Small Business Administration: Express Loan Programs; Affiliation Standards—Rescission (Final rule; rescission, December 14, 2020)
Summary
This Small Business Administration final rule, printed in the Federal Register of Monday, December 14, 2020 (Vol. 85, No. 240, page 80581) and signed by Administrator Jovita Carranza, rescinds the interim final rule “Express Loan Programs; Affiliation Standards” that SBA published on February 10, 2020. Section 1102(e) of the CARES Act permanently rescinded that rule effective March 27, 2020, so SBA removes the regulations it added to 13 CFR Parts 103, 120 and 121 and restores those in effect before. The rule is effective March 27, 2020, and SBA lenders making loans between March 11, 2020 and March 27, 2020 should have complied with the regulations in effect during that period. The pages also print parts of other Federal Register documents, including an FAA airworthiness directive for The Boeing Company.
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80581
Rules and Regulations Federal Register
Vol. 85, No. 240
Monday, December 14, 2020
This section of the FEDERAL REGISTER Disaster Loans, Military Reservist effective on March 11, 2020, except that
contains regulatory documents having general Economic Injury Disaster Loans, and compliance with two of the regulatory
applicability and legal effect, most of which Physical Disaster Business Loans) provisions, 13 CFR 103.5(b) (Fees an
are keyed to and codified in the Code of authorized pursuant to section 7(b) of Agent may charge a Borrower) and 13
Federal Regulations, which is published under the Act (15 U.S.C. 636(b)); CFR 120.221(a) (Fees a Lender may
50 titles pursuant to 44 U.S.C. 1510.
3. The Microloan Program authorized charge a Borrower) was delayed until
The Code of Federal Regulations is sold by pursuant to section 7(m) of the Act (15 October 1, 2020.
the Superintendent of Documents. U.S.C. 636(m)); On March 27, 2020, President Trump
4. The Intermediary Lending Pilot signed into law, the Coronavirus Aid,
(ILP) Program authorized pursuant to Relief, and Economic Security Act
SMALL BUSINESS ADMINISTRATION section 7(l) of the Act (15 U.S.C. 636(l)); (CARES Act) (Pub. L. 116–136, 134 Stat
5. The Surety Bond Guarantee 281). Section 1102(e) of that Act
13 CFR Parts 103, 120, and 121 Program authorized pursuant to part B permanently rescinded the Express IFR
RIN 3245–AG74 of title IV of the Small Business effective March 27, 2020. In light of this
Investment Act of 1958 (15 U.S.C. 694b rescission, SBA is issuing the
Express Loan Programs; Affiliation et seq.); and amendments identified below to remove
Standards—Rescission 6. The Development Company all of the regulations that were added by
AGENCY: U.S. Small Business
Program (the 504 Loan Program) the interim final rule and restore the
Administration. authorized pursuant to title V of the regulations that were in effect prior to
Small Business Investment Act of 1958 the effective date of the Express IFR. For
ACTION: Final rule; rescission.
(15 U.S.C. 695 et seq.). loans made between March 11, 2020,
SUMMARY: The Small Business (In this final rule, the 7(a), Microloan, and March 27, 2020, SBA Lenders
Administration (SBA) is publishing this ILP, and 504 Loan Programs are should have complied with the
rule to rescind the regulations published collectively referred to as the Business regulations in effect during that period.
on February 10, 2020, in the interim Loan Programs.)
final rule (IFR) titled, ‘‘Express Loan On September 28, 2018, SBA II. Waiver of Notice and Comment and
Programs; Affiliation Standards’’ published a proposed rule with request Delayed Effective Date
(Express IFR). This action is necessary for comments in the Federal Register to
incorporate the requirements related to Agencies ordinarily publish a notice
to implement section 1102 of the of proposed rulemaking in the Federal
Coronavirus Aid, Relief, and Economic the SBA Express and Export Express
Loan Programs; add a regulation Register to provide a period for public
Security Act (CARES Act), which comment before the rule takes effect in
permanently rescinded the interim final pertaining to the 7(a) and Development
Company (504) loan programs regarding accordance with the Administrative
rule effective March 27, 2020. As a Procedure Act (APA) (5 U.S.C. 553(b)).
result of the rescission, SBA is removing when the owners of a small business
Applicant are required to inject excess However, an agency can waive this
the amended regulations added by the notice and comment procedure if it
Express IFR and reinstating the liquid assets into the project; amend
certain regulations setting forth the finds, for good cause, that the notice and
regulations that were in effect before the comment process is impracticable,
rule became effective on March 11, affiliation principles applicable to SBA
financial assistance programs; limit unnecessary, or contrary to the public
2020. interest and incorporates a statement of
certain fees payable by loan Applicants
DATES: This rule is effective on March to amounts deemed reasonable by SBA; its findings and reasons in the notice. 5
27, 2020, as authorized by Public Law clarify the responsibility of a Lender for U.S.C. 553(b)(B).
116–136, sec. 1102(e). the contingent liabilities associated with This rule is rescinding an interim
FOR FURTHER INFORMATION CONTACT: 7(a) loans purchased from the Federal final rule that was developed using the
Rosemarie Drake, Chief, 7(a) Program, Deposit Insurance Corporation; and, APA notice and comment procedures.
Office of Financial Assistance, Office of finally, amend certain regulations Because Congress has rescinded those
Capital Access, Small Business governing the use of microloan grant regulations, they no longer have any
Administration, 409 Third Street SW, funds by Microloan Intermediaries and legal effect, and their continued
Washington, DC 20416; telephone: (202) the maximum maturity of a microloan. inclusion in the Code of Federal
619–1674; email: Rosemarie.Drake@ (83 FR 49001) The original comment Regulations would not only be in
sba.gov. period was scheduled to end November violation of a statutory mandate, it
SUPPLEMENTARY INFORMATION: 27, 2018. On November 16, 2018, SBA would lead to public confusion as well.
announced an extension of the public It is also unnecessary and contrary to
I. Background Information comment period for an additional 15 the public interest to subject the
The SBA programs affected by the business days to December 18, 2018. (83 regulations that will be reinstated to
rescission of the Express IFR are: FR 57693) APA notice and comment procedures,
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1. The 7(a) Loan Program authorized On February 10, 2020, SBA published since they too were already subject to
pursuant to section 7(a) of the Small the Express IFR with a request for public scrutiny when they were initially
Business Act (the Act) (15 U.S.C. comment to provide the public with an codified in the Code of Federal
636(a)); additional opportunity to comment on Regulations. Therefore, SBA finds that
2. The Business Disaster Loan the modifications to the rule. (85 FR good cause exists to forgo public notice
Programs (collectively, Economic Injury 7622). The interim final rule became and comment procedures because they
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80582 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
would be unnecessary and contrary to However, this is not a major rule under small business Applicants, and resulted
the public interest. the Congressional Review Act, 5 U.S.C. in a reduction of overall cost to
In addition, section 553(d) of the APA 800. participants. SBA did not expect,
generally requires a 30-day delay in the however, that the interim final rule
effective date of a final rule after the Regulatory Impact Analysis
would affect loan volume significantly.
date of its publication in the Federal The rescission of the interim final rule The interim final rule changes for
Register. This 30-day delay in effective removes the regulations that were added affiliation determinations provided
date can also be waived as provided by by the interim final rule, including detailed guidance for the SBA Lender
the agency for good cause found and those pertaining to the SBA Express and charged with determining the size of a
published with the rule. 5 U.S.C. Export Express Loan Programs, in small business Applicant, with an
553(d)(3). Based on the language in compliance with section 1102(e) of the expected benefit for the SBA Lender
section 1102(e) of the CARES Act, the CARES Act, which permanently from the time savings in making the
rescission of the Express IFR was rescinded the interim final rule effective eligibility determination. These changes
effective as of March 27, 2020. Thus, the March 27, 2020. are rescinded with this rule.
rule cannot be delayed for 30 days; to The primary objective of the interim This rescission rule transforms the
do so would be an unauthorized final rule was to incorporate into the benefits of the interim final rule into
extension of the rescission date. This regulations governing the 7(a) Loan forgone benefits and the costs of the
statutorily determined effective date Program the requirements specifically interim final rule into forgone costs.
provides the good cause to waive the 30- applicable to the SBA Express and
day delay in effective date. Forgone Benefits to SBA Lenders,
Export Express Loan Programs in order
Applicants, and Agents
Compliance With Executive Orders to provide additional clarity for SBA
12866, 12988, 13132, and 13771, the Express and Export Express Lenders. The greatest benefit from the interim
Paperwork Reduction Act (44 U.S.C. Ch. The interim final rule provided a bright- final rule to all program participants,
35), and the Regulatory Flexibility Act (5 line test for SBA Lenders on how to including SBA Lenders, Applicants, and
U.S.C. 601–612) adequately determine whether a small Agents, was clear regulatory guidance
business had access to credit elsewhere and bright-line tests to increase
Executive Order 12866 based on personal liquid assets. It efficiency, including bright-line tests for
OMB determined that the interim modified regulatory provisions related making certain determinations about
final rule, entitled Express Loan to allowable fees that a Lender or an eligibility which would have eliminated
Programs; Affiliation Standards, was a Agent may collect from an Applicant for the ambiguity and uncertainty that had
significant rule for purposes of this financial assistance. The interim final hindered some SBA Lenders in recent
Executive order. Accordingly, SBA rule also revised affiliation principles years. SBA estimated that the
prepared the requisite regulatory impact for the financial assistance programs. reinstatement of the personal resources
analysis, which was published with the SBA expected that the additional test at § 120.102 would have saved SBA
rule. OMB has determined that this detailed clarity on the requirements for Lenders a total of approximately 67,000
rescission of the interim final rule is program delivery in the subject areas of hours annually, monetized to
also a ‘‘significant’’ rulemaking. the interim final rule would have $2,456,890 per year. This estimated
Accordingly, the next section contains increased understanding for program annual benefit is forgone with the
SBA’s Regulatory Impact Analysis. users, decreased time spent evaluating rescission of the interim final rule.
TABLE 1—ESTIMATED ANNUAL BENEFIT TO SBA LENDERS FROM PERSONAL RESOURCES TEST IN THE INTERIM FINAL
RULE, FORGONE WITH RESCISSION
Number of Average time
expected saved per
Outcomes Total forgone benefit
occurrences occurrence
per year (hours)
Increased efficiency in determining credit elsewhere ...... 67,000 1–2 67,000–134,000 hours, $2,456,890–$4,913,780.
Estimated Forgone Annual Benefit ................................................................................... 67,000–134,000 hours, $2,456,890–$4,913,780.1
The interim final rule set clear
cost benefit was estimated by multiplying the hours to SBA’s 7(a) and 504 loan data reports. The total
limitations on fees that an Agent or saved by the mean hourly wage for a loan officer, number of guaranteed loans was used, versus the
as reported by the U.S. Department of Labor’s number of loans identified to have charged fees as
1 SBA arrived at this estimate by inquiring with Bureau of Labor Statistics as of May 2018 ($36.67). discussed in the preamble of the interim final rule,
various SBA Lenders as to the average time required 2 SBA arrived at this estimate by inquiring with because SBA Lenders must review every loan
to determine an Applicant’s access to credit various SBA Lenders as to the average time required application to determine whether any fees were
elsewhere. SBA calculated the average of the to determine the reasonableness and permissibility charged to an Applicant and, if so, whether the fees
timeframes provided to estimate the range of time of all fees charged to an Applicant for assistance are permissible and reasonable. Because Agents are
the personal resources test would have saved SBA with obtaining an SBA-guaranteed loan. SBA not involved in every SBA-guaranteed loan, the
Lenders, on average, in their analysis. Since each
calculated the average of the timeframes provided number of expected occurrences per year for Agents
loan is required to address an Applicant’s access to
to estimate the range of time SBA Lenders would was estimated based on averaging the total number
credit elsewhere, the number of expected
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have saved, on average, in determining permissible of loans identified to have used an Agent (other
occurrences per year was estimated by using the
average number of 7(a) and 504 loans guaranteed in and reasonable fees with the bright-line tests than the participating Lender) in fiscal years 2013–
the most recent five fiscal years (2014–2018), included in the interim final rule, which SBA 2017. The number of expected occurrences per year
according to SBA’s 7(a) and 504 loan data reports. estimated would be the same for an Agent. The for 7(a) Lenders no longer being required to itemize
The number of expected occurrences per year was number of expected occurrences per year for SBA fees was based on the average number of 7(a) loans
multiplied by the average time saved per Lenders was estimated based on the average guaranteed over the most recent five fiscal years.
occurrence to estimate the total hourly benefit. The number of 7(a) and 504 loans guaranteed in the The number of expected occurrences per year for
most recent five fiscal years (2014–2018), according each outcome was multiplied by the average time
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Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations 80583
Lender could have charged an may have performed for compensation time. Applicants would have benefitted
Applicant and left no question as to by the Applicant or the SBA Lender. from protection against impermissible
what fees SBA considered to be This would have saved SBA Lenders or unreasonable costs for assistance
reasonable. Further, the interim final and Agents time in making these with obtaining an SBA-guaranteed loan.
rule’s revisions to the definitions of determinations for each loan. In Benefits from these changes are forgone
Agents and Associates of Lenders and addition, the rule changed requirements with the rescission of the interim final
CDCs provided clarity for SBA’s for 7(a) Lenders to itemize fees and rule.
determination of an Agent and what submit the itemization to SBA, which
services the different types of Agents also would have saved these Lenders
TABLE 2—ESTIMATED ANNUAL BENEFIT TO SBA LENDERS AND AGENTS FROM FEE LIMITS IN THE INTERIM FINAL RULE,
FORGONE WITH RESCISSION
Number of Average time
expected saved per
Outcomes Total benefit
occurrences occurrence
per year (hours)
Increased efficiency for SBA Lenders when determining 67,000 0.5–1 33,500–67,000 hours, $1,228,445–$2,456,890.
permissibility and reasonableness of fees.
Increased efficiency for Agents when determining per- 1,605 0.5–1 803–1,605 hours, $29,446–$58,855.
missibility and reasonableness of fees.
Increased efficiency for 7(a) Lenders no longer required 60,951 0.5–1 30,476–60,951 hours, $1,117,555–$2,235,073.
to itemize fees.
Estimated Forgone Annual Benefit ................................................................................... 64,779–129,556 hours, $2,375,446–$4,750,818.2
The interim final rule modified efficiency for the Agency and SBA determined to be small. The benefits
principles of affiliation for the financial Lenders in providing financial from this modification are forgone with
assistance programs, increasing assistance only to businesses rescission of the interim final rule.
TABLE 3—ESTIMATED ANNUAL BENEFIT TO SBA LENDERS AND SURETIES FROM MODIFIED PRINCIPLES OF AFFILIATION IN
THE INTERIM FINAL RULE, FORGONE WITH RESCISSION
Number of Average time
expected saved per
Outcomes Total forgone benefit
occurrences occurrence
per year (hours)
Increased efficiency in determining affiliation ........... 77,000 2–4 154,000–308,000 hours, $5,647,180–$11,294,360.
Estimated Forgone Annual Benefit ................................................................................... 154,000–308,000 hours, $5,647,180–$11,294,360.3
SBAexpected these benefits to have oversight activities. Specifically, the Lender’s assessment of these issues in
been realized upon enactment of the Office of Credit Risk Management the interim final rule, which would
interim final rule and to have remained (OCRM) would have realized increased have improved SBA Lenders’
the same each year thereafter, subject to efficiencies in conducting loan file compliance and allowed OCRM to
changes in number of loans and hourly reviews of SBA Lenders. With the develop more efficient methods of
rates. These benefits are forgone with reinstatement of the personal resources testing SBA Lenders’ compliance. In
rescission of the interim final rule. test, clear limitations on fees an Agent addition, the removal of the requirement
Like the program participants, SBA or Lender could have charged an that a Lender itemize fees charged to an
would have benefitted from the clear Applicant, revised definitions of Agents Applicant when the fee is over $2,500
regulatory guidance and bright-line tests and Associates of Lenders and CDCs, would have reduced the burden on
included in the interim final rule, and revised affiliation principles, SBA OCRM of reviewing these additional
especially when performing lender had removed the subjectivity of a documents.
saved per occurrence to estimate the total hourly time SBA Lenders will save, on average, in and information on surety bonds entered into SBA’s
benefit. The cost benefit was estimated by determining affiliation based on the guidance Capital Access Finance System. The total number
multiplying the hours saved by the mean hourly provided in the interim final rule. Since an of expected occurrences for loans and surety bonds
wage for a loan officer, as reported by the U.S. affiliation determination must be made for each
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per year was multiplied by the average time saved
Department of Labor’s Bureau of Labor Statistics as application for SBA financial assistance, the
per occurrence to estimate the total hourly benefit.
number of expected occurrences per year for SBA
of May 2018 ($36.67). The cost benefit was estimated by multiplying the
Lenders and Sureties was estimated by using the
3 SBA arrived at this estimate by inquiring with
average number of 7(a) and 504 loans and the hours saved by the mean hourly wage for a loan
various Lenders as to the average time required to average number of Bid and Final Bonds guaranteed officer, as reported by the U.S. Department of
determine affiliation. SBA calculated the average of during the most recent five fiscal years (2014–2018), Labor’s Bureau of Labor Statistics as of May 2018
the timeframes provided to estimate the range of according to SBA’s 7(a) and 504 loan data reports ($36.67).
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80584 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
TABLE 4—ESTIMATED ANNUAL BENEFIT TO SBA FROM THE INTERIM FINAL RULE, FORGONE WITH RESCISSION
Number of Average time
expected saved per
Outcomes Total forgone benefit
occurrences occurrence
per year (hours)
Increased efficiency in reviewing credit elsewhere as- 2,000 0.25–0.5 500–1,000 hours, $18,375–$36,750.
sessment.
Increased efficiency in reviewing fees charged to Appli- 1,300 0.5–1 650–1,300 hours, $23,888–$47,775.
cants.
Increased efficiency in reviewing Lender’s affiliation de- 2,000 0.25–0.5 500–1,000 hours, $18,375–$36,750.
termination.
Estimated Forgone Annual Benefit ................................................................................... 1,650–3,300 hours, $60,638–$121,275.4
SBA expected these benefits to be program participants and relevant Loan Program Requirements, as required
realized immediately upon enactment of stakeholders necessary to comply with by 13 CFR 120.180, and to remain in
the rule and to have remained the same the interim final rule were good standing with SBA as defined in
each year thereafter, subject to changes administrative costs. Administrative 13 CFR 120.420(f). The Table below
in the number of loan files reviewed and costs considered included estimations shows the estimated administrative
hourly rates. These benefits are forgone on reading and interpreting the costs attributable to the interim final
with rescission of the interim final rule. regulation, developing and revising rule, which were expected to occur
internal policies and procedures, and mainly in the first year of
Costs to SBA Lenders, Applicants, and
training. It is noted that program implementation, decrease by half in the
Agents
participants are presumed to incur such second year, and be eliminated by the
For purposes of the Regulatory Impact administrative costs continuously in third year. These costs are forgone with
Analysis (RIA), the only costs to order to maintain familiarity with SBA rescission of the interim final rule.
TABLE 5—ESTIMATES OF ADMINISTRATIVE COMPLIANCE COSTS TO SBA LENDERS AND AGENTS IN THE INTERIM FINAL
RULE, FORGONE WITH RESCISSION
Amount Number of
Frequency
of time Value of SBA lenders/
for first Total forgone cost
required time agents
year
(hours) affected
Read and interpret the regulation .......... 2–3 $36.67 5–7 3,500 35,000–73,500 hours,
$1,283,450–$2,695,245.
Develop or Revise Internal Policies and 5–7 $36.67 5–6 3,500 87,500–147,000 hours,
Procedures. $3,208,625–$5,390,490.
Training ................................................... 5–8 $36.67 10–12 3,500 175,000–336,000 hours,
$6,417,250–$12,321,120.
Estimated First Year Forgone Administrative Costs ...................................................................................... 297,500–556,500 hours,
$10,909,325–$20,406,855.5
Costs to SBA
There were no expected additional
costs to the Agency required to achieve
4 SBA developed this estimated annual benefit hourly rate of a GS–13, Step 1 ($36.75 per hour) by conducted business with SBA during fiscal years
based on an estimate from OCRM on the range of the number of expected occurrences per year and 2013–2017, rounded up to the next hundred to
time that the guidance and bright-line tests the average time saved per occurrence. account for trade associations, and other resource
included in the interim final rule would have saved 5 SBA developed the estimate for the
partners. SBA estimated that on average between 5–
a Financial Analyst, on average, in reviewing each administrative costs in the first year of the final rule 7 employees at each SBA Lending institution or
relevant element of an SBA Lender’s analysis based on the approximate number of active SBA Agent entity may have spent between 2–3 hours
during OCRM-conducted loan file reviews. The Lenders and Agents. Although approximately 4,500 each reading and interpreting the rule in the first
number of expected occurrences per year was based Lenders have executed agreements to participate as year and that these employees are compensated at
on the approximately 2,000 loan files reviewed by a 7(a) Lender, over the past two fiscal years, the the mean hourly wage for a loan officer, as reported
OCRM annually. The SBA Lender is required to average number of active Lenders has totaled only by the U.S. Department of Labor’s Bureau of Labor
address credit elsewhere and affiliation on every 1,958. (A 7(a) Lender is considered to be ‘‘active’’
Statistics ($36.67). SBA also estimated that 5–6
loan, but fees are not charged in connection with if it has approved at least one 7(a) loan in that fiscal
every loan. OCRM estimates that in approximately year.) SBA estimated that only those Lenders employees on average may have been involved in
65 percent of the 2,000 loans reviewed annually, actively participating in the program would have developing or revising the internal policies of the
OCRM identifies an issue related to fees charged to been affected by the costs of the interim final rule respective program participant and would likely
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Applicants by SBA Lenders and/or Agents, since the estimated costs are strictly administrative. have spent between 5–7 hours updating policies
including underreporting, inaccurate reporting, or The number of SBA Lenders and Agents affected specifically related to the interim final rule. Finally,
impermissible fees. The number of expected included approximately 2,474 active SBA Lenders SBA estimated that between 10–12 employees on
occurrences per year for each outcome was (including approximately 2,061 active 7(a) Lenders, average for each program participant would have
multiplied by the average time saved per 213 CDCs, 135 Microloan Intermediaries, 33 ILP spent between 5–8 hours on training related to
occurrence to estimate the total hourly benefit. The Intermediaries, and 32 Sureties), plus updates and modifications made by the interim
cost estimate was obtained by multiplying the approximately 1,018 Agents identified as having final rule. Applicants were not included as an
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Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations 80585
the outcomes of the interim final rule. loan programs. SBA determines that the changes in the interim final rule would
The administrative costs considered for Agency bears no costs from rescission of have provided a cost savings to
the loan program participants, including the interim final rule. Applicants; however, the Agency
reading and interpreting the regulation, acknowledged that this savings to the
Transfers
developing and revising internal Applicant would have resulted in a cost
policies and procedures, and training SBA identified a transfer of costs, due (‘‘transfer’’) to the small number of
are already inherent requirements of to the limits on permissible fees charged Agents and Lenders that reported
SBA employees and therefore, the to an Applicant by Agents and Lenders, charging fees in excess of the limits
publication of this interim final rule had as well as the prohibition against Agents imposed by the interim final rule. This
no additional bearing on the providing services to both an Applicant
transfer is forgone with the rescission of
responsibilities of relevant SBA and an SBA Lender in connection with
the interim final rule.
employees involved in the Agency’s the same SBA loan application. These
TABLE 6—ESTIMATED TRANSFERS OF COSTS IN THE INTERIM FINAL RULE, FORGONE WITH RESCISSION
Number of Average
expected money Total forgone
Outcomes occurrences saved per transfer
per year occurrence
Elimination of fees exceeding set limits ................................................................................ 746 $2,380.75 $1,776,042.63
Estimated Forgone Annual Transfer ...................................................................................................................................... 1,776,042.63 6
Below is a table showing an forgone benefits of the interim rule over
estimation of the total forgone costs and three years.
TABLE 7—ESTIMATED UNDISCOUNTED BENEFITS AND COSTS SCHEDULE IN THE INTERIM FINAL RULE, FORGONE WITH
RESCISSION
Forgone benefits Forgone costs
Low estimate High estimate Low estimate High estimate
Year 1
267,429 hours, $9,806,754 ............. 534,856 hours, $19,613,433 ........ 297,500 hours, $10,909,325 ........ 556,500 hours, $20,406,855.
Year 2
267,429 hours, $9,806,754 ............. 534,856 hours, $19,613,433 ........ 148,750 hours, $5,454,662.50 ..... 278,250 hours, $10,203,427.50.
Year 3
267,429 hours, $9,806,754 ............. 534,856 hours, $19,613,433 ........ 0 hours, $0 ................................... 0 hours, $0.
Below is a table showing the estimated costs and cost savings, as of the interim final rule’s estimates of
annualized values of the forgone 2016, over an infinite horizon, based on these annualized values.
TABLE 8—ANNUALIZED VALUES AS OF 2016 OVER AN INFINITE HORIZON
Primary estimate
3% discount rate 7% discount rate
Low High Low High
estimate estimate estimate estimate
Forgone Annualized Cost Savings .................................................................. $9,806,751 $19,613,433 $9,806,754 $19,613,433
Forgone Annualized Costs .............................................................................. 485,479 908,132 1,077,116 2,014,841
Forgone Annualized Net Cost Savings .................................................... 9,321,272 18,705,301 8,729,638 17,598,592
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entity affected by the administrative costs of the 6 SBA arrived at this estimate based on the total the interim final rule and the total amount that
rule, as the Applicant relies on the SBA Lender or number of loans guaranteed between FY2013 and those fees on those loans exceeded the imposed
third-party Agent to inform them of SBA policy and FY2017 that reported fees charged to an Applicant limit for each threshold.
procedure. by an Agent or Lender over the limits imposed in
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80586 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
Executive Order 12988 the CARES Act; therefore, no action is participants are presumed to incur
This rule meets applicable standards required as a result of the rescission of administrative costs related to reading
set forth in sections 3(a) and 3(b)(2) of the Express IFR. In addition, the Express and interpreting SBA Loan Program
Executive Order 12988, Civil Justice IFR codified an existing requirement for Requirements, revising and updating
Reform, to minimize litigation, Small Business Lending Companies internal policies, and training staff
eliminate ambiguity, and reduce (SBLCs) to annually submit to SBA the continuously in order to maintain
burden. The rule has no preemptive validation of any credit scoring model familiarity with SBA Loan Program
effect but consistent with section they use in connection with SBA Requirements, as required by 13 CFR
1102(e) of the CARES Act, which made Express and Export Express loans. Since 120.180, and to remain in good standing
the rescission of the regulations the reporting requirement was already with SBA as defined in 13 CFR
effective on March 27, 2020, the rule included in an approved information 120.420(f). SBA determines that the
necessarily has retroactive effect. collection, SBA Lender Reporting rescission of the interim final rule
Requirements (OMB Control Number causes these costs to be forgone.
Executive Order 13132 3245–0365), no amendment was
required. As a result, the rescission of The RIA for the interim final rule
SBA has determined that this rule
the rule does not impact SBLCs’ duty to identified an estimated transfer of costs
will not have substantial, direct effects
report. due to the limits on permissible fees
on the States, on the relationship
charged to an Applicant by Agents and
between the National Government and Regulatory Flexibility Act, 5 U.S.C. 601– Lenders, as well as the prohibition
the States, or on the distribution of 612
power and responsibilities among the against an Agent providing services to
various levels of government. Therefore, When an agency issues a rule, the both an Applicant and an SBA Lender
for the purposes of Executive Order Regulatory Flexibility Act (RFA), 5 in connection with the same SBA loan
13132, SBA has determined that this U.S.C. 601–612, requires the agency to application. The Agency acknowledged
rule has no federalism implications ‘‘prepare and make available for public that any savings to the Applicant from
warranting preparation of a federalism comment a final regulatory analysis’’ these limitations in the interim final
assessment. which will ‘‘describe the impact of the rule would have resulted in a potential
proposed rule on small entities.’’ loss of revenue to the small number of
Executive Order 13771 Section 605 of the RFA allows the head Agents and Lenders that reported
This rescission is considered an E.O. of an agency to certify a rule will not, charging fees in excess of the limits.
13771 regulatory action. SBA if promulgated, have a significant With the rescission of the interim final
determines that the estimated economic impact on a substantial rule, these transfers are forgone.
$12,633,634 in annualized savings from number of small entities, in lieu of
To estimate the average annualized
the interim final rule using a 7% preparing an analysis.
Small entities likely to be affected by forgone cost per small entity in the
discount rate in perpetuity in 2016 interim final rule, SBA annualized the
dollars is forgone with this rescission. In the rescission of the interim final rule
include small SBA Lenders and small sum of all administrative costs plus the
addition, SBA determines that the estimated potential loss of revenue (e.g.,
estimated present value of savings in Agents who assist small business
Applicants with obtaining SBA- the total transfer amount of
perpetuity from the interim final rule of $1,776,042.63) identified in the RIA (see
$180,480,486 is forgone with this guaranteed financing. Other entities that
provide services to an Applicant for Table 6 in the RIA). The estimated total
rescission. Details on the breakdown of annualized costs, which are forgone
the estimated cost savings of this obtaining SBA-guaranteed financing
include individuals who may assist with the rescission, over 10 years at a
interim final rule can be found in the
with packaging a loan application or 7 percent discount rate range from a low
rule’s economic analysis.
assisting the Applicant with finding an estimate of $2,773,295.70 to a high
Paperwork Reduction Act, 44 U.S.C. SBA Lender, entities formed for the estimate of $4,331,035. Dividing the
3501–3521 purpose of providing such assistance, total estimated annualized costs by the
The Express IFR required attorneys, and Certified Public 3,207 estimated small entities affected,
modification to reporting or Accountants. The RIA of the interim the forgone annualized cost per entity
recordkeeping requirements contained final rule estimated that approximately with the rescission is estimated to be
in several SBA forms: Form 1920, 3,207 small entities would be affected. between approximately $864.76 and
Lender’s Application for Guaranty The rescission of the interim final rule $1,350.49. Although SBA was unable to
(OMB Control number 3245–0348); also affects these 3,207 small entities. ascertain the NAICS codes of all types
Form 2450, Eligibility Information As described more fully in the RIA, of entities considered to be Agents for
Required for 504 Submission (Non- SBA determined that the only costs to estimation purposes in the interim final
PCLP) (OMB Control number 3245– program participants and relevant rule, SBA used data from the 2012 U.S.
0071); Form 2234 (Part C), Eligibility stakeholders necessary to comply with Census Bureau’s SUSB for NAICS code
Information Required for 504 the interim final rule were 522310 for Mortgage and Nonmortgage
Submission (PCLP) (OMB Control administrative costs, which are forgone Loan Brokers as an example to examine
number 3245–0346); and Form 159, Fee with the rescission. Administrative the annualized compliance cost as a
Disclosure and Compensation costs considered include estimations on percentage of annual receipts for small
Agreement (OMB Control number 3245– reading and interpreting the regulation, entities classified by this NAICS code.
0201). developing and revising internal For the purposes of this estimation in
Since publication of the Express IFR, policies and procedures, and training. the interim final rule, SBA averaged the
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SBA has cancelled Form 2234 and Form Although these costs were estimated for high and low estimates of the
2450. With respect to Form 1920 and the purposes of the Regulatory annualized cost for a mid-point total of
Form 159, none of the proposed changes Flexibility Act for the interim final rule, $388 per entity. This annualized cost
had been finalized and submitted to it is important to note that, regardless of per entity is forgone with the rescission
OMB for approval prior to enactment of any new rulemaking, program of the interim final rule.
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Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations 80587
MORTGAGE AND NONMORTGAGE LOAN BROKERS (NAICS 522310)—$7.5 MILLION SIZE STANDARD
Average Annualized % of Revenue
Firm size # of
annual forgone cost small test *
(by receipts) firms
receipts per firm firms (%)
All Firms ............................................................................... 1,005,967 388 7,007 N/A 0.0
Small Firms .......................................................................... 549,802 388 6,817 100 0.1
<$100K ................................................................................. 48,038 388 1,533 22 0.8
100K–499,999 ...................................................................... 250,730 388 3,233 47 0.2
500,000–999,999 ................................................................. 693,276 388 1,042 15 0.1
1,000,000–2,499,999 ........................................................... 1,482,997 388 721 12 0.0
2,500,000–4,999,999 ........................................................... 3,244,231 388 216 3 0.0
5,000,000–7,499,999 ........................................................... 5,157,764 388 72 1 0.0
* Annualized compliance costs as a percentage of annual receipts.
SBA has determined that forgoing the interim final rule would be even smaller representing an Applicant or Participant
annualized cost per entity of the interim than the 8% noted above. by conducting business with SBA.
final rule by its rescission will not have SBA determined that the interim final * * * * *
a significant economic impact on a rule did not have a significant impact on (d) Lender Service Provider means an
substantial number of small entities. a substantial number of small entities. Agent who carries out lender functions
The average annualized cost in the The Administrator of SBA likewise in originating, disbursing, servicing, or
example above is not a significant certifies that the rescission of the liquidating a specific SBA business loan
percentage of each entity’s average interim final rule has no significant or loan portfolio for compensation from
annual revenue for any size firm impact on a substantial number of small the lender. SBA determines whether or
considered to be small. It is also noted entities. not one is a ‘‘Lender Service Provider’’
that these forgone annualized costs are List of Subjects on a loan-by-loan basis.
set against forgone annualized benefits (e) Packager means an Agent who is
ranging from a low estimate of 13 CFR Part 103 employed and compensated by an
$9,806,754 to a high estimate of Administrative practice and Applicant or lender to prepare the
$19,613,433 (or approximately $3,056– procedure. Applicant’s application for financial
$6,116 per entity). Also, the number of assistance from SBA. SBA determines
small entities affected is not substantial. 13 CFR Part 120
whether or not one is a ‘‘Packager’’ on
SBA estimated that from FY2013 Community development, a loan-by-loan basis.
through FY2017, 213 small entities (83 Environmental protection, Equal (f) Referral Agent means a person or
small Lenders and 130 small Agents) employment opportunity, Exports, Loan entity who identifies and refers an
reported charging fees in excess of the programs—business, Reporting and Applicant to a lender or a lender to an
limits imposed in the interim final rule. recordkeeping requirements, Small Applicant. The Referral Agent may be
SBA does not consider 83 small Lenders businesses. employed and compensated by either an
to be a substantial number when Applicant or a lender.
13 CFR Part 121
compared to the overall number of small
Loan programs—business, Reporting * * * * *
Lenders, which is approximately 2,000.
With respect to small Agents, SBA does and recordkeeping requirements, Small ■ 3. Amend § 103.4 by revising
not consider 130 Agents to be a businesses. paragraph (g) to read as follows:
substantial number when compared to For the reasons stated in the § 103.4 What is ‘‘good cause’’ for
the overall number of small Agents. preamble, SBA is amending 13 CFR suspension or revocation?
SBA believes the number of small parts 103, 120, and 121 as follows: * * * * *
entities acting as Agents in connection
PART 103—STANDARDS FOR (g) Acting as both a Lender Service
with the SBA loan programs is most
CONDUCTING BUSINESS WITH SBA Provider or Referral Agent and a
likely much larger when taking into
Packager for an Applicant on the same
consideration the attorneys,
■ 1. The authority citation for part 103 SBA business loan and receiving
accountants, business consultants and
continues to read as follows: compensation for such activity from
others that act as Agents. As SBA noted
Authority: 15 U.S.C. 634, 642. both the Applicant and lender. A
above, the NAICS Code for Mortgage
limited exception to the ‘‘two master’’
and Nonmortgage Loan Brokers is only ■ 2. Amend § 103.1 by: prohibition in this paragraph (g) exists
one of numerous NAICS codes under ■ a. Revising paragraph (a); when an Agent acts as a Packager and
which Agents may be classified. Many ■ b. Redesignating paragraph (d) as is compensated by the Applicant for
different types of individuals and paragraph (g); and packaging services; also acts as a
entities, including attorneys, ■ c. Adding a new paragraph (d) and Referral Agent and is compensated by
accountants, and business consultants, paragraphs (e) and (f). the lender for those activities; discloses
act as Agents and assist Applicants in The revision and additions read as the referral activities to the Applicant;
obtaining SBA-guaranteed loans. Thus, follows: and discloses the packaging activities to
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SBA believes that the actual universe of
§ 103.1 Key definitions. the lender.
small Agents may be considerably larger
than 602. When all of the potentially (a) Agent means an authorized * * * * *
relevant NAICS codes are considered, representative, including an attorney, ■ 4. Amend § 103.5 by revising
SBA believes that the number of small accountant, consultant, packager, lender paragraph (b) and the last sentence of
entities affected by the rescission of the service provider, or any other person paragraph (c) to read as follows:
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80588 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
§ 103.5 How does SBA regulate an and other services. The Lender must Supplemental Guarantee Agreement,
Agent’s fees and provision of service? advise the applicant in writing that the which will specify a term not to exceed
* * * * * applicant is not required to obtain or two years. SBA may grant shortened
(b) Compensation agreements must pay for unwanted services. The renewals based on risk or any of the
provide that in cases where SBA deems applicant is responsible for deciding other delegated authority criteria.
the compensation unreasonable, the whether fees are reasonable. SBA may Lenders with less than 3 years of SBA
Agent or Packager must: Reduce the review these fees at any time. Lender lending experience will be limited to a
charge to an amount SBA deems must refund any such fee considered term of 1 year or less.
reasonable, refund any sum in excess of unreasonable by SBA. ■ 16. Remove the undesignated center
the amount SBA deems reasonable to * * * * * heading ‘‘SBA Express and Export
the Applicant, and refrain from charging Express Loan Programs’’ that appears
or collecting, directly or indirectly, from § 120.222 [Amended] before § 120.441.
the Applicant an amount in excess of ■ 10. Amend § 120.222 by adding the
the amount SBA deems reasonable. § § 120.441 through 120.447 [Removed
word ‘‘in’’ before the words ‘‘any
(c) * * * However, such and Reserved]
premium received’’.
compensation may not be directly ■ 17. Remove and reserve §§ 120.441
■ 11. Revise § 120.344(b) to read as
charged to an Applicant or Borrower. through 120.447.
follows:
PART 120—BUSINESS LOANS § 120.344 Unique requirements of the § 120.707 [Amended]
EWCP. ■ 18. Amend § 120.707(b) by removing
■ 5. The authority citation for part 120
continues to read as follows: * * * * * the word ‘‘seven’’ and adding in its
(b) SBA does not limit the amount of place the word ‘‘six.’’
Authority: 15 U.S.C. 634(b) (6), (b) (7), (b) extraordinary servicing fees, as ■ 19. Amend § 120.712 by:
(14), (h), and note, 636(a), (h) and (m), and
referenced in § 120.221(b), under the ■ a. Revising paragraph (b)(1); and
note, 650, 657t, and note, 657u, and note,
687(f), 696(3) and (7), and note, and 697(a) EWCP. ■ b. In paragraph (d), removing the
and (e), and note. * * * * * number ‘‘30’’ and adding in its place the
■ 12. Revise § 120.350 to read as number ‘‘25.’’
■ 6. Amend § 120.10 by revising
follows: The revision reads as follows:
paragraph (1)(i) of the defined term
‘‘Associate’’ to read as follows: § 120.350 Policy. § 120.712 How does an Intermediary get a
grant to assist Microloan borrowers?
§ 120.10 Definitions. Section 7(a)(15) of the Act authorizes
SBA to guarantee a loan to a qualified * * * * *
* * * * * (b) * * *
Associate. (1) * * * employee trust (‘‘ESOP’’) to:
(a) Help finance the growth of its (1) Up to 25 percent of the grant funds
(i) An officer, director, key employee,
employer’s small business; or may be used to provide information and
or holder of 20 percent or more of the
(b) Purchase ownership or voting technical assistance to prospective
value of the Lender’s or CDC’s stock or
control of the employer. Microloan borrowers; and
debt instruments, or an agent involved
in the loan process; or ■ 13. Revise § 120.352 to read as
* * * * *
* * * * * follows: ■ 20. Amend § 120.840 by revising
paragraph (b) to read as follows:
§ 120.102 [Removed and Reserved] § 120.352 Use of proceeds.
§ 120.840 Accredited Lenders Program
■ 7. Remove and reserve § 120.102. Loan proceeds may be used for two
(ALP).
■ 8. Amend § 120.130 by revising
purposes.
(a) Qualified employer securities. A * * * * *
paragraph (c) to read as follows: (b) Application. A CDC must apply for
qualified employee trust may relend
§ 120.130 Restrictions on uses of loan proceeds to the employer by ALP status to the Lead SBA Office. The
proceeds. purchasing qualified employer Lead SBA Office will send its
securities. The small business concern recommendation and the application to
* * * * *
(c) Floor plan financing or other may use these funds for any general the D/FA for final decision.
revolving line of credit, except under purpose under section 7(a) of the Act. * * * * *
§ 120.340 or § 120.390; (b) Control of employer. A qualified
employee trust may use loan proceeds PART 121—SMALL BUSINESS SIZE
* * * * * REGULATIONS
to purchase a controlling interest (51
■ 9. Amend § 120.221 by:
■ a. Revising the section heading and
percent) in the employer. Ownership
■ 21. The authority citation for part 121
paragraph (a); and and control must vest in the trust by the
continues to read as follows:
■ b. Removing the last sentence of
time the loan is repaid.
Authority: 15 U.S.C. 632, 634(b)(6),
paragraph (b). § 120.432 [Amended] 636(a)(36), 662, and 694a(9); Public Law 116–
The revisions read as follows: 136, Section 1114.
■ 14. Amend § 120.432(a) by removing
§ 120.221 Fees and expenses that the the last sentence. ■ 22. Amend § 121.301 by:
Lender may collect from a loan applicant or ■ 15. Amend § 120.440 by revising ■ a. Revising paragraph (f)(4);
Borrower. ■ b. Removing paragraphs (f)(5) and (6);
paragraph (c) to read as follows:
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* * * * * ■ c. Redesignating paragraphs (f)(7)
(a) Service and packaging fees. The § 120.440 How does a 7(a) Lender obtain through (9) as paragraphs (f)(5) through
Lender may charge an applicant delegated authority? (7), respectively; and
reasonable fees (customary for similar * * * * * ■ d. Revising newly redesignated
Lenders in the geographic area where (c) If delegated authority is approved paragraph (f)(5).
the loan is being made) for packaging or renewed, Lender must execute a The revisions to read as follows:
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Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations 80589
§ 121.301 What size standards and DEPARTMENT OF TRANSPORTATION Model 787–8, 787–9, and 787–10
affiliation principles are applicable to airplanes.
financial assistance programs? Federal Aviation Administration As published, the regulatory text
* * * * * included errors in certain references to
14 CFR Part 39 the AFM that is required to be revised.
(f) * * *
[Docket No. FAA–2020–1031; Project The location of the AFM text to be
(4) Affiliation based on identity of
Identifier AD–2020–00846–T; Amendment revised is incorrectly identified as the
interest. Affiliation arises when there is ‘‘Limitations section’’; the correct
39–21334; AD 2020–24–04]
an identity of interest between close location is the ‘‘Operating Procedures
relatives, as defined in 13 CFR 120.10, RIN 2120–AA64 chapter.’’ In addition, the figure
with identical or substantially identical incorrectly identified the heading of the
business or economic interests (such as Airworthiness Directives; The Boeing
AFM text as ‘‘Operating Instructions’’;
where the close relatives operate Company Airplanes
the correct heading is ‘‘Autopilot Flight
concerns in the same or similar industry AGENCY: Federal Aviation Director System—Operating
in the same geographic area). Where Administration (FAA), DOT. Instructions.’’
SBA determines that interests should be ACTION: Final rule; correction.
aggregated, an individual or firm may Correction of Publication
rebut that determination with evidence SUMMARY: The FAA is correcting an This document corrects an error and
showing that the interests deemed to be airworthiness directive (AD) that correctly adds the AD as an amendment
one are in fact separate. published in the Federal Register. That to 14 CFR 39.13. Although no other part
(5) Affiliation based on franchise and AD applies to all The Boeing Company of the preamble or regulatory
license agreements. The restraints Model 787–8, 787–9, and 787–10 information has been corrected, the
imposed on a franchisee or licensee by airplanes. As published, the regulatory FAA is publishing the entire rule in the
text of the AD included errors in certain Federal Register.
its franchise or license agreement
references to the airplane flight manual The effective date of this AD remains
generally will not be considered in
(AFM) that is required to be revised. December 18, 2020.
determining whether the franchisor or
This document corrects those errors. In Since this action only corrects errors
licensor is affiliated with an applicant all other respects, the original document
franchisee or licensee provided the in certain AFM references, it has no
remains the same. adverse economic impact and imposes
applicant franchisee or licensee has the
DATES: This correction is effective no additional burden on any person.
right to profit from its efforts and bears
December 18, 2020. The effective date of Therefore, the FAA has determined that
the risk of loss commensurate with
AD 2020–24–04 remains December 18, notice and public comment procedures
ownership. SBA will only consider the 2020.
franchise or license agreements of the are unnecessary.
applicant concern. ADDRESSES: You may examine the AD List of Subjects in 14 CFR Part 39
docket at https://www.regulations.gov;
* * * * * or in person at the Docket Management Air transportation, Aircraft, Aviation
■ 23. Amend § 121.302 by revising Facility between 9 a.m. and 5 p.m., safety, Incorporation by reference,
paragraphs (a) and (b) to read as follows: Monday through Friday, except Federal Safety.
holidays. The AD docket contains this Adoption of the Correction
§ 121.302 When does SBA determine the final rule, any comments received, and
size status of an applicant? other information. The address for Accordingly, pursuant to the
(a) The size status of an applicant for Docket Operations is U.S. Department of authority delegated to me by the
SBA financial assistance is determined Transportation, Docket Operations, M– Administrator, the Federal Aviation
as of the date the application for 30, West Building Ground Floor, Room Administration amends part 39 of the
financial assistance is accepted for W12–140, 1200 New Jersey Avenue SE, Federal Aviation Regulations (14 CFR
processing by SBA, except for Washington, DC 20590. part 39) as follows:
applications under the Preferred FOR FURTHER INFORMATION CONTACT:
Frank Carreras, Aerospace Engineer, PART 39—AIRWORTHINESS
Lenders Program (PLP), the Disaster DIRECTIVES
Loan program, the SBIC program, and Systems and Equipment Section, FAA,
the New Markets Venture Capital Seattle ACO Branch, 2200 South 216th
■ 1. The authority citation for part 39
(NMCV) program. St., Des Moines, WA 98198; phone and
continues to read as follows:
fax: 206–231–3539; email:
(b) For the Preferred Lenders Program, frank.carreras@faa.gov. Authority: 49 U.S.C. 106(g), 40113, 44701.
size is determined as of the date of SUPPLEMENTARY INFORMATION: As
approval of the loan by the Preferred § 39.13 [Corrected]
published, Airworthiness Directive
Lender. 2020–24–04, Amendment 39–21334 (85 ■ 2. The FAA amends § 39.13 by adding
* * * * * FR 77991, December 3, 2020), requires the following new airworthiness
revising the existing AFM to incorporate directive (AD):
Jovita Carranza,
procedures for conducting an approach 2020–24–04 The Boeing Company:
Administrator. with a localizer-based navigation aid, Amendment 39–21334; Docket No.
[FR Doc. 2020–26450 Filed 12–11–20; 8:45 am] monitoring localizer raw data, calling FAA–2020–1031; Project Identifier AD–
2020–00846–T.
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BILLING CODE 8026–03–P out any significant deviations, and
performing an immediate go around if (a) Effective Date
the airplane has not intercepted the This AD is effective December 18, 2020.
final approach course as shown by the
localizer deviation. AD 2020–24–04 (b) Affected ADs
applies to all The Boeing Company None.
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