[Federal Register Volume 70, Number 68 (Monday, April 11, 2005)]
[Rules and Regulations]
[Pages 18263-18271]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-7252]



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  Federal Register / Vol. 70, No. 68 / Monday, April 11, 2005 / Rules 
and Regulations  

[[Page 18263]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 274

[Amendment No. 394]
RIN 0584-AC37


Food Stamp Program, Regulatory Review: Standards for Approval and 
Operation of Food Stamp Electronic Benefit Transfer (EBT) Systems

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule and interim rule.

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

SUMMARY: This action provides interim and final rulemaking for a 
proposed rule. It revises Food Stamp Program rules affecting the 
standards for approval and operation of Food Stamp Electronic Benefit 
Transfer systems. The changes will increase State agency flexibility in 
administering the Program and maximize the advantages afforded by the 
technology. The revisions will also streamline Program administration 
and improve customer service. Based on the comments received, a 
significant change to the store-and-forward provision of the proposed 
rule has been incorporated. The Department has decided to publish this 
provision only, as an interim rule, so that retailers may immediately 
be allowed to recoup partial payment for store-and-forward transactions 
denied solely for insufficient funds, and at the same time, it can 
solicit comments on the impact of the change. All comments received 
will be analyzed, and any appropriate changes to the store-and-forward 
provision of the rule will be incorporated into the subsequent 
publication of a store-and-forward final rule. The Department is 
publishing all of the remaining provisions from the proposed rule as a 
final rule.

DATES: Effective Date: The interim and final provisions of this rule 
are effective May 11, 2005. State agencies may implement the provisions 
anytime after May 11, 2005 but no later than October 11, 2005.
    Comment Date: Comments on the interim provisions of this rule at 7 
CFR 274.12(n) must be received by June 10, 2005 to be assured of 
consideration.

ADDRESSES: The Food and Nutrition Service invites interested persons to 
submit comments on the interim rule at 7 CFR 274.12(n). Comments may be 
sent to Mandy Briggs, Chief, EBT Branch, Benefit Redemption Division, 
Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park 
Center Drive, Room 403, Alexandria, VA 22302; FAX number (703) 305-
1863; E-mail: [email protected]. Comments may also be sent through 
the Federal eRulmaking Portal by going to http://www.regulations.gov. 
Follow the online instructions for submitting comments. All submitted 
comments should refer to the title of this proposal.
    Read Comments: All written comments will be open 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, Room 403, Alexandria, Virginia.

FOR FURTHER INFORMATION CONTACT: Questions regarding this rulemaking 
should be addressed to Ms. Briggs at the above address or by telephone 
at (703) 305-2523.

SUPPLEMENTARY INFORMATION:

Interim Rule

    Because there may be new information available relevant to the 
Store and Forward provision at 7 CFR 274.12(n) of this rule since the 
last comment period, the Department is soliciting further public 
comment, on this provision only, for 60 days. The Store and Forward 
provision is discussed under the heading, Back-up System, in the 
preamble. Effective dates of the provision are discussed in the 
subsequent paragraph under Implementation. All comments received will 
be analyzed, and any appropriate changes in the rule will be 
incorporated in the subsequent publication of a final rule.

Executive Order 12866

    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget (OMB) under Executive Order 12866. 
This rule, however, is not economically significant, since it is not 
expected to have an economic impact on the economy of $100 million or 
more in any one year.

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.

Federalism Summary Impact Statement

    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 changes numerous requirements for approval and operations 
of Electronic Benefit Transfer (EBT) systems to deliver food stamp 
benefits. All of the provisions in this rule are discretionary. FNS is 
not aware of any case where any of these provisions would in fact 
preempt State law. Prior to drafting this final and the proposed rule, 
we received input from State agencies at various times. Several of the 
provisions are in direct response to State agency concerns and some, in 
fact, codify policies already implemented by State agencies operating 
EBT systems. Since the Food Stamp Program (FSP) is a State 
administered, federally funded program, our national headquarters staff 
and regional offices have informal and formal discussions with State 
and local officials on an ongoing basis regarding EBT implementation 
issues. This arrangement allows State agencies to provide feedback that 
forms the basis for many discretionary decisions in this and other FSP 
rules. In addition, we sent representatives to regional, national, and 
professional conferences to discuss our issues and receive feedback on 
EBT implementation.

[[Page 18264]]

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, 
the Under Secretary for Food, Nutrition, and Consumer Services has 
certified that this final rule will not have a significant economic 
impact on a substantial number of small entities. State and local 
welfare agencies will be the most affected to the extent that they 
administer the Program.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, the 
reporting and recordkeeping requirements contained in this final rule 
were submitted and approved by OMB under OMB No. 0584-0083. FNS 
published a proposed rule in which comments were solicited from the 
public for 60 days on the proposed decrease in burden hours. No 
comments were received. This final rule includes revisions of 
collection of information pertaining to Advanced Planning Documents 
(APD) required of State agencies requesting funding for an EBT system 
for food stamps.
    Under section 7(i) of the Food Stamp Act of 1977 (FSA) (7 U.S.C. 
2016(i)), as amended, 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 an EBT system 
must submit a written plan of action called an APD to FNS.
    In the final rule, we are revising FSP rules affecting the 
standards for approval and operation of Food Stamp EBT systems. Several 
of the provisions will reduce the amount of information required for a 
State agency to submit as part of the standard APD. We are making these 
revisions in response to the evolution of EBT over time, which has 
rendered some of the information we are currently collecting 
unnecessary.
    With provisions in this regulation, we are eliminating or reducing 
the reporting requirements as described below.
     State agencies will no longer need to provide FNS with the 
written planning and implementation APD approvals from other 
participating Federal agencies, or indicate that approval is being 
sought simultaneously from other participating Federal agencies.
     State agencies will be required to submit a substantially 
abbreviated planning APD compared to what is currently required. The 
document will include a brief letter of intent, a budget, a cost 
allocation plan and a schedule of activities and deliverables.
     State agencies will no longer need to submit an acceptance 
test report unless FNS is not present at the testing or if serious 
problems are found during the test.
     State agencies will no longer have to submit quarterly 
pilot project reports, but rather, report problems or issues to FNS 
when they occur or are identified.
     State agencies will not be required to submit a pilot cost 
analysis.
     The State agency will not need to submit an APD update 
requesting FNS approval to expand EBT operations beyond the pilot area 
unless there are substantive changes to the implementation plan. State 
agencies may expand EBT simultaneously with pilot operations, unless 
significant problems arise.
    The burden estimates, as currently approved by OMB under OMB No. 
0584-0083, are revised as follows below. Appropriate forms will be 
submitted to OMB.
    Estimates of Burden: We estimate the provisions of this rule, as 
listed above, will reduce the amount of time each State agency spends 
on an APD for EBT by 10 hours, for an overall decrease in burden hours 
of 100 hours annually, bringing the total time down to 35 hours per 
respondent.
    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: 350 hours.

Government Paperwork Elimination Act

    FNS is committed to compliance with the Government Paperwork 
Elimination Act (GPEA), which requires Government agencies to provide 
the public the option of submitting information or transacting business 
electronically to the maximum extent possible. This rule accomplishes 
the intent of the GPEA by facilitating Electronic Benefit Transfer 
(EBT) system implementation for the Food Stamp Program (FSP), and 
thereby eliminating the need to print, distribute and handle paper food 
stamp coupons in operation of the FSP.

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 
unless so specified in the ``Effective Date'' 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 exhausted. In the FSP, the State 
administrative procedures for Program benefit recipients are issued 
pursuant to 7 U.S.C. 2020(e)(10) of the FSA and regulations at 7 CFR 
273.15; for State agencies, the administrative procedures are issued 
pursuant to 7 U.S.C. 2023 of the FSA and regulations 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); for Program retailers 
and wholesalers, the administrative procedures are issued pursuant to 
Section 14 of the FSA (7 U.S.C. 2023) and 7 CFR 278.8.

Public Law 104-4

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Public 
Law 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 the ``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, this rule is not economically significant, nor subject to 
the requirements of sections 202 and 205 of the UMRA.

Background

    A proposed rule was published in the Federal Register on July 12, 
2001 at 66 FR 36495 to implement provisions to revise food stamp 
regulations affecting the standards for approval and

[[Page 18265]]

operation of Food Stamp EBT Systems. Comments on the proposed rule were 
solicited through September 10, 2001. This final action takes the 
comments received into account. Readers are referred to the proposed 
regulation for more complete understanding of this final action. The 
revisions will streamline administration of the program, offer greater 
flexibility to State agencies in enacting policy, and improve customer 
service. Other provisions have been clarified in order to facilitate 
EBT implementation by State agencies.
    Seventeen comment letters were received in response to the proposed 
rule. Individual comments were received from 8 State agencies. Of the 
remaining letters, 3 were from retailers or retailer associations, 2 
were from EBT processors, 2 were from EBT industry trade groups, and 2 
were from consumer advocacy groups. In addition, the Department 
solicited supplementary comments specifically on the Store and Forward 
provision of this rule. The two sessions held for this purpose were the 
National Automated Clearinghouse Association (NACHA) meeting in Coral 
Gables, Florida in April 2004 and the Electronic Funds Transfer 
Association meeting in Chicago, Illinois in May 2004. Input was 
received from State agencies, retailers/retailer associations, EBT 
processors and Third Party Processors at these sessions.
    In general, the commenters supported the Department's efforts to 
revise the EBT rules and welcomed the attempts to reduce burdens, 
increase State flexibility, streamline and reduce the need for some 
waivers. The specific provisions are discussed below.

System Approvals

    Regulations at 7 CFR 274.12(b)(1) require that State agencies 
submit APD for approval of EBT systems. We are clarifying in this final 
rule our expectation that State agencies continue to follow the APD 
process when procuring subsequent EBT systems after the initial system 
contract comes to an end. Although one commenter expressed concern that 
this was not necessary, we believe that the APD process ensures that 
State agencies have appropriately planned and budgeted for a new system 
contract. We are also eliminating the requirement that State agencies 
provide written approval to FNS of the Planning and Implementation APDs 
from other participating Federal agencies or indicate that approval is 
being sought simultaneously from participating Federal agencies.
    The Department is revising 7 CFR 274.12(c)(1) to reduce the amount 
of State EBT planning documentation that must be submitted for EBT 
systems approval. There is no longer a need for FNS to receive the 
current level of detail on planning activities to provide sufficient 
agency oversight. We have modified the regulations to make Planning 
Advanced Planning Documents (PAPD) less burdensome and less 
prescriptive in terms of the information required, by eliminating the 
specifications for pilot project site and expanded site descriptions 
and description of major contacts; and indicating that only minimal 
information be contained in the PAPD, including a brief letter of 
intent, planning budget, cost allocation plan, and schedule of 
activities and deliverables.
    We received one comment that opposed not requiring evidence in the 
PAPD of State agency contact with organizations. USDA continues to 
encourage open discussions between State agencies and all EBT 
stakeholders when EBT is coming up for the first time or coming up for 
re-bid procurement. However, at this stage of EBT implementation 
nationwide, we do not see the necessity to document these contacts for 
our purposes.

System Testing

    To further decrease the burden on State agencies to document all 
aspects of the EBT planning process, we revised the regulations so that 
functional demonstration test plans and reports are no longer required. 
Although we no longer require the test documentation, it is in the 
State agencies' best interest to require that their vendors perform a 
functional demonstration test. This is especially important if the 
State Agency is new to EBT or if the functions of the system are new 
for that vendor. Without such a test, avoidable functional problems 
could arise later in the acceptance test and result in the project's 
delay.
    In general, the regulations require that extensive acceptance 
testing be successfully completed prior to system operation. Since 
experience has shown that EBT systems are often modified over the life 
of a State agency's contract with a particular vendor, it may be 
necessary to repeat any or all of these tests if significant changes 
are made to the system after the system is operational. Therefore, the 
Department is clarifying this provision by indicating that FNS reserves 
the right to require re-testing, if warranted.
    The Department is also revising the provision that requires the 
State agency to provide an acceptance test report. Under most 
circumstances, FNS will no longer require this report. However, a 
report will be necessary if FNS is not present at the acceptance 
testing or serious problems are uncovered during the test.
    Regarding testing, we received one comment encouraging us to 
further streamline the system testing process. The commenter expressed 
concern that it was too costly to continue testing systems that have 
already been accepted by FNS. We will continue to appraise our testing 
needs, but at this time our experience is that problems continue to be 
revealed during acceptance testing. This indicates a need to continue 
the practice, regardless of whether the EBT contractor has already been 
through the acceptance test process with another State.

Pilot Operation and Reporting

    The Department is revising the regulations at 7 CFR 274.12(c)(4) by 
replacing the specifics on pilot reporting with less rigid 
requirements. This will provide State agencies the latitude to discern 
which details are relevant for their particular pilot. Reporting will 
not be required on a quarterly basis; rather, it will occur as issues 
or problems arise. Furthermore, we have deleted the requirements for 
State agencies to provide an EBT pilot project cost analysis because of 
the cumbersome nature of the data collection process and the limited 
value that the information provides to FNS.
    One commenter expressed concern about doing away with pilot 
reporting, while another felt that we should do away with all pilot 
definition requirements unless they are describing a new system. We 
want to clarify that in most cases, pilots will only occur with a new 
system. Now that most States have statewide EBT systems, these 
provisions regarding pilots will affect few State agencies. However, in 
some cases, State agencies may want to convert a new system in a pilot 
area only, because the system is introducing new features that were not 
tested in the previous implementation. For these reasons, some pilot 
reporting requirements remain in the regulations for instances where 
they are warranted, but they are substantially reduced.
    We are also revising regulations at 7 CFR 274.12(d) to relax the 
requirement for a minimum full three months of pilot project operation 
prior to obtaining approval for expansion. This will decrease 
unnecessary delays in project expansion and reduce additional costs 
that may ensue while State agencies wait for completion of pilot 
analyses

[[Page 18266]]

and FNS approval. We received one comment that opposed authorization 
for State agencies to begin statewide rollout before the end of the 
pilot period. The commenter was concerned that by expediting the 
process, it will be difficult to discover and prevent certain problems 
before rollout, especially in the re-bid environment where we are 
seeing new contracting relationships, e.g. multi-vendor contracts.
    While we appreciate this concern, FNS has for some time now, 
allowed State agencies to expand beyond the pilot area prior to the end 
of the three-month period without significant consequences. As long as 
the State agency has defined a pilot area with FNS, which can be a base 
for any analysis and reporting that may be necessary during the first 
three months, they will not need to delay system expansion. In all 
cases, FNS reserves the right to halt rollout activities if problems 
arise during pilot or project expansion.

Retailer Management

    We are extending the time required for State agencies to ensure 
that retailer equipment is replaced or repaired from 24 hours to within 
48 hours. We received two comments stating that extending the timeframe 
for retailer equipment replacement or repair to 48 hours will promote 
efficient administration of the program. One commenter felt that 48 
hours may still not be long enough in certain areas and recommended we 
offer options of either extending to 72 hours, giving States the 
latitude to price contract options with various replacement timeframes, 
or eliminating next-day requirements for retailers with more than one 
terminal. Conversely, one commenter expressed concern that extending 
the timeframe would have an adverse impact on retailers.
    With regard to the concern expressed about the impact on retailers, 
experience supports the fact that in many cases 24 hours is not enough 
time for contractors to fix or replace problem terminals. 
Alternatively, allowing for longer than 48 hours would likely create a 
hardship for many retailers. Therefore, the final regulations at 7 CFR 
274.12(f)(4)(v) allow for up to 48 hours to fix or replace store 
terminals in order to best meet the needs of all parties.
    We are revising the regulations at 7 CFR 274.12(f)(4)(vi) to 
require that State agencies continue to ensure that training is offered 
to all retailers, but allow retailers to opt out of the training if 
they desire. For tracking purposes, State agencies shall direct 
retailers to confirm in writing that they are waiving their training 
option. We received two comments that having retailers opt out of 
training in writing is unnecessary and that it makes more sense to 
require retailers to put it in writing if they do want training. 
Another comment was that USDA should update the retailer application 
and training process to include an EBT training option. Also, they felt 
it would be important to clarify what action could be taken against 
retailers that do not respond to requests to put in writing the option 
not to receive training. One commenter wrote in that allowing retailers 
to opt out of training in writing is a good idea.
    FNS does incorporate general information about EBT into the 
training associated with the food stamp authorization process. However, 
the State agency and its contractor are best suited to provide retailer 
training since it will vary somewhat from State to State. Due to the 
current processing environment, many retailers today will not see a 
need to be trained in using point of sale (POS) equipment and will wish 
to decline training. However, it is important that retailers continue 
to receive the benefit of training when needed to be sure that they can 
properly serve food stamp households. Asking the retailers to decline 
training in writing will help insure that those retailers that want and 
need the training are getting it without making assumptions as to why 
they did not respond in writing.
    Regulations require FNS compliance investigators be provided access 
to State EBT systems in order to conduct investigations of program 
abuse and alleged violations. We are revising the provision to specify 
the need for on-line access and to extend the access to other FNS staff 
involved in compliance activity, including FNS regional and field 
offices, as well as staff from the Department's Office of Inspector 
General. Also, the rule makes clear the requirement that FNS compliance 
investigators and investigators from the Department's Office of 
Inspector General must be given EBT cards with benefits that can be 
used for food stamp investigations.
    In response to several comments, we are correcting language that 
was published in the proposed rule, which required the deployment of 
administrative terminals to FNS and other federal agencies with 
investigative responsibilities. Investigative agencies have been able 
to use existing terminals as long as they have the necessary software 
and telecommunications to ensure access to the system. State agencies 
must ensure that the investigative offices have these items in place in 
order to have access to the system. Also, in response to comments, we 
are clarifying that this will be read-only access to the States' 
systems. Two comments expressed the view that FNS should cover the cost 
for this access. FNS will continue to share in these costs on a 50-50-
match basis in accordance with 7 CFR 277.18.

Transaction Receipts

    We are revising regulations at 7 CFR 274.12(g)(3) with an 
additional requirement that a truncated primary account number (PAN) or 
a coded transaction number be included on the receipt. This policy has 
been adopted in every operational project to date, and we want to be 
sure it remains this way. Truncation of the PAN is a well recognized 
security feature, and we did not receive any comments to this 
provision.

Benefit Issuance and Replacement

    The Department is revising regulations at 7 CFR 274.12(g)(5)(i) to 
allow for Personal Identification Number (PIN) assignment in accordance 
with commercial industry standards, as long as clients have the ability 
to later select their PIN if they choose and are informed of the 
selection option. We only received one comment on this provision, which 
opposed authorization to use PIN pre-assignment even with the option to 
change the PIN later.
    FNS shared the concern that some households may have difficulty 
remembering PINs that are assigned. The Department commissioned a study 
through the Economic Research Service to examine the effects of various 
EBT customer service waivers, including PIN assignment. The study, 
Effects of EBT Customer Service Waivers on Food Stamp Recipients, by 
Abt Associates, was released in April 2002. Results indicate that 
clients are most likely to forget an assigned PIN shortly after a state 
converts to EBT or after new food stamp recipients receive their EBT 
card. However, these effects diminish dramatically after a recipient 
uses an assigned PIN repeatedly or has the PIN changed. The requirement 
to provide all clients the option to change an assigned PIN protects 
the clients. In many States this can be done very conveniently over the 
phone.
    We are revising regulations at 7 CFR 274.12(g)(5)(ii) to allow a 
State agency to replace lost or stolen EBT cards within up to five 
calendar days if the State agency is using centralized issuance. At the 
same time, we are clarifying that the intent of ``card replacement'' 
requirements is to ensure that clients are given access to their

[[Page 18267]]

benefits within the specified time frame. This means that regardless of 
what timeframe the State agency has indicated for card replacement 
(e.g., 2 days, 5 days) the client must have an active card and PIN in 
hand and benefits available on the card within the time frame specified 
by the State agency.
    We received several comments to this provision. Three commenters 
felt we should expand the ability to replace cards within 5 days to 
State agencies that do some local office card mail-out or rural areas 
where 2-day replacements are difficult. Two commenters expressed that 
contractors have no control over the mail system, and therefore, they 
cannot guarantee that benefits will be in the clients' hands within the 
allotted timeframe. Another comment was that we should make it 5 
business days, not calendar days since some commercial delivery 
services are cutting back or eliminating Saturday deliveries. Finally, 
one comment opposed extension to 5 calendar days for receipt of 
replacement cards from a centralized location.
    We appreciate that these concerns exist, however, we are not 
willing to go any further to allow for more time or fewer restrictions. 
We want to ensure that households can receive their replacement cards 
as expeditiously as possible without creating a logistic hardship on 
the State agencies that need the extra time. Many State agencies have 
waivers to operate this way currently and we have not seen that it 
creates an undue burden on the households.

Household Training

    Provisions at 7 CFR 274.12(g)(10) are revised by removing the 
requirement for a ``hands-on'' approach to household training. This 
provides State agencies the flexibility to determine the best training 
approach for their client population in their particular environment. 
However, hands-on training must be available as a back-up for those 
clients who request it, for special needs populations such as the 
elderly, or for those individuals identified as having problems with 
the EBT system.
    We received three comments on this provision. One was in complete 
agreement with the regulation change. Another commented that the 
requirement to provide hands-on training when necessary is not 
stipulated in the proposed regulation language. The final comment 
opposes elimination of the requirement for hands-on training.
    FNS is very sensitive to the concern that by not providing hands-on 
training, new clients may not get the most thorough exposure to EBT. 
The Department commissioned a study through the Economic Research 
Service to examine the effects of various EBT customer service waivers, 
including training. The results, which were released in April 2002, 
indicate that eliminating the requirement for hands-on training reduces 
the amount of time and possibly out-of-pocket costs most recipients 
spend on EBT training. Also, we have added regulatory language 
requiring hands-on training for vulnerable client populations and in 
those cases where the clients request it. This will protect those 
clients that need hands-on training without burdening those that are 
comfortable learning through some other approach such as mail training, 
videos, or training kiosks.

Retailer Participation

    FNS Authorization: We have deleted from the regulations at 7 CFR 
274.12(h)(1)(ii), language that inappropriately placed procedural 
directions for FNS field offices regarding authorizations of Food Stamp 
retailers. This does not change current FNS policy. No comments were 
received on this proposal.
    Fees: Section 7(g)(2) of the FSA (7 U.S.C. 2016(g)(2)) and 
regulations at 7 CFR 274.12(h)(2) state that authorized retailers shall 
not be required to pay costs essential to EBT system operations that 
are utilized solely for the Food Stamp Program. The Department wishes 
to reiterate that retailers cannot be required to pay for costs related 
to EBT for Food Stamps, which includes any fees for food stamp 
transactions on government-provided terminals. Retailers may, however, 
make the business decision to pay commercial third party processors a 
fee to process food stamp transactions along with credit and debit 
transactions processed for the store. These fees would not be 
reimbursable by the State agency unless mandated by State law.
    We have revised regulations at 7 CFR 274.12(h)(2) to allow State 
agencies to charge retailers reasonable fees to cover the costs 
resulting from result from abuses, breach of contract or negligence on 
the part of the retailer.
    POS Deployment: Regulations at 7 CFR 274.12(h)(4)(ii)(D) are 
revised to clarify that State agencies may place additional POS 
terminals in stores above the minimum number of terminals required at 
no cost to retailers. One comment disagreed with this approach, stating 
that it may drive up costs. Another comment was that any POS deployment 
above the formula in the regulation is at a cost to the retailers. This 
revision to the regulation does not change current policy. If State 
agencies are in a position to offer extra terminals to retailers at no 
cost, that is acceptable, but it is at their discretion.

Minimum Card Requirements

    In the proposed regulation we proposed removing the requirement at 
7 CFR 274.12(i)(6)(i)(B) that FNS' statement of nondiscrimination be 
printed on the card or card jacket since the State agencies are already 
expected to provide this nondiscrimination statement to system users on 
application forms, handbooks, manuals and other distributed materials. 
The Agency has reconsidered this proposal due to concerns about our 
responsibility to protect food stamp households against discrimination. 
We have decided that some form of the nondiscrimination statement must 
appear on the card or card sleeve, as it does on food stamp coupon 
books.
    Therefore, we are revising the final regulation to require an 
abbreviated version of the nondiscrimination statement, which is much 
shorter than the full version printed on other materials. Also, the 
abbreviated version does not include an address so it should not 
confuse households about who to contact for general problems with EBT 
accounts or transactions. The abbreviated non-discrimination statement 
reads, ``The USDA is an equal opportunity provider and employer.'' This 
statement must be printed on the EBT card or card sleeve. Consequently, 
household training requirements will not change with regard to the non-
discrimination statement so language at 7 CFR 274.12(g)(10) is not 
revised as proposed.

Concentrator Bank Responsibilities

    We have revised regulations at 7 CFR 274.12(j)(1)(iii) to describe 
the current reimbursement procedures for crediting retailers through 
the Automated Standard Application for Payment (ASAP) system developed 
for the U.S. Treasury Department by the Federal Reserve Bank of 
Richmond. State agencies will need to accommodate the communication 
linkages and data flow requirements as prescribed by FNS.
    In conjunction with the ASAP system, FNS has entered into a 
partnership with the Federal Reserve Bank of Richmond to develop the 
Account Management Agent (AMA) system. The AMA system supports the 
Department's efforts to improve accountability, oversight and 
management of State EBT systems. State agencies must provide data to 
the AMA system in the format established by

[[Page 18268]]

FNS. This requirement is specified in section 274.12(k)(2)(iii).

Management and Reporting

    We have replaced requirements for EBT exception reports with the 
Anti-fraud Locator for EBT Redemption Transaction (ALERT) system in 7 
CFR 274.12(k)(2)(ii). The ALERT system is used to collect and examine 
EBT transaction data for the purpose of detecting and investigating 
retailer fraud and abuse. The standardized format for the ALERT system 
was developed in consultation with EBT processors and is in use today 
for all EBT projects. This provision brings our regulations up to date 
by codifying the required use of the ALERT system. In response to a 
comment on this provision, we want to clarify that these rules do not 
change the current ALERT system specifications.

Federal Financial Participation

    We have removed language regarding enhanced funding for development 
of EBT systems that are fully integrated components of the State's 
complete automated data processing (ADP) system, because such funding 
has not been available since the April 1, 1994 enactment of Public Law 
103-66 amending the FSA.

Back-Up System

    In the proposed rule we presented an electronic store-and-forward 
transaction option to State agencies as an alternative to manual 
transactions. The rule proposed that State agencies could permit 
retailers with commercial EBT equipment to use store-and-forward 
transactions at the retailer's option when the EBT system is 
inaccessible and the retailer is willing to assume liability for the 
transaction. It was proposed that retailers would have 24 hours from 
the time the transaction occurred to forward it to the host. If the 
system were inoperable for more than a 24-hour period, the retailer 
would have 24 hours from the point when the system resumes operation to 
forward the transaction.
    The proposed rule further stated that in an instance where the 
store-and-forward transaction is denied due to insufficient benefits, 
the retailer could resubmit the transaction for the balance in the 
account. The outstanding balance of the resubmitted transaction could 
not be re-presented in future months. FNS had previously approved two 
operational EBT States to incorporate this model into their systems.
    This was the most commented-on provision in the proposed rule. 
Because the comments received raised significant concerns about 
security, data validity, and fraud, the Department solicited additional 
input from the EBT stakeholder community on this provision. In response 
to some of these comments, we have changed the proposed rule 
significantly. Therefore, the Department is issuing this provision as 
an interim rule, and is soliciting additional comments.
    Nine commenters supported store-and-forward transactions in 
general. Three of these commenters expressed strong support for 
allowing retailers an opportunity to resubmit the transaction for the 
balance in the account in the case of insufficient benefits.
    Three comments did not support the requirement that retailers must 
submit their transactions within 24 hours of the purchase or of 
restored EBT services, indicating that this was too short a timeframe. 
The 24-hour period in the proposed rule refers to the time limit for 
original submission of the store-and-forward transaction. The 
Department clearly expects that resubmission would be almost immediate 
and would be an automated function built into the retailer's system. 
Most retailers will want to submit store-and-forward transactions as 
soon as they possibly can access the EBT system to minimize the risk of 
insufficient funds in the account. One retailer that is operating a 
store and forward pilot and was present at the NACHA session confirmed 
that this automated functionality is built into his system. However, 
since there may be some systems designed to forward transactions in a 
batch process mode, the Department is allowing a 24-hour submission 
period to accommodate this system design. To reduce confusion, the 
Department has revised the description of the 24-hour period to have a 
single starting point, that is, when the system again becomes 
available.
    Three additional comments expressed the concern that setting up a 
24-hour limited period for submission of transactions provided a 
potential for fraud because processors do not have the ability to 
monitor the timing of the transactions, leaving the monitoring up to 
the retailers. During the NACHA and EFTA sessions, EBT processors 
clarified their concern to be that the 24-hour period is not auditable 
in the EBT system since the system does not have information on the 
availability of the retailer system. The Department did not intend to 
imply that EBT processors must track this time limit or take any 
unusual action if the transaction date is older than 24 hours. Timely 
submission will be the retailer's responsibility. However, if a delay 
of greater than 24 hours on the part of the retailer or its third party 
processor results in a client inquiry or complaint that a transaction 
was processed more than 24 hours after system functionality returned 
and a future month's benefits were deducted, the client is entitled to 
an adjustment at the retailer's liability.
    Four comments argued that the rule should allow access to the 
household's subsequent month's benefits to cover a circumstance where 
there are insufficient benefits available in the current period. Under 
current rules, there are already manual transaction procedures in place 
for retailers to obtain approval for Food Stamp transactions when EBT 
systems are unavailable, procedures that remove any risk for the 
retailer. Since these manual transaction procedures take longer than an 
electronic transaction, some retailers prefer to operate in store and 
forward mode, thus assuming liability for these transactions. These new 
store-and-forward provisions provide retailers relief from a 
significant portion of the risk involved with store-and-forward 
transactions, and relief from more time-consuming procedures associated 
with manual transactions. At the same time, the provisions allow for 
better customer service to Food Stamp recipients. The 24-hour timeframe 
is in place to protect recipients from problems associated with 
untimely submissions while providing retailers with a reasonable period 
within which to submit stored transactions. Because the use of credit 
is prohibited under the Food Stamp Act, the Department is upholding the 
24-hour timeframe requirement between renewed EBT system access and 
submission of the store-and-forward transactions. Should the 24-hour 
window cross into the beginning of a new benefit issuance period, 
retailers may nevertheless draw against all available benefits in the 
account. If it is determined through repeated client complaints or 
agency oversight that retailers are abusing this process, the retailer 
may be required to discontinue use of store-and-forward functionality.
    Two other commenters were concerned that the rule as written raised 
issues of data integrity, audit trails and security and could have 
unintended impacts on other policies, e.g., adjustments and claims. 
Store-and-forward transactions are subject to the same level of data 
and security standards, edit checks, and PIN encryption requirements as 
any other EBT transaction. Therefore, the Department does not agree 
that these transactions pose an added data or security risk. In fact, 
several commenters at the NACHA and EFTA sessions stated that the 
store-and-forward function was a secure

[[Page 18269]]

transaction and a significant improvement to manual voucher procedures, 
which can be misused by retailers and are less secure transactions. 
Store-and-forward transactions would be subject to the same adjustment 
and claim procedures as any other EBT transactions; however, there 
could be a need for additional training to recipients because the date 
of the store-and-forward transaction would not necessarily coincide 
with their shopping date.
    Since publication of the proposed rule, there has been much 
discussion within the EBT community about store-and-forward 
transactions. Most of the debate and resulting concern surround the 
concept of changing the purchase amount when resubmitting a transaction 
for payment after it has been denied for insufficient benefits. In this 
two-step model, if the retailer receives a denial message [which 
includes the remaining balance in the account] for a store-and-forward 
transaction, the retailer sends a second message to the processor 
requesting the remaining balance. These transactions are not 
specifically identified to EBT system processors. Commenters believed 
that this could open the door for additional data manipulation, 
resulting in increased error and potential fraud. At the NACHA and EFTA 
sessions, several commenters provided positive comments on this model 
based on operational experience. There have been no documented 
complaints from recipients in the New Jersey, New York and Pennsylvania 
pilots, while at the same time there has proven to be a significant 
benefit to retailers and their customers. There was also a great deal 
of support for this method due to the ease of implementation. However, 
the Department recognizes that from an oversight perspective, it is 
preferable to have an audit trail, which identifies store-and-forward 
transactions in order to monitor fraudulent activity through the 
Agency's retailer oversight system. Currently, in the store-and-forward 
pilots, these transactions are not specifically identified as ``store-
and-forward,'' so EBT processors and the Department [through the 
agency's ALERT system] have no way of knowing that these transactions 
are taking place. This raises significant concerns for the Department.
    A second alternative solution involving a single transaction has 
now emerged. In this alternative approach, if there were no remaining 
benefits at all when the stored transaction is submitted, the 
transaction would be denied. However, if there were benefits, but not 
enough to cover the full purchase amount, the system would return a 
partial approval, immediately crediting the retailer for the balance 
remaining in the account and debiting the client balance to zero. The 
retailer would retain liability for the difference, and would not be 
allowed to resubmit any denied or partially approved store-and-forward 
transaction. Partial approvals would only be granted for store-and-
forward transactions, identified as such within the body of the 
transaction message. By using the single-transaction approach, there is 
no need to track the timing of the second submission or its 
relationship to the initial transaction, which were concerns raised in 
comments to the proposed rule. It also eliminates any need for the 
retailer to alter transaction data and minimizes fraud concerns.
    The Department has considered the benefits and disadvantages 
related to both alternatives. The two-step method described in the 
proposed rule has been tested, found to be viable, and worked well in 
the demonstration environment. At the same time, the Department finds 
the concerns raised by commenters to be valid. The one-step method 
discussed above is a cleaner solution and supported by industry 
transaction message standards; however, no retailer or EBT processor 
has yet attempted this process. Nevertheless, the Department is 
confident that the one-step method is achievable, and in fact 
preferable, given the inadequacies of the two-step method cited above.
    Consequently, under the interim regulations, State agencies, at 
their option, may allow retailers to implement the one-step store-and-
forward methodology herein described. The retailer that has been 
operating a two-step store-and-forward pilot as a demonstration waiver 
may continue to do so for up to three years from this rule's effective 
date in order to facilitate the transition from a two-step to one-step 
process.
    Three commenters relayed concerns that implementing store-and-
forward as proposed would require processors to change their systems, 
consequently increasing cost. Further information on the costs 
associated with Store and Forward was obtained at the NACHA and EFTA 
sessions. Although stakeholders did not provide specific cost 
information, several participants at these sessions indicated that 
there are no costs to EBT processors or the government in the two step 
process; any system changes in this model are born by the retailers. 
However, in the one-step process, EBT system changes would be necessary 
to accommodate this option as well as one-time costs associated with 
testing the interface between the EBT system and the retailer or the 
retailer's third party processor. The Department expects that the total 
cost to implement the one-step process would be between 3-8 million 
dollars, and that the majority of the cost burden (between 2-7 million 
dollars) falls on retailers making changes to their store systems. 
Since these costs would be spread out over thousands of retailers, 
there would not be a significant burden on any one party. The remaining 
one million dollars in costs would be shared equally by State agencies 
and the Federal government through the 50/50 reimbursement procedure. 
Cost estimates for the implementation of the one-step are based on 150 
development and testing hours for States and processors, plus 10 
additional hours for each third party processor that must be certified 
to a State EBT system. Estimates also assume that once a processor 
develops this core functionality for one State, it can be implemented 
in another State with a minimal number of development and 
implementation hours. It is the Department's assessment that the 
benefits to system integrity over the long run outweigh the costs 
involved in implementing this system option.
    While developing the interim language, the Department concluded 
that store-and-forward requirements should stand on their own, and not 
be addressed as a subpart of re-presentation. Therefore, the proposed 
changes to 7 CFR 274.12(m) have been removed from the interim rule, and 
paragraph (m) will continue to deal solely with manual voucher 
procedures. Instead, 7 CFR 274.12 (n) has been redesignated as 7 CFR 
274.12(o) and a new paragraph (n) addresses store-and-forward.

Implementation

    The interim and final provisions of this rule are effective May 11, 
2005. State agencies may implement the required provisions anytime 
after May 11, 2005, but no later than October 11, 2005. The Department 
will review and approve a State Agency's implementation plan for Store 
and Forward, which preferably will include a phase-in schedule or 
shake-down period prior to statewide rollout. Based on review and 
analysis of comments received, as well as experience gained through 
implementing the one-step method, FNS plans to publish a store-and-
forward final rule.

[[Page 18270]]

List of Subjects

7 CFR Part 272

    Alaska, Civil Rights, Food Stamps, Grant Programs--social programs, 
Reporting and recordkeeping requirements.

7 CFR Part 274

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

0
Accordingly, for the reasons set forth in the preamble, 7 CFR parts 272 
and 274 are amended as follows:
0
1. The authority citation for 7 CFR parts 272 and 274 continues to read 
as follows:

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

0
2. In Sec.  272.1, paragraph (g)(168), previously reserved, is added to 
read as follows:


Sec.  272.1  General terms and conditions.

* * * * *
    (g) * * *
    (168) Amendment No. 394. The interim and final provisions of 
Amendment No. 394 are effective May 11, 2005. State agencies may 
implement the provisions anytime after May 11, 2005 but no later than 
October 11, 2005.

PART 274--ISSUANCE AND USE OF COUPONS

0
3. In Sec.  274.12:
0
a. The first sentence in paragraph (b)(1) is amended by adding the 
words ``for development and implementation of initial and subsequent 
EBT systems.'' at the end.
0
b. Paragraph (b)(4) is amended by removing the first sentence;
0
c. Paragraphs (c)(1) and (c)(2)(i) are revised;
0
d. Paragraph (c)(2)(ii) is removed, and paragraphs (c)(2)(iii) through 
(c)(2)(vii) are redesignated as paragraphs (c)(2)(ii) through 
(c)(2)(vi), respectively;
0
e. Newly redesignated paragraph (c)(2)(ii)(B) is amended by removing 
the semicolon at the end of the second sentence and adding a period in 
its place and by adding a sentence to the end of the paragraph;
0
f. The first sentence of newly redesignated paragraph (c)(2)(iii) 
following the paragraph heading is revised;
0
g. Paragraph (c)(4) is revised and paragraph (c)(5) is removed;
0
h. Paragraph (d) is revised;
0
i. Paragraph (f)(4)(v) is amended by removing the words ``24 hours'' 
and adding in their place the words ``48 hours'';
0
j. Paragraphs (f)(4)(vi) and (f)(4)(vii) are revised;
0
k. A new paragraph (f)(4)(viii) is added;
0
l. The first sentence in paragraph (g)(3)(iii) is revised;
0
m. Paragraphs (g)(5)(i) and (g)(5)(ii) are revised;
0
n. The first sentence in paragraph (g)(6)(ii) is amended by removing 
the word ``pilot'' and adding in its place the word ``project'';
0
o. Paragraph (g)(10)(ii) is revised;
0
p. The last two sentences of paragraph (h)(1)(ii) are removed;
0
q. Paragraph (h)(2) is revised, and paragraph (h)(4)(ii)(D) is amended 
by adding a sentence to the end of the paragraph;
0
r. The second sentence of paragraph (i)(5)(i) is amended by removing 
the word ``publish'' and adding in its place the words ``make available 
to third party processors'';
0
s. Paragraph (i)(6)(i)(B) is revised;
0
t. Paragraphs (j)(1)(iii) and (k)(2)(ii) are revised, and paragraph 
(k)(2)(iii) is added;
0
u. Paragraph (l)(2) is removed, and paragraphs (l)(3) through (l)(6) 
are redesignated as paragraphs (l)(2) through (l)(5), respectively; and
0
v. Paragraph (n) is redesignated as paragraph (o) and new paragraph (n) 
is added.
    The revisions and additions read as follows:


Sec.  274.12  Electronic Benefits Transfer issuance system approval 
standards.

* * * * *
    (c) * * * (1) EBT planning APD. The State agency shall comply with 
the two-stage approval process for APDs in submitting an EBT system 
proposal to FNS for approval. The Planning APD shall contain the 
requirements specified under Sec.  277.18(d)(1) of this chapter, 
including a brief letter of intent, planning budget, cost allocation 
plan, and schedule of activities and deliverables.
    (2) * * *
    (i) Functional demonstration. A functional demonstration of the 
functional requirements prescribed in paragraph (f) of this section in 
combination with the system components described by the approved System 
Design is recommended in order to identify and resolve any problems 
prior to acceptance testing. The Department reserves the right to 
participate in the Functional Demonstration if one is conducted.
    (ii) * * *
    (B) * * * FNS may require that any or all of these tests be 
repeated in instances where significant modifications are made to the 
system after these tests are initially completed or if problems that 
surfaced during initial testing warrant a retest;
* * * * *
    (iii) * * * The State agency shall provide a separate report after 
the completion of the acceptance test only in instances where FNS is 
not present at the testing or when serious problems are uncovered 
during the testing that remain unresolved by the end of the test 
session. * * *
* * * * *
    (4) Pilot project reporting. The State agency is required to report 
to FNS all issues that arise during the pilot period. Reports to FNS 
shall be provided as problems occur. In instances where the State 
agency must investigate the issue, FNS must receive the information no 
later than one month after completion of pilot operations.
    (d) Expansion requirements. The pilot and expansion schedule must 
be delineated in the State agency's approved implementation plan. As 
part of the plan, the State agency must indicate a suitable pilot area 
to serve as the basis of the three-month analysis and reporting; 
however, expansion can occur simultaneously with pilot operation. 
Submission of an Advanced Planning Document Update to request FNS 
approval to implement and operate the EBT system in areas beyond the 
pilot area is only required in instances where there are substantial 
changes to the implementation plan. However, if significant problems 
arise during the pilot period or expansion, the Department can require 
that roll-out be suspended until such problems are resolved.
* * * * *
    (f) * * *
    (4) * * *
    (vi) Ensure that retail store employees are trained in system 
operation prior to implementation. Retailer training shall be offered 
by the State agency and include the provision of appropriate written 
and program specific materials. Retailers have the option to waive 
instruction by the State agency if they desire. State agencies shall 
direct retailers to confirm in writing that they are waiving their 
option to training;
    (vii) Provide on-line read-only access to State EBT systems for 
compliance investigations. The State agency is required to provide 
software and telecommunications capability as necessary to FNS 
Compliance Branch

[[Page 18271]]

Area offices, Regional offices and Field offices so that FNS compliance 
investigators, other appropriate FNS personnel and investigators from 
the Department's Office of Inspector General have access to the system 
in order to conduct investigations of program abuse and alleged 
violations;
    (viii) Ensure that FNS compliance investigators and investigators 
from the Department's Office of Inspector General have access to EBT 
cards and accounts that are updated as necessary to conduct food stamp 
investigations.
    (g) * * *
    (3) * * *
    (iii) Identify the food stamp household member's account number 
(the PAN) using a truncated number or a coded transaction number. * * *
* * * * *
    (5) * * *
    (i) The State agency shall permit food stamp households to select 
their Personal Identification Number (PIN). PIN assignment procedures 
shall be permitted in accordance with industry standards as long as PIN 
selection is available to clients if they so desire and clients are 
informed of this option.
    (ii) In general, the State agency shall replace EBT cards within 
two business days following notice by the household to the State agency 
that the card has been lost or stolen. In cases where the State agency 
is using centralized card issuance, replacement can be extended to take 
place within up to five calendar days. In all instances, the State 
agency must ensure that clients have in hand an active card and PIN 
with benefits available on the card, within the time frame the State 
agency has identified for card replacement.
* * * * *
    (10) * * *
    (ii) Hands-on experience in the use of the EBT equipment must be 
available for households that request it or demonstrate a need for that 
kind of training;
* * * * *
    (h) * * *
    (2) Authorized retailers shall not be required to pay costs 
essential to and directly attributable to EBT system operations as long 
as the equipment or services are provided by the State agency or its 
contractor and are utilized solely for the Food Stamp Program. In 
addition, if Food Stamp Program equipment is deployed under contract to 
the State agency, the State agency may, with USDA approval, share 
appropriate costs with retailers if the equipment is also utilized for 
commercial purposes. The State agency may choose to charge retailers 
reasonable fees in the following circumstances:
    (i) Cost for the replacement of lost, stolen or damaged equipment;
    (ii) The cost of materials and supplies for POS terminals not 
provided by the State agency;
    (iii) Telecommunication costs for all non-EBT use by retailers when 
lines are provided by the State agency. In addition, State agencies may 
remove phone lines from retailers in instances where there is 
significant misuse of the lines.
* * * * *
    (4) * * *
    (ii) * * *
    (D) * * * State agencies may provide retailers with additional 
terminals above the minimum number required by this paragraph at 
customer service booths or other locations if appropriate.
* * * * *
    (i) * * *
    (6) * * *
    (i) * * *
    (B) The abbreviated statement of nondiscrimination, which reads as 
follows: ``The USDA is an equal opportunity provider and employer.'' In 
lieu of printing the required information on the EBT card, the State 
agency shall provide each household a card jacket or sleeve containing 
the nondiscrimination statement.
* * * * *
    (j) * * *
    (1) * * *
    (iii) Initiating and accepting reimbursement from the appropriate 
U.S. Treasury account through the Automated Standard Application for 
Payment (ASAP) system or other payment process approved by FNS. At the 
option of FNS, the State agency may designate another entity as the 
initiator of reimbursement for food stamp redemptions provided the 
entity is acceptable to FNS and U.S. Treasury.
* * * * *
    (k) * * *
    (2) * * *
    (ii) Retailer transaction data submitted to FNS on a monthly basis. 
This data must be submitted in the specified format in accordance with 
the required schedule.
    (iii) Data detailing by specified category the amount of food stamp 
benefits issued or returned through the EBT system. Data shall be 
provided in a format and mechanism specified by FNS to the FNS Account 
Management Agent as the benefits become available to recipients. This 
data will be used to increase or decrease the food stamp EBT benefit 
funding authorization for the State's ASAP account.
* * * * *
    (n) Store-and-Forward. As an alternative to manual transactions:
    (1) State agencies may opt to allow retailers, at the retailer's 
own choice and liability, to perform store-and-forward transactions 
when the EBT system cannot be accessed for any reason. The retailer 
would be able to forward the transaction to the host one time within 24 
hours of when the system again becomes available. Should the 24-hour 
window cross into the beginning of a new benefit issuance period, 
retailers may draw against all available benefits in the account.
    (2) State agencies may also opt, in instances where there are 
insufficient funds to authorize an otherwise approvable store-and-
forward transaction, to allow the retailer to collect the balance 
remaining in the client's account, in accordance with the requirements 
detailed in this section. In States that elect not to give retailers 
this option, all store-and-forward transactions with insufficient funds 
will be denied in full.
    (i) State Agencies may elect to allow store and forward to provide 
remaining balances to retailers as follows:
    (A) The EBT processor may provide partial approval of the store-
and-forward transaction, crediting the retailer with the balance 
remaining in the account through a one-step process;
    (B) The transaction should be in accordance with the standard 
message format requirements for store and forward; and
    (C) Re-presentation, as described in paragraph (m) of this section, 
to obtain the uncollected balance from current or future months' 
benefits shall not be allowed for store-and-forward transactions.
* * * * *

    Dated: February 5, 2005.
Eric M. Bost,
Under Secretary for Food, Nutrition and Consumer Services.
[FR Doc. 05-7252 Filed 4-8-05; 8:45 am]
BILLING CODE 3410-30-U