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Rule

Removal of Racial and Ethnic Presumptions in Response to Court Ruling

A Rule by the Minority Business Development Agency on 12/16/2024

• 1.

1.

• Document Details Published Content - Document Details Agencies Department of Commerce Minority Business Development Agency Agency/Docket Number Docket No. 241121-0298 CFR 15 CFR 1400 Document Citation 89 FR 101466 Document Number 2024-29059 Document Type Rule Pages 101466-101467
  (2 pages) Publication Date 12/16/2024 RIN 0640-AA02 Published Content - Document Details

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• Document Details Published Content - Document Details Agencies Department of Commerce Minority Business Development Agency Agency/Docket Number Docket No. 241121-0298 CFR 15 CFR 1400 Document Citation 89 FR 101466 Document Number 2024-29059 Document Type Rule Pages 101466-101467
  (2 pages) Publication Date 12/16/2024 RIN 0640-AA02 Published Content - Document Details

• Document Dates Published Content - Document Dates Effective Date 2025-01-15 Dates Text This rule is effective January 15, 2025. Published Content - Document Dates

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  • AGENCY:
  • ACTION:
  • SUMMARY:
  • DATES:
  • FOR FURTHER INFORMATION CONTACT:
  • SUPPLEMENTARY INFORMATION:
  • Background
  • Court Decision in Nuziard
  • Updating Regulations
  • Classification
  • List of Subjects in 15 CFR Part 1400
  • PART 1400—DETERMINATION OF GROUP ELIGIBILITY FOR MBDA ASSISTANCE Enhanced Content - Table of Contents

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Comment on Nuzard Case

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Department of Commerce

Minority Business Development Agency

1. 15 CFR Part 1400
2. [Docket No. 241121-0298]
3. RIN 0640-AA02

AGENCY:

Minority Business Development Agency, Department of Commerce.

ACTION:

Final rule.

SUMMARY:

The Minority Business Development Agency (MBDA) amends their regulations to remove the list of racial and ethnic presumptions in order to comply with the Court's decision in Nuziard et al v. Minority Business Development Agency et al., which struck down those racial and ethnic presumptions.

DATES:

This rule is effective January 15, 2025.

FOR FURTHER INFORMATION CONTACT:

Donald Smith, Chief Operating Officer, MBDA, dsmith5@mbda.gov.

SUPPLEMENTARY INFORMATION:

Background

The Department of Commerce's Minority Business Development Agency (MBDA) derives authority from the Minority Business Development Act of 2021 (“the Act”), 15 U.S.C. 9501, et seq., to appoint an Under Secretary of Commerce for Minority Business Development to carry out the Act's activities and initiatives. MBDA's mission is to promote the growth and global competitiveness of minority business enterprises (MBEs) in order to unlock the country's full economic potential. One of the ways MBDA accomplishes this mission is through the funding of a network of Business Centers, Specialty Centers, and other technical assistance programs to provide MBEs with business assistance services and resources.

For a business to access MBDA technical assistance programs that serve MBEs, the individual seeking services must certify that their business is “a business enterprise (i) that is not less than 51 percent-owned by 1 or more socially or economically disadvantaged individuals; and (ii) the management and daily business operations of which are controlled by 1 or more socially or economically disadvantaged individuals.” 15 U.S.C. 9501(9). “Socially or economically disadvantaged individual” is defined in the Act as “an individual who has been subjected to racial or ethnic prejudice or cultural bias (or the ability of whom to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities, as compared to others in the same line of business and competitive market area) because of the identity of the individual as a member of a group, without regard to any individual quality of the individual that is unrelated to that identity.” 15 U.S.C. 9501(15)(A). Additionally, the Act contains a presumption in which “the Under Secretary shall presume that the term “socially or economically disadvantaged individual” includes any individual who is— (i) Black or African American; (ii) Hispanic or Latino; (iii) American Indian or Alaska Native; (iv) Asian; (v) Native Hawaiian or other Pacific Islander; or (vi) a member of a group that the Agency determines under part 1400 of title 15, Code of Federal Regulations, as in effect on November 23, 1984, is a socially disadvantaged group eligible to receive assistance.” 15 U.S.C. 9501(15)(B). This presumption was also found in MBDA's regulations at 15 CFR 1400.1(b) and (c), and members of these racial groups are presumed to be eligible for MBDA assistance.

Court Decision in Nuziard

The racial presumptions found in the Minority Business Development Act of 2021 and 15 CFR part 1400 were challenged in Nuziard, et. al. v. Minority Business Development Agency, et. al., in which the Court found any “provision of the MBDA Statute that is contingent on the presumption in 15 U.S.C. 9501(15)(B) ” unconstitutional and prohibited MBDA from “imposing the racial and ethnic classifications defined in 15 U.S.C. 9501 and implemented in 15 U.S.C. 9511, 9512, 9522, 9523, 9524, and 15 CFR 1400.1.-.-. ” No. 4:23-cv-00278-P (N.D. Tex. March 5, 2024). The court's injunction applies to the sections of the Minority Business Development Act and related regulations that require the Under Secretary of Commerce for Minority Business Development to presume that a “socially or economically disadvantaged individual” “includes any individual who is—(i) Black or African American; (ii) Hispanic or Latino; (iii) American Indian or Alaska Native; (iv) Asian; (v) Native Hawaiian or other Pacific Islander.” 15 U.S.C. 9501(15)(B). Similarly, the Court enjoined the application of 15 CFR 1400.1(b) to the extent that it imposes racial and ethnic classifications, and designates “Blacks, Puerto-Ricans, Spanish-speaking Americans, American Indians, Eskimos, and Aleuts” as individuals who are socially or economically disadvantaged. Finally, the Court also enjoined 15 CFR 1400.1(c), which designates “Hasidic Jews, Asian-Pacific Americans, and Asian Indians” as socially or economically disadvantaged.

Updating Regulations

As a result of the Court's decision, MBDA is updating their regulations at 15 CFR 1400.1(b) and (c) to remove the sections that contain the racial presumptions described in the decision above. MBDA also proposes to make a correction to 15 CFR 1400.2(a) pertaining to the definition of minority business enterprise and where it is defined in the Act. The last change pertains to striking out outdated language referring to Executive Order 11625 in 15 CFR 1400.3 because MBDA draws statutory authority directly from the Act and not from the Executive Order. See 15 U.S.C. 9597. These changes will clarify the eligibility requirements to qualify for MBDA technical assistance programs that serve MBEs.

Classification

Pursuant to 5 U.S.C. 553(a)(2), the provisions of the Administrative Procedure Act requiring notice of proposed rulemaking and the opportunity for public participation are inapplicable to this final rule because this rule relates to “public property, loans, grants, benefits, or contracts.” In addition, 5 U.S.C. 553(b)(B) exempts rulemakings from prior notice and public comment procedures when an agency finds for good cause that such procedures “are impractical, unnecessary, or contrary to the public interest.” Here, MBDA has determined that there is good cause and that providing prior notice and opportunity ( printed page 101467) for public comment is impractical because MBDA is required to amend the CFR to implement the holding in Nuziard. The court order requires MBDA to amend the CFR in a specific manner, and there are no alternative ways to make the change other than as implemented in this final rule. Therefore, this final rule is being issued without notice and comment.

This rule has been determined to be not significant for purposes of Executive Order 12866.

Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by another law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. Accordingly, no regulatory flexibility analysis is required and none has been prepared.

This rule does not have any collection of information requirements under the Paperwork Reduction Act.

List of Subjects in 15 CFR Part 1400

• Federal financial assistance, technical assistance, administrative practice and procedure Dated: December 5, 2024.

Eric J. Morrissette,

Deputy Under Secretary of Commerce for Minority Business Development, Performing the delegated duties of the Under Secretary, Minority Business Development Agency, U.S. Department of Commerce.

For the reasons set out in the preamble, MBDA amends 15 CFR part 1400 as follows:

PART 1400—DETERMINATION OF GROUP ELIGIBILITY FOR MBDA ASSISTANCE

1. The authority citation for part 1400 continues to read as follows:

Authority: 15 U.S.C. 1512, E.O. 11625, 3 CFR 616 (1971-75), 36 FR 19967 (1971); and E.O. 12432, 3 CFR 198 (1983), 48 FR 32551 (1983).

1. Revise and republish § 1400.1 to read as follows:

§ 1400.1 Purpose and scope. (a) The purpose of this part is to set forth regulations for determination of group eligibility for MBDA assistance.

(b) In order to be eligible to receive assistance from MBDA funded organizations, a concern must be a minority business enterprise as defined in 15 U.S.C. 9501(9). The purpose of this regulation is to provide guidance to groups not previously designated as eligible for assistance who believe they are entitled to formal designation as “socially or economically disadvantaged.” Upon adequate showing by representatives of the group that the group is, as a whole, socially or economically disadvantaged, the group will be so designated and its members will be eligible for MBDA assistance. Designation under this regulation will not establish eligibility for any other Federal or Federally funded program.

1. In § 1400.2, revise paragraph (a) to read as follows:

§ 1400.2 Definitions. * * * * * (a) Minority business enterprise is defined in 15 U.S.C. 9501(9).

• * * * * § 1400.3 [Amended] 4. In § 1400.3:

a. Remove “ Executive Order 11625 ” and add in its place “this part” in the introductory text; and

b. Designate the parenthetical following paragraph (d) as note 1 to paragraph (d) and remove the parentheses.

[FR Doc. 2024-29059 Filed 12-13-24; 8:45 am]

BILLING CODE 3510-21-P

Published Document: 2024-29059 (89 FR 101466)