Rule2024-21936
Exchange of Coin
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 25, 2024
Effective
October 25, 2024
Issuing agencies
Treasury DepartmentUnited States Mint
Abstract
This final rule removes Treasury regulations relating to the exchange of bent, partial, fused, and mixed coins. The removal will end the exchange program for bent and partial coin.
Full Text
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<title>Federal Register, Volume 89 Issue 186 (Wednesday, September 25, 2024)</title>
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[Federal Register Volume 89, Number 186 (Wednesday, September 25, 2024)]
[Rules and Regulations]
[Pages 78241-78245]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-21936]
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DEPARTMENT OF THE TREASURY
United States Mint
31 CFR Part 100
Exchange of Coin
AGENCY: United States Mint, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This final rule removes Treasury regulations relating to the
exchange of bent, partial, fused, and mixed coins. The removal will end
the exchange program for bent and partial coin.
DATES: Effective Date: October 25, 2024.
FOR FURTHER INFORMATION CONTACT: Apryl Whitaker, Senior Legal Counsel,
Office of the Chief Counsel, United States Mint, at (202) 354-7938 or
<a href="/cdn-cgi/l/email-protection#d4a6a1b8b1b9b5bfbdbab394a1a7b9bdbaa0faa0a6b1b5a7fab3bba2"><span class="__cf_email__" data-cfemail="c3b1b6afa6aea2a8aaada483b6b0aeaaadb7edb7b1a6a2b0eda4acb5">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
The Treasury regulations appearing at 31 CFR 100.11 are promulgated
under 31 U.S.C. 321 and relate to the exchange of bent and partial
coin. The last amendment to 31 CFR part 100, subpart C, was on December
20, 2017. In August 2018, the United States Mint suspended the
redemption program due to the possibility of unlawful material being
submitted for redemption. On May 5, 2021, the United States Mint issued
a notice of proposed rulemaking proposing certain revisions to these
regulations (86 FR 23877), which was withdrawn on May 3, 2024 (89 FR
36721). The United States Mint subsequently decided to close the bent
and partial coin exchange program.
For many years, the United States Mint has redeemed bent and
partial coins for full face value. However, circumstances surrounding
the redemption program have materially changed. Today submissions must
be carefully evaluated to ensure that counterfeit coins are not
accepted to the program, and the condition of many coins, particularly
large volumes of coins damaged by recycling or industrial processes,
makes authentication increasingly difficult and time-consuming. In
addition, the volume of coins submitted for possible redemption has
greatly increased, and counterfeits have been increasingly identified
in imported coins intercepted by law enforcement, as well as in several
large submissions to the redemption program. The result of these
changes is that there is no financially responsible way to ensure the
integrity of the redemption program and to the meet the full level of
demand. The United States Mint's capacity to process mutilated coins is
limited by physical storage capacity, caseload complexity, and
workload. Authentication procedures require extensive time and
resources. The United States Mint has dedicated substantial time and
resources to the bent and partial coin exchange program, in addition to
operating the program at a loss by paying out face value for
redemptions.
In 89 FR 36721, May 3, 2024, the United States Mint issued a notice
of proposed rulemaking (NPRM) to remove regulations relating to the
exchange of bent and partial coins, and it requested comments on the
proposed revisions. In the NPRM, the Mint proposed to end the exchange
program for bent and partial coin. As discussed below, the United
States Mint has considered the comments received and has concluded that
the proposed regulations will be adopted as a final rule.
II. Public Participation
The United States Mint received 35 comments in response to the NPRM
proposing to end the Mutilated Coin Redemption Program. Eight of these
comments were provided by organizations that identified as businesses,
two identified as a trade association, and the remainder of the
comments were provided by unknown, anonymous, or individual persons.
The comments are available at <a href="http://www.regulations.gov">www.regulations.gov</a>.
Disposing of Coins
Some commenters were concerned about the disposal of dimes,
quarters, half-dollar, and dollar coins. The proposed rule indicated
correctly that the melting of dimes, quarters, half-dollar, and dollar
coins is not regulated by the United States Mint. There is no
prohibition on melting dimes, quarters, half-dollar, and dollar coins
for non-fraudulent purposes. Some commenters expressed concern that 18
U.S.C. 331 criminalizes the melting of all U.S. coins. This statute,
however, specifically addresses certain behavior that is conducted with
the intent to defraud and does not address coins melted without
fraudulent intent and consistent with 31 CFR part 82.
While there is a prohibition against melting pennies and nickels,
there is a specific exception at 31 CFR 82.2 for coins melted or
treated incidental to recycling other materials if (1) the coins were
not added to the other materials for their metallurgical value, (2) the
volumes of the coins, relative to the volumes of the other materials
recycled, makes it clear that the presence of such coins is merely
incidental, and (3) the separation of the coins from the other
materials would be impracticable or cost prohibitive. See 31 CFR
82.2(c). This exception extends to the melting of coins that become
mutilated due to treatment that is itself within the scope of the
exception. If an exception does not apply, then applications for
licenses to melt pennies and nickels should be transmitted to the
Director, United States Mint; 801 9th Street NW, Washington, DC 20220.
See 31 CFR 82.2(f).
Some individuals were concerned about how they can dispose of their
bent or partial coins. Individuals can inquire of their local scrap
metal dealers.
Lack of Capacity
Some commenters indicated that the United States Mint's assertion
that it lacks the capacity to process large volumes of bent or partial
coin is disingenuous, because, in the past, large submissions of bent
or partial coin were delivered directly to a third-party contractor,
not to the United States Mint. However, after the program was suspended
in 2018, the United States Mint developed new authentication techniques
and procedures as recommended by the Treasury Department's Office of
Inspector General to test and authenticate the genuineness of coins. To
effectively authenticate the material with the new counterfeit
detection methods that the United States Mint developed, the
[[Page 78242]]
United States Mint could no longer accept redemption submissions at a
third-party site. The United States Mint's coin authentication methods
are time-consuming and can only be performed using specialized
equipment at the United States Mint's Philadelphia location.
Prior Participants
Some commenters suggested that the United States Mint develop a
``trusted,'' ``preferred,'' or ``qualified'' participant program
whereby certain participants that meet additional requirements could be
allowed to submit large volumes of coins for possible redemption. Many
of these commenters did not specify the types of additional
requirements that would qualify these participants as ``trusted,''
merely suggesting that certain participants should be allowed to redeem
large amounts of coin. Other participants suggested site visits,
background checks, a certification process, or compliance with industry
standards. None of these controls separately or together, however, are
sufficient to detect counterfeit coins. Every submission must be
properly authenticated by the United States Mint to detect counterfeit
coins, and background checks or site visits, for example, would not
eliminate the need for this crucial step in the process.
A few commenters suggested that coins that were stockpiled during
the program suspension should be exempted, essentially allowing these
coins to be redeemed with no restrictions. In August 2018, the United
States Mint stopped processing submissions to the redemption program
due to the possibility of unlawful material being submitted for
redemption and later formally suspended the redemption program in July
2019 (84 FR 35181). Members of the public have been on notice that the
exchange program is subject to suspension and those who have stockpiled
coins during its suspension assumed the risk of doing so.
Office of Inspector General Recommendations for the Redemption Program
Some commenters indicated that the United States Mint has not
complied with the recommendations contained in the Department of the
Treasury's Office of Inspector General's August 18, 2020, Audit Report
on ``Mint Controls Over Raw Materials and Coin Exchange Programs Need
Improvement.'' Following the issuance of these audit recommendations,
the United States Mint hired additional staff and developed improved
authentication procedures and testing methodology to detect counterfeit
coins. To implement the new procedures, the United States Mint can no
longer accept redemption submissions at a third-party site. The United
States Mint's coin authentication methods are time-consuming and can
only be performed using specialized equipment and processes developed
and installed at the United States Mint's Philadelphia location.
Environmental Concerns
Some commenters were concerned that unredeemable bent or partial
coins would end up in landfills. Although the melting of pennies and
nickels is prohibited in certain instances, the melting of dimes,
quarters, and half-dollar coins, which historically have made up the
majority of bent or partial coin redemptions, is not prohibited. The
public may melt and reuse coins consistent with 31 CFR part 82, which
reduces the likelihood that unredeemable coins will be landfilled. At
least one commenter indicated that, if the program were closed, bent or
partial coin would end up recycled as scrap metal sold on the secondary
metals market.
Some commenters were concerned that closing the redemption program
would lead to increased metals mining by requiring the United States
Mint to purchase more virgin metal. The amount of metal contained in
bent or partial coin redeemed is very small in the context of the
larger metals market. In addition, melted coinage scrap must always be
supplemented with pure nickel and copper to re-alloy the material for
reuse. For example, quarters are made with a pure copper core and two
cupronickel outer layers. These coins are permanently bonded in three
layers, and the individual layers cannot be separated for reclamation.
When quarters and other clad coins are melted, the resulting coinage
scrap metal cannot be re-used for the core component, and significant
amounts of nickel must be added to the scrap to create the alloy for
the outer layer. The United States Mint's suppliers are limited in the
amount of scrap that can be used to manufacture new coin roll. Roughly
25% of the material that the United States Mint purchases for
circulating strip is returned to the strip supplier as ``web-scrap.''
This material must be recycled, along with submissions from the
Uncurrent Coin Redemption Program, which leaves very little use for
additional scrap material. The United States Mint suppliers that redeem
scrap are not required to re-use coin scrap material to make new
coinage material and may--and do--sell the excess coin scrap material
as scrap. At least one commenter indicated that, if the program were
closed, bent or partial coin would end up recycled as scrap metal sold
on the secondary metals market. Therefore, the proposed limitations on
submissions will not lead to an appreciable increase in the use of
primary nickel or copper.
Some commenters suggested evaluating the environmental impact of
the redemption program's closure under the National Environmental
Policy Act (NEPA). It is the determination of the United States Mint
that the final rule does not constitute a major Federal action
significantly affecting the quality of the human environment, and, in
accordance with the NEPA, neither an Environmental Assessment nor an
Environmental Impact Statement is required.
Discretionary Program
Some commenters indicated that the redemption program is not a
discretionary program and is instead mandated by law. The relevant
statutes and regulations pertaining to the U.S. Department of Treasury
and the overall statutory framework applicable to the program give
broad discretion to the Secretary of the Treasury. The regulations at
31 CFR part 100, subpart C, are promulgated under 31 U.S.C. 321. By
law, the Secretary of the Treasury ``shall melt obsolete and worn
United States coins withdrawn from circulation.'' See 31 U.S.C. 5120.
This statute simply prescribes the method of destruction that the
Secretary is to employ when the Secretary withdraws obsolete and worn
coins from circulation. There is no statutory requirement for the
redemption of mutilated coins. Nor does the statute say how the
Secretary shall acquire those coins, how the Secretary shall go about
withdrawing those coins from circulation, or how the Secretary shall go
about melting coins that have been withdrawn. These details are
entirely committed to the Secretary's discretion, and pursuant to that
discretion, the Mutilated Coin Redemption Program was established. See
31 CFR 100.11.
The expenses of the Mutilated Coin Redemption Program are entirely
paid for through the United States Mint Public Enterprise Fund (PEF), a
revolving fund that was created to fund all United States Mint
operations in lieu of any appropriations from Congress. See 31 U.S.C.
5136. The PEF legislation makes clear that ``all expenses incurred by
the Secretary of the Treasury for operations and programs of the United
States Mint that the Secretary of the Treasury determines, in the
Secretary's
[[Page 78243]]
sole discretion, to be ordinary and reasonable incidents of Mint
operations and programs . . . shall be paid out of the Fund.'' Id.
(emphasis added). In other words, the Secretary of the Treasury is
given sole discretion to decide whether the Mutilated Coin Redemption
Program will operate and be funded. This issue was specifically
considered by the court in Bramlett v. United States Dep't of the
Treasury, No. 16-257 and 16-270, 2017 WL 1048366 at *5 (E.D. Pa. March
20, 2017), which held that the suspension or termination of the
redemption program is committed to agency discretion by law.
Existence of Counterfeits
Some commenters suggested that the United States Mint has no
evidence of any counterfeit coins. There are indicators of current
counterfeit coin fraud schemes aimed at the Mutilated Coin Redemption
Program, the details of which are law enforcement sensitive. The United
States Government was successful in forfeiting counterfeit coins in
United States of America v. 5 Crates of Counterfeit Coins, CV 20-08487,
in the United States District Court in the Central District of
California. In declaring the coins in this case to be counterfeit and
forfeited to the U.S., the court specifically relied on the United
States Mint's counterfeit determination.
Impact on Circulating Coins
Some commenters expressed concern that closing the program would
impact the quality of coins in circulation and thus undermine the
public's confidence and trust in the currency system. Commenters,
however, did not provide information supporting their belief that bent
or partial coins will no longer be removed from circulation if the
redemption program were closed. For example, bent and partial coins
that are recovered from trash or recycling have already been removed
from circulation, and there is no information available to the United
States Mint or in the record to support the premise that somehow these
coins will continue to circulate if the redemption program were closed.
Likewise, individuals and business will continue to remove bent or
partial coins from circulation.
Additional commenters suggested that closing the program will
impact the United States Mint's Uncurrent Coin Redemption Program, due
to bent or partial coins being diverted to the Uncurrent Coin
Redemption Program. The United States Mint's Uncurrent Coin Redemption
Program will continue in accordance with 31 CFR 100.10 and the Federal
Reserve's Operating Circular 2. The Uncurrent Coin Redemption Program
allows financial institutions to redeem whole U.S. coins which are
merely worn or reduced in weight by natural abrasion, are readily and
clearly recognizable as to genuineness and denomination, are machine
countable, and do not include bent or partial coins. See 31 CFR 100.10.
Neither the U.S. Mint nor the Federal Reserve will redeem any bent or
partial coins.
Operating Losses
Some commenters indicated that operating losses are not a valid
reason for the United States Mint to end the redemption program,
because the program has always operated at a loss. Commenters requested
specific numbers detailing the program's operating losses. Costs to run
the program in the past have included the payout of the face value of
the coins being reimbursed, less the scrap credit the United States
Mint receives from its suppliers for raw material, and the cost to
travel to the suppliers to witness the melt, in addition to the
resource costs for the various support personnel. In 2014--the last
year the program was fully operational--the United States Mint paid out
roughly $30 million in reimbursement and received roughly $5 million in
scrap credit, for a total cost of about $25 million (not including the
cost of travel, resources expended, and other costs of operating the
program).
The United States Mint's programs are self-sustaining and operate
at no cost to the taxpayer. The United States Mint has a fiduciary
responsibility to be a prudent steward of its funds and to minimize
expenses. The expenses of the Mutilated Coin Redemption Program are
considered part of the United States Mint's circulating coin expenses
and are paid from the United States Mint Public Enterprise Fund, a
revolving fund that was created to fund all United States Mint
operations in lieu of any appropriations from Congress. See 31 U.S.C.
5136. Circulating operations are financed by the sale of circulating
coins to the Federal Reserve Bank. In recent years, the United States
Mint's seigniorage, which is the difference between the face value and
cost of producing circulating coinage, has significantly declined. For
example, as of June 2024, year-to-date seigniorage has decreased 92%
compared to June 2023 due to lower coin orders from the Federal Reserve
Bank. In view of this decline, continued operation of the redemption
program would not be financially responsible.
Congressional Intent
Some commenters point to a 2023 House Appropriations Committee
report that indicated that the United States Mint should work with
stakeholders to redeem mutilated coin within the existing regulations
and expressed their concern that the United States Mint's proposed
closure of the program is contrary to the intent of Congress. See H.R.
Rep No. 118-145 (2023). In that report, the Committee indicated that it
expects that the United States Mint will work with entities to recover
coin to redeem bent and partial coin through the redemption program,
because, according to the report, there was no other reasonable way to
manage recovered coin. Consistent with the recommendations in the
report, the United States Mint engaged with its program stakeholders
through this formal rulemaking process. The United States Mint has
addressed the concern regarding disposal of recovered coin to the
extent possible by providing information on avenues for the disposal of
coins following the program's closure. The comments received on the
proposed rule closing the program recommended that the redemption
program should re-open without any limitations on the amount of coin
submitted. While the United States Mint has carefully considered these
comments, as described above, there is no financially responsible way
to ensure the integrity of the redemption program and to meet the full
level of demand.
Low Denomination Coins
Several commenters suggested that the program should remain open
for low denomination coins, such as pennies and nickels, because, in
their view, the risk of counterfeiting lower denominations is lower or
non-existent given the lack of economic incentive to counterfeit low
denominations. While low denomination coins may be less likely to be
counterfeited, this would not eliminate the need for the United States
Mint to sample, inspect, and test coins submitted to be redeemed,
regardless of denomination. Given these procedural constraints, the
United States Mint could no longer accept redemption submissions at a
third-party site and, as described above, does not have the capacity to
do so in Philadelphia.
Fees
A couple of commenters suggested that the United States Mint
develop a small administrative fee for bent or partial coin redemption.
As discussed above, the redemption program's operating expenses are
significant. A small administrative fee (one commenter suggested 1% of
the value of each submission) would cover only a
[[Page 78244]]
very small portion of the redemption program's operating costs.
Extension of Comment Period
Several commenters requested an extension of time to comment on the
proposed rule. The United States Mint found the 60-day comment period
length appropriate and provided a meaningful opportunity for interested
parties to comment on the proposed rule. Of the commenters that
submitted extension requests, most were able to provide substantive
responses by the deadline.
III. Procedural Analysis
Regulatory Planning and Review
The Office of Management and Budget has determined that this rule
does not constitute a ``significant regulatory action'' under Executive
Order 12866, as amended.
Regulatory Flexibility Act Analysis
Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
seq.), it is hereby certified that the 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 bent or partial coins is a discretionary
service offered to the public; participation is voluntary.
In accordance with section 3(a) of the Regulatory Flexibility Act,
the United States Mint has reviewed the proposed regulation. While the
United States Mint certifies that the final rule--or in this case--the
removal thereof, will not have a significant economic impact on a
substantial number of small entities given that the regulations do not
directly regulate any entities, the United States Mint has prepared a
Final Regulatory Flexibility Analysis in accordance with 5 U.S.C. 604.
1. Statement of the Need for, Objectives of, and Legal Basis for, the
Rule
The regulations at 31 CFR part 100, subpart C, are promulgated
under 31 U.S.C. 321, and provide for the exchange of uncurrent, bent,
partial, fused, and mixed coins. For the reasons herein, the United
States Mint has decided to close the bent and partial coin exchange
program, which is a discretionary program that is not mandated by law.
2. Significant Comments in Response to the Initial Regulatory
Flexibility Analysis
One commenter that appeared to be a small business indicated that
closing the program would lead to closing their business but did not
quantify the specific economic impact of the proposed changes to this
voluntary and discretionary program. One of the commenters stated that
they worked for the City of Juneau, Alaska, a small entity as defined
by the RFA, and inquired about how to dispose of ``several mutilated
coins [accumulated] over the years.'' The commenter did not express
opposition to the program's closure and merely requested information
about where to dispose of what appears to be a very small number of
coins. The United States Mint has carefully considered the impact of
the redemption program's closure on small businesses; however, for the
reasons discussed herein, there is no financially responsible way for
the United States Mint to expand the resources devoted to the program
necessary to meet the full level of demand. The United States Mint has
carefully reviewed all the comments that were submitted and, based on
the data available, has analyzed the regulatory flexibility impact
using reasonable assumptions.
3. Small Entities Affected by the Rule
The number of entities tendering significant quantities of coins
for redemption in the past has been small. A large number of entities
redeeming coins in the past were individuals--not businesses. A wide
variety of businesses, such as municipal entities, recyclers, coin
processors, amusement parks, auto shops, and waste management companies
have applied for coins to be redeemed in the past. Data on the number
of small entities voluntarily submitting coins to the redemption
program was not provided by the commenters or within the public docket.
Likewise, the United States Mint does not have data within its
possession regarding the numbers of small entities submitting coins.
The United States Mint has carefully reviewed all the comments that
have been submitted and, based on the data available, has analyzed the
regulatory flexibility impact using reasonable assumptions.
4. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
The United States Mint has not identified any reporting,
recordkeeping, or other compliance requirements associated with the
rule.
5. Steps Taken To Minimize Impacts on Small Entities and Alternatives
Considered
The United States Mint considered alternatives in promulgating this
final rule. For example, the United States Mint considered re-opening
the program under the parameters identified in the May 5, 2021, Federal
Register document (86 FR 23877), proposing certain revisions to these
regulations that would establish weight and shipment limits per
participant and would prohibit the submission of certain kinds of coins
or coins with certain kinds of damage. However, re-opening the
program--even with these restrictions--would entail significant costs
to the United States Mint. Further, the volume of coins submitted for
possible redemption has greatly increased over the years, and there is
no financially responsible way for the United States Mint to expand the
resources devoted to the program necessary to meet the full level of
demand. In response to the United States Mint's May 5, 2021, Federal
Register document (86 FR 23877), several commenters expressed concern
with the proposed 1,000 lb. per month submission limit, indicating that
businesses have large volumes of coins to be redeemed that well exceed
the monthly or annual limit. For example, one vendor alone indicated
that at a rate of 1,000 lbs. per month, it would take over seven years
just to redeem a portion of its inventory. The prior rulemaking
indicated that, under these limits, participants would not be
guaranteed the right to submit 1,000 lbs. per month; nor would the
United States Mint have capacity even at this low rate to evaluate more
than a small number of submissions per month.
The United States Mint considered re-opening the program for a
short, limited time under the new parameters identified in the May 5,
2021, Federal Register document (86 FR 23877) with a published sunset
date to allow those that have stored their mutilated coins in
anticipation of the program reopening to submit their mutilated coins.
It is clear, however, that there is no financially responsible way for
the United States Mint to expand the resources devoted to the program
necessary to meet the full level of demand, even for a limited time.
List of Subjects in 31 CFR Part 100
Coins.
For the reasons set forth in the preamble, the United States Mint
amends 31 CFR part 100 as follows:
PART 100--EXCHANGE OF PAPER CURRENCY AND COIN
0
1. The authority citation for part 100 continues to read as follows:
Authority: 31 U.S.C. 321.
Sec. 100.11 [Removed and Reserved]
0
2. Remove and reserve Sec. 100.11.
[[Page 78245]]
0
3. Amend Sec. 100.12 by revising paragraph (b) to read as follows:
Sec. 100.12 Exchange of fused or mixed coin.
* * * * *
(b) Fused and mixed coins. The United States Mint will not accept
fused or mixed coins for redemption.
Sec. 100.13 [Amended]
0
4. Amend Sec. 100.13 by:
0
a. Removing paragraph (a);
0
b. Redesignating paragraphs (b) through (d) as paragraphs (a) through
(c), respectively; and
0
c. In newly redesignated paragraph (b), removing the phrase ``to any
bent or partial''.
Ventris C. Gibson,
Director, United States Mint.
[FR Doc. 2024-21936 Filed 9-24-24; 8:45 am]
BILLING CODE 4810-37-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.