[Federal Register Volume 68, Number 87 (Tuesday, May 6, 2003)]
[Proposed Rules]
[Pages 23927-23930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-11135]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 68, No. 87 / Tuesday, May 6, 2003 / Proposed 
Rules  

[[Page 23927]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 274, 276, 278, 279, and 280

RIN 0584-AD28


Food Stamp Program, Reauthorization: Electronic Benefit Transfer 
(EBT) and Retail Food Stores Provisions of the Food Stamp 
Reauthorization Act of 2002

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This action proposes to revise Food Stamp Program regulations 
pertaining to the standards for approval of Electronic Benefits 
Transfer (EBT) systems, the participation of retail food stores and 
wholesale food concerns, and the State agency liabilities and federal 
sanctions.
    These proposed changes to the Food Stamp Program's regulations are 
put forth to implement sections 4108, 4110, 4113 and 4117 of the Food 
Stamp Reauthorization Act of 2002.
    These changes will allow the U.S. Department of Agriculture 
(Department) to use delivery methods other than certified mail when 
notifying retailers or State agencies of adverse action; permit the 
Department to approve alternate methods of issuing food stamp benefits 
during disasters; eliminate the requirement that Federal costs for EBT 
systems cannot exceed the costs of the paper systems they replace; and 
allow group homes and institutions to redeem EBT benefits directly 
through banks rather than going through authorized wholesalers or other 
retailers.

DATES: The Department must receive comments on or before July 7, 2003 
to assure consideration.

ADDRESSES: Submit comments to Lizbeth Silbermann, Chief, Electronic 
Benefit Transfer Branch, Benefit Redemption Division, Food and 
Nutrition Service, USDA, 3101 Park Center Drive, Alexandria, Virginia, 
22302. You may also datafax comments to Ms. Silbermann's attention at 
(703) 305-1863, or e-mail them to her at 
[email protected]. The Department will open all written 
comments for public inspection at the office of the Food and Nutrition 
Service during regular business hours (8:30 a.m. to 5 p.m., Monday 
through Friday) at 3101 Park Center Drive, Alexandria, Virginia, Room 
403.

FOR FURTHER INFORMATION CONTACT: Address any questions regarding this 
rulemaking to Ms. Silbermann at the above address or by telephone at 
(703) 305-2517.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be not significant and was not 
reviewed by the Office of Management and Budget under Executive Order 
12866.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule in 7 CFR part 3015, subpart V and related notice (48 FR 29115), 
this Program is excluded from the scope of Executive Order 12372, which 
requires intergovernmental consultation with State and local officials.

Executive Order 13132, Federalism

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(2)(B) of Executive Order 13132. The 
Department has considered the impact of this rule on State and local 
governments and has determined that this rule does not have Federalism 
implications. This rule does not impose substantial or direct 
compliance costs on State and local governments. Therefore, under 
section 6(b) of the Executive order, a federalism summary impact 
statement is not required.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601-612). Roberto Salazar, 
Administrator, Food and Nutrition Service, has certified that this 
proposed rule will not have a significant economic impact on a 
substantial number of small entities. Departmental Field Offices, 
retailers participating or applying to participate in the Food Stamp 
Program, State agencies that distribute food stamp benefits and group 
living homes are the entities affected by this change.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507), this proposed rule contains information collections that are 
subject to review and approval by the Office of Management and Budget; 
therefore, FNS is submitting for public comment the changes in the 
information collection burden that would result from adoption of the 
proposals in the rule.
    Comments on this proposed rule must be received by July 7, 2003.
    Send comments to Office of Information and Regulatory Affairs, OMB, 
Attention: Lauren Wittenberg, Desk Officer for FNS, Washington, DC, 
20503. Please also send a copy of your comments to Lizbeth Silbermann, 
Chief, Electronic Benefit Transfer Branch, Benefit Redemption Division, 
Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park 
Center Drive, Alexandria, VA 22302. For further information, or for 
copies of the information collection, please contact Ms. Silbermann at 
the above address.
    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the performance of the functions of the 
agency, including whether the information will have practical utility; 
(b) the accuracy of the agency's estimate of the burden of the proposed 
collection of information including the validity of the methodology and 
assumptions used; (c) ways to enhance the quality, utility and clarity 
of the information to be collected; and (d) ways to minimize the burden 
of the collection of information through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology.
    All responses to this notice will be summarized and included in the 
request

[[Page 23928]]

for OMB approval. All comments will also become a matter of public 
record.
    Title: Operating Guidelines, Forms and Waivers.
    OMB Number: 0584-0083.
    Type of Request: Revision of a currently approved collection.
    Abstract: Under section 7(i) of the Food Stamp Act of 1977, as 
amended, (7 U.S.C. 2016(i)) the Secretary is authorized to permit State 
agencies to implement Electronic Benefit Transfer (EBT) systems. The 
Secretary is authorized to establish standards for the required testing 
prior to implementation of any EBT system and may require analysis of 
the implementation results in a limited pilot project area before 
expansion of the system. Any State requesting funding for the design, 
development and operation of an EBT system must submit a written plan 
of action called an Advance Planning Document (APD) to the Food and 
Nutrition Service (FNS) for approval.
    In this proposed rulemaking, we are revising Food Stamp Program 
rules affecting the standards for approval and operation of Food Stamp 
EBT systems. One of the provisions will reduce the amount of 
information required for a State agency to submit as part of the 
standard APD. We are proposing these revisions in response to section 
4110 of the 2002 Farm Bill, which eliminates the cost neutrality 
requirements.
    With provisions in this regulation, we are proposing to eliminate 
or reduce the reporting requirements as follows: State agencies will no 
longer be required to complete a cost neutrality assessment of EBT 
system design, development and operation costs in comparison to the 
paper system that has been replaced. This assessment was subject to FNS 
approval as part of the State's APD.
    As currently approved by OMB, the estimated time to gather 
information and complete an EBT APD is 35 hours per respondent. The 
record-keeping burden includes maintaining a copy of the system design 
specifications, the APD submission, approvals and APD updates. A total 
of 49 States have operational EBT systems, and we expect 53 State 
agencies will be operational within the next year. In addition to the 
remaining States, some EBT States will be entering new contracts as 
their current contracts expire. We estimate 10 State agencies will 
submit an APD each year, for a total of 350 hours.
    Estimates of Burden: We estimate the provisions of this proposed 
rule will reduce the amount of time each State agency spends on an APD 
for EBT by 5 hours, for an overall decrease in burden hours of 50 
annually, bringing the total time down to 30 hours per respondent or 
300 hours per year overall.
    Respondents: State agencies.
    Estimated number of Respondents: 10 State agencies per year.
    Estimated number of Responses per Respondent: One.
    Estimated annual number of responses: 10.
    Estimated Total Annual Burden on Respondents: 300 hours.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
except as specified in the DATES section of the final rule. Prior to 
any judicial challenge to the provisions of this rule or the 
application of its provisions, all applicable administrative procedures 
must be exhausted.

Public Law 104-4

    Unfunded Mandate Reform Act of 1995 (UMRA) Title II of UMRA 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. Under Section 202 of the UMRA, the Department 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, or tribal governments in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. When such a statement is needed for a rule, section 205 of 
the UMRA generally requires the Department to identify and consider a 
reasonable number of regulatory alternatives and adopt the least 
costly, more cost-effective or least burdensome alternative that 
achieves the objectives of the rule. This rule contains no Federal 
mandates (under the regulatory provisions of Title II of the UMRA) for 
State, local, and tribal governments or the private sector of $100 
million or more in any one year. This rule is, therefore, not subject 
to the requirements of sections 202 and 205 of the UMRA.

Background

    In this rule, the Department proposes the following: to revise food 
stamp regulations affecting the delivery of adverse action notices to 
retailers and State agencies; to allow alternative issuance systems in 
disasters; to eliminate the requirement for cost neutrality for EBT 
systems; and, to permit redemption of EBT benefits through group living 
facilities.

Mailing to Retailers and State Agencies

    The Department proposes a revision to regulations at 7 CFR 
276.7(b), 278.1(k), 278.1(l)(2), 278.6(o), 278.7(b)(2), 278.7(f), 
279.8(e), and, 279.10(b) to eliminate the requirement that the 
Department send notices of adverse actions to retailers and State 
agencies using certified mail. Effective May 13, 2002, section 4117 of 
the Food Stamp Reauthorization Act of 2002 (FSRA) amended section 
(14)(a)(2) of the Food Stamp Act of 1977 (Food Stamp Act) (7 U.S.C. 
2023 (a)(2)) to authorize the delivery of such notices in any form the 
Secretary determines will provide evidence of the delivery.
    Whenever the Department denies a retailer authorization to 
participate in the Food Stamp Program or prepares to withdraw or 
disqualify an authorized food stamp retailer for violating program 
regulations or asserts a claim against the State agency, the FNS sends 
notice of this adverse action directly to the retailer or State agency. 
Prior to the enactment of the FSRA, section 14(a)(2) of the Food Stamp 
Act of 1977 stated, ``such notice must be delivered by certified mail 
or personal service''. Given the various methods of delivery that have 
become available since the inception of the Food Stamp Program, the 
Department wants to expand its methods of delivery to include other 
mailing services, including but not limited to Federal Express, UPS, 
Emery, and similar services. Thus, to reflect the amendments made by 
the recently enacted FSRA we propose to amend the program regulations 
to allow use of delivery methods other than certified mail when mailing 
determination letters to retailers, or notices to retail food stores, 
wholesale food concerns and claim notices to State agencies, as long as 
the method provides evidence of delivery. Although the statutory 
amendment was directed specifically at notices of adverse action to 
retail food stores and wholesale food concerns, the Department believes 
that similar notification would be appropriate for other types of 
official notices provided under current regulations. Thus, we are 
proposing to amend regulations at: 7 CFR 276.6(b) regarding claims 
forfeiture of bonds, 278.7(f) regarding denial of claims brought by 
authorized firms against FNS; 279.8(e) regarding determinations of 
review officers; and 279.10(b) regarding the service of a summons and 
complaint.

[[Page 23929]]

Alternative Issuance Systems In Disasters

    This section proposes a revision to food stamp regulations at 7 CFR 
280.1 for emergency food assistance for victims of disasters. By terms 
of section 4108 of the FSRA, which amended section (5)(h)(3)(B) of the 
Food Stamp (7 U.S.C. 2014(h)(3)(B)), the Department received authority 
to approve alternate methods for issuing food stamp benefits during 
disasters when reliance on EBT systems is impracticable. This proposal 
would amend the regulation to reflect this new authority.
    Consistent with the intent of the statutory amendment, as expressed 
in legislative history, the Department would only approve alternate 
issuance, such as cash, as a last resort, depending on the specific 
circumstances of the disaster. In disaster situations, the Department 
will consult with State agencies to determine available means of 
benefit delivery. (H.R. Conf. Rep. No. 107-424, 107th Cong. 2nd Sess. 
P. 264 (2002).) EBT is always the preferred method of food stamp 
benefit delivery. It provides assistance that is earmarked for its 
intended purpose and is much more difficult to divert. Furthermore, 
State agencies typically have disaster plans in place under their EBT 
systems with contingencies for events of this nature. Therefore, it is 
unlikely a State would ever need to resort to any alternate form of 
issuance. However, in some extreme circumstances, when EBT is 
impracticable and the system cannot be restored in a timely fashion, an 
appropriate alternative delivery method, such as cash, may be 
permitted. The use of coupons is no longer practicable except in those 
few States that still issue some or all benefits in the form of 
coupons. Because EBT systems will be fully implemented by the end of 
2004, the cost of printing coupons and maintaining a redemption system 
for disaster use only would be prohibitive.

Cost Neutrality For EBT Systems

    This section proposes to eliminate the requirement at 7 CFR 
274.12(e) that Federal costs of EBT systems not exceed the costs of the 
paper systems they replace, in accordance with section 4110 of the 
FSRA, which eliminated the statutory requirement that the Secretary 
include a cost neutrality standard as a condition of approval of State 
EBT systems.
    The elimination of the cost neutrality requirement does not remove 
the requirement for State agencies to submit Implementation Advanced 
Planning Documents (IAPDs) to the Department for approval prior to 
implementing, or make upgrades or changes to their EBT systems as 
determined necessary for approval.

Redemption of Benefits Through Group Living Arrangements

    This section proposes to revise food stamp regulations regarding 
participation of group living facilities. By terms of section 4113 of 
the FSRA, ``a center, organization, institution, shelter, group living 
arrangement and establishment'' that are among those defined as retail 
food stores under section 3(k)(2) of the Food Stamp Act (7 U.S.C. 
2012(k)(2)), ``may now be authorized to redeem benefits directly 
through financial institutions in areas where EBT has been 
implemented.''
    The four types of entities affected by this change are drug addict 
and alcoholic treatment and rehabilitation programs; group living 
arrangements; shelters for battered women and children; and public or 
private nonprofit homeless meal providers. Prior to FSRA, such 
facilities could only redeem benefits through authorized wholesalers 
and other retailers under section 10 of the Food Stamp Act (7 U.S.C. 
2019). Under the coupon system, this was not an unduly cumbersome 
requirement.
    The implementation of EBT changed the dynamic for redeeming food 
stamp benefits, making it more difficult for group homes to redeem 
residents' food stamp benefits. The logistics were impractical for many 
group homes and recipients. This prompted the Department to approve 
demonstration projects, specifically permitting group homes to deposit 
benefits directly into their bank accounts by providing point-of-sale 
(POS) devices or to process manual vouchers. Facilities then deposit 
food stamp benefits into their financial institution accounts without 
involving wholesale food concerns in the process. These demonstration 
projects mirror the regulatory changes in this proposed rule.
    In these situations, the facility functions like most authorized 
retailers, conducting EBT transactions with its residents, deducting 
benefits from their cards and depositing them into the facility's 
account. The facility can then purchase eligible foods at any 
authorized retailer with funds drawn directly from its own account. 
This makes it easier for those recipients residing in the authorized 
facilities to use their benefits in an EBT environment. Therefore, the 
Department is proposing that group home facilities be equipped with POS 
devices in a manner that meets the requirements established for 
retailers. These facilities would redeem benefits using the POS device, 
and then purchase eligible food items.
    Equiping of these facilities would be in accordance with the EBT 
regulations at 7 CFR 274.12. State agencies approved to operate a 
demonstration project for this function may continue operations without 
further action and are no longer bound by the survey requirements of a 
demonstration project.

Implementation

    The Department is proposing that the provisions of this rulemaking 
be effective no later than 30 days after publication of the final rule.

List of Subjects

7 CFR Part 274

    Administrative practice and procedure, Food stamps, Fraud, Grant 
programs--social programs, Reporting and recordkeeping requirements, 
State liabilities.

7 CFR Part 276

    Administrative practice and procedure, Food stamps, Fraud, State 
agency liabilities and federal sanctions.

7 CFR Part 278

    Food stamps, Grant programs--social programs, Penalties.

7 CFR Part 279

    Administrative practice and procedure, Food stamps, Grant 
programs--social programs.

7 CFR Part 280

    Disaster assistance, Food stamps, Grant programs--social programs.
    Accordingly, 7 CFR parts 274, 276, 278, 279, and 280 are proposed 
to be amended as follows:
    1. The authority citation for 7 CFR parts 274, 276, 278, 279, and 
280 continue to read as follows:

    Authority: 7 U.S.C. 2011-2036.

PART 274--ISSUANCE AND USE OF COUPONS

    1. In Sec.  274.10, paragraphs (f)(1), (f)(2) and (f)(3) are 
revised to read as follows:


Sec.  274.10  Use of identification cards and redemption of coupons by 
eligible households.

* * * * *
    (f) * * *
    (1) Members of eligible households who are narcotics addicts or 
alcoholics and who regularly participate in a drug or alcoholic 
treatment rehabilitation program may use food stamp benefits to 
purchase food prepared for them during the course of such program by a 
private

[[Page 23930]]

nonprofit organization or institution or publicly operated community 
mental health center which is authorized by FNS to redeem benefits in 
accordance with Sec.  278.1 and Sec.  278.2(g) of this chapter.
    (2) Eligible residents of a group living arrangement may use food 
stamp benefits issued to them to purchase meals prepared especially for 
them at a group living arrangement which is authorized by FNS to redeem 
benefits in accordance with Sec.  278.1 and Sec.  278.2(g) of this 
chapter.
    (3) Residents of shelters for battered women and children as 
defined in Sec.  278.1(g) of this chapter may use their food stamp 
benefits to purchase meals prepared especially for them at a shelter 
which is authorized by FNS to redeem benefits in accordance with Sec.  
278.1 and Sec.  278.2(g) of this chapter.
* * * * *


Sec.  274.12  [Amended]

    2. In Sec.  274.12:
    a. Paragraph (e) is removed, and paragraphs (f) through (n) are 
redesignated as paragraphs (e) through (m), respectively;
    b. Newly redesignated paragraph (k)(5) is removed.

PART 276--STATE AGENCY LIABILITIES AND FEDERAL SANCTIONS

    1. In Sec.  276.7, paragraph (b) is revised to read as follows:


Sec.  276.7  Administrative review process.

    (b) Notice of claim. When asserting a claim against a State agency, 
FNS shall provide the notice to the State agency using any delivery 
method as long as the method provides evidence of the delivery.
* * * * *

PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD 
CONCERNS AND INSURED FINANCIAL INSTITUTIONS

    1. In Sec.  278.1:
    a. The first sentence in paragraph (e) is amended by removing the 
words ``wishing to redeem through wholesalers food stamps received from 
or on behalf of their participants'';
    b. The first sentence in paragraph (f) is amended by removing the 
words ``coupons directly through wholesalers'' and adding in their 
place the word ``benefits'';
    c. The first sentence in paragraph (g) is amended by removing the 
words ``coupons directly through wholesalers'' and adding in their 
place the word ``benefits'';
    d. The second sentence in paragraph (k)(7) is revised as set forth 
below;
    e. The first sentence in paragraph (l)(2) is amended by removing 
the words ``certified mail or personal service'' and adding in their 
place the words ``using any delivery method as long as the method 
provides evidence of delivery.''


Sec.  278.1  Approval of retail food stores and wholesale food 
concerns.

* * * * *
    (k) * * *
    (7) * * * The FNS officer in charge shall issue a notice to the 
firm (using any delivery method that provides evidence of delivery) to 
inform the firm of any authorization denial and advise the firm that it 
may request review of that determination.
* * * * *
    2. In Sec.  278.2, the text of paragraph (g) is redesignated as 
paragraph (g)(1), and a new paragraph (g)(2) is added to read as 
follows:


Sec.  278.2  Participation of retail food stores.

* * * * *
    (g) * * *
    (2) Not withstanding paragraph (g)(1)of this section, authorized 
drug addict and alcoholic treatment and rehabilitation programs, group 
living arrangements, shelters for battered women and children, and 
public or private nonprofit homeless meal providers for homeless food 
stamp households shall redeem EBT benefits directly through an insured 
financial institution in areas where an Electronic Benefit Transfer 
(EBT) system has been implemented.
* * * * *


Sec.  278.6  [Amended]

    3. In Sec.  278.6, the first sentence in paragraph (o) is amended 
by removing the words ``certified mail or personal service'' and adding 
in their place the words ``any method that provides evidence of 
delivery''.


Sec.  278.7  [Amended]

    4. In Sec.  278.7:
    a. The first sentence in paragraph (b)(2) is amended by removing 
the words ``certified mail-return receipt requested'' and adding in 
their place the words ``using any delivery method as long as the method 
provides evidence of delivery'';
    b. The first sentence in paragraph (f) is amended by removing the 
words ``certified mail or personal service'' and adding in their place 
the words ``using any delivery method as long as the method provides 
evidence of delivery''.

PART 279--ADMINISTRATIVE AND JUDICIAL REVIEW--FOOD RETAILERS AND 
FOOD WHOLESALERS


Sec.  279.8  [Amended]

    1. In Sec.  279.8, the first sentence in paragraph (e) is amended 
by removing the words ``certified mail'' and adding in their place the 
words ``using any delivery method as long as the method provides 
evidence of delivery''.


Sec.  279.10  [Amended]

    2. In Sec.  279.10, the last sentence in paragraph (b) is amended 
by removing the words ``registered or certified mail'' and adding in 
their place the words ``using any delivery method as long as the method 
provides evidence of delivery''.

PART 280--EMERGENCY FOOD ASSISTANCE FOR VICTIMS OF DISASTERS

    1. Sec.  280.1 is amended by adding a sentence to the end of the 
section to read as follows:


Sec.  280.1  Interim disaster procedures.

    * * * The Secretary may also approve alternate methods for issuing 
food stamp benefits during a disaster when reliance on Electronic 
Benefits Transfer (EBT) systems is impracticable.

    Dated: April 30, 2003.
Roberto Salazar,
Administrator, Food and Nutrition Service.
[FR Doc. 03-11135 Filed 5-5-03; 8:45 am]
BILLING CODE 3410-30-P