Procedures and Standards for Declining Surety Immigration Bonds and Administrative Appeal Requirement for Breaches, 45968-45990 [2020-14824]

Agencies

• DEPARTMENT OF HOMELAND SECURITY

[Federal Register Volume 85, Number 148 (Friday, July 31, 2020)]
[Rules and Regulations]
[Pages 45968-45990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14824]


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DEPARTMENT OF HOMELAND SECURITY

8 CFR Part 103

[DHS Docket No. ICEB-2017-0001]
RIN 1653-AA67


Procedures and Standards for Declining Surety Immigration Bonds 
and Administrative Appeal Requirement for Breaches

AGENCY: U.S. Immigration and Customs Enforcement, Department of 
Homeland Security.

ACTION: Final rule.

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SUMMARY: The U.S. Department of Homeland Security (DHS) is promulgating 
two changes that apply to surety companies certified by the Department 
of the Treasury, Bureau of the Fiscal Service (Treasury), to underwrite 
bonds on behalf of the Federal Government. First, this final rule 
requires Treasury-certified sureties seeking to overturn a surety 
immigration bond breach determination to exhaust administrative 
remedies by filing an administrative appeal raising all legal and 
factual defenses. This requirement to exhaust administrative remedies 
and present all issues to the administrative tribunal will allow 
Federal district courts to review a written decision addressing all of 
the surety's defenses, thereby streamlining litigation over the breach 
determination's validity. Second, this rule sets forth ``for cause'' 
standards and due process protections so that U.S. Immigration and 
Customs Enforcement (ICE), a component of DHS, may decline bonds from 
companies that do not cure their deficient performance. Treasury 
administers the Federal corporate surety bond program and, in its 
regulations, allows agencies to prescribe in their regulations for 
cause standards and procedures for declining to accept bonds from a 
Treasury-certified surety company. ICE adopts the for cause standards 
contained in this rule because certain surety companies have failed to 
pay amounts due on administratively final bond breach determinations or 
have had in the past unacceptably high breach rates.

DATES: This rule is effective August 31, 2020.

FOR FURTHER INFORMATION CONTACT: Melinda A. Jones, Management and 
Program Analyst, MS 5207 Enforcement and Removal Operations, U.S. 
Immigration and Customs Enforcement, Bond Management Unit, 500 12th 
Street SW, Washington, DC 20536; email [email protected] or [email protected]. Telephone 202-271-9855 (not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Abbreviations
II. Background
    A. ICE Immigration Bonds Generally
    B. Surety Bonds
    C. Need for Exhaustion Requirement
    D. Need for Ability To Decline Bonds From Non-Performing Surety 
Companies
    E. Treasury Regulation Allows Federal Agencies To Decline Bonds 
From Certified Sureties for Cause
III. Discussion of Final Rule
    A. Exhaustion of Administrative Remedies
    B. Issue Exhaustion
    C. Standards and Process for Declining Bonds From a Treasury-
Certified Surety
    D. Technical Changes
IV. Discussion of Comments
    A. Comments on Exhaustion of Administrative Remedies
    B. Comments on For Cause Standards for Declining Bonds
V. Statutory and Regulatory Requirements
    A. Executive Orders 12866, 13563, and 13771: Regulatory Planning 
and Review
    B. Final Regulatory Flexibility Analysis
    C. Unfunded Mandates Reform Act
    D. Small Business Regulatory Enforcement Fairness Act of 1996
    E. Collection of Information
    F. Federalism
    G. Civil Justice Reform
    H. Energy Effects
    I. Environment
VI. The Amendments

I. Abbreviations

AAO Administrative Appeals Office
APA Administrative Procedure Act
CFR Code of Federal Regulations
DHS Department of Homeland Security
DOJ Department of Justice
FY Fiscal Year
ICE U.S. Immigration and Customs Enforcement
INA Immigration and Nationality Act
INS Immigration and Naturalization Service
OMB Office of Management and Budget
ROP Record of Proceedings
Treasury Department of the Treasury, Bureau of the Fiscal Service
USCIS U.S. Citizenship and Immigration Services

II. Background

A. ICE Immigration Bonds Generally

    ICE may release certain aliens from detention during removal 
proceedings after a custody determination has been made pursuant to 8 
CFR 236.1(c). ICE may require an alien to post an

[[Page 45969]]

immigration bond as a condition of his or her release from custody. See 
Immigration and Nationality Act (INA) 236(a)(2)(A), 8 U.S.C. 
1226(a)(2)(A); 8 CFR 236.1(c)(10). This rule applies to all immigration 
bonds issued by ICE. There are currently three types of immigration 
bonds issued by ICE. A delivery bond is posted to guarantee the 
appearance of the bonded alien for removal, an interview, or at 
immigration court hearings; a voluntary departure bond is posted to 
secure the timely voluntary departure of an alien from the United 
States, 8 CFR 1240.26(b)(3)(i), (c)(3)(i); and an order of supervision 
bond is to secure compliance with an order of supervision, 8 CFR 
241.5(b). See also INA 103(a)(3), 8 U.S.C. 1103(a)(3) (authorizing the 
Secretary of Homeland Security to ``prescribe such forms of bond'' as 
the Secretary deems necessary to carry out his immigration 
authorities).
    ICE immigration bonds may be secured by a cash deposit (``cash 
bonds'') or may be underwritten by a surety company certified by 
Treasury pursuant to 31 U.S.C. 9304-9308 to issue bonds on behalf of 
the Federal government (``surety bonds''). 8 CFR 103.6(b). Treasury 
publishes the list of certified sureties in Department Circular 570, 
available at https://www.fiscal.treasury.gov/surety-bonds/list-certified-companies.html. For cash bonds, ICE requires a deposit for 
the face amount of the bond and, if the bond is breached, ICE transfers 
that deposit into the Breached Bond/Detention Fund as compensation for 
the breach of the bond agreement. 8 U.S.C. 1356(r); 8 CFR 103.6(b), 
(e). In contrast, when a surety bond is breached, ICE must issue an 
invoice to collect the amount due from the surety company or its agent. 
ICE Form I-352 (Rev. 12/17). This rule applies to surety bonds only, 
and not to cash bonds.

B. Surety Bonds

    Pursuant to the terms of the bond, surety companies and their 
agents serve as co-obligors on the bond and are jointly and severally 
liable for payment of the face amount of the bond when ICE issues an 
administratively final breach determination. In this rule, the singular 
term ``bond obligor'' refers to either the surety company or the 
bonding agent. The plural term ``bond obligors'' refers to both 
entities.
    ICE officials may declare a bond breached when there has been a 
``substantial violation of the stipulated conditions.'' 8 CFR 103.6(e). 
Bond breach determinations are issued on ICE Form I-323, Notice--
Immigration Bond Breached. ICE makes such a determination when a bond 
obligor fails to deliver the alien into ICE custody when requested, 
when an obligor fails to ensure that the alien timely voluntarily 
departs the United States, or when an obligor fails to ensure that the 
alien complies with an order of supervision, as required by the terms 
of the bond.
    Bond obligors have a right to appeal the breach determination by 
completing Form I-290B, Notice of Appeal or Motion, and submitting the 
form together with the appropriate filing fee and a brief written 
statement setting forth the reasons and evidence supporting the appeal 
within 30 days after service of the decision. 8 CFR 103.3(a)(2)(i). If 
a bond obligor does not timely appeal the breach determination to the 
U.S. Citizenship and Immigration Services (USCIS) Administrative 
Appeals Office (AAO), or if the appeal is dismissed, the breach 
determination becomes an administratively final agency action. See 8 
CFR 103.6(e); see generally United States v. Gonzales & Gonzales Bonds 
& Ins. Agency, Inc., 728 F. Supp. 2d 1077, 1086-91 (N.D. Cal. 2010); 
Safety Nat'l Cas. Corp. v. DHS, 711 F. Supp. 2d 697, 703-04 (S.D. Tex. 
2008).\1\
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    \1\ Courts have also held that certain AAO decisions are final 
agency actions when the AAO issues opinions on non-bond appeals 
within its jurisdiction in other contexts. See, e.g., Herrera v. 
U.S. Citizenship & Imm. Servs., 571 F.3d 881, 885 (9th Cir. 2009).
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    For surety bonds, if a bond obligor does not timely appeal to the 
AAO or if the appeal is dismissed, ICE will issue a demand for payment 
on an administratively final breach determination in the form of an 
invoice to the bond obligors. 31 CFR 901.2(a). The bond obligors have 
30 days to pay the invoice or submit a written dispute; otherwise, the 
debt is past due. 31 CFR 901.2(b)(3). During this 30-day period, the 
bond obligors may seek agency review of the debt. See 6 CFR 11.1(a); 31 
CFR 901.2(b)(1), (e). If the bond obligors ask to review documents 
related to the debt, ICE will provide documents supporting the 
existence of the debt. If the bond obligors dispute the debt, ICE will 
review the breach determination and issue a written response to any 
issues raised by the bond obligors. Under the terms set forth in ICE's 
invoice, if a debtor, such as a bond obligor, does not pay the invoice 
within 30 days of issuance of the written response to the dispute, the 
invoice is past due. See 31 CFR 901.2(b)(3).

C. Need for Exhaustion Requirement

    Treasury-certified surety companies that receive a breach 
determination need to know when that decision is final to plan their 
next steps. When a decision is final, the bond obligor can seek further 
review of the decision in the federal courts. 5 U.S.C. 704. An initial 
agency action, such as a bond breach determination, is considered final 
and subject to judicial review unless exhaustion of administrative 
remedies is required, i.e., unless (1) a statute expressly requires an 
appeal to a higher agency authority, or (2) the agency's regulations 
require (a) an appeal to a higher agency authority as a prerequisite to 
judicial review, and (b) the administrative action is made inoperative 
during such appeal. Darby v. Cisneros, 509 U.S. 137, 154 (1993) 
(explaining that when the Administrative Procedure Act (APA) applies, 
an appeal to ``superior agency authority'' is a prerequisite to 
judicial review only when expressly required by statute or when an 
agency rule requires appeal before review and the administrative action 
is made inoperative pending that review).\2\ An agency may also by 
regulation require issue exhaustion, meaning that a litigant cannot 
raise an issue in federal court without first raising the issue in the 
litigant's administrative appeal. See generally Sims v. Apfel, 530 U.S. 
103, 107-10 (2000).
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    \2\ See also Air Espana v. Brien, 165 F.3d 148, 151 (2d Cir. 
1999) (noting that section 273 of the Immigration and Nationality 
Act does not impose an exhaustion requirement); DSE, Inc. v. United 
States, 169 F.3d 21, 26-27 (D.C. Cir. 1999) (party may seek judicial 
review without pursuing intra-agency appeal because filing of appeal 
did not make agency decision inoperative); Young v. Reno, 114 F.3d 
879, 881-82 (9th Cir. 1997) (by regulation, appeal was not 
required).
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    In this rule, DHS requires Darby exhaustion by revising DHS 
regulations such that before a surety can sue on ICE's bond breach 
determination in federal court, the surety must appeal such 
determination to the AAO. Consistent with Darby, the rule also provides 
that the agency's breach determination remains inoperative during the 
pendency of such appeal. In addition, this rule requires issue 
exhaustion by requiring sureties to raise all factual and legal issues 
in an administrative appeal or waive those issues in federal court.
    The need for exhaustion of administrative remedies and issue 
exhaustion requirements for bond breach determinations is evidenced by 
two cases where district court judges required ICE to issue written 
decisions addressing defenses raised by surety companies and their 
agents for the first time in federal district court litigation. In 
these cases, filed by the United States in federal district court to 
collect

[[Page 45970]]

amounts due from surety companies and their agents for breached bonds, 
the courts issued remand orders requiring ICE to prepare written 
decisions addressing whether over 100 breach determinations were valid 
after evaluating the defenses raised by the bond obligors. United 
States v. Int'l Fidelity Ins. Co., No. 2:11-cv-396-FSH-PS, ECF No. 86 
at 8 (D.N.J. July 30, 2012); United States v. Gonzales & Gonzales Bonds 
& Ins. Agency, Inc., 2012 WL 4462915, at 9 (N.D. Cal. Sept. 25, 2012).
    Requiring exhaustion of administrative remedies and issue 
exhaustion will streamline this type of litigation and conserve 
judicial resources because the bond obligors will be required to raise 
all factual and legal issues in an administrative appeal, and the AAO 
will issue a written decision addressing all defenses. The 
administrative appeal process will allow errors to be corrected without 
resort to federal court litigation and will avoid the delay associated 
with remanding breach determinations to the agency to issue written 
administrative decisions addressing defenses. As noted by a district 
court, appropriate review of an agency determination would be 
simplified by requiring exhaustion of administrative remedies. See 
Int'l Fidelity Ins. Co., ECF No. 86, at 9. This regulation will promote 
judicial economy by requiring obligors to present their defenses to the 
AAO in the first instance, thus allowing federal courts to review a 
written decision addressing those defenses under the APA's arbitrary 
and capricious standard of review, rather than remanding cases to ICE 
for necessary administrative determinations.

D. Need for Ability To Decline Bonds From Non-Performing Surety 
Companies

    For decades, certain surety companies and their agents have failed 
to pay invoices for breached bonds timely (within 30 days) or to 
present specific reasons to the agency why, in their view, the breach 
determinations are invalid. This non-performance has compelled 
litigation in federal court to resolve thousands of unpaid breached-
bond debts valued in the millions of dollars and has also resulted in 
ICE filing claims in state receivership proceedings when sureties 
cannot pay past-due invoices. ICE needs to be able to decline future 
bonds from non-performing surety companies, after providing the due 
process specified in this rule, to give surety companies an incentive 
to take appropriate action when a bond is breached.
    The need for the ability to decline bonds derives from the lack of 
an effective existing mechanism to address non-performing surety 
companies at the bond-approving agency level. Specifically, certain 
surety companies' failure to pay amounts due on breached bonds had been 
ongoing for years, and the agency considered different approaches to 
recovering payments. In 1982, Regional Counsel for the former 
Immigration and Naturalization Service (INS) recommended that the INS 
amend 8 CFR 103.6 to implement a procedure, similar to that established 
by the U.S. Customs Service in July 1981, to stop accepting bonds from 
surety companies with poor payment records until their payment 
performance improved, but this proposal was never implemented.
    In 2005, ICE notified a surety with substantial delinquent debt 
that it would no longer accept immigration bonds underwritten by that 
company and separately asked Treasury to revoke the surety's 
certification to post bonds on behalf of the United States. A district 
court enjoined ICE's action not to accept additional bonds, ruling that 
ICE could not decline immigration bonds from this surety without first 
affording the company procedural due process. Safety Nat'l Cas. Corp. 
v. DHS, No. 4:05-cv-2159, slip op. at 8 (S.D. Tex. Dec. 9, 2005).
    Treasury, after conducting an informal hearing, issued a 
determination concluding that the surety company exhibited a course and 
pattern of doing business that was incompatible with its authority to 
underwrite bonds on behalf of the United States and directed the surety 
to make full payment of all amounts due and owing on over 900 breached 
bonds (over $7 million at the time). See ``Notice to Safety National 
Casualty Corp. from FMS Commissioner'' (Jan. 23, 2007) (withdrawn and 
vacated, with prejudice, on July 19, 2013). The surety then filed suit 
in federal district court on February 21, 2007, seeking to enjoin 
Treasury from enforcing its final decision and to vacate Treasury's 
ruling that the surety should be decertified. Safety Nat'l Cas. Corp. 
v. U.S. Dep't of the Treasury, No. 4:07-cv-00643 (S.D. Tex. Feb. 21, 
2007), ECF No. 1. On August 27, 2008, the court stayed the case pending 
the resolution of 1,421 bond disputes, id. (Minute Entry), raised in an 
earlier case filed by Safety National Casualty Corp. and its agent 
against DHS, Safety Nat'l Cas. Corp. v. DHS, No. 4:05-cv-2159 (S.D. 
Tex. filed June 23, 2005), ECF No. 1. On July 30, 2013, the Treasury 
case was dismissed based on a settlement agreement reached by the 
parties in the earlier case involving the 1,421 bond disputes. No. 
4:07-cv-00643, ECF. No. 67. This example illustrates the difficulty ICE 
has encountered in precluding surety companies that have not paid 
invoices issued on administratively final breach determinations from 
issuing new immigration bonds.
    The repeated failures of certain surety companies to respond 
appropriately to breached-bond invoices, either by paying the invoice 
or disputing the validity of the breach determination before the 
agency, shows the need for this rule allowing ICE to decline bonds from 
non-performing surety companies.

E. Treasury Regulation Allows Federal Agencies To Decline Bonds From 
Certified Sureties for Cause

    Treasury is responsible for administering the corporate Federal 
surety bond program pursuant to 31 U.S.C. 9304-9308 and 31 CFR part 
223. Treasury evaluates the qualifications of sureties to underwrite 
Federal bonds and issues certificates of authority to those sureties 
that meet the specified corporate and financial standards. Under 31 
U.S.C. 9305(b)(3), a surety must ``carry out its contracts'' to comply 
with statutory requirements. To ``carry out its contracts'' and be in 
compliance with section 9305, a surety must, on a continuing basis, 
make prompt payment on invoices issued to collect amounts arising from 
administratively final determinations.
    On October 16, 2014, Treasury published a final rule entitled, 
``Surety Companies Doing Business with the United States.'' 79 FR 
61992. The rule became effective on December 15, 2014. This Treasury 
regulation clarifies that: (1) Treasury certification does not insulate 
a surety from the requirement to satisfy administratively final bond 
obligations; and (2) an agency bond-approving official has the 
discretion to decline to accept additional bonds on behalf of his or 
her agency that would be underwritten by a Treasury-certified surety 
for cause provided that certain due process standards are satisfied.
    Through this rule, DHS specifies the circumstances under which ICE 
will decline to accept new immigration bonds from Treasury-certified 
sureties. This rule also sets forth the procedures that ICE will follow 
before it declines bonds from a surety. This rule facilitates the 
prompt resolution of bond obligation disputes between ICE and sureties 
and minimizes the number of situations where the surety will routinely 
fail to pay administratively final bond obligations or fail to promptly 
seek administrative review of bond breach determinations.

[[Page 45971]]

III. Discussion of Final Rule

A. Exhaustion of Administrative Remedies

    Exhaustion of administrative remedies serves many purposes. Bastek 
v. Fed. Crop Ins. Corp., 145 F.3d 90, 93 (2d Cir. 1998). First, 
exhausting administrative remedies ensures that persons do not flout 
established administrative processes by ignoring agency procedures. See 
McKart v. United States, 395 U.S. 185, 195 (1969); Pub. Citizen Health 
Research Group v. Comm'r, Food & Drug Admin., 740 F.2d 21, 29 (D.C. 
Cir. 1984). Second, it protects the autonomy of agency decision making 
by allowing the agency the opportunity to apply its expertise in the 
first instance, exercise discretion it may have been granted, and 
correct its own errors. Woodford v. Ngo, 548 U.S. 81, 89 (2006). Third, 
the doctrine aids judicial review by permitting the full factual 
development of issues relevant to the dispute. James v. HHS, 824 F.2d 
1132, 1137-38 (D.C. Cir. 1987). Finally, the doctrine of exhaustion 
promotes judicial and administrative economy by resolving some claims 
without judicial intervention. Woodford, 548 U.S. at 89. For all of 
these reasons, DHS considers it to be both necessary and appropriate to 
mandate the exhaustion of administrative remedies for bond breach 
determinations on bonds issued by Treasury-certified surety companies.
    Therefore, under this rule, a Treasury-certified surety or its 
agent that receives a breach notification from ICE must seek 
administrative review of that breach determination by filing an appeal 
with the AAO before the agency's action becomes final and subject to 
judicial review. The initial breach determination will not be enforced 
while any timely administrative appeal is pending. ICE will not issue 
an invoice to collect the amount due from the bond obligors on a 
breached bond until the agency action becomes final. If the bond 
obligor fails to file an administrative appeal during the filing period 
(currently 30 days) or files an appeal that is summarily dismissed or 
rejected due to failure to comply with the agency's deadlines or other 
procedural rules, then the bond obligor will have waived all issues and 
will not be able to seek review of the breach determination in federal 
court.\3\ ICE will then issue an invoice to collect the amount due.\4\
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    \3\ See, e.g., Woodford, 548 U.S. at 90 (``Proper exhaustion 
demands compliance with an agency's deadlines and other critical 
procedural rules''); Silverton Snowmobile Club v. U.S. Forest Serv., 
433 F.3d 772, 787 (10th Cir. 2006) (upholding district court's 
dismissal of complaint due to failure to exhaust administrative 
remedies); Galvez Pineda v. Gonzales, 427 F.3d 833, 838 (10th Cir. 
2005) (``[U]ntimely filings with administrative agencies do not 
constitute exhaustion of administrative remedies.''); Glisson v. 
U.S. Forest Serv., 55 F.3d 1325 (7th Cir. 1995) (suit barred for 
failure to appeal from the decision of the supervisor of a national 
forest to authorize the sale of timber).
    \4\ Because a motion to reconsider or reopen a bond breach 
determination does not stay the final decision, a bond obligor's 
failure to file such a motion will not constitute failure to exhaust 
administrative remedies.
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B. Issue Exhaustion

    The rule also requires Treasury-certified surety companies and 
their agents to raise all defenses or other objections to a bond breach 
determination in their appeal to the AAO; otherwise, these defenses and 
objections will be deemed waived. The Supreme Court has observed that 
administrative issue exhaustion requirements may be created by agency 
regulations:

    [I]t is common for an agency's regulations to require issue 
exhaustion in administrative appeals. See, e.g., 20 CFR 802.211(a) 
(1999) (petition for review to Benefits Review Board must ``lis[t] 
the specific issues to be considered on appeal''). And when 
regulations do so, courts reviewing agency action regularly ensure 
against the bypassing of that requirement by refusing to consider 
unexhausted issues.

Sims v. Apfel, 530 U.S. 103, 107-08 (2000).
    DHS believes that issue exhaustion is appropriate and necessary 
when a Treasury-certified surety company or its agent appeals a breach 
determination to the AAO. Some of these companies have engaged in 
protracted litigation over the validity of bond breach determinations; 
some of this litigation could have been streamlined if the bond 
obligors had been required to present all of their issues and disputes 
to the agency for adjudication on appeal before suit was filed in 
federal court instead of raising new issues for the first time in 
federal court. Under this rule, DHS considers issue exhaustion to be 
mandatory in that a commercial surety or its agent is required to raise 
all issues before the AAO and waives and forfeits any issues not 
presented.

C. Standards and Process for Declining Bonds From a Treasury-Certified 
Surety

    As required by the Treasury regulation, DHS, through this rule, 
establishes the standards ICE will use to decline surety immigration 
bonds for cause (the ``for cause'' standards) and the procedures that 
ICE will follow before declining bonds from a Treasury-certified 
surety. The standards are informed by the important function that 
surety immigration bonds serve in the orderly administration of the 
immigration laws. Because insufficient resources exist to hold in 
custody all of the individuals whose statuses are being determined 
through removal proceedings, delivery bonds perform the vital function 
of allowing eligible individuals to be released from custody while the 
bond obligors accept the responsibility for ensuring their future 
appearance when required. If the bond obligor fails to satisfy its 
obligations under the terms of the bond, a claim is created in favor of 
the United States for the face amount of the bond. 8 CFR 103.6(e); 
Immigration Bond, ICE Form I-352, G.1 (Rev. 12/17). Enforcing 
collection of a breached immigration bond is important to motivate bond 
obligors to comply with the obligations they agreed to when they 
executed the bond and upon which ICE relied in permitting the alien to 
remain at liberty while removal proceedings are pending. When an alien 
does not appear as required, agency resources must be expended to 
locate the alien and take him or her back into custody.
    In short, the ``for cause'' standards arise from the need to 
maintain the integrity of the bond program. The bond program does not 
operate as intended when sureties (1) fail to timely pay invoices based 
on administratively final breach determinations, or (2) have 
unacceptably high breach rates. The incentive to deliver aliens in 
response to demand notices is reduced when sureties do not timely 
forfeit the amount of the bond as a consequence of their failure to 
perform. Moreover, if sureties do not submit payment for the 
Government's claim created as a result of the breach, they may receive 
an undeserved windfall if they retain any premiums or collateral paid 
by the person who contracted with them to obtain the bond on behalf of 
the alien (the indemnitor).
1. For Cause Standards
    The rule establishes three circumstances, or for cause standards, 
when ICE may notify a surety of its intention to decline any new bonds 
underwritten by the surety.\5\ ICE's decision about whether to decline 
new bonds is discretionary; ICE is not required to stop accepting new 
bonds every time one of the for cause standards has been violated, and 
ICE retains discretion to work with surety

[[Page 45972]]

companies on an individual basis to ensure compliance.
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    \5\ Treasury's regulation permitting agencies to promulgate 
``for cause'' standards to decline new bonds is ``prospective and is 
not intended to require a principal to obtain replacement bonds that 
have already been accepted.'' 79 FR 61,992, 61,995. Accordingly, 
ICE's notification would not have any effect on a surety's open 
bonds.
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First For Cause Standard: Ten or More Past-Due Invoices
    Under the first for cause standard, ICE is authorized to issue a 
notice of its intention to decline new bonds when the surety has 10 or 
more past-due invoices issued after the final rule's effective date. 
The terms ``invoice,'' ``administratively final,'' and ``past due'' are 
each terms of art which require further explanation.
    In this context, an ``invoice'' is a demand notice that ICE sends 
to a surety company and its agent seeking payment on an 
administratively final breach determination. A breach determination is 
``administratively final'' either when the time to file an appeal with 
the AAO has expired without an appeal having been filed or when the 
appeal is dismissed. See 8 CFR 103.6(e); see also Gonzales & Gonzales 
Bonds, 728 F. Supp. 2d at 1086, 1091; Safety Nat'l Cas. Corp., 711 F. 
Supp. 2d at 703-04.
    Finally, an invoice is ``past due'' when the bond obligor does not 
pay the invoice within 30 days of ICE's issuance of the invoice. 31 CFR 
901.2(b)(3). This 30-day period can be tolled if the obligor disputes 
the debt during the 30-day period.\6\ If the obligor disputes the debt, 
ICE will review the underlying breach determination and issue a written 
response to any issues raised by the surety or bonding agent. If ICE, 
in its written response to the obligor's dispute, concludes that the 
debt is invalid, ICE will cancel the invoice. If, however, ICE 
concludes that the debt is valid, the obligor has 30 days from issuance 
of the written decision to pay the debt. If a disputed invoice is 
valid, or if the obligor has declined to timely dispute the invoice, 
such an invoice, when it becomes past due, will be included as one of 
the 10 past-due invoices that may trigger the issuance of a notice that 
ICE intends to decline new bonds underwritten by the surety.\7\
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    \6\ Treasury has issued guidance to federal agencies instructing 
them to ``develop clear policies and procedures on how to respond to 
a debtor's request for copies of records related to the debt, 
consideration for a voluntary repayment agreement, or a review or 
hearing on the debt.'' Department of the Treasury, Bureau of the 
Fiscal Service, Managing Federal Receivables, at 6-16 (Mar. 2015). 
When it issues an invoice, ICE includes information about its 
collection policies, including a statement that: ``If a timely 
written request disputing the debt is received, the debt will be 
reviewed and collection will cease on the debt or disputed portion 
until verification or correction of the debt is made and a written 
summary of the review is provided.'' ICE Form Invoice, ``Important 
Information Regarding This Invoice,'' maintained by ICE's Financial 
Service Center Burlington.
    \7\ There is no further administrative review of ICE's 
determination that a disputed invoice is valid. This is because the 
administratively final breach determination underlying each invoice 
has already been subject to appellate review. In other words, 
because ICE does not issue an invoice until after the related breach 
has become administratively final, ICE's issuance of an invoice, and 
its review of a disputed invoice, would not occur until after the 
AAO had already resolved the obligor's appeal, if any, of the 
underlying breach determination.
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    Again, the first for cause standard will be triggered when at least 
10 invoices issued after this rule's effective date are past due. DHS 
establishes this standard because, when a surety company has 10 past-
due invoices, such a company is not fulfilling its obligation to 
diligently and promptly act on demands for payment. DHS considered 
using a smaller number of past-due invoices as the trigger for this 
standard but concluded that some leeway should be given for missed 
payments. However, DHS believes that a reasonably attentive surety 
company should be able to avoid having 10 past-due invoices at the same 
time.
    In fiscal year (FY) 2019, only five surety companies exceeded 10 
unpaid past-due invoices. Three of these companies stopped posting new 
bonds, of their own volition. All five of these companies were either 
in liquidation or exhibited a practice of repeatedly failing to timely 
pay invoices, exhibiting that nonpayment of 10 invoices did not occur 
through mistake or inadvertence. During this same period, multiple 
surety companies had timely paid all of their invoices or were late in 
submitting payments on fewer than 10 invoices.
Second For Cause Standard: Cumulative Debt of $50,000 or More on Past-
Due Invoices
    Under the second for cause standard, ICE is authorized to issue a 
notice of its intention to decline new bonds when the surety owes a 
cumulative total of $50,000 or more on past-due invoices issued after 
the effective date of this final rule, including interest and other 
fees assessed by law on delinquent debt. This rule includes a for cause 
standard based on cumulative debt because bond amounts differ based on 
custody determinations, and a surety could have a fairly large 
cumulative debt (over $50,000) when fewer than 10 invoices are unpaid. 
As of October 31, 2019,\8\ for bonds in an ``open'' status (those that 
have not yet been breached or canceled), the lowest surety bond value 
was $500 and the highest surety bond value was $750,000, the average 
value of the over 40,000 open surety bonds was about $11,200 and the 
median value was $10,000.\9\
---------------------------------------------------------------------------

    \8\ The data presented has been updated from the data provided 
in the proposed rule, but it is not meaningfully different. Although 
the data used here reflects FY 2019 information, the updated data 
supports the same conclusion as was reached in the proposed rule.
    \9\ Immigration Bond Statistics maintained by ICE's Financial 
Service Center Burlington.
---------------------------------------------------------------------------

    Data from FY 2019 illustrate the need for this standard. In FY 
2019, ICE issued invoices to collect amounts due on breached 
immigration bonds to 13 different sureties. As of October 31, 2019, 
three of those thirteen sureties owed cumulative debts above $50,000, 
and the median amount of cumulative debt owed by these three companies 
was substantial--$253,500.\10\ One other surety, which of its own 
volition no longer posts bonds, accrued a cumulative debt of $142,500 
on 16 past-due invoices in FY 2019 before paying those invoices. 
Likewise, data from FY 2019 confirm that surety companies that 
regularly pay invoices on time do not generally exceed a cumulative 
total of $50,000 in past due debt. Three sureties generally paid their 
debts in a timely manner with only a few late payments.\11\ The highest 
amount of past-due debt accrued by any of those three companies was 
$25,000. In addition, six surety companies had no past-due debts during 
FY 2019.
---------------------------------------------------------------------------

    \10\ An additional surety that has been in liquidation 
proceedings since 2001 owes a significant amount of past due debt, 
but no new invoices were issued to that surety in FY 2019.
    \11\ For purposes of this analysis, ICE considered payments to 
be timely when the payments were processed within 45 days of 
issuance of the invoice or were made in accordance with a payment 
agreement.
---------------------------------------------------------------------------

    These numbers suggest that the $50,000 threshold represents a 
reasonable trigger because, based on an average bond amount of $11,200, 
a surety could quickly accumulate a substantial debt if it is not 
committed to fulfilling its obligations by paying invoices timely. 
Continuing to accept bonds from such an entity places an unacceptable 
risk on the agency. If a surety company is approaching $50,000 in 
unpaid obligations and cannot pay such obligations, it should stop 
attempting to post new bonds.
    This standard also gives ICE the flexibility to take action when a 
surety's non-performance is problematic even though fewer than 10 
invoices may be past due. Because more than half of the open surety 
bonds are in the amount of $10,000 or more, a surety could incur a 
cumulative debt of $50,000 or more with relatively few unpaid invoices. 
This second for cause standard recognizes that possibility and gives 
ICE the option of taking action when the surety has failed to timely 
pay invoices,

[[Page 45973]]

while still giving the surety some latitude in making late payments. 
Having separate standards based either on a designated number of unpaid 
invoices or the dollar value of past due debt allows ICE to take 
appropriate action when a surety company is not current on payments of 
administratively final breach determinations.
Third For Cause Standard: Bond Breach Rate of 35 Percent or Greater
    Finally, under the third for cause standard, ICE is authorized to 
issue a notice of its intention to decline new bonds when the surety's 
breach rate for bonds is 35 percent or greater during a fiscal year. 
The breach rate is important because it measures the surety's 
compliance with its obligations under the terms of the immigration 
bond. The breach rate is calculated by dividing the number of 
administratively final breach determinations during a fiscal year for a 
surety company by the sum of the number of bonds breached and the 
number of bonds cancelled for that surety company during the same 
fiscal year. For example, if 50 bonds posted by a surety company were 
declared breached from October 1 to September 30, and 50 bonds posted 
by that same surety were cancelled during the same fiscal year (for a 
total of 100 bond dispositions) that surety would have a breach rate of 
50 percent for that fiscal year.
    ICE issues notices of breach determinations on Form I-323, Notice--
Immigration Bond Breached. As noted above, if the surety does not 
appeal ICE's breach determination to the AAO, ICE's breach 
determination becomes administratively final after the appeal period 
has expired and would be used in the breach rate calculation. If the 
surety files an appeal with AAO, only those breach determinations 
upheld by the AAO will be included in the breach rate calculation. In 
addition, for immigration delivery bonds, ICE will include in the 
breach rate calculation instances when ICE's mitigation policy applies 
because these bonds have been breached. As set forth in prior ICE 
policy statements and as recognized by courts, see Gonzales & Gonzales 
Bonds, 103 F. Supp. 3d at 1150, the mitigation policy applies to 
delivery bond breaches when the surety company or its agent has 
delivered the alien within 90 days of the surrender date set forth on 
the Form I-340, Notice to Obligor to Deliver Alien (demand notice). 
Currently, the amount forfeited is reduced when the surety or its agent 
surrenders the alien within 90 days of the surrender date. The 
mitigation policy does not apply when the alien appears on his or her 
own at an ICE office or when the alien appears with the indemnitor. 
Gonzales & Gonzales Bonds, 103 F. Supp. 3d at 1150. Because breaches to 
which the mitigation policy applies are still breached bonds, ICE 
includes these breach determinations in its calculation of a surety's 
breach rate.
    Under this rule, ICE will calculate breach rates on a federal 
fiscal year basis (October 1-September 30) to generate a meaningful 
sample size for each company. ICE will perform the breach rate 
calculation in the month of January after the end of the relevant 
fiscal year so that ICE can work with ``closed out'' data. The breach 
rate calculations used in the standard will be calculated for the first 
full fiscal year beginning after the effective date of this final rule, 
and each fiscal year thereafter. If an appeal timely filed with the AAO 
is still pending while the breach rate calculation is being performed, 
ICE will not include that breach in its calculations until the AAO has 
issued a decision dismissing or rejecting the appeal because the breach 
determination would not be administratively final.
    This rule uses 35 percent as the trigger because past performance 
shows that sureties can meet this standard by exercising reasonable 
diligence. Higher breach rates signal that obligors are not taking 
adequate actions to fulfill their responsibility to surrender aliens. 
During FY 2018, six of the eight surety companies that posted 
immigration bonds in that year had a breach rate, calculated using this 
approach, that was less than 35 percent. One of the surety companies 
with a breach rate that exceeded 35 percent also failed to meet the 
other standards set forth in this rule, and its failure to meet the 
breach rate standard reflects under-performance in complying with the 
terms and conditions of the bonds it has posted. The remaining surety 
company with a high breach rate had recently begun to post bonds in FY 
2018, and as a result, it had only four breaches and three 
cancellations. Subsequently, this surety company has improved its 
performance such that it would have cured its deficiency prior to ICE 
making a final determination to decline bonds from the surety.
    Surety companies have demonstrated their ability to comply with a 
35 percent breach rate; a higher breach rate would demonstrate a 
departure from their own and their peers' past performance. Moreover, 
as set forth in the bond agreement's terms and conditions, bonds are 
automatically cancelled when certain events occur before the bond has 
been breached, such as the death of the alien or the alien's departure 
from the United States. These types of bond cancellations will assist 
the surety companies in maintaining a relatively low breach rate. Using 
35 percent as a threshold for taking action is reasonable because 
surety companies have some latitude when they are, on occasion, unable 
to produce the alien, but to remain in compliance, they must surrender 
aliens for almost two-thirds of the demands issued.
2. Procedures
    ICE will use the following procedures to afford the surety company 
procedural due process protections consistent with 31 CFR 223.17: (1) 
Provide advance written notice to the surety stating the agency's 
intention to decline future bonds underwritten by the surety; (2) set 
forth the reasons for the proposed non-acceptance of such bonds; (3) 
provide an opportunity for the surety to rebut the stated reasons for 
non-acceptance of future bonds; and (4) provide an opportunity to cure 
the stated reasons, i.e., deficiencies, causing ICE's proposed non-
acceptance of future bonds. ICE will consider any written submission 
presented by the surety in response to the agency's notice provided 
that the response is received by ICE on or before the 30th calendar day 
following the date ICE issued the notice. ICE may decline bonds 
underwritten by the surety only after issuing a written determination 
that the bonds should be declined when at least one of the for cause 
standards set forth in this rule has been triggered.

D. Technical Changes

    The final rule also includes technical changes. It updates the 
reference to Treasury's authority to certify surety companies to 
underwrite bonds on behalf of the Federal Government in 8 CFR 103.6(b) 
from ``6 U.S.C. 6-13'' to ``31 U.S.C. 9304-9308'' to reflect Public Law 
97-258 (96 Stat. 877, Sept. 13, 1982), an Act that codified without 
substantive change certain laws related to money and finance as title 
31, United States Code, ``Money and Finance.''

IV. Discussion of Comments

    On June 5, 2018, DHS published a notice of proposed rulemaking 
(NPRM) proposing two changes that would apply to surety companies 
certified by Treasury to underwrite bonds on behalf of the Federal 
Government. 83 FR 25951. Specifically, DHS proposed: (1) To require 
Treasury-certified sureties seeking to overturn a surety immigration 
bond breach determination to exhaust administrative remedies by filing 
an administrative appeal with the AAO raising all legal and factual 
defenses; and (2) to issue for cause standards and

[[Page 45974]]

due process protections so that ICE may decline future bonds from non-
performing sureties.
    DHS received a total of eight comments in response to the NPRM. 
Five comments were submitted by a variety of entities and individuals 
associated with sureties. Specifically, two comments were submitted by 
trade associations, two comments were submitted by law firms 
representing surety companies currently underwriting immigration bonds, 
and one comment was submitted by a surety company that has not issued 
any immigration bonds. The five comments submitted on behalf of surety 
companies were opposed to the NPRM as written, and some of the 
commenters suggested that the NPRM be withdrawn because they believe 
the proposed changes are arbitrary, anticompetitive, and without 
sufficient authority.
    In addition, two comments were submitted by individuals who had no 
apparent connection to sureties. The two individuals expressed general 
concerns about immigration policies without raising any concerns about 
the impact of the NPRM, and did not provide any recommendations for 
revising elements of the proposed rule. Accordingly, these two comments 
will not be discussed further.

A. Comments on Exhaustion of Administrative Remedies

    The comments submitted by entities and individuals associated with 
sureties raised multiple issues related to the requirement that 
sureties exhaust administrative remedies before seeking judicial 
review. The following is a discussion of the issues that were raised 
and DHS's responses.
Adequacy of AAO Review Process
    One commenter asserted that the exhaustion requirement should not 
be imposed because the AAO's review process is fatally flawed based 
upon a 2005 Recommendation from the USCIS Ombudsman to the USCIS 
Director. The commenter stated that the AAO had not issued a 
precedential decision addressing immigration bonds since August 7, 
1998. The commenter further claimed that insufficient information had 
been issued about the applicable standard of review used by the AAO. 
The commenter also characterized the $675 cost to file an appeal as 
outrageous, claiming that the process lacks any due process safeguards 
based upon the commenter's estimate that 95 percent of all immigration 
bond breach appeals are dismissed.
    The report referenced by the commenter recommended that the AAO 
make available to the public four items: (1) The appellate standard of 
review; (2) the process under which cases are deemed precedent 
decisions; (3) the criteria under which cases are selected for oral 
argument; and (4) the statistics on decision-making by the AAO. 
Recommendation from the CIS Ombudsman to the Director, USCIS (Dec. 6, 
2005), https://www.dhs.gov/xlibrary/assets/CISOmbudsman_RR_20_Administrative_Appeals_12-07-05.pdf. At the time, 
the USCIS Ombudsman recommended that the legal standards and procedures 
for the AAO be spelled out in regulation or in detailed policy 
guidance, and that data on AAO decisions be published on a regular 
basis.
    After issuance of the 2005 report, the AAO changed its practices to 
address the report's concerns. For example, the AAO now provides 
detailed information about its decisions and the review process to 
stakeholders. The AAO has issued seven precedential decisions since the 
Ombudsman's report, including one issued in 2016. See Matter of 
Dhanasar, 26 I&N Dec. 884 (AAO 2016). In addition, non-precedential 
decisions are available through the AAO's website, including 
approximately 2,000 non-precedential decisions issued in response to 
appeals of breached immigration bonds. See Administrative Decisions, 
https://www.uscis.gov/laws/admin-decisions?topic_id=1&newdir=G1+-+Breach+of+Delivery+Bond.
    Further, the AAO has published a handbook on its website, setting 
forth rules, procedures, and recommendations for practice before the 
AAO. AAO Practice Manual, https://www.uscis.gov/aao-practice-manual. 
The Practice Manual specifically describes the applicable standard of 
review, explaining that the AAO is independent and exercises de novo 
review of all issues of fact, law, policy, and discretion. Id. at sec. 
3.4. The Practice Manual also provides information about the issuance 
of non-precedent and precedent decisions, explaining that AAO decisions 
may be designated as precedent by the Secretary of Homeland Security, 
with the approval of the Attorney General. Id. at sec. 3.15. In 
addition, the Practice Manual sets forth the process by which an 
appellant may request oral argument and the factors considered by the 
AAO in determining whether to grant a request for oral argument. Id. at 
sec. 6.5.
    The AAO also publishes detailed statistics about its decisions, 
including statistics showing that appeals of bond breaches are 
adjudicated in a timely manner. Specifically, the AAO's published 
statistics reflect that in the second quarter of FY 2020, the AAO 
completed 212 bond breach appeals, and 99.53 percent of those appeals 
were completed within 180 days. See AAO Processing Times, https://www.uscis.gov/about-us/directorates-and-program-offices/administrative-appeals-office-aao/aao-processing-times.
    The AAO's published statistics also reflect that the AAO 
independently reviews the validity of bond breaches in issuing its 
decisions. From FY 2017-2019, the AAO issued 244 decisions on the 
merits in bond breach appeals. Of those 244 decisions, 30 decisions 
(12.3 percent) sustained the appeal and determined that the bond breach 
was invalid. See AAO Appeal Adjudications, https://www.uscis.gov/sites/default/files/USCIS/About%20Us/Directorates%20and%20Program%20Offices/AAO/AAO_Data_for_Publishing_Thru_FY19.pdf.
    To the extent that the comment contends that USCIS' fee for 
processing the appeal is too high, DHS has previously explained the fee 
was set at $675 because DHS must recover the full costs of the services 
that USCIS provides or else risk reductions in service quality. USCIS 
Fee Schedule, 81 FR 73,292, 73,306 (Oct. 24, 2016). This rule does not 
affect the prior published analysis setting the AAO appeal filing fee. 
In sum, because the AAO has altered its practices after issuance of the 
2005 Ombudsman's report, and those changes are publicly documented, the 
commenter's reliance on criticisms of the AAO in the report is 
misplaced.
Sufficiency of 30-Day Time Period for Administrative Appeal
    Three commenters objected to the exhaustion requirement because 
they believe that the 30-day time limit for filing an appeal does not 
afford sureties enough time to gather evidence to submit a defense to 
the bond breach determination. One of those commenters noted that 
surety companies that request documents related to the bond breach 
through the Freedom of Information Act (FOIA), 5 U.S.C. 552, may not 
receive responsive documents within the 30-day time period.
    Another commenter stated that the rule would result in sureties 
underwriting an immigration bond as if there were no defenses to the 
validity of a bond breach, and, as a result, aliens would have more 
difficulty obtaining a bond because a surety would agree to underwrite 
an immigration bond only when it could fully collateralize the amount 
of the bond. The commenter

[[Page 45975]]

predicted that sureties would underwrite fewer bonds because the 
commenter believes that sureties will encounter difficulties in raising 
defenses to bond breaches based on the 30-day time period for filing an 
appeal.
    This rule does not alter the time period for filing an 
administrative appeal, which is set forth in 8 CFR 103.3(a)(2)(i). This 
rule requires that before seeking judicial review, a surety must 
present any defenses to the AAO through existing procedures.
    The AAO's procedures provide ample time for a surety to evaluate 
the validity of a bond breach, gather relevant evidence, and present 
any defenses to the validity of the breach. To appeal ICE's bond breach 
determination to the AAO, a surety must file a Notice of Appeal (Form 
I-290B) within 33 days after the breach determination was mailed (30 
calendar days of the date of service with an additional 3 days because 
the decision was sent by mail). 8 CFR 103.3(a)(2)(i); Form I-290B 
Instructions at 2. The surety does not need to submit a brief in 
support of the appeal, but if a surety does wish to submit a brief or 
additional evidence, the surety may submit those materials with the 
Form I-290B or within 30 days of filing the Form I-290B. Id. at 5. If a 
surety needs more than 30 calendar days after filing Form I-290B to 
submit a brief, the surety must make a written request to the AAO 
within 30 calendar days of filing the appeal. Id. at 6. The AAO may 
grant more time to submit a brief for good cause. Id.
    A surety need not have received a response to a FOIA request to 
file an appeal with the AAO or present any defenses to the bond breach 
determination. A surety should have access to the necessary information 
to evaluate the validity of the breach without obtaining additional 
documents through FOIA. Specifically, the surety receives a copy of the 
bond when the bond is posted, and the surety, or the surety's agent, 
receives all bond-related notices, including demand notices and breach 
notices. In addition, a surety can determine the status of an alien's 
immigration court proceedings by accessing the information system 
maintained by EOIR or by obtaining information about the status of 
proceedings through the alien or his/her attorney. If the surety seeks 
documents needed for a bond breach appeal through FOIA that it does not 
have access to otherwise, the surety may request an extension of the 
briefing period from the AAO.
    DHS does not expect this rule to significantly impact the 
availability of bonds. A large majority of immigration bonds are cash 
bonds, which are unaffected by this rule. Moreover, a surety will 
continue to have the same opportunities to challenge the validity of a 
breach after this rule as it does before the rule. Thus, a surety with 
valid defenses to a bond breach may raise those defenses by filing an 
appeal with the AAO and can obtain judicial review thereafter.
Records Needed To Challenge Breach and Applicable Standards
    One commenter argued that DHS should not require exhaustion of 
administrative remedies unless ICE is required to produce non-
privileged documents from the alien's registration file (``the A-
File'') to sureties after determining that a bond has been breached. 
The commenter asserted that all non-privileged documents in the A-File 
are needed to assist the surety in identifying defenses to the bond 
breach, to locate the alien, and to mitigate the bond breach. The 
commenter also stated that this rule provides no procedure for review 
of a dispute or appeal of a breach and argued that the rule should 
contain requirements to apply specific standards for review and 
incorporate court decisions addressing the validity of bond breaches.
    A surety need not have access to the A-File to perform its 
obligations under the bond and to evaluate the validity of the breach 
because a surety should already possess the necessary information. As 
explained earlier, the surety receives a copy of the bond when it is 
issued, and the surety, or the surety's agent, receives all bond-
related notices, including demand notices and breach notices. In 
addition, a surety can determine the status of an alien's immigration 
court proceedings by accessing the information system maintained by 
EOIR or by obtaining information about the status of proceedings 
through the alien or his/her attorney. A surety also has a contractual 
relationship with the indemnitor who requested the bond be posted for 
the alien, and the surety may obtain information through the 
indemnitor. Moreover, the A-File contains numerous documents unrelated 
to bond breaches and requiring ICE to produce the entire A-File for 
every surety bond breach would be unduly burdensome and unproductive.
    Incorporating the standards used by the AAO and courts to review 
the validity of bond breaches in this rule is unnecessary because both 
the procedural and substantive standards for assessing the validity of 
bond breaches are publicly available in existing regulations and 
judicial decisions. Specifically, as noted above, 8 CFR 103.3 governs 
the procedure for filing an appeal with the AAO, and the AAO has 
published a handbook containing applicable rules and procedures for 
matters submitted to it for review. AAO Practice Manual, https://www.uscis.gov/aao-practice-manual. 8 CFR 103.6(c)(3) explains that 
``[s]ubstantial performance of all conditions imposed by the terms of a 
bond shall release the obligor from liability.'' Conversely, ``a bond 
is breached when there has been a substantial violation of the 
stipulated conditions'' of the bond. 8 CFR 103.6(e). The terms and 
conditions of a bond are set forth in the bond form, and those terms 
and conditions have been interpreted in numerous judicial decisions, 
e.g., AAA Bonding Agency, Inc. v. DHS, 447 F. App'x 603 (5th Cir. 
2011); United States v. Gonzales & Gonzales Bonds and Ins. Agency, 
Inc., 103 F. Supp. 3d 1121 (N.D. Cal. 2015).
Relationship to Other Processes
    Two commenters expressed uncertainty about the relationship between 
review of a bond breach by the AAO and other avenues for contesting the 
validity of a bond breach. Specifically, one commenter stated that the 
proposed regulations are ambiguous as to whether an appeal to the AAO 
is the exclusive manner to challenge a bond breach. The commenter 
stated that the proposed rule appeared to suggest that sureties could 
dispute invoices via a written procedure as an alternative to filing an 
appeal to the AAO, and that this apparent alternative was in conflict 
with a requirement that the surety file an AAO appeal. Another 
commenter perceived a conflict between the rule's requirement of 
exhaustion through an appeal to the AAO and provisions set forth in 
settlement agreements known as the Amwest Agreements for using points 
of contact (POCs) to resolve complaints and questions.
    Both the invoice dispute process and the provisions for resolving 
complaints for signatories of the Amwest Agreements will continue to be 
available after this rule takes effect, but a surety cannot satisfy the 
exhaustion requirement through those processes.
    This rule requires that, before seeking judicial review, a surety 
must exhaust administrative remedies by filing an administrative appeal 
with the AAO raising all legal and factual defenses. The failure by a 
Treasury-certified surety or its bonding agent to exhaust 
administrative appellate review before the AAO waives all defenses to 
the breach before a district court.

[[Page 45976]]

    Based on the timing of filing an administrative appeal and 
disputing an invoice, a surety can exhaust administrative remedies and 
still raise a dispute on an invoice. An invoice for a surety bond 
breach is issued only after a bond breach becomes administratively 
final. The breach is inoperative during the administrative appeal 
period and while a timely-filed administrative appeal to the AAO is 
pending. If a surety chooses not to file an appeal to the AAO, ICE 
issues an invoice after appeal period has ended. On the other hand, if 
a surety submits a timely appeal to the AAO, ICE issues an invoice 
after the AAO issues a decision upholding the breach determination. In 
either case, a surety may submit a dispute of an invoice pursuant to 31 
CFR 901.2(b)(1) and ICE policy as set forth on the invoice, and ICE 
will review the dispute. However, the submission of an invoice dispute 
is neither necessary nor sufficient to satisfy the exhaustion 
requirement under this rule. To satisfy the exhaustion requirement, a 
surety must appeal the bond breach to the AAO, an entity that 
independently reviews the breach using de novo review.
    Likewise, filing of an administrative appeal does not preclude a 
signatory to the Amwest Agreements from seeking review available under 
those agreements. The Amwest Agreements were executed in 1995 and 1997 
by Amwest Surety Insurance Co., Far West Surety Insurance Co, Gonzales 
& Gonzales Bonds and Insurance Agency, and the INS to resolve 
litigation filed in 1993 by those companies challenging the INS's 
interpretation of the bond contract. The Amwest Agreements provided 
that the INS would designate certain officials to serve as POCs for the 
resolution of the signatories' comments, complaints, and questions 
regarding bonds or bond practices. Specifically, the 1997 Amwest 
Agreement states that the signatories are ``entitled to seek resolution 
through the appropriate POC without paying any filing fee.'' \12\
---------------------------------------------------------------------------

    \12\ Draft Memorandum re; Implementation of Settlement Amwest v. 
Reno, at 5, attachment to Settlement Agreement executed by the 
United States of America and the Gonzales & Gonzales Bonds and 
Insurance Agency, Inc., the Amwest Surety Insurance Co., and the Far 
West Surety Insurance Co. (Sept. 10, 1997).
---------------------------------------------------------------------------

    The commenter claims that ICE will violate the Amwest Agreements if 
the proposed rule is adopted, contending that a signatory's only option 
for administrative review would be filing an appeal with the AAO, which 
necessitates paying the applicable filing fee. The 1997 Amwest 
Agreement, however, expressly states that the parties to the Agreement 
did not intend that submission of a complaint to a POC would ``replace 
the existing procedures for filing either a motion for reconsideration 
with the Office issuing a breach notice, or an appeal with the AAU [now 
called the AAO]. It was their intent, however, to create an alternative 
procedure for resolution of questions relating solely to the 
implementation of the Settlement [the Amwest Agreements].'' \13\
---------------------------------------------------------------------------

    \13\ Id. (emphasis in original).
---------------------------------------------------------------------------

    The option of submitting disputes to a POC about issues arising 
under the Amwest Agreements does not preclude DHS from requiring 
exhaustion of administrative remedies. An Amwest signatory is still 
entitled to raise issues arising under the Amwest Agreements to a POC. 
However, if the signatory ultimately seeks to challenge ICE's breach 
determination in federal court, it must first exhaust administrative 
remedies by filing an appeal with the AAO raising all legal and factual 
defenses to the breach.

B. Comments on For Cause Standards for Declining Bonds

    The five comments submitted by Treasury-certified sureties and 
their representatives also raised numerous issues related to the 
proposal to adopt for cause standards so that ICE can decline to accept 
surety immigration bonds from underperforming sureties. Each of the 
issues is addressed below.
Authority of ICE To Decline Bonds
    Two commenters argued that only Treasury has the authority to 
prevent a surety from conducting business and that ICE lacks delegated 
authority to decline bonds. The commenters noted that Congress has 
authorized Treasury to revoke the authority of a surety to do business 
when Treasury decides the corporation is insolvent, is in violation of 
31 U.S.C. 9304-9306, or has failed to pay a final judgment. The 
commenters contended that Treasury does not have the right to delegate 
by regulation its authority to administer the federal surety bond 
program.
    Congress has granted Treasury the power to authorize sureties to 
post bonds in favor of the Federal government and to revoke that 
authorization. 31 U.S.C. 9305(b), (d); Concord Casualty & Surety Co. v. 
United States, 69 F.2d 78, 80 (2d Cir. 1934). However, Congress has 
also expressly conditioned acceptance of a bond on the approval of the 
Federal agency issuing the bond. 31 U.S.C. 9304(b); see American 
Druggists Ins. Co. v. Bogart, 707 F.2d 1229, 1233 (11th Cir. 1983) 
(recognizing that even if a surety has been approved by Treasury, an 
agency may refuse a bond proffered by the surety if it has reason to 
doubt the surety's willingness to perform according to the conditions 
of the bond).
    In issuing its regulation authorizing agencies to decline bonds 
from underperforming sureties, Treasury noted that several comments on 
its rule made the same objection raised in response to this rule: 
Specifically, the comments stated that 31 U.S.C. 9305(e) provides the 
only circumstances under which an agency may decline to accept a new 
bond from a surety. Surety Companies Doing Business with the United 
States, 79 FR 61992-01, 61993 (Oct. 16, 2014). As Treasury explained, 
section 9305(e) is the statutory standard under which a surety's 
certificate of authority to write any additional bonds for any agency 
is revoked by operation of law for failure to pay a final court 
judgment or order. However, section 9304(b) reflects that Treasury-
certification does not provide a guarantee to a surety that its bonds 
will be accepted by a particular agency in all situations. That is, 
Congress expressly conditioned acceptance of a bond on the approval of 
a Federal agency bond-approving official. 79 FR at 61993. This rule 
applies only to ICE's ability to decline bonds from non-performing 
sureties based on authority derived from section 9304(b) as recognized 
by Treasury in 31 CFR 223.17.
For Cause Standards Appropriately Differ From Treasury's Statutory 
Standards for Revoking a Surety's Authorization To Issue Bonds on 
Behalf of the Federal Government
    Two commenters asserted that ICE's for cause standards could not 
differ from Treasury's standards for decertification (revocation of a 
surety's certification). One of those commenters stated that ICE's for 
cause standards improperly altered the existing standard of review in 
revocation proceedings because ICE's for cause standards allow it to 
refuse to accept bonds based on administratively final breach 
determinations where payment is past due. The commenter claimed that 
the standards would result in unprecedented deference to ICE's 
interpretation of the law, depriving sureties of due process. The 
second commenter claimed that ICE's for cause standards could not 
include past-due invoices unless the surety had failed to pay a final 
judgment issued by a court because Treasury's statutory standard for 
decertification under 31 U.S.C. 9305(e) refers to final judgments.

[[Page 45977]]

    The commenters incorrectly characterize ICE's for cause standards 
as being inconsistent with Treasury's revocation authority. The 
existing Treasury regulation for revocation proceedings initiated by an 
agency complaint specifically recognizes that Treasury may revoke a 
surety's authority based on the failure to satisfy administratively 
final bond obligations. 31 CFR 223.20(a)(1). Moreover, in its 
regulation authorizing other agencies to decline bonds based on for 
cause standards, Treasury provides that an agency can decline to accept 
new bonds pursuant to section 9304(b) based on for cause standards that 
can include ``circumstances when a surety has not paid or satisfied an 
administratively final bond obligation due to the agency.'' 31 CFR 
223.17(b)(3).
    In its final rulemaking promulgating 31 CFR 223.17, Treasury 
explained its reasoning for allowing agencies to base for cause 
standards on administratively final breaches. 79 FR 61,992-01, 61,993. 
Treasury stated that it did not believe ``it is necessary or 
appropriate to require an agency to reduce every surety claim to 
judgment or submit a surety revocation complaint in every instance, in 
order to facilitate equitable and efficient resolution of surety 
performance and collection concerns at the agency level.'' Id.
    In addition, the requirements for decertification under 31 U.S.C. 
9305(e) are inapplicable to ICE's decision to decline bonds from a 
surety because ICE is not revoking a surety's ability to post all 
government bonds. Unlike a court judgment or order meeting the 
requirements of section 9305(e), which would preclude a surety from 
underwriting any Federal bond for any agency, a surety's failure to 
comply with ICE's for cause standards in this rule may result in ICE 
declining to accept future bonds, but will not prevent the surety from 
posting bonds issued by other Federal agencies.
Need for Rule
    Four commenters opined that this rule is unnecessary because 
Treasury has existing authority to revoke a surety's certificate of 
authority to write additional bonds. The commenters asserted that an 
agency's appropriate remedy for underperforming sureties is to request 
that Treasury revoke the surety's certificate of authority.
    In issuing 8 CFR 223.17, Treasury indicated that an agency may 
appropriately decline to accept future bonds based upon agency-specific 
for cause standards. In its final rulemaking, Treasury stated that, in 
some cases, sureties appeared ``to have simply ignored agency final 
decisions for extended periods of time.'' 79 FR 61992-01, 61995. 
Treasury explained that an agency's ability to decline bonds based upon 
its own for cause standards could reduce litigation because the agency 
and the surety would have the proper incentive to resolve disputes at 
the administrative level. Id. In addition, giving agencies discretion 
to decline bonds based on for cause standards is consistent with, and 
gives effect to, 31 U.S.C. 9304(b). Id.
    These for cause standards are necessary to implement an agency-
specific process for addressing underperforming sureties. The for cause 
standards are expected to provide greater incentive to underperforming 
sureties to timely pay administratively final breaches and to maintain 
an acceptable breach rate.
Prevention of Erroneous Application of For Cause Standards
    One commenter stated that ICE's bond breach determinations are 
error-prone, arguing that ICE should not implement for cause standards 
because of possible errors in breach determinations.
    Ample procedural protections exist to allow a surety to challenge 
bond breach determinations to avoid any erroneous breaches from being 
the basis of a determination that the surety is not in compliance with 
the for cause standards. Before a bond breach becomes administratively 
final, a surety may appeal the breach determination to the AAO and 
obtain administrative review of any defenses that the surety wishes to 
raise to the breach determination. If a surety timely appeals to the 
AAO, the breach determination will not become administratively final 
until the AAO issues a decision either dismissing or rejecting the 
appeal. Independent of the AAO review process, a surety may also 
dispute the validity of a bond breach debt invoiced by ICE pursuant to 
31 CFR 901.2(b)(1) and ICE policy as set forth on the invoice, and ICE 
will review the dispute.
    In addition, under the final rule, before declining bonds from a 
surety, ICE will inform the surety of its intent to decline future 
bonds and provide the surety with an opportunity to submit a written 
response and cure deficiencies in its performance. ICE will consider 
the surety's written response and efforts to cure before making a final 
determination whether to decline future bonds from the surety.
The For Cause Standards Appropriately Measure a Surety's Performance 
and Are Not Anticompetitive
    One commenter asserted that ICE's for cause standards are flawed 
and anticompetitive. The commenter claimed that the for cause standards 
are arbitrary, fail to reflect a surety's performance in paying legally 
valid bond breach determinations, and penalize sureties and their 
agents in favor of cash bond obligors. The commenter also described 
specific perceived flaws in each of the for cause standards, each of 
which will be addressed in the sections that follow, along with other 
comments about each specific for cause standard.
    The for cause standards are designed to measure the performance of 
sureties in complying with their bond obligations. Two of the for cause 
standards measure a surety's prompt payment of invoices after 
administratively final bond breach determinations. As recognized by 
Treasury's regulation, `` `[f]or cause' includes, but is not limited 
to, circumstances where a surety has not paid or satisfied an 
administratively final bond obligation due the agency.'' 8 CFR 
223.17(b)(3). When a bond is breached, sureties are expected to pay the 
amount due as a result of the bond breach, and when a surety fails to 
pay an invoice within 30 days, it represents nonperformance. Thus, the 
for cause standards appropriately allow the agency to decline bonds 
based on the nonpayment of invoices issued on administratively final 
bond breach determinations.
    ICE's for cause standards also appropriately consider a surety's 
breach rate. The purpose of an immigration bond is to provide a 
mechanism for obtaining an alien's compliance with his or her 
obligations during immigration proceedings and after the issuance of a 
final order in those proceedings. When a surety has a high breach rate, 
it indicates that bonds posted by that surety are not effectively 
serving the purpose of the bond to ensure the alien's compliance.
    While a commenter expressed the opinion that the rule should apply 
to cash bonds as well as surety bonds, ICE has three reasons for 
applying the for cause standards only to surety bonds. First, the 
majority of cash bond obligors are individuals who post a single bond 
to secure the release of a friend or relative. Thus, ICE sees no 
utility in issuing a notice to a cash bond obligor who likely will post 
only one bond that ICE will decline any future bonds from the obligor.

[[Page 45978]]

    Second, because a cash bond obligor deposits the bond amount with 
ICE when posting a bond, no invoice is issued when a cash bond breach 
becomes administratively final to collect the amount forfeited because 
ICE already is in possession of the cash deposit securing performance. 
Thus, a cash bond obligor would never have unpaid invoices and could 
not violate two of the three for cause standards. In addition, because 
the majority of cash bond obligors post only one bond, ICE would not 
have a reasonable sample size to use in calculating the breach rate for 
cash bonds--the breach rate for a cash bond obligor who posted one bond 
would either be 0 percent or 100 percent.
    Third, although cash bond obligors are not subject to this rule, 
ICE retains authority to decline to accept a bond if it has specific 
information indicating that a cash bond obligor will not comply with 
the terms of a bond. See American Druggists Ins. Co, 707 F.2d at 1233 
(noting the government's authority to refuse a bond when there is 
reason to doubt the obligor's willingness to perform the terms of the 
bond agreement).
For Cause Standard for Unpaid Invoices--Inclusion of Disputed Invoices
    Five commenters expressed concern that the use of unpaid invoices 
as a basis for declining future bonds would have the effect of 
requiring sureties to pay for bond breaches for which they have 
legitimate defenses. The commenters contend that a surety will be 
forced to forego judicial review of a breach determination even if it 
has strong defenses because ICE could decline to accept future bonds if 
the surety fails to pay invoices within 30 days. Another commenter 
argued that the standard fails to provide adequate due process and 
suggested excluding any breaches undergoing judicial review in 
determining whether a surety has 10 or more unpaid invoices or a 
cumulative unpaid amount of $50,000 or more.
    All delinquent unpaid invoices are appropriately included in the 
determination of whether a surety is in compliance with its obligations 
because a surety has ample opportunity to challenge the validity of a 
bond breach prior to issuance of an invoice. ICE issues an invoice on a 
breached immigration bond only after the surety has had an opportunity 
to seek administrative review by the AAO. If the surety files a timely 
appeal of a bond breach to the AAO, ICE will issue the invoice only 
after the AAO issues a decision dismissing the appeal. While this rule 
will not prevent sureties from seeking judicial review of a bond breach 
determination, because the applicable statute of limitations for 
judicial review is six years, 28 U.S.C. 2401(a), it would be 
impractical to wait for a judicial challenge to be completed or until a 
surety's ability to bring the case has expired before taking action to 
decline new bonds posted by a surety that fails to pay for 
administratively final breach determinations. Consistent with 31 CFR 
223.17(b)(5)(i), ICE does not have authority to decline new bonds from 
a Treasury-certified surety when a court of competent jurisdiction has 
issued a stay or injunction of enforcement of the breach determinations 
that would otherwise support the for cause reasons.
For Cause Standard for Unpaid Invoices--Number and Amount of Delinquent 
Invoices
    One commenter suggested that the number of past-due invoices be 
increased in the for cause standard for declining bonds. The commenter 
stated that using a standard of 10 past-due invoices could affect even 
attentive sureties. The commenter also suggested that declining bonds 
from a surety with past-due invoices in the cumulative amount of 
$50,000 was problematic because a surety with a few or even one large 
invoice could exceed the $50,000 threshold. In addition, the commenter 
stated that the $50,000 threshold may be unnecessary because sureties 
with a practice of repeatedly not paying invoices would likely have 
both more than 10 past-due invoices and a cumulative past due amount 
exceeding $50,000.
    The standard appropriately sets thresholds that will not affect 
attentive sureties, while giving ICE the ability to decline bonds from 
sureties that are not complying with their obligations to timely pay 
invoices for breached bonds. Sureties that routinely pay invoices on a 
timely basis are unlikely to inadvertently fail to comply with these 
standards. Moreover, when a surety is given notice of ICE's intent to 
decline bonds based on noncompliance with this standard, the surety has 
an opportunity to cure the deficiency. Thus, there is no need to raise 
the threshold amount to accommodate sureties with a practice of 
complying with obligations because DHS anticipates that those sureties 
will remain in compliance with these standards or timely cure any 
deficiencies.
    In addition, it is appropriate to decline bonds from a surety that 
has past-due invoices totaling more than $50,000 even when the surety 
has fewer than 10 past-due invoices. A surety that posts higher-value 
bonds can accumulate debt more quickly than sureties that post lower-
value bonds if it is not committed to fulfilling its obligations by 
paying invoices timely. Thus, ICE runs a greater risk by continuing to 
accept bonds from such an entity.
For Cause Standard for Breach Rate--Purpose
    Two commenters stated that ICE should not use a surety's breach 
rate as a basis for declining to accept new bonds. One of those 
commenters argued that monitoring a surety's breach rate does not serve 
the purpose of this rule because the preamble of the NPRM states that 
the purpose of the rule is to resolve problems with collecting breached 
bond amounts from sureties and their agents. The second commenter 
asserted that the breach rate standard would make a surety more risk 
averse when furnishing bonds.
    The purpose of the for cause standards is to create a mechanism 
that allows ICE to decline bonds from underperforming surety companies. 
Most ICE immigration bonds posted by sureties are delivery bonds, which 
require the surety to deliver the alien to ICE's custody upon demand. 
If a surety has a breach rate that exceeds 35 percent, it means that 
the surety has routinely failed to perform its obligation to deliver 
the alien, which necessitates that ICE bring the alien into custody 
using its own resources. If a surety demonstrates that it is routinely 
unable to deliver the alien in accordance with the terms of the bond, 
it is appropriate for ICE to decline to accept future bonds from that 
surety.
    ICE expects that inclusion of the breach rate for cause standard 
will incentivize surety companies to use appropriate practical measures 
to comply with the terms of the bond agreement. For example, sureties 
and their agents will likely choose more effective methods to ensure 
delivery of the alien in response to demand notices on delivery bonds 
to avoid a high breach rate that may result in ICE declining to accept 
future bonds from that surety.
For Cause Standard for Breach Rate--Methodology
    One commenter suggested multiple changes to the methodology for 
calculating the breach rate. The commenter stated that calculating the 
breach rate on an annual basis could cause the breach rate to be more a 
function of luck instead of reflecting the surety's performance because 
a surety

[[Page 45979]]

could have several cancellations a few days or weeks shortly before the 
start or after the end of the fiscal year that would substantially 
reduce the surety's breach rate. The commenter also argued that the 
calculation of the breach rate should consider the number of open bonds 
for a surety because a surety that has a small number of breaches and 
cancellations may have a large number of open bonds that will 
subsequently be cancelled.
    Because the breach rate calculation will be performed on an annual 
basis, the calculation will be based on a sample size of the surety's 
performance over the entire year. Performing the calculation on an 
annual basis will provide ICE with a meaningful sample while also 
giving ICE the ability to react in a timely manner if a surety begins 
to show a pattern of repeatedly breaching bonds. Additionally, before 
ICE declines bonds from a surety based on the surety's breach rate, it 
will provide notice to the surety and afford the surety an opportunity 
to rebut the determination of the breach rate and cure deficient 
performance. Thus, a surety that improves its performance shortly after 
the calculation period may be allowed to continue underwriting new 
immigration bonds.
    This rule does not include open bonds in the calculation of the 
breach rate for two reasons. First, when a bond is open, it is not yet 
determined whether the surety will successfully perform its obligations 
under the bond agreement. An open bond has not yet been breached or 
cancelled. Therefore, including the number of open bonds in the 
calculation would not provide an accurate or meaningful measure of the 
surety's performance of its obligations.
    Second, including the number of open bonds in the calculation would 
unfairly favor sureties that have posted large numbers of bonds. For 
example, if open bonds were counted, a surety company that has 500 
breached bonds and 5 cancelled bonds during one fiscal year could still 
have a breach rate of 10 percent if the company had 5,000 open bonds. 
In contrast, if the surety instead had 1,000 open bonds, 500 breached 
bonds, and 5 cancelled bonds, it would have a breach rate of 50 percent 
if open bonds were included in the calculation. No principled 
distinction exists for treating sureties with more open bonds more 
favorably than sureties with fewer open bonds. Because the number of 
open bonds has no bearing on the surety's performance, the breach rate 
calculation properly disregards the number of open bonds.

V. Statutory and Regulatory Requirements

    DHS developed this rule after considering numerous statutes and 
executive orders related to rulemaking. The following sections 
summarize our analyses based on a number of these statutes or executive 
orders.

A. Executive Orders 12866, 13563, and 13771: Regulatory Review

    Executive Orders 12866 (``Regulatory Planning and Review'') and 
13563 (``Improving Regulation and Regulatory Review'') direct agencies 
to assess the costs and benefits of available regulatory alternatives 
and, if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. Executive Order 13771 (``Reducing Regulation and 
Controlling Regulatory Costs'') directs agencies to reduce regulation 
and control regulatory costs and provides that ``for every one new 
regulation issued, at least two prior regulations be identified for 
elimination, and that the cost of planned regulations be prudently 
managed and controlled through a budgeting process.''
    The Office of Management and Budget (OMB) has not designated this 
rule a ``significant regulatory action'' under section 3(f) of 
Executive Order 12866. Accordingly, OMB has not reviewed it. As this 
rule is not a significant regulatory action, this rule is not subject 
to the requirements of Executive Order 13771. See OMB's Memorandum 
``Guidance Implementing Executive Order 13771, Titled `Reducing 
Regulation and Controlling Regulatory Costs' '' (April 5, 2017).
    This rule requires Treasury-certified sureties seeking to overturn 
an ICE breach determination to file a timely administrative appeal 
raising all legal and factual defenses in their appeal. DHS anticipates 
that more appeals will be filed with the AAO as a result of this 
requirement. The costs to sureties to comply with this requirement 
include the transactional costs associated with filing an appeal with 
the AAO. Sureties that do not timely appeal a breach determination 
could incur the cost of foregoing the opportunity to obtain judicial 
review of a breach determination. Surety companies will also incur 
familiarization costs in learning about the rule's requirements.
    The rule also establishes ICE standards for declining surety 
immigration bonds for cause and the procedures that ICE will follow 
before making a determination that it will no longer accept new bonds 
from a Treasury-certified surety. If a surety fulfills its obligations 
and is not subject to these for cause standards, this provision imposes 
no additional costs on that surety. Surety companies that fail to 
fulfill their obligations and are subject to the for cause standards 
may incur minimal costs in responding to ICE's notification. If they 
fail to cure any deficiencies in their performance, they may also lose 
business when ICE declines to accept new bonds submitted by the surety.
    DHS estimates the most likely total 10-year discounted cost of the 
rule to be approximately $1.2 million at a seven percent discount rate 
and approximately $1.5 million at a three percent discount rate.\14\ 
The cost of the rule increased from the estimates presented in the NPRM 
due to updated assumptions which reflect more current data ranging from 
FY 2017-2019, particularly because the anticipated number of additional 
appeals that will be filed as a result of this rule's exhaustion 
requirements increased from 190 in the NPRM to 225 in the analysis for 
this final rule.
---------------------------------------------------------------------------

    \14\ USCIS proposed the Form I-290B fee to be $705 in its NPRM, 
``Fee Schedule and Changes to Certain Other Immigration Benefit 
Request Requirements,'' on Nov. 14, 2019. 84 FR 62,280, 62,360. If 
this proposed rule is finalized, this increased fee would add 
$47,409 to the 10-year discounted cost of the rule at a seven 
percent discount rate and $57,579 to the 10-year discounted cost of 
the rule at a three percent discount rate.
---------------------------------------------------------------------------

    The benefits of the rule include improved efficiency and lower 
costs in litigating unresolved breach determinations. In addition, the 
rule increases incentives for surety companies to timely perform 
obligations, provides ICE with a mechanism to stop accepting new bonds 
from non-performing sureties after due process has been provided, and 
reduces adverse consequences both of sureties' failures to pay invoices 
timely on administratively final breach determinations and unacceptably 
high breach rates. When a surety fails to perform its obligation to 
deliver an alien and the bond is breached, ICE's resources are expended 
in locating aliens who have not been surrendered in response to ICE's 
demands. Finally, this rule allows ICE to resolve or avoid certain 
disputes, thereby decreasing the number of debts referred to Treasury 
for further collection efforts or the cases

[[Page 45980]]

referred to the Department of Justice (DOJ) for litigation.
    Table 1 shows a summary of the costs of the final rule and list of 
the updates to the inputs used in the NPRM. The wages and the annual 
number of breached bonds were updated using the latest available data. 
Since the publication of the NPRM, the Bureau of Labor Statistics 
released more recent data on wages and fringe benefits; these updates 
resulted in higher loaded wage rates. The updated analysis in this rule 
relies on statistical data about bond breaches from FY 2017-2019. Using 
the data available for the NPRM, FY 2012-2015, there were 18,892 surety 
bonds posted, an average of 4,723 per year. 2,486 surety bonds were 
breached during this time period (average of 622 per year). During FY 
2017-2019, there were 28,022 surety bonds posted, an average of 9,341 
per year. 3,603 surety bonds were breached during this time period, an 
average of 1,201 per year. Because the number of bond breaches in FY 
2017-2019 was greater than the number of breaches that occurred when 
the NPRM was published, the estimated total cost of this rule is 
greater than the estimate in the NPRM. Another change from the proposed 
rule is a reduction in costs because ICE no longer sends a Record of 
Proceedings (ROP) to the AAO when a bond breach appeal is filed with 
the AAO. Instead, the AAO now uses an electronic system to request the 
A-File from the DHS office that currently has the A-File. That DHS 
office transfers the file to the AAO with a minimal cost. These input 
updates are discussed throughout the regulatory impact analysis.

      Table 1--Changes From the Initial Regulatory Impact Analysis to the Final Regulatory Impact Analysis
----------------------------------------------------------------------------------------------------------------
                                        NPRM            Final rule         Difference     Description of changes
----------------------------------------------------------------------------------------------------------------
Total Annual Cost, 10-year 3%    $1.3 million.....  $1.5 million.....  $0.2 million.....   Increase in
 discount rate.                                                                            the number of
                                                                                           breached bonds and
                                                                                           wages used to
                                                                                           estimate annual cost.
----------------------------------------------------------------------------------------------------------------
                                                   Population
----------------------------------------------------------------------------------------------------------------
Number of additional breached    190..............  225..............  35...............  Updated using most
 bonds that might be appealed                                                              recent three years of
 as a result of this rule.                                                                 data, FY 2017-2019.
----------------------------------------------------------------------------------------------------------------
                                Wages Weighted Average Hourly Wage Rate (loaded)
----------------------------------------------------------------------------------------------------------------
Insurance Agent................  $44.31...........  $45.59...........  $1.28............   Average
Attorney in-house..............  $96.06...........  $100.93..........  $4.87............   hourly wage updated
                                                                                           from BLS release of
                                                                                           Occupational
                                                                                           Employment
                                                                                           Statistics, May 2018.
                                                                                           Loaded Wage with
                                                                                           fringe benefits from
                                                                                           BLS release of the
                                                                                           Employer Costs for
                                                                                           Employee
                                                                                           Compensation, June
                                                                                           2018.
Attorney Outsourced............  $240.14..........  $252.33..........  $12.19...........   Outsourced
                                                                                           attorney rate is
                                                                                           estimated to be 2.5
                                                                                           times the wage of an
                                                                                           in-house attorney.
Government Bond Control          $30.40...........  This cost is no    N/A..............   This cost is
 Specialist.                                         longer                                no longer applicable
                                                     applicable.                           to this rule.
----------------------------------------------------------------------------------------------------------------

1. Exhaustion of Administrative Remedies
i. Costs
    To comply with the exhaustion of administrative remedies 
requirement, sureties are required to timely appeal a breach 
determination to the AAO and raise all issues or defenses during the 
appeal or waive them in future court proceedings. Previously, if a 
surety company decided to challenge a breach determination, the surety 
company could choose to appeal the breach determination to the AAO or 
seek review in federal district court. The previous and new appeal 
processes, beginning at the stage of an ICE bond breach determination, 
are represented in Figure 1.
BILLING CODE 4410-10-P

[[Page 45981]]

[GRAPHIC] [TIFF OMITTED] TR31JY20.027

BILLING CODE 4410-10-C
    Anticipated costs for sureties to comply with this requirement are 
costs associated with filing an appeal with the AAO. Sureties filing an 
appeal must complete Form I-290B, Notice of Appeal or Motion, and 
submit the form together with the $675 filing fee set by USCIS \15\ 
along with a brief written statement setting forth the reasons and 
evidence supporting the appeal. If a surety or its agent decides not to 
timely challenge a breach determination, this requirement imposes no 
additional costs.
---------------------------------------------------------------------------

    \15\ USCIS I-290B, Notice of Appeal or Motion, Filing Fee $675, 
https://www.uscis.gov/i-290b.
---------------------------------------------------------------------------

    More current information than was available when the NPRM was 
published shows that a larger number of surety bond breaches are being 
appealed to the AAO. Data from FY 2017 through FY 2019 show that, on 
average, 1,201 surety bonds were breached annually \16\ and 
approximately 415 surety bond breaches were appealed annually.\17\ 
Thus, approximately 35 percent of breached surety bonds were appealed 
annually during FY 2017 through FY 2019.
---------------------------------------------------------------------------

    \16\ ICE's Financial Service Center Burlington.
    \17\ USCIS's AAO.
---------------------------------------------------------------------------

    DHS believes that the requirement to exhaust administrative 
remedies will likely increase the number of bond breach appeals 
submitted by sureties because they will waive their right to federal 
district court review if they do not file an administrative appeal. In 
its

[[Page 45982]]

updated economic analysis, DHS used the following assumptions to 
develop an estimate of the number of additional appeals that will be 
filed because of this rule. DHS employed a similar methodology in its 
NPRM, and no comments were submitted about this methodology.
    To estimate the likely increase in bond breach appeals, DHS 
presumes that it is unlikely that surety companies will file appeals 
with the AAO to contest bond breach determinations that were paid 
timely.\18\ Conversely, DHS assumes that invoices that were not paid 
promptly can serve as a proxy for breaches that may be subject to 
dispute and thus might be appealed. In FY 2017, there were 235 invoices 
not paid promptly. In FY 2018 and FY 2019, there were 763 and 729 
invoices not paid promptly, respectively.\19\ For bond breaches subject 
to a settlement agreement with DHS, DHS assumes that those breaches 
would have been appealed to the AAO if this rule were in effect because 
the surety did not pay them promptly. In FY 2017, 99 surety bonds 
appeals were filed. In FY 2018 and FY 2019, there were 239 and 906 
surety bond appeals filed. In FY 2019, DHS expected 7 additional 
disputed bond breaches to be appealed.\20\ DHS excluded from its 
analysis bond breaches that the agency rescinded because no AAO appeal 
was needed to overturn these breach determinations.
---------------------------------------------------------------------------

    \18\ ``Timely'' as used in this context means that the payments 
were processed within 45 days of issuance of the invoice or were 
made in accordance with a payment agreement.
    \19\ ICE's Financial Service Center Burlington.
    \20\ Ibid.
---------------------------------------------------------------------------

    Using this methodology, based on FY 2017-FY 2019 data, DHS 
estimates that approximately 225 additional surety bond breaches might 
have been appealed annually if an exhaustion requirement had been in 
place.\21\ In the proposed rule, DHS estimated 190 additional surety 
bond breaches might have been appealed annually based on the average 
annual number of invoices that were not timely paid and could be 
considered ``disputed'' and potential candidates for AAO appeals during 
FY 2013-FY 2015 (142 + 119 + 313 = 574. 574 / 3 = 191.33).
---------------------------------------------------------------------------

    \21\ DHS estimates that an additional 136 breaches would have 
been appealed in FY 2017 (235-99 = 136), 524 additional breaches 
would have been appealed in FY 2018 (763-239 = 524), and 7 
additional breaches would have been appealed in FY 2019. The 
estimated number of additional appeals was found to be smaller for 
FY 2019 because 906 appeals were filed in FY 2019. Thus, the average 
estimated annual number of additional appeals for FY 2017-2019 is 
222. DHS rounds this estimate to 225.
---------------------------------------------------------------------------

    Sureties that appeal incur an opportunity cost for time spent 
filing an appeal with the AAO. USCIS estimates the average burden for 
filing Form I-290B is 90 minutes.\22\ The person preparing the appeal 
could either be an attorney or a non-attorney in the immigration bond 
business. DHS does not have information on whether all surety companies 
have an in-house attorney, so we considered a range of scenarios 
depending on the opportunity cost of the person who would prepare the 
appeal. DHS assumes the closest approximation to the cost of a non-
attorney in the immigration bond business is an insurance agent. The 
average hourly loaded wage rate of an insurance agent is $45.59.\23\ 
The average hourly loaded wage rate of an attorney is $100.93.\24\ To 
determine the full opportunity costs if a surety company hired outside 
counsel, we multiplied the fully loaded average wage rate for an in-
house attorney ($100.93) by 2.5 for a total of $251.23 to roughly 
approximate an hourly billing rate for outside counsel.\25\ For 
purposes of this analysis, DHS assumes the minimum opportunity cost 
scenario is one where a non-attorney, or insurance agent (or 
equivalent), prepares the appeal. The opportunity cost per appeal in 
this scenario would be approximately $68 ($45.59 x 1.5 hours, rounded). 
DHS assumes that an in-house attorney or an insurance agent (or 
equivalent) is equally likely to prepare a surety's appeal. Thus, the 
primary estimate for the cost to prepare the appeal is $110--the 
average of the wage rates for an in-house attorney and an insurance 
agent multiplied by the estimated time to prepare the appeal ($73.26 
\26\ x 1.5 hours, rounded). DHS estimates a maximum cost scenario in 
which a surety would hire outside counsel to prepare the appeal, 
resulting in a cost of $378 ($252.33 x 1.5 hours, rounded). Sureties 
also incur a $675 filing fee per appeal. When the filing fee is added 
to the cost of preparing the appeal, the total cost per appeal ranges 
from $743 ($675 + $68) to $1,053 ($675 + $378), with a primary estimate 
of $785 ($675 + $110). This results in a total annual cost between 
$167,175 and $236,925, with a primary estimate of $176,625 ($785 x 225 
breached bonds).
---------------------------------------------------------------------------

    \22\ Form I-290B, 2018 Information Collection Request Supporting 
Statement, Question 12, https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201804-1615-002.
    \23\ Bureau of Labor Statistics, Occupational Employment 
Statistics May 2018, Standard Occupational Code 41-3021 Insurance 
Sales Agents, Mean hourly wage $32.64, https://www.bls.gov/oes/2018/may/oes413021.htm. The fully loaded wage rate is calculated using 
the percentage of wages to total compensation, found in the Bureau 
of Labor Statistics, Employer Costs for Employee Compensation June 
2018, Table 5. Employer costs per hour worked for employee 
compensation and costs as a percent of total compensation: private 
industry workers, by major occupational group, Sales and Office 
Occupational Group, https://www.bls.gov/news.release/archives/ecec_09182018.pdf. Wages are 71.6 percent of total compensation. 
$45.59 = $32.64/0.716.
    \24\ Bureau of Labor Statistics, Occupational Employment 
Statistics May 2018, Standard Occupational Code 23-1011 Lawyers, 
Mean hourly wage $69.34, https://www.bls.gov/oes/2018/may/oes231011.htm. https://www.bls.gov/oes/2015/may/oes231011.htm The 
fully loaded wage rate is calculated using the percentage of wages 
to total compensation, found in the Bureau of Labor Statistics, 
Employer Costs for Employee Compensation June 2018, Table 5. 
Employer costs per hour worked for employee compensation and costs 
as a percent of total compensation: Private industry workers, by 
major occupational group, Management, Professional, and related 
Group, https://www.bls.gov/news.release/archives/ecec_09182018.pdf. 
Wages are 68.7 percent of total compensation. $100.93 = $69.34/
0.687.
    \25\ DHS has previously calculated the hourly cost of outside 
counsel using this methodology of multiplying the fully loaded 
average wage rate for an in-house attorney by 2.5. See the Final 
Small Entity Impact Analysis of the Supplemental Proposed Rule 
``Safe-Harbor Procedures for Employers Who Receive a No-Match 
Letter,'' page G-4, at https://www.regulations.gov/#!documentDetail;D=ICEB-2006-0004-0922.
    \26\ $73.26 = ($45.59 + $100.93)/2.
---------------------------------------------------------------------------

    DHS expects minimal costs to the Federal government associated with 
this rule. Although a cost was estimated for ICE to submit an ROP to 
the AAO in the proposed rule, ICE no longer performs this task. The 
proposed rule estimated that each ROP took approximately 90 minutes to 
compile by an ICE Bond Control Specialist. However, now no ROP is 
prepared; instead, the AAO bases its review of the bond breach 
determination on the A-File. When the AAO receives a new appeal, it 
uses a DHS system to request the A-File from the DHS office that 
currently has the A-File. That DHS office transfers the file to the AAO 
at a minimal additional burden. The costs to USCIS for conducting an 
administrative review of the appeals are covered by the $675 fee 
charged for each appeal, as well as by funds otherwise available to 
USCIS.
ii. Benefits
    This rule assists both DOJ's and ICE's efforts in litigation to 
collect amounts due on breached surety bonds. For example, the rule 
eliminates the need for remand decisions required by two federal courts 
in litigation to collect unpaid breached bond invoices because the AAO 
will already have had an opportunity to issue a written decision 
addressing all of the surety company's defenses raised as part of the 
required administrative appeal. As with any requirement for exhaustion 
of administrative remedies, this rule promotes judicial and 
administrative efficiency by resolving many claims

[[Page 45983]]

without the need for litigation. Furthermore, review confined to a 
defined administrative record will eliminate the need for discovery as 
part of litigation.
2. Process for Declining Bonds
i. Costs
    This rule establishes for cause standards that ICE will use to 
decline new immigration bonds from a surety company. If the surety does 
not meet these standards, ICE may notify the surety that it has fallen 
below the required performance levels and, if the surety fails to cure 
its deficient performance, ICE may stop accepting new bonds from the 
company. The anticipated costs of a surety's response to ICE's 
notification derive from the due process requirements set by Treasury 
for all agencies that issue rules to decline new bonds from Treasury-
certified sureties. The rule provides an opportunity for the surety to 
rebut the stated reasons for non-acceptance of new bonds and provides 
an opportunity to cure the stated deficiencies. In addition to costs in 
responding to ICE's notifications, sureties may lose future revenue if 
ICE makes a final determination to decline new bonds underwritten by 
the surety.
    The rule only applies prospectively. However, for purposes of this 
economic analysis, DHS uses a snapshot of sureties' past financial 
performance to estimate the possible impacts of the proposed rule on 
future performance. As part of its updated economic analysis since 
publishing the NPRM, DHS examined the impacts to surety companies that 
actively posted bonds with ICE in FY 2018. In FY 2018, eight sureties 
posted immigration bonds with ICE and would have been subject to the 
requirements of this rule had it been in place. Of those eight 
sureties, three would have been subject to at least one of the proposed 
for cause standards as of the end of FY 2018. Two of those sureties 
would have been subject to two of the three for cause standards as of 
the end of FY 2018. These two sureties together had more than 244 
invoices that were past due, with a total outstanding balance of over 
$2.0 million. The third surety was subject to the for cause standard 
for breach rate, but as explained earlier, subsequently improved its 
breach rate substantially.
    DHS is establishing the for cause standards to deter deficient 
performance. DHS believes that less stringent standards would allow 
historical, deficient business practices to continue. DHS also believes 
that more stringent standards could result in unnecessarily sanctioning 
sureties when they are making good-faith efforts to comply with their 
obligations.
    Under this rule, if a surety has 10 or more invoices past due at 
one time, owes a cumulative total of $50,000 or more on past-due 
invoices, or has a breach rate of 35 percent or greater in a fiscal 
year, ICE is authorized to notify the surety that it has fallen below 
the required performance levels. The surety will have the opportunity 
to review ICE's written notice identifying the for cause reasons for 
declining new bonds, rebut the agency's reasons for non-acceptance of 
new bonds, and cure its performance deficiencies. Before any surety 
receives a notification from ICE of its intention to decline any new 
bonds underwritten by the surety, the surety will have had ample 
opportunities to evaluate and rebut each administratively final breach 
determination. Furthermore, the for cause standards for declining new 
bonds will be triggered only when the surety has failed to pay amounts 
due on administratively final breach determinations or has an 
unacceptably high breach rate. If a surety fulfills its obligations and 
is not subject to these for cause standards, this rule will impose no 
additional costs on that surety.
    Surety companies may incur a new opportunity cost when responding 
to the agency's notification of its intention to decline any new bonds 
underwritten by the surety. DHS estimates that personnel at a surety 
company may spend three hours to complete a response to the ICE 
notification. DHS assumes that an insurance agent (or equivalent) 
employed by the surety company, an in-house attorney, or outside 
counsel is equally likely to respond to the notification. The 
opportunity cost estimate per response is $399 ($133 x 3 hours).\27\
---------------------------------------------------------------------------

    \27\ $133 represents the rounded, average loaded wage rate of an 
insurance agent, an in-house attorney and outside counsel hired by 
the surety. $133 = ($45.59 + $100.93 + $252.33)/3.
---------------------------------------------------------------------------

    Because a surety will have had ample opportunities to evaluate and 
challenge administratively final breach determinations, DHS anticipates 
that it will rarely need to send a notification of its intent to 
decline new bonds because sureties will use good faith efforts to avoid 
triggering the for cause standards. However, for the purposes of this 
cost analysis, DHS assumes that it will send one to three notifications 
during a 10-year period.\28\ To calculate the cost of responding to 
three notifications over 10 years (the likely maximum number of 
notifications), the likelihood of issuing a notification during any 
given year is multiplied by the opportunity cost per response. This 
equals about $120 (30 percent x $399). The cost of responding to one 
notification over 10 years (the likely minimum number of notifications) 
is approximately $40 (10 percent x $399). Thus, the range of response 
costs per year is $40 to $120, with a primary, or most likely, estimate 
of $80 (20 percent x $399).
---------------------------------------------------------------------------

    \28\ As discussed previously, one or more of the for cause 
standards would have applied to three companies as of the end of FY 
2018. DHS assumes that, at most, the for cause standards will be 
triggered for three companies over the course of 10 years. DHS 
assumes that it is possible and somewhat likely that at a minimum, 
one company's failure to perform will trigger the for cause 
standards over 10 year timeframe.
---------------------------------------------------------------------------

    Sureties that receive, after being afforded due process, a written 
determination that future bonds will be declined pursuant to the for 
cause standards set forth in this rule will also incur future losses 
from the inability to submit to ICE future bonds underwritten by the 
surety. Because DHS does not have access to information about the 
surety companies' profit margins per bond, DHS is unable to estimate 
any future loss in revenue to these companies. However, ICE notes that, 
although it would no longer accept immigration bonds underwritten by 
these sureties, this rule does not prohibit these sureties from 
underwriting bonds for other agencies in the Federal government.
ii. Benefits
    This rule addresses problems that ICE has had with certain surety 
companies failing to pay amounts due on administratively final bond 
breach determinations or having unacceptably high breach rates. For 
example, certain companies may have realized an undeserved windfall 
when they have refused to timely pay invoices, yet have foreclosed on 
collateral securing the bonds because the bonds have been breached. 
This rule provides greater incentive for surety companies to timely pay 
their administratively final bond breach determinations and helps 
ensure that sureties comply with the requirements imposed by the terms 
of a bond. In turn, this will minimize the number of situations where 
the surety routinely fails to pay and reduce the number of times agency 
resources are expended in locating aliens when the alien is not 
surrendered in response to demands issued pursuant to bonds. In 
addition, this rule allows ICE to resolve or avoid certain disputes, 
thereby decreasing the debt referred to Treasury for further collection 
efforts or the cases referred to DOJ for litigation.

[[Page 45984]]

3. Regulatory Familiarization Costs
    During the first year that this rule is in effect, sureties will 
need to learn about the new rule and its requirements. DHS assumes that 
each Treasury-certified surety company currently issuing immigration 
bonds will conduct a regulatory review. DHS assumes that this task is 
equally likely to be performed by either an in-house attorney or by a 
non-attorney at each surety company. DHS estimates that it will take 
eight hours for the regulatory review by either an in-house attorney or 
a non-attorney, such as an insurance agent (or equivalent), at each 
surety. Although DHS requested comments regarding this estimate, no 
comments addressed the time necessary for regulatory review.
    To calculate the familiarization costs, DHS multiplies its 
estimated review time of eight hours by the average hourly loaded wage 
rate of an attorney and an insurance agent, $73.26. DHS calculates that 
the familiarization cost per surety company is $586.08 (8 hours x 
$73.26). Nine sureties posted immigration bonds with ICE in FY 2019. 
DHS calculates the total estimated regulatory familiarization cost for 
all sureties currently issuing immigration bonds as $5,275 ($73.26 x 8 
hours x 9 sureties).
4. Alternatives
    OMB Circular A-4 directs agencies to consider regulatory 
alternatives to the provisions of the rule.\29\ This section addresses 
two alternative regulatory approaches and the rationales for rejecting 
these alternatives in favor of this rule.
---------------------------------------------------------------------------

    \29\ OMB Circular A-4, https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf.
---------------------------------------------------------------------------

    The first alternative would be to include different for cause 
standards for surety companies that fall in different ranges of 
underwriting limitations.\30\ For example, surety companies with higher 
underwriting limitations could be held to more stringent for cause 
standards than companies with lower underwriting limitations. The 
difference of underwriting limitations is great for some Treasury-
certified sureties: The lowest underwriting limitation of all of the 
Treasury-certified sureties is $254,000 per bond and the highest is 
$11.6 billion per bond.\31\ This distinction might be supported by the 
assumptions that companies with higher underwriting limitations would 
issue more bonds and possibly bonds of higher values and thus their 
actions should be monitored more closely, and larger companies have 
greater resources to ensure compliance with the for cause standards.
---------------------------------------------------------------------------

    \30\ The underwriting limitations set forth in the Treasury's 
Listing of Certified Companies are on a per bond basis. Department 
of the Treasury's Listing of Certified Companies Notes, (b) (updated 
July 1, 2018), https://www.fiscal.treasury.gov/surety-bonds/circular-570.html#1.
    \31\ Department of the Treasury's Listing of Certified 
Companies, https://www.fiscal.treasury.gov/surety-bonds/list-certified-companies.html.
---------------------------------------------------------------------------

    This alternative was rejected because the amount of a non-
performing surety company's underwriting limitation should have no 
bearing on whether ICE can stop accepting bonds from that surety 
company. The underwriting limitation is an indication of the surety 
company's financial resources. A surety company can comply with its 
immigration bond responsibilities regardless of its underwriting 
limitation. In addition, because the average amount of a surety bond is 
about $11,200,\32\ and the lowest underwriting limitation per bond set 
by Treasury greatly exceeds this average bond amount, it would serve no 
purpose to make a distinction among surety companies based on their 
underwriting limitations. Thus, DHS rejected this alternative.
---------------------------------------------------------------------------

    \32\ Immigration Bond Statistics maintained by ICE's Financial 
Service Center Burlington.
---------------------------------------------------------------------------

    The second regulatory alternative DHS considered would be to apply 
the requirements of the rule to cash bond obligors as well as to surety 
companies to further the goal of treating all bond obligors similarly. 
DHS has rejected this alternative for several reasons. First, by 
definition, cash bond obligors cannot be delinquent in paying invoices 
on administratively final breach determinations. Cash bond obligors 
deposit with ICE the full face amount of the bond before the bond is 
issued. Thus, when a bond is breached, no invoice is issued because the 
Federal Government already has the funds on deposit. Second, because 
cash bond obligors generally will post only one immigration bond, the 
same concerns about repeated violations of applicable standards do not 
apply to them. The majority of cash bond obligors are not institutions, 
but friends or family members of the alien who has been detained. From 
FY 2015-FY 2019, at least 65 percent of cash bonds were posted by an 
obligor who only posted one bond.\33\ Finally, the volume of disputes 
regarding surety bonds, as opposed to cash bonds, necessitates 
administrative and issue exhaustion requirements for claims based on 
surety bonds. The number of claims in federal court involving breached 
surety bonds in litigation has far exceeded the number of claims 
involving breached cash bonds. One surety bond case alone presented 
more than 1,400 breached bond claims for adjudication.\34\ In contrast, 
the number of cash bond cases challenging bond breaches litigated in 
federal courts has averaged less than two per year for the past five 
years.\35\
---------------------------------------------------------------------------

    \33\ ICE's Financial Service Center Burlington.
    \34\ AAA Bonding Agency Inc., v. DHS, 447 F. App'x 603, 606 (5th 
Cir. 2011).
    \35\ ICE's Financial Service Center Burlington.
---------------------------------------------------------------------------

5. Conclusion
    This rule requires Treasury-certified sureties or their bonding 
agents seeking to overturn a breach determination to file an 
administrative appeal raising all legal and factual defenses in this 
appeal, and allows ICE to decline new bonds from surety companies that 
fail to meet for cause standards. DHS has provided an estimate of the 
transactional costs, the opportunity costs, and the familiarization 
costs associated with this rule, as well as the rule's benefits. Table 
2 summarizes the costs and benefits of the final rule.

                          Table 2--Summary of Costs and Benefits of the Rule (2018 US$)
----------------------------------------------------------------------------------------------------------------
                                                                      Minimum         Primary         Maximum
                    Category                       Discount rate     estimate        estimate        estimate
----------------------------------------------------------------------------------------------------------------
                                           Annualized Monetized Costs
----------------------------------------------------------------------------------------------------------------
Exhaustion of administrative remedies...........              7%        $167,175        $176,630        $236,925
                                                               3         167,175         176,630         236,925
For Cause Standards.............................               7              40              80             120
                                                               3              40              80             120
Familiarization *...............................               7             702             702             702
                                                               3             600             600             600

[[Page 45985]]

 
Total Annualized Cost...........................               7         167,917         177,407         237,747
                                                               3         167,815         177,305         237,645
Total 10-Year Undiscounted Cost.................                       1,677,424       1,722,323       2,375,722
Total 10-Year Discounted Cost...................               7       1,179,377       1,246,030       1,669,832
                                                               3       1,431,498       1,512,449       2,027,161
                                                 ---------------------------------------------------------------
Unquantified Costs..............................   Surety companies may lose revenue if ICE declines new
                                                  immigration bonds.
                                                 ---------------------------------------------------------------
Unquantifiable Benefits.........................   The rule will assist DOJ's efforts in preparing cases
                                                  for litigation and eliminate the need for remand decisions.
                                                   The rule will decrease the debt referred to Treasury
                                                  for further collection efforts and streamline the litigation
                                                  of any breached bond claims referred to DOJ.
                                                   The rule will increase compliance with a surety
                                                  company's duty to surrender aliens and reduce the number of
                                                  times agency resources are expended in locating aliens when
                                                  the alien is not surrendered.
                                                 ---------------------------------------------------------------
Net Benefits....................................             N/A             N/A             N/A
----------------------------------------------------------------------------------------------------------------
Familiarization cost is the cost to businesses to familiarize themselves with the rule. It is a one-time cost
  expected to be incurred within the first year of the rule's effective date. The cost is estimated to be $586
  per surety company.

B. Final Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA) at 5 U.S.C. 603 requires 
agencies to consider the economic impact its rules will have on small 
entities. In accordance with the RFA, DHS has prepared an Final 
Regulatory Flexibility Analysis that examines the impacts of the final 
rule on small entities (5 U.S.C. 601 et seq.). The term ``small 
entities'' comprises small businesses, not-for-profit organizations 
that are independently owned and operated and are not dominant in their 
fields, and governmental jurisdictions with populations of fewer than 
50,000.
    1. A statement of the need for, and objectives of, the rule.
    DHS establishes procedural and substantive standards under which it 
may decline new immigration bonds from a Treasury-certified surety and 
an exhaustion of administrative remedies requirement. This rule will 
facilitate the resolution of disputes between ICE and sureties that 
arise after its effective date.
    This rule promotes judicial and administrative efficiency by 
allowing Federal courts to review the AAO's written decision on the 
validity of a breach determination under the APA without first 
remanding breach decisions to ICE to prepare written decisions based on 
defenses raised for the first time in federal court. In addition, the 
discovery process will be unnecessary in cases solely involving the 
review of a written AAO decision on a defined administrative record.
    By establishing the for cause standards, surety companies will have 
a greater incentive to surrender aliens in response to demand notices, 
thereby reducing agency resources expended in locating aliens. They 
also will have a greater incentive to either pay amounts due on 
invoices for breached bonds or appeal the breach determination, thereby 
reducing the number of delinquent debts referred to Treasury for 
further collection efforts and claims referred to DOJ for litigation.
    DHS's objective in requiring exhaustion of administrative remedies 
and issue exhaustion for disputed surety bond breaches is to allow the 
agency to correct any mistakes it may have made before claims are filed 
in federal court, and to allow for more efficient judicial review of 
breach determinations under the APA. The legal bases for requiring 
exhaustion of administrative remedies and issue exhaustion are well-
established. See Darby v. Cisneros, 509 U.S. 137, 154 (1993); Sims v. 
Apfel, 530 U.S. 103, 107-108 (2000).
    DHS's objective in adopting the for cause standards for declining 
bonds is to provide an incentive for sureties to comply with their 
obligations to surrender aliens in response to demand notices and to 
timely pay the amounts due on invoices for breached bonds or appeal the 
breach determinations.
    2. A statement of the significant issues raised by the public 
comments in response to the initial regulatory flexibility analysis, a 
statement of the assessment of the agency of such issues, and a 
statement of any changes made in the proposed rule as a result of such 
comments.
    DHS did not receive any public comments raising issues in response 
to the initial regulatory flexibility analysis and did not make any 
revisions to the standards and procedures for declining bonds 
underwritten by small entities in this final rule.
    3. The response of the agency to any comments filed by the Chief 
Counsel for Advocacy of the Small Business Administration in response 
to the proposed rule, and a detailed statement of any change made to 
the proposed rule in the final rule as a result of the comments.
    DHS did not receive comments from the Chief Counsel for Advocacy of 
the Small Business Administration in response to the proposed rule.
    4. A description of and an estimate of the number of small entities 
to which the rule will apply or an explanation of why no such estimate 
is available.
    As part of its updated economic analysis, ICE determined that for 
FY 2019 nine of the 266 Treasury-certified sureties \36\ would have 
been subject to the requirements of this rule had it been in place 
because these nine sureties are the only ones that posted new 
immigration bonds with ICE during FY 2019. However, any of the 
Treasury-certified sureties could potentially post new immigration 
bonds with ICE and would then be subject to the requirements of this 
rule. Most surety companies are subsidiaries or divisions

[[Page 45986]]

of insurance companies,\37\ where bail bonds are a small part of their 
portfolios. Other lines of surety bonds include contract, commercial, 
customs, construction, notary, and fidelity bonds.\38\
---------------------------------------------------------------------------

    \36\ The list of Treasury-certified sureties can be found here: 
https://fiscal.treasury.gov/surety-bonds/list-certified-companies.html. There are 266 sureties as of July 1, 2019.
    \37\ National Association of Surety Bond Producers and Surety 
and Fidelity Association of America, ``Frequently-Asked Questions,'' 
2016, https://suretyinfo.org/?page_id=84#surety.
    \38\ International Credit Insurance & Surety Association, ``What 
kind of surety bonds does a surety insurance company issue?'', 2016, 
https://www.icisa.org/surety/1548/mercury.asp?page_id=1899.
---------------------------------------------------------------------------

    DHS used multiple data sources such as Dun & Bradstreet, Inc. and 
ReferenceUSA \39\ to determine that four of these sureties are small 
entities as that term is defined in 5 U.S.C. 601(6). This determination 
is based on the number of employees or revenue being less than their 
respective Small Business Administration (SBA) size standard.\40\ These 
four sureties issued approximately 70 percent of the total number of 
surety bonds to ICE in FY 2019. The following table provides the 
industry descriptions of the small entities that will be impacted by 
this rule.
---------------------------------------------------------------------------

    \39\ These databases offer information of location, number of 
employees, and estimated sales revenue for millions of U.S. 
businesses. The Dun & Bradstreet, Inc's website is www.hoovers.com. 
The Reference USA website is https://www.referenceusa.com. ICE 
collected data from these sources in November 2019.
    \40\ U.S. Small Business Administration, Table of Small Business 
Size Standards Matched to North American Industry Classification 
System (NAICS) Codes, August 19, 2019. https://www.sba.gov/document/
support--table-size-standards.
---------------------------------------------------------------------------

    None of the nine entities that posted bonds with ICE in FY 2019 
were small governmental organizations or small organizations not 
dominant in their field.

                               Table 3--Small Entities to Which This Rule Applies
----------------------------------------------------------------------------------------------------------------
                                                                Count of small
                                                                   entities       SBA size standard  (in sales
            NAICS code                  NAICS description         impacted by   receipts or number of employees)
                                                                     rule
----------------------------------------------------------------------------------------------------------------
523930...........................  Investment Advice..........               1  $38,500,000.
524126...........................  Direct Property and                       2  1,500 employees.
                                    Casualty Insurance
                                    Carriers.
524210...........................  Insurance Agencies and                    1  $8,000,000
                                    Brokerages.
                                                               ----------------
    Total........................  ...........................               4  ................................
----------------------------------------------------------------------------------------------------------------

    5. A description of the projected reporting, recordkeeping, and 
other compliance requirements of the rule, including an estimate of the 
classes of small entities which will be subject to the requirement and 
the types of professional skills necessary for preparation of the 
report or record.
    This rule requires that a surety or its bonding agent seek 
administrative review of a breach determination by filing an appeal 
with the AAO before seeking judicial review. The rule also requires a 
surety company to respond to any notification that it violated a for 
cause standard. Other than responding to such a notification, the rule 
imposes no recordkeeping or reporting requirements.
Estimated Cost and Impact as a Percentage of Revenue
    To estimate the impact on small entities, DHS has calculated the 
cost of this rule as a percentage of the revenue of those entities. 
During the first year that this rule is in effect, sureties of all 
sizes will need to learn about the new rule and its requirements. DHS 
assumes that this task would be equally likely to be performed by 
either an attorney or by a non-attorney in the immigration bond 
business. DHS uses the average compensation of an attorney and an 
insurance agent (the closest approximation to the cost of a non-
attorney in the immigration bond business), $73.26,\41\ to estimate the 
familiarization cost. DHS estimates that it will take eight hours for 
the regulatory review.
---------------------------------------------------------------------------

    \41\ Bureau of Labor Statistics, supra notes 12 and 13. The 
average of the described wages is $73.26 = ($100.93 + $45.59)/2.
---------------------------------------------------------------------------

    To calculate the familiarization costs, DHS multiplies its 
estimated review time of eight hours by the average of an attorney and 
an insurance agent's hourly loaded wage rate, $73.26. DHS calculates 
that the familiarization cost per surety is $586 rounded (8 hours x 
$73.26).
    Another cost that sureties may incur is the fee for filing an 
appeal with the AAO. One possibility that DHS cannot account for in its 
analysis is that a surety company's agent may pay the filing fee 
instead of the surety company. DHS has no information about the 
contractual arrangements between a surety company and its agent, but 
either party can file an appeal with the AAO and pay the required fee. 
In the analysis in its NPRM, DHS assumed that the surety company pays 
for all the appeals filed. DHS requested comments regarding this 
assumption, but no comments addressed this assumption. Therefore, DHS 
uses the same methodology here.
    As discussed previously, sureties that choose to appeal complete 
Form I-290B, Notice of Appeal, and submit the form with a $675 filing 
fee and a brief written statement setting forth the reasons and 
evidence supporting the appeal. Based on FY 2017-2019 data, DHS 
estimates that approximately 225 additional surety bond breaches might 
be appealed to the AAO annually if an exhaustion requirement had been 
in place. For the purposes of this analysis, DHS assumes that the 
additional 225 AAO appeals are divided among the sureties at the same 
ratio at which the sureties posted bonds in FY 2019. DHS multiplies the 
percent of bonds posted in FY 2019 that may be appealed, or 2.3 
percent, by the number of bonds posted in FY 2019 for each of the four 
small business sureties to estimate the annual number of breached bonds 
that the companies might appeal. Applying this methodology to the 
number of bonds posted by the four small businesses during FY 2019, DHS 
estimates that each of the four sureties would file between 19 and 61 
appeals.
    Sureties that appeal will incur an opportunity cost for time spent 
filing an appeal with the AAO. USCIS has estimated that the average 
burden for filing Form I-290B is 90 minutes.\42\ The person preparing 
the appeal could either be an attorney or a non-attorney in the 
immigration bond business. The closest approximation to the cost of a 
non-attorney in the immigration bond business is an insurance agent. 
For purposes of this analysis, DHS uses as its primary estimate the 
average of the hourly loaded wage rate of an in-house attorney and 
insurance agent, $73.26, to reflect that an in-house attorney or an

[[Page 45987]]

insurance agent (or equivalent) is equally likely to prepare the 
appeal. Thus, an approximation of the cost to prepare the appeal would 
be $110 per appeal ($73.26 x 1.5 hours, rounded). The total cost per 
appeal is $785 for fees and opportunity costs ($110 opportunity cost + 
$675 fee).
---------------------------------------------------------------------------

    \42\ Form I-290B, 2018 Information Collection Request Supporting 
Statement, Question 12, https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201804-1615-002.
---------------------------------------------------------------------------

    DHS multiplies the total cost per appeal ($785) by the estimated 
annual number of breached bonds that a surety company might appeal to 
determine the annual cost per surety for additional appeals filed 
because of the exhaustion requirement. DHS adds the familiarization 
costs per surety to the first year of costs incurred by the surety. For 
the four small businesses analyzed, the company with the lowest first 
year costs would incur costs of $15,501 ($785 cost per appeal x 19 
appeals + $586 familiarization cost) and the company with the highest 
first year costs would incur costs of $48,471 ($785 cost per appeal x 
61 appeals + $586 familiarization cost).
    The four surety companies that are small entities would not have to 
change any of their current business practices if they do not violate 
any of the for cause standards set forth in this rule. If one of the 
entities were to receive notification from ICE that it violated a for 
cause standard, the entity would then have the opportunity to submit a 
written response either explaining why the company is not in violation 
or how the company intends to cure any deficiency. These due process 
protections benefit the small entity and entail no additional 
recordkeeping or reporting other than preparing a response to ICE's 
notification. Surety companies will, however, incur a new opportunity 
cost when responding to ICE's notification of its intent to decline new 
bonds underwritten by the surety. DHS estimates that personnel at a 
surety company may spend three hours to complete a response to ICE's 
notification. The opportunity cost estimate per response would be $399 
($133 x 3 hours).\43\ Because a surety would have had ample 
opportunities to evaluate and challenge administratively final breach 
determinations, DHS anticipates that it will rarely need to send a 
notification of its intent to decline new bonds. However, for the 
purposes of this opportunity cost estimate, DHS assumes that it may 
send about two notifications during a 10-year period to the small 
sureties. To calculate the cost of responding to two notifications over 
10 years, the likelihood of issuing a notification during any given 
year is multiplied by the opportunity cost per response. This equals 
about $80 (20 percent x $399).
---------------------------------------------------------------------------

    \43\ $133 represents the rounded, average loaded wage rate of an 
insurance agent, an in-house attorney and an outside counsel hired 
by the surety. $133 = ($45.59 + $100.93 + $252.33)/3.
---------------------------------------------------------------------------

    DHS estimates this rule's annual impact to each small surety 
company by calculating its total costs as a percentage of its annual 
revenue. The costs are the cost of filing appeals for each small surety 
company, the opportunity cost to respond to a notification that ICE 
intends to decline future bonds posted by the company, plus the 
familiarization costs.
    The annual revenue for these four sureties, according to the 2019 
sales revenue reported by Dun & Bradstreet, Inc., ranges from 
approximately $2.6 million to $285.7 million. The annual impact of the 
rule is estimated to be two percent or less of each company's annual 
revenue. The following tables summarize the quantified impacts of this 
rule on the four small surety companies for the first year which 
includes the one-time familiarization costs and for the subsequent 
years, not including the familiarization costs.\44\
---------------------------------------------------------------------------

    \44\ USCIS proposed the I-290B fee to be $705 in its NPRM, ``Fee 
Schedule and Changes to Certain Other Immigration Benefit Request 
Requirements,'' on Nov. 14, 2019. 84 FR at 62360. If this proposed 
rule is finalized, the increased fee will not change the results of 
Tables 4 and 5.

 Table 4--Quantified First Year Impact to Small Entities for Exhaustion
  of Administrative Remedies and Responding to a Notification of ICE's
 Intent To Decline New Bonds, Including Regulatory Familiarization Costs
------------------------------------------------------------------------
                                             Number of      Percent of
          Revenue impact range            small entities  small entities
------------------------------------------------------------------------
0% < Impact <= 1%.......................               2              50
1% < Impact <= 2%.......................               2              50
                                         -------------------------------
    Total...............................               4             100
------------------------------------------------------------------------


  Table 5--Quantified Annual Impact to Small Entities for Exhaustion of
Administrative Remedies and Responding to a Notification of ICE's Intent
                          To Decline New Bonds
------------------------------------------------------------------------
                                             Number of      Percent of
          Revenue impact range            small entities  small entities
------------------------------------------------------------------------
0% < Impact <= 1%.......................               2              50
1% < Impact <= 2%.......................               2              50
                                         -------------------------------
    Total...............................               4             100
------------------------------------------------------------------------

    The above estimated impacts reflect the quantified direct costs to 
comply with the rule. Surety companies may be impacted in other ways 
that DHS is unable to quantify. This rule may result in some surety 
companies changing behavior to pay breached bonds when they otherwise 
may not have, thereby impacting revenue. For surety companies that fail 
to fulfill their obligations and cure deficiencies in their 
performance, this rule may result in business losses when ICE declines 
to accept new bonds submitted by the surety. DHS is not able to predict 
which surety companies may choose non-compliance and is not able to 
factor in the loss of surety companies' revenue.
    6. A description of the steps the agency has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of applicable statutes, including a statement of the 
factual,

[[Page 45988]]

policy, and legal reasons for selecting the alternative adopted in the 
final rule and why each of the other significant alternatives to the 
rule considered by the agency which affect the impact on small entities 
was rejected.
    DHS examined two regulatory alternatives that could potentially 
reduce the burden of this rule on small entities. The alternatives to 
the rule were: (1) Different for cause standards for surety companies 
with different underwriting limitations; and (2) application of the 
rule to cash bond obligors as well as surety bond obligors. The first 
alternative would include different for cause standards for surety 
companies that fall in different ranges of underwriting limitations. 
For example, surety companies with higher underwriting limitations 
could be held to more stringent for cause standards than companies with 
lower underwriting limitations. The difference of underwriting 
limitations is great for some Treasury-certified sureties: The lowest 
underwriting limitation of the Treasury-certified sureties is $254,000 
per bond and the highest is $11.6 billion per bond.\45\ This 
distinction might be supported by the assumptions that companies with 
higher underwriting limitations are larger companies that might issue 
more bonds and possibly bonds of higher values, and smaller companies 
might have fewer resources to ensure compliance with the for cause 
standards. Based on these differences, an argument could be made that 
larger companies' actions should be monitored more closely than smaller 
companies' actions.
---------------------------------------------------------------------------

    \45\ Department of the Treasury's Listing of Certified 
Companies, https://www.fiscal.treasury.gov/surety-bonds/list-certified-companies.html.
---------------------------------------------------------------------------

    This alternative was rejected because the amount of a non-
performing surety company's underwriting limitation should have no 
bearing on whether ICE can stop accepting bonds from that surety 
company. The underwriting limitation is an indication of the surety 
company's financial resources. A surety company can comply with its 
immigration bond responsibilities regardless of its underwriting 
limitation. In addition, because the average amount of a surety bond is 
about $11,200,\46\ and the lowest underwriting limitation per bond set 
by Treasury greatly exceeds this average bond amount, it would serve no 
purpose to make a distinction among surety companies based on their 
underwriting limitations. Thus, the agency rejected this alternative.
---------------------------------------------------------------------------

    \46\ Immigration Bond Statistics maintained by ICE's Financial 
Service Center Burlington.
---------------------------------------------------------------------------

    DHS rejected the second alternative because many of the for cause 
standards would not be applicable to cash bond obligors. For cash bond 
obligors, the Federal Government already has collected the face value 
of the bond as collateral and thus does not need to issue invoices to 
collect amounts due on breached bonds. The majority of cash bond 
obligors are not in the business of issuing bonds for profit and thus 
do not raise concerns about manipulating the bond management process 
for institutional gain.

C. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995, Public Law 104-4, 109 
Stat. 48 (codified at 2 U.S.C. 1531-1538) requires federal agencies to 
assess the effects of their discretionary regulatory actions. In 
particular, the Act addresses actions that may result in the 
expenditure by a State, local, or tribal government, in the aggregate, 
or by the private sector of $100,000,000 (adjusted for inflation) or 
more in any year. Though this rule will not result in such an 
expenditure, we do discuss the effects of this rule elsewhere in this 
preamble.

D. Small Business Regulatory Enforcement Fairness Act of 1996

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996, Public Law 104-121, 110 Stat. 847, 858-59, we 
want to assist small entities in understanding this rule so that they 
can better evaluate its effects on them. This rulemaking is not a major 
rule as defined by section 804 of the Small Business Regulatory 
Enforcement Act of 1996. See 5 U.S.C. 804(2). As indicated in the 
Executive Orders 12866, 13563, and 13771: Regulatory Review, Section V, 
the rule is expected to have an effect on compliance costs and 
regulatory burden for employers. As small businesses may be impacted 
under this regulation, DHS has prepared a RFA analysis.

E. Collection of Information

    Agencies are required to submit to OMB for review and approval any 
reporting or recordkeeping requirements inherent in a rule under the 
Paperwork Reduction Act of 1995, as amended, Public Law 104-13, 109 
Stat. 163 (1995) (codified at 44 U.S.C. 3501-3520). This rule will not 
require a collection of information.
    As protection provided by the Paperwork Reduction Act, as amended, 
an agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently 
valid OMB control number.

F. Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. We have analyzed this rule under that Order and have 
determined that it does not have implications for federalism.

G. Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

H. Energy Effects

    We have analyzed this rule under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. We have determined that it is not a ``significant 
energy action'' under that order because it is not a ``significant 
regulatory action'' under Executive Order 12866 and is not likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy.

I. Environment

    DHS Management Directive (MD) 023-01, Rev. 01 and Instruction 
Manual (IM) 023-01-001-01 establish procedures that DHS and its 
Components use to implement the requirements of the National 
Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321-4375, and the 
Council on Environmental Quality (CEQ) regulations for implementing 
NEPA, 40 CFR parts 1500-1508. The CEQ regulations allow federal 
agencies to establish categories of actions that do not individually or 
cumulatively have a significant effect on the human environment and, 
therefore, do not require an Environmental Assessment or Environmental 
Impact Statement. 40 CFR 1508.4. The IM 023-01-001-01, Rev. 01 lists 
the Categorical Exclusions that DHS has found to have no such effect. 
IM 023-01-001-01 Rev. 01, Appendix A, Table 1.
    For an action to be categorically excluded, IM 023-01-001-01 Rev. 
01 requires the action to satisfy each of the following three 
conditions:
    (1) The entire action clearly fits within one or more of the 
Categorical Exclusions;

[[Page 45989]]

    (2) The action is not a piece of a larger action; and
    (3) No extraordinary circumstances exist that create the potential 
for a significant environmental effect. IM 023-01-001-01 Rev. 01 Sec.  
V(B)(2)(a)-(c). Where it may be unclear whether the action meets these 
conditions, MD 023-01 requires the administrative record to reflect 
consideration of these conditions. MD 023-01, app. A, Sec.  V.B.
    This rule requires Treasury-certified sureties seeking to overturn 
a breach determination to file an administrative appeal raising all 
legal and factual defenses in this appeal. The rule also allows ICE to 
decline additional immigration bonds from Treasury-certified surety 
companies for cause after certain procedures have been followed. The 
procedures require ICE to provide written notice before declining 
additional bonds to allow sureties the opportunity to challenge ICE's 
proposed action and to cure any deficiencies in their performance.
    DHS has analyzed this rule under MD 023-01 and IM 023-01-001-01 
Rev. 01. DHS has made a determination that this action is one of a 
category of actions, which do not individually or cumulatively have a 
significant effect on the human environment. This rule clearly fits 
within the Categorical Exclusion found in MD 023-01, Appendix A, Table 
1, number A3(d): ``Promulgation of rules . . . that interpret or amend 
an existing regulation without changing its environmental effect.'' 
This rule is not part of a larger action. This rule presents no 
extraordinary circumstances creating the potential for significant 
environmental effects. Therefore, this rule is categorically excluded 
from further NEPA review.

List of Subjects in 8 CFR Part 103

    Administrative practice and procedure, Surety bonds.

    Accordingly, for the reasons set forth in the preamble, the 
Department of Homeland Security amends chapter I of title 8 of the Code 
of Federal Regulations as follows:

Subchapter B--Immigration Regulations

PART 103--IMMIGRATION BENEFITS; BIOMETRIC REQUIREMENTS; 
AVAILABILITY OF RECORDS

0
1. The authority citation for part 103 is revised to read as follows:

    Authority:  5 U.S.C. 301, 552, 552a; 8 U.S.C. 1101, 1103, 1304, 
1356, 1365b; 31 U.S.C. 9701; Pub. L. 107-296, 116 Stat. 2135 (6 
U.S.C. 1 et seq.); E.O. 12356, 47 FR 14874, 15557; 3 CFR, 1982 
Comp., p. 166; 8 CFR part 2; Pub. L. 112-54; 125 Stat. 550; 31 CFR 
part 223.


0
2. Section 103.6 is amended by revising the section heading, revising 
paragraph (b), and adding paragraph (f) as follows:

Subpart A--[Amended]


Sec.  103.6  Immigration Bonds.

* * * * *
    (b) Acceptable sureties--(1) Acceptable sureties generally. 
Immigration bonds may be posted by a company holding a certificate from 
the Secretary of the Treasury under 31 U.S.C. 9304-9308 as an 
acceptable surety on Federal bonds (a Treasury-certified surety). They 
may also be posted by an entity or individual who deposits cash or cash 
equivalents, such as postal money orders, certified checks, or 
cashier's checks, in the face amount of the bond.
    (2) Authority to decline bonds underwritten by Treasury-certified 
surety. In its discretion, ICE may decline to accept an immigration 
bond underwritten by a Treasury-certified surety when--
    (i) Ten or more invoices issued to the surety on administratively 
final breach determinations are past due at the same time;
    (ii) The surety owes a cumulative total of $50,000 or more on past-
due invoices issued to the surety on administratively final breach 
determinations, including interest and other fees assessed by law on 
delinquent debt; or
    (iii) The surety has a breach rate of 35 percent or greater in any 
Federal fiscal year after August 31, 2020.The surety's breach rate will 
be calculated in the month of January following each Federal fiscal 
year after the effective date of this rule by dividing the sum of 
administratively final breach determinations for that surety during the 
fiscal year by the total of such sum and bond cancellations for that 
surety during that same year. For example, if 50 bonds posted by a 
surety company were declared breached from October 1 to September 30, 
and 50 bonds posted by that same surety were cancelled during the same 
fiscal year (for a total of 100 bond dispositions), that surety would 
have a breach rate of 50 percent for that fiscal year.
    (iv) Consistent with 31 CFR 223.17(b)(5)(i), ICE may not decline a 
future bond from a Treasury-certified surety when a court of competent 
jurisdiction has stayed or enjoined enforcement of a breach 
determination that would support ICE's decision to decline future 
bonds. For example, if collection of a past-due invoice has been stayed 
by a court, it cannot be counted as one of the ten or more invoices 
under paragraph (b)(1)(i) of this section.
    (3) Definitions. For purposes of paragraphs (b)(2)(i) and (ii) of 
this section--
    (i) A breach determination is administratively final when the time 
to file an appeal with the Administrative Appeals Office (AAO) has 
expired or when the appeal is dismissed or rejected.
    (ii) An invoice is past due if it is delinquent, meaning either 
that it has not been paid or disputed in writing within 30 days of 
issuance of the invoice; or, if it is a debt upon which the surety has 
submitted a written dispute within 30 days of issuance of the invoice, 
ICE has issued a written explanation to the surety of the agency's 
determination that the debt is valid, and the debt has not been paid 
within 30 days of issuance of such written explanation that the debt is 
valid.
    (4) Notice of intention to decline future bonds. When one or more 
of the for cause standards provided in paragraph (b)(2) of this section 
applies to a Treasury-certified surety, ICE may, in its discretion, 
initiate the process to notify the surety that it will decline future 
bonds. To initiate this process, ICE will issue written notice to the 
surety stating ICE's intention to decline bonds underwritten by the 
surety and the reasons for the proposed non-acceptance of the bonds. 
This notification will inform the surety of its opportunity to rebut 
the stated reasons set forth in the notice, and its opportunity to cure 
the stated reasons, i.e., deficient performance.
    (5) Surety's response. The Treasury-certified surety must send any 
response to ICE's notice in writing to the office that sent the notice. 
The surety's response must be received by the designated office on or 
before the 30th calendar day following the date the notice was issued. 
If the surety or agent fails to submit a timely response, the surety 
will have waived the right to respond, and ICE will decline any future 
bonds submitted for approval that are underwritten by the surety.
    (6) Written determination. After considering any timely response 
submitted by the Treasury-certified surety to the written notice issued 
by ICE, ICE will issue a written determination stating whether future 
bonds issued by the surety will be accepted or declined. This written 
determination constitutes final agency action. If the written 
determination concludes that future bonds will be declined from the 
surety, ICE will decline any future bonds submitted for

[[Page 45990]]

approval that are underwritten by the surety.
    (7) Effect of decision to decline future bonds. Consistent with 31 
CFR 223.17(b)(4), ICE will use best efforts to ensure persons 
conducting business with the agency are aware that future bonds 
underwritten by the surety will be declined by ICE. For example, ICE 
will notify any bonding agents who have served as co-obligors with the 
surety that ICE will decline future bonds underwritten by the surety.
* * * * *
    (f) Appeals of Breached Bonds Issued by Treasury-Certified 
Sureties.
    (1) Final agency action. Consistent with section 10(c) of the 
Administrative Procedure Act, 5 U.S.C. 704, the AAO's decision on 
appeal of a breach determination constitutes final agency action. The 
initial breach determination remains inoperative during the 
administrative appeal period and while a timely administrative appeal 
is pending. Dismissal of an appeal is effective upon the date of the 
AAO decision. Only the granting of a motion to reopen or reconsider by 
the AAO makes the dismissal decision no longer final.
    (2) Exhaustion of administrative remedies. The failure by a 
Treasury-certified surety or its bonding agent to exhaust 
administrative appellate review before the AAO, or the lapse of time to 
file an appeal to the AAO without filing an appeal to the AAO, 
constitutes waiver and forfeiture of all claims, defenses, and 
arguments involving the bond breach determination. A Treasury-certified 
surety's or its agent's failure to move to reconsider or to reopen a 
breach decision does not constitute failure to exhaust administrative 
remedies.
    (3) Requirement to raise all issues. A Treasury-certified surety or 
its bonding agent must raise all issues and present all facts relied 
upon in the appeal to the AAO. A Treasury-certified surety's or its 
agent's failure to timely raise any claim, defense, or argument before 
the AAO in support of reversal or remand of a breach decision waives 
and forfeits that claim, defense, or argument.
    (4) Failure to file a timely administrative appeal. If a Treasury-
certified surety or its bonding agent does not timely file an appeal 
with the AAO upon receipt of a breach notice, a claim in favor of ICE 
is created on the bond breach determination, and ICE may seek to 
collect the amount due on the breached bond.

Chad R. Mizelle,
Senior Official Performing the Duties of the General Counsel.
[FR Doc. 2020-14824 Filed 7-30-20; 8:45 am]
BILLING CODE 4410-10-P