[Federal Register Volume 60, Number 158 (Wednesday, August 16, 1995)]
[Rules and Regulations]
[Pages 42464-42466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20189]
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NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES
45 CFR Part 1160
RIN 3154-AAoo
Indemnities Under the Arts and Artifacts Indemnity Act
AGENCY: Federal Council on the Arts and the Humanities.
ACTION: Final rule.
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SUMMARY: The Federal Council on the Arts and Humanities is adopting as
a final rule, without change, the provisions of a proposed rule that
revises the regulations implementing the Arts and Artifacts Indemnity
Act, as amended (20 U.S.C. 971-977) (the ``Act''). The final rule
permits the indemnification of eligible items from the United States
while on exhibition in this country in connection with an exhibition of
eligible items from outside of the United States. The final rule also
includes illustrations of exhibitions eligible for indemnification
which are intended to provide further guidance to persons considering
applying for the indemnification of an international exhibition. The
final rule is not intended to bring about a major shift in emphasis of
the current policy or practice of the indemnity program.
EFFECTIVE DATE: September 15, 1995.
FOR FURTHER INFORMATION CONTACT: Alice Whelihan, Indemnity
Administrator, National Endowment for the Arts, 1100 Pennsylvania
Avenue, N.W., Washington, D.C. 20506, 202-682-5442.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Background
In 1975, the United States Congress enacted the Arts and Artifacts
Indemnity Act which established an indemnity program administered by
the Federal Council on the Arts and the Humanities (the ``Federal
Council''). 20 U.S.C. Sections 971-977. The Federal Council is composed
of the heads of nineteen federal agencies and was established by
Congress, among other things, to coordinate the policies and operations
of the National Endowment for the Arts, the National Endowment for the
Humanities, and the Institute of Museum Services, including the joint
support of activities. 20 U.S.C. Section 971.
Under the indemnification program, the United States Government
guarantees to pay loss or damage claims, subject to certain
limitations, arising out of exhibitions containing items determined by
the Federal Council to be of educational, cultural, historical or
scientific value the exhibition of which must be certified by the
Director of the United States Information Agency as being in the
national interest. In order to be eligible for indemnification, the
objects must be on exhibition in the United States, or if outside this
country preferably as part of an exchange of exhibitions.
B. Legislative History
On May 21, 1975, Senators Claiborne Pell (D, RI) and Jacob Javits
(R, NY) introduced the Arts and Artifacts Indemnity Act as an amendment
to the reauthorization of the National Foundation on the Arts and
Humanities Act of 1965. According to the House Committee report, the
purpose of the statute was ``to provide indemnities for exhibitions of
artistic and humanistic endeavors, and for other purposes.'' \1\ The
Senate Committee stated that it believed that this purpose could be
advanced ``through the exchange of cultural activities and sharing by
nations of the world of their cultural institutions and national wealth
and treasure.'' \2\
\1\ Id.
\2\ Id.
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The broad purpose of the Act is echoed throughout the Act's
language and legislative history. For example, in testifying at joint
hearings before the House Subcommittee on Select Education and the
Senate Special Subcommittee on Arts and Humanities, Nancy Hanks,
Chairman, National Endowment for the Arts, stated:
Cultural exhibitions and exchanges of high quality should be
encouraged by the laws and policies of the United States Government.
They are in the national interest because of the personal,
aesthetic, intellectual, and cultural benefits accruing to every
man, woman and child of this nation who has the opportunity to
experience these beautiful and enlightening presentations. We
believe that this country should do as much as any nation in the
world to insure that these vitally important programs are
strengthened.\3\
\3\ H.R. Rep. No. 680, 94th Cong., 1st Sess., at 5.
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There was concern in Congress that such exchanges were impeded by
prohibitively high insurance costs. The Senate noted that ``anywhere
from half to two-thirds of the cost of an international exhibition is
the cost of insuring the material to be exhibited.'' \4\ Ronald Berman,
Chairman of the Federal Council, testified that without indemnification
provided in special legislation enacted by the 93rd Congress, the
insurance costs in connection with several widely attended exhibitions
would have been prohibitive.\5\
\4\ S. Rep. No. 289, 94th Cong., 1st Sess., at 1.
\5\ H.R. Rep. No. 680, 94th Cong., 1st Sess., at 5.
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C. Regulatory Background
The Federal Council is the agency charged by Congress with the
responsibility to administer the Arts and Artifacts Indemnity Act. In
practice, the Indemnity Program is administered for the Federal Council
by the Museum Program of the National Endowment for the Arts under the
``Indemnities Under the Arts and Artifacts Indemnity Act'' regulations
(the ``Regulations''), which are set forth at 45 CFR Part 1160.
These Regulations have been promulgated, and amended from time to
time, by the Federal Council pursuant to the express and implied
rulemaking authorities granted by Congress to make and amend rules
needed for the effective administration of the indemnity program. Among
other things, Congress expressly granted the Federal Council the
authorities to establish the terms and conditions of indemnity
agreements; to set application procedures; and to establish claim
adjustment procedures. 20 U.S.C. Sections 971(a)(2), 973(a), 975(a).
For a number of years, the Federal Council has considered the
desirability of amending the Regulations to permit the indemnification
of U.S.-owned loans on exhibition in the United States in connection
with certified international exhibitions. As currently drafted, the
Regulations do not cover domestic objects on loan to an international
exhibition in the United States. The Regulations provide, in pertinent
part:
An indemnity agreement made under these regulations shall cover:
(1) Eligible items from outside the United States while on
exhibition in the United States or
(2) Eligible items from the United States while on exhibition
outside this country, preferably when they are part of an exchange
of exhibitions. 45 CFR Section 1160.1.
On February 25, 1993, during a lengthy discussion of the
application of the National Gallery of Art for the indemnification of
the exhibition ``Great French Paintings from the Barnes
[[Page 42465]]
Foundation: Impressionist, Post-Impressionist and Early Modern,'' the
Federal Council concluded that the eligibility criteria set forth in
the Regulations were more narrowly drawn than required under the Act.
While the Council approved the indemnification of the Barnes
exhibition, which consisted of one foreign-owned object and 80
domestically owned objects, a Certificate of Indemnity ultimately did
not issue because of legal uncertainties related to the Council's
action under its current Regulations. To clarify eligibility issues for
future actions, the Federal Council voted to amend its regulations.
After extensive discussion of the issue, the Federal Council
resolved that the proposed amendment to the Regulations would
significantly enhance its ability to provide the American public with
the benefits to a high quality program of international exhibitions
while not significantly increasing the exposure of the Federal
government to pay loss or damage claims nor significantly adding to the
administrative burdens or costs of the program.
The Federal Council concluded that widening the eligibility
criteria under the Indemnity Program to include coverage of U.S.-owned
objects in exhibitions that also include foreign-owned loans would
provide an important benefit to U.S. cultural institutions and to the
American public. Under the current guidelines, U.S.-owned loans may be
indemnified only when exhibited abroad. The Federal Council concluded
that if items from abroad are of educational, cultural, historical or
scientific value, and their exhibition has been certified by the
Director of the United States Information Agency as being in the
national interest, thereby making them eligible for indemnification
coverage, the U.S.-owned loans to the exhibition also should be
eligible for indemnification.
The Federal Council stressed that the amendment is not intended to
bring about a major shift in the emphasis of the current policy or
practice of the indemnity program. Under the amended Regulations,
indemnity coverage will continue to be available primarily for the
exhibition of items coming from outside the United States. In
determining whether to indemnify international exhibitions that also
include U.S. loans, the Federal Council will continue to apply the same
general standard of review--whether the exhibition taken as a whole is
of educational, cultural, historical or scientific significance.
However, to guard against potential abuses, the Federal Council will
require that the foreign loans be an integral or essential component of
the exhibition. Exhibitions consisting solely of domestic items will
continue to be ineligible for indemnification.
The Federal Council concluded that because of the overall statutory
cap on the program the proposed modification would not significantly
increase the exposure of the Federal government to claims for loss or
damage while providing important additional relief for U.S. borrowing
institutions. Under the statutory cap, the Federal Council may not
issue indemnity agreements covering losses of more than an aggregate of
$3,000,000,000 at any one time. The cap--and thereby the total
government exposure--remains the same whether the indemnity agreements
cover foreign or domestic content. Moreover, the fact that coverage
during international transit, the time of greatest risk, would not be
required for loans from U.S. lending institutions greatly reduces the
risk of additional losses.
The Federal Council further concluded that the proposed amendment
would not cause a significant increase in either the number of
applications to the program or the administrative burdens associated
with applying or reviewing indemnification applications. This is the
case because under the current practice, applicants already are
required to include information on domestic loans in their
applications, and indemnity panels consider the educational, cultural,
historical or scientific value of both the domestic and foreign items
in determining whether to indemnify an exhibition.
While the need to determine whether indemnification of the domestic
content is appropriate will require an additional judgment made by the
Federal Council, it is similar in character to the determinations
already made by the Federal Council in determining the appropriateness
of indemnification of foreign content. Moreover, the same options for
technical assistance and resubmission will be available for a rejected
applicant as are currently available.
On June 16, 1993, on the basis of these conclusions, the Federal
Council reaffirmed its vote of February 25, 1993 to amend the
Regulations to permit the coverage of domestic items in connection with
international exhibitions in the United States. Specifically, the
Federal Council approved a motion to promulgate regulations revising 45
CFR 1160.1 (``Purpose and Scope'') by adding the following language:
(3) eligible items from the United States while on exhibition in
the United States if the exhibition includes other eligible items
from outside the United States.
On April 6, 1994, the Federal Council published in the Federal
Register an advance notice of proposed rulemaking (ANPR) regarding the
indemnification of eligible items from the United States while on
exhibition in this country in connection with an exhibition of items
from outside the United States. 59 FR 16162-64, April 6, 1994. On July
6, 1995, the Federal Council published in the Federal Register a notice
of proposed rulemaking which included the Federal Council's responses
to the comments received in response to the ANPR. 60 FR 35162-66, July
6, 1995.
II. Discussion of Comments Received
The Federal Council did not receive any comments in response to its
notice of proposed rulemaking.
III. Regulatory Anlayses
This rule is not a significant regulatory action for the purposes
of Executive Order 12866 of September 20, 1993.
As required by the Regulatory Flexibility Act, it is hereby
certified that this rule will not have a significant impact on small
business entities.
The Catalogue of Federal Domestic Assistance number for the Arts
and Artifacts Indemnity Program is 45-201.
For the Federal Council on the Arts and the Humanities.
Michael S. Shapiro,
Counsel to the Federal Council on the Arts and the Humanities.
For the reasons set forth in the preamble, 45 CFR Part 1160 is
amended as follows:
PART 1160--INDEMNITIES UNDER THE ARTS AND ARTIFACTS INDEMNITY ACT
1. The authority citation for part 1160 continues to read as
follows:
Authority: 20 U.S.C. 971-977.
2. Section 1160.1 is amended by revising paragraph (a) as follows:
Sec. 1160.1 Purpose and scope.
(a) This part sets forth the exhibition indemnity procedures of the
Federal Council on the Arts and Humanities under the Arts and Artifacts
Indemnity Act (Pub. L. 94-158) as required by section 2(a)(2) of the
Act.
* * * * *
3. Sections 1160.4 through 1160.11 are redesignated as Secs. 1160.5
through
[[Page 42466]]
1160.12 and a new Section 1160.4 is added to read as follows:
Sec. 1160.4 Eligibility.
An indemnity agreement made under these regulations shall cover:
(a) Eligible items from outside the United States while on
exhibition in the United States;
(b) Eligible items from the United States while on exhibition
outside this country, preferably when they are part of an exchange of
exhibitions; and
(c) Eligible items from the United States while on exhibition in
the United States, in connection with other eligible items from outside
the United States which are integral to the exhibition as a whole.
Example 1
Museum A, an American art museum, is organizing a retrospective
exhibition which will include more than 150 works of art by the
Impressionist painter Auguste Renoir. The exhibition will present
the full range of Renoir's production for the first time ever in an
American museum. Museums B and C, large national museums in Paris
and London, have agreed to lend 125 major works of art illustrating
every aspect of Renoir's career. Museum A is also planning to
include related works from other American public and private
collections which have not been seen together since the artist's
death in 1919. Museums D and E, major east coast American art
museums, have agreed to lend 25 masterworks by Renoir. The
exhibition will open in Chicago and travel to San Francisco and
Washington.
Discussion
Example 1 is a straightforward application of the amended
indemnity regulations. Under the old regulations, only the works of
art from Museums B and C, the foreign museums, would have been
eligible for indemnification. Under the proposed Regulations, the
works of art from American museums and other public and private
collections also would be eligible for indemnification. In
determining whether to indemnify the entire exhibition, the Federal
Council will evaluate the exhibibition as a whole and whether the
foreign loans are integral to the educational, cultural, historical
or scientific significance of the exhibition. In this example, the
Federal Council would likely approve indemnification of the entire
exhibit.
Example 2
Museum A in Massachusetts is organizing an exhibition
celebrating 250 Years of Decorative Arts in America, to be held in
conjunction with the state's celebration of the millennium. Included
among the objects to be borrowed from museums and historical
societies in the United States are furniture, textiles, metalwork,
ceramics, glass and jewelry, illustrating the best examples of
American design from colonial times to the present. The curator
traveled abroad recently and saw an exhibition of American quilts
which have been acquired by a British decorative arts museums. He
intends to borrow several of the quilts for the exhibition.
Discussion
Example 2 raises the question as to whether the American museum
organizing the exhibition has included the British-owned American
quilts merely to obtain insurance relief. In determining whether to
indemnify the entire exhibition, the Federal Council will evaluate
the exhibition as a whole and whether the foreign loans are integral
to achieving its educational, cultural and historical purposes.
Here, it is likely that the Federal Council will conclude that the
foreign work are not an essential component of the exhibition. The
Federal Council also may seek additional information from the
applicant to determine whether the objectives of the exhibition
could have been accomplished as satisfactorily by borrowing American
quilts from U.S. collections. On these facts, the Federal Council in
all likelihood would deny indemnification for the entire exhibition.
Example 3
Museum A, an American museum, is organizing an exhibition of the
works of James Watkins, a nineteenth century American painter,
focusing on his studies of human anatomy. Museum A has the foremost
collection of preparatory drawings related to Watkins' major
painting, ``The Surgeon and His Students.'' The painting is in the
permanent collection of Museum B, located in the south of France,
which has agreed to lend the painting for the exhibition. The
exhibition will be shown at Museum B after the U.S. tour. American
Universities, C and D, have also agreed to lend anatomical
illustrations and drawings which show Watkins' development as a
draughtsman. The exhibition and accompanying catalogue are expected
to shed new light on Watkins contributions to art and scientific
history.
Discussion
Example 3 addresses the issue of whether the Federal Council
will indemnify an exhibition even where the U.S. objects outnumber
the foreign works. In determining whether to indemnify the entire
exhibition, the Federal Council will evaluate the exhibition as a
whole and the relationship of the foreign loans to the educational,
cultural, historical and scientific significance of the exhibition.
In this example, the exhibition promises to make important
contributions not only to the history of art but also to the history
of science. While there is only a single foreign work of art, it is
clearly an essential component of the exhibition as a whole. The
case for indemnification of the entire exhibition is further
strengthened by the fact that a foreign masterpiece, which is
closely related to the preparatory drawings and anatomical
illustrations and drawings owned by American institutions, will be
made available to the American public. Thus, the mere fact that the
U.S. loans outnumber the foreign works will not in itself disqualify
the entire exhibition for indemnification.
[FR Doc. 95-20189 Filed 8-15-95; 8:45 am]
BILLING CODE 7536-01-M
