10578 Federal Register / Vol. 66, No. 33 / Friday, February 16, 2001 / Rules and Regulations

strictly on a ‘‘hands-off’’ approach since

the foreign consignee is understood to

have the inherent capability to both

design and produce the defense article

and only lacks the necessary

requirement information; and/or

(iii) Basic Research. ‘‘Basic

Research’’—means a systemic study

directed toward greater knowledge or

understanding of the fundamental

aspects of phenomena and observable

facts without specific applications

towards processes or products in mind.

It does not include ‘‘Applied Research’’

(i.e. a systemic study to gain knowledge

or understanding necessary to

determine the means by which a

recognized and specific need may be

met. It is a systematic application of

knowledge toward the production of

useful materials, devices, and systems

or methods, including design,

development, and improvement of

prototypes and new processes to meet

specific requirements.); and

(iv) Maintenance (i.e., inspection,

testing, calibration or repair, including

overhaul, reconditioning and one-to-one

replacement of any defective items,

parts or components, but excluding any

modification, enhancement, upgrade or

other form of alteration or improvement

that changes the basic performance of

the item); and does not include

(v) Design Methodology, such as: The

underlying engineering methods and

design philosophy utilized (i.e., the

‘‘why’’ or information that explains the

rationale for particular design decision,

engineering feature, or performance

requirement); engineering experience

(e.g. lessons learned); and the rationale

and associated databases (e.g. design

allowables, factors of safety, component

life predictions, failure analysis criteria)

that establish the operational

requirements (e.g., performance,

mechanical, electrical, electronic,

reliability and maintainability) of a

defense article. (Final analytical results

and the initial conditions and

parameters may be provided.)

(vi) Engineering Analysis, such as:

Analytical methods and tools used to

design or evaluate a defense article’s

performance against the operational

requirements. Analytical methods and

tools include the development and/or

use of mockups, computer models and

simulations, and test facilities. (Final

analytical results and the initial

conditions and parameters may be

provided.)

(vii) Manufacturing Know-how, such

as: Information that provides detailed

manufacturing processes and techniques

needed to translate a detailed design

into a qualified, finished defense article.

(Information may be provided in a

build-to-print package identified in

paragraph (c)(6)(i) of this section that is

necessary in order to produce an

acceptable defense article.).

(d) Reexports/retransfer. Rexport/retransfer in Canada to another end user

or end use or from Canada to another

destination, except the United States,

must in all instances have the prior

approval of the Office of Defense Trade

Controls. Unless otherwise exempt in

this subchapter, the original exporter is

responsible, upon request from a

Canadian-registered person for

obtaining or providing reexport/

retransfer approval. In any instance

when the U.S. exporter is no longer

available to the Canadian end user the

request for reexport/retransfer may be

made directly to Department of State,

Office of Defense Trade Controls. All

requests must include the information

in § 123.9(c) of this subchapter.

Reexport/retransfer approval is acquired

by:

(1) If the reexport/retransfer being

requested could be made pursuant to

this section (i.e., a retransfer within

Canada to another eligible Canadian

recipient under this section) if exported

directly from the U.S., upon receipt by

the U.S. company of a request by a

Canadian end user, the original U.S.

exporter is authorized to grant on behalf

of the U.S. Government by confirming

in writing to the Canadian requester that

the reexport/retransfer is authorized

subject to the conditions of this section;

or

(2) If the reexport/retransfer is to an

end use or end user that, if directly

exported from the U.S. requires a

license, retransfer must be handled in

accordance with § 123.9 of this

subchapter.

Notes to § 126.5:

1. In any instance when the exporter has

knowledge that the defense article exempt

from licensing is being exported for use other

than by a qualified Canadian-registered

person or for export to another foreign

destination, other than the United States, in

its original form or incorporated into another

item, an export license must be obtained

prior to the transfer to Canada.

2. Additional exemptions exist in

other sections of this subchapter that are

applicable to Canada, for example

§§ 123.9, 125.4 and 124.2 which allows

for the performance of defense services

related to training in basic operations

and maintenance, without a license, for

defense articles lawfully exported,

including those identified in paragraphs

(b)(1) through (20) of this section.

Dated: January 24, 2001.

Colin L. Powell,

Secretary of State.

[FR Doc. 01–3877 Filed 2–15–01; 8:45 am]

BILLING CODE 4710–25–P

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 210

RIN 1510–AA81

Federal Government Participation in

the Automated Clearing House

AGENCY: Financial Management Service,

Fiscal Service, Treasury.

ACTION: Interim rule with request for

comment.

SUMMARY: This rule amends our

regulation governing the use of the

Automated Clearing House (ACH)

system by Federal agencies. The

regulation adopts, with some

exceptions, the ACH Rules developed

by NACHA—The Electronic Payments

Association (NACHA) as the rules

governing the use of the ACH system by

Federal agencies. We’re issuing this

interim rule to address changes that

NACHA has made to the ACH Rules

during the past year.

DATES: This interim rule is effective

March 19, 2001. The incorporation by

reference of the publication listed in the

rule is approved by the Director of the

Federal Register as of March 19, 2001.

ADDRESSES: You can download this

interim rule at the following website:

http://www.fms.treas.gov/ach/. You may

also inspect and copy this rule at:

Treasury Department Library, Freedom

of Information Act (FOIA) Collection,

Room 1428, Main Treasury Building,

1500 Pennsylvania Avenue, NW,

Washington, DC 20220. Before visiting,

you must call (202) 622–0990 for an

appointment.

You can view Treasury’s procedural

guidelines for ACH payments in the

Green Book at the following website:

http://www.fms.treas.gov/greenbook.

You may also register at this website for

e-mail notification of updates to the

Green Book.

You may send comments

electronically to the following address:

210comments@fms.treas.gov. You may

also mail comments to Cynthia L.

Johnson, Director, Cash Management

Policy and Planning Division, Financial

Management Service, 401 14th Street,

SW, Room 420, Washington, DC 20227.

FOR FURTHER INFORMATION CONTACT: Walt

Henderson, Senior Financial Program

Federal Register / Vol. 66, No. 33 / Friday, February 16, 2001 / Rules and Regulations 10579

1The 2000 ACH Rule changes were published in

an interim rule with request for comment. 65 FR

18866 (April 7, 2000).

2NACHA also adopted in the 2001 rule book a

rule that modifies the process by which

amendments to the ACH Rules are approved. Under

the new rule, approval of an amendment requires

two thirds of the voting power cast on the

amendment by members entitled to vote. The rule

change became effective as of January 1, 2001. Since

neither the Financial Management Service nor other

Federal agencies vote on the amendment of the

ACH Rules, this rule change does not affect the

Federal government’s participation in the ACH

system and we do not believe it is necessary or

appropriate to address this rule modification in Part

210.

Specialist, at (202) 874–6705 or

walt.henderson@fms.treas.gov; Natalie

H. Diana, Senior Attorney, at (202) 874–

6680 or natalie.diana@fms.treas.gov;

Adam Martin, Financial Program

Specialist, at (202) 874–6881 or

adam.martin@fms.treas.gov; Michele

Heine, Financial Program Specialist, at

(202) 874–8645 or

michele.heine@fms.treas.gov; or Cynthia

L. Johnson, Director, Cash Management

Policy and Planning Division, at (202)

874–6590 or

cindy.johnson@fms.treas.gov.

SUPPLEMENTARY INFORMATION:

I. Background

Part 210 incorporates, with certain

exceptions, the ACH Rules. NACHA

periodically updates the ACH Rules.

Each year NACHA publishes a new rule

book that reflects the changes to the

ACH Rules that have been approved

since the publication of the previous

rule book. Part 210 currently provides

that any amendment to the ACH Rules,

as published in NACHA’s 2000 rule

book, that takes effect after September

15, 2000, will not apply to Federal

government ACH entries unless we

publish notice of acceptance of the

amendment in the Federal Register. 31

CFR § 210.3(b)(2). NACHA recently

published its 2001 rule book. We’re

publishing this interim rule in order to

indicate which amendments to the ACH

Rules we’re accepting and which

amendments we’re rejecting.1

II. Summary of Rule Changes

A. Changes to ACH Rules

The ACH Rules published in

NACHA’s 2001 rule book reflect

changes to the ACH Rules published in

NACHA’s 2000 rule book related to five

topics 2

1. Telephone Initiated ACH Debit

NACHA has adopted a rule enabling

an Originator to initiate a single entry

ACH debit to a consumer’s account for

transactions initiated over the

telephone. The rule requires the

Originator to receive oral authorization

from the Receiver, and to retain that

authorization for a period of two years

from the termination or revocation of

that authorization. The Originator must

either tape record the authorization or

provide the Receiver with written notice

confirming the oral authorization prior

to the settlement date of the entry. The

rule permits the initiation of ACH debits

by telephone in three sets of

circumstances: When a consumer makes

a telephone call to a company with

which the consumer has an existing

relationship, when a company makes a

telephone call to a consumer with

whom the company has an existing

relationship, or when a consumer makes

a telephone call to a company with

which the consumer has no prior

relationship. The rule change will

become effective September 14, 2001.

2. Corrected Returns Time Frame

NACHA has adopted a rule that

amends the ACH Rules to shorten the

time frame for the transmission of

corrected returns to two banking days

from the settlement date of the

dishonored return. This change will

make the time frame consistent with

that of the contested dishonored return

process. This rule change will reduce

the risk to the Originator and originating

depository financial institution (ODFI)

because corrected returns will be

received more quickly than is currently

required. The rule change will become

effective March 16, 2001.

3. Internet-Initiated Entries

NACHA has adopted a rule that is

intended to establish a foundation for

promoting secure Internet-initiated ACH

payments. The rule establishes a new

Standard Entry Class (SEC) Code, WEB,

that will specifically identify consumer

ACH debit transactions initiated over

the Internet. Among other things, the

rule requires that Originators utilize

commercially reasonable fraudulent

transaction detection systems to screen

entries; verify that routing numbers are

valid; and establish secure Internet

sessions prior to and during the key

entry by consumers of banking

information. The rule will become

effective March 16, 2001.

4. Accounts Receivable Check

Truncation

In 1999 NACHA adopted a short-term

rule expanding the definition of the

Prearranged Payment and Deposit Entry

(PPD) format in the ACH Rules to allow

Originators to utilize the PPD format to

truncate checks received through the

U.S. mail for payment of goods or

services and convert them to ACH debit

entries. The implementation period for

the rule ended on December 15, 2000.

However, in order to allow for the

continuation of pilot programs testing

lockbox check truncation, NACHA has

issued a revised short-term rule with an

implementation period from December

15, 2000 through March 14, 2002.

Unlike the original short-term rule, the

revised short-term rule permits

truncation of items exceeding $2,500.

5. Cross-Border Payments

NACHA has amended the ACH Rules

governing the transmission and receipt

of cross-border entries to (1) include

necessary legal protections for ACH

network participants in light of

modifications to the Cross-Border

Payment Operating Rules that were

adopted by the Cross-Border Council

and (2) allow for the transmission and

receipt of cross-border debit

transactions. The amendment became

effective September 15, 2000.

B. ACH Rule Changes That We Are

Accepting

We are accepting the ACH Rules that

address telephone-initiated ACH

entries, corrected returns time frames,

and cross-border payments. These rule

changes are effective as of the effective

date of this interim rule or NACHA’s

effective date for the rule change,

whichever is later. In order to

incorporate these rules in Part 210, the

only change necessary to the current

regulation is to replace references to the

2000 rule book with references to the

2001 rule book.

C. ACH Rule Changes That We Are Not

Accepting

We are not accepting, at this time, the

ACH Rules that address accounts

receivable check truncation or Internetinitiated entries. We are currently

evaluating Treasury initiatives in both

of these areas and will publish a notice

of proposed rulemaking in the near

future in order to provide the public

with an opportunity to comment before

we adopt rules related to these

transactions.

D. Section-by-Section Analysis

Section 210.2(d)

We are amending the definition of

‘‘applicable ACH Rules’’ at section

210.2(d) to reference the rules published

in NACHA’s 2001 rule book rather than

the rules published in NACHA’s 2000

rule book. We also are adding new

subsection 210.2(d)(6) and (d)(7) to

exclude the rules relating to accounts

receivable check truncation and

Internet-initiated entries from the

definition of ‘‘applicable ACH Rules.’’

10580 Federal Register / Vol. 66, No. 33 / Friday, February 16, 2001 / Rules and Regulations

Section 210.3(b)

We are amending subsection 210.3(b),

‘‘Incorporation by reference—applicable

ACH Rules,’’ by replacing the references

to the ACH Rules as published in the

2000 rule book with references to the

ACH Rules as published in the 2001

rule book.

III. Procedural Requirements

Request for Comment

We invite comment on all aspects of

the interim rule.

Request for Comment on Plain Language

On June 1, 1998, the President issued

a memorandum directing each agency in

the Executive branch to write its rules

in plain language. This directive is

effective for all new proposed and final

rulemaking documents issued on or

after January 1, 1999. We invite

comment on how to make this interim

rule clearer. For example, you may wish

to discuss: (1) Whether we have

organized the material to suit your

needs; (2) whether the requirements of

this interim rule are clear; or (3)

whether there is something else we

could do to make this rule easier to

understand.

Notice and Comment; Effective Date

We find that good cause exists for

issuing this interim rule without prior

notice and comment. Under the

Administrative Procedure Act, an

agency is permitted to issue a rule

without prior notice and comment when

the agency for good cause finds that

notice and public procedure thereon are

impracticable, unnecessary, or contrary

to the public interest. 5 U.S.C. 553(b)(B).

We believe that it is important to

address the publication of new ACH

Rules as quickly as possible in order to

mitigate the uncertainty and

inconvenience to financial institutions

and agencies that would result from a

time lag in responding to NACHA’s rule

changes. When we proposed to address

changes to the ACH Rules by reviewing

and responding to rule changes on an

annual basis, we received many

comments expressing concern over the

potential consequences of such a time

lag.

Those consequences include

uncertainty as to the rules governing

government ACH transactions, as well

as the inability of financial institutions

to segregate the processing of those

transactions. For these reasons, we find

that we have good cause for issuing this

interim rule without prior notice and

comment.

Nevertheless, we are inviting

comment and will consider the

comments received.

Executive Order 12866, Regulatory

Planning and Review

This interim rule does not meet the

criteria for a ‘‘significant regulatory

action’’ as defined in Executive Order

12866.

Regulatory Flexibility Act

Because notice and public comment

are not required, the Regulatory

Flexibility Act (5 U.S.C. 601) does not

apply.

Paperwork Reduction Act

This interim rule contains no new

collections of information. Therefore,

the Paperwork Reduction Act does not

apply.

List of Subjects in 31 CFR Part 210

Automated Clearing House, Electronic

funds transfer, Financial institutions,

Fraud, and Incorporation by reference.

Authority and Issuance

For the reasons set out in the

preamble, 31 CFR part 210 is amended

as follows:

PART 210—FEDERAL GOVERNMENT

PARTICIPATION IN THE AUTOMATED

CLEARING HOUSE

1. The authority citation for Part 210

continues to read as follows:

Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31

U.S.C. 321, 3301, 3302, 3321, 3332, 3335, and

3720.

2. Revise § 210.2(d) to read as follows:

§ 210.2 Definitions.

* * * * *

(d) Applicable ACH Rules means the

ACH Rules with an effective date on or

before September 14, 2001, as published

in Parts II, III, and IV of the ‘‘2001 ACH

Rules: A Complete Guide to Rules &

Regulations Governing the ACH

Network,’’ (see § 210.3(b)), except:

(1) ACH Rule 1.1 (limiting the

applicability of the ACH Rules to

members of an ACH association);

(2) ACH Rule 1.2.2 (governing claims

for compensation);

(3) ACH Rule 1.2.4; 2.2.1.10;

Appendix Eight and Appendix Eleven

(governing the enforcement of the ACH

Rules, including self-audit

requirements);

(4) ACH Rules 2.2.1.8; 2.6; and 4.7

(governing the reclamation of benefit

payments);

(5) ACH Rule 8.3 and Appendix Two

(requiring that a credit entry be

originated no more than two banking

days before the settlement date of the

entry—see definition of ‘‘Effective Entry

Date’’ in Appendix Two);

(6) 2.1.4; 2.9; 3.6; 7.6.3; and 7.7.3

(governing PPD accounts receivable

truncated check debit entries); and

(7) ACH Rule 2.10 and 3.8 (governing

Internet-initiated entries) and Appendix

Two (definition of WEB entry).

* * * * *

3. Revise § 210.3(b) to read as follows:

§ 210.3 Governing law.

* * * * *

(b) Incorporation by reference—

applicable ACH Rules. (1) This part

incorporates by reference the applicable

ACH Rules, including rule changes with

an effective date on or before September

14, 2001, as published in Parts II, III,

and IV of the ‘‘2001 ACH Rules: A

Complete Guide to Rules & Regulations

Governing the ACH Network.’’ The

Director of the Federal Register

approves this incorporation by reference

in accordance with 5 U.S.C. 552(a) and

1 CFR part 51. Copies of the ‘‘2001 ACH

Rules’’ are available from NACHA—The

Electronic Payments Association, 13665

Dulles Technology Drive, Suite 300,

Herndon, Virginia 20171. Copies also

are available for public inspection at the

Office of the Federal Register, 800 North

Capitol Street, NW., Suite 700,

Washington, DC; and the Financial

Management Service, 401 14th Street,

SW., Room 420, Washington, DC 20227.

(2) Any amendment to the applicable

ACH Rules that takes effect after

September 14, 2001, shall not apply to

Government entries unless the Service

expressly accepts such amendment by

publishing notice of acceptance of the

amendment to this part in the Federal

Register. An amendment to the ACH

Rules that is accepted by the Service

shall apply to Government entries on

the effective date of the rulemaking

specified by the Service in the Federal

Register notice expressly accepting such

amendment.

* * * * *

Dated: February 8, 2001.

Richard L. Gregg,

Commissioner.

[FR Doc. 01–3667 Filed 2–15–01; 8:45 am]

BILLING CODE 4810–35–P