[Federal Register Volume 68, Number 122 (Wednesday, June 25, 2003)]
[Rules and Regulations]
[Pages 37693-37697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15897]



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  Federal Register / Vol. 68, No. 122 / Wednesday, June 25, 2003 / 
Rules and Regulations  

[[Page 37693]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 274

[Amendment No. 384]
RIN 0584-AC91


Food Stamp Program: Electronic Benefit Transfer (EBT) Systems 
Interoperability and Portability

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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

SUMMARY: This action provides final rulemaking for an interim rule 
published on August 15, 2000. It implements legislation in accordance 
with the Electronic Benefit Transfer Interoperability and Portability 
Act of 2000. This rule finalizes revisions to the Food Stamp Program 
regulations to ensure that recipients can use their electronic food 
stamp benefits across state borders. The regulations require 
interoperable state electronic issuance systems and establish national 
standards to achieve this requirement. One hundred percent Federal 
funding is available to pay for the operational cost of this 
functionality, up to a national annual limit of $500,000. Costs beyond 
this level will be covered at the standard fifty percent program 
reimbursement rate for State administrative costs. Based on the 
Department's experience to date, it is not expected that costs will 
exceed $500,000.

DATES: This rule is effective July 25, 2003.

FOR FURTHER INFORMATION CONTACT: Lizbeth Silbermann, Chief, Electronic 
Benefit Transfer Branch, Benefit Redemption Division, Food and 
Nutrition Service, USDA, 3101 Park Center Drive, Alexandria, Virginia, 
22302, or telephone (703) 305-2517.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant and was 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 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 and 
consult with them as they develop and carry out those policy actions. 
The Food and Nutrition Service (FNS) has considered the impact of this 
rule which requires mandatory interoperability of Food Stamp Program 
Electronic Benefit Transfer (EBT) Systems and portability of 
electronically-used benefits nationwide in accordance with specific 
requirements set forth in the Electronic Benefit Transfer 
Interoperability and Portability Act of 2000. FNS is not aware of any 
case where any of these provisions would in fact preempt State law and 
no comments were made to that effect. This rule also does not impose 
substantial direct compliance costs on State and local governments. 
Some of the provisions, although not previously required by food stamp 
regulations, have already been implemented by State agencies and, 
therefore, have no incremental costs associated with them. Furthermore, 
the Federal government will pay 100 percent for the cost of switching 
and settling interstate food stamp transactions, up to an annual 
nationwide limit of $500,000. Under current pricing trends, there is no 
indication that total costs for switching and settling interstate food 
stamp transactions will exceed the limit. Should this occur, however, 
State agencies will continue to be paid at the 50 percent reimbursement 
rate for the amount above the limit. The provisions implemented by this 
rule are mandated by the Electronic Benefit Transfer Interoperability 
and Portability Act of 2000, Public Law No. 106-171. Therefore, a 
federalism summary impact statement is not necessary under Section 6 of 
Executive Order 13132.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Eric M. Bost, 
Under Secretary for Food, Nutrition, and Consumer Services, has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. State welfare agencies will be 
the most affected to the extent that they administer or operate EBT 
services for Food Stamp Program benefit delivery.

Paperwork Reduction Act

    This rule does not alter the reporting or recordkeeping 
requirements contained in the interim rule. Those requirements have 
been previously approved by the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 and assigned OMB control 
number 0348-0004 for the SF-270 (Request for Advance or Reimbursement) 
and 0348-0038 for the SF-269A (Financial Status Report--Short Form).

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have a 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 
unless so specified in the DATES paragraph of this preamble. Prior to 
any judicial challenge to the provisions of this rule or the 
application of its provisions, all applicable administrative procedures 
must be followed. In the Food Stamp Program, the administrative 
procedures are as follows: (1) For Program benefit recipients--State 
administrative procedures issued pursuant to 7 U.S.C. 2020(e)(11) and 7 
CFR 273.15; (2) for State agencies--administrative procedures issued 
pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for rules related to 
non-quality control (QC) liabilities) or 7 CFR Part 283 (for rules 
related to QC liabilities); (3) for Program retailers and wholesalers--
administrative procedures

[[Page 37694]]

issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8.

Public Law 104-4

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub.L. 
104-4, 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, FNS 
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 FNS 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. Thus, the rule is not subject to the requirements of sections 202 
and 205 of the UMRA.

Background

    In this rule, the U.S. Department of Agriculture (Department), FNS 
finalizes revisions to the Food Stamp Program (FSP) regulations to 
require interoperability of all State EBT Systems and portability of 
all electronically-issued benefits. This requirement is in accordance 
with the Electronic Benefit Transfer Interoperability and Portability 
Act of 2000, Pub. L. 106-171, (hereinafter ``Pub. L. 106-171'') which 
amended Section 7(k) of the Food Stamp Act of 1977, 7 U.S.C. 2016(k), 
to mandate nationwide interoperability of FSP EBT systems and 
portability of electronically issued benefits and directs the Secretary 
to establish standards to accomplish this. In accordance with the 
regulations promulgated by the Secretary, the Department will pay one 
hundred percent of the costs incurred by a State agency for switching 
and settling transactions, up to an annual limit of $500,000 
nationwide. Pub. L. 106-171 required the Department to promulgate 
regulations to require interoperability and establish a uniform 
national standard of interoperability for Food Stamp EBT systems within 
210 days of its enactment. In order to meet this requirement, interim 
regulations were published in the Federal Register on August 15, 2000 
at 65 FR 49719. This final action takes the comments received in 
response to the interim rulemaking into account. Readers are referred 
to the interim regulation for a more complete understanding of this 
final action.
    Readers should note that another EBT rule was published in the 
Federal Register at around the same time that the interim 
interoperability rule was published. That rule, EBT Provisions of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
(PRWORA) of 1996 (65 FR 59105, October 4, 2000), redesignated several 
paragraphs in the EBT regulations. Therefore, readers should refer to 
the Code of Federal Regulations (CFR) for the most accurate regulatory 
citations of provisions implemented by the interim rule. Furthermore, 
this rule reinstates a paragraph from the August 15, 2000 interim 
Interoperability rule that was inadvertently deleted by the October 4, 
2000 EBT Provisions of the PRWORA rule regarding the interoperability 
funding provisions.
    Comments on the interim rule were solicited through November 13, 
2000. Eight comment letters were received in response to the interim 
rule. Comments were received from 5 State agencies, one retailer 
association, one EBT processor, and one public interest group. This 
final rule makes one revision to the interim regulations, taking into 
consideration all comments received.
    In general, the commenters supported EBT system interoperability 
and food stamp benefit portability. Various provisions of the interim 
rule mandated interoperability of FSP EBT systems and the portability 
of FSP benefits by requiring: The use of the EBT standard message 
format; the establishment of the necessary telecommunication links; the 
use of an Issuer Identification Number on the State's EBT card; and the 
use of the Retailer EBT Data Exchange (REDE) system. The rule also 
provides for 100 percent enhanced Federal funding for the cost of 
switching and settling interstate EBT food stamp transactions, up to an 
annual nationwide limit of $500,000. The specific provisions are 
discussed below.

Interoperability Mandate

    The interim rule mandated that each State agency implement the 
functionality for nationwide interoperability of their EBT systems and 
portability of electronically-issued food stamp benefits by October 1, 
2002. The interim rule provided for exemptions from the deadline for 
State agencies with signed contracts before October 16, 2000 until they 
re-negotiate or reprocure their EBT contracts. The rule also exempted 
Smart Card systems from the mandate until the Department determines 
that a practicable technological method is available for 
interoperability with on-line systems. We received no comments opposing 
the mandate. Three commenters expressed support for the 
interoperability and portability of FSP benefits because it ensures 
that food stamp recipients will be able to use their food stamp 
benefits at authorized retail stores across the country in the same way 
they were able to use paper food coupons.

System Standards for Interoperability

    The interim rule established uniform national standards of 
interoperability and portability based on the standards used by a 
majority of State agencies. Although the Departmental standards are 
based on the Quest Operating Rules (hereinafter ``Quest''), which have 
already been adopted by a majority of State agencies, the Department 
did not adopt Quest in its entirety. Instead the Department chose to 
require only those components that are essential to interoperability. 
One commenter supported this decision because it allows the Quest 
standards to be modified to reflect the emerging industry practices 
without the burden of obtaining a change in federal regulation. 
However, two other commenters opposed it, believing that all State 
agencies should follow the Quest rules to ensure standardization and, 
therefore, nationwide interoperability.
    The Department is aware of no other technical standards, other than 
those established in the rule, that are fundamental to the achievement 
of nationwide interoperability. Furthermore, the Quest rules contain 
requirements that are not essential to interoperability but that would 
require procedural and card modifications at an expense to the State 
agencies that have chosen not to adopt the Quest rules. If the 
Department were to require all State agencies to adopt the Quest rules 
in their entirety, this would impose added burdens, costs, and rigidity 
without strong justification. Accordingly, this rule maintains the 
interoperability standards established in the interim rule and does not 
specifically require State agencies to adopt Quest.

ISO 8583 Message Format

    The interim final rule required State agencies to use the 
International Organization for Standards (ISO) 8583 message format, 
modified for EBT, in order to facilitate interstate transactions. One 
commenter opposed language

[[Page 37695]]

which requires State agencies to adopt the ISO 8583 message format in 
``a version mutually agreed to between the authorization agent and the 
party connected for all transactions.'' Instead, the commenter 
supported adoption of the ISO standard currently being developed by the 
American National Standards Institute (ANSI) X9A11 EBT Working Group. 
The Department would like to clarify that the provision requires State 
agencies to use the ISO 8583 message format as updated by the American 
National Standards Institute (ANSI). The requirement refers to the base 
8583 message format in order to provide enough flexibility to ensure 
automatic updates of the message format by State agencies without the 
need to issue new regulations in the future. The Department, therefore, 
would expect State agencies to update the message format specifications 
of their respective EBT systems in accordance with the most current 
version of the ISO 8583 message format upon adoption by ANSI or 
reprocurement of a State EBT contract.

Issuer Identification Number (IIN)

    The interim final rule requires that the Primary Account Number 
(PAN) on the State-issued EBT card be standardized to include State 
routing information so that transactions can be routed to the 
appropriate State system for authorization, regardless of the 
transaction's point of origin. There were no comments opposing the 
requirement to include the Issuer Identification Number (IIN) in the 
PAN. However, one commenter requested clarification regarding the use 
of the term ``IIN'', and opposed the requirements regarding the 
distribution and updating of the State IIN files.
    Specifically, the commenter requested clarification as to whether 
an ``IIN'' is the same as a Bank Identification Number (BIN). We 
consider the two terms to be interchangeable. We chose to use the term, 
``IIN,'' because the number is used to route transactions to the 
various State authorization systems and not to banking institutions as 
the term ``BIN'' implies.
    The commenter also opposed language which requires each State 
agency to be responsible for distributing all State IINs to each 
retailer, processor, or acquirer that is directly connected to the 
State's authorization system. Instead, the commenter believes that 
State IIN distribution should be the responsibility of the Federal 
government to avoid excessive and redundant updates. We are in 
agreement that redundant updates of IIN information should be avoided. 
However, in the time since FNS published the interim rule, several 
State agencies implemented interoperability without any indications of 
redundant IIN distribution, nor was redundant IIN distribution raised 
as a possible issue by any of the parties involved.
    Although the Department is directing the interoperability 
provisions to all 53 State agencies, most State agencies delegate 
responsibilities to their prime EBT contractor or other designated 
agent of the State. This results in many fewer entities involved in the 
IIN dissemination process. Furthermore, because FNS does not have a 
direct relationship with the processors or acquirers that are directly 
connected to the State agency's authorization system, having FNS be 
responsible for distributing IINs to those entities would place a 
greater burden on State agencies. Each State agency would be 
responsible for ensuring that FNS has the most current listing and 
contact information of such entities. State agencies would also need to 
inform FNS when a new processor or acquirer enters the system and 
necessitates the IIN information. Therefore, the requirement that each 
State agency be responsible for the distribution of State IINs is 
unchanged in this rule.
    The commenter further questioned how a State agency could ensure 
that parties not directly connected to its system update their IIN 
information. Because of the several different levels of third party 
service providers and acquirers involved in the routing of EBT 
transactions, we understand the commenter's concern with getting 
information updated throughout the system. State agencies must, 
therefore, use the required third party processor (TPP) agreements to 
ensure that IIN files or routing tables are updated by all entities 
involved. These are the agreements each State agency is required to 
enter into with a TPP or acquirer directly connected to its 
authorization system. Once the agreements are in place, each TPP or 
acquirer has primary responsibility for having all the State IINs 
loaded into its system.

Third Party Processor

    One comment was received regarding the third party processor 
interface requirements. The interim rule requires each terminal 
operator to interface directly with a State authorization system or 
with a third party service provider to obtain access to one or more 
State authorization systems. The commenter opposed the provision, 
believing that it does not allow retailers to connect directly to a 
State agency's EBT processor. We would like to clarify that, by 
referencing direct interfaces with a State's authorization systems, we 
are referring to interfaces with a State agency's EBT processor or 
transaction switching agent. The purpose of the provision is to ensure 
that terminal operators make the necessary accommodations that will 
enable them to accept EBT cards from all States without requiring a 
system with multiple connections. Therefore, giving terminal operators 
the option to directly connect with a State's authorization system or 
with a third party processor provides them with the flexibility to 
establish the required interfaces in an efficient manner.

FNS REDE System

    The interim final rule requires State agencies or their designated 
agent to access the FNS automated REDE system to update retailer 
authorization information on a daily basis. The requirement ensures 
that State agencies' EBT systems are using the most current Federally 
posted information on retailer authorizations nationwide when approving 
in-State and out-of-State EBT transactions. The requirement also helps 
to improve the efficiency of retailer operations overall. One commenter 
considered the requirement an unnecessary, time-consuming, and unfunded 
mandate due to the added time needed for additional ``checks.'' We 
would like to clarify that transactions do not actually touch the 
national REDE file. Instead, the contractor uses the REDE file to 
update its own retailer database which is used to authorize 
transactions. While we understand that this is a new requirement, most 
State agencies or their vendors were already accessing REDE voluntarily 
prior to the publication of the interim rule because the manual process 
of receiving updated information via telefax or e-mail was more 
cumbersome. Currently, all State agencies that operate an EBT system 
are using the FNS automated REDE system. None of these State agencies 
have indicated that the system is overly burdensome. Furthermore, the 
requirement that State agencies access the REDE system on a daily basis 
is consistent with the level of importance we place on ensuring that 
food stamp benefits be approved only at authorized retailer locations.
    The commenter also asked for clarification on State agencies' 
responsibility for the accuracy of the REDE file. This provision does 
not make State agencies responsible for the accuracy of the REDE file, 
but rather for

[[Page 37696]]

downloading REDE updates on a daily basis.

Border Stores and Manual Vouchers

    Except where necessary for border store access, the interim final 
rule excludes manual transactions from the interoperability 
requirements. In general, commenters were in support of the requirement 
that manual transactions continue to be interoperable in border stores 
necessary for access, with one commenter stating that all EBT retailers 
should be able to process interstate manual transactions nationwide. 
However, two commenters opposed the requirement that any retailer be 
required to process interstate manual transactions because of the 
administrative burden to the retailer. Although we understand this 
concern, border store retailers are already required to have the 
capability to participate in the neighboring State EBT system via a 
manual voucher process when the system is down or if the retailer is 
not equipped with a POS device. The requirement is in place because 
border stores, by definition, are necessary for clients to be able to 
make food stamp purchases without having to travel excessive distances. 
State agencies must, therefore, ensure that there is a process in place 
for these clients to purchase food regardless of system availability at 
the time. Given the high degree of client dependence on these stores 
and because the interim rule does not place an additional burden on 
these retailers, the Department is maintaining the manual voucher 
requirement in the final rule.

Benefit Conversion

    The interim rule requires State agencies to have the capability to 
convert electronic benefits to paper coupons when the household 
relocates to a State that is not interoperable with, and where 
electronic benefits are not portable from, the household's current 
State of residence. One commenter opposed the requirement because 
retailers are increasingly reluctant to accept coupons from recipients 
and banks are refusing to redeem coupons for retailers. Although other 
commenters did not oppose the requirement under current EBT 
implementation realities, they wanted acknowledgement that coupons will 
soon become obsolete.
    The Department is indeed preparing for the time when paper coupons 
will no longer be needed. The Department is also sympathetic to State 
agency concerns that as EBT is implemented in the remaining State 
agencies, coupons will become increasingly unfamiliar to both clients 
and retailers. Currently, there are only six State agencies that do not 
have a Statewide EBT system in place. Four of these State agencies are 
scheduled to have EBT fully implemented within the next year, at which 
time approximately 95 percent of all food stamp benefits will be issued 
electronically.
    The Department is also mindful, however, of Ohio and Wyoming's 
indefinite off-line exemptions from the interoperability requirements. 
Although many third party processor stores in these two States are able 
to accept out-of-State EBT cards, no retailers in the other States can 
accept the Ohio and Wyoming EBT smartcards. Therefore, the long-term 
impacts of eliminating the benefit conversion requirement would affect 
Ohio and Wyoming clients who move to another State. Estimates indicate 
that one percent of a State agency's caseload moves to another State in 
a given year. Currently, Ohio converts to coupons approximately $92,000 
in benefits a year. Wyoming converts approximately $4,000 in benefits a 
year.
    Given the limited instances in which benefit conversion would be 
necessary, the Department is convinced that requiring each State agency 
to have a benefit conversion process in place is no longer justified. 
Therefore, the Department is making optional the requirement that State 
agencies be able to convert electronic benefits to paper coupons when a 
household relocates to a State that is not interoperable with the 
household's current State of residence. However, clients must still be 
able to use their remaining electronic benefits upon relocation.
    State agencies that wish to rely on third party processor access 
when a client moves to another State will need to assist clients in 
finding a store where their out-of-State benefits can be used and, if 
necessary, work with other State EBT directors, store managers, or 
third party processors to get the State's IIN loaded into a store's IIN 
files or routing tables.
    Since it is not yet technically feasible for EBT smartcards to be 
interoperable at this time, Ohio and Wyoming State agencies will need 
to continue converting benefits to coupons whenever a household moves 
to another State.

Funding Provisions

    Pub. L. 106-171 provided one hundred percent Federal funding for 
the cost of switching and settling interstate food stamp transactions. 
The total amount of funding available annually is limited to $500,000. 
The $500,000 funding limit was based on a study of interoperability 
fees conducted by the National Automated Clearing House Association 
(NACHA). Four commenters opposed the funding limit stating that 
interoperability should be an obligation of the Federal government.
    The Department does not have the discretion to change the amount of 
one hundred percent funding available for interoperability costs 
incurred by State agencies. Although only about half of all State 
agencies have requested interoperability funding to date, there is no 
indication that total interoperability costs will exceed the $500,000 
limit given current pricing trends. In the event that interoperability 
costs do exceed the funding limit, State agencies will continue to be 
reimbursed at the fifty percent rate for the amount over the limit. 
Should such an instance occur, the Department expects the additional 
cost to individual State agencies to be nominal.
    Other comments were raised regarding one hundred percent 
reimbursement for administrative fees related to interoperability that 
are passed onto State agencies. Public Law 106-171 (7 U.S.C. 
2016(k)(6)A)) specifically states, ``the Secretary shall pay 100 
percent of the costs incurred by a State agency under this Act for 
switching and settling interstate transactions * * *.'' Therefore, the 
legislation does not give the Department authority to provide one 
hundred percent Federal reimbursement for administrative costs related 
to interoperability. Accordingly, one hundred percent Federal funding 
for interoperability costs will continue to be limited to costs 
incurred specifically for switching and settling interstate food stamp 
transactions.
    Two commenters expressed concern over the nature, amount and 
organization of billing information required to receive enhanced 
interoperability funding. The Department distributes to State agencies 
more detailed information on these requirements each fiscal year as 
part of the ``Request for Interoperability Funding, Administrative 
Procedures.'' This document includes specific procedures outside the 
regulatory process. We have worked closely with State agencies since 
the publication of the interim rule to make the request and payment 
process for interoperability funding as streamlined as possible within 
our regulatory constraints. As a result, we believe we have achieved a 
process that is agreeable to all parties involved and welcome continued 
input.

[[Page 37697]]

National Switch

    We received three comments regarding FNS administration and control 
of a national switch (Gateway). Two commenters supported the 
development of a national switch while one commenter opposed it. In 
accordance with Pub. L. 106-171, the Department employed Phoenix 
Maximus to examine the feasibility of developing a Federal Gateway for 
handling interstate food stamp transactions. Although the report did 
not find technical barriers to having FNS support its own EBT 
transaction switch, it found that such an undertaking would not be cost 
effective. The Benton International Study of the interoperability costs 
of EBT transactions estimates that nationwide interoperability fees 
would amount to approximately $450,000 annually using private switches. 
In contrast, Phoenix Maximus estimates that the annual cost of 
operating a Federal EBT Gateway would be approximately $17 million. 
Another $2.2 million would be needed for initial implementation costs. 
Therefore, the Department is convinced that it would not be fiscally 
prudent to pursue the development of a Federal EBT Gateway at this 
time. As EBT expands across all States as the prevailing method for 
issuing food stamp benefits, we will continue to look into ways to make 
interoperability efficient and cost effective for all parties involved.

Disposition of Disputes, Error Resolution and Adjustments

    Two commenters raised issues regarding the handling of disputes, 
error resolution, and adjustments across State lines. One commenter 
favored a specific reference to the Quest rules while the other 
commenter favored having FNS take the lead in facilitating standards 
for error resolution. The Department has chosen to define standards for 
error resolution within a separate rulemaking body. The EBT Benefit 
Adjustments Final Rule, published on July 5, 2000 at 65 FR 41321 
specifically addresses the process for making retailers or clients 
whole when a system error occurs.

List of Subjects in 7 CFR Part 274

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

0
Accordingly, the interim rule amending 7 CFR parts 272 and 274 which 
was published at 65 FR 49719 on August 15, 2000, as amended by the 
final rule which was published at 65 FR 59105 on October 4, 2000 is 
adopted as a final rule with the following changes:

PART 274--ISSUANCE AND USE OF COUPONS

0
1. The authority citation for 7 CFR Part 274 continues to read as 
follows:

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


0
2. In Sec.  274.12:
0
a. Paragraph (g)(6)(i) is amended by revising the second sentence; and
0
b. Paragraph (l)(6) is correctly reinstated.
    The revision and reinstatement read as follows:


Sec.  274.12  Electronic Benefit Transfer issuance system approval 
standards.

* * * * *
    (g) * * *
    (6) * * *
    (i) * * * States must provide a means for a client to be able to 
use their benefits upon relocation. A State agency may convert 
electronic benefits to paper coupons if a household is relocating to a 
State that is not interoperable and where electronic benefits are not 
portable from the household's current State of residence, or assist 
clients in finding an authorized retail location where out-of-State 
electronic benefits can be used. * * *
* * * * *
    (l) * * *
    (6) State agencies may receive one hundred percent federal funding 
for the costs they incur for switching and settling all food stamp 
interstate transactions. For purposes of this section, the term 
``switching'' means the routing of an interstate transaction that 
consists of transmitting the details of a transaction electronically 
recorded through the use of an EBT card in one State to the issuer of 
the card that is in another State; and the term ``settling'' means 
movement, and reporting such movement, of funds from an EBT card issuer 
located in one to a retail food store, or wholesale food concern, that 
is located in another State, to accomplish an interstate transaction. 
The total amount of one hundred percent funding available annually is 
limited to $500,000 nationwide. Once the $500,000 limitation is 
exceeded, federal financial participation reverts to the standard fifty 
percent program reimbursement rate and procedure. In order to qualify 
for this funding, the State agency must:
    (i) Adhere to the standard of interoperability and portability 
adopted by a majority of State agencies for interoperability costs 
incurred for the period from February 11, 2000 through September 30, 
2002;
    (ii) Meet standards of interoperability and portability under 
paragraphs (e) and (h) of this section for costs incurred after 
September 30, 2002;
    (iii) Sign and submit, in each fiscal year for which the State 
agency requests enhanced funding, an Interoperability Funding Agreement 
to comply with the administrative procedures established by the 
Department. The State agency must submit the signed agreement to the 
Department before the end of the fiscal year in which costs are 
incurred in order to qualify for payment for that fiscal year, and
    (iv) Submit requests for payment on a quarterly basis after the end 
of the quarter in which interoperability costs are incurred, in 
accordance with the Department's administrative procedures. Requests 
for payments shall be due February 15 (for the period October through 
December), May 15 (January through March), August 15 (April through 
June), and November 15 (July through September). Requests for payment 
submitted after the required date for a quarter shall not be considered 
until the following quarter, when such requests for payments are 
scheduled to be processed.
* * * * *

    Dated: June 17, 2003.
Eric M. Bost,
Under Secretary, Food, Nutrition, and Consumer Services.
[FR Doc. 03-15897 Filed 6-24-03; 8:45 am]
BILLING CODE 3410-30-P