Exchange of Coin

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>United States Mint</SUBAGY> <CFR>31 CFR Part 100</CFR> <SUBJECT>Exchange of Coin</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> United States Mint, Department of the Treasury. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This final rule removes Treasury regulations relating to the exchange of bent, partial, fused, and mixed coins. The removal will end the exchange program for bent and partial coin. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective Date:</E> October 25, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Apryl Whitaker, Senior Legal Counsel, Office of the Chief Counsel, United States Mint, at (202) 354-7938 or <E T="03">rulemaking@usmint.treas.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> The Treasury regulations appearing at 31 CFR 100.11 are promulgated under 31 U.S.C. 321 and relate to the exchange of bent and partial coin. The last amendment to 31 CFR part 100, subpart C, was on December 20, 2017. In August 2018, the United States Mint suspended the redemption program due to the possibility of unlawful material being submitted for redemption. On May 5, 2021, the United States Mint issued a notice of proposed rulemaking proposing certain revisions to these regulations (86 FR 23877), which was withdrawn on May 3, 2024 (89 FR 36721). The United States Mint subsequently decided to close the bent and partial coin exchange program. For many years, the United States Mint has redeemed bent and partial coins for full face value. However, circumstances surrounding the redemption program have materially changed. Today submissions must be carefully evaluated to ensure that counterfeit coins are not accepted to the program, and the condition of many coins, particularly large volumes of coins damaged by recycling or industrial processes, makes authentication increasingly difficult and time-consuming. In addition, the volume of coins submitted for possible redemption has greatly increased, and counterfeits have been increasingly identified in imported coins intercepted by law enforcement, as well as in several large submissions to the redemption program. The result of these changes is that there is no financially responsible way to ensure the integrity of the redemption program and to the meet the full level of demand. The United States Mint's capacity to process mutilated coins is limited by physical storage capacity, caseload complexity, and workload. Authentication procedures require extensive time and resources. The United States Mint has dedicated substantial time and resources to the bent and partial coin exchange program, in addition to operating the program at a loss by paying out face value for redemptions. In 89 FR 36721, May 3, 2024, the United States Mint issued a notice of proposed rulemaking (NPRM) to remove regulations relating to the exchange of bent and partial coins, and it requested comments on the proposed revisions. In the NPRM, the Mint proposed to end the exchange program for bent and partial coin. As discussed below, the United States Mint has considered the comments received and has concluded that the proposed regulations will be adopted as a final rule. <HD SOURCE="HD1">II. Public Participation</HD> The United States Mint received 35 comments in response to the NPRM proposing to end the Mutilated Coin Redemption Program. Eight of these comments were provided by organizations that identified as businesses, two identified as a trade association, and the remainder of the comments were provided by unknown, anonymous, or individual persons. The comments are available at <E T="03">www.regulations.gov.</E> <HD SOURCE="HD2">Disposing of Coins</HD> Some commenters were concerned about the disposal of dimes, quarters, half-dollar, and dollar coins. The proposed rule indicated correctly that the melting of dimes, quarters, half-dollar, and dollar coins is not regulated by the United States Mint. There is no prohibition on melting dimes, quarters, half-dollar, and dollar coins for non-fraudulent purposes. Some commenters expressed concern that 18 U.S.C. 331 criminalizes the melting of all U.S. coins. This statute, however, specifically addresses certain behavior that is conducted with the intent to defraud and does not address coins melted without fraudulent intent and consistent with 31 CFR part 82. While there is a prohibition against melting pennies and nickels, there is a specific exception at 31 CFR 82.2 for coins melted or treated incidental to recycling other materials if (1) the coins were not added to the other materials for their metallurgical value, (2) the volumes of the coins, relative to the volumes of the other materials recycled, makes it clear that the presence of such coins is merely incidental, and (3) the separation of the coins from the other materials would be impracticable or cost prohibitive. See 31 CFR 82.2(c). This exception extends to the melting of coins that become mutilated due to treatment that is itself within the scope of the exception. If an exception does not apply, then applications for licenses to melt pennies and nickels should be transmitted to the Director, United States Mint; 801 9th Street NW, Washington, DC 20220. See 31 CFR 82.2(f). Some individuals were concerned about how they can dispose of their bent or partial coins. Individuals can inquire of their local scrap metal dealers. <HD SOURCE="HD2">Lack of Capacity</HD> Some commenters indicated that the United States Mint's assertion that it lacks the capacity to process large volumes of bent or partial coin is disingenuous, because, in the past, large submissions of bent or partial coin were delivered directly to a third-party contractor, not to the United States Mint. However, after the program was suspended in 2018, the United States Mint developed new authentication techniques and procedures as recommended by the Treasury Department's Office of Inspector General to test and authenticate the genuineness of coins. To effectively authenticate the material with the new counterfeit detection methods that the United States Mint developed, the United States Mint could no longer accept redemption submissions at a third-party site. The United States Mint's coin authentication methods are time-consuming and can only be performed using specialized equipment at the United States Mint's Philadelphia location. <HD SOURCE="HD2">Prior Participants</HD> Some commenters suggested that the United States Mint develop a “trusted,” “preferred,” or “qualified” participant program whereby certain participants that meet additional requirements could be allowed to submit large volumes of coins for possible redemption. Many of these commenters did not specify the types of additional requirements that would qualify these participants as “trusted,” merely suggesting that certain participants should be allowed to redeem large amounts of coin. Other participants suggested site visits, background checks, a certification process, or compliance with industry standards. None of these controls separately or together, however, are sufficient to detect counterfeit coins. Every submission must be properly authenticated by the United States Mint to detect counterfeit coins, and background checks or site visits, for example, would not eliminate the need for this crucial step in the process. A few commenters suggested that coins that were stockpiled during the program suspension should be exempted, essentially allowing these coins to be redeemed with no restrictions. In August 2018, the United States Mint stopped processing submissions to the redemption program due to the possibility of unlawful material being submitted for redemption and later formally suspended the redemption program in July 2019 (84 FR 35181). Members of the public have been on notice that the exchange program is subject to suspension and those who have stockpiled coins during its suspension assumed the risk of doing so. <HD SOURCE="HD2">Office of Inspector General Recommendations for the Redemption Program</HD> Some commenters indicated that the United States Mint has not complied with the recommendations contained in the Department of the Treasury's Office of Inspector General's August 18, 2020, Audit Report on “Mint Controls Over Raw Materials and Coin Exchange Programs Need Improvement.” Following the issuance of these audit recommendations, the United States Mint hired additional staff and developed improved authentication procedures and testing methodology to detect counterfeit coins. To implement the new procedures, the United States Mint can no longer accept redemption submissions at a third-party site. The United States Mint's coin authentication methods are time-consuming and can only be performed using specialized equipment and processes developed and installed at the United States Mint's Philadelphia location. <HD SOURCE="HD2">Environmental Concerns</HD> Some commenters were concerned that unredeemable bent or partial coins would end up in landfills. Although the melting of pennies and nickels is prohibited in certain instances, the melting of dimes, quarters, and half-dollar coins, which historically have made up the majority of bent or partial coin redemptions, is not prohibited. The public may melt and reuse coins consistent with 31 CFR part 82, which reduces the likelihood that unredeemable coins will be landfilled. At least one commenter indicated that, if the program were closed, bent or partial coin would end up recycled as scrap metal sold on the secondary metals market. Some commenters were concerned that closing the redemption program would lead to increased metals mining by requiring the United States Mint to purchase more virgin metal. The amount of metal contained in b ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 30k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━