Federal Register, Volume 71 Issue 110 (Thursday, June 8, 2006)

[Federal Register Volume 71, Number 110 (Thursday, June 8, 2006)]
[Rules and Regulations]
[Pages 33147-33168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5223]

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Rules and Regulations
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Federal Register / Vol. 71, No. 110 / Thursday, June 8, 2006 / Rules
and Regulations

[[Page 33147]]

DEPARTMENT OF HOMELAND SECURITY

Office of the Secretary

6 CFR Part 25

[USCG-2003-15425]
RIN 1601-AA15

Regulations Implementing the Support Anti-terrorism by Fostering
Effective Technologies Act of 2002 (the SAFETY Act)

AGENCY: Office of the Secretary, Department of Homeland Security.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule implements Subtitle G of Title VIII of the
Homeland Security Act of 2002--the Support Anti-terrorism by Fostering
Effective Technologies Act of 2002 (``the SAFETY Act'' or ``the Act''),
which provides critical incentives for the development and deployment
of anti-terrorism technologies by providing liability protections for
providers of ``qualified anti-terrorism technologies.'' The purpose of
this rule is to facilitate and promote the development and deployment
of anti-terrorism technologies that will save lives. The final rule
amends the interim rule to incorporate changes resulting from the
comments.

DATES: This final rule is effective July 10, 2006.

ADDRESSES: You may submit comments identified by Coast Guard docket
number USCG-2003-15425 or RIN 1601-AA15, to the Docket Management
Facility at the Department of Transportation, by one of the following
methods:
(1) Web Site: http://dms.dot.gov.
(2) Mail: Docket Management Facility, U.S. Department of
Transportation, 400 Seventh Street, SW., Washington, DC 20590-0001.
(3) Fax: 202-493-2251.
(4) Delivery: Room PL-401 on the Plaza level of the Nassif
Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The telephone
number is 202-366-9329.
(5) Federal eRulemaking portal: http://www.regulations.gov.
Instructions: Comments and materials received from the public, as well
as documents mentioned in this preamble as being available in the
docket, are part of docket USCG-2003-15425 and are available for
inspection or copying from the Docket Management Facility, U.S.
Department of Transportation, room PL-401, 400 Seventh Street, SW.,
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday except
Federal holidays. You may also find this docket on the Internet at
http://dms.dot.gov. You may also access the Federal eRulemaking Portal
at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: If you have questions on this final
rule, contact the Director of the Office of SAFETY Act Implementation,
Science and Technology, Department of Homeland Security, telephone 703-
575-4511. If you have questions on viewing or submitting material to
the docket, call Dorothy Beard, Chief, Dockets, Department of
Transportation, telephone 202-366-5149.

SUPPLEMENTARY INFORMATION: Capitalized terms appearing in this preamble
shall have the meanings ascribed to such terms in Sec. 25.2 of this
final rule. This section is organized as follows:

Table of Contents

I. Analysis of the SAFETY Act
A. Background
B. Statutory and Regulatory History and Analysis
C. Government Contractor Defense
D. Exclusive Federal Jurisdiction and Scope of Insurance
Coverage
E. Relationship of the SAFETY Act to Indemnification Under
Public Law 85-804
II. Discussion of Changes and Comments
A. Confidentiality of Information
B. Application Preparation Burden
C. Certifying ``accuracy and completeness''
D. Conditions on Designations
E. Significant Modification to a Qualified Anti-
TerrorismTechnology
F. Exclusive Responsibility for Government Contractor Defense,
Definitions of Fraud and Willful Misconduct
G. Definition of an ``Act of Terrorism''
H. Retroactive Designation
I. Bias Toward Product-Based Anti-Terrorism Technologies
J. Scope of Insurance Coverage
K. Interactions With Public Law 85-804
L. Prioritization of Evaluations
M. Standards
N. Expiration of Designations
O. Appeal/Review of Decisions Regarding SAFETY Act Applications
P. Coordination With Government Procurements
Q. Pre-Application Consultations
R. Developmental Test & Evaluation Designations
S. Seller's Continuing Obligations With Respect to Maintaining
Insurance
T. Block Designations and Block Certifications
U. Reciprocal Waivers
V. Deference Due to Other Federal or State Regulatory or
Procurement Officials
III. Regulatory Requirements
A. Executive Order 12866
B. Regulatory Flexibility Act
C. Unfunded Mandates Reform Act of 1995
D. Executive Order 13132--Federalism
E. Paperwork Reduction Act

I. Analysis of the SAFETY Act

A. Background

Congress was clear, both in the text of the SAFETY Act and in the
Act's legislative history, that the SAFETY Act can and should be a
critical tool in expanding the creation, proliferation and use of anti-
terrorism technologies. On July 11, 2003, the Department of Homeland
Security (``DHS'') published its first proposed rules for
implementation of the SAFETY Act (Notice of Proposed Rulemaking
entitled ``Regulations Implementing the Support Anti-terrorism by
Fostering Effective Technologies Act of 2002 (the SAFETY Act)'' (68 FR
41420), laying out its fundamental interpretive approach to the Act and
requesting comment. On October 16, 2003, an interim rule governing
implementation of the SAFETY Act was promulgated making certain changes
to the proposed rules but again embracing many of the fundamental
interpretive approaches proposed several months earlier (68 FR 59684).
Subsequently, the Department published detailed procedural mechanisms
for implementation of the Act and announced additional details relating
to the process for filing and adjudicating applications.

[[Page 33148]]

The SAFETY Act program is now in its third year, and the Department
has a substantial record of program performance to evaluate. While the
Department concludes that the Department's core legal interpretations
of the Act's provisions are fundamentally sound, experience in
administering the program has demonstrated that certain of the
procedural processes built to administer the Act can be improved.
Shortly after being sworn in, Secretary of Homeland Security Michael
Chertoff stated: ``There is more opportunity, much more opportunity, to
take advantage of this important law, and we are going to do that.'' In
the past year, the Department has instituted process improvements which
have yielded positive initial results. In the first sixteen months of
the SAFETY Act program, from October 2003 to February 2005, six
technologies were designated Qualified Anti-Terrorism Technologies
under the SAFETY Act. By contrast, since March 2005, 68 additional
technologies have received SAFETY Act protections. This is a greater
than ten-fold increase in SAFETY Act approvals in the past 14 months.
In addition, the Department has instituted a program to run SAFETY Act
reviews in parallel with key anti-terrorism procurement processes.
Despite these recent improvements, further changes to Department
rules and processes are necessary to ensure that the program achieves
the results that Congress intended. With this final rule, the
Department:
1. Further clarifies the liability protections available under the
SAFETY Act;
2. States with greater specificity those products and services that
are eligible for Designation as a Qualified Anti-Terrorism Technology;
3. Clarifies the Department's efforts to protect the confidential
information, intellectual property, and trade secrets of SAFETY Act
applicants;
4. Articulates the Department's intention to extend SAFETY Act
liability protections to well-defined categories of anti-terrorism
technologies by issuing ``Block Designations'' and ``Block
Certifications;''
5. Discusses appropriate coordination of SAFETY Act consideration
of anti-terrorism technologies with government procurement processes;
and
6. Takes other actions necessary to streamline processes, add
flexibility for applicants, and clarify protections afforded by the
SAFETY Act.
While this rule is indeed final, the Department remains committed
to making future changes to the implementing regulation or to any
element of the program that interferes with the purposes of the SAFETY
Act. To that end, the Department seeks further comment on the specific
issues identified herein.
Section I of this preamble reviews the Department's longstanding
legal interpretation of the SAFETY Act's provisions and reviews the
Act's statutory and regulatory history. Section II addresses regulatory
changes and outlines additional improvements in SAFETY Act processes
and procedures that the Department will implement in the coming months
that will improve administration of the Act. Section III addresses this
rule's compliance with other regulatory requirements.

B. Statutory and Regulatory History and Analysis

As part of the Homeland Security Act of 2002, Public Law 107-296,
Congress enacted liability protections for providers of certain anti-
terrorism technologies. The SAFETY Act provides incentives for the
development and deployment of anti-terrorism technologies by creating a
system of ``risk management'' and a system of ``litigation
management.'' The purpose of the Act is to ensure that the threat of
liability does not deter potential manufacturers or sellers of anti-
terrorism technologies from developing, deploying, and commercializing
technologies that could save lives. The Act thus creates certain
liability limitations for ``claims arising out of, relating to, or
resulting from an act of terrorism'' where Qualified Anti-Terrorism
Technologies (as such term is defined in 6 CFR 25.2) have been
deployed.
Together, the risk and litigation management provisions provide the
following protections:
Exclusive jurisdiction in Federal court for suits against
the sellers of ``Qualified Anti-Terrorism Technologies'' (Sec.
863(a)(2));
A limitation on the liability of sellers of Qualified
Anti-Terrorism Technologies to an amount of liability insurance
coverage specified for each Qualified Anti-Terrorism Technology,
provided that sellers cannot be required to obtain any more liability
insurance coverage than is reasonably available ``at prices and terms
that will not unreasonably distort the sales price'' of the technology
(Sec. 864(a)(2));
A prohibition on joint and several liability such that
sellers can only be liable for the percentage of noneconomic damages
that is proportionate to their responsibility (Sec. 863(b)(2));
A complete bar on punitive damages and prejudgment
interest (Sec. 863(b)(1));
The reduction of a plaintiff's recovery by the amount of
collateral source compensation, such as insurance benefits or
government benefits, such plaintiff receives or is eligible to receive
(Sec. 863(c)); and
A rebuttable presumption that sellers are entitled to the
``government contractor defense'' (Sec. 863(d)).
The Secretary's designation of a technology as a Qualified Anti-
Terrorism Technology (QATT) confers each of the liability protections
identified above except the rebuttable presumption in favor of the
government contractor defense. The presumption in favor of the
government contractor defense requires an additional ``Certification''
by the Secretary under section 863(d) of the Act. In many cases,
however, SAFETY Act Designation and Certification are conferred
contemporaneously.
As noted above, the Designation of a technology as a Qualified
Anti-Terrorism Technology confers all of the liability protections
provided in the SAFETY Act, except for the presumption in favor of the
government contractor defense. The Act gives the Secretary broad
discretion in determining whether to designate a particular technology
as a Qualified Anti-Terrorism Technology, although the Act sets forth
the following criteria for consideration of a particular technology:
(1) Prior United States Government use or demonstrated substantial
utility and effectiveness; (2) availability of the technology for
immediate deployment; (3) the potential liability of the Seller; (4)
the likelihood that the technology will not be deployed unless the
SAFETY Act protections are conferred; (5) the risk to the public if the
technology is not deployed; (6) evaluation of scientific studies; and
(7) the effectiveness of the technology in defending against acts of
terrorism. It is not required that applicants satisfy all of the
preceding criteria to receive SAFETY Act protections. Moreover, these
criteria are not exclusive--the Secretary may consider other factors
that he deems appropriate. The Secretary has discretion to give greater
weight to some factors over others, and the relative weighting of the
various criteria may vary depending upon the particular technology at
issue and the threats that the particular technology is designed to
address. The Secretary may, in his discretion, determine that failure
to meet a particular criterion justifies denial of an application under
the SAFETY Act. However, the Secretary is

[[Page 33149]]

not required to reject an application that fails to meet one or more of
the criteria. Rather, the Secretary may conclude, after considering all
of the relevant criteria and any other relevant factors, that a
particular technology merits Designation as a Qualified Anti-Terrorism
Technology even if one or more particular criteria are not satisfied.
The Secretary's considerations will also vary with the constantly
evolving threats and conditions that give rise to the need for the
technologies.
The SAFETY Act applies to a broad range of technologies, including
products, services, and software, or combinations thereof, as long as
the Secretary, as an exercise of discretion and judgment, determines
that a technology merits Designation. The Secretary may designate a
system containing many component technologies (including products and
services) or may designate specific component technologies
individually. Further, as the statutory criteria suggest, a Qualified
Anti-Terrorism Technology need not be newly developed--it may have
already been employed (e.g. ``prior United States government use''') or
may be a new application of an existing technology.
The SAFETY Act provides that, before designating a Qualified Anti-
Terrorism Technology, the Secretary will examine the amount of
liability insurance the Seller of the technology proposes to maintain
for coverage of the anti-terrorism technology at issue. Under section
864(a), the Secretary must certify that the coverage level is
appropriate ``to satisfy otherwise compensable third-party claims
arising out of, relating to, or resulting from an act of terrorism when
qualified anti-terrorism technologies have been deployed.'' Sec.
864(a)(1). While the Act provides the Secretary with significant
discretion in this regard, the Secretary may not require the Seller to
obtain liability insurance of more than the maximum amount of liability
insurance reasonably available from private sources on the world
market. Likewise, the Secretary may not require a Seller to obtain
insurance, the cost of which would unreasonably distort the sales price
of Seller's anti-terrorism technologies. Sec. 864(a)(2). Although the
Secretary may permit the Seller to self-insure, he may not require the
Seller to self-insure if appropriate insurance is unavailable. Sec.
864(a)(2).
The Secretary does not intend to set a ``one-size-fits-all''
numerical requirement regarding required insurance coverage for all
technologies that have been designated as QATTs. Instead, as the Act
suggests, the inquiry will be specific to each application and may
involve an examination of several factors, including without limitation
the following: (i) The amount of insurance the Seller has previously
maintained; (ii) the amount of insurance maintained by the Seller for
other related technologies or for the Seller's business as a whole;
(iii) the amount of insurance typically maintained by Sellers of
comparable technologies; (iv) data and history regarding mass casualty
losses; and (v) the particular technology at issue. Once the Secretary
concludes the analysis regarding the appropriate level of insurance
coverage (which typically will include discussions with the Seller),
the Secretary will provide a description of the coverage appropriate
for the particular Seller of a Qualified Anti-Terrorism Technology to
maintain. The Seller's insurance certification may identify an
appropriate amount of insurance coverage available under a
comprehensive general liability policy or other liability insurance
program. The insurance certification also may specify that the amount
of insurance required to be maintained will be the amount of coverage
available under the terms of the specific policy at issue. If, during
the term of the Designation, the Seller desires to request
reconsideration of that insurance certification due to changed
circumstances or for other reasons, the Seller may do so and the
Secretary is authorized to use the discretion described above to adjust
insurance requirements appropriately. If the Seller fails to maintain
coverage at the certified level, the liability protections of the Act
will continue to apply, but the Seller's liability limit will remain at
the certified insurance level. The Department recognizes that the
market for insurance might change over time and seeks further comment
on how the Department can and should address changes in insurance
availability.

C. Government Contractor Defense

The SAFETY Act creates a rebuttable presumption that the government
contractor defense applies to those Qualified Anti-Terrorism
Technologies ``approved by the Secretary'' in accordance with certain
criteria specified in Sec. 863(d)(2). The government contractor
defense is an affirmative defense that immunizes Sellers from liability
for certain claims brought under Sec. 863(a) of the Act. See Sec.
863(d)(1). The presumption of this defense applies to all ``approved''
Qualified Anti-Terrorism Technologies for claims brought in a ``product
liability or other lawsuit'' and ``arising out of, relating to, or
resulting from an act of terrorism when qualified anti-terrorism
technologies * * * have been deployed in defense against or response or
recovery from such act and such claims result or may result in loss to
the Seller.'' Id. While the government contractor defense is a
judicially-created doctrine, section 863's express terms supplant the
requirements in the case law for the application of the defense. First,
and most obviously, the Act expressly provides that the government
contractor defense is available not only to government contractors, but
also to those who sell to State and local governments or the private
sector. See Sec. 863(d)(1) (``This presumption of the government
contractor defense shall apply regardless of whether the claim against
the Seller arises from a sale of the product to Federal Government or
non-Federal Government customers.'') Second, Sellers of Qualified Anti-
Terrorism Technologies need not design their technologies to federal
government specifications in order to obtain the government contractor
defense under the SAFETY Act. Instead, the Act sets forth criteria for
the Department's Certification of technologies. Specifically, the Act
provides that before issuing a Certification for a technology, the
Secretary will conduct a ``comprehensive review of the design of such
technology and determine whether it will perform as intended, conforms
to the Seller's specifications, and is safe for use as intended.''
Sec. 863(d)(2). The Act also provides that the Seller will ``conduct
safety and hazard analyses'' and supply such information to the
Secretary. Id. This express statutory framework thus governs in lieu of
the requirements developed in case law for the application of the
government contractor defense. Third, the Act expressly states the
limited circumstances in which the applicability of the defense can be
rebutted. The Act provides expressly that the presumption can be
overcome only by evidence showing that the Seller acted fraudulently or
with willful misconduct in submitting information to the Secretary
during the course of the Secretary's consideration of such technology.
See Sec. 863(d)(1) (``This presumption shall only be overcome by
evidence showing that the Seller acted fraudulently or with willful
misconduct in submitting information to the Secretary during the course
of the Secretary's consideration of such technology under this
subsection.'')
The applicability of the government contractor defense to
particular technologies is thus governed by these express provisions of
the Act, rather than by the judicially-developed criteria

[[Page 33150]]

for applicability of the government contractor defense outside the
context of the SAFETY Act. While the Act does not expressly delineate
the scope of the defense (i.e., the types of claims that the defense
bars), the Act and the legislative history make clear that the scope is
broad. For example, it is clear that any Seller of an ``approved''
technology cannot be held liable under the Act for design defects or
failure to warn claims, unless the presumption of the defense is
rebutted by evidence that the Seller acted fraudulently or with willful
misconduct in submitting information to the Secretary during the course
of the Secretary's consideration of such technology. In Boyle v. United
Technologies Corp., and its progeny, the Supreme Court has ruled that
the government contractor defense bars a broad range of claims. For
example, the Supreme Court in Boyle concluded that ``state law which
holds Government contractors liable for design defects'' can present a
significant conflict with Federal policy (including the discretionary
function exception to the Federal Tort Claims Act) and therefore ``must
be displaced.'' Boyle v. United Technologies Corp., 487 U.S. 500, 512
(1988). The Department believes with the SAFETY Act that Congress
incorporated government contractor defense protections outlined in the
Supreme Court's Boyle line of cases as it existed on the date of
enactment of the SAFETY Act, rather than incorporating future
developments of the government contractor defense in the courts.
Indeed, it is difficult to imagine that Congress would have intended a
statute designed to provide certainty and protection to Sellers of
anti-terrorism technologies to be subject to future developments of a
judicially-created doctrine. In fact, there is evidence that Congress
rejected such a construction. See, e.g., 148 Cong. Rec. E2080 (November
13, 2001) (statement of Rep. Armey) (``[Companies] will have a
government contractor defense as is commonplace in existing law.'')
(emphasis added).
Procedurally, the presumption of applicability of the government
contractor defense is conferred by the Secretary's Certification of a
Qualified Anti-Terrorism Technology specifically for the purposes of
the government contractor defense. This Certification is an act
separate from the Secretary's issuance of a Designation for a Qualified
Anti-Terrorism Technology and confers additional benefits to Sellers.
Importantly, Sellers may submit applications for both Designation as a
Qualified Anti-Terrorism Technology and Certification for purposes of
the government contractor defense at the same time, and the Secretary
may review and act upon both applications contemporaneously. The
distinction between the Secretary's two actions is important, however,
because the approval process for the government contractor defense
includes a level of review that is not required for the Designation as
a Qualified Anti-Terrorism Technology. In appropriate cases, Sellers
may obtain the protections that come with Designation as a Qualified
Anti-Terrorism Technology even if they have not satisfied the
additional requirements for the government contractor defense.
In an effort to provide greater clarity, the Department intends to
publish guidance regarding its interpretation of the government
contractor defense and the Supreme Court's Boyle line of cases as it
existed on the date of enactment of the SAFETY Act.

D. Exclusive Federal Jurisdiction and Scope of Insurance Coverage

The Act creates an exclusive Federal cause of action ``for any
claim for loss of property, personal injury, or death arising out of,
relating to, or resulting from an act of terrorism when qualified anti-
terrorism technologies have been deployed in defense against or
response or recovery from such act and such claims result or may result
in loss to the Seller.'' Sec. 863(a)(2); See also Sec. 863(a)(1).
This exclusive ``Federal cause of action shall be brought only for
claims for injuries that are proximately caused by sellers that provide
qualified anti-terrorism technology.'' Sec. 863(a)(1). The best
reading of Sec. 863(a), and the reading the Department has adopted, is
that
(1) Only one cause of action exists for loss of property, personal
injury, or death for performance or non-performance of the Seller's
Qualified Anti-Terrorism Technology in relation to an Act of Terrorism,
(2) Such cause of action may be brought only against the Seller of
the Qualified Anti-Terrorism Technology and may not be brought against
the buyers, the buyers' contractors, downstream users of the Qualified
Anti-Terrorism Technology, the Seller's suppliers or contractors, or
any other person or entity, and
(3) Such cause of action must be brought in Federal court. The
exclusive Federal nature of this cause of action is evidenced in large
part by the exclusive jurisdiction provision in Sec. 863(a)(2). That
subsection states: ``Such appropriate district court of the United
States shall have original and exclusive jurisdiction over all actions
for any claim for loss of property, personal injury, or death arising
out of, relating to, or resulting from an act of terrorism when
Qualified Anti-Terrorism Technologies have been deployed in defense
against or response or recovery from such act and such claims result or
may result in loss to the Seller.'' Id. Any presumption of concurrent
causes of action (between state and Federal law) is overcome by two
basic points. First, Congress would not have created in this Act a
Federal cause of action to complement State law causes of action. Not
only is the substantive law for decision in the Federal action derived
from State law (and thus would be surplusage), but in creating the Act
Congress plainly intended to limit rather than increase the liability
exposure of Sellers. Second, the granting of exclusive jurisdiction to
the Federal district courts provides further evidence that Congress
wanted an exclusive Federal cause of action. Indeed, a Federal district
court (in the absence of diversity) does not have jurisdiction over
State law claims, and the statute makes no mention of diversity claims
anywhere in the Act.
Further, it is clear that the Seller is the only appropriate
defendant in this exclusive Federal cause of action. First and
foremost, the Act unequivocally states that a ``cause of action shall
be brought only for claims for injuries that are proximately caused by
sellers that provide qualified anti-terrorism technology.'' Sec.
863(a)(1). Second, if the Seller of the Qualified Anti-Terrorism
Technology at issue were not the only defendant, would-be plaintiffs
could, in an effort to circumvent the statute, bring claims (arising
out of or relating to the performance or non-performance of the
Seller's Qualified Anti-Terrorism Technology) against arguably less
culpable persons or entities, including but not limited to contractors,
subcontractors, suppliers, vendors, and customers of the Seller of the
technology. Because the claims in the cause of action would be
predicated on the performance or non-performance of the Seller's
Qualified Anti-Terrorism Technology, those persons or entities, in
turn, would file a third-party action against the Seller. In such
situations, the claims against non-Sellers thus ``may result in loss to
the Seller'' under Sec. 863(a)(2). The Department believes Congress
did not intend through the Act to increase rather than decrease the
amount of litigation arising out of or related to the deployment of
Qualified Anti-Terrorism Technology. Rather, Congress balanced the need
to provide recovery to plaintiffs against the need to

[[Page 33151]]

ensure adequate deployment of anti-terrorism technologies by creating a
cause of action that provides a certain level of recovery against
Sellers, while at the same time protecting others in the supply chain.

E. Relationship of the SAFETY Act to Indemnification Under Public Law
85-804

The Department recognizes that Congress intended that the SAFETY
Act's liability protections would substantially reduce the need for the
United States to provide indemnification under Public Law 85-804 to
Sellers of anti-terrorism technologies. The liability protections of
the SAFETY Act should, in many circumstances, make it unnecessary to
provide indemnification to Sellers. The Department recognizes, however,
that there are circumstances in which both SAFETY Act coverage and
indemnification are warranted. See 148 Cong. Rec. E2080 (statement by
Rep. Armey) (November 13, 2002) (stating that in some situations the
SAFETY Act protections will ``complement other government risk-sharing
measures that some contractors can use such as Pub. L. 85-804''). In
recognition of this close relationship between the SAFETY Act and
indemnification authority, in section 73 of Executive Order 13286 of
February 28, 2003, the President amended the existing Executive Order
on indemnification-Executive Order 10789 of November 14, 1958, as
amended. The amendment granted the Department of Homeland Security
authority to indemnify under Public Law 85-804. At the same time, it
requires that all agencies--not just the Department of Homeland
Security--follow certain procedures to ensure that the potential
applicability of the SAFETY Act is considered before any
indemnification is granted for an anti-terrorism technology.
Specifically, the amendment provides that Federal agencies cannot
provide indemnification ``with respect to any matter that has been, or
could be, designated by the Secretary of Homeland Security as a
qualified anti-terrorism technology'' unless the Secretary of Homeland
Security has advised whether SAFETY Act coverage would be appropriate
and the Director of the Office of Management and Budget has approved
the exercise of indemnification authority. The amendment includes an
exception for the Department of Defense where the Secretary of Defense
has determined that indemnification is ``necessary for the timely and
effective conduct of United States military or intelligence
activities.''

II. Discussion of Changes and Comments

The Department received 16 sets of comments to the interim rule
during the comment period and has made substantive and stylistic
changes in response to those comments. The Department considered all of
the comments received and the Department's responses follow.

A. Confidentiality of Information

Eight commenters expressed dissatisfaction with the Department's
stated policy with regard to safeguarding proprietary information
(including business confidential information) submitted as part of a
SAFETY Act application. Some commenters desired the Department to
declare that SAFETY Act application contents are ``voluntary
submissions'' for purposes of determining whether the Critical
Infrastructure Information Act applies. Commenters also noted that
Exemption 4 of FOIA protects ``trade secrets or commercial or financial
information from a person [that is] privileged or confidential.''
The Department remains committed to the vigorous protection of
applicants' submissions and confidential information. One applicant
suggested that the Department ``adopt a general presumption of
confidential treatment of all SAFETY Act applications, evaluations and
studies of such applications, underlying decisional documentation, and
application rejection notices.'' This has been the Department's
intention, policy, and practice from the outset. DHS is committed to
taking all appropriate steps to protect the proprietary information of
applicants consistent with applicable FOIA exemptions and the Trade
Secrets Act (18 U.S.C. 1905). As an example of this commitment, those
engaged in evaluating applications are required to enter into
appropriate nondisclosure agreements. In addition, prior to being
granted access to any proprietary information associated with an
application or its evaluation, each potential evaluator is examined for
potential conflicts of interest. Finally, the Department's conflict of
interest and confidentiality policies apply to everyone associated with
SAFETY Act implementation.
Underlying this commitment to protect an applicant's information
are various Federal civil and criminal laws that potentially apply to
unauthorized disclosure of SAFETY Act confidential materials, including
the Trade Secrets Act and 18 U.S.C. Chapter 90 (Protection of Trade
Secrets, especially section 1831--Economic Espionage, and section
1832--Theft of Trade Secrets). These laws establish criminal penalties
for disclosing proprietary data under various circumstances. There are
also relevant state laws, including versions of the Uniform Trade
Secrets Act adopted in the District of Columbia, the State of Maryland,
the Commonwealth of Virginia, and 39 other states. In addition,
sensitive homeland security information, including information
regarding vulnerabilities of critical infrastructure can be entitled to
certain statutory protections under sections 892(a)(1)(B), 892(b)(3),
892(f) of the Homeland Security Act of 2002, Sensitive Security
Information under 49 U.S.C. 40119, 49 CFR part 1520 and FOIA Exemption
3 (among other FOIA exemptions).
The Department also believes that all information that is submitted
as part of an application, including the fact that a particular entity
has submitted an application, is confidential commercial information
under the tests established in National Parks & Conservation
Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974), and its progeny.
In particular, much or all of this information qualifies as
confidential under both the ``competitive harm'' prong of the test, and
the ``third prong'' of government interest and program effectiveness.
The Department will assert appropriate exemptions (including, as
applicable, FOIA Exemptions 1 through 4) in declining to disclose under
FOIA any information concerning the source of a SAFETY Act application
or the contents of applications. This policy is now reflected in the
rule at section 25.10 of this final rule. In addition, the Department
will work with applicants to ensure that no proprietary information is
published in connection with an announcement of a Block Designation
(pursuant to Sec. 25.6(i) of this final rule), DHS's publication of
the Approved Product List for Homeland Security (pursuant to Sec.
25.8(k) of the final rule) or the voluntary publication by DHS of
issued Designations. Moreover, the Government does not, at this time,
intend to ``portion mark'' information contained in the application, or
associated case file, to delineate between protected proprietary
information (also referred to as ``SAFETY Act Confidential
Information'') and other less sensitive data in the application.
Instead the entirety of the application will be treated as confidential
under appropriate law. It is the Department's

[[Page 33152]]

belief that requiring the reviewer to portion mark at the time of
submission would greatly impact efficiency and applicants' confidence
in the integrity of protections for proprietary information, and that
such a practice does not reflect the requirements of applicable
confidentiality protections.
The Department has established internal security procedures for
handling technical, business, and insurance information that is
submitted in connection with a SAFETY Act application. Certain of the
measures the Department has instituted to safeguard proprietary
information are reflected in 6 CFR 25.10. All applications, whether
paper or electronic, will be subject to stringent safeguards. In
obtaining the input of subject matter experts and evaluators that
analyze SAFETY Act applications, the Department will only seek input
from individual experts or evaluators and will not consult any
committee in the process of reviewing SAFETY Act applications. Finally,
the Department recognizes that information submitted in SAFETY Act
applications may constitute Protected Critical Infrastructure
Information pursuant to sections 211-215 of the Homeland Security Act
of 2002. The Department is in the process of revising its Protected
Critical Infrastructure Information regulations and anticipates
providing further information on this subject in the near future.

B. Application Preparation Burden

Six commenters expressed concern that the amount and type of
information required by the SAFETY Act Application Kit is extremely
burdensome, if not prohibitively so, and that only large companies have
the resources necessary to respond to each of the questions. Commenters
also expressed the opinion that some of the information being
requested-- particularly financial information--is not relevant to the
evaluation of applications against the criteria of the Act.
The Department recognizes that the SAFETY Act Application Kit
utilized to date poses significant burdens for applicants. We are very
sensitive to concerns about the application process and the difficulty
of preparing and submitting a SAFETY Act application. The Department
specifically solicited comments on the SAFETY Act Application Kit and
application process set forth in the interim rule. In addition, the
Department released for comment a revised SAFETY Act Application Kit in
December 2004. Based on both the comments received concerning the
SAFETY Act Application Kit as well as the experience of the Office of
SAFETY Act Implementation (``OSAI'') with the applications filed to
date, OSAI has published numerous Frequently Asked Questions on its Web
site as well as undertaken a substantial revision of the SAFETY Act
Application Kit. The Department plans to publish a revised SAFETY Act
Application Kit, which will account for the changes contained in this
final rule and which will state with greater specificity the
information required to properly evaluate a SAFETY Act application. For
example, the Department agrees that some of the financial information
requested in the original SAFETY Act Application Kit is not essential
to the evaluation of every application. The Department, therefore, will
limit the amount of financial information requested as part of the
initial submission and to supplement the information as needed
throughout the evaluation process.
The Department believes that the streamlining of the SAFETY Act
Application Kit will result in further efficiencies and time
reductions. We anticipate making a revised SAFETY Act Application Kit
available as soon as practicable.

C. Certifying ``accuracy and completeness'

Two commenters expressed the opinion that it is unreasonable to
require applicants to certify the application as ``accurate and
complete'' under penalty of perjury when some of the questions require
the applicant to provide answers on a ``best guess'' basis. In
particular, the answers to the questions related to threat estimates,
potential casualties, and potential casualty reductions were cited as
questions whose answers may be essentially unknowable.
The Department agrees that it would be unreasonable to expect
applicants to certify the accuracy of their speculative or predictive
estimates of future events and risks. The language of the completeness
certification is qualified, however, by the phrase ``to the best of my
knowledge and belief.'' Since the applicant either knows or is able to
obtain accurate factual information about the applicant's anti-
terrorism technology and business enterprise, the Department believes
the application's completeness certification is appropriate as to
factual information and the application will so state. Conversely,
since estimates are by definition not factual information, the
Department's position is that the completeness certification requires
only that estimates be provided in good faith with a reasonable belief
they are as accurate as possible at the time of submission. The
Department will add this explanation as to estimates to the application
form, and will consider all forms presented to date as incorporating
this explanation.

D. Conditions on Designations

Two commenters took exception to the inclusion of limitations on
SAFETY Act Designations (as such term is defined in 6 CFR 25.2) or
Certifications (as such term is defined in 6 CFR 25.2), suggesting that
the liability protections presented by the SAFETY Act potentially could
be bypassed through a claim that such limitations imposed by the
Department as a condition of SAFETY Act Designation were not met.
The Department is aware of this concern and understands that
undependable or uncertain liability protections would not have the
desired effect of fostering the deployment of anti-terrorism
technologies. Further, the Department is aware of the difficulty of
crafting language for limitations that is not subject to multiple
interpretations. As a general matter, the Department does not intend to
impose conditions on SAFETY Act Designations and Certifications. If a
question arises regarding the functionality of a technology, generally
the Department will address and resolve that question in the course of
the application process.

E. Significant Modification to a Qualified Anti-Terrorism Technology

Section 25.5(i) of the interim final rule has been the focus of
significant attention, both by commenters and by members of Congress.
That provision provided for automatic termination of SAFETY Act
protection if a ``significant modification'' was made to a QATT,
defined as a modification that could significantly reduce the
technology's safety or effectiveness, unless the Seller notified the
Under Secretary and received approval of the modification. Several
commenters have argued that the rule improperly suggests that a SAFETY
Act Designation or Certification could terminate without notice if a
``significant modification'' is made to the QATT. Commenters have
argued that, in hindsight, any routine, non-substantive or immaterial
change in use, implementation, components, manufacturing process or
other facet of a Technology might later be regarded as a ``significant
modification.'' If such a change might be used later in litigation to
invalidate SAFETY Act coverage retroactive to the time of the change,
they argue, the value of a SAFETY Act Designation or Certification is
minimal. The American Bar Association, Public

[[Page 33153]]

Contract Law Section commented, for instance, that: ``the regulations
should be clear that the designation cannot be stripped away after the
fact by a claimant alleging a significant change * * *'' ``Because the
SAFETY Act covers all parties in the stream of commerce who rely on the
designation and certification, it makes sense that their justifiable
reliance not be undermined by retroactive effect back to the time of
the change * * *'' Other commenters were even more direct: ``This
requirement is misplaced in several respects and undermines the intent
of the SAFETY Act to provide certainty and protection for those
afforded coverage under the Act.'' ``[T]he language of this provision
is so broad that some unanticipated future change in operation,
maintenance or methodology by a downstream user of the technology,
totally outside the control of the QATT Seller, might ultimately be
construed to terminate the Seller's SAFETY Act coverage. This is
particularly problematic for technologies involving technical
services--almost every new application of these technologies will
encounter unique circumstances and variations in operation,
installation, implementation that, in retrospect, might be construed to
be `significant.' '' Commenters indicated that section 25.5(i) was thus
a ``grave concern,'' and that ``it is essential that this provision be
altered.''
The American Bar Association proposed regulatory language to
address this issue, including the following: ``The termination of the
Designation will apply prospectively and will only affect products or
services deployed after the DHS notice of termination * * *'' In
addition, commenters and certain members of Congress have raised
concerns about the tension between the statutory provision in Sec.
863(d) of the SAFETY Act and the text of the section 25.5(i) of the
interim final rule. Section 863(d) of the SAFETY Act provides that a
SAFETY Act Certification is entitled to a presumption that the
Government Contractor Defense applies, and specifies that a
Certification may only terminate for one reason:

This presumption shall only be overcome by evidence showing that
the Seller acted fraudulently or with willful misconduct in
submitting information to the Secretary during the course of the
Secretary's consideration of such technology under this subsection.
Sec. 863(d)(1)

Thus, the argument goes, because the statute specifies one and only one
means to terminate a certification, the regulations cannot add a second
route to termination through the ``significant modification''
provision.
The Department has carefully considered all of these comments and
the legal arguments above. Section 25.5(i) of the interim final rule
was intended to serve an important purpose--to provide the Department
with knowledge of and the ability to address significant modifications
that diminish the capability of a QATT. While the Department needs to
preserve the intended function of this provision of the interim final
rule, it agrees that changes to the provision are necessary to address
the legal and policy concerns raised above.
The final rule eliminates language from section 25.5(i) of the
interim final rule that could suggest that a Designation or
Certification could terminate automatically and retroactively to the
time of change and without notice, and replaces such language with a
portion of the suggested text from the ABA commentary, and with
procedures similar to those recommended by other commenters. To be
clear, modifications that do not cause the QATT to be outside the scope
of the QATT's Designation or Certification will not adversely affect
SAFETY Act coverage, nor are such modifications required to be notified
to the Department. The final rule does not, however, eliminate the
requirement that a Seller provide notice to the Department if the
Seller intends to make, or has made, a modification that would cause
the QATT to be outside the scope of a Designation or Certification.
The Department recognizes that many modifications to components,
processes, use, implementation or other aspects of a technology occur
from time to time during the life of a technology, and that many
modifications either will have no consequence for the functionality of
the Technology or will improve it. While certain proposed significant
modifications should require review, many routine or non-significant
modifications will not. The Department needs a rapid system for
prospectively reviewing significant modifications that could reduce the
effectiveness of a QATT. Such a system must recognize that routine
changes may occur to components or processes that do not reduce the
safety or effectiveness of the Technology.
This final rule modifies the procedure for Sellers to notify the
Department of modifications or proposed modifications to a QATT and for
the Department to respond quickly to such notifications with
appropriate instructions for the Seller. Immaterial or routine
modifications that are within the scope of the Designation will not
require notice. It is important, however, and required, that the
Department be informed of any significant modifications that the Seller
makes or intends to make to a QATT. A significant modification is one
that is outside the scope of a Designation. The Under Secretary will
make the language of Designations and Certifications as precise as
practicable under the circumstances to ensure that Sellers and other
parties have fair notice of the scope of coverage, and in that regard
the Department calls attention to the revisions in sections 25.6(e) and
25.9(f) of the final rule.
Whether notice to the Department is required for a change to a
particular QATT will depend on the specific nature of the QATT and the
terms of the Designation or Certification applicable to the QATT. If
notice of a modification is required, review of the notice will also be
undertaken in a reasonable time. If the Department does not take action
in response to the notice, SAFETY Act coverage of the Technology as
modified will be conclusively established. If the Department ultimately
does not approve of the proposed changes, it will so notify the Seller
and may discuss possible remedial action to address the Department's
concerns or take other appropriate action in the discretion of the
Under Secretary, as provided in section 25.6(l) of the final rule. In
no event will a Designation terminate automatically or retroactively
under this provision.
It is also important to recognize that the ``significant
modification'' provisions may require notice by the Seller to the
Department only when the modifications are made to a QATT by the Seller
or are made to a QATT with the Seller's knowledge and consent. The rule
does not require that a Seller notify the Department of changes to a
QATT made post-sale by an end-user of the QATT, and any such change by
an end-user cannot result in loss of SAFETY Act protection for the
Seller or others protected by the Seller's Designation or
Certification.

F. Exclusive Responsibility for Government Contractor Defense,
Definitions of Fraud and Willful Misconduct

The Act is clear in allocating to the Secretary the exclusive
responsibility for establishing the government contractor defense under
section 861. The Act does not permit judicial review of the Secretary's
exercise of discretion in this context. When the Secretary determines
that a Certification is appropriate, that decision creates a

[[Page 33154]]

rebuttable presumption that the government contractor defense applies.
This presumption may only be rebutted ``by clear and convincing
evidence showing that the Seller acted fraudulently or with willful
misconduct in submitting information to the Department during the
course of the consideration of such Technology.'' See section 25.8(b).
Two commenters expressed concern over the lack of a concrete
standard of evidence for determining ``fraud'' or ``willful
misconduct.'' One commenter specifically suggested adoption of the
``clear and convincing evidence'' standard from common-law civil fraud
jurisprudence.
The Department agrees that the statutory presumption should only be
overcome by evidence demonstrating an intentional effort to deceive the
Department during the Certification process. This is the clear import
of the statutory language and legislative history of the Act. Also, the
traditional common law ``clear and convincing evidence'' standard is
appropriate for evaluating a claim of fraud or willful misconduct in
the SAFETY Act context.

G. Definition of ``Act of Terrorism''

Two commenters expressed uncertainty concerning whether an act on
foreign soil could be deemed an ``Act of Terrorism'' for purposes of
the SAFETY Act. One commenter additionally requested clarification of
the role of the Secretary in declaring whether a given event was or was
not an ``Act of Terrorism'' for purposes of the SAFETY Act.
The definition of the term ``Act of Terrorism'' set forth in the
SAFETY Act provides that any act meeting the requirements specified in
the Act, as such requirements ``are further defined and specified by
the Secretary,'' may be deemed an ``Act of Terrorism.'' In the interim
rule, the Department presented its view that the term ``Act of
Terrorism'' potentially encompasses acts that occur outside the
territory of the United States. The Department stated that the basis
for that view is ``there is no geographic requirement in the
definition; rather, an act that occurs anywhere may be covered if it
causes harm to a person, property, or an entity in the United States.''
The Department confirms its prior interpretation. The statutory
requirements for what may be deemed an ``Act of Terrorism'' address the
legality of the act in question, the harm such act caused, and whether
instrumentalities, weapons or other methods designed or intended ``to
cause mass destruction, injury or other loss to citizens or
institutions of the United States'' were employed. The statutory
requirements are focused on the locus where harm was caused, the intent
of the perpetrators and the victims of the particular act. See Sec.
865(2)(B)(ii). The Department does not interpret the language of the
Act to impose a geographical restriction for purposes of determining
whether an act may be deemed an ``Act of Terrorism.'' In other words,
the Act is concerned more with where effects of a terrorist act are
felt rather than where on a map a particular act may be shown to have
occurred. Accordingly, an act on foreign soil may indeed be deemed an
``Act of Terrorism'' for purposes of the SAFETY Act provided that it
causes harm in the United States. The Department interprets ``harm'' in
this context to include harm to financial interests. It is certainly
possible that terrorist acts occurring outside the United States could
be intended to cause, and may result in, devastating financial harm in
the United States.
The focus of the ``Act of Terrorism'' definition on where harm is
realized is appropriate in light of the possibility that an Act of
Terrorism may be the result of a series of actions occurring in
multiple locations or that the locus of the terrorist act may not be
readily discernible. This is especially the case with respect to acts
of cyber terrorism.

H. Retroactive Designation

Five commenters found the distinction between ``sales'' and
``deployments,'' as expressed in the interim rule, to be confusing. The
commenters expressed concern that similar deployments of identical
QATTs might not be similarly protected, depending on when the
deployment was made. In particular, failing to extend SAFETY Act
liability protections retroactively may incentivize Sellers to remove
or nullify existing deployments, only to make identical new deployments
at significant cost to the Seller and/or its customers.
The Department believes these commenters may have misunderstood the
language of the interim rule. As part of each Designation or
Certification, the Department will specify the earliest date that
deployments of the QATT will be accorded the protections of that
Designation or Certification. The Seller supplies the information
concerning the earliest date the technology was deployed.

I. Bias Toward Product-Based Anti-Terrorism Technologies

Despite the assurances of the interim rule, particularly in the
responses to comments on the Notice of Proposed Rulemaking, four
commenters thought that the language of the interim rule and of the
SAFETY Act Application Kit implicitly assumed that all anti-terrorism
technologies would be product-based and not service-based or analysis-
based.
To avoid any confusion on this issue, the definition of
``Technology'' set forth in this final rule clearly and unequivocally
states that a Technology for SAFETY Act purposes includes ``any
product, equipment, service (including support services), device, or
technology (including information technology) or any combination of the
foregoing.'' In particular, design services, consulting services,
engineering services, software development services, software
integration services, program management and integration services,
threat assessments, vulnerability studies, and other analyses relevant
to homeland security may each be deemed a Technology under the SAFETY
Act. Corresponding changes will be incorporated into the revised SAFETY
Act Application Kit. Further, this concern is not manifest in the
operating history of the Act. Multiple anti-terrorism services have
received SAFETY Act Designation to date.

J. Scope of Insurance Coverage

Several commenters suggested there is no reason for the insurance
required to be purchased by Sellers pursuant to the Act to cover claims
brought against the Seller's supply and distribution chains since a
plaintiff's sole point of recovery with respect to claims implicating
the SAFETY Act would be the Seller. Furthermore, commenters pointed out
that insurance policies offering coverage for a Seller and the Seller's
contractors, subcontractors, suppliers, vendors and customers are not
currently available on the open market.
The Department recognizes that an action for recovery of damages
proximately caused by a QATT that arises out of an Act of Terrorism may
only be properly brought against a Seller. Accordingly, the Department
has specified, and will continue to specify in particular Designations,
that the liability insurance required to be obtained by the Seller
shall not be required to provide coverage for the Seller's contractors,
subcontractors, suppliers, vendors or customers.

K. Interactions With Public Law 85-804

Three commenters believed that the language in the interim rule
concerning Public Law 85-804, and its relationship with the SAFETY Act,
was unclear, especially in light of Executive Order 13286. In
particular, the commenters

[[Page 33155]]

sought clarification with respect to the circumstances in which both
SAFETY Act Designation and indemnification under Public Law 85-804
might be available. One commenter suggested that DHS implement a
mechanism for simultaneous SAFETY Act and Public Law 85-804
consideration in association with a procurement.
Commenters also expressed concern with the availability of Public
Law 85-804 indemnification for technologies for which Sellers do not
apply for (or receive) SAFETY Act Designation. They suggested that the
phrase ``any matter that has been, or could be, designated by the
Secretary of Homeland Security as a Qualified Anti-Terrorism
Technology'' in Executive Order 13286 is a potential source of
confusion and an obstacle to otherwise appropriate indemnification for
Sellers who do not seek, and would not merit, Designation.
Section 73(b) of Executive Order 13286 revises Executive Order
10789 to state that no technology that has been, or could be Designated
as a QATT, can be considered for indemnification under Public Law 85-
804 (except by the Department of Defense) until ``(i) the Secretary of
Homeland Security has advised whether the use of the authority provided
under [the SAFETY Act] would be appropriate, and (ii) the Director of
the Office and Management and Budget has approved the exercise of
authority under this order.''
The Department is sympathetic to the notion that separate processes
in multiple agencies for Public Law 85-804 and SAFETY Act review could
consume inordinate time and expense. The Department is supporting
interagency efforts to find a solution to speed and ease the burden of
both processes.
The Department acknowledges that some anti-terrorism technologies
involve unusually hazardous risk, independent of an act of terrorism,
and that indemnification under Public Law 85-804 might appropriately be
made available under such circumstances. In those circumstances, both
the SAFETY Act and Public Law 85-804 could be applicable to the same
technology for different risks at the same time, and one process should
not slow progress in the other. Executive Order 10789, as amended by
section 73 of Executive Order 13286, allows for such a solution with
the concurrence of the Director of the Office of Management and Budget.
Where appropriate, the Department will entertain letter requests
for a ``Notice of Inapplicability of SAFETY Act Designation,'' which
would allow entities to obtain a statement from the Department
regarding the inappropriateness of SAFETY Act Designation for a
particular technology in a particular context, outside of the
established SAFETY Act application process. In this process, the
Department expects that submitters will include sufficient information
within their letter request to allow for a determination of
inapplicability to be made. The Department will, however, reserve the
right either to request additional information of the type included in
the SAFETY Act application if it determines that the request does not
adequately describe the Seller's technology before a determination of
applicability or inapplicability, as the case may be, can be made.

L. Prioritization of Evaluations

Three commenters noted the importance of an appropriate process for
expediting SAFETY Act applications associated with government
procurements that are ready to proceed and where the need for immediate
deployment is urgent and compelling. They also asked that the
Department publish guidance describing how it plans to prioritize
application reviews.
The Department will expedite the review of SAFETY Act applications
that it deems particularly urgent and that involve government
procurements and will publish guidance on how SAFETY Act applications
and the government procurement process may best be aligned (See
``Coordination with Government Procurements'' below and section 25.6(g)
of the rule).

M. Standards

Three commenters expressed concern about standards and suggested
proposed changes to the interim rule in this area. The gist of these
suggestions was to ensure that proprietary standards are not treated
inappropriately by the Department, and that the Department not
needlessly develop new standards in competition with existing, widely-
accepted, proprietary standards. In addition, several commenters felt
that adherence to certain existing standards, or to Federal
certifications of various kinds, should be deemed conclusive evidence
of compliance with certain SAFETY Act evaluation criteria.
The Department reiterates that it intends to protect proprietary
and other protected information to the maximum extent possible. No
copyrighted or otherwise protected intellectual property will be
distributed by the Department without the express permission of the
owner, unless the Department's rights in that data have been acquired
through some other manner. Where specific proprietary standards are
relevant to the SAFETY Act evaluation process, the Department will
advise applicants of the appropriate channels for obtaining copies of
such standards.
The Department has to date and will continue to work closely with
standard-setting organizations that have sought SAFETY Act protection
for anti-terrorism standards. The Secretary has discretion to decide
which standards are relevant with respect to the criteria for SAFETY
Act Designation and Certification, and the Department remains open to
the concept that a standard itself may constitute a QATT.

N. Expiration of Designations

Three commenters stated that Designations should not expire, or
should at the least have a minimum term of 10 years or more.
The Department notes that qualification for SAFETY Act coverage
depends on a combination of the ability of the technology to be
effective in a specific threat environment, the nature and cost of
available insurance, and other factors, all of which are subject to
change. At the same time, the Department is cognizant of the need for a
guaranteed period of protection for successful SAFETY Act applicants to
achieve the main goal of the Act, which is to facilitate the deployment
of needed anti-terrorism technologies. Since the expiration of SAFETY
Act Designation and Certification would impact only future sales of the
subject QATT, the Department believes that mandatory reconsideration of
Designations after five to eight years provides a fair balancing of
public and private interests while providing the certainty required by
Sellers. Sellers may apply for renewal up to two years prior to the
expiration of their SAFETY Act Designation.

O. Appeal/Review of Decisions Regarding SAFETY Act Applications

Two commenters reiterated a request for an independent appeal or
review process. The Department is aware of the complexity of the review
process and has made and is making numerous allowances for exchange of
information and concerns between evaluators and applicants at multiple
points during the application process, to give the applicant further
opportunity to provide supplemental information and address issues. The
Department believes that this interactive process will provide
sufficient recourse to applicants. The SAFETY Act is a discretionary
authority accorded by Congress to the Secretary of Homeland Security to
facilitate the commercialization and deployment of

[[Page 33156]]

needed anti-terrorism technologies. The exercise of that authority with
respect to a particular technology requires that many discretionary
judgments be made regarding the applicability of the SAFETY Act
criteria to the technology and the weighting of the criteria in each
case.
SAFETY Act protections are not a prerequisite for marketing any
technology and therefore the absence of a grant of protection under the
SAFETY Act will not prevent any person, firm or other entity from doing
business. The Department also notes that a SAFETY Act Designation is
not a ``license required by law'' within the meaning of the
Administrative Procedure Act (APA), and thus is not covered by the APA.
5 U.S.C. 558(c).

P. Coordination With Government Procurements

The Department recognizes the need to align consideration of SAFETY
Act applications and the government procurement process more closely.
Accordingly, the final rule incorporates provisions that establish a
flexible approach for such coordination. A government agency can seek a
preliminary determination of SAFETY Act applicability, a ``Pre-
Qualification Designation Notice,'' with respect to a technology to be
procured. This notice would (i) enable the selected contractor to
receive expedited review of a streamlined application for SAFETY Act
coverage and (ii) in most instances establish the presumption that the
technology under consideration constitutes a QATT. If the technology in
question has previously received Block Designation or Block
Certification (as defined in 6 CFR 25.8), or the technology is based on
established, well-defined specifications, the Department may indicate
in DHS procurements, or make recommendations with respect to
procurements of other public entities, that the contractor providing
such technology will affirmatively receive Designation or Certification
with respect to such technology, provided the contractor satisfies each
other applicable requirement set forth in this final rule. In addition,
the OSAI may expedite SAFETY Act review for technologies subject to
ongoing procurement processes. The Department will on an on-going basis
provide guidance for effectively coordinating government procurements
(among Federal and non-Federal procurement officials) and consideration
of SAFETY Act applications. In addition, the Department may
unilaterally determine that the subject of a procurement is eligible
for SAFETY Act protections and give notice of such determination in
connection with a government solicitation.
The final rule clarifies that a determination by the Department to
designate, or not to designate, a particular technology as a QATT
should not be viewed as a determination that the technology meets, or
fails to meet, the requirements of any solicitation issued by a Federal
government customer or a non-Federal government customer.

Q. Pre-Application Consultations

The Department regards the process by which an applicant seeks
SAFETY Act coverage as necessarily interactive and cooperative.
Accordingly, the final rule continues to provide that the Department
and applicants may consult prior to the submission of SAFETY Act
Application. These consultations will provide an opportunity for
applicants to provide the Department with a description of their anti-
terrorism technology and will allow for the Department to address an
applicant's questions with respect to the application process and the
criteria by which the Department evaluates the anti-terrorism
technology. Prospective applicants may request such consultations
through the pre-application process set forth in the SAFETY Act
Application Kit. The confidentiality provisions in Sec. 25.10 are
applicable to such consultations.

R. Developmental Testing and Evaluation Designations

The SAFETY Act provides the Secretary significant discretion in
determining what may be designated a ``Qualified Anti-Terrorism
Technology.'' Section 25.4 recognizes that there may be instances of
certain anti-terrorism technologies being developed that could serve as
an important homeland security resource but that require additional
developmental testing and evaluation, e.g., a prototype of a particular
technology that has undergone successful lab testing may require field
testing or a controlled operational deployment to validate its safety
and efficacy. This section provides that the system of litigation and
risk management established by the SAFETY Act may be afforded to such
technologies albeit with certain limitations and constraints that
otherwise would not attach to Qualified Anti-Terrorism Technologies
that are Designated pursuant to Sec. 25.4(a). Developmental Testing
and Evaluation (DT&E) Designations will facilitate the deployment of
promising anti-terrorism technologies in the field either for test and
evaluation purposes or in response to exigent circumstances, by
providing, on a limited basis, the liability protections offered by the
SAFETY Act. The limits on the protections offered by a DT&E
Designation, as compared with a Designation issued pursuant to Sec.
25.4(a), are set forth in the final rule.
In general, DT&E Designations will include limitations on the use
and deployment of the subject technology, remain terminable at-will by
the Department should any concerns regarding the safety of technology
come to light, and will have a limited term not to exceed a reasonable
period for testing or evaluating the technology (presumptively not
longer than 36 months). Further, the SAFETY Act liability protections
associated with DT&E Designations will apply only to acts that occur
during the period set forth in the particular DT&E Designation. The
Department seeks further comment on this topic.

S. Seller's Continuing Obligations With Respect to Maintaining
Insurance

The Department received comments on insurance certification
requirements. There is no change with respect to the obligation of the
Seller to certify to the Department in writing that the insurance
required to be maintained pursuant to a particular SAFETY Act
Designation has been obtained. However, this rule modifies each
Seller's obligation to certify to the Department that the required
insurance has been maintained, and to do so within 30 days of each
anniversary of the issuance of their SAFETY Act Designation. A Seller's
obligation to certify on an annual basis that the required insurance
has been maintained is now dependent upon the Under Secretary making a
request for such an insurance certification from the Seller. In other
words, following their initial insurance certification, Sellers will be
obligated to certify that they have maintained the required insurance
as set forth in their SAFETY Act Designation only upon the Department
requesting such a certification. However, no change has been made to
each Seller's continuing obligation to advise the Department of any
material change in the type or amount of liability insurance coverage
that the Seller actually maintains.

T. Block Designations and Block Certifications

The Department has established a streamlined procedure for
providing SAFETY Act coverage for qualified Sellers of certain
categories of

[[Page 33157]]

technologies. Those Certifications or Designations are known as ``Block
Designations'' or ``Block Certifications.'' Block Designations and
Block Certifications may be issued at the Secretary's discretion and
are intended to recognize technology that meets the criteria for
Designation as a Qualified Anti-Terrorism Technology and that is based
on established performance standards or defined technical
characteristics. Fundamentally, Block Designation or Block
Certification will announce to potential Sellers of the subject QATT
that the Department has determined that the QATT satisfies the
technical criteria for either Certification or Designation and that no
additional technical analysis will be required in evaluating
applications from potential Sellers of that QATT. The terms of any such
Block Designation or Block Certification will establish the procedures
and conditions upon which an applicant may receive SAFETY Act coverage
as a Seller of the subject technology. Applications from potential
Sellers of a QATT that has received either Block Designation or Block
Certification will receive expedited review and will not require
submission of information concerning the technical merits of the
underlying technology.
All Block Designations and Block Certifications will be published
by the Department within ten days after the issuance thereof at http://www.safetyact.gov, and copies may also be obtained by mail by sending a
request to: Directorate of Science and Technology, Office of SAFETY Act
Implementation, Room 4320, Department of Homeland Security, Washington,
DC 20528. Such publication will be coordinated to guard again the
unauthorized disclosure of proprietary information. Any person, firm,
or other entity that desires to qualify as a Seller of a QATT that is
the subject of a Block Designation or Block Certification will be
required to submit only those portions of the application referenced in
Sec. 25.6(a) that are specified in such Block Designation or Block
Certification and otherwise to comply with terms of Sec. 25.6(a) and
the relevant Block Designation or Block Certification.

U. Reciprocal Waivers

Several commenters stated that reciprocal waivers of the type
described in the SAFETY Act (reciprocal waivers of claims by the
specified parties for losses sustained arising from an Act of Terrorism
with respect to which a Qualified Anti-Terrorism Technology is
deployed) are not standard practice in most industries and that some
parties may be unwilling to enter into such reciprocal agreements. The
Department recognizes that the ability of the Seller to obtain the
reciprocal waiver of claims with its contractors, subcontractors,
suppliers, vendors, and customers, and contractors and subcontractors
of the customers necessarily depends on action by parties other than
the Seller and that it may not be possible to obtain such waivers in
all circumstances. The Department's view is that such waivers are not
an absolute condition precedent or subsequent for the issuance,
validity, effectiveness, duration, or applicability of a Designation
because (1) obtaining such waivers often will be beyond the control of
SAFETY Act applicants, (2) requiring all of such waivers as such a
condition would thwart the intent of Congress in enacting the SAFETY
Act by rendering the benefits of the SAFETY Act inapplicable in many
otherwise appropriate situations, and (3) the consequences of failing
to obtain the waivers are not specified in the Act. Accordingly, as was
previously the case, this rule requires only a good faith effort by the
Seller to secure these waivers.

V. Deference Due to Other Federal or State Regulatory or Procurement
Officials

The Department has received multiple comments suggesting that the
Department defer to the expertise of other Federal or state procurement
officials in reviewing the technical criteria for SAFETY Act
applications. The level of deference due to other governmental
officials will depend on the nature of such officials' review of the
technology in question. In certain circumstances when qualified
officials have determined specifically that a technology is appropriate
for anti-terrorism purposes, such determinations may be accorded
significant weight in the SAFETY Act application review process. In
other circumstances, where a prior government determination was made
for different purposes or by persons not qualified to address anti-
terrorism threats, less weight will be given the prior determination.
See Sec. 25.4(b)(8).

III. Regulatory Requirements

A. Executive Order 12866

The Department has examined the economic implications of the final
rule as required by Executive Order 12866. Executive Order 12866
directs agencies to assess all costs and benefits of available
regulatory alternatives and, when regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential
economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity). Executive Order 12866
classifies a rule as significant if it meets any one of a number of
specified conditions, including: Having an annual effect on the economy
of $100 million, adversely affecting a sector of the economy in a
material way, adversely affecting competition, or adversely affecting
jobs. A regulation is also considered a significant regulatory action
if it raises novel legal or policy issues.
These matters were discussed in the interim rule and the Department
received no comments on the economic analysis.
The Department concludes that the final rule is a significant
regulatory action under the Executive Order because it will have a
positive, material effect on public safety under section 3(f)(1) of
Executive Order 12866, and it raises novel legal and policy issues
under section 3(f)(4) of the Executive Order. The Department concludes,
however, that the final rule does not meet the significance threshold
of $100 million effect on the economy in any one year under section
3(f)(1), due to the relatively low estimated burden of applying for
this technology program, the unknown number of Certifications and
Designations that the Department will dispense, and the unknown
probability of a terrorist attack that would have to occur in order for
the protections put in place in the final rule to have a large impact
on the public.
Need for the Regulation and Market Failure
The final rule implements the SAFETY Act and is intended to
implement the provisions set forth in that Act. The Department believes
the current development of anti-terrorism technologies has been slowed
due to the potential liability risks associated with their development
and eventual deployment. In a fully functioning insurance market,
technology developers would be able to insure themselves against
excessive liability risk; however, the terrorism risk insurance market
appears to be in disequilibrium. The attacks of September 11
fundamentally changed the landscape of terrorism insurance. Congress,
in the findings of the Terrorism Risk Insurance Act of 2002 (TRIA),
concluded that temporary financial assistance in the insurance market
is needed to ``allow for a transitional period for the private markets
to stabilize, resume pricing of such insurance, and build capacity to
absorb any future losses.'' Public Law

[[Page 33158]]

107-297, 101(b)(2). This final rulemaking addresses a similar concern,
to the extent that potential technology developers are unable to insure
efficiently against large losses due to an ongoing reassessment of
terrorism issues in insurance markets.
Even after a temporary insurance market adjustment, purely private
terrorism risk insurance markets may exhibit negative externalities.
Because the risk pool of any single insurer may not be large enough
efficiently to spread and therefore insure against the risk of damages
from a terrorist attack, and because the potential for excessive
liability may render any terrorism insurance prohibitively expensive,
society may suffer from less than optimal technological protection
against terrorist attacks. The measures set forth in the final rule are
designed to meet this goal; they will provide certain liability
protection and consequently will increase the likelihood that
businesses will pursue development and deployment of important
technologies that may not be pursued without this protection.
Costs and Benefits to Technology Development Firms
Since this final rulemaking puts in place an additional voluntary
option for technology developers, the expected direct net benefits to
firms of this rulemaking will be positive; companies presumably will
not choose to pursue the Designation of ``Qualified Anti-Terrorism
Technology'' unless they believe it to be a profitable endeavor. The
Department cannot predict with certainty the number of applicants for
this program. An additional source of uncertainty is the reaction of
the insurance market to this Designation. As mentioned above, insurance
markets appear currently to be adjusting their strategy for terrorism
risk, so little market information exists that would inform this
estimate.
If a firm chooses to invest effort in pursuing SAFETY Act liability
protection, the direct costs to that firm will be the time and money
required to submit the required paperwork and other information to the
Department. Only companies that choose to request this protection will
incur paperwork costs in completing the application kit.
The direct benefits to firms include lower potential losses from
liability for terrorist attacks and, as a consequence, a lower burden
from liability insurance for this type of technology. In this
assessment, we were careful to consider only benefits and costs
specifically due to the implementation of the final rule and not costs
that would have been incurred by companies absent any rulemaking. The
SAFETY Act requires the Sellers of the technology to obtain liability
insurance ``of such types and in such amounts'' certified by the
Secretary. The entire cost of insurance is not a cost specifically
imposed by the proposed rulemaking, as companies in the course of good
business practice routinely purchase insurance absent Federal
requirements to do so. Any difference in the amount or price of
insurance purchased as a result of the SAFETY Act would be a cost or
benefit of the final rule for firms.
The language of the SAFETY Act clearly states that Sellers are not
required to obtain liability insurance beyond the maximum amount of
liability insurance reasonably available from private liability sources
on the world market at prices and terms that will not unreasonably
distort the sales price of the Seller's Anti-Terrorism Technologies. We
tentatively conclude, however, that this final rulemaking will impact
both the prices and terms of liability insurance relative to the amount
of insurance coverage absent the SAFETY Act. The probable effect of the
final rule is to lower the quantity of liability coverage needed in
order for a firm to protect itself from terrorism liability risks,
which would be considered a benefit of the final rule to firms. This
change will most likely be a reduction in demand that leads to a
movement along the supply curve for technology firms already in this
market; they probably will buy less liability coverage. This will have
the effect of lowering the price per unit of coverage in this market.
The Department also expects, however, that this final rule will
lead to greater market entry, which will generate benefits for
technology firms but should also lead to a larger pool of potential
products that will require insurance.
Costs and Benefits to Insurers
The Department has little information on the future structure of
the terrorism risk insurance market, and how this final rule will
affect that structure. As stated above, this type of intervention could
serve to lower the demand for insurance in the current market, thus the
static effect on the profitability of insurers is negative. The
benefits of the lower insurance burden to technology firms would be
considered a cost to insurers; the static changes to insurance coverage
would cause a transfer of economic benefits from insurers to technology
firms. On the other hand, this type of intervention should serve to
increase the economic benefits of insurers by making some types of
insurance products possible that would have been cost prohibitive for
customers to purchase or insurers to design in the absence of this
final rulemaking.
Costs and Benefits to the Public
The benefits to the public of this final rulemaking are very
difficult to put in dollar value terms since the ultimate objective of
the final rule is the development of new technologies that will help
prevent or limit the damage from terrorist attacks. It is not possible
to determine whether these technologies could help prevent large or
small scale attacks, as the SAFETY Act applies to a vast range of
technologies, including products, services, software, and other forms
of intellectual property that could have a widespread impact. In
qualitative terms, the SAFETY Act removes a great deal of the risk and
uncertainty associated with product liability and in the process
creates a powerful incentive that will help fuel the development of
critically-needed anti-terrorism technologies. Additionally, we expect
the SAFETY Act to reduce the research and development costs of these
technologies.
The tradeoff, however, may be that a greater number of technologies
may be developed and qualify for this program that have a lower average
effectiveness against terrorist attacks than technologies currently on
the market, or technologies that would be developed in the absence of
this final rulemaking. In the absence of this rulemaking, strong
liability discouragement implies that the fewer products that are
deployed in support of anti-terrorist efforts may be especially
effective, since profit maximizing firms will always choose to develop
the technologies with the highest demand first. It is the tentative
conclusion of the Department that liability discouragement in this
market is currently too strong or prohibitive, for the reasons
mentioned above. The Department tentatively concludes that the final
rule will have positive net benefits to the public, since it serves to
strike a better balance between consumer protection and technological
development.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) mandates that an agency
conduct an RFA analysis when an agency is ``required by section 553 * *
*, or any other law, to publish general notice of proposed rulemaking
for any proposed rule, or publishes a notice of proposed rulemaking for
interpretative rule involving the internal revenue laws of the United
States * * *'' 5 U.S.C.

[[Page 33159]]

603(a). The Regulatory Flexibility Act requires the Department to
determine whether this final rulemaking will have a significant impact
on a substantial number of small entities. Although we expect that many
of the applicants for SAFETY Act protection are likely to meet the
Small Business Administration's criteria for being a small entity, we
do not believe this final rulemaking will impose a significant
financial impact on them. In fact, we believe the final rule will be a
benefit to technology development businesses, especially small
businesses, and present them with an attractive, voluntary option of
pursuing a potentially profitable investment by reducing the amount of
risk and uncertainty of lawsuits associated with developing anti-
terrorist technology. The requirements of this final rulemaking will
only be imposed on such businesses that voluntarily seek the liability
protection of the SAFETY Act. If a company does not request that
protection, the company will bear no cost from the final rule.
To the extent that demand for insurance falls, however, insurers
may be adversely impacted by the final rule. The Department believes
that eventual new entry into this market and further opportunities to
insure against terrorism risk implies that the long-term impact of this
final rulemaking on insurers is ambiguous but could very well be
positive. We also expect that this final rulemaking will affect
relatively few firms and relatively few insurers either positively or
negatively, as this appears to be a specialized industry. Therefore, we
certify this final rule will not have a significant impact on a
substantial number of small entities.

C. Unfunded Mandates Reform Act of 1995

The final rule will not result in the expenditure by State, local
and tribal governments, in the aggregate, or by the private sector, of
$100 million or more in any one year, and it will not significantly or
uniquely affect small governments. Therefore, no actions were deemed
necessary under the provisions of the Unfunded Mandates Reform Act of
1995.

D. Executive Order 13132--Federalism

The Department of Homeland Security does not believe the final rule
will have substantial direct effects on the States, on the relationship
between the national government and the States, or on distribution of
power and responsibilities among the various levels of government.
States will, however, benefit from the final rule to the extent that
they are purchasers of qualified anti-terrorism technologies.

E. Paperwork Reduction Act

The revised SAFETY Act Application Kit referenced above was
released for comment with public notice published in the Federal
Register on December 13, 2004, at 69 FR 72207. The SAFETY Act
Application Kit may also be found at http://www.safetyact.gov.
Concurrent with the publication of this final rule, the Department
submitted a revised Paperwork Reduction Act package to the Office of
Management and Budget (OMB) for review.

List of Subjects in 6 CFR Part 25

Business and industry, Insurance, Practice and procedure, Science
and technology, Security measures.

0
For the reasons discussed in the preamble, 6 CFR part 25 is revised to
read as follows:

PART 25--REGULATIONS TO SUPPORT ANTI-TERRORISM BY FOSTERING
EFFECTIVE TECHNOLOGIES

Sec. 25.1 Purpose.
Sec. 25.2 Definitions.
Sec. 25.3 Delegation.
Sec. 25.4 Designation of Qualified Anti-Terrorism Technologies.
Sec. 25.5 Obligations of Seller.
Sec. 25.6 Procedures for Designation of Qualified Anti-Terrorism
Technologies.
Sec. 25.7 Litigation Management.
Sec. 25.8 Government Contractor Defense.
Sec. 25.9 Procedures for Certification of Approved Products for
Homeland Security.
Sec. 25.10 Confidentiality and Protection of Intellectual Property.

Authority: Subtitle G, of Title VIII, Public Law 107-296, 116
Stat. 2238 (6 U.S.C. 441-444).

Sec. 25.1 Purpose.

This part implements the Support Anti-terrorism by Fostering
Effective Technologies Act of 2002, sections 441-444 of title 6, United
States Code (the ``SAFETY Act'' or ``the Act'').

Sec. 25.2 Definitions.

Act of Terrorism--The term ``Act of Terrorism'' means any act
determined to have met the following requirements or such other
requirements as defined and specified by the Secretary:
(1) Is unlawful;
(2) Causes harm, including financial harm, to a person, property,
or entity, in the United States, or in the case of a domestic United
States air carrier or a United States-flag vessel (or a vessel based
principally in the United States on which United States income tax is
paid and whose insurance coverage is subject to regulation in the
United States), in or outside the United States; and
(3) Uses or attempts to use instrumentalities, weapons or other
methods designed or intended to cause mass destruction, injury or other
loss to citizens or institutions of the United States.
Certification--The term ``Certification'' means (unless the context
requires otherwise) the certification issued pursuant to section 25.9
that a Qualified Anti-Terrorism Technology for which a Designation has
been issued will perform as intended, conforms to the Seller's
specifications, and is safe for use as intended.
Contractor--The term ``contractor'' means any person, firm, or
other entity with whom or with which a Seller has a contract or
contractual arrangement relating to the manufacture, sale, use, or
operation of anti-terrorism Technology for which a Designation is
issued (regardless of whether such contract is entered into before or
after the issuance of such Designation), including, without limitation,
an independent laboratory or other entity engaged in testing or
verifying the safety, utility, performance, or effectiveness of such
Technology, or the conformity of such Technology to the Seller's
specifications.
Designation--The term ``Designation'' means the designation of a
Qualified Anti-Terrorism Technology under the SAFETY Act issued by the
Under Secretary under authority delegated to the Under Secretary by the
Secretary of Homeland Security.
Loss--The term ``loss'' means death, bodily injury, or loss of or
damage to property, including business interruption loss (which is a
component of loss of or damage to property).
Noneconomic damages--The term ``noneconomic damages'' means damages
for losses for physical and emotional pain, suffering, inconvenience,
physical impairment, mental anguish, disfigurement, loss of enjoyment
of life, loss of society and companionship, loss of consortium, hedonic
damages, injury to reputation, and any other nonpecuniary losses.
Office of SAFETY Act Implementation--The term ``Office of SAFETY
Act Implementation'' or ``OSAI'' means the office within the Department
of Homeland Security's Directorate of Science and Technology that
assists with the implementation of the SAFETY Act. The responsibilities
of the Office of SAFETY Act Implementation may include, without
limitation, preparing the SAFETY Act Application Kit, receiving and

[[Page 33160]]

facilitating the evaluation of applications, managing the SAFETY Act
Web site and otherwise providing the public with information regarding
the SAFETY Act and the application process.
Physical harm--The term ``physical harm'' as used in the Act and
this part means any physical injury to the body, including an injury
that caused, either temporarily or permanently, partial or total
physical disability, incapacity or disfigurement. In no event shall
physical harm include mental pain, anguish, or suffering, or fear of
injury.
Qualified Anti-Terrorism Technology or QATT--The term ``'Qualified
Anti-Terrorism Technology'' or ``QATT'' means any Technology (including
information technology) designed, developed, modified, procured, or
sold for the purpose of preventing, detecting, identifying, or
deterring acts of terrorism or limiting the harm such acts might
otherwise cause, for which a Designation has been issued pursuant to
this part.
SAFETY Act or Act--The term ``SAFETY Act'' or ``Act'' means the
Support Anti-terrorism by Fostering Effective Technologies Act of 2002,
sections 441-444 of title 6, United States Code.
SAFETY Act Application Kit --The term ``SAFETY Act Application
Kit'' means the Application Kit containing the instructions and forms
necessary to apply for Designation or Certification. The SAFETY Act
Application Kit shall be published at http://www.safetyact.gov or made
available in hard copy upon written request to: Directorate of Science
and Technology, SAFETY Act/room 4320, Department of Homeland Security,
Washington, DC 20528.
SAFETY Act Confidential Information--Any and all information and
data voluntarily submitted to the Department under this part (including
Applications, Pre-Applications, other forms, supporting documents and
other materials relating to any of the foregoing, and responses to
requests for additional information), including, but not limited to,
inventions, devices, Technology, know-how, designs, copyrighted
information, trade secrets, confidential business information,
analyses, test and evaluation results, manuals, videotapes, contracts,
letters, facsimile transmissions, electronic mail and other
correspondence, financial information and projections, actuarial
calculations, liability estimates, insurance quotations, and business
and marketing plans. Notwithstanding the foregoing, ``SAFETY Act
Confidential Information'' shall not include any information or data
that is in the public domain or becomes part of the public domain by
any means other than the violation of this section.
Secretary--The term ``Secretary'' means the Secretary of Homeland
Security as established by section 102 of the Homeland Security Act of
2002.
Seller--The term ``Seller'' means any person, firm, or other entity
that sells or otherwise provides Qualified Anti-Terrorism Technology to
any customer(s) and to whom or to which (as appropriate) a Designation
and/or Certification has been issued under this Part (unless the
context requires otherwise).
Technology--The term ``Technology'' means any product, equipment,
service (including support services), device, or technology (including
information technology) or any combination of the foregoing. Design
services, consulting services, engineering services, software
development services, software integration services, threat
assessments, vulnerability studies, and other analyses relevant to
homeland security may be deemed a Technology under this part.
Under Secretary--The term ``Under Secretary'' means the Under
Secretary for Science and Technology of the Department of Homeland
Security.

Sec. 25.3 Delegation.

All of the Secretary's responsibilities, powers, and functions
under the SAFETY Act, except the authority to declare that an act is an
Act of Terrorism for purposes of section 865(2) of the SAFETY Act, may
be exercised by the Under Secretary for Science and Technology of the
Department of Homeland Security or the Under Secretary's designees.

Sec. 25.4 Designation of Qualified Anti-Terrorism Technologies.

(a) General. The Under Secretary may Designate as a Qualified Anti-
Terrorism Technology for purposes of the protections under the system
of litigation and risk management set forth in sections 441-444 of
Title 6, United States Code, any qualifying Technology designed,
developed, modified, provided or procured for the specific purpose of
preventing, detecting, identifying, or deterring acts of terrorism or
limiting the harm such acts might otherwise cause.
(b) Criteria to be Considered. (1) In determining whether to issue
the Designation under paragraph (a) of this section, the Under
Secretary may exercise discretion and judgment in considering the
following criteria and evaluating the Technology:
(i) Prior United States Government use or demonstrated substantial
utility and effectiveness.
(ii) Availability of the Technology for immediate deployment in
public and private settings.
(iii) Existence of extraordinarily large or extraordinarily
unquantifiable potential third party liability risk exposure to the
Seller or other provider of such anti-terrorism Technology.
(iv) Substantial likelihood that such anti-terrorism Technology
will not be deployed unless protections under the system of risk
management provided under sections 441-444 of title 6, United States
Code, are extended.
(v) Magnitude of risk exposure to the public if such anti-terrorism
Technology is not deployed.
(vi) Evaluation of all scientific studies that can be feasibly
conducted in order to assess the capability of the Technology to
substantially reduce risks of harm.
(vii) Anti-terrorism Technology that would be effective in
facilitating the defense against acts of terrorism, including
Technologies that prevent, defeat or respond to such acts.
(viii) A determination made by Federal, State, or local officials,
that the Technology is appropriate for the purpose of preventing,
detecting, identifying or deterring acts of terrorism or limiting the
harm such acts might otherwise cause.
(ix) Any other factor that the Under Secretary may consider to be
relevant to the determination or to the homeland security of the United
States.
(2) The Under Secretary has discretion to give greater weight to
some factors over others, and the relative weighting of the various
criteria may vary depending upon the particular Technology at issue and
the threats that the Technology is designed to address. The Under
Secretary may, in his discretion, determine that failure to meet a
particular criterion justifies denial of an application under the
SAFETY Act. However, the Under Secretary is not required to reject an
application that fails to meet one or more of the criteria. The Under
Secretary may conclude, after considering all of the relevant criteria
and any other relevant factors, that a particular Technology merits
Designation as a Qualified Anti-Terrorism Technology even if one or
more particular criteria are not satisfied. The Under Secretary's
considerations will take into account evolving threats and conditions
that give rise to the need for the anti-terrorism Technologies.
(c) Use of Standards. From time to time, the Under Secretary may
develop,

[[Page 33161]]

issue, revise, adopt, and recommend technical standards for various
categories or components of anti-terrorism Technologies (``Adopted
Standards''). In the case of Adopted Standards that are developed by
the Department or that the Department has the right or license to
reproduce, the Department will make such standards available to the
public consistent with necessary protection of sensitive homeland
security information. In the case of Adopted Standards that the
Department does not have the right or license to reproduce, the
Directorate of Science and Technology will publish a list and summaries
of such standards and may publish information regarding the sources for
obtaining copies of such standards. Compliance with any Adopted
Standard or other technical standards that are applicable to a
particular anti-terrorism Technology may be considered in determining
whether a Technology will be Designated pursuant to paragraph (a) of
this section. Depending on whether an Adopted Standard otherwise meets
the criteria set forth in section 862 of the Homeland Security Act; 6
U.S.C. 441, the Adopted Standard itself may be deemed a Technology that
may be Designated as a Qualified Anti-Terrorism Technology.
(d) Consideration of Substantial Equivalence. In considering the
criteria in paragraph (b) of this section, or evaluating whether a
particular anti-terrorism Technology complies with any Adopted Standard
referenced in paragraph (c) of this section, the Under Secretary may
consider evidence that the Technology is substantially equivalent to
other Technologies (``Predicate Technologies'') that previously have
been Designated as Qualified Anti-Terrorism Technologies under the
SAFETY Act. A Technology may be deemed to be substantially equivalent
to a Predicate Technology if:
(1) It has the same intended use as the Predicate Technology; and
(2) It has the same or substantially similar performance or
technological characteristics as the Predicate Technology.
(e) Pre-Application Consultations. To the extent that he deems it
to be appropriate, the Under Secretary may consult with prospective and
current SAFETY Act applicants regarding their particular anti-terrorism
Technologies. Prospective applicants may request such consultations
through the Office of SAFETY Act Implementation. The confidentiality
provisions in Sec. 25.10 shall be applicable to such consultations.
(f) Developmental Testing & Evaluation (DT&E) Designations. With
respect to any Technology that is being developed, tested, evaluated,
modified or is otherwise being prepared for deployment for the purpose
of preventing, detecting, identifying, or deterring acts of terrorism
or limiting the harm such acts might otherwise cause, the Under
Secretary may Designate such Technology as a Qualified Anti-Terrorism
Technology and make such Technology eligible for the protections under
the system of litigation and risk management set forth in sections 441-
444 of title 6, United States Code. A Designation made pursuant to this
paragraph shall be referred to as a ``DT&E Designation,'' and shall
confer all of the rights, privileges and obligations that accompany
Designations made pursuant to paragraph (a) of this section except as
modified by the terms of this paragraph or the terms of the particular
DT&E Designation. The intent of this paragraph is to make eligible for
SAFETY Act protections qualifying Technologies that are undergoing
testing and evaluation and that may need to be deployed in the field
either for developmental testing and evaluation purposes or on an
emergency basis, including during a period of heightened risk. DT&E
Designations shall describe the subject Technology (in such detail as
the Under Secretary deems to be appropriate); identify the Seller of
the subject Technology; be limited to the period of time set forth in
the applicable DT&E Designation, which in no instance shall exceed a
reasonable period for testing or evaluating the Technology
(presumptively not longer than 36 months); be terminable by the Under
Secretary at any time upon notice to the Seller; be subject to the
limitations on the use or deployment of the QATT set forth in the DT&E
Designation; and be subject to such other limitations as established by
the Under Secretary. The protections associated with a DT&E Designation
shall apply only during the period specified in the applicable DT&E
Designation. Consent of the Seller of a QATT Designated pursuant to
this paragraph will be a condition precedent to the establishment of
any deployment or use condition and any other obligation established by
the Under Secretary pursuant to this paragraph. Those seeking a DT&E
Designation for a QATT pursuant to this paragraph (f) shall follow the
procedures for DT&E Designations set forth in the SAFETY Act
Application Kit.

Sec. 25.5 Obligations of Seller.

(a) Liability Insurance Required. The Seller shall obtain liability
insurance of such types and in such amounts as shall be required in the
applicable Designation, which shall be the amounts and types certified
by the Under Secretary to satisfy otherwise compensable third-party
claims arising out of, relating to, or resulting from an Act of
Terrorism when Qualified Anti-Terrorism Technologies have been deployed
in defense against, response to, or recovery from, such act. The Under
Secretary may request at any time that the Seller of a Qualified Anti-
Terrorism Technology submit any information that would:
(1) Assist in determining the amount of liability insurance
required; or
(2) Show that the Seller or any other provider of Qualified Anti-
Terrorism Technology otherwise has met all of the requirements of this
section.
(b) Amount of Liability Insurance. (1) The Under Secretary may
determine the appropriate amounts and types of liability insurance that
the Seller will be required to obtain and maintain based on criteria he
may establish to satisfy compensable third-party claims arising from,
relating to or resulting from an Act of Terrorism. In determining the
amount of liability insurance required, the Under Secretary may
consider any factor, including, but not limited to, the following:
(i) The particular Technology at issue;
(ii) The amount of liability insurance the Seller maintained prior
to application;
(iii) The amount of liability insurance maintained by the Seller
for other Technologies or for the Seller's business as a whole;
(iv) The amount of liability insurance typically maintained by
Sellers of comparable Technologies;
(v) Information regarding the amount of liability insurance offered
on the world market;
(vi) Data and history regarding mass casualty losses;
(vii) The intended use of the Technology; and
(viii) The possible effects of the cost of insurance on the price
of the product, and the possible consequences thereof for development,
production, or deployment of the Technology.
(2) In determining the appropriate amounts and types of insurance
that a particular Seller is obligated to carry, the Under Secretary may
not require any type of insurance or any amount of insurance that is
not available on the world market, and may not require any type or
amount of insurance that would

[[Page 33162]]

unreasonably distort the sales price of the Seller's anti-terrorism
Technology
(c) Scope of Coverage. (1) Liability insurance required to be
obtained pursuant to this section shall, in addition to the Seller,
protect the following, to the extent of their potential liability for
involvement in the manufacture, qualification, sale, use, or operation
of Qualified Anti-Terrorism Technologies deployed in defense against,
response to, or recovery from, an Act of Terrorism:
(i) Contractors, subcontractors, suppliers, vendors and customers
of the Seller.
(ii) Contractors, subcontractors, suppliers, and vendors of the
customer.
(2) Notwithstanding the foregoing, in appropriate instances the
Under Secretary will specify in a particular Designation that,
consistent with the Department's interpretation of the SAFETY Act, an
action for the recovery of damages proximately caused by a Qualified
Anti-Terrorism Technology that arises out of, relates to, or results
from an Act of Terrorism may properly be brought only against the
Seller and, accordingly, the liability insurance required to be
obtained pursuant to this section shall be required to protect only the
Seller.
(d) Third Party Claims. To the extent available pursuant to the
SAFETY Act, liability insurance required to be obtained pursuant to
this section shall provide coverage against third party claims arising
out of, relating to, or resulting from an Act of Terrorism when the
applicable Qualified Anti-Terrorism Technologies have been deployed in
defense against, response to, or recovery from such act.
(e) Reciprocal Waiver of Claims. The Seller shall enter into a
reciprocal waiver of claims with its contractors, subcontractors,
suppliers, vendors, and customers, and contractors and subcontractors
of the customers, involved in the manufacture, sale, use, or operation
of Qualified Anti-Terrorism Technologies, under which each party to the
waiver agrees to be responsible for losses, including business
interruption losses, that it sustains, or for losses sustained by its
own employees resulting from an activity resulting from an Act of
Terrorism when Qualified Anti-Terrorism Technologies have been deployed
in defense against, response to, or recovery from such act.
Notwithstanding the foregoing, provided that the Seller has used
diligent efforts in good faith to obtain all required reciprocal
waivers, obtaining such waivers shall not be a condition precedent or
subsequent for, nor shall the failure to obtain one or more of such
waivers adversely affect, the issuance, validity, effectiveness,
duration, or applicability of a Designation or a Certification. Nothing
in this paragraph (e) shall be interpreted to render the failure to
obtain one or more of such waivers a condition precedent or subsequent
for the issuance, validity, effectiveness, duration, or applicability
of a Designation or a Certification.
(f) Information to be Submitted by the Seller. As part of any
application for a Designation, the Seller shall provide all information
that may be requested by the Under Secretary or his designee, regarding
a Seller's liability insurance coverage applicable to third-party
claims arising out of, relating to, or resulting from an Act of
Terrorism when the Seller's Qualified Anti-Terrorism Technology has
been deployed in defense against, response to, or recovery from such
act, including:
(1) Names of insurance companies, policy numbers, and expiration
dates;
(2) A description of the types and nature of such insurance
(including the extent to which the Seller is self-insured or intends to
self-insure);
(3) Dollar limits per occurrence and annually of such insurance,
including any applicable sublimits;
(4) Deductibles or self-insured retentions, if any, that are
applicable;
(5) Any relevant exclusions from coverage under such policies or
other factors that would affect the amount of insurance proceeds that
would be available to satisfy third party claims arising out of,
relating to, or resulting from an Act of Terrorism;
(6) The price for such insurance, if available, and the per-unit
amount or percentage of such price directly related to liability
coverage for the Seller's Qualified Anti-Terrorism Technology deployed
in defense against, or response to, or recovery from an Act of
Terrorism;
(7) Where applicable, whether the liability insurance, in addition
to the Seller, protects contractors, subcontractors, suppliers, vendors
and customers of the Seller and contractors, subcontractors, suppliers,
vendors and customers of the customer to the extent of their potential
liability for involvement in the manufacture, qualification, sale, use
or operation of Qualified Anti-terrorism Technologies deployed in
defense against, response to, or recovery from an Act of Terrorism; and
(8) Any limitations on such liability insurance.
(g) Under Secretary's Certification. For each Qualified Anti-
Terrorism Technology, the Under Secretary shall certify the amount of
liability insurance the Seller is required to carry pursuant to section
443(a) of title 6, United States Code, and paragraphs (a), (b), and (c)
of this section. The Under Secretary shall include the insurance
certification under this section as a part of the applicable
Designation. The insurance certification may specify a period of time
for which such insurance certification will apply. The Seller of a
Qualified Anti-Terrorism Technology may at any time petition the Under
Secretary for a revision of the insurance certification under this
section, and the Under Secretary may revise such insurance
certification in response to such a petition. The Under Secretary may
at any time request information from the Seller regarding the insurance
carried by the Seller or the amount of insurance available to the
Seller.
(h) Seller's Continuing Obligations. Within 30 days after the Under
Secretary's insurance certification required by paragraph (g) of this
section, the Seller shall certify to the Under Secretary in writing
that the Seller has obtained the required insurance. Within 30 days of
each anniversary of the issuance of a Designation or at any other time
as he may determine, the Under Secretary may require, by written notice
to the Seller, that the Seller certify to the Under Secretary in
writing that the Seller has maintained the required insurance. The
Under Secretary may terminate a Designation if the Seller fails to
provide any of the insurance certifications required by this paragraph
(h) or provides a false certification.

Sec. 25.6 Procedures for Designation of Qualified Anti-Terrorism
Technologies.

(a) Application Procedure. Any person, firm or other entity seeking
a Designation shall submit an application to the Under Secretary or
such other official as may be named from time to time by the Under
Secretary. Such applications shall be submitted according to the
procedures set forth in and using the appropriate forms contained in
the SAFETY Act Application Kit prescribed by the Under Secretary, which
shall be made available at http://www.safetyact.gov and by mail upon
written request to: Directorate of Science and Technology, SAFETY Act/
room 4320, Department of Homeland Security, Washington, DC 20528. The
burden is on the applicant to make timely submission of all relevant
data requested in the SAFETY Act Application Kit to substantiate an
application for Designation. An applicant may withdraw a submitted
application at any time and for any reason by making a written request
for withdrawal with the Department. Withdrawal of a SAFETY Act

[[Page 33163]]

application shall have no prejudicial effect on any other application.
(b) Initial Notification. Within 30 days after receipt of an
application for a Designation, the Under Secretary his designee shall
notify the applicant in writing that:
(1) The application is complete and will be reviewed and evaluated,
or
(2) That the application is incomplete, in which case the missing
or incomplete parts will be specified.
(c) Review Process. (1) The Under Secretary or his designee will
review each complete application and any included supporting materials.
In performing this function, the Under Secretary or his designee may
but is not required to:
(i) Request additional information from the Seller;
(ii) Meet with representatives of the Seller;
(iii) Consult with, and rely upon the expertise of, any other
Federal or non-Federal entity;
(iv) Perform studies or analyses of the subject Technology or the
insurance market for such Technology; and
(v) Seek information from insurers regarding the availability of
insurance for such Technology.
(2) For Technologies with which a Federal, State, or local
government agency already has substantial experience or data (through
the procurement process or through prior use or review), the review may
rely in part upon such prior experience and, thus, may be expedited.
The Under Secretary may consider any scientific studies, testing, field
studies, or other experience with the Technology that he deems
appropriate and that are available or can be feasibly conducted or
obtained, including test results produced by an independent laboratory
or other entity engaged to test or verify the safety, utility,
performance, in order to assess the effectiveness of the Technology or
the capability of the Technology to substantially reduce risks of harm.
Such studies may, in the Under Secretary's discretion, include, without
limitation:
(i) Public source studies;
(ii) Classified and otherwise confidential studies;
(iii) Studies, tests, or other performance records or data provided
by or available to the producer of the specific Technology; and
(iv) Proprietary studies that are available to the Under Secretary.
(3) In considering whether or the extent to which it is feasible to
defer a decision on a Designation until additional scientific studies
can be conducted on a particular Technology, the Under Secretary will
bring to bear his expertise concerning the protection of the security
of the United States and will consider the urgency of the need for the
Technology.
(d) Action by the Under Secretary. Within 90 days of notification
to the Seller that an application for a Designation is complete in
accordance with paragraph (b)(1) of this section, the Under Secretary
shall take one of the following actions:
(1) Approve the application and issue an appropriate Designation to
the applicant for the Technology, which shall include the insurance
certification required by Sec. 25.5(h) of this Part;
(2) Notify the applicant in writing that the Technology is
potentially eligible for a Designation, but that additional specified
information is needed before a decision may be reached; or
(3) Deny the application, and notify the applicant in writing of
such decision. The Under Secretary may extend the 90-day time period
for up to 45 days upon notice to the Seller. The Under Secretary is not
required to provide a reason or cause for such extension. The Under
Secretary's decision shall be final and not subject to review, except
at the discretion of the Under Secretary.
(e) Content of Designation. (1) A Designation shall:
(i) Describe the Qualified Anti-Terrorism Technology (in such
detail as the Under Secretary deems to be appropriate);
(ii) Identify the Seller(s) of the Qualified Anti-Terrorism
Technology;
(iii) Specify the earliest date of sale of the Qualified Anti-
Terrorism Technology to which the Designation shall apply (which shall
be determined by the Under Secretary in his discretion, and may be
prior to, but shall not be later than, the effective date of the
Designation);
(iv) Set forth the insurance certification required by Sec.
25.5(g); and
(v) To the extent practicable, include such standards,
specifications, requirements, performance criteria, limitations, or
other information as the Department in its sole and unreviewable
discretion may deem appropriate.
(2) The Designation may, but need not, specify other entities that
are required to be covered by the liability insurance required to be
purchased by the Seller. The failure to specify a covered person, firm,
or other entity in a Designation will not preclude the application or
applicability of the Act's protections to that person, firm, or other
entity.
(f) Term of Designation; Renewal. A Designation shall be valid and
effective for a term of five to eight years (as determined by the Under
Secretary) commencing on the date of issuance, and the protections
conferred by the Designation shall continue in full force and effect
indefinitely to all sales of Qualified Anti-Terrorism Technologies
covered by the Designation. At any time within two years prior to the
expiration of the term of the Designation, the Seller may apply for
renewal of the Designation. The Under Secretary shall make the
application form for renewal available at http://www.safetyact.gov and
by mail upon request sent to: Directorate of Science and Technology,
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC
20528.
(g) Government Procurements. (1) Overview. The Under Secretary may
coordinate the review of a Technology for SAFETY Act purposes in
connection with a Federal, State, or local government agency
procurement of an anti-terrorism Technology in any manner he deems
appropriate consistent with the Act and other applicable law. A
determination by the Under Secretary to issue a Designation, or not to
issue a Designation for a particular Technology as a QATT is not a
determination that the Technology meets, or fails to meet, the
requirements of any solicitation issued by any Federal government
customer or non-Federal government customer. Determinations by the
Under Secretary with respect to whether to issue a Designation for
Technologies submitted for his review shall be based on the factors
identified in Sec. 25.4(b).
(2) Procedure. Any Federal, State, or local government agency that
engages in or is planning to engage in the procurement of a Technology
that potentially qualifies as a Qualified Anti-terrorism Technology,
through the use of a solicitation of proposals or otherwise, may
request that the Under Secretary issue a notice stating that the
Technology to be procured either affirmatively or presumptively
satisfies the technical criteria necessary to be deemed a Qualified
Anti-Terrorism Technology (a ``Pre-Qualification Designation Notice'').
The Pre-Qualification Designation Notice will provide that the
vendor(s) chosen to provide the Technology (the ``Selected
Vendor(s)''), upon submitting an application for SAFETY Act Designation
will: Receive expedited review of their application for Designation;
either affirmatively or presumptively (as the case may be) be deemed to
have satisfied the technical criteria for SAFETY Act Designation with
respect to the Technology identified in the Pre-Qualification
Designation Notice; and be

[[Page 33164]]

authorized to submit a streamlined application as set forth in the Pre-
Qualification Designation Notice. In instances in which the subject
procurement involves Technology with respect to which a Block
Designation or Block Certification has been issued, the Department may
determine that the vendor providing such Technology will affirmatively
receive Designation or Certification with respect to such Technology,
provided the vendor satisfy each other applicable requirement for
Designation or Certification. Government agencies seeking a Pre-
Qualification Designation Notice shall submit a written request using
the ``Procurement Pre-Qualification Request'' form prescribed by the
Under Secretary and made available at http://www.safetyact.gov and by
mail upon request sent to: Directorate of Science and Technology,
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC
20528.
(3) Actions. Within 60 days after the receipt of a complete
Procurement Pre-Qualification Request, the Under Secretary shall take
one of the following actions:
(i) Approve the Procurement Pre-Qualification Request and issue an
appropriate Pre-Qualification Designation Notice to the requesting
agency that it may include in the government contract or in the
solicitation materials, as appropriate; or
(ii) Notify the requesting agency in writing that the relevant
procurement is potentially eligible for a Pre-Qualification Designation
Notice, but that additional information is needed before a decision may
be reached; or
(iii) Deny the Procurement Pre-Qualification Request and notify the
requesting agency in writing of such decision, including the reasons
for such denial.
(4) Contents of Notice. A Pre-Qualification Designation Notice
shall contain, at a minimum, the following:
(i) A detailed description of and detailed specifications for the
Technology to which the Pre-Qualification Designation Notice applies,
which may incorporate by reference all or part of the procurement
solicitation documents issued or to be issued by the requesting agency;
(ii) A statement that the Technology to which the Pre-Qualification
Designation Notice applies satisfies the technical criteria to be
deemed a Qualified Anti-Terrorism Technology and that the Selected
Vendor(s) may presumptively or will qualify for the issuance of a
Designation for such Technology upon compliance with the terms and
conditions set forth in such Pre-Qualification Designation Notice and
the approval of the streamlined application;
(iii) A list of the portions of the application referenced in Sec.
25.6(a) that the Selected Vendor(s) must complete and submit to the
Department in order to obtain Designation and the appropriate period of
time for such submission;
(iv) The period of time within which the Under Secretary will take
action upon such submission;
(v) The date of expiration of such Pre-Qualification Designation
Notice; and
(vi) Any other terms or conditions that the Under Secretary deems
to be appropriate in his discretion.
(5) Review of Completed Applications. The application for
Designation from the Selected Vendor(s) shall be considered, processed,
and acted upon in accordance with the procedures set forth in Sec.
25.6 (which shall be deemed to be modified by the terms and conditions
set forth in the applicable Pre-Qualification Designation Notice).
However, the review and evaluation of the Technology to be procured
from the Selected Vendor(s), in relation to the criteria set forth in
Sec. 25.4(b), shall ordinarily consist of a validation that that the
Technology complies with the detailed description of and detailed
specifications for the Technology set forth in the applicable Pre-
Qualification Designation Notice.
(h) Block Designations. (1) From time to time, the Under Secretary,
in response to an application submitted pursuant to Sec. 25.6(a) or
upon his own initiative, may issue a Designation that is applicable to
any person, firm, or other entity that is a qualified Seller of the
QATT described in such Designation (a ``Block Designation''). A Block
Designation will be issued only for Technology that relies on
established performance standards or defined technical characteristics.
All Block Designations shall be published by the Department within ten
days after the issuance thereof at http://www.safetyact.gov, and copies
may also be obtained by mail by sending a request to: Directorate of
Science and Technology, SAFETY Act/room 4320, Department of Homeland
Security, Washington, DC 20528. Any person, firm, or other entity that
desires to qualify as a Seller of a QATT that has received a Block
Designation shall complete only such portions of the application
referenced in Sec. 25.6(a) as are specified in such Block Designation
and shall submit an application to the Department in accordance with
Sec. 25.6(a) and the terms of the Block Designation. Applicants
seeking to be qualified Sellers of a QATT pursuant to a Block
Designation will receive expedited review of their applications and
shall not be required to provide information with respect to the
technical merits of the QATT that has received Block Designation.
Within 60 days (or such other period of time as may be specified in the
applicable Block Designation) after the receipt by the Department of a
complete application, the Under Secretary shall take one of the
following actions:
(i) Approve the application and notify the applicant in writing of
such approval, which notification shall include the certification
required by Sec. 25.5(g); or
(ii) Deny the application, and notify the applicant in writing of
such decision, including the reasons for such denial.
(2) If the application is approved, commencing on the date of such
approval the applicant shall be deemed to be a Seller under the
applicable Block Designation for all purposes under the SAFETY Act,
this part, and such Block Designation. A Block Designation shall be
valid and effective for a term of five to eight years (as determined by
the Under Secretary in his discretion) commencing on the date of
issuance, and may be renewed or extended by the Under Secretary at his
own initiative or in response to an application for renewal submitted
by a qualified Seller under such Block Designation in accordance with
Sec. 25.6(h). Except as otherwise specifically provided in this
paragraph, a Block Designation shall be deemed to be a Designation for
all purposes under the SAFETY Act and this part.
(i) Other Bases for Expedited Review of Applications. The Under
Secretary may identify other categories or types of Technologies for
which expedited processing may be granted. For example, the Under
Secretary may conduct expedited processing for applications addressing
a particular threat or for particular types of anti-terrorism
Technologies. The Under Secretary shall notify the public of any such
opportunities for expedited processing by publishing such notice in the
Federal Register.
(j) Transfer of Designation. Except as may be restricted by the
terms and conditions of a Designation, any Designation may be
transferred and assigned to any other person, firm, or other entity to
which the Seller transfers and assigns all right, title, and interest
in and to the Technology covered by the Designation, including the
intellectual property rights therein (or, if the Seller is a licensee
of the Technology, to any

[[Page 33165]]

person, firm, or other entity to which such Seller transfers all of its
right, title, and interest in and to the applicable license agreement).
Such transfer and assignment of a Designation will not be effective
unless and until the Under Secretary is notified in writing of the
transfer using the ``Application for Transfer of Designation'' form
issued by the Under Secretary (the Under Secretary shall make this
application form available at http://www.safetyact.gov and by mail by
written request sent to: Directorate of Science and Technology, SAFETY
Act/room 4320, Department of Homeland Security, Washington, DC 20528).
Upon the effectiveness of such transfer and assignment, the transferee
will be deemed to be a Seller in the place and stead of the transferor
with respect to the applicable Technology for all purposes under the
SAFETY Act, this part, and the transferred Designation. The transferred
Designation will continue to apply to the transferor with respect to
all transactions and occurrences that occurred through the time at
which the transfer and assignment of the Designation became effective,
as specified in the applicable Application for Transfer of Designation.
(k) Application of Designation to Licensees. Except as may be
restricted by the terms and conditions of a Designation, any
Designation shall apply to any other person, firm, or other entity to
which the Seller licenses (exclusively or nonexclusively) the right to
manufacture, use, or sell the Technology, in the same manner and to the
same extent that such Designation applies to the Seller, effective as
of the date of commencement of the license, provided that the Seller
notifies the Under Secretary of such license by submitting, within 30
days after such date of commencement, a ``Notice of License of
Qualified Anti-terrorism Technology'' form issued by the Under
Secretary. The Under Secretary shall make this form available at http://www.safetyact.gov and by mail upon request sent to: Directorate of
Science and Technology, SAFETY Act/room 4320, Department of Homeland
Security, Washington, DC 20528. Such notification shall not be required
for any licensee listed as a Seller on the applicable Designation.
(l) Significant Modification of Qualified Anti-terrorism
Technologies. (1) The Department recognizes that Qualified Anti-
Terrorism Technologies may routinely undergo changes or modifications
in their manufacturing, materials, installation, implementation,
operating processes, component assembly, or in other respects from time
to time. When a Seller makes routine changes or modifications to a
Qualified Anti-Terrorism Technology, such that the QATT remains within
the scope of the description set forth in the applicable Designation or
Certification, the Seller shall not be required to provide notice under
this subsection, and the changes or modifications shall not adversely
affect the force or effect of the Seller's QATT Designation or
Certification.
(2) A Seller shall promptly notify the Department and provide
details of any change or modification to a QATT that causes the QATT no
longer to be within the scope of the Designation or Certification by
submitting to the Department a completed ``Notice of Modification to
Qualified Anti-Terrorism Technology'' form issued by the Under
Secretary (a ``Modification Notice''). A Seller is not required to
notify the Department of any change or modification of a particular
Qualified Anti-Terrorism Technology that is made post-sale by a
purchaser unless the Seller has consented expressly to the
modification. The Under Secretary shall make an appropriate form
available at http://www.safetyact.gov and by mail upon request sent to:
Directorate of Science and Technology, SAFETY Act/room 4320, Department
of Homeland Security, Washington, DC 20528. The Department will
promptly acknowledge receipt of a Modification Notice by providing the
relevant Seller with written notice to that effect. Within 60 days of
the receipt of a Modification Notice, the Under Secretary may, in his
sole and unreviewable discretion:
(i) Inform the submitting Seller that the QATT as changed or
modified is consistent with, and is not outside the scope of, the
Seller's Designation or Certification;
(ii) Issue to the Seller a modified Designation or Certification
incorporating some or all of the notified changes or modifications;
(iii) Seek further information regarding the changes or
modifications and temporarily suspend the 60-day period of review;
(iv) Inform the submitting Seller that the changes or modifications
might cause the QATT as changed or modified to be outside the scope of
the Seller's Designation or Certification, and require further review
and consideration by the Department;
(v) Inform the submitting Seller that the QATT as changed or
modified is outside the scope of the subject Seller's Designation or
Certification, and require that the QATT be brought back into
conformance with the Seller's Designation or Certification; or
(vi) If the Seller fails to bring the subject QATT into conformance
in accordance with the Under Secretary's direction pursuant to
paragraph (l)(2)(v) of this section, issue a public notice stating that
the QATT as changed or modified is outside the scope of the submitting
Seller's Designation or Certification and, consequentially, that such
Designation or Certification is not applicable to the QATT as changed
or modified. If the Under Secretary does not take one or more of such
actions within the 60-day period following the Department's receipt of
a Seller's Modification Notice, the changes or modifications identified
in the Modification Notice will be deemed to be approved by the Under
Secretary and the QATT, as changed or modified, will be conclusively
established to be within the scope of the description of the QATT in
the Seller's Designation or Certification.
(3) Notwithstanding anything to the contrary herein, a Seller's
original QATT Designation or Certification will continue in full force
and effect in accordance with its terms unless modified, suspended, or
terminated by the Under Secretary in his discretion, including during
the pendency of the review of the Seller's Modification Notice. In no
event will any SAFETY Act Designation or Certification terminate
automatically or retroactively under this section. A Seller is not
required to notify the Under Secretary of any change or modification
that is made post-sale by a purchaser or end-user of the QATT without
the Seller's consent, but the Under Secretary may, in appropriate
circumstances, require an end-user to provide periodic reports on
modifications or permit inspections or audits.

Sec. 25.7 Litigation Management

(a) Liability for all claims against a Seller arising out of,
relating to, or resulting from an Act of Terrorism when such Seller's
Qualified Anti-Terrorism Technology has been deployed in defense
against, response to, or recovery from such act and such claims result
or may result in loss to the Seller shall not be in an amount greater
than the limits of liability insurance coverage required to be
maintained by the Seller under this section or as specified in the
applicable Designation.
(b) In addition, in any action for damages brought under section
442 of Title 6, United States Code:
(1) No punitive damages intended to punish or deter, exemplary
damages, or other damages not intended to compensate a plaintiff for
actual losses

[[Page 33166]]

may be awarded, nor shall any party be liable for interest prior to the
judgment;
(2) Noneconomic damages may be awarded against a defendant only in
an amount directly proportional to the percentage of responsibility of
such defendant for the harm to the plaintiff, and no plaintiff may
recover noneconomic damages unless the plaintiff suffered physical
harm; and
(3) Any recovery by a plaintiff shall be reduced by the amount of
collateral source compensation, if any, that the plaintiff has received
or is entitled to receive as a result of such Acts of Terrorism that
result or may result in loss to the Seller.
(c) Without prejudice to the authority of the Under Secretary to
terminate a Designation pursuant to paragraph (h) of Sec. 25.6, the
liability limitations and reductions set forth in this section shall
apply in perpetuity to all sales or deployments of a Qualified Anti-
Terrorism Technology in defense against, response to, or recovery from
any Act of Terrorism that occurs on or after the effective date of the
Designation applicable to such Qualified Anti-Terrorism Technology,
regardless of whether any liability insurance coverage required to be
obtained by the Seller is actually obtained or maintained or not,
provided that the sale of such Qualified Anti-Terrorism Technology was
consummated by the Seller on or after the earliest date of sale of such
Qualified Anti-Terrorism Technology specified in such Designation and
prior to the earlier of the expiration or termination of such
Designation.
(d) There shall exist only one cause of action for loss of
property, personal injury, or death for performance or non-performance
of the Seller's Qualified Anti-Terrorism Technology in relation to an
Act of Terrorism. Such cause of action may be brought only against the
Seller of the Qualified Anti-Terrorism Technology and may not be
brought against the buyers, the buyers' contractors, or downstream
users of the Technology, the Seller's suppliers or contractors, or any
other person or entity. In addition, such cause of action must be
brought in the appropriate district court of the United States.

Sec. 25.8 Government Contractor Defense

(a) Criteria for Certification. The Under Secretary may issue a
Certification for a Qualified Anti-Terrorism Technology as an Approved
Product for Homeland Security for purposes of establishing a rebuttable
presumption of the applicability of the government contractor defense.
In determining whether to issue such Certification, the Under Secretary
or his designee shall conduct a comprehensive review of the design of
such Technology and determine whether it will perform as intended,
conforms to the Seller's specifications, and is safe for use as
intended. The Seller shall provide safety and hazard analyses and other
relevant data and information regarding such Qualified Anti-Terrorism
Technology to the Department in connection with an application. The
Under Secretary or his designee may require that the Seller submit any
information that the Under Secretary or his designee considers relevant
to the application for approval. The Under Secretary or his designee
may consult with, and rely upon the expertise of, any other
governmental or non-governmental person, firm, or entity, and may
consider test results produced by an independent laboratory or other
person, firm, or other entity engaged by the Seller.
(b) Extent of Liability. Should a product liability or other
lawsuit be filed for claims arising out of, relating to, or resulting
from an Act of Terrorism when Qualified Anti-Terrorism Technologies
Certified by the Under Secretary as provided in Sec. Sec. 25.8 and
25.9 of this part have been deployed in defense against or response or
recovery from such act and such claims result or may result in loss to
the Seller, there shall be a rebuttable presumption that the government
contractor defense applies in such lawsuit. This presumption shall only
be overcome by clear and convincing evidence showing that the Seller
acted fraudulently or with willful misconduct in submitting information
to the Department during the course of the consideration of such
Technology under this section and Sec. 25.9 of this part. A claimant's
burden to show fraud or willful misconduct in connection with a
Seller's SAFETY Act application cannot be satisfied unless the claimant
establishes there was a knowing and deliberate intent to deceive the
Department. This presumption of the government contractor defense shall
apply regardless of whether the claim against the Seller arises from a
sale of the product to Federal Government or non-Federal Government
customers. Such presumption shall apply in perpetuity to all
deployments of a Qualified Anti-Terrorism Technology (for which a
Certification has been issued by the Under Secretary as provided in
this section and Sec. 25.9 of this part) in defense against, response
to, or recovery from any Act of Terrorism that occurs on or after the
effective date of the Certification applicable to such Technology,
provided that the sale of such Technology was consummated by the Seller
on or after the earliest date of sale of such Technology specified in
such Certification (which shall be determined by the Under Secretary in
his discretion, and may be prior to, but shall not be later than, such
effective date) and prior to the expiration or termination of such
Certification.
(c) Establishing Applicability of the Government Contractor
Defense. The Under Secretary will be exclusively responsible for the
review and approval of anti-terrorism Technology for purposes of
establishing the government contractor defense in any product liability
lawsuit for claims arising out of, relating to, or resulting from an
Act of Terrorism when Qualified Anti-Terrorism Technologies approved by
the Under Secretary, as provided in this final rule, have been deployed
in defense against or response or recovery from such act and such
claims result or may result in loss to the Seller. The Certification of
a Technology as an Approved Product for Homeland Security shall be the
only evidence necessary to establish that the Seller of the Qualified
Anti-Terrorism Technology that has been issue a Certification is
entitled to a presumption of dismissal from a cause of action brought
against a Seller arising out of, relating to, or resulting from an Act
of Terrorism when the Qualified Anti-Terrorism Technology was deployed
in defense against or response to or recovery from such Act of
Terrorism. This presumption of dismissal is based upon the statutory
government contractor defense conferred by the SAFETY Act.

Sec. 25.9 Procedures for Certification of Approved Products for
Homeland Security.

(a) Application Procedure. An applicant seeking a Certification of
anti-terrorism Technology as an Approved Product for Homeland Security
under Sec. 25.8 shall submit information supporting such request to
the Under Secretary. The Under Secretary shall make application forms
available at http://www.safetyact.gov, and copies may also be obtained
by mail by sending a request to: Directorate of Science and Technology,
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC
20528. An application for a Certification may not be filed unless the
applicant has also filed an application for a Designation for the same
Technology in accordance with Sec. 25.6(a). Such applications may be
filed simultaneously and may be reviewed simultaneously by the
Department.

[[Page 33167]]

(b) Initial Notification. Within 30 days after receipt of an
application for a Certification, the Under Secretary or his designee
shall notify the applicant in writing that:
(1) The application is complete and will be reviewed, or
(2) That the application is incomplete, in which case the missing
or incomplete parts will be specified.
(c) Review Process. The Under Secretary or his designee will review
each complete application for a Certification and any included
supporting materials. In performing this function, the Under Secretary
or his designee may, but is not required to:
(1) Request additional information from the Seller;
(2) Meet with representatives of the Seller;
(3) Consult with, and rely upon the expertise of, any other Federal
or non-Federal entity; and
(4) Perform or seek studies or analyses of the Technology.
(d) Action by the Under Secretary.
(1) Within 90 days after receipt of a complete application for a
Certification, the Under Secretary shall take one of the following
actions:
(i) Approve the application and issue an appropriate Certification
to the Seller;
(ii) Notify the Seller in writing that the Technology is
potentially eligible for a Certification, but that additional specified
information is needed before a decision may be reached; or
(iii) Deny the application, and notify the Seller in writing of
such decision.
(2) The Under Secretary may extend the time period one time for 45
days upon notice to the Seller, and the Under Secretary is not required
to provide a reason or cause for such extension. The Under Secretary's
decision shall be final and not subject to review, except at the
discretion of the Under Secretary.
(e) Designation is a Pre-Condition. The Under Secretary may approve
an application for a Certification only if the Under Secretary has also
approved an application for a Designation for the same Technology in
accordance with Sec. 25.4.
(f) Content and Term of Certification; Renewal. (1) A Certification
shall:
(i) Describe the Qualified Anti-Terrorism Technology (in such
detail as the Under Secretary deems to be appropriate);
(ii) Identify the Seller(s) of the Qualified Anti-Terrorism
Technology;
(iii) Specify the earliest date of sale of the Qualified Anti-
Terrorism Technology to which the Certification shall apply (which
shall be determined by the Under Secretary in his discretion, and may
be prior to, but shall not be later than, the effective date of the
Certification); and
(iv) To the extent practicable, include such standards,
specifications, requirements, performance criteria, limitations, or
other information as the Department in its sole and unreviewable
discretion may deem appropriate.
(2) A Certification shall be valid and effective for the same
period of time for which the related Designation is issued, and shall
terminate upon the termination of such related Designation. The Seller
may apply for renewal of the Certification in connection with an
application for renewal of the related Designation. An application for
renewal must be made using the ``Application for Certification of an
Approved Product for Homeland Security'' form issued by the Under
Secretary.
(g) Application of Certification to Licensees. A Certification
shall apply to any other person, firm, or other entity to which the
applicable Seller licenses (exclusively or nonexclusively) the right to
manufacture, use, or and sell the Technology, in the same manner and to
the same extent that such Certification applies to the Seller,
effective as of the date of commencement of the license, provided that
the Seller notifies the Under Secretary of such license by submitting,
within 30 days after such date of commencement, a ``Notice of License
of Approved Anti-terrorism Technology'' form issued by the Under
Secretary. The Under Secretary shall make this form available at http://www.safetyact.gov and by mail upon request sent to: Directorate of
Science and Technology, SAFETY Act/room 4320, Department of Homeland
Security, Washington, DC 20528. Such notification shall not be required
for any licensee listed as a Seller on the applicable Certification.
(h) Transfer of Certification. In the event of any permitted
transfer and assignment of a Designation, any related Certification for
the same anti-terrorism Technology shall automatically be deemed to be
transferred and assigned to the same transferee to which such
Designation is transferred and assigned. The transferred Certification
will continue to apply to the transferor with respect to all
transactions and occurrences that occurred through the time at which
such transfer and assignment of the Certification became effective.
(i) Issuance of Certificate; Approved Product List. For anti-
terrorism Technology reviewed and approved by the Under Secretary and
for which a Certification is issued, the Under Secretary shall issue a
certificate of conformance to the Seller and place the anti-terrorism
Technology on an Approved Product List for Homeland Security, which
shall be published by the Department.
(j) Block Certifications. (1) From time to time, the Under
Secretary, in response to an application submitted pursuant to Sec.
25.9(a) or at his own initiative, may issue a Certification that is
applicable to any person, firm or other entity that is a qualified
Seller of the Approved Product for Homeland Security described in such
Certification (a ``Block Certification''). All Block Certifications
shall be published by the Department within ten days after the issuance
thereof at http://www.safetyact.gov, and copies may also be obtained by
mail by sending a request to: Directorate of Science and Technology,
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC
20528. Any person, firm, or other entity that desires to qualify as a
Seller of an Approved Product for Homeland Security under a Block
Certification shall complete only such portions of the application
referenced in Sec. 25.9(a) as are specified in such Block
Certification and shall submit such application to the Department in
accordance with Sec. 9(a). Applicants seeking to be qualified Sellers
of an Approved Product for Homeland Security pursuant to a Block
Certification will receive expedited review of their applications and
shall not be required to provide information with respect to the
technical merits of the Approved Product for Homeland Security that has
received Block Certification. Within 60 days (or such other period of
time as may be specified in the applicable Block Certification) after
the receipt by the Department of a complete application, the Under
Secretary shall take one of the following actions:
(i) Approve the application and notify the applicant in writing of
such approval; or
(ii) Deny the application, and notify the applicant in writing of
such decision, including the reasons for such denial.
(2) If the application is approved, commencing on the date of such
approval, the applicant shall be deemed to be a Seller under the
applicable Block Certification for all purposes under the SAFETY Act,
this part, and such Block Certification. A Block Certification shall be
valid and effective for the same period of time for which the related
Block Designation is issued. A Block Certification may be renewed by
the Under Secretary at his own initiative or in response to an
application for

[[Page 33168]]

renewal submitted by a qualified Seller under such Block Certification
in accordance with Sec. 25.9(g). Except as otherwise specifically
provided in this paragraph, a Block Certification shall be deemed to be
a Certification for all purposes under the SAFETY Act and this part.

Sec. 25.10 Confidentiality and Protection of Intellectual Property.

(a) General. The Secretary, in consultation with the Office of
Management and Budget and appropriate Federal law enforcement and
intelligence officials, and in a manner consistent with existing
protections for sensitive or classified information, shall establish
confidentiality procedures for safeguarding, maintenance and use of
information submitted to the Department under this part. Such protocols
shall, among other things, ensure that the Department will utilize all
appropriate exemptions from the Freedom of Information Act.
(b) Non-Disclosure. Except as otherwise required by applicable law
or regulation or a final order of a court of competent jurisdiction, or
as expressly authorized in writing by the Under Secretary, no person,
firm, or other entity may:
(1) Disclose SAFETY Act Confidential Information (as defined above)
to any person, firm, or other entity, or
(2) Use any SAFETY Act Confidential Information for his, her, or
its own benefit or for the benefit of any other person, firm, or other
entity, unless the applicant has consented to the release of such
SAFETY Act Confidential Information.
(c) Legends. Any person, firm, or other entity that submits data or
information to the Department under this Part may place a legend on
such data or information indicating that the submission constitutes
SAFETY Act Confidential Information. The absence of such a legend shall
not prevent any data or information submitted to the Department under
this Part from constituting or being considered by the Department to
constitute SAFETY Act Confidential Information.

Dated: June 2, 2006.
Michael Chertoff,
Secretary.
[FR Doc. 06-5223 Filed 6-5-06; 2:16 pm]
BILLING CODE 4410-10-P