Exchange of Coin

AGENCY:

United States Mint, Department of the Treasury.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The United States Mint proposes to revise its regulations relating to the exchange of uncurrent, bent, partial, fused, and mixed coins. The proposed revisions will enhance the integrity of the redemption process for bent and partial United States coins and prevent fraud.

DATES:

Send comments on or before July 6, 2021.

ADDRESSES:

The United States Mint invites comments on all aspects of this proposed revision. You may send comments by any of the following methods:

• Federal eRulemaking Portal: www.regulations.gov. Follow the instructions for sending comments.
• Mail: Submit all written comments to Mutilated Coin Redemption Program; Manufacturing Directorate; United States Mint, 801 9th Street NW, Washington, DC 20220.
• Hand Delivery/Courier: Same as mail address.

Instructions: All submissions received must include the agency name for this rulemaking. All comments received will be posted without change to regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT:

Apryl Whitaker, Senior Legal Counsel, Office of the Chief Counsel, United States Mint, at (202) 354-7938 or rulemaking@usmint.treas.gov.

SUPPLEMENTARY INFORMATION:

I. Background

The Treasury Regulations appearing at 31 CFR part 100, subpart C, are promulgated under 31 U.S.C. 5120, and relate to the exchange of uncurrent, bent, partial, fused, and mixed coins. The last amendment to 31 CFR part 100, subpart C, was on December 20, 2017. Since then, the United States Mint has identified additional portions of the regulations in need of revision to further enhance the integrity of the redemption process for bent and partial United States coins.

For many years, the United States Mint has redeemed bent and partial coins for full face value. The policy's objective was always to maintain public confidence in United States coinage and protect the integrity of the currency by removing coins that were unfit for circulation through general wear and tear. However, in recent years, the volume of coins submitted for possible redemption has greatly increased. Additionally, the condition of many coins submitted for examination precludes effective authentication. Rather than removing damaged coins from general domestic coin circulation, as was the intended purpose, many participants are seeking to submit large quantities of coins that, in some cases, have already been removed from general circulation (e.g., recovered from scrap or trash processing), or in other cases, are extremely difficult to authenticate due to their condition and volume. Finally, there are indicators of current counterfeit coin fraud schemes aimed at the Mutilated Coin Redemption Program, which the revisions are specifically designed to deter. The United States Mint has hired additional staff and developed improved authentication procedures and testing methodology for coin redemptions to ensure that only genuine U.S. coins are accepted for redemption.

II. This Proposed Rule

The first category of proposed revisions would update and improve the efficiency and security of the redemption process for bent and partial coins. These revisions would provide notice that the United States Mint will establish weight and shipment limits for at a maximum of 1,000 lbs. of coins per month per participant. To implement improved testing and authentication methods for determining the genuineness of coins, the United States Mint will process all future redemptions at its Philadelphia location, which has new equipment and staff capable of performing detailed analyses of coins submitted for redemption. Previously, the United States Mint directed approved bulk redeemers to ship submissions directly to authorized recyclers. Large shipments sent to our recyclers created storage and material control issues during the time necessary for sampling and authentication before melting. A 1,000 lb. limit is necessary to ensure effective controls so that each submission may be carefully reviewed to ensure that only genuine U.S. coinage is redeemed. Under these limits, participants are not guaranteed the right to submit 1,000 lbs. per month. The United States Mint Philadelphia facility's capacity to process mutilated coins is limited by physical storage capacity, caseload complexity, submission size, and workload. Improved authentication procedures extend the time required for sampling and evaluation, and the amount of time needed to properly authenticate and then process each submission varies. Given the intent of the program, which is to allow for the removal of bent or partial coins from circulation (and not recycling recovered coin from scrap or trash), the proposed weight limit and scheduling restrictions propose a reasonable balance between a discretionary service offered to the public to redeem bent or partial coins received in good faith in commerce and protection against fraud.

The second category of proposed revisions would prohibit redemption if a submission contains coins imported from outside of the United States. The United States Mint has learned of fraud schemes where large amounts of counterfeit coins are manufactured overseas in an attempt to defraud the Government. A high percentage of counterfeits have been identified in imported coins intercepted by law enforcement, as well in as several large submissions to the Mutilated Coin Redemption Program. It is extremely difficult to trace and verify the chain of custody of coins imported from outside of the United States given that the majority of coins coming from abroad are represented to have been found in scrap that has been processed and sold multiple times over. Another consideration is that such coins have been effectively removed from the domestic coin circulation for which the redemption program aims to replace bent or partial coins. A prohibition on imported coins reduces the risk of fraud on the program. The proposed revisions also clarify that coins damaged in industrial processes (such as shredders, burnishers, incinerators, exposure to elevated temperatures), or coins that have been drilled, punctured, ground, polished, etched, or chemically treated by any industrial or recycling process, are not eligible for redemption. Such coins present a high risk of being counterfeit because they are difficult and time-consuming to evaluate and require increased resources to determine whether they are genuine. The regulations already require coins to be readily and clearly identifiable as to genuineness and denomination. The proposed revisions seek to provide examples from the United States Mint's experience of coins that by their nature are difficult to evaluate and cannot be “readily and clearly identifiable” as genuine.

The third category of proposed revisions clarifies the roles and responsibilities of the United States Mint and participants. For example, the proposed revisions clarify under what circumstances a participant will have the opportunity to retrieve a rejected shipment, and under what circumstances an entire submission will be turned over to law enforcement authorities. The purpose is to clearly put members of the public on notice of the potential consequences of submitting coins for examination that are prohibited from redemption. For example, if a submission contains counterfeit coins, the United States Mint will turn the entire submission over to law enforcement.

III. Procedural Analysis

Regulatory Planning and Review

The Office of Management and Budget has determined that this proposed rule does not constitute a “significant regulatory action” under Executive Order 12866 or Executive Order 13771.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) (PRA), the United States Mint is seeking approval for a new information collection of data and reporting requirements applicable to participants seeking to redeem bent or partial coins. The proposed collection of information described in this notice of proposed rulemaking has been submitted to the Office of Management and Budget (OMB) for review in accordance with the PRA under OMB No. 1525-NEW.

Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, or via email to OIRA_Submission@omb.eop.gov, with copies to Mutilated Coin Redemption Program; Manufacturing Directorate; United States Mint, 801 9th Street NW, Washington, DC 20220. Comments on the collection of information should be received by July 6, 2021.

In accordance with 5 CFR 1320.8(d)(1), the Department of the Treasury is soliciting comments from members of the public concerning this collection of information to:

(1) Evaluate 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) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information;

(3) Enhance the quality, utility, and clarity of the information to be collected; and

(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated collection techniques or other forms of information technology.

The form for OMB No. 1525-NEW proposed in the information collection rulemaking is as follows:

United States Mint Mutilated Coin Redemption Program Instructions and Application Form, Mint Form MF 6006:

The burden of the information collections in this proposed rule is estimated as follows:

Estimated total annual reporting and/or recordkeeping burden: 200 hours.

Estimated average annual burden per respondent: 1 hour.

Estimated number of respondents: 200.

Estimated annual frequency of responses: Annually.

Under the PRA, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Regulatory Flexibility Act Analysis

It is hereby certified that the proposed revisions will not have a significant economic impact on a substantial number of small entities. First and foremost, the regulations do not directly regulate any entities. The redemption of uncurrent, bent, or partial coins is a discretionary service offered to the public; participation is voluntary.

Second, the number of entities tendering significant quantities of coins for redemption is small. A large number of entities redeeming coins are individuals. A wide variety of businesses, such as municipal entities, recyclers, coin processors, amusement parks, auto shops, and waste management companies, also have applied for coins to be redeemed in the past. With the proposed limit of 1,000 lbs. per month, that is, at most, equivalent to $240,000 a year. In Fiscal Years (FY) 2014, 2013, and 2012, the United States Mint paid only nine entities more than $240,000. In FY 2011, there were 14, and FY 2010 there were 12. With respect to the proposed ban on coins imported from outside the United States, about 20 applicants listed “overseas” as the source of their coins on their applications submitted from 2018 to 2019. With respect to the proposed ban on coins that have been through industrial processes, about 20 applicants listed “recycling” as the source of their coins on their applications submitted from 2018 to 2019.

Even if each entity qualified as a “small entity” within the meaning of 5 U.S.C. 605(b), based on a review of past applications as described above, the United States Mint does not believe that the proposed revisions are likely to have a significant economic impact. The proposed rule does not change the redemption rates. Moreover, the regulations already require coins to be readily and clearly identifiable as to genuineness and denomination. The proposed revisions seek to provide guidance from the United States Mint's experience of coins that by their nature are difficult to evaluate and cannot be “readily and clearly identifiable” as genuine. Notwithstanding this certification, the United States Mint invites comments on the impacts this rule may have on small entities.

IV. Request for Comment

Before the proposed revisions to the Treasury Regulations at 31 CFR part 100, subpart C, are adopted as final regulations, the United States Mint will consider any comments that are submitted to the bureau as prescribed in this preamble under the DATES and ADDRESSES sections. The United States Mint and the Department of the Treasury request comments on all aspects of the proposed revisions to these regulations, including the effects on stakeholders of the 1,000 lb. monthly limit and suggestions for alternative ways to achieve a balance between providing for the removal of bent or partial coins, cost, and prevention of fraud.

List of Subjects in 31 CFR Part 100

• Coins

Words of Issuance

For the reasons set forth in the preamble, the United States Mint proposes to amend 31 CFR part 100 as follows:

PART 100—EXCHANGE OF PAPER CURRENCY AND COIN

1. The authority for part 100 continues to read as follows:

Authority: 31 U.S.C. 321.

2. Subpart C is revised to read as follows:

Subpart C—Request for Examination of Coin for Possible Redemption