[Federal Register: October 16, 2003 (Volume 68, Number 200)]
[Rules and Regulations]
[Page 59683-59704]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16oc03-12]
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Part II
Department of Homeland Security
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Office of the Secretary
6 CFR Part 25
Regulations Implementing the Support Anti-terrorism by Fostering
Effective Technologies Act of 2002 (the SAFETY Act); Interim Rule
[[Page 59684]]
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DEPARTMENT OF HOMELAND SECURITY
Office of the Secretary
6 CFR Part 25
[USCG-2003-15425]
RIN 1601-AA15
Regulations Implementing the Support Anti-terrorism by Fostering
Effective Technologies Act of 2002 (the SAFETY Act)
AGENCY: Office of the Secretary, Department of Homeland Security.
ACTION: Interim rule with request for comments.
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SUMMARY: This interim rule implements Subtitle G of Title VIII of the
Homeland Security Act of 2002--the Support Anti-terrorism by Fostering
Effective Technologies Act of 2002 (``the SAFETY Act'' or ``the Act''),
which provides critical incentives for the development and deployment
of anti-terrorism technologies by providing liability protections for
Sellers of ``qualified anti-terrorism technologies.'' This rule
provides the application process by which a seller will apply for
liability protections for anti-terrorism technologies. Its purpose is
to facilitate and promote the development and deployment of anti-
terrorism technologies that will save lives.
DATES: This interim rule is effective October 16, 2003. Comments and
related material must reach the Docket Management Facility on or before
December 15, 2003. Comments sent to the Office of Management and Budget
(OMB) on collection of information must reach OMB on or before December
15, 2003.
ADDRESSES: Because the Department of Homeland Security does not yet
have electronic docketing capability, for the purposes of this rule, we
are using the Department of Transportation Docket Management System for
the U.S. Coast Guard. You may submit comments identified by Coast Guard
docket number USCG-2003-15425 to the Docket Management Facility at the
Department of Transportation. To avoid duplication, please use only one
of the following methods:
(1) Web site: http://dms.dot.gov.
(2) Mail: Docket Management Facility, U.S. Department of
Transportation, 400 Seventh Street, SW., Washington, DC 20590-0001.
(3) Fax: 202-493-2251.
(4) Delivery: Room PL-401 on the Plaza level of the Nassif
Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The telephone
number is 202-366-9329.
(5) Federal eRulemaking portal: http://www.regulations.gov.
You must also mail comments on collection of information to the
Office of Information and Regulatory Affairs, Office of Management and
Budget, 725 17th Street, NW., Washington, DC 20503, ATTN: Desk Officer,
Department of Homeland Security.
Comments and materials received from the public, as well as
documents mentioned in this preamble as being available in the docket,
are part of docket USCG-2003-15425 and are available for inspection or
copying from the Docket Management Facility, U.S. Department of
Transportation, room PL-401, 400 Seventh Street, SW., Washington, DC,
between 9 a.m. and 5 p.m., Monday through Friday except Federal
holidays. You may also find this docket on the Internet at http://dms.dot.gov.
You may also access the Federal eRulemaking Portal at
http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: If you have questions on this interim
rule, call Wendy Howe, Directorate of Science and Technology,
Department of Homeland Security, telephone 202-772-9887. If you have
questions on viewing or submitting material to the docket, call Dorothy
Beard, Chief, Dockets, Department of Transportation, telephone 202-366-
5149.
SUPPLEMENTARY INFORMATION:
Public Participation and Request for Comments
We encourage you to participate in this rulemaking by submitting
comments and related materials. All comments received will be posted,
without change, to http://dms.dot.gov and will include any personal
information you have provided.
Submitting comments: If you submit a comment, please include your
name and address, identify the docket number for this rulemaking (USCG-
2003-15425), indicate the specific section of this document to which
each comment applies, and give the reason for each comment. You may
submit your comments and material by electronic means, mail, fax, or
delivery to the Docket Management Facility at the address under
ADDRESSES; but please submit your comments and material by only one
means. If you submit them by mail or delivery, submit them in an
unbound format, no larger than 8\1/2\ by 11 inches, suitable for
copying and electronic filing. If you submit them by mail and would
like to know that they reached the Facility, please enclose a stamped,
self-addressed postcard or envelope. We will consider all comments and
material received during the comment period. We may change this rule in
view of them.
Viewing comments and document: To view comments, as well as
documents mentioned in this preamble as being available in the docket,
go to http://dms.dot.gov at any time and conduct a simple search using
the docket number. You may also visit the Docket Management Facility in
room PL-401 on the Plaza level of the Nassif Building, 400 Seventh
Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through
Friday, except Federal holidays.
Privacy Act: Anyone can search the electronic form of all comments
received in the docket by the name of the individual submitting the
comment (or signing the comment, if submitted on behalf of an
association, business, labor union, etc.).
Regulatory History
On July 11, 2003, we published a notice of proposed rulemaking
entitled ``Regulations Implementing the Support Anti-Terrorism by
Fostering Effective Technologies Act of 2002 (the SAFETY Act)'' in the
Federal Register (68 FR 41420). No public hearing was requested and
none was held. As stated in the notice of proposed rulemaking, we
intended to implement this interim rule as soon as possible. The
Department of Homeland Security (Department) finds that the need to
foster anti-terrorism technology by instituting liability protection
measures, as soon as practicable, furnishes good cause for this interim
rule to take effect immediately under both the Administrative Procedure
Act, 5 U.S.C. 552(d)(3), and section 808 of the Congressional Review
Act. The Department believes the current development of anti-terrorism
technologies has been slowed due to the potential liability risks
associated with their development and eventual deployment. In a fully
functioning insurance market, technology developers would be able to
insure themselves against excessive liability risk; however, the
terrorism risk insurance market appears to be in disequilibrium. The
attacks of September 11 fundamentally changed the landscape of
terrorism insurance. Congress, in its statement of findings and purpose
in the Terrorism Risk Insurance Act of 2002 (``TRIA''), concluded that
temporary financial assistance in the insurance market is needed to
``allow for a transitional
[[Page 59685]]
period for the private markets to stabilize, resume pricing of such
insurance, and build capacity to absorb any future losses * * *.'' TRIA
Sec. 101(b)(2).
The United States remains at risk to terrorist attacks. It is in
the public's interest to have this interim rule effective immediately
because its aim is to foster the development and deployment of anti-
terrorism technologies. Additionally, this interim rule will clarify to
the greatest extent possible the application of the liability
protections created by the SAFETY Act, thus providing an instant
incentive for prospective applicants to apply for its protections and
for others to begin exploring new measures that will prevent or reduce
acts of terrorism. The interim rule will also provide the Department
with sufficient program flexibility to address the specific
circumstances of each particular request for SAFETY Act coverage. The
application process is interactive. Those persons availing themselves
of the protections afforded in this interim rule will also be
interacting with the Department in the application process.
Furthermore, the Department will continue to consider comments on this
interim rule. Since the use of the liability protections afforded in
this interim rulemaking is voluntary, there are no mandatory costs or
burdens associated with the immediate implementation of this rule.
By having these provisions in place, the Department may begin
processing applications for the liability protections and thus provide
qualified Sellers of anti-terrorism technologies valuable incentives to
develop and sell such technologies, as well as incentives for others to
deploy such technologies. The purpose of those technologies is to
detect, deter, mitigate, or assist in the recovery from a catastrophic
act of terrorism. Thus, the Department finds that it is not only
impracticable to delay an effective date of implementation, but it is
also in the public's interest to make the interim rule effective upon
publication in the Federal Register.
As previously mentioned in the proposed rule, the Department does
not intend to resolve every conceivable programmatic issue through this
interim rule. Instead, this interim rule sets out a basic set of
regulations that implements the SAFETY Act program. The Department will
continue to consider public comments and determine whether possible
supplemental regulations are needed as we gain experience with
implementing the Act.
Discussion of Comments and Changes
The Department received 43 different sets of comments on the
proposed rule during the comment period. Two additional sets of
comments were received on August 12, 2003, the day after the comment
period ended, but in view of the relatively brief comment period (30
days), the Department has decided to accept those comments as well. The
Department has considered all of the aforementioned 45 sets of
comments, and summaries of the comments and the Department's responses
follow.
Applicability and Use of Standards
The Department received a total of 24 comments relating to
references to standards in the proposed rule. A change in the term
``safety and effectiveness standards,'' used in Section 25.3(c) of the
proposed rule, to the industry accepted term ``technical standards,''
was suggested and has been implemented in Section 25.3(c) of the
interim rule. A number of comments were made regarding the use of
voluntary consensus technical standards and the advisability of
ensuring that the Department provide for stakeholder participation in
any standard development activities. The Department recognizes the
advisability of such participation and has instituted a comprehensive
program based on using the voluntary consensus process for the majority
of its standard development activities. This process is designed to
involve users, manufacturers, and private and public sector technical
communities in all phases of standard development. The American
National Standards Institute, numerous Standards Development
Organizations, and the National Institute for Standards and Technology
already have been actively involved in assisting the Department in
accomplishing its standard development goals. Although the Department
is vested with the authority to promulgate regulatory standards, the
circumstances under which Department regulations governing anti-
terrorism technologies are likely to be required are unusual.
Therefore, the Department does not believe that there is a need for
specific language about rulemaking with respect to standards.
One comment suggested postponing standard setting activities for
two years in order to allow the market to stabilize. Other comments
indicated a concern regarding possible prejudice against technologies
that were not governed by formally accepted standards. The Department
believes, however, that because of the rapidly evolving threat
environment and the lack of basic standards for many classes of
technologies, it is not in the best interest of the nation--and
particularly of the emergency response community--to delay standard
development activities. The Department also understands, however, that
there is a continuing need for flexibility in the technical evaluation
criteria under the SAFETY Act, and accordingly the Department will
apply standards in SAFETY Act evaluations only to the extent that they
are applicable to a particular technology and the circumstances of its
proposed deployment. For those technologies without applicable
standards (or with incomplete standards), additional methods of
evaluation will be used, such as best practices, existing laboratory or
field testing, etc. It will be highly desirable to use test
information, where appropriate, from independent, accredited
laboratories. The Department has also initiated a program to establish
a network of certified labs that should address this need.
It will be important for SAFETY Act applicants to identify
applicable standards that are appropriate to the specific operating
environment and threat conditions for any potential anti-terrorism
technology. The degree to which a proposed technology meets applicable
standards will certainly be used to inform the technical evaluation
process. However, technical effectiveness is only one facet of the
criteria for issuance of a Designation or a Certification. Therefore,
prior approval or certification by a United States Government agency
(such as the Food and Drug Administration) will not be sufficient to
form the basis for a SAFETY Act Designation or Certification per se,
although such approval or certification might constitute relevant
evidence of utility, effectiveness, or safety, and of course prior use
of a technology by the United States Government is expressly relevant
to the first criterion in Section 862(b)(1) of the SAFETY Act and the
corresponding provision of the interim rule (Sec. 25.3(b)(1)).
Section 25.3(c) of the proposed rule stated that the Department
will make available standards that are developed for anti-terrorism
technologies. This service will apply only to potential regulatory
criteria established by the Department. As noted by several commenters,
many voluntary consensus technical standards are developed and owned by
private sector entities. Where voluntary consensus standards are
identified by the Department as being applicable to anti-terrorism
[[Page 59686]]
technologies, a summary of such standards may be published, along with
a link to the appropriate site for the applicant to obtain or purchase
the required or suggested standard. In preparing applications for
SAFETY Act protections, however, applicants are encouraged not to limit
themselves to standards previously promulgated or recognized by the
Department, but rather to consider and reference any consensus
technical standards that they believe to be applicable to technology.
Several standards development organizations suggested that
voluntary consensus standards themselves be designated as qualified
anti-terrorism technologies under the SAFETY Act. Although the
Department believes it is unlikely that standards themselves will
qualify for a Designation because it is unlikely that a standard will
fall within the definition of ``qualified anti-terrorism technology''
in the Act, the Department will fully evaluate all applications for
SAFETY Act protections received from Sellers of standards.
Scope of Required Insurance Coverage
Thirteen comments expressed concerns or confusion regarding the
scope of required insurance coverage. Some commenters expressed
uncertainty regarding the definition of the term ``Seller,'' the issue
of who may be a defendant in the Federal cause of action prescribed in
the SAFETY Act, and the nature of protection from liability afforded to
entities other than the ``Seller'' in the manufacturing and
distribution chains of the technology. In response, the Department has
revised the definition of ``Seller'' in Section 25.9 of the interim
rule in order to clarify that the ``Seller'' is the actual recipient of
the Designation for a qualified anti-terrorism technology. The
Department has also revised Section 25.4(a) of the interim rule to
clarify that only the Seller is required to obtain the required
liability insurance coverage.
Concern was expressed regarding the availability of insurance
covering all of the parties specified in Section 864(a)(3) of the
SAFETY Act and the corresponding provision in the interim rule (Sec.
25.4(c)). First, under the interpretation of Section 863 of the Act
expressed by the Department in the preamble of the interim rule, (1)
there is one exclusive Federal cause of action for claims relating to
the deployment of a qualified anti-terrorism technology with respect to
an act of terrorism, and (2) such cause of action may be brought only
against the Seller, and only for injuries proximately caused by the
Seller. Therefore, although other persons and entities must be covered
by the required insurance coverage, the actuarial analyses of the
insurance industry should focus mainly, if not exclusively, on the
Seller's potential liability, which should facilitate the issuance of
insurance policies. Moreover, in this context, the provisions of
Section 864(a)(2) of the Act and the corresponding provision of the
interim rule (Sec. 25.4(b)), which limit the required insurance to no
more than the maximum amount reasonably available from private sources
on the world market at prices and terms that will not unreasonably
distort the sales price of Seller's anti-terrorism technologies (which
the Department intends to interpret with regard to the effect of the
insurance requirement on the price of the technology and ultimately on
the demand for and deployment of the technology for anti-terrorism
purposes), should be emphasized. It should also be noted that the
Department has revised Section 25.4(a) of the interim rule to provide
specifically for the possibility of self-insurance if the Under
Secretary determines that insurance in appropriate amounts or of
appropriate types is not available for a particular technology from
third-party insurance carriers.
Term, Expiration, and Termination of Designation
Twenty-four comments were made suggesting that SAFETY Act
Designations either should not expire or should have a longer duration
(10-20 years) than provided for in the proposed rule (five to eight
years). In response, the Department notes that qualification for a
SAFETY Act Designation depends on a combination of the ability of the
technology to be effective in a specific threat environment, the nature
and cost of available insurance, and other factors, all of which are
subject to rapid and unpredictable change. At the same time, the
Department is very cognizant of the need for a guaranteed period of
protection for successful SAFETY Act applicants in order to achieve the
main goal of the Act, which is to facilitate the commercialization of
needed anti-terrorism technologies. The Department believes that
mandatory reconsideration of Designations after five to eight years
provides a fair balancing of public and private interests.
Several comments suggested that SAFETY Act protections should have
retroactive effect. There are two different senses of retroactivity
that must be addressed. The first sense relates to the deployment of a
technology. The Department believes that it would be inappropriate to
apply SAFETY Act protections retroactively to deployments of a
qualified anti-terrorism technology that occurred prior to the
effective date of the Designation issued for such technology. The
reasons are (1) there is no explicit authority to issue retroactive
protections under the SAFETY Act, (2) a Designation with such
retroactive effect would be potentially unlawful if it extinguishes an
already accrued cause of action, (3) retroactive designation is not
necessary to achieve, and does not further, the goals of the Act, and
(4) there is no equitable method for determining the retroactivity of
particular Designations. The Department believes that SAFETY Act
protections should apply only to deployments of a qualified anti-
terrorism technology that occur on or after the effective date of the
Designation issued for such technology.
The second sense of retroactivity relates to the date of the sale
of the qualified anti-terrorism technology by the Seller. The
Department recognizes that, in some cases, technologies that qualify
for SAFETY Act protections will have been sold by the Seller prior to
the effective date of such protections. The Department believes that
the date on which a technology was sold by a Seller, per se, is not
necessarily relevant to the applicability of SAFETY Act protections to
a deployment of the technology in defense against, response to, or
recovery from an act of terrorism, provided that the technology is
within the scope of a Designation and was originally sold by the Seller
to which the Designation is issued. In other words, it might be
appropriate for SAFETY Act protections to be applicable to any
deployment of a qualified anti-terrorism technology that occurs on or
after the effective date of the Designation issued for such technology
even if such technology was originally sold by the Seller before the
effective date of such Designation. The Department believes that any
other interpretation would lead to anomalous and inequitable results.
Therefore, provisions have been added to Sections 25.3(f), 25.4(f),
25.6(b), and 25.7(g) of the interim rule to clarify this issue, and in
particular to require the Under Secretary to specify in each
Designation and Certification the earliest date of the sale of the
technology to which the protections will apply.
The Department notes that many qualified anti-terrorism
technologies might be designed for continuous ``deployment'' (e.g.,
sensors). The fact that a qualified anti-terrorism technology was sold
and ``deployed'' prior to the effective date of an applicable
Designation or Certification, or is, in a sense, continuously
[[Page 59687]]
``deployed,'' should not prevent such protections from applying to any
deployment of such technology that occurs on or after the effective
date of the applicable Designation or Certification in defense against,
response to, or recovery from any act of terrorism.
Termination of a Designation Resulting From Significant Modification
Several comments expressed concern regarding Section 25.5(i) of the
proposed rule, which provided for automatic termination if a designated
technology is significantly modified or changed as defined in that
provision. The concern was essentially that the standard for
termination is too vague, although at least one commenter opposed
automatic termination for any reason.
It is vital that the Department be able to ensure that technologies
for which protections are granted are not changed in a way that will
significantly affect their safety or effectiveness. The Department does
not have the ability to monitor every change to a designated
technology, however, and therefore the interim rule must place the
burden on Sellers to submit proposed changes to the Department so that
they may be properly evaluated.
That said, the Department agrees with one of the comments that
suggested that only changes that significantly reduce the safety or
effectiveness of the technology should be subject to automatic
termination, and Section 25.5(i) of the interim rule has been revised
accordingly. In addition, that Section has been revised to authorize
the Under Secretary, in lieu of issuing a modified Designation, to
issue a certificate to a Seller that certifies that a proposed change
or modification to a technology does not significantly reduce its
safety or effectiveness and reaffirms the applicability of the existing
Designation to the technology. That option should enable the Under
Secretary to respond swiftly to submissions of relatively minor
changes. The Department strongly encourages holders of Designations to
submit to the Under Secretary any proposed modifications or changes
that could significantly reduce the safety or effectiveness of the
designated technology.
One commenter wondered how the Department will evaluate a proposed
change in advance when the factors to be evaluated would seem to
require actual ``implementation'' of the change. The Department is
confident that Sellers will have effective methods to evaluate the
safety and effectiveness of changes to their technologies prior to
actual commercialization, and the Department will take advantage of
those same methods in its evaluation.
Confidentiality of Information
Seventeen commenters indicated a concern regarding the Department's
ability to protect the confidentiality of information that is provided
in an application. In particular, there is apprehension that the
Freedom of Information Act (FOIA) protections might be inadequate to
guarantee nondisclosure of an applicant's trade secrets or confidential
business information. It was suggested that explicit protections
similar to those available for source selection or procurement
information under FAR section 3, or a declaration that all financial
information provided is deemed voluntary, or both, be included in the
interim rule.
The Department is committed to the protection of applicants'
proprietary information to the fullest extent required or permitted by
law. Although the interim rule does not establish any new special
protections (such as those in section 3 of the FAR), there are multiple
protections available for applicants' sensitive information. Those
protections include the Trade Secrets Act (18 U.S.C. 1905), Exemption 1
(``national security'') of FOIA, and Exemption 4 (``privileged or
confidential information'') of FOIA. In particular, Federal employees
are subject to criminal penalties for unauthorized disclosure of
information qualifying under Exemption 4 of FOIA. All contractors or
other agents of the Secretary will be required to enter into
nondisclosure agreements, and each will be examined on an Application-
by-Application basis for potential conflicts of interest, before being
granted access to any confidential information provided by applicants.
Services as Distinguished From Products
Fourteen comments expressed concerns that the language in the
proposed rule did not make clear how certain provisions of the SAFETY
Act will apply to services, as opposed to physical products. The
Department recognizes that the Act applies equally to product-based
technologies and service-based technologies.
The Department will evaluate services and products using the same
seven non-exclusive criteria set forth in Section 862(b) and the
corresponding provision in the interim rule (Sec. 25.3(b)), as
required by the Act. These criteria include ``demonstrated substantial
utility and effectiveness'' and ``studies * * * to assess the
capability of the technology to substantially reduce risks of harm.''
Similarly, qualified Sellers of service-based technologies must satisfy
the same post-Designation obligations as Sellers of products. These
obligations include reporting insurance status, notifying the Secretary
of any transfer or licensing of the designated technology, and applying
for modification of a Designation prior to making any significant
change to the designated technology. Appropriate revisions have been
made to Section 25.5(i) and other provisions of the interim rule to
clarify their applicability to services.
Transfer or licensing of Designations for products and, in
particular, services may not be appropriate, since the identity and
established expertise of the Seller is often be an integral basis for a
Designation. That issue will be addressed in appropriate cases in
individual Designations, as provided in Section 25.3(f) of the interim
rule.
Determining the Required Amount of Insurance
A number of commenters discussed the potential difficulty of
determining the amounts of insurance that must be carried to satisfy
claims arising out of, relating to, or resulting from an act of
terrorism with respect to which qualified anti-terrorism technologies
have been deployed. Issues revolve around concern that most liability
insurance is not purchased product-by-product, so that it might be
difficult to estimate the ``price distortion'' caused by needing to
insure a proposed new product or service. It was also suggested that
there is a circular dependency between insurance costs and Designation:
i.e., the cost of insurance depends on the liability exposure, which
depends on the content of the Designation (if any), which in turn
depends on the cost of insurance. There was also concern expressed that
insurance is not available at any price for certain technologies.
The Department is aware of the difficulties involved in quantifying
the price impact of insuring (or self-insuring) against the specific
potential liabilities addressed by the Act. The Department will rely on
expert opinion and analysis in this area, as it will with technical
determinations of safety and effectiveness. The Department will address
the potential circularity issue by evaluating the need for SAFETY Act
protections assuming the non-existence of such protections, and then
setting the required amount of insurance by taking into account all
relevant factors, including the cost and availability of
[[Page 59688]]
insurance coverage at different liability limitation levels.
Regarding potential unavailability of insurance for certain
technologies, the Department notes that the granting of a Designation
may render a previously uninsurable technology insurable through
reduction of liability exposure. Where necessary to address
unavailability of insurance, however, Designations may be granted that
permit the insurance requirement to be satisfied by self-insurance up
to a specified limit of liability. A new Section 25.4(f) and other
provisions have been inserted in the interim rule to address this
issue, as well as the continuing applicability of SAFETY Act
protections after the expiration or termination of a Designation (which
had been addressed in the proposed rule only in the preamble).
Clarification of Government Contractor Defense (GCD)
The precise nature and consequences of the GCD as applied by the
Act were considered by 14 commenters to be unclear in the proposed
rule. In particular, the interaction between the scope of the
judicially derived GCD and the scope of the presumption defined in the
Act was believed to be unclear.
As defined in the Act, the rebuttable presumption of the
applicability of the GCD is accorded to any Seller who (1) has received
Certification as described in Section 863(d), and (2) is the defendant
in the Federal cause of action arising in Section 863(a). Pursuant to
Section 863(d)(1), the presumption may only be overcome by evidence
showing that the Seller acted fraudulently or with willful misconduct
in submitting information during the SAFETY Act application process.
The view of the Department is that the GCD protections afforded by
the SAFETY Act to recipients of Certifications are similar to those
affirmed by the courts in Boyle v. United Technologies and its progeny
as of the date of the enactment of the SAFETY Act. In applying those
protections, the Department believes that Congress intended that, for
purposes of applying the GCD, courts presume that all of the legal and
factual requirements for establishment of the GCD by a government
contractor are met by the existence of an applicable SAFETY Act
Certification.
The Department has added a new paragraph to Section 25.6 of the
interim rule that corresponds to Section 863(d)(1) of the Act. Such new
paragraph makes it clear that the presumption of the GCD will continue
to apply in perpetuity to all deployments of technologies that receive
a Certification, provided that the sale of the technology was
consummated by the Seller prior to the expiration or termination of the
applicable Certification.
Relationship of the SAFETY Act and Indemnification Under Public Law 85-
804
Thirteen comments related to the relationship between SAFETY Act
protections and indemnification under Public Law 85-804. The Department
believes, however, that the language contained in part 8 of the
``Special Issues'' section of the preamble of the interim rule
adequately explains such relationship, and makes it clear that
eligibility for a SAFETY Act Designation does not preclude the granting
of indemnification under Public Law 85-804.
Detailed Specification of the Seller, Technology, and Scope of a
Designation
Twenty comments focused on the detailed specification of the
Seller, technology, and scope of a Designation. Commenters suggested
that there are advantages to the public, to industry, and to the
application evaluation process in designating entire classes of
technology, rather than designating each Seller of a technology
individually.
The Department seeks to balance the need for rapid deployment of
anti-terrorism technologies with the need for careful evaluation of
each technology and the need to avoid uncertainty in the marketplace
concerning which specific product or service deployments are protected
by Designation. In general, Designations will be restricted in scope to
a particular Seller, a specific product or service, and delineated
types of deployment or application. This approach addresses the comment
that it is beneficial to the public to be able to learn precisely which
Sellers and which of their products/services have been designated, and
for what scope of deployment. At some in the near future, as relevant
standards are adopted and the body of ``substantially equivalent''
technologies increases, the Department will revisit the advisability of
awarding broader Designations (``Block Designations'') to classes of
technology.
Definition of ``Act of Terrorism''
Ten comments indicated a belief that the definition of ``act of
terrorism'' in Section 865(2) of the Act (and in Section 25.9 of the
interim rule) is ambiguous. One suggested that the definition coincide
with other federal definitions of ``terrorism,'' such as the definition
in 22 U.S.C. 2656f(d)(2). The Department notes that the definition of
``act of terrorism'' was prescribed by Congress in the SAFETY Act. The
Department believes that the definition in the Act provides an
appropriate degree of flexibility in the evolving threat environment,
including the use of the broad term ``harm.'' Regarding the comment
concerning whether acts that occur on foreign territory are covered by
the definition, the Department's view is that the term ``act of
terrorism,'' as defined, potentially encompasses acts that occur
outside the territory of the United States. The basis for that view is
that there is no geographic requirement in the definition; rather, an
act that occurs anywhere may be covered if it causes harm to a person,
property, or an entity in the United States. The statutory definition
of ``act of terrorism'' has been added to Section 25.9 of the interim
rule.
Determinations Not Subject to Review or Appeal
Five commenters observed that the SAFETY Act Designation and
Certification processes are complex and that many apparently subjective
assessments will be made during the evaluation process. They were
concerned that the Secretary's decision is final, without recourse or
appeal. Some commenters suggested that the Administrative Procedures
Act (APA) requires a formal review as part of the process.
The Department is aware of the complexity of the review process and
has made numerous allowances for exchange of information and concerns
between evaluators and applicants at multiple points during the
process, in order to clarify uncertainties and to give the applicant an
opportunity to provide supplemental information and address issues. The
Department believes that this interactive process provides sufficient
recourse to applicants. The SAFETY Act is a discretionary authority
accorded by Congress to the Secretary of Homeland Security in order to
facilitate the commercialization and deployment of needed anti-
terrorism technologies. The exercise of that authority with respect to
a particular technology requires that many discretionary judgments be
made regarding the applicability and application of the SAFETY Act
criteria to the technology and the weighting of the criteria in each
case. It would be inappropriate to provide for what would amount to the
second-guessing of the Secretary's discretionary judgment by empowering
another entity to substitute its own discretionary judgment for that of
the Secretary.
[[Page 59689]]
SAFETY Act protections are not required to market any technology,
and therefore the absence of a grant of protection under the SAFETY Act
will not prevent any person or entity from doing business. The
Department also notes that a SAFETY Act Designation is not a ``license
required by law'' within the meaning of Section 558(c) of the APA, and
thus is not covered by the APA.
Allowability of Insurance Costs
Four comments questioned whether the cost of maintaining the
insurance required by a SAFETY Act Designation is an ``allowable cost''
under Federal contracting practices. The Department notes that each
Federal procurement and contracting arrangement is unique to the
Federal agency involved. When an applicant has questions regarding
allowability for a specific case involving Federal procurements, the
applicant should consult with the procuring agency and, if appropriate,
with the applicant's legal counsel.
Burden of Proof With Regard to Evaluation Criteria
Three commenters asked, in essence, if the applicant bears the
responsibility for demonstrating the applicability of each of the seven
evaluation criteria. In particular, it was asked whether the applicant
must establish the existence of an extraordinarily large or
unquantifiable potential risk exposure (criterion 3), or the magnitude
of risk exposure to the public if applicant's technology were not
deployed (criterion 5). It was also asked whether applicants will bear
the cost of scientific studies (criterion 6).
An application for a Designation or a Certification is a positive
assertion on the applicant's part that the technology in question
deserves special protections under the law in order to promote a public
good. It is the applicant's responsibility to make a persuasive and
defensible case. This will involve, at a minimum, submitting evidence
that the technology satisfies the criteria in Section 862(b) of the
SAFETY Act and the corresponding provision of the interim rule (Sec.
25.3(b)). To that end, an application that contains the most complete
suite of supporting information regarding concrete evidence of proven
or potential effectiveness will be more persuasive than an application
that relies solely on the applicant's personal effectiveness estimates
and a priori threat and liability assessments. Any evaluations needed
to address the criteria will be the financial responsibility of the
applicant.
Relationship of Designation and Certification Processes
Three comments addressed the linkage of the Designation and
Certification processes. The Department believes that it is appropriate
for these two aspects of the Act to remain closely aligned, and that
the SAFETY Act indeed requires the issuance of a Designation for a
technology to be a prerequisite (but not sufficient in itself) for
issuance of a Certification. The same high standard of review will be
applied to evaluations for Designations and Certifications, and a
substantial amount of the information that is needed to evaluate
applications for Designations is also integral to the Certification
process (although there is additional information required to support
the evaluation for a Certification). The Designation and the
Certification are two separate protections with separate (but
overlapping) criteria, and therefore they require two discrete
application processes. The Department notes again, however, that
applications for both protections may be considered in parallel, and
that both protections may be granted simultaneously.
Multi-use Technologies and ``Specific Purpose''
Four commenters noted that the proposed rule stated that a
technology must be ``designed, developed, modified, or procured for the
specific purpose of preventing, detecting, identifying or deterring
acts of terrorism * * *.'' They stated that the word ``specific,'' as
used in this context, seems overly restrictive. They believe that this
narrow reading could exclude from designation any product originally
developed for another use.
The ``specific purpose'' clause was prescribed by Congress in
Section 865(1) of the Act, and the Department does not have the
authority to change that definition. The Department believes, however,
that Congress did not intend for ``specific purpose'' to mean
``exclusive purpose.'' An applicant need only show that one specific
purpose of the subject technology is to prevent, detect, identify, or
deter acts of terrorism or limit the harm such acts might otherwise
cause; it is irrelevant for purposes of the definition of ``qualified
anti-terrorism technology'' that a technology might have other purposes
or uses. Applications for SAFETY Act protections, and their component
parts, should, of course, focus on the specific purpose(s) of the
technology for which the applicant is seeking protection.
Expedited Reviews
Thirteen comments expressed a desire for the Department to provide
expedited reviews for specific technologies based on various criteria.
The approach of the Department will be to prioritize and expedite
SAFETY Act applications in order to ensure that the highest risk
vulnerabilities to the highest consequence threats are addressed first.
In general, the Department will expedite reviews of SAFETY Act
applications as its resources allow.
Reciprocal Waivers
Several comments stated that reciprocal waivers of the type
described in the Act (reciprocal waivers of claims by the specified
parties for losses sustained by them or their employees arising from an
act of terrorism with respect to which a qualified anti-terrorism
technology is deployed) are not standard practice in most industries,
and that some customers, vendors, and suppliers may be unwilling to
enter into such reciprocal agreements. The Department will not withhold
or revoke a Designation based on the failure to obtain one or more
required reciprocal waivers, provided that the Seller shows that it
made diligent efforts in good faith to obtain such waivers.
The Department's view is that such waivers are not an absolute
condition (precedent or subsequent) for the issuance, validity,
effectiveness, duration, or applicability of a Designation, because (1)
obtaining such waivers often will be beyond the control of SAFETY Act
applicants, (2) requiring all of such waivers as such a condition would
thwart the intent of Congress in enacting the SAFETY Act by rendering
the benefits of the SAFETY Act inapplicable in many otherwise
appropriate situations, and (3) the consequences of failing to obtain
the waivers are not specified in the Act. Section 25.4(e) of the
interim rule has been revised accordingly.
Mass Casualty Data
Four comments expressed concern over the use of mass casualty data.
In particular, the proposed rule stated that the Secretary's inquiry
concerning an application ``may involve * * * data and history
regarding mass casualty losses.'' It was noted that, in the case of
past mass tort settlements, such data may exist but be confidential.
Questions were asked regarding whether providing such data (where it
exists) would be mandatory for a Designation or a Certification, even
when restricted by prior court-ordered confidentiality agreements, and
whether special
[[Page 59690]]
protections would exist to prevent unauthorized disclosure.
The Department will not ask applicants to violate court ordered
confidentiality agreements, but will expect that every reasonable
effort will be made to extract relevant non-protected information or to
provide equivalent information--e.g., from industry aggregate data or
summaries, etc.
Multiple Sellers
Questions were posed regarding whether it will be possible for
joint ventures or other multi-party arrangements to receive SAFETY Act
protections, and who will be responsible for obtaining insurance for
such a multi-Seller Designation. A joint venture may take many forms. A
joint venture that takes the form of a recognized business association
with legal personality will be treated as a single Seller, and will be
required to obtain insurance coverage itself.
As specified in the proposed rule, SAFETY Act protections may be
issued to multiple Sellers (e.g., a situation in which the owner of a
technology and one or more of its licensees are to be covered by a
single Designation). In that situation, the parties' respective
obligations to obtain insurance will be specified in the Designation.
Discussion of Interim Rule
As part of the Homeland Security Act of 2002, Public Law 107-296,
Congress enacted several liability protections for providers of anti-
terrorism technologies. The SAFETY Act provides incentives for the
development and deployment of anti-terrorism technologies by creating a
system of ``risk management'' and a system of ``litigation
management.'' The purpose of the Act is to ensure that the threat of
liability does not deter potential manufacturers or Sellers of anti-
terrorism technologies from developing and commercializing technologies
that could save lives. The Act thus creates certain liability
limitations for ``claims arising out of, relating to, or resulting from
an act of terrorism'' where qualified anti-terrorism technologies have
been deployed. The Act does not limit liability for harms caused by
anti-terrorism technologies when no act of terrorism has occurred.
Together, the risk and litigation management provisions provide the
following protections:
[sbull] Exclusive jurisdiction in Federal court for suits against
the Sellers of ``qualified anti-terrorism technologies'' (Sec.
863(a)(2));
[sbull] A limitation on the liability of Sellers of qualified anti-
terrorism technologies to an amount of liability insurance coverage
specified for each individual technology, provided that Sellers will
not be required to obtain any more liability insurance coverage than is
reasonably available ``at prices and terms that will not unreasonably
distort the sales price'' of the technology (Section 864(a)(2));
[sbull] A prohibition on joint and several liability for
noneconomic damages, so that Sellers can only be liable for that
percentage of noneconomic damages proportionate to their responsibility
for the harm (Sec. 863(b)(2));
[sbull] A complete bar on punitive damages and prejudgment interest
(Sec. 863(b)(1));
[sbull] A reduction of plaintiffs' recovery by amounts that
plaintiffs received from ``collateral sources,'' such as insurance
benefits or other government benefits (Sec. 863(c)); and
[sbull] A rebuttable presumption that the Seller is entitled to the
``government contractor defense'' (Sec. 863(d)).
The Act provides that these liability protections are conferred by
two separate actions by the Secretary. The Secretary's designation of a
technology as a ``qualified anti-terrorism technology'' confers all of
the liability protections except the rebuttable presumption in favor of
the government contractor defense. The presumption in favor of the
government contractor defense requires an additional ``approval'' by
the Secretary under Section 863(d) of the Act. In many cases, however,
the designation and the approval can be conferred simultaneously.
Analysis
This preamble to the interim rule first addresses the two major
aspects of the Act--the designation of qualified anti-terrorism
technologies and the approval of technologies for purposes of the
government contractor defense. Following that discussion, the preamble
addresses specific issues regarding the interim rule and the
Department's interpretation of the Act.
Designation of Qualified Anti-Terrorism Technologies
As noted above, the designation of a technology as a qualified
anti-terrorism technology confers all of the liability protections
provided in the Act, except for the presumption in favor of the
government contractor defense. The Act gives the Secretary broad
discretion in determining whether to designate a particular technology
as a ``qualified anti-terrorism technology,'' although the Act sets
forth the following criteria that must be considered to the extent that
they are applicable to the technology: (1) Prior United States
Government use or demonstrated substantial utility and effectiveness;
(2) availability of the technology for immediate deployment; (3) the
potential liability of the Seller; (4) the likelihood that the
technology will not be deployed unless the SAFETY Act protections are
conferred; (5) the risk to the public if the technology is not
deployed; (6) evaluation of scientific studies; and (7) the
effectiveness of the technology in defending against acts of terrorism.
These criteria are not exclusive--the Secretary may consider other
factors that he deems appropriate. The Secretary has discretion to give
greater weight to some factors over others, and the relative weighting
of the various criteria may vary based upon the particular technology
at issue and the threats that the technology is designed to address.
The Secretary may, in his discretion, determine that failure to meet a
particular criterion justifies denial of an application under the
SAFETY Act. However, the Secretary is not required to reject an
application that fails to meet one or more of the criteria. Rather the
Secretary, after considering all of the relevant criteria, may conclude
that a particular technology merits designation as a ``qualified anti-
terrorism technology'' even if a particular criterion is not satisfied.
The Secretary's considerations will also vary with the constantly
evolving threats and conditions that give rise to the need for the
technologies. The interim rule provides for designation as a qualified
anti-terrorism technology for five to eight years.
The SAFETY Act applies to a very broad range of technologies,
including products, services, software, and other forms of intellectual
property, as long as the Secretary, as an exercise of discretion and
judgment, determines that a technology merits designation under the
statutory criteria. Further, as the statutory criteria suggest, a
``qualified anti-terrorism technology'' is not necessarily required to
be newly developed--it may have already been employed (e.g. ``prior
United States government use'') or may be a new application of an
existing technology.
The Act also provides that, before designating a ``qualified anti-
terrorism technology,'' the Secretary will examine the amount of
liability insurance the Seller of the technology proposes to maintain
for coverage of the technology at issue. Under Sec. 864(a), the
Secretary must certify that the coverage level is appropriate ``to
satisfy otherwise
[[Page 59691]]
compensable third-party claims arising out of, relating to, or
resulting from an act of terrorism when qualified anti-terrorism
technologies have been deployed.'' Section 864(a)(1). The Act further
provides that ``the Seller is not required to obtain liability
insurance of more than the maximum amount of liability insurance
reasonably available from private sources on the world market at prices
and terms that will not unreasonably distort the sales price of
Seller's anti-terrorism technologies'' (which the Department intends to
interpret with regard to the effect of the insurance requirement on the
price of the technology and ultimately on the demand for and deployment
of the technology for anti-terrorism purposes). Section 864(a)(2).
The Secretary does not intend to set a ``one-size-fits-all''
numerical requirement regarding required insurance coverage for all
technologies. Instead, as the Act suggests, the inquiry will be
specific to each application and may involve an examination of several
factors, including the following: the amount of insurance the Seller
has previously maintained; the amount of insurance maintained by the
Seller for other technologies or for the Seller's business as a whole;
the amount of insurance typically maintained by sellers of comparable
technologies; data and history regarding mass casualty losses; and the
particular technology at issue. The Secretary will not require
insurance beyond the point at which the cost of coverage would
``unreasonably distort'' the price of the technology. Once the
Secretary concludes the analysis regarding the appropriate level of
insurance coverage (which might include discussions with the Seller in
appropriate cases), the Secretary will identify in a short
certification a description of the coverage appropriate for the
particular qualified anti-terrorism technology. If, during the term of
the designation, the Seller would like to request reconsideration of
that insurance certification due to changed circumstances or for other
reasons, the Seller may do so. If the Seller fails to maintain coverage
at the certified level during that time period, the liability
protections of the Act will continue to apply, but the Seller's
liability limit will remain at the certified insurance level. Such
failure, however, will be regarded as a negative factor in the
consideration of any future application by the Seller for renewal of
the applicable designation, and perhaps in any other application by the
Seller.
The Department solicits comment on the designation of qualified
anti-terrorism technologies, including whether the five to eight year
period is an appropriate length of time for such a designation.
Government Contractor Defense
The Act creates a rebuttable presumption that the government
contractor defense applies to qualified anti-terrorism technologies
``approved by the Secretary'' in accordance with certain criteria
specified in Section 863(d)(2). The government contractor defense is an
affirmative defense that immunizes Sellers from liability for certain
claims brought under Section 863(a) of the Act. See Sec. 863(d)(1).
The presumption of this defense applies to all ``approved'' qualified
anti-terrorism technologies for claims brought in a ``product liability
or other lawsuit'' and ``arising out of, relating to, or resulting from
an act of terrorism when qualified anti-terrorism technologies * * *
have been deployed in defense against or response or recovery from such
act and such claims result or may result in loss to the Seller.'' Id.
While the government contractor defense is a judicially-created
doctrine, Section 863's express terms supplant many of the requirements
in the case law for application of the defense.
First, and most obviously, the Act expressly provides that the
government contractor defense is available not only to government
contractors, but also to those who sell to state and local governments
and the private sector. See Sec. 863(d)(1) (``This presumption of the
government contractor defense shall apply regardless of whether the
claim against the Seller arises from a sale of the product to federal
government or non-federal government customers.'').
Second, Sellers of qualified anti-terrorism technologies need not
design their technologies to federal government specifications in order
to obtain the government contractor defense under the SAFETY Act.
Instead, the Act sets forth criteria for the Department's ``approval''
of technologies. Specifically, the Act provides that during the process
of approval for the government contractor defense the Secretary will
conduct a ``comprehensive review of the design of such technology and
determine whether it will perform as intended, conforms to the Seller's
specifications, and is safe for use as intended.'' Section 863(d)(2).
The Act also provides that the Seller will ``conduct safety and hazard
analyses'' and supply such information to the Secretary. Id. This
express statutory framework thus governs in lieu of the requirements
developed in case law for the application of the government contractor
defense.
Third, the Act expressly states the limited circumstances in which
the applicability of the defense can be rebutted. The Act provides
expressly that the presumption can be overcome only by evidence showing
that the Seller acted fraudulently or with willful misconduct in
submitting information to the Secretary during the course of the
Secretary's consideration of such technology. See Sec. 863(d)(1)
(``This presumption shall only be overcome by evidence showing that the
Seller acted fraudulently or with willful misconduct in submitting
information to the Secretary during the course of the Secretary's
consideration of such technology under this subsection.'').
The applicability of the government contractor defense to
particular technologies is thus governed by these express provisions of
the Act, rather than by the judicially-developed criteria for
applicability of the government contractor defense outside the context
of the SAFETY Act.
While the Act does not expressly delineate the scope of the defense
(i.e., the types of claims that the defense bars), the Act and the
legislative history make clear that the scope is broad. For example, it
is clear that any Seller of an ``approved'' technology cannot be held
liable under the Act for design defects or failure to warn claims,
unless the presumption of the defense is rebutted by evidence that the
Seller acted fraudulently or with willful misconduct in submitting
information to the Secretary during the course of the Secretary's
consideration of such technology.
The government contractor defense under Boyle and its progeny bars
a broad range of claims. The Supreme Court in Boyle concluded that
``state law which holds government contractors liable for design
defects'' can present a significant conflict with Federal policy
(including the discretionary function exception to the Federal Tort
Claims Act) and therefore ``must be displaced.'' Boyle v. United
Technologies Corp., 487 U.S. 500, 512 (1988). The Department believes
that Congress incorporated the Supreme Court's Boyle line of cases as
it existed on the date of enactment of the SAFETY Act, rather than
incorporating future developments of the government contractor defense
in the courts. Indeed, it is hard to imagine that Congress would have
intended a statute designed to provide certainty and protection to
Sellers of anti-terrorism technologies to be subject to future
developments of a judicially-created doctrine. In fact, there is
evidence that Congress rejected such a construction. See, e.g., 148
Cong. Rec.
[[Page 59692]]
E2080 (November 13, 2001) (statement of Rep. Armey) (''[Companies] will
have a government contractor defense as is commonplace in existing
law.'') (emphasis added).
Procedurally, the presumption of applicability of the government
contractor defense is conferred by the Secretary's ``approval'' of a
qualified anti-terrorism technology specifically for the purposes of
the government contractor defense. This approval is a separate act from
the Secretary's ``designation'' of a qualified anti-terrorism
technology. Importantly, the Seller may submit applications for both
designation as a qualified anti-terrorism technology and approval for
purposes of the government contractor defense at the same time, and the
Secretary may review and act upon both applications simultaneously. The
distinction between the Secretary's two actions is important, however,
because the approval process for the government contractor defense
includes a level of review that is not required for the designation of
a qualified anti-terrorism technology. Specifically, the Act provides
that during the process of approval for the government contractor
defense the Secretary will conduct a ``comprehensive review of the
design of such technology and determine whether it will perform as
intended, conforms to the Seller's specifications, and is safe for use
as intended.'' Section 863(d)(2). The Department believes that certain
Sellers will be able to obtain the protections that come with
designation as a qualified anti-terrorism technology even if they have
not satisfied the requirements for the government contractor defense.
Similarly, even if the applicability of the government contractor
defense were rebutted under the test set forth in Section 863(d)(1) of
the Act, the technology may still retain the designation and
protections as a qualified anti-terrorism technology. Fraud or willful
misconduct in the submission of information to the Department in
connection with an application under the Act may result not only in
rebuttal of the presumed application of the government contractor
defense, but may also prompt the Department to refer the matter to the
Department of Justice for pursuit of criminal or civil penalties.
The Department invites comment regarding the government contractor
defense.
Specific Issues Regarding the Act and This Interim Rule
1. Definition of Anti-Terrorism Technologies. The Department
recognizes that the universe of technologies that can be deployed
against terrorism includes far more than physical products. Rather, the
defense of the homeland will require deployment of a broad range of
technologies that includes services, software, and other forms of
intellectual property. Thus, consistent with Section 865 of the Act,
Section 25.3(a) of the interim rule defines qualified anti-terrorism
technologies very broadly to include ``any qualifying product,
equipment, service (including support services), device, or technology
(including information technology)'' that the Secretary, as an exercise
of discretion and judgment, determines to merit designation under the
statutory criteria.
2. Development of New Technologies. The Act's success depends not
only upon encouraging Sellers to provide existing anti-terrorism
technologies, but also upon encouraging Sellers to develop new and
innovative technologies to respond to the ever-changing threats to the
American people. The interim rule is thus designed to allow the
Department to assist would-be Sellers during the invention, design, and
manufacturing phases in two important respects. First, Section 25.3(h)
of the proposal makes clear that the Department, within its discretion
and where feasible, may provide feedback to inventors and manufacturers
regarding whether proposed or developing anti-terrorism technologies
might meet the qualification factors under the Act. The Department has
developed a pre-application submission process in order to facilitate
the procurement of such feedback. To be sure, the Department cannot
provide advance designation, as some of the factors for the Secretary's
consideration cannot be addressed in advance. The Department may,
however, provide feedback regarding other factors, with the goal of
giving potential Sellers some understanding of whether it might be
advantageous to proceed with further development of the technology.
Departmental feedback at the design, prototyping, or testing stage of
development, to the extent feasible, may provide manufacturers with
added incentive to commence and/or complete production of cutting-edge
anti-terrorism technology that otherwise might not be produced or
deployed in the absence of the risk and litigation management
protections in the Act. The Department will perform these consultations
with potential Sellers in a manner consistent with the protection of
intellectual property and trade secrets, as discussed below.
Second, Section 25.3(g) of the interim rule recognizes that
Federal, state, and local government agencies will often be the
purchasers of anti-terrorism technologies. The Department recognizes
that terms on which Sellers are able to provide anti-terrorism
technologies to government agencies may vary depending on whether the
technologies receive SAFETY Act coverage or not. The interim rule thus
provides that the Department may coordinate SAFETY Act reviews with
government agency procurements. The Department also intends to review
SAFETY Act applications relating to technologies that are the subject
of government agency procurements on an expedited basis.
The Department requests public comments regarding the best way for
the Department to provide feedback to potential Sellers regarding
SAFETY Act coverage and the best way for the Department to coordinate
SAFETY Act review with agency procurements.
3. Protection of Intellectual Property and Trade Secrets. The
Department believes that successful implementation of the Act requires
that applicants' intellectual property interests and trade secrets
remain protected in the application process and beyond. Toward that
end, the Department will create an application and review process in
which the Department maintains the confidentiality of an applicant's
proprietary information. The Department notes that laws mandating
disclosure of information submitted to the government generally contain
exclusions or exceptions for such information. The Freedom of
Information Act, for instance, provides specific exceptions for
proprietary information submitted to Federal agencies.
4. Evaluation of Scientific Studies; Consultation with Scientific
and Technical Experts. Section 862(b)(6) of the Act provides that, as
one of many factors in determining whether to designate a particular
technology under the Act, the Secretary shall consider evaluation of
all scientific studies ``that can be feasibly conducted'' in order to
assess the capability of the technology to substantially reduce the
risks of harm. An important part of this provision is that it
contemplates review only of such studies as can ``feasibly'' be
conducted. The Department believes that the need to protect the
American public by facilitating the manufacture and marketing of anti-
terrorism technologies might render it infeasible to defer a
designation decision until after every conceivable scientific study is
completed. In many cases, existing
[[Page 59693]]
information (whether based on scientific studies, experience with the
technology or a related technology, or other factors) might enable the
Secretary to perform an appropriate assessment of the capability of the
technology to reduce risks of harm. In other cases, even where less
information is available about the capability of a technology to reduce
risks of harm, the public interest in making the technology available
as soon as practicable may render it infeasible to await the conduct of
further scientific studies on that issue. In considering whether or to
what extent it is feasible to defer a designation decision until
additional scientific studies can be conducted, the Department will
bring to bear its expertise concerning the protection of the American
homeland and will consider the urgency of the need for the technology
and other relevant factors and circumstances.
5. ``Exclusive Federal Jurisdiction'' and ``Scope'' of Insurance
Coverage under Section 864(a)(3). The Act creates an exclusive Federal
cause of action ``for any claim for loss of property, personal injury,
or death arising out of, relating to, or resulting from an act of
terrorism when qualified anti-terrorism technologies have been deployed
in defense against or response or recovery from such act and such
claims result or may result in loss to the Seller.'' Section 863(a)(2);
see also section 863(a)(1). This exclusive ``Federal cause of action
shall be brought only for claims for injuries that are proximately
caused by sellers that provide qualified anti-terrorism technology.''
Section 863(a)(1). The best reading of Section 863(a), and the reading
the Department hereby adopts, is that (1) only one Federal cause of
action exists for loss of property, personal injury, or death when a
claim relates to the deployment (performance or non-performance) of the
Seller's qualified anti-terrorism technology in defense against,
response to, or recovery from an act of terrorism, and (2) such cause
of action may be brought only against the Seller.
The exclusive Federal nature of this cause of action is evidenced
in large part by the exclusive jurisdiction provision in Section
863(a)(2). That subsection states: ``Such appropriate district court of
the United States shall have original and exclusive jurisdiction over
all actions for any claim for loss of property, personal injury, or
death arising out of, relating to, or resulting from an act of
terrorism when qualified anti-terrorism technologies have been deployed
in defense against or response or recovery from such act and such
claims result or may result in loss to the Seller.'' Id. Any
presumption of concurrent causes of action (between State and Federal
law) is overcome by two basic points. First, Congress would not have
created in this Act a Federal cause of action to complement State law
causes of action. Not only is the substantive law for decision in the
Federal action derived from State law (and thus would be surplusage),
but in creating the Act Congress plainly intended to limit rather than
increase the liability exposure of Sellers. Second, the granting of
exclusive jurisdiction to the Federal district courts provides further
evidence that Congress wanted an exclusive Federal cause of action.
Indeed, a Federal district court (in the absence of diversity) does not
have jurisdiction over state law claims, and the statute makes no
mention of diversity claims anywhere in the Act.
Further, it is clear that the Seller is the only appropriate
defendant in this exclusive Federal cause of action. First and
foremost, the Act unequivocally states that a ``cause of action shall
be brought only for claims for injuries that are proximately caused by
sellers that provide qualified anti-terrorism technology.'' Section
863(a)(1) (emphasis added). Second, if the Seller of the qualified
anti-terrorism technology at issue was not the only defendant, would-be
plaintiffs could, in an effort to circumvent the statute, bring claims
(arising out of or relating to the performance or non-performance of
the Seller's qualified anti-terrorism technology) against arguably less
culpable persons or entities, including but not limited to contractors,
subcontractors, suppliers, vendors, and customers of the Seller of the
technology. Because the claims in the cause of action would be
predicated on the performance or non-performance of the Seller's
qualified anti-terrorism technology, those persons or entities, in
turn, would file a third-party action against the Seller. In such
situations, the claims against non-Sellers thus ``may result in loss to
the Seller'' under section 863(a)(2). The Department believes Congress
did not intend through the Act to increase rather than decrease the
amount of litigation arising out of or related to the deployment of
qualified anti-terrorism technology. Rather, Congress balanced the need
to provide recovery to plaintiffs against the need to ensure adequate
deployment of anti-terrorism technologies by creating a cause of action
that provides a certain level of recovery against Sellers, while at the
same time protecting others in the supply chain.
The scope of Federal preemption of state laws is highly relevant to
the Department's implementation of the Act, as the Department will have
to determine the amount of insurance that Sellers must obtain.
Accordingly, the Department seeks comment on that matter.
6. Amount of Insurance. The Act requires that Sellers obtain
liability insurance ``of such types and in such amounts'' certified by
the Secretary ``to satisfy otherwise compensable third-party claims
arising out of, relating to, or resulting from an act of terrorism when
qualified anti-terrorism technologies have been deployed.'' Section
864(a)(1). However, the Act makes clear that Sellers are not required
to obtain liability insurance beyond ``the maximum amount of liability
insurance reasonably available from private sources on the world market
at prices and terms that will not unreasonably distort the sales price
of Seller's anti-terrorism technologies.'' Section 864(a)(2).
As explained above, the Department eschews any ``one-size-fits-
all'' approach to the insurance coverage requirement. Instead, the
Department construes the Act as contemplating the examination of
several factors. Section 25.4(b) of the interim rule therefore sets
forth a nonexclusive list of several factors that the Department may
consider. These include the amount of insurance the Seller has
previously maintained; the amount of insurance maintained by the Seller
for other technologies or for the Seller's business as a whole; the
amount of insurance typically maintained by sellers of comparable
technologies; data and history regarding mass casualty losses;
information regarding the amount of liability insurance offered on the
world market; the particular technology at issue and its intended use;
and the point at which the cost of coverage would ``unreasonably
distort'' the price of the technology.
In the course of determining the amount of insurance required under
the Act for a particular technology, the Department may consult with
the Seller, the Seller's insurer, and others. While the decision
regarding the amount of insurance required will generally be specific
to each Seller or each technology, the Department recognizes that the
incentive-based purposes of the Act may be furthered if the Department
provides information to potential Sellers regarding the types and
amounts of insurance that they will likely be required to obtain. Thus
the Secretary may, where appropriate, give guidance to potential
Sellers regarding the type and amounts of insurance that may be
sufficient under the Act for particular
[[Page 59694]]
technologies or categories of technologies.
The Department also recognizes that the amount of insurance
available at prices that will not unreasonably distort the price of the
anti-terrorism technology may vary over time. Thus, the interim rule is
written to give the Department flexibility to address fluctuating
insurance prices by providing that, during the term of the designation,
the Seller may request reconsideration of the insurance certification
due to changed circumstances or other reasons.
The interim rule provides that the Seller shall certify on an
annual basis that the Seller has maintained the insurance required by
the Under Secretary's certification. It further provides that the Under
Secretary may terminate the designation as a qualified anti-terrorism
technology if the Seller fails to provide the certification or provides
a false certification. Termination of the designation would mean that
the Seller would not be able to sell the technology as a qualified
anti-terrorism technology after the date of the termination. The
Seller's failure to maintain the insurance also may adversely affect
the Seller's ability to obtain a renewal of the designation for the
technology, and may even adversely affect the Seller's ability to
obtain future designations of ``qualified anti-terrorism
technologies.'' Finally, a false certification may result in criminal
or other penalties under existing laws.
The liability protections of the Act will continue to apply to
technologies sold while the SAFETY Act designation was effective,
regardless of whether the seller maintains the required insurance. This
is necessary because the SAFETY Act protects not only the Seller, but
also others in the manufacturing and distribution chains. For example,
a buyer who purchases the technology while the SAFETY Act designation
is still in effect should not be punished for the Seller's failure to
maintain the insurance. The Seller, however, will face potential
uninsured liability, because the Seller's liability limit will remain
at the certified insurance level. This is because subsection (c) of
Section 864 makes clear that the Seller's liability is capped at the
amount of insurance ``required'' to be maintained under Section 864,
rather than the amount of coverage actually obtained. The limitation of
liability thus relates entirely to the amount of insurance required and
makes no reference to whether such insurance is, in fact, maintained by
the Seller.
The Department, as part of each certification, will specify the
Seller or Sellers of the anti-terrorism technology for purposes of
SAFETY Act coverage. The Department may, but need not, specify in the
certification the others who are covered by the liability insurance
required to be purchased by the Seller.
7. Use of Standards. Section 25.3(c) of the interim rule provides
that the Under Secretary may issue technical standards for categories
of anti-terrorism technologies, and that the Under Secretary may
consider compliance with any such applicable standards in determining
whether to grant a designation under the Act.
8. Relationship of the SAFETY Act to Indemnification under Public
Law 85-804. The Department recognizes that Congress intended that the
SAFETY Act's liability protections would substantially reduce the need
for the United States to provide indemnification under Public Law 85-
804 to Sellers of anti-terrorism technologies. Where applicable, the
strong liability protections of the SAFETY Act should, in most
circumstances, make it unnecessary to provide indemnification to
Sellers. The Department recognizes, however, that there might be, in
some limited circumstances, technologies or services with respect to
which both SAFETY Act coverage and indemnification might be warranted.
See 148 Cong. Rec. E2080 (statement by Rep. Armey) (November 13, 2002)
(stating that in some situations the SAFETY Act protections will
``complement other government risk-sharing measures that some
contractors can use such as Public Law 85-804'').
In recognition of this close relationship between the SAFETY Act
and indemnification authority, in Section 73 of Executive Order 13286
of February 28, 2003, the President recently amended the existing
Executive Order on indemnification--Executive Order 10789 of November
14, 1958, as amended. The amendment granted the Department of Homeland
Security authority to indemnify under Public Law 85-804. At the same
time, it requires that all agencies--not just the Department of
Homeland Security--follow certain procedures to ensure that the
potential applicability of the SAFETY Act is considered before any
indemnification is granted for an anti-terrorism technology.
Specifically, the amendment provides that Federal agencies cannot
provide indemnification ``with respect to any matter that has been, or
could be, designated by the Secretary of Homeland Security as a
qualified anti-terrorism technology'' unless the Secretary of Homeland
Security has advised whether SAFETY Act coverage would be appropriate
and the Director of the Office and Management and Budget has approved
the exercise of indemnification authority. The amendment includes an
exception for the Department of Defense where the Secretary of Defense
has determined that indemnification is ``necessary for the timely and
effective conduct of United States military or intelligence
activities.''
Application of Various Laws and Executive Orders to This Interim
Rulemaking
Executive Order 12866--Regulatory Planning and Review
The Department has examined the economic implications of this
interim rule as required by Executive Order 12866. Executive Order
12866 directs agencies to assess all costs and benefits of available
regulatory alternatives and, when regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential
economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity). Executive Order 12866
classifies a rule as significant if it meets any one of a number of
specified conditions, including: having an annual effect on the economy
of $100 million, adversely affecting a sector of the economy in a
material way, adversely affecting competition, or adversely affecting
jobs. A regulation is also considered a significant regulatory action
if it raises novel legal or policy issues.
The Department did not receive any comments on our economic
analysis.
The Department concludes that this interim rule is a significant
regulatory action under the Executive Order because it will have a
positive, material effect on public safety under Section 3(f)(1), and
it raises novel legal and policy issues under Section 3(f)(4). The
Department concludes, however, that this interim rule does not meet the
significance threshold of $100 million effect on the economy in any one
year under Section 3(f)(1), due to the relatively low estimated burden
of applying for this technology program, the unknown number of
certifications and designations that the Department will dispense, and
the unknown probability of a terrorist attack that would have to occur
in order for the protections put in place in this interim rule to have
a large impact on the public.
[[Page 59695]]
Need for the Regulation and Market Failure
This regulation implements the SAFETY Act and is intended to
implement the provisions set forth in that Act. The Department believes
the current development of anti-terrorism technologies has been slowed
due to the potential liability risks associated with their development
and eventual deployment. In a fully functioning insurance market,
technology developers would be able to insure themselves against
excessive liability risk; however, the terrorism risk insurance market
appears to be in disequilibrium. The attacks of September 11
fundamentally changed the landscape of terrorism insurance. Congress,
in the findings of TRIA, concluded that temporary financial assistance
in the insurance market is needed to ``allow for a transitional period
for the private markets to stabilize, resume pricing of such insurance,
and build capacity to absorb any future losses.'' TRIA Sec. 101(b)(2).
This interim rulemaking addresses a similar concern, to the extent that
potential technology developers are unable to efficiently insure
against large losses due to an ongoing reassessment of terrorism issues
in insurance markets.
Even after a temporary insurance market adjustment, purely private
terrorism risk insurance markets may exhibit negative externalities.
Because the risk pool of any single insurer may not be large enough to
efficiently spread and therefore insure against the risk of damages
from a terrorist attack, and because the potential for excessive
liability may render any terrorism insurance prohibitively expensive,
society may suffer from less than optimal technological protection
against terrorist attacks. The measures set forth in this interim rule
are designed to meet this goal; they will provide certain liability
protection from lawsuits and consequently will increase the likelihood
that businesses will pursue important technologies that may not be
pursued without this protection.
Costs and Benefits to Technology Development Firms
Since this interim rulemaking puts in place an additional voluntary
option for technology developers, the expected direct net benefits to
firms of this interim rulemaking will be positive; companies presumably
will not choose to pursue the designation of ``anti-terrorism
technology'' unless they believe it to be a profitable endeavor. The
Department cannot predict with certainty the number of applicants for
this program. An additional source of uncertainty is the reaction of
the insurance market to this designation. As mentioned above, insurance
markets appear currently to be adjusting their strategy for terrorism
risk, so little market information exists that would inform this
estimate. The Department invites comments on these issues.
If a firm chooses to invest effort in pursuing SAFETY Act liability
protection, the direct costs to that firm will be the time and money
required to submit the required paperwork and other information to the
Department. Only companies that choose to request this protection will
incur costs. Please see the accompanying PRA analysis for an estimate
of these costs.
The direct benefits to firms include lower potential losses from
liability for terrorist attacks, and as a consequence a lower burden
from liability insurance for this type of technology. In this
assessment, we were careful to only consider benefits and costs
specifically due to the implementation of the interim rule and not
costs that would have been incurred by companies absent any interim
rulemaking. The SAFETY Act requires the sellers of the technology to
obtain liability insurance ``of such types and in such amounts''
certified by the Secretary. The entire cost of insurance is not a cost
specifically imposed by the proposed rulemaking, as companies in the
course of good business practice routinely purchase insurance absent
Federal requirements to do so. Any difference in the amount or price of
insurance purchased as a result of the SAFETY Act would be a cost or
benefit of this interim rule for firms.
The wording of the SAFETY Act clearly states that sellers are not
required to obtain liability insurance beyond the maximum amount of
liability insurance reasonably available from private liability sources
on the world market at prices and terms that will not unreasonably
distort the sales price of the seller's anti-terrorism technologies. We
tentatively conclude, however, that this interim rulemaking will impact
both the prices and terms of liability insurance relative to the amount
of insurance coverage absent the SAFETY Act. The probable effect of
this interim rule is to lower the quantity of liability coverage needed
in order for a firm to protect itself from terrorism liability risks,
which would be considered a benefit of this interim rule to firms. This
change will most likely be a shift back in demand that leads to a
movement along the supply curve for technology firms already in this
market; they probably will buy less liability coverage. This will have
the effect of lowering the price per unit of coverage in this market.
The Department also expects, however, that this interim rulemaking
will lead to greater market entry, which will generate surplus for both
technology firms and insurers. Again, this market is still in
development, and the Department solicits comments on exactly how to
predict the effect of this interim rulemaking on technology
development.
Costs and Benefits to Insurers
The Department has little information on the future structure of
the terrorism risk insurance market, and how this interim rulemaking
will affect that structure. As stated above, this type of intervention
could serve to lower the demand for insurance in the current market,
thus the static effect on the profitability of insurers is negative.
The benefits of the lower insurance burden to technology firms would be
considered a cost to insurers; the static changes to insurance coverage
would cause a transfer from insurers to technology firms. On the other
hand, this type of intervention should serve to increase the surplus of
insurers by making some types of insurance products possible that would
have been prohibitive to customers or impossible for insurers to design
in the absence of this interim rulemaking. The Department is interested
in public comment on any possible negative or positive impacts to
insurers caused by the SAFETY Act and this interim rulemaking, and
whether these impacts would result in transfers within this market or
an efficiency change not captured by another party. We encourage
commenters to be as specific as possible.
Costs and Benefits to the Public
The benefits to the public of this interim rulemaking are very
difficult to put in dollar value terms since its ultimate objective is
the development of new technologies that will help prevent or limit the
damage from terrorist attacks. It is not possible to even determine
whether these technologies could help prevent large or small scale
attacks, as the SAFETY Act applies to a vast range of technologies,
including products, services, software, and other forms of intellectual
property that could have a widespread impact. In qualitative terms, the
SAFETY Act removes a great deal of the risk and uncertainty associated
with product liability and in the process creates a powerful incentive
that will help fuel the development of critically needed anti-terrorism
[[Page 59696]]
technologies. Additionally, we expect the SAFETY Act to reduce the
research and development costs of these technologies.
The tradeoff, however, may be that a greater number of technologies
may be developed and qualify for this program that have a lower average
effectiveness against terrorist attacks than technologies currently on
the market, or technologies that would be developed in the absence of
this interim rulemaking. In the absence of this rulemaking, strong
liability discouragement implies that the fewer products that are
deployed in support of anti-terrorist efforts may be especially
effective, since profit maximizing firms will always choose to develop
the technologies with the highest demand first. It is the tentative
conclusion of the Department that liability discouragement in this
market is too strong or prohibitive, for the reasons mentioned above.
The Department tentatively concludes that this interim rule will have
positive net benefits to the public, since it serves to strike a better
balance between consumer protection and technological development. The
Department welcomes comments informing this tradeoff argument, and
public input on whether this interim rulemaking does strike the correct
balance.
Collection of Information
Paperwork Reduction Act of 1995
This interim rule includes collection of information under the
Paperwork Reduction Act of 1995 (Paperwork Reduction Act) (44 U.S.C.
3501-3520). As defined in 5 CFR 1320(c), ``collection of information''
comprises reporting, recordkeeping, monitoring, posting, labeling, and
other similar actions. The title and description of the information
collections, a description of those who must collect the information,
and an estimate of the total annual burden follow. The estimate covers
the time for reviewing instructions, searching existing sources of
data, gathering and maintaining the data needed, and completing and
reviewing the collection.
The Department submitted the following information collection
requests to the Office of Management and Budget (OMB) for emergency
review with an expiration of six months from the date of publication of
this interim rule in accordance with procedures of the Paperwork
Reduction Act of 1995. The proposed information collection will be
published to obtain comments from the public and affected agencies.
The Department requests comments on at least the following four
points:
(1) Whether the proposed collection of information is necessary for
the proper performance of the functions of the agency, including
whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used;
(3) The quality, utility, and clarity of the information to be
collected; and
(4) The burden of the collection of information on those who are to
respond, including through the use of appropriate automated,
electronic, mechanical, or other technological collection techniques or
other forms of information technology, e.g., permitting electronic
submission of responses.
For the purpose of each analysis described below and associated
with each collection of information, the Department assumes a loaded
labor rate of the personnel preparing each collection of information to
be $100 per hour. The Department does not have sufficient information
to provide a known number of applicants or submitters of information.
All numbers are estimates.
This rule requires persons to conduct safety, effectiveness,
utility, and hazard analyses and provide them to the Under Secretary in
the course of applying for Designation of qualified anti-terrorism
technology. We do not have quantified estimates of the impact of this
provision, but we expect that much of the safety, effectiveness,
utility, and hazard analysis activity will already take place in the
normal course of technology development, since those matters are
fundamental characteristics of a product. The Department acknowledges
considerable uncertainty in these estimates, but even if the estimates
were considerably higher, this does not represent a large investment by
firms relative to overall development costs.
Overview of Requests for Collection of Information
(a) Collection of Information Form No. DHS-S&T-I-SAFETY-001.
(1) Type of Information Collection: New Collection.
(2) Title of the Form/Collection: Pre-Application for Designation
of Qualified Anti-terrorism Technology.
(3) Agency form numbers and applicable component sponsoring the
collection: Form Number: DHS-S&T-I-SAFETY-001, Directorate of Science
and Technology, Department of Homeland Security.
(4) Affected public who will be asked or required to respond, as
well as a brief abstract: Primary: Sellers and potential Sellers of
qualified anti-terrorism technology. Abstract: The Pre-Application Form
for Designation of Qualified Anti-Terrorism Technology will be used to
provide information to the Under Secretary for Science and Technology
of the Department of Homeland Security in determining whether Sellers
pre-qualify for risk and litigation management protections under the
SAFETY Act.
(5) An estimate of the total number of respondents and the amount
of time estimated for an average respondent to respond: 1,000
applicants annually; 14 to 72 hours per application.
(6) An estimate of the total public burden (in hours) associated
with the collection: 14,000 to 72,000 hours.
(b) Collection of Information Form No. DHS-S&T-I-SAFETY-002.
(1) Type of Information Collection: New Collection.
(2) Title of the Form/Collection: Application for Designation of
Qualified Anti-Terrorism Technology.
(3) Agency form numbers and applicable component sponsoring the
collection: Form Number: DHS-S&T-I-SAFETY-002, Directorate of Science
and Technology, Department of Homeland Security.
(4) Affected public who will be asked or required to respond, as
well as a brief abstract: Primary: Sellers and potential Sellers of
qualified anti-terrorism technology. Abstract: The Application Form for
Designation of Qualified Anti-Terrorism Technology will be used to
provide information to the Under Secretary for Science and Technology
of the Department of Homeland Security in determining whether Sellers
qualify for risk and litigation management protections under the SAFETY
Act.
(5) An estimate of the total number of respondents and the amount
of time estimated for an average respondent to respond: 1,000
applicants annually; 36 to 180 hours per application.
(6) An estimate of the annual total public burden associated with
the collection: 36,000 to 180,000 hours.
(c) Collection of Information Form No. DHS-S&T-I-SAFETY-003.
(1) Type of Information Collection: New Collection.
(2) Title of the Form/Collection: Application of Transfer of
Designation.
(3) Agency form numbers and applicable component sponsoring the
collection: Form Number: DHS-S&T-I-SAFETY-003, Directorate of Science
and Technology, Department of Homeland Security.
[[Page 59697]]
(4) Affected public who will be asked or required to respond, as
well as a brief abstract: Primary: Sellers of qualified anti-terrorism
technology. Abstract: The Application Form for Transfer of Designation
will be used by Sellers to notify the Under Secretary for Science and
Technology of the Department of Homeland Security of a transfer of
Designation.
(5) An estimate of the total number of respondents and the amount
of time estimated for an average respondent to respond: 250 to 500
applicants annually, 15 to 30 minutes per application.
(6) An estimate of the annual total public burden (in hours)
associated with the collection: 250 hours.
(d) Collection of Information Form No. DHS-S&T-I-SAFETY-004.
(1) Type of Information Collection: New Collection.
(2) Title of the Form/Collection: Notice of License of Qualified
Anti-Terrorism Technology.
(3) Agency form numbers and applicable component sponsoring the
collection: Form Number: DHS-S&T-I-SAFETY-004, Directorate of Science
and Technology, Department of Homeland Security.
(4) Affected public who will be asked or required to respond, as
well as a brief abstract: Primary: Sellers of qualified anti-terrorism
technology. Abstract: The Notice of License of Qualified Anti-Terrorism
Technology.
Application Form for Transfer of Designation will be used by
Sellers to notify the Under Secretary for Science and Technology of the
Department of Homeland Security of its license of the right to
manufacture, use or sell Designated technology.
(5) An estimate of the total number of respondents and the amount
of time estimated for an average respondent to respond: 250 to 500
applicants annually; fifteen to thirty minutes per application.
(6) An estimate of the annual total public burden (in hours)
associated with the collection: 250 hours.
(e) Collection of Information Form No. DHS-S&T-I-SAFETY-005.
(1) Type of Information Collection: New Collection.
(2) Title of the Form/Collection: Notice of License of Approved
Technology.
(3) Agency form numbers and applicable component sponsoring the
collection: Form Number: DHS-S&T-I-SAFETY-005, Directorate of Science
and Technology, Department of Homeland Security.
(4) Affected public who will be asked or required to respond, as
well as a brief abstract: Primary: Sellers of approved anti-terrorism
technology. Abstract: The Form for Notice of License of Approved Anti-
Terrorism Technology will be used by Sellers to notify the Under
Secretary for Science and Technology of the Department of Homeland
Security of the right to manufacture and sell approved technology.
(5) An estimate of the total number of respondents and the amount
of time estimated for an average respondent to respond: 250 to 500
applicants annually; fifteen to thirty minutes per application.
(6) An estimate of the annual total public burden (in hours)
associated with the collection: 250 hours.
(f) Collection of Information Form No. DHS-S&T-I-SAFETY-006.
(1) Type of Information Collection: New Collection.
(2) Title of the Form/Collection: Application for Modification of
Designation.
(3) Agency form numbers and applicable component sponsoring the
collection: Form Number: DHS-S&T-I-SAFETY-006, Directorate of Science
and Technology, Department of Homeland Security.
(4) Affected public who will be asked or required to respond, as
well as a brief abstract: Primary: Sellers of qualified anti-terrorism
technology. Abstract: The Application Form for Modification of
Designation will be used by Sellers to apply to the Under Secretary for
Science and Technology of the Department of Homeland Security for
approval of modification of a designation of Qualified Anti-Terrorism
Technology.
(5) An estimate of the total number of respondents and the amount
of time estimated for an average respondent to respond: 250 applicants
annually; 10 to 20 hours per application.
(6) An estimate of the annual total public burden (in hours)
associated with the collection: 5,000 hours.
(g) Collection of Information Form No. DHS-S&T-I-SAFETY-007.
(1) Type of Information Collection: New Collection.
(2) Title of the Form/Collection: Application for Renewal of
Certification of an Approved Product for Homeland Security.
(3) Agency form numbers and applicable component sponsoring the
collection: Form Number: DHS-S&T-I-SAFETY-007, Directorate of Science
and Technology, Department of Homeland Security.
(4) Affected public who will be asked or required to respond, as
well as a brief abstract: Primary: Sellers of qualified anti-terrorism
technology. Abstract: The Application Form for Renewal of Certification
of an Approved Product for Homeland Security will be used by Sellers to
request renewal of Certification of an approved product for Homeland
Security to the Under Secretary for Science and Technology of the
Department of Homeland Security.
(5) An estimate of the total number of respondents and the amount
of time estimated for an average respondent to respond: 250 to 500
applicants annually; fifteen to thirty minutes per application.
(6) An estimate of the annual total public burden (in hours)
associated with the collection: 250 hours.
(h) Additional Information: If additional information is required
on any of these forms, contact: Directorate of Science and Technology,
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC
20528.
(i) Submission of Comments on the Collection of Information: If you
submit comments on the collection of information, submit them both to
OMB and to the Docket Management Facility where indicated under
addresses, by the date under Dates.
(j) Valid OMB Control Document: You need not respond to a
collection of information unless it displays a currently valid control
document from OMB.
Regulatory Flexibility Act
The Regulatory Flexibility Act requires the Department to determine
whether this interim rulemaking will have a significant impact on a
substantial number of small entities. Although we expect that many of
the applicants for SAFETY Act protection are likely to meet the Small
Business Administration's criteria for being a small entity, we do not
believe this interim rulemaking will impose a significant financial
impact on them. In fact, we believe this interim rule will be a benefit
to technology development businesses, especially small businesses, by
presenting them with an attractive, voluntary option of pursuing a
potentially profitable investment by reducing the amount of risk and
uncertainty of lawsuits associated with developing anti-terrorist
technology. The requirements of this interim rulemaking will only be
imposed on such businesses that voluntarily seek the liability
protection of the SAFETY Act. If a company does not request that
protection, the company will bear no cost.
To the extent that demand for insurance falls, however, insurers
may be adversely impacted by this interim rule. The Department believes
that
[[Page 59698]]
eventual new entry into this market and further opportunities to insure
against terrorism risk implies that the long-term impact of this
interim rulemaking on insurers is ambiguous but could very well be
positive. We also expect that this interim rulemaking will affect
relatively few firms and relatively few insurers either positively or
negatively, as this appears to be a specialized industry. Therefore, we
preliminarily certify this notice of interim rulemaking will not have a
significant impact on a substantial number of small entities, and we
request comments on this certification.
Unfunded Mandates Reform Act of 1995
This interim rule will not result in the expenditure by State,
local and tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year, and it will not
significantly or uniquely affect small governments. Therefore, no
actions were deemed necessary under the provisions of the Unfunded
Mandates Reform Act of 1995.
Small Business Regulatory Fairness Act of 1996
As noted above, the Department has tentatively determined that this
interim rule would not qualify as a ``major rule'' as defined by
section 804 of the Small Business and Regulatory Enforcement Act of
1996.
Executive Order 13132--Federalism
The Department of Homeland Security does not believe this interim
rule will have substantial direct effects on the States, on the
relationship between the national government and the States, or on
distribution of power and responsibilities among the various levels of
government. States will, however, benefit from this interim rule to the
extent that they are purchasers of qualified anti-terrorism
technologies. The Department requests comment on the federalism impact
of this Interim rule. In particular, the Department seeks comment on
whether this interim rule will raise significant federalism
implications and, if so, what is the nature of those implications.
List of Subjects in 6 CFR Part 25
Business and industry, Insurance, Practice and procedure, Science
and technology, Security measures.
0
For the reasons discussed in the preamble, 6 CFR Chapter I is amended
by adding part 25 to read as follows:
PART 25--REGULATIONS TO SUPPORT ANTI-TERRORISM BY FOSTERING
EFFECTIVE TECHNOLOGIES
Sec.
25.1 Purpose.
25.2 Delegation.
25.3 Designation of qualified anti-terrorism technologies.
25.4 Obligations of seller.
25.5 Procedures for designation of qualified anti-terrorism
technologies.
25.6 Government contractor defense.
25.7 Procedures for certification of approved products for homeland
security.
25.8 Confidentiality and protection of intellectual property.
25.9 Definitions.
Authority: Subtitle G, Title VIII, Pub. L. 107-296, 116 Stat.
2238 (6 U.S.C. 441-444).
Sec. 25.1 Purpose.
This part implements the Support Anti-terrorism by Fostering
Effective Technologies Act of 2002, Subtitle G of Title VIII of Public
Law 107-296 (``the SAFETY Act'' or ``the Act'').
Sec. 25.2 Delegation.
All of the Secretary's responsibilities, powers, and functions
under the SAFETY Act may be exercised by the Under Secretary for
Science and Technology of the Department of Homeland Security (``the
Under Secretary'') or the Under Secretary's designees.
Sec. 25.3 Designation of qualified anti-terrorism technologies.
(a) General. The Under Secretary may designate as a qualified anti-
terrorism technology for purposes of protections set forth in Subtitle
G of Title VIII of Public Law 107-296 any qualifying product,
equipment, service (including support services), device, or technology
(including information technology) designed, developed, modified, or
procured for the specific purpose of preventing, detecting,
identifying, or deterring acts of terrorism or limiting the harm such
acts might otherwise cause.
(b) Criteria to be considered. In determining whether to grant the
designation under paragraph (a) (a ``Designation''), the Under
Secretary may exercise discretion and judgment in interpreting and
weighting the following criteria in each case:
(1) Prior United States Government use or demonstrated substantial
utility and effectiveness.
(2) Availability of the technology for immediate deployment in
public and private settings.
(3) Existence of extraordinarily large or extraordinarily
unquantifiable potential third party liability risk exposure to the
Seller or other provider of such anti-terrorism technology.
(4) Substantial likelihood that such anti-terrorism technology will
not be deployed unless protections under the system of risk management
provided under 6 U.S.C. 441-444 are extended.
(5) Magnitude of risk exposure to the public if such anti-terrorism
technology is not deployed.
(6) Evaluation of all scientific studies that can be feasibly
conducted in order to assess the capability of the technology to
substantially reduce risks of harm.
(7) Anti-terrorism technology that would be effective in
facilitating the defense against acts of terrorism, including
technologies that prevent, defeat or respond to such acts.
(8) Any other factor that the Under Secretary may consider to be
relevant to the determination or to the homeland security of the United
States.
(c) Use of standards. From time to time the Under Secretary may
develop, issue, revise, and adopt technical standards for various
categories of anti-terrorism technologies. Such standards will be
published by the Department at http://www.dhs.gov, and copies may also
be obtained by mail by sending a request to: Directorate of Science and
Technology, SAFETY Act/room 4320, Department of Homeland Security,
Washington, DC 20528. Compliance with any such standards that are
applicable to a particular anti-terrorism technology may be considered
before any Designation will be granted for such technology under
paragraph (a) of this section; in such cases, the Under Secretary may
consider test results produced by an independent laboratory or other
entity engaged to test or verify the safety, utility, performance, or
effectiveness of such technology.
(d) Consideration of substantial equivalence. In determining
whether a particular technology satisfies the criteria in paragraph (b)
and complies with any applicable standards referenced in paragraph (c),
the Under Secretary may take into consideration evidence that the
technology is substantially equivalent to other, similar technologies
(``predicate technologies'') that have been previously designated as
``qualified anti-terrorism technologies'' under the SAFETY Act. A
technology may be deemed to be substantially equivalent to a predicate
technology if:
(1) it has the same intended use as the predicate technology; and
(2) it has the same or substantially similar technological
characteristics as the predicate technology.
[[Page 59699]]
(e) Duration and depth of review. Recognizing the urgency of
certain security measures, the Under Secretary will make a judgment
regarding the duration and depth of review appropriate for a particular
technology. This review will include submissions by the applicant for
SAFETY Act coverage, along with information that the Under Secretary
can feasibly gather from other sources. For technologies with which a
Federal, state, or local government agency already has substantial
experience or data (through the procurement process or through prior
use or review), the review may rely in part upon that prior experience
and, thus, may be expedited. The Under Secretary may consider any
scientific studies, testing, field studies, or other experience with
the technology that he deems appropriate and that are available or can
be feasibly conducted or obtained in order to assess the capability of
the technology to substantially reduce risks of harm. Such studies may,
in the Under Secretary's discretion, include:
(1) Public source studies;
(2) Classified and otherwise confidential studies;
(3) Studies, tests, or other performance records or data provided
by or available to the producer of the specific technology; and
(4) Proprietary studies that are available to the Under Secretary.
In considering whether or the extent to which it is feasible to
defer a decision on a Designation until additional scientific studies
can be conducted on a particular technology, the Under Secretary will
bring to bear his or her expertise concerning the protection of the
security of the American homeland and will consider the urgency of the
need for the technology.
(f) Content of Designation. A Designation shall specify the
technology, the Seller(s) of the technology, and the earliest date of
sale of the technology to which the Designation shall apply (which
shall be determined by the Under Secretary in his or her discretion,
and may be prior to, but shall not be later than, the effective date of
the Designation). The Designation may, but need not, also specify
others who are required to be covered by the liability insurance
required to be purchased by the Seller. The Designation shall include
the Under Secretary's certification required by Sec. 25.4(h). The
Designation may also include such other specifications as the Under
Secretary may deem to be appropriate, including, but not limited to,
specific applications of the technology, materials or processes
required to be used in producing or using the technology, restrictions
on transfer or licensing, and training and instructions required to be
provided to persons involved in the deployment of the technology.
Failure to specify a covered person or entity in a Designation will not
preclude application of the Act's protections to that person or entity.
(g) Government procurements. The Under Secretary may coordinate a
SAFETY Act review in connection with a Federal, state, or local
government agency procurement of an anti-terrorism technology in any
manner he or she deems appropriate and consistent with the Act and
other applicable laws.
(h) Pre-application consultations. To the extent that he or she
deems it appropriate, the Under Secretary may consult with potential
SAFETY Act applicants regarding the need for or advisability of
particular types of anti-terrorism technologies, although no pre-
approval of any particular technology may be given. Such potential
applicants may request such consultations through the Pre-Application
process set forth in the SAFETY Act Application Kit. The
confidentiality provisions in Sec. 25.8 shall be applicable to such
consultations.
Sec. 25.4 Obligations of Seller.
(a) Liability insurance required. The Seller shall obtain liability
insurance of such types and in such amounts as shall be required in the
applicable Designation, which shall be the amounts and types certified
by the Under Secretary to satisfy otherwise compensable third-party
claims arising out of, relating to, or resulting from an act of
terrorism when qualified anti-terrorism technologies have been deployed
in defense against, response to, or recovery from, such act.
Notwithstanding the foregoing, if the Under Secretary determines that
insurance in appropriate amounts or of appropriate types is not
available for a particular technology, the Under Secretary may
authorize a Seller to self-insure and prescribe the amount and terms of
the Seller's liability in the applicable Designation, which amount and
terms shall be such as will not unreasonably distort the sales price of
the Seller's anti-terrorism technology. The Under Secretary may request
at any time (before or after the insurance certification process
established under this section) that the Seller or any other provider
of qualified anti-terrorism technology submit any information that
would:
(1) Assist in determining the amount of liability insurance
required, or
(2) Show that the Seller or any other provider of qualified anti-
terrorism technology otherwise has met all the requirements of this
section.
(b) Maximum Amount. For the total claims related to one act of
terrorism, in determining the required amounts and types of liability
insurance that the Seller will be required to obtain, the Under
Secretary shall not require the Seller to obtain liability insurance of
more than the maximum amount of liability insurance reasonably
available from private sources on the world market at prices and terms
that will not unreasonably distort the sales price of the Seller's
anti-terrorism technology. The Under Secretary will determine the
amount of liability insurance required for each technology, or, to the
extent feasible and appropriate, a particular group of technologies.
The Under Secretary or his designee may find that--notwithstanding the
level of risk exposure for a particular technology, or group of
technologies--the maximum amount of liability insurance from private
sources on the world market is set at a price or contingent on terms
that will unreasonably distort the sales price of a Seller's
technology, thereby necessitating liability insurance coverage below
the maximum amount available. In determining the amount of liability
insurance required, the Under Secretary may consider any factor,
including, but not limited to, the following:
(1) The particular technology at issue;
(2) The amount of liability insurance the Seller maintained prior
to application;
(3) The amount of liability insurance maintained by the Seller for
other technologies or for the Seller's business as a whole;
(4) The amount of liability insurance typically maintained by
sellers of comparable technologies;
(5) Information regarding the amount of liability insurance offered
on the world market;
(6) Data and history regarding mass casualty losses;
(7) The intended use of the technology;
(8) The possible effects of the cost of insurance on the price of
the product, and the possible consequences thereof for development,
production, or deployment of the technology; and
(9) In the case of a Seller seeking approval to self-insure, the
factors described in 48 CFR 28.308(d).
(c) Scope of coverage. Liability insurance required to be obtained
(or self-insurance required) pursuant to this section shall, in
addition to the Seller, protect the following, to the extent of their
potential liability for involvement in the manufacture, qualification,
sale,
[[Page 59700]]
use, or operation of qualified anti-terrorism technologies deployed in
defense against, response to, or recovery from, an act of terrorism:
(1) Contractors, subcontractors, suppliers, vendors and customers
of the Seller.
(2) Contractors, subcontractors, suppliers, and vendors of the
customer.
(d) Third party claims. Any liability insurance required to be
obtained (or self-insurance required) pursuant to this section shall
provide coverage against third party claims arising out of, relating
to, or resulting from an act of terrorism when the applicable qualified
anti-terrorism technologies have been deployed in defense against,
response to, or recovery from such act.
(e) Reciprocal waiver of claims. The Seller shall enter into a
reciprocal waiver of claims with its contractors, subcontractors,
suppliers, vendors, and customers, and contractors and subcontractors
of the customers, involved in the manufacture, sale, use, or operation
of qualified anti-terrorism technologies, under which each party to the
waiver agrees to be responsible for losses, including business
interruption losses, that it sustains, or for losses sustained by its
own employees resulting from an activity resulting from an act of
terrorism when qualified anti-terrorism technologies have been deployed
in defense against, response to, or recovery from such act.
Notwithstanding the foregoing, if the Seller has used diligent efforts
in good faith to obtain all required reciprocal waivers, then obtaining
such waivers shall not be a condition precedent or subsequent for, nor
shall the failure to obtain one or more of such waivers adversely
affect, the issuance, validity, effectiveness, duration, or
applicability of a Designation or a Certification. Nothing in this
paragraph (e) shall be interpreted to render the failure to obtain one
or more of such waivers a condition precedent or subsequent for the
issuance, validity, effectiveness, duration, or applicability of a
Designation or a Certification.
(f) Extent of liability. Liability for all claims against a Seller
arising out of, relating to, or resulting from an act of terrorism when
such Seller's qualified anti-terrorism technology has been deployed in
defense against, response to, or recovery from such act in accordance
with the applicable Designation and such claims result or may result in
loss to the Seller, whether for compensatory or punitive damages or for
contribution or indemnity, shall not be in an amount greater than the
limits of liability insurance coverage required to be maintained by the
Seller under this Section, or, in the case of a Seller authorized by
the Under Secretary to self-insure pursuant to this Section, shall not
be in an amount greater than the liability limit prescribed by the
Under Secretary in the applicable Designation.
(1) In addition, in any action brought under Section 863 of the Act
for damages:
(i) No punitive damages intended to punish or deter, exemplary
damages, or other damages not intended to compensate a plaintiff for
actual losses may be awarded, nor shall any party be liable for
interest prior to the judgment,
(ii) Noneconomic damages may be awarded against a defendant only in
an amount directly proportional to the percentage of responsibility of
such defendant for the harm to the plaintiff, and no plaintiff may
recover noneconomic damages unless the plaintiff suffered physical
harm, and
(iii) any recovery by a plaintiff shall be reduced by the amount of
collateral source compensation, if any, that the plaintiff has received
or is entitled to receive as a result of such acts of terrorism that
result or may result in loss to the Seller.
(2) Without prejudice to the authority of the Under Secretary to
terminate a Designation pursuant to paragraph (h) of this Section, such
liability limitations and reductions shall apply in perpetuity to all
deployments of a qualified anti-terrorism technology that occur on or
after the effective date of the Designation applicable to such
technology in defense against, response to, or recovery from any act of
terrorism, regardless of whether any liability insurance coverage
required to be obtained by the Seller is actually maintained or not,
provided that the sale of such technology was consummated by the Seller
on or after the earliest date of sale of such technology specified in
such Designation (which shall be determined by the Under Secretary in
his or her discretion, and may be prior to, but shall not be later
than, such effective date) and prior to the expiration or termination
of such Designation.
(g) Information to be submitted by the Seller. As part of any
application for a Designation, the Seller shall provide a statement,
executed by a duly authorized representative of the Seller, of all
liability insurance coverage applicable to third-party claims arising
out of, relating to, or resulting from an act of terrorism when the
Seller's qualified anti-terrorism technology has been deployed in
defense against, response to, or recovery from such act, including:
(1) Names of insurance companies, policy numbers, and expiration
dates;
(2) A description of the types and nature of such insurance
(including the extent to which the Seller is self-insured or intends to
self-insure);
(3) Dollar limits per occurrence and annually of such insurance,
including any applicable sublimits;
(4) Deductibles or self-insured retentions, if any, that are
applicable;
(5) Any relevant exclusions from coverage under such policies;
(6) The price for such insurance, if available, and the per-unit
amount or percentage of such price directly related to liability
coverage for the Seller's qualified anti-terrorism technology deployed
in defense against, or response to, or recovery from an act of terror;
(7) Where applicable, whether the liability insurance, in addition
to the Seller, protects contractors, subcontractors, suppliers, vendors
and customers of the Seller and contractors, subcontractors, suppliers,
vendors and customers of the customer to the extent of their potential
liability for involvement in the manufacture, qualification, sale, use
or operation of Qualified Anti-terrorism Technologies deployed in
defense against, response to, or recovery from an act of terrorism;
(8) Any limitations on such liability insurance; and
(9) In the case of a Seller seeking approval to self-insure, all of
the information described in 48 CFR 28.308(a)(1) through (10).
(h) Under Secretary's certification. For each qualified anti-
terrorism technology, the Under Secretary shall certify the amount of
insurance required under Section 864 of the Act. The Under Secretary
shall include the certification under this section as a part of the
applicable Designation. The certification may specify a period of time
for which the certification will apply. The Seller of a qualified anti-
terrorism technology may at any time petition the Under Secretary for a
revision or termination of the certification under this section. The
Under Secretary or his designee may at any time request information
from the Seller regarding the insurance maintained by the Seller or the
amount of insurance available to the Seller.
(i) Seller's continuing obligations. Within 30 days after the Under
Secretary's certification required by paragraph (h), and within 30 days
after each subsequent anniversary of the issuance of a Designation, the
Seller shall certify to the Under Secretary that the Seller has
maintained the insurance required by such certification. The Under
Secretary may terminate a Designation if the Seller fails to provide
[[Page 59701]]
the certification required by this paragraph or provides a false
certification. The Under Secretary may also consider such failure to
provide the certification or provision of a false certification when
reviewing future applications from the same Seller. The Seller must
also notify the Under Secretary of any changes in types or amounts of
liability insurance coverage for any qualified anti-terrorism
technology.
Sec. 25.5 Procedures for designation of qualified anti-terrorism
technologies.
(a) Application procedure. Any Seller seeking a designation shall
submit information supporting such request to the Assistant Secretary
for Plans, Programs, and Budget of the Department of Homeland Security
Directorate of Science and Technology (``the Assistant Secretary''), or
such other official of such Directorate as may be designated from time
to time by the Under Secretary. The Under Secretary shall make
application forms available at http://www.dhs.gov and by mail upon
request sent to: Directorate of Science and Technology, SAFETY Act/room
4320, Department of Homeland Security, Washington, DC 20528.
(b) Initial notification. Within 30 days after receipt of an
Application for a Designation, the Assistant Secretary or his or her
designee shall notify the applicant in writing that:
(1) The Application is complete and will be reviewed, or
(2) That the Application is incomplete, in which case the missing
or incomplete parts will be specified.
(c) Review process. The Assistant Secretary or his or her designee
will review each complete Application and any included supporting
materials. In performing this function, the Assistant Secretary or his
or her designee may, but is not required to:
(1) Request additional information from the Seller;
(2) Meet with representatives of the Seller;
(3) Consult with, and rely upon the expertise of, any other Federal
or nonfederal entity;
(4) Perform studies or analyses of the technology or the insurance
market for such technology; and
(5) Seek information from insurers regarding the availability of
insurance for such technology.
(d) Recommendation of the Assistant Secretary. (1) Within 90 days
after receipt of a complete Application for a Designation, the
Assistant Secretary shall make one of the following recommendations to
the Under Secretary regarding such Application:
(i) That the Application be approved and a Designation be issued to
the Seller;
(ii) That the Seller be notified that the technology is potentially
eligible for a Designation, but that additional specified information
is needed before a decision may be reached; or
(iii) That the Application be denied.
(2) If approval is recommended, the recommendation shall include a
recommendation regarding the certification required by Sec. 25.4(h).
The Assistant Secretary may extend the time period beyond 90 days upon
notice to the Seller; the Assistant Secretary is not required to
provide a reason or cause for such extension.
(e) Action by the Under Secretary. Within 30 days after receiving a
recommendation from the Assistant Secretary pursuant to paragraph (d)
of this section, the Under Secretary shall take one of the following
actions:
(1) Approve the Application and issue an appropriate Designation to
the Seller, which shall include the certification required by
Sec. 25.4(h);
(2) Notify the Seller in writing that the technology is potentially
eligible for a Designation, but that additional specified information
is needed before a decision may be reached; or
(3) Deny the Application, and notify the Seller in writing of such
decision. The Under Secretary may extend the time period beyond 30 days
upon notice to the Seller; the Under Secretary is not required to
provide a reason or cause for such extension. The Under Secretary's
decision shall be final and not subject to review, except at the
discretion of the Under Secretary.
(f) Term of Designation; renewal. A Designation shall be valid and
effective for a term of five to eight years (as determined by the Under
Secretary based upon the technology) commencing on the date of
issuance. At any time commencing two years prior to the expiration of a
Designation, the Seller may apply for renewal of the Designation. The
Under Secretary shall make the application form for renewals available
at http://www.dhs.gov and by mail upon request sent to: Directorate of
Science and Technology, SAFETY Act/room 4320, Department of Homeland
Security, Washington, DC 20528.
(g) Transfer of Designation. (1) Except as may be restricted by the
terms and conditions of a Designation, any Designation may be
transferred and assigned to any other person or entity to which the
Seller transfers and assigns all right, title, and interest in and to
the technology covered by the Designation, including the intellectual
property rights therein (or, if the Seller is a licensee of the
technology, to any person or entity to which such Seller transfers all
of its right, title, and interest in and to the applicable license
agreement). Such transfer and assignment of a Designation will not be
effective unless and until:
(i) the Under Secretary is notified in writing of the transfer
using the ``Application for Transfer of Designation'' form issued by
the Under Secretary (the Under Secretary shall make this application
form available at http://www.dhs.gov and by mail by written request
sent to: Directorate of Science and Technology, SAFETY Act/room 4320,
Department of Homeland Security, Washington, DC 20528), and
(ii) the transferee complies with all applicable provisions of the
SAFETY Act, this Part, and the relevant Designation as if the
transferee were the Seller.
(2) Upon the effectiveness of such transfer and assignment, the
transferee will be deemed to be a Seller in the place and stead of the
transferor with respect to the applicable technology for all purposes
under the SAFETY Act, this Part, and the transferred Designation. The
transferred Designation will continue to apply to the transferor with
respect to all transactions and occurrences that occurred through the
time at which the transfer and assignment of the Designation became
effective, as specified in the applicable Application for Transfer of
Designation.
(h) Application of Designation to licensees. Except as may be
restricted by the terms and conditions of a Designation, any
Designation shall apply to any other person or entity to which the
Seller licenses (exclusively or nonexclusively) the right to
manufacture, use, or and sell the technology, in the same manner and to
the same extent that such Designation applies to the Seller, effective
as of the date of commencement of the license, provided that the Seller
notifies the Under Secretary of such license by submitting, within 30
days after such date of commencement, a ``Notice of License of
Qualified Anti-terrorism Technology'' form issued by the Under
Secretary. The Under Secretary shall make this form available at http://www.dhs.gov
and by mail upon request sent to: Directorate of Science
and Technology, SAFETY Act/room 4320, Department of Homeland Security,
Washington, DC 20528. Such notification shall not be required for any
licensee listed as a Seller on the applicable Designation.
(i) Termination of Designation resulting from significant
modification.
[[Page 59702]]
A Designation shall terminate automatically, and have no further force
or effect, if the designated qualified anti-terrorism technology is
significantly changed or modified. A significant change or modification
in the technology is one that could significantly reduce the safety or
effectiveness of the technology. This could include, in the case of a
device, a significant change or modification in design, material,
chemical composition, energy source, manufacturing process, or purpose
for which it is to be sold, and in the case of a service, a significant
change or modification in methodology, procedures, or purpose for which
it is to be sold. If a Seller is planning a change or modification to a
designated technology, such Seller may apply for a corresponding
modification of the applicable Designation in advance of the
implementation of such modification. Application for such a
modification must be made using the ``Application for Modification of
Designation'' form issued by the Under Secretary. The Under Secretary
shall make this application form available at http://www.dhs.gov and by
mail upon request sent to: Directorate of Science and Technology,
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC
20528. Changes or modifications will be evaluated at a minimum with
reference to the description of the technology and its purposes as
provided in the Seller's application and with reference to what was
designated in the applicable Designation. In lieu of issuing a modified
Designation in response to such an application, the Under Secretary may
elect to issue a certificate to the Seller certifying that the
submitted changes or modifications are not significant within the
meaning of this paragraph (i) and that the Seller's existing
Designation continues to be applicable to the changed or modified
technology.
Sec. 25.6 Government contractor defense.
(a) Criteria for certification. The Under Secretary may certify a
qualified anti-terrorism technology as an Approved Product for Homeland
Security for purposes of establishing a rebuttable presumption of the
applicability of the government contractor defense. In determining
whether to grant such certification, the Under Secretary or his or her
designee shall conduct a comprehensive review of the design of such
technology and determine whether it will perform as intended, conforms
to the Seller's specifications, and is safe for use as intended. The
Seller shall provide safety and hazard analyses and other relevant data
and information regarding such technology to the Department in
connection with an application. The Under Secretary or his designee may
require that the Seller submit any information that the Under Secretary
or his designee considers relevant to the application for approval. The
Under Secretary or his designee may consult with, and rely upon the
expertise of, any other governmental or non-governmental person or
entity, and may consider test results produced by an independent
laboratory or other person or entity engaged by the Seller.
(b) Extent of liability. Should a product liability or other
lawsuit be filed for claims arising out of, relating to, or resulting
from an act of terrorism when qualified anti-terrorism technologies
certified by the Under Secretary as provided in Sec. Sec. 25.6 and
25.7 of this part have been deployed in defense against or response or
recovery from such act and such claims result or may result in loss to
the Seller, there shall be a rebuttable presumption that the government
contractor defense applies in such lawsuit. This presumption shall only
be overcome by evidence showing that the Seller acted fraudulently or
with willful misconduct in submitting information to the Assistant
Secretary during the course of the Assistant Secretary's consideration
of such technology under this subsection. This presumption of the
government contractor defense shall apply regardless of whether the
claim against the Seller arises from a sale of the product to Federal
Government or non-Federal Government customers. Such presumption shall
apply in perpetuity to all deployments of a qualified anti-terrorism
technology (for which a Certification has been issued by the Under
Secretary as provided in this section and Sec. 25.7) that occur on or
after the effective date of the Certification applicable to such
technology in defense against, response to, or recovery from any act of
terrorism, provided that the sale of such technology was consummated by
the Seller on or after the earliest date of sale of such technology
specified in such Certification (which shall be determined by the Under
Secretary in his or her discretion, and may be prior to, but shall not
be later than, such effective date) and prior to the expiration or
termination of such Certification.
Sec. 25.7 Procedures for Certification of Approved Products for
Homeland Security.
(a) Application procedure. A Seller seeking certification of anti-
terrorism technology as an Approved Product for Homeland Security under
Sec. 25.6 (a ``Certification'') shall submit information supporting
such request to the Assistant Secretary. The Under Secretary shall make
application forms available at http://www.dhs.gov, and copies may also
be obtained by mail by sending a request to: Directorate of Science and
Technology, SAFETY Act/room 4320, Department of Homeland Security,
Washington, DC 20528. An application for a certification may not be
filed unless the Seller has also filed an application for designation
of qualified anti-terrorism technology for the same technology. The two
applications may be filed simultaneously and may be reviewed
simultaneously.
(b) Initial notification. Within 30 days after receipt of an
Application for a Certification, the Assistant Secretary or his or her
designee shall notify the applicant in writing that:
(1) The Application is complete and will be reviewed, or
(2) That the Application is incomplete, in which case the missing
or incomplete parts will be specified.
(c) Review process. The Assistant Secretary or his or her designee
will review each complete Application for a Certification and any
included supporting materials. In performing this function, the
Assistant Secretary or his or her designee may, but is not required to:
(1) Request additional information from the Seller;
(2) Meet with representatives of the Seller;
(3) Consult with, and rely upon the expertise of, any other Federal
or nonfederal entity; and
(4) Perform or seek studies or analyses of the technology.
(d) Recommendation of the Assistant Secretary. (1) Within 90 days
after receipt of a complete Application for a Certification, the
Assistant Secretary shall make one of the following recommendations to
the Under Secretary regarding such Application:
(i) That the Application be approved and a Certification be issued
to the Seller;
(ii) That the Seller be notified that the technology is potentially
eligible for a Certification, but that additional specified information
is needed before a decision may be reached; or
(iii) That the Application be denied.
(2) The Assistant Secretary may extend the time period beyond 90
days upon notice to the Seller; the Assistant Secretary is not required
to provide a reason or cause for such extension.
(e) Action by the Under Secretary. (1) Within 30 days after
receiving a
[[Page 59703]]
recommendation from the Assistant Secretary pursuant to paragraph (d)
of this section, the Under Secretary shall take one of the following
actions:
(i) Approve the Application and issue an appropriate Certification
to the Seller;
(ii) Notify the Seller in writing that the technology is
potentially eligible for a Certification, but that additional specified
information is needed before a decision may be reached; or
(iii) Deny the Application, and notify the Seller in writing of
such decision.
(2) The Under Secretary may extend the time period beyond 30 days
upon notice to the Seller, and the Under Secretary is not required to
provide a reason or cause for such extension. The Under Secretary's
decision shall be final and not subject to review, except at the
discretion of the Under Secretary.
(f) Designation is a pre-condition. The Under Secretary may approve
an application for a certification only if the Under Secretary has also
approved an application for a designation for the same technology under
section 25.3.
(g) Content and term of certification; renewal. A Certification
shall specify the technology, the Seller(s) of the technology, and the
earliest date of sale of the technology to which the Certification
shall apply (which shall be determined by the Under Secretary in his or
her discretion, and may be prior to, but shall not be later than, the
effective date of the Certification). The Certification may also
include such other specifications as the Under Secretary may deem to be
appropriate, including, but not limited to, specific applications of
the technology, materials or processes required to be used in producing
or using the technology, restrictions on transfer or licensing, and
training and instructions required to be provided to persons involved
in the deployment of the technology. A certification shall be valid and
effective for the same period of time for which the related Designation
is issued, and shall terminate upon the termination of such related
Designation. The Seller may apply for renewal of the Certification in
connection with an application for renewal of the related Designation.
An application for renewal must be made using the ``Application for
Certification of an Approved Product for Homeland Security'' form
issued by the Under Secretary.
(h) Application of Certification to licensees. Any certification
shall apply to any other person or entity to which the Seller licenses
(exclusively or nonexclusively) the right to manufacture and sell the
technology, in the same manner and to the same extent that such
certification applies to the Seller, effective as of the date of
commencement of the license, provided that the Seller notifies the
Under Secretary of such license by submitting, within 30 days after
such date of commencement, a ``Notice of License of Approved Anti-
terrorism Technology'' form issued by the Under Secretary. The Under
Secretary shall make this form available at http://www.dhs.gov and by
mail upon request sent to: Directorate of Science and Technology,
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC
20528. Such notification shall not be required for any licensee listed
as a Seller on the applicable Certification.
(i) Transfer of Certification. In the event of any permitted
transfer and assignment of a Designation, any related Certification for
the same anti-terrorism technology shall automatically be deemed to be
transferred and assigned to the same transferee to which such
Designation is transferred and assigned. The transferred Certification
will continue to apply to the transferor with respect to all
transactions and occurrences that occurred through the time at which
such transfer and assignment of the Certification became effective.
(j) Issuance of Certificate; Approved Product List. For anti-
terrorism technology reviewed and approved by the Under Secretary and
for which a Certification is issued, the Under Secretary shall issue a
certificate of conformance to the Seller and place the anti-terrorism
technology on an Approved Product List for Homeland Security, which
shall be published by the Department of Homeland Security.
Sec. 25.8 Confidentiality and protection of intellectual property.
The Secretary, in consultation with the Office of Management and
Budget and appropriate Federal law enforcement and intelligence
officials, and in a manner consistent with existing protections for
sensitive or classified information, shall establish confidentiality
protocols for maintenance and use of information submitted to the
Department under the SAFETY Act and this Part. Such protocols shall,
among other things, ensure that the Department will utilize all
appropriate exemptions from the Freedom of Information Act.
Sec. 25.9 Definitions.
Act of Terrorism--The term ``act of terrorism'' means any act
that--
(1) Is unlawful;
(2) Causes harm to a person, property, or entity, in the United
States, or in the case of a domestic United States air carrier or a
United States-flag vessel (or a vessel based principally in the United
States on which United States income tax is paid and whose insurance
coverage is subject to regulation in the United States), in or outside
the United States; and
(3) Uses or attempts to use instrumentalities, weapons or other
methods designed or intended to cause mass destruction, injury or other
loss to citizens or institutions of the United States.
Assistant Secretary--The term ``Assistant Secretary'' means the
Assistant Secretary for Plans, Programs, and Budget of the Department
of Homeland Security Directorate of Science and Technology, or such
other official of such Directorate as may be designated from time to
time by the Under Secretary.
Certification--The term ``Certification'' means (unless the context
requires otherwise) a certification that a qualified anti-terrorism
technology for which a Designation has been issued will perform as
intended, conforms to the Seller's specifications, and is safe for use
as intended.
Contractor--The term ``contractor'' of a Seller means any person or
entity with whom or with which the Seller has entered into a contract
relating to the manufacture, sale, use, or operation of anti-terrorism
technology for which a Designation is issued (regardless of whether
such contract is entered into before or after the issuance of such
Designation), including, without limitation, an independent laboratory
or other entity engaged in testing or verifying the safety, utility,
performance, or effectiveness of such technology, or the conformity of
such technology to the Seller's specifications.
Designation--The term ``Designation'' means a designation of a
qualified anti-terrorism technology under the SAFETY Act issued by the
Under Secretary under authority delegated by the Secretary of Homeland
Security.
Loss--The term ``loss'' means death, bodily injury, or loss of or
damage to property, including business interruption loss (which is a
component of loss of or damage to property).
Noneconomic damages--The term ``noneconomic damages'' means damages
for losses for physical and emotional pain, suffering, inconvenience,
physical impairment, mental anguish, disfigurement, loss of enjoyment
of life, loss of society and companionship, loss of consortium, hedonic
damages, injury to reputation, and any other nonpecuniary losses.
[[Page 59704]]
Physical harm--The term ``physical harm'' as used in the Act shall
mean a physical injury to the body that caused, either temporarily or
permanently, partial or total physical disability, incapacity or
disfigurement. In no event shall physical harm include mental pain,
anguish, or suffering, or fear of injury.
Qualified Anti-Terrorism Technology (QATT)--The term ``'qualified
anti-terrorism technology''' means any product, equipment, service
(including support services), device, or technology (including
information technology) designed, developed, modified, or procured for
the specific purpose of preventing, detecting, identifying, or
deterring acts of terrorism or limiting the harm such acts might
otherwise cause, for which a Designation has been issued under this
Part.
SAFETY Act or Act--The term ``SAFETY Act'' or ``Act'' means the
Support Anti-terrorism by Fostering Effective Technologies Act of 2002,
enacted as Subtitle G of Title VIII of the Homeland Security Act of
2002, Public Law 107-296.
Seller--The term ``Seller'' means any person or entity to whom or
to which (as appropriate) a Designation has been issued under this Part
(unless the context requires otherwise).
Under Secretary--The term ``Under Secretary'' means the Under
Secretary for Science and Technology of the Department of Homeland
Security.
Dated: October 10, 2003.
Tom Ridge,
Secretary of Homeland Security.
[FR Doc. 03-26217 Filed 10-10-03; 4:15 pm]
BILLING CODE 4410-10-P