Prohibition on the Exportation, Melting, or Treatment of 5-Cent and One-Cent Coins, 76148-76150 [06-9777]

Agencies

• Monetary Offices
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 71, Number 244 (Wednesday, December 20, 2006)]
[Rules and Regulations]
[Pages 76148-76150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-9777]


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DEPARTMENT OF THE TREASURY

Monetary Offices

31 CFR Part 82


Prohibition on the Exportation, Melting, or Treatment of 5-Cent 
and One-Cent Coins

AGENCY: United States Mint, Treasury.

ACTION: Interim rule with request for comments.

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SUMMARY: To protect the coinage of the United States, this interim rule 
prohibits the exportation, melting, and treatment of 5-cent and one-
cent coins. This interim rule is issued pursuant to 31 U.S.C. 5111(d), 
which authorizes the Secretary of the Treasury to prohibit or limit the 
exportation, melting, or treatment of United States coins when the 
Secretary decides the prohibition or limitation is necessary to protect 
the coinage of the United States. This interim rule is effective until 
April 14, 2007. The public is invited to comment until January 14, 
2007. Thereafter, but prior to April 14, 2007, the Department of the 
Treasury will reevaluate the need for the rule in light of the public 
comments, and other relevant factors. Upon consideration of the public 
comments and other relevant factors, the Department of the Treasury may 
issue a final rule extending or modifying the provisions of this 
interim rule, or may allow the interim rule to expire without 
extension.

DATES: Effective Date: This interim rule is effective December 20, 2006 
through April 14, 2007.
    Expiration Date: Unless extended by a further rulemaking document 
published in the Federal Register, this interim rule expires April 14, 
2007.
    Comment Due Date: January 19, 2007.

ADDRESSES: Send written comments to Daniel P. Shaver, Chief Counsel, 
Office of Chief Counsel, United States Mint, 801 9th Street, NW., 
Washington DC 20220.

FOR FURTHER INFORMATION CONTACT: Kristie Bowers, Attorney-Advisor, 
United States Mint at (202) 354-7631 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

I. Background

    Section 5111(d) of title 31, United States Code, authorizes the 
Secretary of the Treasury to prohibit or limit the exportation, 
melting, or treatment of United States coins when the Secretary decides 
the prohibition or limitation is necessary to protect the coinage of 
the United States. In enacting 31 U.S.C. 5111(d), Congress has 
conferred upon the Secretary of the Treasury broad discretion to ensure 
that he can effectively carry out his statutory duties to protect the 
Nation's coinage and to ensure that sufficient quantities of coins are 
in circulation to meet the needs of the United States. Pursuant to this 
authority, the Secretary of the Treasury has determined that, to 
protect the coinage of the United States, it is necessary to generally 
prohibit the exportation, melting, or treatment of 5-cent and one-cent 
coins minted and issued by the United States. The Secretary has made 
this determination because the values of the metal contents of 5-cent 
and one-cent coins are in excess of their respective face values, 
raising the likelihood that these coins will be the subject of 
recycling and speculation. In fact, the Department has received 
anecdotal reports suggesting that this activity may already be 
occurring. The prohibitions contained in this interim rule apply only 
to 5-cent and one-cent coins.
    The primary reason for limiting the melting, exportation, and 
treatment of 5-cent and one-cent coins is to avoid a shortage of these 
coins in circulation. Under 31 U.S.C. 5111(a)(1), the core 
responsibility of the Secretary of the Treasury with respect to the 
Nation's coinage is to ``mint and issue coins * * * in amounts the 
Secretary decides are necessary to meet the needs of the United 
States.'' In meeting the needs for low-value circulating coin 
denominations, the United States Mint estimates that it augments and 
replenishes only about four percent of the Nation's 5-cent coin supply, 
and only about eight percent of the one-cent coin supply, each year. 
Accordingly, the extraction of even relatively small amounts of these 
coins from circulation could have a significant impact on the United 
States Mint's ability to produce

[[Page 76149]]

sufficient volumes of these coins to meet the needs of commerce. 
Another reason for limiting the melting, exportation, and treatment of 
5-cent and one-cent coins is that the United States Mint, and 
ultimately the United States Treasury and the taxpayer, would have to 
bear the additional cost of replenishing these coins. At prevailing 
prices, and based on existing commercial coin counting and 
recirculation capacities, the cost to the United States Treasury in 
replenishing 5-cent and one-cent coins taken out of circulation and 
diverted as scrap metal for recycling could be well in excess of $1 
million per day, and volumes required for replenishment could be in 
excess of the United States Mint's capacity.
    The authority granted to the Secretary by the Coinage Act of 1965 
has been invoked on two prior occasions; in both instances the 
regulations were implemented as interim rules that were later made 
permanent until rescinded. In 1967, during the transition from silver 
to cupro-nickel clad coinage, then-Secretary Fowler authorized 
regulations that prohibited the exportation, melting, or treatment of 
all U.S. coins containing silver. 32 FR 7496 (May 20, 1967). In 1974, 
to stem the unprecedented increase in demand for one-cent coins 
attributable to speculation that the metal content of the coin would 
soon exceed its face value, then-Secretary Shultz invoked this 
authority, approving regulations that limited the exportation, melting, 
or treatment of one-cent coins. 39 FR 13881 (April 18, 1974). These 
prior regulations were rescinded in 1969 and 1978, respectively, when 
the prohibitions were no longer necessary to protect the Nation's 
coinage. 34 FR 7704 (May 15, 1969); 43 FR 24691 (June 7, 1978).
    The interim rule provides limited exceptions to the prohibitions. 
First, exportation and any of the otherwise prohibited activities may 
be authorized by license granted by the Secretary (or designee). 
Second, the interim rule also provides exceptions for coins exported in 
small amounts for legitimate use as money or for numismatic purposes, 
and for small amounts of coins carried on the person, or in the 
personal effects, of individuals leaving the country. Finally, there is 
an exception for coins treated in small quantities for educational, 
amusement, novelty, jewelry, and similar purposes.
    The Secretary of the Treasury has delegated to the Director of the 
United States Mint the authority to issue these regulations and to 
approve exceptions by license.

II. Public Comments

    The public is invited to submit written comments concerning any 
aspect of this interim rule. Comments should be received by January 14, 
2007. All comments will be available for public inspection. To inspect 
comments, contact Kristie Bowers, Attorney-Advisor, United States Mint 
at (202) 354-7631 (not a toll-free call).

III. Procedural Requirements

    This rule is not a significant regulatory action for the purposes 
of Executive Order 12866. Because no notice of proposed rulemaking is 
required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) do not apply.
    Pursuant to 5 U.S.C. 553(b)(B), it has been determined that notice 
and public procedure regarding this interim rule are contrary to the 
public interest. Issuing this rule for notice and comment rulemaking 
would only serve to hasten recycling and speculation in 5-cent and one-
cent coins, thereby exacerbating the very problems this interim rule 
seeks to prevent. As stated above, the Secretary of the Treasury has 
determined that the prohibitions contained in this interim rule are 
necessary to protect the coinage of the United States for two principal 
reasons.
    First, the economic burden on the Treasury, and ultimately on 
taxpayers, occasioned by the need to replace 5-cent and one-cent coins 
withdrawn from circulation if these regulations are not implemented 
could be in excess of $1 million per day. At current metal prices, the 
profit potential from recycling 5-cent and one-cent coins to reclaim 
copper, nickel and zinc is sufficiently lucrative to effect these 
dangers in a very short time period. If this were to happen, delaying 
the implementation of this rule for notice and comment will have 
undermined the Secretary's ability to fulfill his statutory duty to 
protect the Nation's coinage. 31 U.S.C. 5111(d). Rather, protecting the 
5-cent and one-cent coins currently in circulation, without delay, is 
essential to avoiding the destruction of coins that would result in 
high costs to the Government. Cf. Arteaga v. Lyng, 660 F. Supp 1142, 
1147 (M.D. Fla. 1987).
    Second, the potential pace and volume at which such withdrawals 
could occur would exceed the United States Mint's replenishment 
capacity and potentially cause a circulating coin shortage. In this 
regard, employing a notice of proposed rulemaking will serve its 
intended purposes--that is, to inform the public that the Secretary is 
considering a limitation on the melting, treatment, and exportation of 
5-cent and one-cent coins because the value of their metal content 
makes it economical to recycle as scrap metal. However, such a notice 
of proposed rulemaking also would have a significant unintended, but 
very predictable, consequence--namely, it would serve as an official 
notice to the public that until such a regulation is finally 
implemented, the melting, treatment, and exportation of 5-cent and one-
cent coins not only is profitable, but also is unquestionably legal. 
The numerous inquiries that the United States Mint receives, asking 
whether it is legal to melt one-cent coins, suggests that there is a 
widely-held belief among the general public that destroying United 
States coins is either unlawful or, at the very least, unseemly. 
However, once a notice of proposed rulemaking publicly reinforces that 
there is no current prohibition against melting the Nation's coins for 
profit, the sale of massive quantities of 5-cent coins and one-cent 
coins to recycling firms as scrap metal can be accomplished very 
quickly, causing a precipitous shortage of these denominations. In this 
regard, the Attorney General's Manual indicates, as to the ``public 
interest'' ground for finding good cause under 5 U.S.C. 553(b)(3), that 
it `` `connotes a situation in which the interest of the public would 
be defeated by any requirement of advance notice,' as when announcement 
of a proposed rule would enable the sort of financial manipulation the 
rule sought to prevent.'' See United States Department of Justice, 
Attorney General's Manual on the Administrative Procedure Act at 31, 
quoted in Utility Solid Waste Activities Group v. Environmental 
Protection Agency, 236 F.3d 749, 755 (D.C. Cir. 2001). Similarly, ``in 
special circumstances, good cause can exist when the very announcement 
of a proposed rule itself can be expected to precipitate activity by 
affected parties that would harm the public welfare.'' Mobil Oil Corp. 
v. Department of Energy, 728 F.2d 1477, 1492 (Temp. Emer. Ct. App. 
1983). Accordingly, delaying this rule for notice and comment would be 
contrary to the public interest because it could impair the Secretary's 
mission to ensure that there are sufficient quantities of one-cent and 
5-cent coins in circulation to meet the needs of the United States. See 
31 U.S.C. 5111(a)(1).
    While these concerns are predictive in nature, and therefore not 
susceptible of strict factual proof, in the judgment of the Department, 
the risk to the public's confidence in the integrity and reliability of 
the United States'

[[Page 76150]]

monetary system, in the event that precipitous speculation or recycling 
causes a shortage of one-cent or 5-cent coins, is not insubstantial. 
Cf. Mobil Oil Corp., 728 F.2d at 1492.
    For these reasons, it has also been determined that, pursuant to 5 
U.S.C. 553(d)(3), good cause exists to make this interim rule effective 
immediately.
    Although the Secretary of the Treasury has determined that it is 
necessary to make this interim rule effective immediately, the 
Department is interested in obtaining input from the public on this 
matter. The public therefore is invited to submit written comments 
concerning this interim rule. Within 120 days, the Department of the 
Treasury will evaluate the public comments and consider other relevant 
factors before deciding whether to issue a final rule extending or 
modifying the provisions of this interim rule, or allowing the interim 
rule to expire without extension.

List of Subjects in 31 CFR Part 82

    Administrative practice and procedure, Currency, Penalties.

Authority and Issuance

0
For the reasons set forth, Chapter 1 of Subtitle B of title 31 of the 
Code of Federal Regulations is amended by adding part 82 to read as 
follows:

PART 82--5-CENT AND ONE-CENT COIN REGULATIONS

Sec.
82.1 Prohibitions.
82.2 Exceptions.
82.3 Definitions.
82.4 Penalties.

    Authority: 31 U.S.C. 5111(d).


Sec.  82.1  Prohibitions.

    Except as specifically authorized by the Secretary of the Treasury 
(or designee) or as otherwise provided in this part, no person shall 
export, melt, or treat:
    (a) Any 5-cent coin of the United States; or
    (b) Any one-cent coin of the United States.


Sec.  82.2  Exceptions.

    (a) The prohibition contained in Sec.  82.1 against the exportation 
of 5-cent coins and one-cent coins of the United States shall not apply 
to:
    (1) The exportation in any one shipment of 5-cent coins and one-
cent coins having an aggregate face value of not more than $100 that 
are to be legitimately used as money or for numismatic purposes. 
Nothing in this paragraph shall be construed to authorize export for 
the purpose of sale or resale of coins for melting or treatment by any 
person.
    (2) The exportation of 5-cent coins and one-cent coins having an 
aggregate face value amount of not more than $5 carried on an 
individual, or in the personal effects of an individual, departing from 
a place subject to the jurisdiction of the United States.
    (b) The prohibition contained in Sec.  82.1 against the treatment 
of 5-cent coins and one-cent coins shall not apply to the treatment of 
these coins for educational, amusement, novelty, jewelry, and similar 
purposes as long as the volumes treated and the nature of the treatment 
makes it clear that such treatment is not intended as a means by which 
to profit solely from the value of the metal content of the coins.
    (c)(1) The prohibition contained in Sec.  82.1 against exportation, 
melting, or treatment of 5-cent coins and one-cent coins of the United 
States shall not apply to coins exported, melted, or treated under a 
written license issued by the Secretary of the Treasury (or designee).
    (2) Applications for licenses should be transmitted to the 
Director, United States Mint, 801 9th Street, NW., Washington, DC 
20220.


Sec.  82.3  Definitions.

    (a) ``5-cent coin of the United States'' means a 5-cent coin minted 
and issued by the Secretary of the Treasury pursuant to 31 U.S.C. 
5112(a)(5).
    (b) ``One-cent coin of the United States'' means a one-cent coin 
minted and issued by the Secretary of the Treasury pursuant to 31 
U.S.C. 5112(a)(6).
    (c) ``Export'' means to remove, send, ship, or carry, or to take 
any action with the intent to facilitate a person's removing, sending, 
shipping, or carrying, from the United States or any place subject to 
the jurisdiction thereof, to any place outside of the United States or 
to any place not subject to the jurisdiction thereof.
    (d) ``Person'' means any individual, partnership, association, 
corporation, or other organization, but does not include an agency of 
the Government of the United States.
    (e) ``Treat'' or ``treatment'' means to smelt, refine, or otherwise 
treat by heating, or by a chemical, electrical, or mechanical process.


Sec.  82.4  Penalties.

    (a) Any person who exports, melts, or treats 5-cent coins or one-
cent coins of the United States in violation of Sec.  82.1 shall be 
subject to the penalties specified in 31 U.S.C. 5111(d), including a 
fine of not more than $10,000 and/or imprisonment of not more than 5 
years.
    (b) In addition to the penalties prescribed by 31 U.S.C. 5111(d), a 
person violating the prohibitions of this part may be subject to other 
penalties provided by law, including 18 U.S.C. 1001(a).

    Dated: December 12, 2006.
Edmund C. Moy,
Director, United States Mint.
[FR Doc. 06-9777 Filed 12-15-06; 12:41 pm]
BILLING CODE 4810-02-P