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White House Preps Race to Regulatory Finish Line (5)

Nov. 20, 2019, 3:04 PMUpdated: Nov. 20, 2019, 10:00 PM

The Trump administration is moving to put the finishing touches on a number of big-ticket regulatory items in the coming months so that those rules are harder to undo if Democrats take the White House and Senate in 2020.

The White House Office of Management and Budget released Nov. 20 its biannual regulatory agenda, a roadmap of upcoming rulemaking activity across federal agencies. The agenda includes updates on various priority regulations, such as updating immigration restrictions, loosening clean water requirements on farmland, bolstering trade protections, and limiting labor liability for companies in franchise and staffing arrangements. It also flags some longer-term goals, including setting the rules of the air for unmanned drones.

Much of the focus heading into President Donald Trump’s fourth year in office remains on slashing regulatory red tape, particularly rules put in place by his predecessor.

“President Trump’s deregulation agenda, led by Acting OMB Director Vought, continues to remove the restraints put on our farmers and small businesses under the Obama administration,” OMB press secretary Chase Jennings said in a prepared statement provided to Bloomberg Law. “The DOW continues to break records, unemployment is at historic lows and consumer confidence is soaring. The Administration is keeping its promise to the American people and will continue to find ways to remove government interference in their lives.”

Federal agencies are said to have circled May on their calendars as the deadline for finalizing many of those rules. That would shield them from any potential challenge under the Congressional Review Act, an obscure federal law that Republicans on Capitol Hill used to scrap a series of Obama administration rules shortly after Trump was sworn in.

Similar challenges against new Trump rules are a long shot: Democrats would have to win control of the White House and Senate to use the tool, which allows lawmakers to vote to kill a “major” regulation within 60 legislative days after it is sent to Congress for review. If that were to happen, Democrats could also be reluctant to use the CRA because it prevents an agency from re-issuing a similar rule.

Administrations always are reluctant to let big regulations come out close to the elections, said Stuart Shapiro, associate dean of the School of Planning and Public Policy at Rutgers University. That furthers the incentive to either get rules done early in 2020 or after the election, he said.

“Most rules though won’t be affected by the CRA,” Shapiro said, because the law’s limit on “substantially similar” new rules is a likely deterrent. The current administration’s deregulatory efforts are the most probable target for any potential congressional challenge because those moves would not have to be replaced with a new rule if blocked.

Immigration, Labor, Trade

The Trump administration has been highlighting a wide range of regulatory trimming, but immigration is one area in which agencies continue to pursue new rules.

That includes a series of rulemakings and updates aimed at making it more difficult for asylum seekers to meet the legal standards for protection. Two proposed regulations due this month would revise the legal eligibility standards and application procedures for asylum. Others would raise the bar for when migrants are determined to have “reasonable fear” of returning to their countries and ban asylum for individuals who had recruited or used child soldiers, such as in conflict-riddled countries like Syria.

All four rulemakings would come jointly from the Departments of Homeland Security and Justice, which have been grappling with processing a surge of migrants on the Southwest border this year. The notice stated these rulemakings are needed to help reduce the backlog of immigration court proceedings, which currently stands at about 1 million. Civil rights advocates and legal groups have stated the administration’s current migration policies are already making it extraordinarily difficult for asylum seekers to receive fair consideration for protections.

The administration also plans to restrict temporary, employment-based visa programs, which it views as job-opportunity killers for U.S. workers.

The Department of Homeland Security is set to soon publish a rule to update eligibility criteria for H-1B visas, commonly used for foreign workers in tech and other white-collar jobs. The administration has been targeting companies that use the visa program to replace or avoid hiring U.S. citizen workers.

“Strengthening the integrity of the agency’s nonimmigrant employment-based benefit programs has been an ongoing priority,” a DHS official told Bloomberg Law.

The administration is additonally moving in the coming months to limit shared liability for labor and employment violations by franchisers and businesses in staffing and other contract relationships. That would fulfill a promise Vice President Mike Pence made in 2017 to tackle the issue.

The Labor Department and the National Labor Relations Board are each expected to unveil final rules to limit the situations in which multiple businesses will be considered “joint employers” and be held jointly responsible for paying the same group of workers minimum wages and overtime and for collectively bargaining with those employees. The agencies are walking back the Obama administration’s more expansive approach, which supporters say was designed to cut through complicated contract arrangements that companies use to avoid legal responsibilities to workers.

Trade, Patents, Drones

The White House has hailed the new trade deal with Mexico and Canada as another tool for creating job opportunities. As Congress prepares to weigh in on the agreement, the Commerce Department is working on a rule to close a possible loophole for steel products manufactured outside of North America.

The U.S. eliminated national security tariffs on steel imports from Mexico and Canada. The department said in the agenda it will look to ensure that steel manufacturers outside of those countries don’t skirt tariffs by moving products through Mexico and Canada on the way to the U.S. It’s working on a new regulation that would require import license applicants to identify the country where steel used in the manufacture of the imported steel product was melted and poured.

The U.S. Patent and Trademark Office, part of the Commerce Department, is also proposing increasing trademark fees to meet operational costs. The agency hasn’t published specific details, but any fee increase will likely impact international trade and investment, according to the agenda.

The agency has additionally proposed rules related to administrative patent challenge procedures. It’s planning a rule that would place the burden on challengers, rather than the patent owner, to show amended patent claims are invalid, in line with a federal appeals court ruling in Aqua Products, Inc. v. Matal.

The agenda also included two updates for drone regulations that national security and law enforcement officials have demanded be implemented before more widespread use of the technology. A final rule that would mandate an external identification marker, similar to a license plate, on small unmanned aircraft is now slated for October. Separately, a rulemaking that would set requirements for tracking hardware as well as airspace and operations restrictions has been delayed.

Companies that want to use drones for deliveries, photography and inspections have repeatedly expressed frustration at the multiple delays from the agency in rulemakings.

Corporate Reporting and Tax Changes

The Securities and Exchange Commission plans to take another step toward easing quarterly reporting for companies after Trump urged the agency to look into allowing less frequent disclosure. The SEC intends to issue a proposal in the coming months, according to the agenda. The agency has sought feedback from companies on quarterly reporting burdens through letters and a roundtable discussion.

That proposal is among more than a dozen new items on the SEC’s short-term regulatory agenda. Other additions include proposals on the accredited investor definition, crowdfunding, and Dodd-Frank Act executive compensation rules concerning clawbacks.

Meanwhile, Internal Revenue Service regulatory activity is on the decline, as implementation of the 2017 tax overhaul begins to taper off.

The 2019 fall agenda includes 187 IRS items compared to 234 regulatory actions on last fall’s installment. Out of those 187 items, 14 are marked as “economically significant.” That includes a proposed rule to change Obama-era regulations that were intended to curb inversions—multinational mergers that result in companies originally owned by U.S. investors being treated as foreign entities for tax purposes. The new regulation is slated for release in September 2020.

In addition to continuing to implement guidance on the 2017 tax law, the IRS and Treasury’s Office of Tax Policy will prioritize in fiscal year 2020 guidance on the Taxpayer First Act, which was signed into law in July. The law is designed to overhaul the IRS, with an emphasis on customer service and cybersecurity.

Relaxing Environmental, Land Standards

The Environmental Protection Agency will continue to ease Obama-era regulations intended to combat water and air pollution, according to the agenda.

The agency by May plans to cement its revised reading of Clean Water Act authority given to states to block or approve federal projects like interstate pipelines or coal exporting terminals if they have direct water quality impacts. The EPA is also set to consider changes to its process of vetoing dredge and fill permits for major projects like mining and roadbuilding, a response to criticism of the Obama administration’s decisions to veto Army Corps of Engineers water permits for Pebble Mine in Alaska and the Spruce coal mine in West Virginia.

The agency is also responding to a congressional mandate with a proposal due out in December that would force tiny rural water utilities that have been out of compliance with federal drinking water standards to merge with larger utilities.

In a change from previously announced plans, the agency also will no longer propose limits on ozone-forming nitrogen oxides from heavy duty truck diesel engines in early 2020, pushing the proposal out to June. The EPA is also planning to propose by February long-awaited updated limits for commercial medical sterilizers that emit toxic ethylene oxide, after finding the gas was a carcinogen in 2016. This rule was due out this past summer, but the agency decided it would take comments on a range of technological options to plug leaks and releases of this gas.

Frustrated with EPA inaction, Rep. Brad Schneider (D-Ill.) announced Nov. 20 that he is forming a congressional task force with Rep. Jody Hice (R-Ga.) to pressure the agency.

“Part of our frustration with EPA” is that the cancer finding on ethylene oxide came out in 2016, Schneider said. “It is unfair of the EPA not to give some sort of guidance to residents.”

The Trump administration also has a variety of regulatory updates on deck for public lands. The Bureau of Land Management wants to revise how it crafts influential planning documents called resource management plans and join other agencies in loosening regulations on the use of electric bikes on public lands. At the same time, the Interior Department says it will also start a process to revise regulations that set out how energy companies should calculate royalties for federal fossil fuels.

Medicaid Payments, Tobacco

The administration is looking to cut down on Medicaid waste after an audit recently revealed the government lost nearly $57.4 billion in improper payments last year. That’s up from $36.2 billion in fiscal year 2018, according to data released Nov. 18 by the Centers for Medicare & Medicaid Services.

The improper payments stemmed mainly from “insufficient documentation to verify eligibility” based on a recipient’s household income.

A proposed new rule slated for April would “strengthen the integrity of the Medicaid eligibility determination process,” including eligibility verification, changes in beneficiary circumstances, and re-determinations of eligibility. The CMS is also expected to put out a request for information in December on whether Medicaid should to stop paying for non-emergency transportation of beneficiaries to caregivers.

The Health and Human Services Department is walking away from a proposal unveiled two years ago that would have forced tobacco companies to cut the level of nicotine in cigarettes to non-addictive levels, according to the agenda. Abandoning the plan, which almost certainly would have meant a sharp reduction in tobacco sales, would be a major victory for the tobacco industry. The move also comes at a time when public debate is focused on the potential for e-cigarettes to create a new generation of nicotine addicts.

Stay Tuned for More Info

The agenda’s release was not accompanied by an annual accounting of rules that were issued and cut, nor did the administration make public agencies’ regulatory budgets for the year ahead. The administration has provided that information along with the agenda for the last two years.

Executive Order 13771, signed by Trump in January 2017, requires agencies to take two deregulatory actions, such as rule cuts or paperwork reductions, for each significant new rule they issue. In fiscal year 2018, agencies reported issuing 14 new regulations and taking 176 deregulatory actions, resulting in lifetime regulatory cost savings to the economy of $23.4 billion.

The executive order also requires the Office of Management and Budget to set annual regulatory budgets for each agency—how much departments can spend or must cut through their regulatory activities. For fiscal 2019, agencies across government were directed to cut $17.9 billion in regulatory costs.

The Trump administration plans to unveil a new report on rulemaking activity and information on regulatory budgets separately, an OMB official told Bloomberg Law.

(Updated with additional comment from Rep. Schneider in paragraph 33.)

To contact the reporters on this story: Chris Opfer in New York at copfer@bloomberglaw.com; Cheryl Bolen in Washington at cbolen@bgov.com; Laura D. Francis in Washington at lfrancis@bloomberglaw.com; Ben Penn in Washington at bpenn@bloomberglaw.com; Rossella Brevetti in Washington at rbrevetti@bloomberglaw.com; Andrew Ramonas in Washington at aramonas@bloomberglaw.com; Allyson Versprille in Washington at aversprille@bloombergtax.com; Amena H. Saiyid in Washington at asaiyid@bloombergenvironment.com; Ellen M. Gilmer in Washington at egilmer@bloombergenvironment.com; Adam Allington in Washington at aallington@bloombergenvironment.com; Pat Rizzuto in Washington at prizzuto@bloombergenvironment.com; David Schultz in Washington at dschultz@bloombergenvironment.com; Sylvia Carignan in Washington at scarignan@bloombergenvironment.com; Michaela Ross in Washington at mross@bgov.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; John Lauinger at jlauinger@bloomberglaw.com

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