Appeals of SBA Loan Review Decisions Under the Paycheck Protection Program

Record facts

Summary

An interim final rule of the U.S. Small Business Administration, Appeals of SBA Loan Review Decisions Under the Paycheck Protection Program, published in the Federal Register of Thursday, August 27, 2020 (Vol. 85, No. 167) under Docket Number SBA-2020-0042 and RIN 3245-AH55. The rule is effective August 25, 2020 and requests public comment on or before September 28, 2020. It establishes a new subpart L of 13 CFR part 134, setting rules of practice for a PPP borrower to appeal certain SBA loan review decisions to the SBA Office of Hearings and Appeals. It defines an SBA loan review decision as a written SBA finding that a borrower was ineligible for a PPP loan or for the amount received, used proceeds for unauthorized uses, or is ineligible for forgiveness, and states that a lender's decision cannot be appealed to that office. Section 134.1202 lists what an appeal petition must contain.

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Federal Register / Vol. 85, No. 167 / Thursday, August 27, 2020 / Rules and Regulations 
the States, or on the distribution of 
power and responsibilities among the 
various layers of government. Therefore, 
SBA has determined that this rule has 
no federalism implications warranting 
preparation of a federalism assessment. 
Paperwork Reduction Act, 44 U.S.C. 
Chapter 35 
SBA has determined that this rule 
will not impose new or modify existing 
recordkeeping or reporting requirements 
under the Paperwork Reduction Act. 
Regulatory Flexibility Act (RFA) 
The Regulatory Flexibility Act (RFA) 
generally requires that when an agency 
issues a proposed rule, or a final rule 
pursuant to Section 553(b) of the APA 
or another law, the agency must prepare 
a regulatory flexibility analysis that 
meets the requirements of the RFA and 
publish such analysis in the Federal 
Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for such small government jurisdictions, 
neither State nor local governments are 
‘‘small entities.’’ Similarly, for purposes 
of the RFA, individual persons are not 
small entities. 
The requirement to conduct a 
regulatory impact analysis does not 
apply if the head of the agency ‘‘certifies 
that the rule will not, if promulgated, 
have a significant economic impact on 
a substantial number of small entities.’’ 
5 U.S.C. 605(b). The agency must, 
however, publish the certification in the 
Federal Register at the time of 
publication of the rule, ‘‘along with a 
statement providing the factual basis for 
such certification.’’ If the agency head 
has not waived the requirements for a 
regulatory flexibility analysis in 
accordance with the RFA’s waiver 
provision, and no other RFA exception 
applies, the agency must prepare the 
regulatory flexibility analysis and 
publish it in the Federal Register at the 
time of promulgation or, if the rule is 
promulgated in response to an 
emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). 
Rules that are exempt from notice and 
comment are also exempt from the RFA 
requirements, including conducting a 
regulatory flexibility analysis, when 
among other things the agency for good 
cause finds that notice and public 
procedure are impracticable, 
unnecessary, or contrary to the public 
interest. SBA Office of Advocacy guide: 
How to Comply with the Regulatory 
Flexibility Act, Ch.1. p.9. Accordingly, 
SBA is not required to conduct a 
regulatory flexibility analysis. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–18940 Filed 8–25–20; 1:00 pm] 
BILLING CODE P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 134 
[Docket Number SBA–2020–0042] 
RIN 3245–AH55 
Appeals of SBA Loan Review 
Decisions Under the Paycheck 
Protection Program 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Interim final rule. 
SUMMARY: On April 2, 2020, the U.S. 
Small Business Administration (SBA) 
posted on its website an interim final 
rule relating to the implementation of 
sections 1102 and 1106 of the 
Coronavirus Aid, Relief, and Economic 
Security Act (CARES Act or the Act) 
(published in the Federal Register on 
April 15, 2020). Section 1102 of the Act 
temporarily adds a new product, titled 
the ‘‘Paycheck Protection Program,’’ to 
the U.S. Small Business 
Administration’s (SBA’s) 7(a) Loan 
Program. Subsequently, SBA issued a 
number of interim final rules 
implementing the Paycheck Protection 
Program (PPP). This interim final rule 
supplements the interim final rule on 
Loan Review Procedures and Related 
Borrower and Lender Responsibilities 
posted on SBA’s website on May 22, 
2020 (published on June 1, 2020, in the 
Federal Register), as revised by the 
interim final rule posted on SBA’s 
website on June 22, 2020, in order to 
inform PPP borrowers and lenders of the 
process for a PPP borrower to appeal 
certain SBA loan review decisions 
under the PPP to the SBA Office of 
Hearings and Appeals, and requests 
public comment. 
DATES: 
Effective date: This rule is effective 
August 25, 2020. 
Applicability date: This interim final 
rule applies to certain loan review 
decisions made by SBA under the 
Paycheck Protection Program. 
Comment date: Comments must be 
received on or before September 28, 
2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0042 
through the Federal eRulemaking Portal: 
http://www.regulations.gov. Follow the 
instructions for submitting comments. 
SBA will post all comments on 
www.regulations.gov. If you wish to 
submit confidential business 
information (CBI) as defined in the User 
Notice at www.regulations.gov, please 
send an email to ppp-ifr@sba.gov. 
Highlight the information that you 
consider to be CBI and explain why you 
believe SBA should hold this 
information as confidential. SBA will 
review the information and make the 
final determination whether it will 
publish the information. 
FOR FURTHER INFORMATION CONTACT: A 
Call Center Representative at 833–572– 
0502, or the local SBA Field Office; the 
list of offices can be found at https://
www.sba.gov/tools/localassistance/ 
districtoffices. 
SUPPLEMENTARY INFORMATION: 
I. Background Information 
On March 13, 2020, President Trump 
declared the ongoing Coronavirus 
Disease 2019 (COVID–19) pandemic of 
sufficient severity and magnitude to 
warrant an emergency declaration for all 
States, territories, and the District of 
Columbia. With the COVID–19 
emergency, many small businesses 
nationwide are experiencing economic 
hardship as a direct result of the 
Federal, State, tribal, and local public 
health measures that have been taken to 
minimize the public’s exposure to the 
virus. These measures, some of which 
are government-mandated, have been 
implemented nationwide and include 
the closures of restaurants, bars, and 
gyms. In addition, based on the advice 
of public health officials, other 
measures, such as keeping a safe 
distance from others or even stay-at- 
home orders, are being implemented, 
resulting in a dramatic decrease in 
economic activity as the public avoids 
malls, retail stores, and other 
businesses. 
On March 27, 2020, the President 
signed the Coronavirus Aid, Relief, and 
Economic Security Act (the CARES Act) 
(Pub. L. 116–136) to provide emergency 
assistance and health care response for 
individuals, families, and businesses 
affected by the coronavirus pandemic. 
The Small Business Administration 
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(SBA) received funding and authority 
through the CARES Act to modify 
existing loan programs and establish a 
new loan program to assist small 
businesses nationwide adversely 
impacted by the COVID–19 emergency. 
Section 1102 of the CARES Act 
temporarily permits SBA to guarantee 
100 percent of 7(a) loans under a new 
program titled the ‘‘Paycheck Protection 
Program’’ (PPP). Section 1106 of the 
CARES Act provides for forgiveness of 
up to the full principal amount of 
qualifying loans guaranteed under the 
PPP. 
On April 2, 2020, SBA posted its first 
PPP interim final rule (85 FR 20811) 
(the First Interim Final Rule). 
Subsequently, SBA issued a number of 
other interim final rules implementing 
the PPP. On April 24, 2020, the 
President signed the Paycheck 
Protection Program and Health Care 
Enhancement Act (Pub. L. 116–139), 
which provided additional funding and 
authority for the PPP. 
On May 22, 2020, SBA and Treasury 
posted an interim final rule on Loan 
Review Procedures and Related 
Borrower and Lender Responsibilities 
(85 FR 33010) (Loan Review Interim 
Final Rule (IFR)). The rule stated that 
SBA would be issuing a separate interim 
final rule addressing the process for 
appealing certain SBA loan review 
decisions under the PPP. On June 5, 
2020, the Paycheck Protection Program 
Flexibility Act of 2020 (Pub. L. 116–142) 
(Flexibility Act) was signed into law, 
amending the CARES Act. On June 22, 
2020, SBA and Treasury posted an 
interim final rule that in part revised the 
Loan Review IFR to incorporate the 
relevant Flexibility Act amendments, 
address revisions to the Loan 
Forgiveness Application (SBA Form 
3508), and include a new alternative 
Loan Forgiveness Application (SBA 
Form 3508EZ). On July 4, 2020, Public 
Law 116–147 was enacted, extending 
the authority for SBA to guarantee PPP 
loans to August 8, 2020. 
As described below, this interim final 
rule informs PPP borrowers and lenders 
of the process for a PPP borrower to 
appeal certain SBA loan review 
decisions under the PPP to the SBA 
Office of Hearings and Appeals (OHA) 
by establishing a new subpart L for 13 
CFR part 134, and requests public 
comment. 
II. Comments and Immediate Effective 
Date 
The intent of the CARES Act is that 
SBA provide relief to America’s small 
businesses expeditiously. This intent, 
along with the dramatic decrease in 
economic activity nationwide, provides 
good cause for SBA to dispense with the 
30-day delayed effective date provided 
in the Administrative Procedure Act. 
Specifically, it is critical to meet 
lenders’ and borrowers’ need for clarity 
concerning the OHA appeal process as 
rapidly as possible because SBA can 
review a PPP loan and make 
determinations as to a borrower’s 
eligibility at any time. This interim final 
rule supplements the previous 
regulation on the discrete issues related 
to SBA’s process for reviewing a 
borrower’s eligibility for a PPP loan, the 
PPP loan amount received, the use of 
the PPP loan proceeds and/or the PPP 
loan forgiveness amount claimed by the 
borrower. 
This interim final rule is effective 
without advance notice and public 
comment because section 1114 of the 
CARES Act authorizes SBA to issue 
regulations to implement title I of the 
CARES Act without regard to notice 
requirements. In addition, SBA has 
determined that there is good cause for 
dispensing with advance public notice 
and comment on the ground that it 
would be contrary to the public interest. 
Specifically, SBA has determined that 
advance notice and public comment 
would delay the ability of PPP 
borrowers to understand with certainty 
the process for appealing certain SBA 
loan review decisions under the PPP. 
This rule is being issued to allow for 
immediate implementation of the OHA 
appeal feature of this program. Although 
this interim final rule is effective 
immediately, comments are solicited 
from interested members of the public 
on all aspects of this interim final rule, 
including section III below. These 
comments must be submitted on or 
before September 28, 2020. SBA will 
consider these comments and the need 
for making any revisions as a result of 
these comments. 
III. Subpart L—Rules of Practice for 
Appeals of Certain SBA Loan Review 
Decisions Under the Paycheck 
Protection Program 
This interim final rule establishes a 
new subpart L for 13 CFR part 134, 
establishing rules of practice for appeals 
of certain SBA loan review decisions 
under the Paycheck Protection Program 
(PPP). 
Section 134.1201, Scope of rules in 
this subpart L, provides a process for 
appeal to OHA of certain SBA loan 
review decisions under the PPP and any 
other PPP matter referred to OHA by the 
Administrator. This subpart defines the 
term SBA loan review decision as an 
official written decision by SBA, after 
SBA completes a review of a PPP loan, 
that finds a borrower (1) was ineligible 
for a PPP loan; (2) was ineligible for the 
PPP loan amount received or used the 
PPP loan proceeds for unauthorized 
uses; (3) is ineligible for PPP loan 
forgiveness in the amount determined 
by the lender in its full or partial 
approval decision issued to SBA (except 
for the deduction of any Economic 
Injury Disaster Loan advance in 
accordance with section 1110(e)(6) of 
the CARES Act); and/or (4) is ineligible 
for PPP loan forgiveness in any amount 
when the lender has issued a full denial 
decision to SBA. 
For a PPP loan of any size, SBA may 
undertake a loan review at any time in 
SBA’s discretion, and this subpart L 
applies to loan review decisions made 
by SBA after SBA completes a review of 
a PPP loan as set forth in Part III.1 and 
Part III.2c. of the Loan Review IFR, as 
amended. Only final SBA loan review 
decisions (as defined in this rule) can be 
appealed to OHA; a PPP borrower 
cannot file an OHA appeal of any 
decision made by a lender concerning a 
PPP loan. A PPP borrower can request 
an SBA review of a lender decision to 
deny the borrower’s loan forgiveness 
application in full, in accordance with 
Part III.2.b. of the Loan Review IFR, as 
amended, but that request is for a 
review by SBA, not an OHA appeal. A 
borrower may exercise any other rights 
it has under applicable law against a 
PPP lender regarding a lender decision. 
In addition, this section sets forth 
other types of decisions and 
determinations that are not covered by 
this subpart L, and makes clear that 
subpart C of this part, Rules of Practice 
for Appeals From Size Determinations 
and NAICS Code Designations, is not 
applicable to appeals from SBA loan 
review decisions. Lastly, this section 
sets forth the specific provisions from 
subpart B of this part, OHA’s general 
Rules of Practice, that are applicable to 
this subpart L. Other provisions from 
subpart B of this part do not apply to 
this subpart L. Because a PPP borrower 
must begin making payments of 
principal and interest on the remaining 
balance of its PPP loan at the end of the 
loan payment deferral period or when 
SBA remits the loan forgiveness amount 
to the PPP lender (or notifies the lender 
that no loan forgiveness is allowed), an 
appeal by a PPP borrower of any SBA 
loan review decision does not extend 
the deferral period of the PPP loan. 
Additionally, if SBA remits to the 
lender the PPP loan forgiveness amount 
set forth in the decision issued by the 
lender to SBA (except for the deduction 
of any Economic Injury Disaster Loan 
advance), the borrower may not file an 
appeal with OHA, and the borrower 
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must begin repayment of any remaining 
balance of its PPP loan. 
Section 134.1202, The appeal 
petition, provides that an appeal 
petition must include the following 
information: (1) The basis for OHA’s 
jurisdiction, including, but not limited 
to, evidence that the appeal is timely 
filed in accordance with § 134.1204; (2) 
A copy of the SBA loan review decision 
that is being appealed, or a description 
of that decision if a copy is unavailable; 
(3) A full and specific statement as to 
why the SBA loan review decision is 
alleged to be erroneous, together with 
all factual information and legal 
arguments supporting the allegations; 
(4) The relief being sought; (5) Signed 
copies of payroll tax filings actually 
reported to the Internal Revenue Service 
(IRS), and State quarterly business and 
individual employee wage reporting and 
unemployment insurance tax filings 
actually reported to the relevant state, 
for the relevant periods of time, if not 
provided with the PPP Loan Forgiveness 
Application (SBA Form 3508, SBA 
Form 3508EZ, or lender’s equivalent), or 
an explanation as to why they are not 
relevant or not available; (6) Signed 
copies of applicable federal tax returns 
actually filed with the IRS with 
appropriate schedules (e.g., IRS Form 
1040 with Schedule C/F) documenting 
income for self-employed individuals or 
partners in a partnership, if not 
provided with the PPP Borrower 
Application Form (SBA Form 2483 or 
lender’s equivalent), or an explanation 
as to why they are not relevant or not 
available; and (7) The name, address, 
telephone number, email address and 
signature of the appellant or its attorney. 
This provision is consistent with OHA’s 
general rules of practice in subpart B, 
with the addition of the requirement for 
submission of certain financial 
information. SBA has determined that 
submission by the appellant of financial 
information, or an explanation as to 
why they are not relevant or not 
available, is appropriate to support 
SBA’s efforts to assess compliance with 
the PPP requirements set forth in the 
statute, rules, and guidance. The 
appellant must serve a copy of the 
appeal petition with attachments on the 
Associate General Counsel for 
Litigation, U.S. Small Business 
Administration, 409 Third Street SW, 
Washington, DC 20416, OLITService@
sba.gov. The appellant must attach to 
the appeal petition a signed certificate 
of service meeting the requirements of 
§ 134.204(d). This section further 
provides that an appeal petition which 
does not include the above may be 
dismissed by the Judge and permits SBA 
to move for a motion for more definite 
statement or otherwise comply with the 
requirements of this section. 
Section 134.1203, Standing, provides 
that only the borrower on a loan for 
which SBA has issued a final SBA loan 
review decision has standing to appeal 
the SBA loan review decision to OHA. 
Individual owners of a borrower and 
lenders do not have standing to appeal 
an SBA loan review decision. 
Section 134.1204, Deadline for filing 
appeal petition, prescribes that an 
appeal petition must be filed within 30 
calendar days after (i) the appellant’s 
receipt of the final SBA loan review 
decision, or (ii) notification by the 
lender of the final SBA loan review 
decision, whichever is earlier. 
Section 134.1205, Dismissal, provides 
that the Judge must dismiss the appeal 
if: (1) The appeal is beyond OHA’s 
jurisdiction as set forth under 
§ 134.1201; (2) the appellant lacks 
standing to appeal under § 134.1203; or 
(3) the appeal is untimely under 
§ 134.1204, or is premature because SBA 
has not yet made a final SBA loan 
review decision. This section also 
provides that the Judge may dismiss the 
appeal if, among other things, the 
appeal does not, on its face, allege 
specific facts that if proven to be true, 
warrant reversal or remand of the SBA 
loan review decision. 
Section 134.1206, Notice and order, 
provides that upon receipt of an appeal 
challenging a final SBA loan review 
decision, OHA will assign the matter to 
either an Administrative Law Judge or 
an Administrative Judge in accordance 
with § 134.218. Unless the appeal will 
be dismissed under § 134.1205, the 
Judge will issue a notice and order 
establishing a deadline for production of 
the administrative record and specifying 
a date for the close of record. Typically, 
the administrative record will be due 20 
calendar days after issuance of the 
notice and order unless additional time 
is requested and granted, and the record 
will close 45 calendar days from the 
date of OHA’s receipt of the appeal 
unless additional time is requested and 
granted. With this timeframe, SBA seeks 
to provide a timely and judicious 
processing of the appeal petition, while 
also affording additional time if, for 
example, the volume of appeals or other 
matters require additional time for 
compilation of the administrative record 
and the close of record. 
Section 134.1207, The administrative 
record, requires that the administrative 
record shall include relevant documents 
that SBA considered in making its final 
decision or that were before SBA at the 
time of the final decision. The 
administrative record need not, 
however, contain all documents 
pertaining to the appellant. In addition, 
SBA may claim privilege as to certain 
materials. The administrative record 
must be certified and authenticated that 
it is, to the best of the signatory’s 
knowledge, complete and correct. SBA 
will file the administrative record with 
OHA and serve it on appellant. This 
section permits the appellant to object 
to the absence of any document from the 
administrative record that the appellant 
believes should have been included in 
the administrative record. An appellant 
also may object to any claim that 
documents in the administrative record 
are privileged. Such objections must be 
filed with OHA and served on SBA no 
later than 10 calendar days after 
appellant’s receipt of the administrative 
record. The Judge will rule upon such 
objections and may direct or permit that 
the administrative record be 
supplemented. 
Section 134.1208, Response to an 
appeal petition, prescribes that only 
SBA may respond to an appeal and the 
response should set forth the relevant 
facts and legal arguments to the issues 
presented on appeal. Except for good 
cause shown, a response filed after the 
close of record established by the Judge 
will not be considered. SBA must file its 
response with OHA, and serve a copy of 
the response upon the appellant and 
upon each of the persons identified in 
the certificate of service attached to the 
appellant’s appeal petition. No reply to 
a response will be permitted unless the 
Judge directs otherwise. 
Section 134.1209, Evidence beyond 
the record, discovery and oral hearings, 
provides that, generally, the Judge may 
not admit evidence beyond the written 
administrative record or permit any 
form of discovery. Discovery will be 
permitted in OHA’s appellate 
proceedings only if the Judge 
determines that SBA, upon written 
submission, has made a showing of 
good cause for discovery. An oral 
hearing will not be held on an appeal of 
an SBA loan review decision, unless, 
following the motion of a party, or at the 
Judge’s own initiative, the Judge orders 
an oral hearing upon concluding that 
there is a genuine dispute of material 
fact that cannot be resolved except by 
the taking of testimony and the 
confrontation of witnesses. SBA has 
determined that allowing an oral 
hearing under limited circumstances, 
and allowing discovery by SBA, only 
upon a showing of good cause, balances 
SBA’s potential need for discovery since 
it may not have all relevant documents 
from appellant with the efficient use of 
limited resources available. If an oral 
hearing is ordered, the proceeding shall 
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be conducted in accordance with 
§§ 134.214 and 134.222 in subpart B of 
this part as the Judge deems 
appropriate. All appeals under this 
subpart L will be decided solely on a 
review of the written administrative 
record, the appeal petition, response(s) 
filed thereto, any admitted evidence, 
and an oral hearing, if held. 
Section 134.1210, Interlocutory 
appeals, provides that either party may 
file an interlocutory appeal of a Judge’s 
ruling which decides an issue of 
privilege. Interlocutory appeals will be 
decided by the Administrator or a 
designee. An interlocutory appeal must 
be filed and served no later than 20 
calendar days after issuance of the 
ruling to which the interlocutory appeal 
applies. A response to the interlocutory 
appeal must be filed 10 calendar days 
after the interlocutory appeal is served. 
The Judge may stay the proceedings 
before OHA, in whole or in part, as he 
or she deems appropriate pending 
resolution of the interlocutory appeal. 
Section 134.1211, Alternative dispute 
resolution, provides that at any time 
during the pendency of an appeal, the 
parties may submit a joint motion 
requesting that the Judge permit the use 
of alternative dispute resolution to assist 
in resolving the matter. If the motion is 
granted, the Judge will also stay the 
proceedings before OHA, in whole or in 
part, as he or she deems appropriate, 
pending the outcome of the alternative 
dispute resolution. In addition, the 
Assistant Administrator for Hearings 
and Appeals (AA/OHA) or a Judge may 
designate another Judge or attorney 
assigned to OHA to serve as a neutral in 
alternative dispute resolution 
procedures. If OHA provides the neutral 
and the mediation fails to resolve all 
issues in the case, the OHA-provided 
neutral will not be involved in the 
adjudication. 
Section 134.1212, Standard of review, 
provides that the standard of review is 
whether the SBA loan review decision 
was based on clear error of fact or law. 
The appellant has the burden of proof, 
by a preponderance of the evidence. 
Section 134.1213, Decision on appeal, 
provides that the Judge will issue his or 
her decision within 45 calendar days 
after the close of record, as practicable. 
The decision will contain findings of 
fact and conclusions of law, the reasons 
for such findings and conclusions, and 
any relief ordered. The decision will be 
served on each party. The Judge’s 
decision on the appeal is an initial 
decision. However, unless a request for 
review is filed pursuant to § 134.228(a), 
or a request for reconsideration is filed 
pursuant to paragraph (c) of § 134.1213, 
an initial decision shall become the 
final decision of SBA 30 calendar days 
after its service. This section allows for 
a request for reconsideration pursuant to 
paragraph (c) of § 134.1213 by either 
party or by the Judge on his or her own 
initiative. This section also provides for 
the right to request review by the 
Administrator pursuant to § 134.228(a), 
in which case the provisions in 
§ 134.228 will apply. If a request for 
review pursuant to § 134.228(a) is filed, 
the decision of the Administrator is a 
final decision of SBA appealable to 
federal district court. In order for a 
borrower to exhaust its administrative 
remedies and preserve its right to seek 
judicial review of an SBA final decision 
in a federal district court, a borrower 
that disputes the initial decision or 
reconsidered initial decision must file 
and serve a request for review of an 
initial decision or reconsidered initial 
decision by the Administrator pursuant 
to § 134.228(a). If the borrower does not 
request review by the Administrator 
pursuant to § 134.228(a), the borrower’s 
right to seek review in federal court is 
waived due to the borrower’s failure to 
exhaust administrative remedies. This 
section also provides that the final OHA 
decision creates precedent only for 
appeals involving the PPP. Any OHA 
decision pursuant to this subpart L 
applies only to the PPP and does not 
apply to SBA’s 7(a) Loan Program 
generally or to any interpretation or 
application of the regulations in part 
120 or part 121 of this title. SBA has 
determined that this is appropriate 
because the PPP is governed by the 
CARES Act, which adds a new 
temporary program to SBA’s 7(a) Loan 
Program, but does not apply to SBA’s 
7(a) Loan Program generally. Lastly, this 
section provides that, consistent with 
the general OHA rules of practice in 
subpart B of part 134, OHA decisions 
are normally published without 
redactions on OHA’s website. A 
decision may contain confidential 
business and financial information or 
personally identifiable information 
where that information is either 
decisionally-significant or otherwise 
necessary for a comprehensible 
decision. Where no protective order is 
in place, a party may request a redacted 
public decision by contacting OHA. 
Where a protective order is in place, the 
Judge will usually issue the unredacted 
decision under the protective order and 
a redacted version for public release. 
Section 134.1214, Effects of the 
decision, provides that OHA may affirm, 
reverse, or remand an SBA loan review 
decision. If remanded, OHA no longer 
has jurisdiction over the matter unless 
a new appeal is filed as a result of a new 
SBA loan review decision. 
Section 134.1215, Equal Access to 
Justice Act (EAJA), provides that a 
prevailing appellant is not entitled to 
recover attorney’s fees. Appeals to OHA 
from SBA loan review decisions under 
the PPP are not proceedings that are 
required to be conducted by an 
Administrative Law Judge under 
§ 134.603. 
Section 134.1216, Exhaustion of 
administrative remedies, provides that 
an appeal to OHA and request for 
review by the Administrator of a 
disputed initial decision or 
reconsidered initial decision are 
administrative remedies that must be 
exhausted before judicial review of an 
SBA loan review decision may be 
sought in a federal district court. 
Section 134.1217, Confidential 
information and protective order, 
provides that if a filing or other 
submission made pursuant to an appeal 
in this subpart L contains confidential 
business and financial information; 
personally identifiable information; 
source selection sensitive information; 
income tax returns; documents and 
information covered under § 120.1060 of 
this title; or any other exempt 
information, that information is not 
available to the public pursuant to the 
Freedom of Information Act (FOIA), 5 
U.S.C. 552. This provision is consistent 
with the general rule of practice in 
subpart B of this part. In addition, this 
section permits SBA or appellant to seek 
a protective order over any document or 
information filed pursuant to an appeal 
in this subpart L, including any 
document or information exchanged in 
discovery if permitted in accordance 
with § 134.1209. 
Compliance With Executive Orders 
12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 U.S.C. 
Ch. 35), and the Regulatory Flexibility 
Act (5 U.S.C. 601–612) 
Executive Orders 12866, 13563, and 
13771 
This interim final rule is 
economically significant for the 
purposes of Executive Orders 12866 and 
13563, and is considered a major rule 
under the Congressional Review Act. 
SBA, however, is proceeding under the 
emergency provision at Executive Order 
12866 Section 6(a)(3)(D) based on the 
need to move expeditiously to mitigate 
the current economic conditions arising 
from the COVID–19 emergency. This 
rule’s designation under Executive 
Order 13771 will be informed by public 
comment. 
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Executive Order 12988 
SBA has drafted this rule, to the 
extent practicable, in accordance with 
the standards set forth in section 3(a) 
and 3(b)(2) of Executive Order 12988, to 
minimize litigation, eliminate 
ambiguity, and reduce burden. The rule 
has no preemptive or retroactive effect. 
Executive Order 13132 
SBA has determined that this rule 
will not have substantial direct effects 
on the States, on the relationship 
between the National Government and 
the States, or on the distribution of 
power and responsibilities among the 
various layers of government. Therefore, 
SBA has determined that this rule has 
no federalism implications warranting 
preparation of a federalism assessment. 
Paperwork Reduction Act, 44 U.S.C. 
Chapter 35 
SBA has determined that this interim 
final rule does not impose additional 
reporting or recordkeeping requirements 
under the Paperwork Reduction Act. 
Regulatory Flexibility Act (RFA) 
The Regulatory Flexibility Act 
generally requires that when an agency 
issues a proposed rule, or a final rule 
pursuant to section 553(b) of the APA or 
another law, the agency must prepare a 
regulatory flexibility analysis that meets 
the requirements of the RFA and 
publish such analysis in the Federal 
Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for such small government jurisdictions, 
neither State nor local governments are 
‘‘small entities.’’ Similarly, for purposes 
of the RFA, individual persons are not 
small entities. The requirement to 
conduct a regulatory impact analysis 
does not apply if the head of the agency 
‘‘certifies that the rule will not, if 
promulgated, have a significant 
economic impact on a substantial 
number of small entities.’’ 5 U.S.C. 
605(b). The agency must, however, 
publish the certification in the Federal 
Register at the time of publication of the 
rule, ‘‘along with a statement providing 
the factual basis for such certification.’’ 
If the agency head has not waived the 
requirements for a regulatory flexibility 
analysis in accordance with the RFA’s 
waiver provision, and no other RFA 
exception applies, the agency must 
prepare the regulatory flexibility 
analysis and publish it in the Federal 
Register at the time of promulgation or, 
if the rule is promulgated in response to 
an emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). Rules that are 
exempt from notice and comment are 
also exempt from the RFA requirements, 
including conducting a regulatory 
flexibility analysis, when among other 
things the agency for good cause finds 
that notice and public procedure are 
impracticable, unnecessary, or contrary 
to the public interest. SBA Office of 
Advocacy guide: How to Comply with 
the Regulatory Flexibility Act, Ch.1. p.9. 
Accordingly, SBA is not required to 
conduct a regulatory flexibility analysis. 
List of Subjects in 13 CFR Part 134 
Administrative practice and 
procedure, Claims, Equal access to 
justice, Lawyers, Organization and 
function (Government agencies). 
For the reasons stated in the 
preamble, the Small Business 
Administration amends 13 CFR part 134 
as set forth below: 
PART 134—RULES OF PROCEDURE 
GOVERNING CASES BEFORE THE 
OFFICE OF HEARINGS AND APPEALS 
■1. The authority citation for part 134 
is revised to read as follows: 
Authority: 5 U.S.C. 504; 15 U.S.C. 632, 
634(b)(6), 634(i), 637(a), 648(l), 656(i), 657t 
and 687(c); 38 U.S.C. 8127(f); E.O. 12549, 51 
FR 6370, 3 CFR, 1986 Comp., p. 189. 
Subpart J issued under 38 U.S.C. 
8127(f)(8)(B). 
Subpart K issued under 38 U.S.C. 
8127(f)(8)(A). 
Subpart L issued under 15 U.S.C. 
636(a)(36); Pub. L. 116–136; Pub. L. 116–139; 
116–142; 116–147. 
■2. Amend § 134.102 by: 
■a. Removing the word ‘‘and’’ at the 
end of paragraph (u); 
■b. Removing the period at the end of 
paragraph (v) and adding ‘‘; and’’ in its 
place; and 
■c. Adding paragraph (w) to read as 
follows: 
§ 134.102
Jurisdiction of OHA. 
* 
* 
* 
* 
* 
(w) Appeals of certain SBA loan 
review decisions as defined in 13 CFR 
134.1201. 
■3. Add subpart L to read as follows: 
Subpart L—Rules of Practice for 
Appeals of Certain SBA Loan Review 
Decisions Under the Paycheck 
Protection Program 
Sec. 
134.1201
Scope of rules in this subpart L. 
134.1202
The appeal petition. 
134.1203
Standing. 
134.1204
Deadline for filing appeal 
petition. 
134.1205
Dismissal. 
134.1206
Notice and order. 
134.1207
The administrative record. 
134.1208
Response to an appeal petition. 
134.1209
Evidence beyond the record, 
discovery and oral hearings. 
134.1210
Interlocutory appeals. 
134.1211
Alternative dispute resolution 
procedures. 
134.1212
Standard of review. 
134.1213
Decision on appeal. 
134.1214
Effects of the decision. 
134.1215
Equal Access to Justice Act 
(EAJA). 
134.1216
Exhaustion of administrative 
remedies. 
134.1217
Confidential information and 
protective order. 
Authority: 15 U.S.C. 636(a)(36); Pub. L. 
116–136; Pub. L. 116–139; Pub. L. 116–142; 
Pub. L. 116–147 
§ 134.1201
Scope of the rules in this 
subpart L. 
(a) The rules of practice in this 
subpart L apply to appeals to OHA from 
certain SBA loan review decisions 
under the Paycheck Protection Program 
(PPP) as described in paragraph (b) of 
this section, and to any other PPP matter 
referred to OHA by the Administrator of 
SBA. The PPP was established as a 
temporary program under section 1102 
of the Coronavirus Aid, Relief, and 
Economic Security Act (CARES Act) 
(Pub. L. 116–136). 
(b) A final SBA loan review decision 
that is appealable under this subpart L 
is an official written decision by SBA, 
after SBA completes a review of a PPP 
loan, that finds a borrower: 
(1) Was ineligible for a PPP loan; 
(2) Was ineligible for the PPP loan 
amount received or used the PPP loan 
proceeds for unauthorized uses; 
(3) Is ineligible for PPP loan 
forgiveness in the amount determined 
by the lender in its full approval or 
partial approval decision issued to SBA 
(except for the deduction of any 
Economic Injury Disaster Loan advance 
in accordance with section 1110(e)(6) of 
the CARES Act); and/or 
(4) Is ineligible for PPP loan 
forgiveness in any amount when the 
lender has issued a full denial decision 
to SBA. 
(c) A borrower cannot file an OHA 
appeal of any decision made by a lender 
concerning a PPP loan. 
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(d) Any determination by SBA’s 
Office of Inspector General concerning a 
PPP loan is not appealable to OHA. 
(e) This subpart L does not create any 
right to appeal any SBA decision on any 
7(a) loans other than PPP loans. 
(f) The Rules of Practice for Appeals 
From Size Determinations and NAICS 
Code Designations in subpart C of this 
part do not apply to appeals of SBA loan 
review decisions or to the PPP. 
(g) In addition to the subpart B of this 
part provisions specifically referenced 
in this subpart L, the following 
regulations from subpart B of this part 
also apply to this subpart L: 13 CFR 
134.207 through 134.209, 134.211, 
134.212, and 134.217 through 134.221. 
§ 134.1202
The appeal petition. 
(a) Contents. The appeal petition must 
include the following information: 
(1) The basis for OHA’s jurisdiction, 
including, but not limited to, evidence 
that the appeal is timely filed in 
accordance with § 134.1204; 
(2) A copy of the SBA loan review 
decision that is being appealed, or a 
description of that decision if a copy is 
unavailable; 
(3) A full and specific statement as to 
why the SBA loan review decision is 
alleged to be erroneous, together with 
all factual information and legal 
arguments supporting the allegations; 
(4) The relief being sought; 
(5) Signed copies of payroll tax filings 
actually filed with the Internal Revenue 
Service (IRS), and State quarterly 
business and individual employee wage 
reporting and unemployment insurance 
tax filings actually reported to the 
relevant state, for the relevant periods of 
time, if not provided with the PPP Loan 
Forgiveness Application (SBA Form 
3508, SBA Form 3508EZ, or lender’s 
equivalent), or an explanation as to why 
they are not relevant or not available; 
(6) Signed copies of applicable federal 
tax returns actually filed with the IRS 
with appropriate schedules (e.g., IRS 
Form 1040 with Schedule C/F) 
documenting income for self-employed 
individuals or partners in a partnership, 
if not provided with the PPP Borrower 
Application Form (SBA Form 2483 or 
lender’s equivalent), or an explanation 
as to why they are not relevant or not 
available; and 
(7) The name, address, telephone 
number, email address and signature of 
the appellant or its attorney. 
(b) Format. The maximum length of 
an appeal petition (not including 
attachments) is 20 pages, unless leave is 
sought by the appellant and granted by 
the Judge. A table of authorities is 
required only for petitions citing more 
than twenty cases, regulations, or 
statutes. 
(c) Service of the appeal petition. In 
addition to filing an appeal with OHA 
in accordance with § 134.204(b), the 
appellant must serve a copy of the 
appeal petition with attachments on the 
Associate General Counsel for 
Litigation, U.S. Small Business 
Administration, 409 Third Street SW, 
Washington, DC 20416, OLITService@
sba.gov. 
(d) Certificate of service. The 
appellant must attach to the appeal 
petition a signed certificate of service 
meeting the requirements of 
§ 134.204(d). 
(e) Dismissal. An appeal petition 
which does not contain all of the 
information required by paragraphs (a) 
through (d) of this section may be 
dismissed, with or without prejudice, at 
the Judge’s own initiative, or upon 
motion of SBA. 
(f) Motion for more definite statement. 
SBA may, not later than five days after 
receiving an appeal petition, move for 
an order to the appellant to provide a 
more definite appeal petition or 
otherwise comply with this section. A 
Judge may order a more definite appeal 
petition on his or her own initiative. 
(1) A motion for a more definite 
appeal petition stays SBA’s time for 
filing a response. The Judge will 
establish the time for filing and serving 
a response and will extend the close of 
the record as appropriate. 
(2) If the appellant does not comply 
with the Judge’s order to provide a more 
definite appeal petition or otherwise 
fails to comply with applicable 
regulations, the Judge may dismiss the 
petition with prejudice. 
(g) Calculation of a deadline when the 
time period is given in days. Do not 
count the day the time period begins, 
but do count the last day of the time 
period. If the last day is Saturday, 
Sunday, or a Federal holiday, the time 
period ends on the next business day. 
§ 134.1203
Standing. 
Only the borrower on a loan for which 
SBA has issued a final SBA loan review 
decision has standing to appeal the SBA 
loan review decision to OHA. 
§ 134.1204
Deadline for filing appeal 
petition. 
An appeal petition must be filed with 
OHA within 30 calendar days after the 
appellant’s receipt of the final SBA loan 
review decision, or notification by the 
lender of the final SBA loan review 
decision, whichever is earlier. 
§ 134.1205
Dismissal. 
(a) The Judge must dismiss the appeal 
if: 
(1) The appeal is beyond OHA’s 
jurisdiction as set forth under 
§ 134.1201; 
(2) The appellant lacks standing to 
appeal under § 134.1203; or 
(3) The appeal is untimely under 
§ 134.1204, or is premature because SBA 
has not yet made a final SBA loan 
review decision. 
(b) The Judge may dismiss the appeal 
in accordance with § 134.1202(e) or 
(f)(2), or if the appeal does not, on its 
face, allege specific facts that if proven 
to be true, warrant reversal or remand of 
the SBA loan review decision. 
§ 134.1206
Notice and order. 
Upon receipt of an appeal challenging 
a final SBA loan review decision, OHA 
will assign the matter to either an 
Administrative Law Judge or an 
Administrative Judge in accordance 
with § 134.218. Unless the appeal is 
dismissed under § 134.1205, the Judge 
will issue a notice and order 
establishing a deadline for production of 
the administrative record and specifying 
a date for the close of record. The notice 
and order will be served upon all 
known parties (or their attorneys). 
Typically, the administrative record will 
be due 20 calendar days after issuance 
of the notice and order unless additional 
time is requested and granted, and the 
record will close 45 calendar days from 
the date of OHA’s receipt of the appeal 
unless additional time is requested and 
granted. 
§ 134.1207
The administrative record. 
(a) Contents. The administrative 
record shall include relevant documents 
that SBA considered in making its final 
decision or that were before SBA at the 
time of the final decision. The 
administrative record need not, 
however, contain all documents 
pertaining to the appellant. In addition, 
SBA may claim privilege as to certain 
materials. The administrative record 
must be certified and authenticated that 
it is, to the best of the signatory’s 
knowledge, complete and correct. 
(b) Filing. SBA will file the 
administrative record with OHA and 
serve it on appellant. 
(c) Objection. The appellant may 
object to the absence of any document 
from the administrative record that the 
appellant believes should have been 
included in the administrative record. 
An appellant also may object to any 
claim that documents in the 
administrative record are privileged. 
Such objections must be filed with OHA 
and served on SBA no later than 10 
calendar days after the appellant’s 
receipt of the administrative record. The 
Judge will rule upon such objections 
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and may direct or permit that the 
administrative record be supplemented. 
§ 134.1208
Response to an appeal petition. 
(a) Who may respond. Only SBA may 
respond to an appeal. The response 
should set forth the relevant facts and 
legal arguments to the issues presented 
on appeal. 
(b) Time limit. Except for good cause 
shown, a response filed after the close 
of record established by the Judge will 
not be considered. 
(c) Service. The SBA must file its 
response with OHA, and serve a copy of 
the response upon the appellant and 
upon each of the persons identified in 
the certificate of service attached to the 
appeal petition pursuant to 
§ 134.1202(d). 
(d) Reply to a response. No reply to 
a response will be permitted unless the 
Judge directs otherwise. 
§ 134.1209
Evidence beyond the record, 
discovery and oral hearings. 
(a) General Rule. Generally, the Judge 
may not admit evidence beyond the 
written administrative record or permit 
any form of discovery. 
(b) Discovery. Discovery will be 
permitted only if the Judge determines 
that SBA, upon written submission, has 
made a showing of good cause for 
discovery. 
(c) Oral hearings. Oral hearings will 
not be held on an appeal of an SBA loan 
review decision, unless, following the 
motion of a party, or at the Judge’s own 
initiative, the Judge orders an oral 
hearing upon concluding that there is a 
genuine dispute of material fact that 
cannot be resolved except by the taking 
of testimony and the confrontation of 
witnesses. If an oral hearing is ordered, 
the proceeding shall be conducted in 
accordance with §§ 134.214 and 134.222 
in subpart B of this part as the Judge 
deems appropriate. 
(d) The record. All appeals under this 
subpart L will be decided solely on a 
review of the written administrative 
record, the appeal petition, and 
response(s) filed thereto, any admitted 
evidence, and an oral hearing, if held. 
§ 134.1210
Interlocutory appeals. 
(a) General. Either party may file an 
interlocutory appeal of a Judge’s ruling 
which decides an issue of privilege. 
Interlocutory appeals will be decided by 
the Administrator of SBA or a designee. 
(b) Procedures. An interlocutory 
appeal must be filed and served no later 
than 20 calendar days after issuance of 
the ruling to which the interlocutory 
appeal applies. A response to the 
interlocutory appeal must be filed 10 
calendar days after the interlocutory 
appeal is served. The Judge may stay the 
proceedings before OHA, in whole or in 
part, as he or she deems appropriate 
pending resolution of the interlocutory 
appeal. 
§ 134.1211
Alternative dispute resolution. 
(a) Joint Motion. At any time during 
the pendency of an appeal, the parties 
may submit a joint motion requesting 
that the Judge permit the use of 
alternative dispute resolution to assist 
in resolving the matter. 
(b) Procedures. If the motion is 
granted, the Judge will also stay the 
proceedings before OHA, in whole or in 
part, as he or she deems appropriate, 
pending the outcome of the alternative 
dispute resolution. In addition, the AA/ 
OHA or a Judge may designate another 
Judge or attorney assigned to OHA to 
serve as a neutral in alternative dispute 
resolution procedures. If OHA provides 
the neutral and the mediation fails to 
resolve all issues in the case, the OHA- 
provided neutral will not be involved in 
the adjudication. 
§ 134.1212
Standard of review. 
The standard of review is whether the 
SBA loan review decision was based on 
clear error of fact or law. The appellant 
has the burden of proof, by a 
preponderance of the evidence. 
§ 134.1213
Decision on appeal. 
(a) Time limits and contents. The 
Judge will issue his or her decision 
within 45 calendar days after the close 
of record, as practicable. The decision 
will contain findings of fact and 
conclusions of law, the reasons for such 
findings and conclusions, and any relief 
ordered. The decision will be served on 
each party. 
(b) Initial decision. The Judge’s 
decision on the appeal is an initial 
decision. However, unless a request for 
review is filed pursuant to § 134.228(a), 
or a request for reconsideration is filed 
pursuant to paragraph (c) of this section, 
an initial decision shall become the 
final decision of SBA 30 calendar days 
after its service. The final OHA decision 
creates precedent only for appeals 
involving the PPP. Any OHA decision 
pursuant to this subpart L applies only 
to the PPP and does not apply to SBA’s 
7(a) Loan Program generally or to any 
interpretation or application of the 
regulations in part 120 or part 121 of 
this title. 
(c) Reconsideration. An initial 
decision of the Judge may be 
reconsidered. Either SBA or the 
appellant may request reconsideration 
by filing with the Judge and serving a 
petition for reconsideration within 10 
calendar days after service of the written 
decision. The request for 
reconsideration must clearly show an 
error of fact or law material to the 
decision. The Judge may also reconsider 
a decision on his or her own initiative 
within 20 calendar days after service of 
the written decision. 
(d) Request for review. Within 30 
calendar days after the service of an 
initial decision or a reconsidered initial 
decision of a Judge, any party, or SBA’s 
Office of General Counsel, may file and 
serve a request for review by the 
Administrator pursuant to § 134.228(a). 
In order for a borrower to exhaust its 
administrative remedies and preserve its 
right to seek judicial review of an SBA 
final decision in a federal district court, 
a borrower that disputes an initial 
decision or reconsidered initial decision 
must file and serve a request for review 
of the initial decision or reconsidered 
initial decision by the Administrator 
pursuant to § 134.228(a). If a request for 
review is filed pursuant to § 134.228(a), 
the provisions in § 134.228 will apply. 
(e) Publication. OHA decisions are 
normally published without redactions 
on OHA’s website. A decision may 
contain confidential business and 
financial information or personally 
identifiable information where that 
information is either decisionally- 
significant or otherwise necessary for a 
comprehensible decision. Where no 
protective order is in place, a party may 
request a redacted public decision by 
contacting OHA. Where a protective 
order is in place, the Judge will usually 
issue the unredacted decision under the 
protective order and a redacted version 
for public release. 
§ 134.1214
Effects of the decision. 
OHA may affirm, reverse, or remand 
an SBA loan review decision. If 
remanded, OHA no longer has 
jurisdiction over the matter unless a 
new appeal is filed as a result of a new 
SBA loan review decision. 
§ 134.1215
Equal Access to Justice Act 
(EAJA), 5 U.S.C. 504. 
A prevailing appellant is not entitled 
to recover attorney’s fees. Appeals to 
OHA from SBA loan review decisions 
under the PPP are not proceedings that 
are required to be conducted by an 
Administrative Law Judge under 
§ 134.603. 
§ 134.1216
Exhaustion of administrative 
remedies. 
An appeal to OHA and request for 
review by the Administrator of a 
disputed initial decision or 
reconsidered initial decision are 
administrative remedies that must be 
exhausted before judicial review of an 
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SBA loan review decision may be 
sought in a federal district court. 
§ 134.1217
Confidential Information and 
Protective Order. 
(a) If a filing or other submission 
made pursuant to an appeal in this 
subpart L contains confidential business 
and financial information; personally 
identifiable information; source 
selection sensitive information; income 
tax returns; documents and information 
covered under § 120.1060 of this title; or 
any other exempt information, that 
information is not available to the 
public pursuant to the Freedom of 
Information Act (FOIA), 5 U.S.C. 552. 
(b) SBA or appellant may seek a 
protective order over any document or 
information exchanged in discovery if 
permitted in accordance with 
§ 134.1209 and any document or 
information filed pursuant to an appeal 
in this subpart L. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–17895 Filed 8–25–20; 11:15 am] 
BILLING CODE P 
DEPARTMENT OF TRANSPORTATION 
Federal Aviation Administration 
14 CFR Part 39 
[Docket No. FAA–2020–0786; Project 
Identifier AD–2020–00914–R; Amendment 
39–21229; AD 2020–18–08] 
RIN 2120–AA64 
Airworthiness Directives; Robinson 
Helicopter Company 
AGENCY: Federal Aviation 
Administration (FAA), DOT. 
ACTION: Final rule; request for 
comments. 
SUMMARY: The FAA is superseding 
Airworthiness Directive (AD) 2019–12– 
18 for Robinson Helicopter Company 
(Robinson) Model R44 II helicopters. AD 
2019–12–18 required inspecting certain 
engine air induction hoses (hoses) and 
replacing any hose that was not 
airworthy. AD 2019–12–18 also 
prohibited the installation of certain 
hoses. This AD continues to require 
inspecting those previously affected 
hoses and amends the applicability, 
clarifies an inspection requirement, 
adds a requirement to repeat the 
inspection, and expands the installation 
prohibition. This AD was prompted by 
an additional report of separation 
between the outer and inner hose layers. 
The FAA is issuing this AD to address 
the unsafe condition on these products. 
DATES: This AD is effective August 27, 
2020. 
The FAA must receive any comments 
on this AD by October 13, 2020. 
ADDRESSES: You may send comments, 
using the procedures found in 14 CFR 
11.43 and 11.45, by any of the following 
methods: 
• Federal eRulemaking Portal: Go to 
https://www.regulations.gov. Follow the 
instructions for submitting comments. 
• Fax: 202–493–2251. 
• Mail: U.S. Department of 
Transportation, Docket Operations, M– 
30, West Building Ground Floor, Room 
W12–140, 1200 New Jersey Avenue SE, 
Washington, DC 20590. 
• Hand Delivery: U.S. Department of 
Transportation, Docket Operations, M– 
30, West Building Ground Floor, Room 
W12–140, 1200 New Jersey Avenue SE, 
Washington, DC 20590, between 9 a.m. 
and 5 p.m., Monday through Friday, 
except Federal holidays. 
For service information identified in 
this final rule, contact Robinson 
Helicopter Company, 2901 Airport 
Drive, Torrance, CA 90505; telephone 
310–539–0508; fax 310–539–5198; or at 
https://robinsonheli.com/. You may 
view this service information at the 
FAA, Office of the Regional Counsel, 
Southwest Region, 10101 Hillwood 
Pkwy, Room 6N–321, Fort Worth, TX 
76177. For information on the 
availability of this material at the FAA, 
call 817–222–5110. 
Examining the AD Docket 
You may examine the AD docket on 
the internet at https://
www.regulations.gov by searching for 
and locating Docket No. FAA–2020– 
0786; or in person at Docket Operations 
between 9 a.m. and 5 p.m., Monday 
through Friday, except Federal holidays. 
The AD docket contains this final rule, 
any comments received, and other 
information. The street address for 
Docket Operations is listed above. 
Comments will be available in the AD 
docket shortly after receipt. 
FOR FURTHER INFORMATION CONTACT: 
Roger Gretler, Aerospace Engineer, Los 
Angeles ACO Branch, Compliance & 
Airworthiness Division, FAA, 3960 
Paramount Blvd., Lakewood, CA 90712; 
phone 562–627–5251; email 
roger.gretler@faa.gov. 
SUPPLEMENTARY INFORMATION: 
Discussion 
The FAA issued AD 2019–12–18, 
Amendment 39–19673 (84 FR 32028, 
July 5, 2019) (‘‘AD 2019–12–18’’), for 
Robinson Model R44 II helicopters. AD 
2019–12–18 required, for helicopter 
serial numbers (S/Ns) 14248 through 
14268 and 14270 through 14286 and 
helicopters with a hose part number (P/ 
N) A785–31 installed after April 30, 
2018, inspecting the inside of the hose 
for separation between the outer and 
inner layers and flexing the hose in all 
directions while listening for a crinkling 
sound, which is an indication of 
separation. If there was any separation 
or a crinkling sound, AD 2019–12–18 
required replacing the hose before 
further flight. If there was no separation 
and no crinkling sound, AD 2019–12–18 
required replacing the hose within 50 
hours time-in-service (TIS). Finally, AD 
2019–12–18 prohibited installing hose 
P/N A785–31 marked with code 1Q18 
on any helicopter. 
AD 2019–12–18 resulted from 12 
reports, including an accident on April 
4, 2019, of separation between the outer 
and inner layers of the orange silicone 
hose out of a suspected population of 
100 hoses traced to a specific 
manufacturing batch marked by code 
1Q18 (1st quarter of 2018). The 
separation of the silicone layers, if not 
addressed, could result in blockage of 
air flow to the engine, engine stoppage, 
and subsequent loss of control of the 
helicopter. Accordingly, the FAA issued 
AD 2019–12–18 to address the unsafe 
condition on these products. 
Actions Since AD 2019–12–18 Was 
Issued 
Since the FAA issued AD 2019–12– 
18, an NTSB report of October 2019 
concluded from the accident aircraft’s 
orange silicone hose marked by code 
1Q18, that contamination was 
introduced during the manufacturing 
process between the silicone layers that 
prevented a satisfactory bond. 
In addition, a helicopter accident 
occurred on April 6, 2020, and 
preliminary investigation indicated that 
separation between the outer and inner 
layers of the orange silicone hose P/N 
A785–31 occurred. This hose was traced 
to the manufacturing batch marked by 
code 3Q17 (3rd quarter of 2017). 
Subsequently, the FAA determined 
that any helicopter with an improved 
black neoprene hose P/N A785–31 
installed should not be affected by this 
AD. The FAA has also determined that, 
for helicopters with an orange silicone 
hose, repeating the inspection is 
necessary. Accordingly, the FAA is 
superseding AD 2019–12–18 to amend 
the applicability from all Robinson 
Model R44 II helicopters to Model R44 
II helicopters with an orange silicone 
hose P/N A785–31 installed. This AD 
also clarifies that the hose must be 
removed to perform the inspection, adds 
a requirement to repeat the inspection, 
and expands the installation prohibition 
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