

principles set forth in Executive Orders 

12866 and 13563. The Department of 

State does not consider this interim 

final rule to be a ‘‘significant regulatory 

action’’ under Executive Order 12866, 

Sec. 3(f), Regulatory Planning and 

Review, and Executive Order 13563. 

However, to better inform the public as 

to the costs and benefits of this rule, the 

Department presents a discussion 

below. 

Affected Population. The Department 

estimates this rule will affect 49 

currently designated Summer Work 

Travel Program sponsors hosting a 

maximum of 109,000 participants. 

These sponsors are responsible for the 

individuals, many between the ages of 

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Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 27607 

18 and 25, while in the Summer Work 

Travel Program. Sponsors provide the 

necessary information, support, and 

guidance for program participants. 

Although sponsors will be provided 

with professional automony regarding 

how they incorporate the requirements 

presented in the 2012 IFR, the 

Department estimates sponsors may still 

incur costs due to the rule. 

Costs. Implementation of certain of 

the provisions set forth in the 2012 IFR 

may result in costs for the sponsors— 

those provisions are: implementation of 

placement prohibitions, implementation 

of a cultural requirement for program 

participants, and implementation of 

additional vetting, reporting, and record 

keeping requirements. 

Prohibited Job Placements. This IFR 

prohibits certain jobs that sponsors may 

already have selected for participant 

placements. The cost of finding 

replacement jobs will be minimal for the 

prohibitions that do not become 

effective until November 1, 2012. For 

the category of jobs that are immediately 

prohibited based on concerns for health, 

safety and welfare, participants already 

placed in these jobs will need to be relocated to new placements. The 

Department estimates that number to be 

no more than 300 and has calculated the 

cost of transferring participants 

scheduled for those jobs to be 

approximately $6,000 to $18,000 (one to 

three man hours at $20 per hour times 

300) for the 24 sponsors that made 

placements last year that will be 

prohibited by the 2012 IFR. 

Cultural Component. The 2012 IFR 

requires program sponsors to ensure 

that all participants have opportunities 

to interact regularly with U.S. citizens 

and experience U.S. culture during the 

work portion of their Summer Work 

Travel programs and to participate in 

organized events or other activities 

outside of work. The Department 

estimates that the new cultural 

component requirement will cost an 

average of $20 per participant for up to 

109,000 participants; or approximately 

$2.18 million annually for the program. 

Vetting, Reporting, and 

Recordkeeping. The 2012 IFR places 

additional vetting, reporting, and 

recordkeeping requirements on 

sponsors. The Department calculates 

that the new requirements may entail up 

to two additional hours of work per 

placement for Summer Work Travel 

sponsors that include an additional half 

hour for participant orientation; one 

additional hour towards third party 

screening, vetting and monitoring; and 

an additional half hour for the 

recordkeeping of the cultural 

component that each Summer Work 

Travel participant receives. The 

Department estimates that half of the 

participating sponsors already 

incorporate these additional 

requirements into their business 

practices. The Department estimates the 

costs for vetting the host employers and 

participant placements for all Summer 

Work Travel sponsors at $2.18 million 

[1⁄2 × (2 hrs. × $20/hr. × 109,000 

participants)]. 

Total Costs. The Department 

estimates that total costs to sponsors 

from implementation of the 2012 IFR 

requirements are estimated at $4.37 to 

$4.38 million in the first year. Recurring 

costs for the 2012 IFR requirements are 

estimated at $4.36 million for the 

cultural component of the program and 

the additional vetting, reporting, and 

recordkeeping component of the 

program. 

Benefits. The 2012 IFR is a 

continuation of efforts the State 

Department is implementing based on a 

comprehensive review of the Summer 

Work Travel Program. The Department 

issued the 2011 IFR based on this 

review. However, events that occurred 

in the summer of 2011 confirmed to the 

Department that it needed to enhance its 

scrutiny of the Summer Work Travel 

Program and take additional steps to 

amend regulations to protect program 

participants. Several foreign 

governments and entities complained to 

the Department about job placements, 

work conditions, and participant 

accommodations. Additionally, in 

recent years, the work component of the 

Summer Work Travel Program has too 

often overshadowed the core cultural 

component necessary for the Program to 

be consistent with the Fulbright-Hays 

Act. 

The changes included in the 2012 IFR 

bear most directly on the health, safety, 

and welfare of the participants and 

serve to reinforce the cultural exchange 

aspects of the program to promote 

mutual understanding in accordance 

with the Fulbright-Hays Act. These 

changes are expected to protect/improve 

the health, safety, and welfare of 

participants by reducing the number of 

improper or unsafe job placements, 

fraudulent job offers, post-arrival job 

cancellations, inappropriate work hours, 

and problems regarding housing and 

transportation. Additionally, these 

changes are designed to help ensure 

participants are properly compensated, 

thereby helping to defray their travel 

costs. 

The cultural dimension of the 

Summer Work Travel Program 

experience is essential to all 

participants. The changes in the 2012 

IFR require sponsors to consider the 

cultural component in all placement 

decisions. However, rather than 

mandating a specific type of cultural 

program, the Department offers 

flexibility in implementing this 

requirement. This cultural component is 

essential to promoting cultural 

exchanges with foreign governments. A 

number of foreign governments have 

unequivocally informed the Department 

that they regard this program as 

important to their bilateral relationship 

with the United States and also 

important to their nationals who seek to 

participate in that program. 

Participating countries, therefore, look 

to the Department to keep the program 

alive but to fix it in a way that helps 

protect their nationals. These changes 

help accomplish this goal. 

The changes in the 2012 IFR will 

allow the United States government to 

better regulate the sponsors in order to 

protect participants, the program itself 

and U.S. communities that support 

Summer Work Travel participants. 

Sponsors are also required to take more 

active roles in ensuring that participants 

have access to suitable, affordable, and 

safe housing and reliable and affordable 

transportation between their residences 

and worksites. These changes will help 

ensure the health, safety, and welfare of 

participants as well as promote the 

intent of the Fulbright-Hays Act through 

cultural exchanges. 

Executive Order 12988 

The Department of State has reviewed 

this interim final rule in light of Sec. 

3(a) and 3(b)(2) of Executive Order 

12988 to eliminate ambiguity, minimize 

litigation, establish clear legal 

standards, and reduce burden. 

Executive Orders 12372 and 13132 

This regulation will not have 

substantial direct effect on the states, on 

the relationship between the national 

government and the states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Therefore, it is 

determined that this interim final rule 

does not have sufficient federalism 

implications to require consultations or 

warrant the preparation of a federalism 

summary impact statement. Executive 

Order 12372, regarding 

intergovernmental consultation on 

federal programs and activities, does not 

apply to this regulation. 

Paperwork Reduction Act 

The information collection 

requirements contained in this interim 

final rule (2012 IFR) are pursuant to the 

Paperwork Reduction Act, 44 U.S.C. 

chapter 35 and OMB Control Number 

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27608 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

1405–0147, Form DS–7000. As part of 

this rulemaking, the Department is 

seeking comment regarding the 

additional administrative burden placed 

on sponsors due to the corresponding 

requirements for the sponsors to 

maintain additional records in the 

administration of their programs (see 22 

CFR 62.10(f)). 

(1) Type of Information Collection: 

Revision of a Currently Approved 

Collection. 

(2) Title of the Form/Collection: 

Recording, Reporting, and Data 

Collection Requirements Under 22 CFR 

part 62. 

(3) Agency form number: DS–7000. 

(4) Affected public: This is an 

expansion and continuation of an 

existing information collection utilized 

by the Bureau of Educational and 

Cultural Affairs in its administration 

and program oversight of the Exchange 

Visitor Program (J–Visa) under the 

provisions of the Mutual Educational 

and Cultural Exchange Act, as amended. 

The Department seeks comment from 

Summer Work Travel Program sponsors 

and other persons directly involved in 

the administration of the Summer Work 

Travel Program. 

(5) Change to information collected by 

the Department of State: The existing 

Placement Report and Foreign Entity 

Report data collections are current 

collections required by all Summer 

Work Travel sponsors, and due to 

electronic reporting, do not impose any 

further recordkeeping burden. The 2012 

IFR requires Summer Work Travel 

sponsors to submit annual price lists for 

all foreign entities to the Department, 

which is expected to place a minimal 

additional administrative burden on the 

49 currently designated Summer Work 

Travel program sponsors. The 

Department believes that the additional 

regulatory requirements for 

documenting interviews, monthly 

contact with participants, and vetting 

host employers are already a standard 

business practice; however, the new 

requirements will bring all sponsors 

into conformity with program 

administration and will add a minimal 

administration burden as well. 

Based on the current 2011 Foreign 

Entity Report, Summer Work Travel 

sponsors are working with 

approximately 960 foreign entities. The 

Department requires Summer Work 

Travel sponsors to conduct thorough 

vetting and institute formal agreements 

with each third party entity that assists 

in certain core programmatic functions. 

The Department believes this screening 

is already conducted in the routine 

administration and only foresees the 

additional cost of criminal background 

checks for those sponsors not already 

conducting such checks. In addition, the 

2012 IFR requires Summer Work Travel 

sponsors to ensure that all participants 

have opportunities to interact regularly 

with U.S. citizens and experience U.S. 

culture during the work portion of their 

Summer Work Travel Programs and to 

accordingly organize events, trips, or 

other activities to provide them 

exposure to U.S. culture. The 

Department outlines the increased cost 

and burden hours associated with this 

collection requirement and discussed it 

fully in the Regulatory Flexibility Act/ 

Executive Order 13272: Small Business 

section above. 

(6) You may submit comments by any 

of the following methods: Direct 

comments to the Department of State 

Desk Officer in the Office of Information 

and Regulatory Affairs at the Office of 

Management and Budget (OMB). You 

may submit comments by the following 

methods: 

• Email: 

oira_submission@omb.eop.gov. You 

must include the DS form number, 

information collection title, and OMB 

control number in the subject line of 

your message. 

• Fax: 202–395–5806. Attention: Desk 

Officer for Department of State. 

(7) The Department seeks public 

comment on: 

• Whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

• The accuracy of the agency’s 

estimate of the burden of the collection 

of information, including the validity of 

the methodology and assumptions used; 

• The quality, utility, and clarity of 

the information to be collected; and 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

(8) An estimate of the total number of 

respondents and the amount of time 

estimated for an average respondent to 

respond: The total number of 

respondents is estimated to be those 49 

organizations designated by the 

Department to conduct the Summer 

Work Travel Program activities. 

(9) An estimate of the total annual 

public burden (in hours) associated with 

the collection: The Department 

calculates that the new requirements 

under the 2012 IFR may require up to 

two additional hours of work per 

placement for Summer Work Travel 

sponsors that include an additional half 

hour for participant orientation; one 

additional hour towards third party 

screening, vetting and monitoring; and 

an additional half hour for the 

recordkeeping of the cultural 

component that each Summer Work 

Travel participant receives. 

The Department estimates that for 

approximately half of the 109,000 

annual Summer Work Travel 

placements, a minimal additional 

burden will be imposed to the sponsors 

given current business practices of some 

sponsors with respect to vetting host 

employers. The total burden for vetting 

the host employers and participant 

placements for all Summer Work Travel 

sponsors is two hours, or 218,000 hours 

of work, which is an increase of one 

hour per placement. The increased 

burden will be imposed on those 

sponsors not currently documenting 

host employer interviews, obtaining 

references and court documents, 

financial viability, and housing being 

provided. 

In addition, the Department estimates 

that the vetting recordkeeping 

obligations of third party foreign agents 

is a standard business practice and that 

the total burden of a half hour per third 

party, should be added to the estimated 

half hour that it already takes to vet and 

establish contracts of the 960 existing 

foreign agents. The additional reporting 

of annual price lists for each foreign 

entity is expected to be minimal. There 

are approximately 960 foreign entities 

and the time to collect and report the 

price list is expected to be a half hour. 

List of Subjects in 22 CFR Part 62 

Cultural exchange programs, 

Reporting and recordkeeping 

requirements. 

Accordingly, 22 CFR Part 62 is 

amended as follows: 

PART 62—EXCHANGE VISITOR 

PROGRAM 

■ 1. The authority citation for Part 62 

continues to read as follows: 

Authority: 8 U.S.C. 1101(a)(15)(J), 1182, 

1184, 1258; 22 U.S.C. 1431–1442, 2451 et 

seq.; Foreign Affairs Reform and 

Restructuring Act of 1998, Pub. L. 105–277, 

Div. G, 112 Stat. 2681 et seq.; Reorganization 

Plan No. 2 of 1977, 3 CFR, 1977 Comp. p. 

200; E.O. 12048 of March 27, 1978; 3 CFR, 

1978 Comp. p. 168; the Illegal Immigration 

Reform and Immigrant Responsibility Act 

(IIRIRA) of 1996, Pub. L. 104–208, Div. C, 110 

Stat. 3009–546, as amended; Uniting and 

Strengthening America by Providing 

Appropriate Tools Required to Intercept and 

Obstruct Terrorism Act of 2001 (USA 

PATRIOT ACT), Pub. L. 107–56, section 416, 

115 Stat. 354; and the Enhanced Border 

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Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 27609 

Security and Visa Entry Reform Act of 2002, 

Pub. L. 107–173, 116 Stat. 543. 

■ 2. Section 62.32 is revised to read as 

follows: 

§ 62.32 Summer work travel. 

(a) Introduction. The regulations in 

this section (in combination with any 

other provisions of 22 CFR part 62, as 

applicable) govern participation in 

Summer Work Travel programs 

conducted by Department of Statedesignated sponsors pursuant to the 

authority granted the Department of 

State under Public Law 105–277. 

(b) Purpose. The purpose of this 

program is to provide foreign college 

and university students with 

opportunities to interact with U.S. 

citizens, experience U.S. culture while 

sharing their own cultures with 

Americans they meet, travel in the 

United States, and work in jobs that 

require minimal training and are 

seasonal or temporary in order to earn 

funds to help defray a portion of their 

expenses. Employment is of a seasonal 

nature when the required service is tied 

to a certain time of the year by an event 

or pattern and requires labor levels 

above and beyond existing worker 

levels. Employment is of a temporary 

nature when an employer’s need for the 

duties to be performed is a one-time 

occurrence, a peak load need, or an 

intermittent need. It is the nature of 

employers’ needs, not the nature of the 

duties that is controlling. 

(c) Duration of participation. Summer 

Work Travel participants are authorized 

to participate in the Exchange Visitor 

Program for up to four months during 

the long break between academic years 

as determined by the Department of 

State. Extensions of program 

participation are not permitted. 

(d) Participant screening and 

selection. In addition to satisfying the 

requirements set forth at § 62.10(a), 

sponsors are solely responsible for 

adequately screening and making the 

final selection. The screening process 

requires that sponsors (or vetted foreign 

entities acting on their behalf) at a 

minimum must: 

(1) Conduct and document interviews 

with potential participants either inperson or by video-conference; 

(2) Verify proficiency in 

conversational English and reading 

comprehension through either 

recognized language tests administered 

by academic institutions or English 

language schools or through the 

required documented interviews; 

(3) Select applicants who demonstrate 

their intention to participate in the 

cultural aspects of the Summer Work 

Travel Program. 

(4) Confirm that at the time of 

application, applicants (including final 

year students) are enrolled full-time and 

pursuing studies at accredited postsecondary, classroom-based, academic 

institutions physically located outside 

of the United States and have 

successfully completed at least one 

semester, or equivalent, of postsecondary academic study. 

(e) Participant orientation. In addition 

to satisfying the requirements set forth 

at § 62.10(b) and (c), sponsors must 

provide program participants, prior to 

participants’ departures from their home 

countries, the following information 

and/or documentation: 

(1) A copy of the Department of 

State’s Summer Work Travel Participant 

Letter; 

(2) A copy of the Department of 

State’s Summer Work Travel Program 

Brochure; 

(3) The Department of State’s toll-free 

help line telephone number; 

(4) The sponsor’s 24/7 immediate 

contact telephone number; 

(5) Information advising participants 

of their obligations to notify their 

sponsors within ten days after they 

arrive in the United States and within 

ten days after they initially secure or 

change residences; 

(6) Information advising participants 

that they may not begin working at 

initial, replacement, or additional jobs 

until their sponsors have verified the 

terms and conditions of such 

employment and fully vetted their host 

employers as set forth at paragraph (n) 

of this section; 

(7) For participants with jobs secured 

prior to departing from selected home 

countries, documentation explaining the 

terms and conditions of such jobs and 

providing information about available 

housing and transportation to and from 

work; 

(8) Information explaining the 

cultural component of the Summer 

Work Travel Program, including 

guidance on how to best experience U.S. 

culture and/or descriptions of cultural 

opportunities arranged by the sponsor; 

and 

(9) Information explaining that 

sponsors will terminate the programs of 

participants who fail to comply with 

enumerated program regulations (i.e., 

reporting their arrivals, reporting 

changes of residence, not starting work 

at unverified jobs, responding to 

sponsor monthly outreach/monitoring 

efforts). 

(f) Cultural exchange. (1) Sponsors 

must ensure that all participants have 

opportunities to work alongside U.S. 

citizens and interact regularly with U.S. 

citizens to experience U.S. culture 

during the workday portion of their 

Summer Work Travel programs; and 

(2) Sponsors must ensure that all 

participants have opportunities to 

engage in cultural activities or events 

outside of work by planning, 

initializing, and carrying out events or 

other activities that provide 

participants’ exposure to U.S. culture. 

(g) Participant placement. 

(1) Sponsors and third parties acting on 

their behalf may not pay or otherwise 

provide any incentive to employers to 

accept program participants for job 

placements with such employers. 

(2) Sponsors must confirm initial, 

replacement, and additional jobs 

placements of all Summer Work Travel 

Program participants before participants 

may start work by verifying, at a 

minimum, the terms and conditions of 

such employment and fully vetting their 

host employers as set forth at paragraph 

(n) of this section. Once participants 

have arrived in the United States and 

identified initial, replacement, or 

additional jobs, sponsors must vet such 

jobs within 72 hours. 

(3) Sponsors must not pose obstacles 

to job changes, but must offer reasonable 

assistance to participants wishing to 

change jobs regardless of whether their 

jobs were secured by the sponsors 

(direct-placed) or by the participants 

(self-placed). 

(4) Sponsors may place participants 

only in jobs that: 

(i) Are seasonal or temporary as 

defined in paragraph (b) of this section; 

and 

(ii) Provide opportunities for regular 

communication and interaction with 

U.S. citizens and allow participants to 

experience U.S. culture. 

(5) Sponsors may not place 

participants in jobs: 

(i) That require licensing; 

(ii) That are on the program exclusion 

list set forth at paragraph (h) of this 

section; or 

(iii) For which there is another 

specific J visa category (e.g., Camp 

Counselor, Trainee, Intern). 

(6) Sponsors may not place 

participants with staffing agencies 

unless the placements meet the 

following three criteria: 

(i) Participants must be employees of 

and paid by the staffing agencies; 

(ii) Staffing agencies must provide 

full-time, primary, on-site supervision 

of the participants; 

(iii) Staffing agencies must effectively 

control the work sites, e.g., have handson management responsibility for the 

participants. 

(7) Sponsors may not place 

participants with employers that fill 

non-seasonal or non-temporary job 

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27610 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

openings with exchange visitors with 

staggered vacation schedules. 

(8) Sponsors must use extra caution 

when placing students in positions at 

employers in lines of business that are 

frequently associated with trafficking 

persons (e.g., modeling agencies, 

housekeeping, janitorial services). 

(9) Sponsors must consider the 

availability of suitable, affordable 

housing (e.g., that meets local codes and 

ordinances) and reliable, affordable, and 

convenient transportation to and from 

work when making job placements. 

(i) If employers do not provide or 

arrange housing and/or transportation, 

or if participants decline employerprovided housing or transportation, 

sponsors must actively and immediately 

assist participants with arranging 

appropriate housing and transportation. 

(ii) If employers provide housing and/ 

or transportation to and from work, job 

offers must include details of all such 

arrangements, including the cost to 

participants; whether such 

arrangements deduct such costs from 

participants’ wages; and the market 

value of housing and/or transportation 

in accordance with the Fair Labor 

Standards Act regulations set forth at 29 

CFR part 531, if they are considered part 

of the compensation packages. 

(10) For participants who are 

nationals of non-Visa Waiver Program 

countries and participants who are 

nationals of Visa Waiver Program 

countries with job placements screened 

in advance by the sponsors (direct 

placement) or jobs found by the 

participants (self-placement), prior to 

issuing Form DS–2019, sponsors must 

vet the potential employers as set forth 

at paragraph (n) of this section, confirm 

the terms and conditions of the job 

offers, and input complete and correct 

data into the Student and Exchange 

Visitor Information System (SEVIS) 

pursuant to the requirements set forth in 

§ 62.70(f). 

(11) Sponsors of applicants who are 

nationals of Visa Waiver Program 

countries and who have not secured 

jobs prior to departing from their home 

countries must: 

(i) Ensure that such participants 

receive pre-departure information that 

explains how to seek employment and 

secure lodging in the United States, and 

clearly identifies the criteria for 

appropriate jobs set forth at paragraph 

(g) of this section and the categories of 

employment and positions that are on 

the program exclusion list set forth at 

paragraph (h) of this section; 

(ii) Ensure that such participants have 

sufficient financial resources to support 

themselves during their searches for 

employment; 

(iii) Assist participants who have not 

found suitable employment within one 

week of commencing their job searches; 

(iv) Instruct participants of their 

obligation to notify their sponsors when 

they obtain job offers (and that they 

cannot start such jobs until the sponsors 

vet them); and 

(v) Promptly (i.e., within 72 hours) 

confirm the initial jobs of such 

participants, at a minimum, by verifying 

the terms and conditions of such 

employment and fully vetting their host 

employers as set forth at paragraph (n) 

of this section. 

(h) Program exclusions. Sponsors 

must not place participants: 

(1) In positions that could bring 

notoriety or disrepute to the Exchange 

Visitor Program; 

(2) In sales positions that require 

participants to purchase inventory that 

they must sell in order to support 

themselves; 

(3) In domestic help positions in 

private homes (e.g., child care, elder 

care, gardener, chauffeur); 

(4) As pedicab or rolling chair drivers 

or operators; 

(5) As operators or drivers of vehicles 

or vessels for which drivers’ licenses are 

required regardless of whether they 

carry passengers or not; 

(6) In positions related to clinical care 

that involves patient contact; 

(7) In any position in the adult 

entertainment industry (including, but 

not limited to jobs with escort services, 

adult book/video stores, and strip 

clubs); 

(8) In positions requiring work hours 

that fall predominantly between 10:00 

p.m. and 6:00 a.m.; 

(9) In positions declared hazardous to 

youth by the Secretary of Labor at 

Subpart E of 29 CFR part 570; 

(10) In positions that require 

sustained physical contact with other 

people and/or adherence to the Centers 

for Disease Control and Prevention’s 

Universal Blood and Body Fluid 

Precautions guidelines (e.g., body 

piercing, tattooing, massage, manicure); 

(11) In positions that are substantially 

commission-based and thus do not 

guarantee that participants will be paid 

minimum wage in accordance with 

federal and state standards; 

(12) In positions involved in gaming 

and gambling that include direct 

participation in wagering and/or betting; 

(13) In positions in chemical pest 

control, warehousing, catalogue/online 

order distribution centers; 

(14) In positions with travelling fairs 

or itinerant concessionaires; 

(15) In positions for which there is 

another specific J category (e.g., camp 

counselor, intern, trainee); or 

(16) After November 1, 2012, in 

positions in the North American 

Industry Classification System’s 

(NAICS) Goods-Producing Industries 

occupational categories industry sectors 

11, 21, 23, 31–33 numbers (set forth at 

http://www.bls.gov/iag/tgs/ 

iag_index_naics.htm). 

(i) Participant compensation. (1) 

Sponsors must inform program 

participants of Federal, State, and Local 

Minimum Wage requirements, and 

ensure that at a minimum, participants 

are compensated at the higher of: 

(i) The applicable Federal, State, or 

Local Minimum Wage (including 

overtime); or 

(ii) Pay and benefits commensurate 

with those offered to their similarly 

situated U.S. counterparts. 

(2) Sponsors must demonstrate that 

participants are also compensated 

according to the above standards in the 

following (and similar) situations: 

(i) The host employers provide 

housing and/or transportation as part of 

participants’ compensation, but the 

compensation package does not explain 

that the lower hourly wage reflects such 

benefits; or 

(ii) The employers compensate 

participants on a ‘‘piece’’ basis (e.g., 

number of rooms cleaned). If at the end 

of each pay period, the participant’s 

earnings under the piece rate do not 

equal at least the amount the participant 

would have earned had the participant 

been paid the predominant local wage 

as provided in subparagraph (1), the 

participant’s pay must be supplemented 

at that time so that the participant’s 

earnings are at least as much as the 

required local wage as provided in 

subparagraph (1). 

(3) Sponsors must ensure that 

appropriate assistance is provided to 

participants on an as-needed basis and 

that sponsors are available to 

participants (and host employers) to 

assist as facilitators, counselors, and 

information resources. 

(j) Monitoring. Sponsors must: 

(1) Maintain, at a minimum, monthly 

personal contacts with program 

participants. Such contact may be inperson, by telephone, or via exchanges 

of electronic mail (including a response 

from the participant) and must be 

properly documented. Sponsors must 

promptly and appropriately address 

issues affecting the participants’ health, 

safety, and welfare identified through 

such contacts; and 

(2) Provide appropriate assistance to 

participants on an as-needed basis and 

be available to participants (and host 

employers) to assist as facilitators, 

counselors, and information resources. 

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Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 27611 

(k) Internal controls. Sponsors must 

utilize organization-specific standard 

operating procedures for training and 

supervising all organization employees. 

In addition, sponsors must establish 

internal controls to ensure that 

employers and/or foreign entities 

comply with the terms of agreements 

with such third parties involved in the 

administration of the sponsors’ 

exchange visitor programs (i.e., affect 

the core programmatic functions). 

(l) Sponsors’ use of third parties. (1) 

If sponsors utilize foreign third party 

entities to assist in fulfilling the core 

programmatic functions of screening 

and orientation that may be conducted 

outside the United States, they must 

first obtain written and executed 

agreements with such third parties. For 

the purpose of this section, U.S. entities 

operating outside the United States (or 

its possessions or territories) are 

considered foreign entities. At a 

minimum, these written agreements 

must: 

(i) Outline the obligations and full 

relationship between the sponsors and 

such third parties on all matters 

involving the administration of the 

sponsors’ exchange visitor programs; 

(ii) Delineate the parties’ respective 

responsibilities; 

(iii) Include annually updated price 

lists for Summer Work Travel Programs 

marketed by the foreign entities 

including itemizations of all costs 

charged to participants; 

(iv) Contain representations that such 

foreign entities will not engage in, 

permit the use of, or otherwise 

cooperate or contract with other third 

parties (including staffing or 

employment agencies or subcontractors) 

for the purpose of outsourcing any core 

programmatic functions of screening 

and orientation covered by the 

agreement; and 

(v) Confirm that the foreign entities 

agree not to pay or provide incentives to 

employers in the United States to accept 

program participants for job placements. 

(2) If sponsors utilize domestic third 

party entities to assist in fulfilling the 

core programmatic functions of 

orientation and promoting mutual 

understanding, they must first obtain 

written and executed agreements with 

such third parties. Domestic third 

parties engaged by sponsors may not 

engage or subcontract any other parties 

to assist in fulfilling these core 

programmatic functions. Only host 

employers may assist in providing 

orientation to program participants. At a 

minimum, these written agreements 

must: 

(i) Outline the obligations and full 

relationship between the sponsors and 

such third parties on all matters 

involving the administration of the 

sponsors’ exchange visitor programs; 

and 

(ii) Delineate the parties’ respective 

responsibilities. 

(m) Vetting third party foreign 

entities. Sponsors must undertake 

appropriate due diligence in the review 

of potential overseas agents or partners 

(i.e., foreign entities) who assist in 

fulfilling the sponsors’ core 

programmatic functions that may be 

conducted outside the United States 

(i.e., screening and orientation) and 

must, at a minimum, annually review 

and maintain the following 

documentation for potential or existing 

foreign entities: 

(1) Proof of business licensing and/or 

registration to enable them to conduct 

business in the venue(s) where they 

operate; 

(2) Disclosure of any previous 

bankruptcy and of any pending legal 

actions or complaints against such an 

entity on file with local authorities; 

(3) Written references from three 

current business associates or partner 

organizations; 

(4) Summary of previous experience 

conducting J–1 Exchange Visitor 

Program activities; 

(5) Criminal background check reports 

(including original and English 

translations) for all owners and officers 

of the organizations; 

(6) A copy of the sponsor-approved 

advertising materials the foreign entities 

intend to use to market the sponsors’ 

programs (including original and 

English translations); and 

(7) A copy of the foreign entity’s 

notarized recent financial statements. 

(n) Vetting domestic third party 

entities. Annually, sponsors must 

undertake appropriate due diligence in 

the vetting of domestic third parties 

who assist in the promotion of mutual 

understanding and potential host 

employers. 

(1) Sponsors must ensure that third 

parties assisting in promoting mutual 

understanding (i.e., providing 

opportunities for participants to engage 

in cultural activities) are reputable 

individuals or organizations that are 

qualified to perform the activities agreed 

to and that they have sufficient liability 

insurance, if appropriate. All third 

parties that are registered business 

entities must be vetted according to the 

host employer procedures set forth in 

paragraphs (n)(2)(i) through (iii) of this 

section. 

(2) Sponsors must ensure that 

potential host employers are legitimate 

and reputable businesses by, at a 

minimum: 

(i) Making direct contact in person or 

by telephone with potential employers 

to verify the business owners’ and/or 

managers’ names, telephone numbers, 

email addresses, street addresses, and 

professional activities; 

(ii) Utilizing publicly available 

information, for example, but not 

limited to, state registries, 

advertisements, brochures, Web sites, 

and/or feedback from prior participants 

to confirm that all job offers have been 

made by viable business entities; 

(iii) Obtaining potential host 

employers’ Employer Identification 

Numbers and copies of their current 

business licenses; and 

(iv) Verifying the potential host 

employers’ Worker’s Compensation 

Insurance Policy or equivalent in each 

state where a participant will be placed 

or, if applicable, evidence of that state’s 

exemption from requirement of such 

coverage. 

(3) At the beginning of each 

placement season, sponsors must 

confirm: 

(i) The number of job placements 

available with host employers; 

(ii) That host employers will not 

displace domestic U.S. workers at 

worksites where they will place 

program participants; and 

(iii) That host employers have not 

experienced layoffs in the past 120 days 

and do not have workers on lockout or 

on strike. 

(o) Host employer cooperation. 

Sponsors may place participants only 

with host employers that agree to: 

(1) Make good faith efforts to provide 

participants the number of hours of paid 

employment per week as identified on 

their job offers and agreed to when the 

sponsors vetted the jobs; 

(2) Pay eligible participants for 

overtime worked in accordance with 

applicable State or Federal law; 

(3) Notify sponsors promptly when 

participants arrive at the work sites to 

begin their programs; when there are 

any changes or deviations in the job 

placements during the participants’ 

programs; when participants are not 

meeting the requirements of their job 

placements; or when participants leave 

their positions ahead of their planned 

departures; 

(4) Contact sponsors immediately in 

the event of any emergency involving 

participants or any situations that 

impact their health, safety, or welfare; 

and 

(5) In those instances when the 

employer provides housing or 

transportation, agree to provide suitable 

and acceptable accommodations and/or 

reliable, affordable, and convenient 

transportation. 

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27612 Federal Register / Vol. 77, No. 92 / Friday, May 11, 2012 / Rules and Regulations 

(p) Reporting requirements. Sponsors 

must electronically comply with the 

following reporting requirements 

utilizing Department-provided 

templates: 

(1) Submit placement reports on 

January 31 and July 31 of each year, 

identifying all Summer Work Travel 

Program participants who began 

exchange programs during the 

preceding six-month period. The reports 

must include the exchange visitors’ 

names, SEVIS Identification Numbers, 

countries of citizenship or legal 

permanent residence, names of host 

employers, and the length of time it took 

non-pre-placed participants to secure 

job placements. For participants who 

change jobs or have multiple jobs during 

their programs, the report must include 

all such placements; 

(2) Maintain listings of all active 

foreign agents or partners on the Foreign 

Entity Report by promptly informing the 

Department of any additions, deletions, 

or changes to foreign entity information 

by submitting new versions of their 

reports that reflect all current 

information. Reports must include the 

names, addresses, and contact 

information, including physical and 

mailing addresses, telephone numbers, 

and email addresses of all foreign 

entities that assist the sponsors in 

fulfilling the provision of core 

programmatic services. Sponsors must 

utilize only vetted foreign entities 

identified in the Foreign Entity Report 

to assist in fulfilling the sponsors’ core 

programmatic functions outside the 

United States, and they must inform the 

Department promptly when and why 

they have cancelled contractual 

arrangements with foreign entities; and 

(3) Submit annual participant price 

lists to the Department on January 31 of 

each year in a format approved by the 

Department to provide itemized 

breakdowns of the costs that exchange 

visitors must pay to both foreign agents 

and sponsors to participate in the 

Summer Work Travel Program on a 

country-specific (and, if appropriate, 

foreign agent-specific) basis. 

Dated: May 4, 2012. 

Robin J. Lerner, 

Deputy Assistant Secretary for Private Sector 

Exchanges, Bureau of Educational and 

Cultural Affairs, Department of State. 

[FR Doc. 2012–11253 Filed 5–10–12; 8:45 am] 

BILLING CODE 4710–05–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9589] 

RIN 1545–BK11 

Modifications to Definition of United 

States Property 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final and temporary 

regulations. 

SUMMARY: This document contains final 

and temporary regulations relating to 

the treatment of upfront payments made 

pursuant to certain notional principal 

contracts for U.S. federal income tax 

purposes. The temporary regulations 

provide that certain obligations of 

United States persons arising from 

upfront payments made by controlled 

foreign corporations pursuant to 

contracts that are cleared by a 

derivatives clearing organization or 

clearing agency do not constitute United 

States property. These regulations affect 

United States shareholders of controlled 

foreign corporations that make such 

payments. The text of the temporary 

regulations also serves as the text of the 

proposed regulations set forth in the 

notice of proposed rulemaking (REG– 

107548–11) on this subject in the 

Proposed Rules section in this issue of 

the Federal Register. 

DATES: Effective Date. These regulations 

are effective on May 11, 2012. 

Applicability Date. These regulations 

apply to payments described in § 1.956– 

2T(b)(1)(xi) made on or after May 11, 

2012. 

FOR FURTHER INFORMATION CONTACT: 

Kristine A. Crabtree at (202) 622–3840 

(not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

A. Section 956 

Section 956 was enacted to require an 

income inclusion by United States 

shareholders (as defined in section 

951(b)) of a controlled foreign 

corporation (as defined in section 

957(a)) that invests certain earnings and 

profits in United States property (U.S. 

property) ‘‘on the grounds that [the 

investment] is substantially the 

equivalent of a dividend being paid to 

them.’’ S. Rep. No. 87–1881, 1962–3 CB 

703, 794 (1962). Under section 

951(a)(1)(B), each United States 

shareholder (U.S. shareholder) of a 

controlled foreign corporation (CFC) is 

generally required to currently include 

in its gross income the amount 

determined under section 956 with 

respect to such shareholder. 

The amount determined under section 

956 with respect to a U.S. shareholder 

of a CFC for any taxable year is the 

lesser of: (1) The excess, if any, of the 

shareholder’s pro rata share of the 

average of the amounts of U.S. property 

held (directly or indirectly) by the CFC 

as of the close of each quarter of such 

taxable year, over the amount of 

earnings and profits of the CFC 

described in section 959(c)(1)(A) with 

respect to such shareholder; or (2) the 

shareholder’s pro rata share of the 

applicable earnings of the CFC. In 

general, the amount taken into account 

with respect to any U.S. property for 

this purpose is the adjusted basis of 

such property as determined for 

purposes of computing earnings and 

profits, reduced by any liability to 

which the property is subject. Earnings 

and profits described in section 

959(c)(1)(A) are attributable to amounts 

previously included in gross income by 

the U.S. shareholder under section 

951(a)(1)(B) (or which would have been 

included except for section 959(a)(2)). 

Section 956(c)(1) defines U.S. 

property to generally include stock of a 

domestic corporation and an obligation 

of a United States person (U.S. person). 

Section 956(c)(2), however, generally 

excludes from the definition of U.S. 

property the stock or obligations of a 

domestic corporation that is neither a 

U.S. shareholder of the CFC nor a 

domestic corporation, 25 percent or 

more of the total combined voting 

power of which, immediately after the 

CFC’s acquisition of stock in such 

domestic corporation, is owned, or is 

considered as being owned, by U.S. 

shareholders of the CFC. Under § 1.956– 

2T(d)(2), subject to certain exceptions 

not relevant here, the term ‘‘obligation’’ 

includes any bond, note, debenture, 

certificate, bill receivable, account 

receivable, note receivable, open 

account, or other indebtedness, whether 

or not issued at a discount and whether 

or not bearing interest. 

B. NPCs With Nonperiodic (Upfront) 

Payments 

When a notional principal contract 

(within the meaning of § 1.446–3(c)(1)) 

(NPC) includes a significant 

nonperiodic payment, the contract is 

generally treated as two separate 

transactions. One transaction is an onmarket, level payment swap; the other is 

a loan. For purposes of section 956, the 

Commissioner may treat any 

nonperiodic payment in connection 

with an NPC, whether or not it is 

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