[Federal Register Volume 73, Number 250 (Tuesday, December 30, 2008)]
[Rules and Regulations]
[Pages 79591-79595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30951]



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  Federal Register / Vol. 73, No. 250 / Tuesday, December 30, 2008 / 
Rules and Regulations  

[[Page 79591]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 278 and 279

RIN 0584-AD44


Food Stamp Program: Revisions to Bonding Requirements for 
Violating Retail and Wholesale Food Concerns

AGENCY: Food and Nutrition Service (FNS), USDA.

ACTION: Final rule.

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

SUMMARY: This action provides final rulemaking for a proposed rule. It 
revises the current bonding requirements imposed against participating 
retailers and wholesalers who have violated the Food Stamp Program 
rules and regulations. Currently, all violating retailers and 
wholesalers that are disqualified for a specified period of time or 
have a civil money penalty imposed in lieu of a disqualification for a 
specified period of time are required to submit a valid collateral 
bond, usually on an annual basis, if they wish to continue to 
participate in the Food Stamp Program. Over the years, securing a 
collateral bond has become increasingly more difficult for retailers 
and wholesalers. Thus, this final rule revises the current requirement 
in order to help alleviate the financial burden to those retailers and 
wholesalers who are required to submit such a bond and also to reduce 
the recordkeeping burden with respect to the FNS field offices which 
have to keep track of the expirations and renewals of these bonds.
    This final rule also places in the Food Stamp Program regulations 
the longstanding policy FNS has adopted to accept irrevocable letters 
of credit (LOC) in lieu of collateral bonds. Lastly, this rule 
establishes a specified period of time for retailers and wholesalers to 
be removed from the program for accepting food stamp benefits in 
payment for eligible food on credit, a violation of the Food Stamp 
Program regulations.

DATES: This rule is effective March 2, 2009.

FOR FURTHER INFORMATION CONTACT: Andrea Gold, Chief, Retailer 
Management and Issuance Branch, Benefit Redemption Division, Food and 
Nutrition Service, U.S. Department of Agriculture, 3101 Park Center 
Drive, Room 406, Alexandria, VA 22302, or telephone (703) 305-2456.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant and was reviewed by 
the Office Management and Budget in conformance with Executive Order 
12866.

Regulatory Impact Analysis

Need for Action

    The regulation reduces and better targets the current bonding and 
letter of credit (LOC) requirements that are imposed on authorized 
retailers and wholesalers who violate Food Stamp Program rules. It: (1) 
Eliminates the bond requirements for retailers who are disqualified for 
six months or incur a civil money penalty in lieu of a six month 
disqualification; and, (2) limits the bond requirement to five years 
for retailers whose disqualification or civil money penalty exceeds six 
months. Retailers who have previously been disqualified for any length 
of time or been issued a civil money penalty and who subsequently 
become disqualified again will be subject to the five year bonding 
requirement, even if the subsequent disqualification is for a period of 
six months or less or the civil money penalty imposed is in lieu of a 
disqualification of six months or less.

Benefits

    Currently, a retailer who is sanctioned as a result of violations 
is required to submit a bond or LOC in order to continue to participate 
in the Food Stamp Program regardless of the type and extent of those 
violations. In this rule, however, retailers who commit less egregious 
violations will be exempt from the bonding requirement. The cost of 
securing and maintaining a bond has increased significantly over the 
years; this change will alleviate the financial burden on retailers who 
have committed relatively minor violations as well as on those who have 
served their program sanction. The agency will also realize a reduced 
burden in that the implementation of this rule will eliminate the labor 
associated with monitoring the bonds and letters of credit. The rule 
will have a modest effect on the revenue FNS collects from retailers 
who commit violations. No impacts on household food stamp participation 
or associated benefit costs are expected.

Costs

    These provisions are expected to produce a small dollar loss to the 
Government of $14,793 in FY 2008 and less than $75,000 over the five-
year period FY2008 through FY 2012.
    While the reduction in labor hours for monitoring bonds and letters 
of credit cannot be counted as a direct savings to the Government, the 
time made available has significant value. It can be used to enhance 
FNS' capacity to manage the authorization and monitoring of food stamp 
retailers.
    When food stamp retailers who have secured bonds or letters of 
credit commit a subsequent violation, the Government may recover its 
losses against the bonds. Historically, such draw downs have been very 
infrequent, less than one percent of all bonds.
    The rule change will eliminate the need for bonds and letters of 
credit among retailers who are disqualified for six months or who pay a 
civil money penalty in lieu of a six month disqualification. 
Approximately 44 percent of retailer violations are associated with a 
six month period of disqualification. A majority of these involve bonds 
with a face value of $1,000. Based on an average of 10.8 bond or letter 
of credit forfeitures per year among this group, the potential loss of 
revenue to the Government over five years is $74,000:
     44% of 3,070 retailers currently in the Program who have 
prior violations that are associated with a 6 month disqualification 
period and who have been reinstated and submitted a bond or LOC = 1,351 
retailers.
     < 1% (.008) of 1,351 retailers = 10.8 who commit a second 
violation that results in bond forfeiture or letter of credit draw 
down.
     86.5% of 10.8 = 9.35 retailers with bonds/LOCs that have a 
face value of

[[Page 79592]]

$1,000 and 13.5% of 10.8 = 1.45 with bonds/LOCs that have an average 
face value of $3,754.
     The annual forfeiture amount is equal to $9,350 (9.35 x 
$1,000) + $5,443 (1.45 x $3,754) or $14,793.
     $14,793 x 5 years = $73,965.
    The estimates of revenue forfeited are reasonably certain as they 
are based on averages created from historical information from the 
Government's administrative files on food stamp retailer 
disqualifications and civil money penalties.
    The financial impact for all food retailers (regardless of when 
they are authorized, both new and current participants) is 
substantially larger than the cost to the Federal Government. The rule 
eliminates the cost of bonds/letters of credit and associated 
processing fees for retailers disqualified for six months or who pay a 
civil money penalty in lieu of a six month disqualification:
     386 is the average number of retailers who are 
disqualified for six months or pay a civil money penalty in lieu of a 
six month disqualification per year.
     These 386 retailers pay an average cost of $668 per bond 
or LOC = $257,848 each year.
     $257,848 per year x five years = $1,289,240 savings for 
such stores over five years.
    When effective, the rule also eliminates the expense of maintaining 
a bond indefinitely to retailers who have been previously disqualified 
and reinstated, or paid a civil money penalty in lieu of a 
disqualification and were required to post a bond/LOC:
     3,070 retailers currently in the Program who previously 
have been disqualified or paid a civil money penalty in lieu of 
disqualification and been reinstated.
     3,070 retailers who pay an estimated annual renewal fee 
for bond/LOC of $100 = $307,000 for first year (2008);
     3,070 retailers x 6.1% = 187 stores who will withdraw or 
otherwise leave the Program. In 2009, 3070 stores - 187 stores 2,883 
stores who pay $100 renewal fee = $288,300.
     In 2010, 2,883 - 187 stores =2,696 retailers x $100 
renewal fee = $269,600.
     In 2011, 2,696 - 187 stores = 2,509 retailers x $100 
renewal fee = $250,900.
     In 2012, 2,509 - 187 stores = 2,322 retailers x $100 
renewal fee = $232,200.
     Cost over five years = $307,000 + $288,300 + $269,600 + 
$250,900 + $232,200 = $1,348,000 savings for such stores over five 
years.
    Finally, retailers who, during 2008, (1) Have a previous 
disqualification(s) or civil money penalty in lieu of disqualification 
and receive an additional disqualification penalty of any length or (2) 
are disqualified for more than six months or pay a civil money penalty 
in lieu of a disqualification period of more than six months will have 
fulfilled their bond/LOC requirement in 2013. During this five year 
period they will continue to pay the fees associated with the annual 
renewal or such bond/LOCs. For each year beyond 2013, the number of 
retailers who no longer pay renewal fees should increase by the number 
of stores who fit in one of the two categories described above and 
remain in the Food Stamp Program. For example:
    In 2014, 2040 + 491 retailers - 6.1% of them who leave the Program 
or 2,377 retailers will no longer incur the average $100 cost of bond 
renewal fees. The total cost associated with this change in 2014 is 
$237,700.
    Since 1969, more than 75% of the stores that have been disqualified 
or subject to a civil money penalty are convenience stores and medium 
or small grocers.
    This regulation also codifies current policy regarding retailers 
with credit violations. Such retailers are disqualified from the 
Program for one year and are required to submit a bond or letter of 
credit for five years. From 1998 to 2005, 244 stores provided 
documentation proving that credit violations were taking place in their 
stores (equal to an average of 30.5 stores each year). Based on 
historical data, securing a bond or letter of credit results in an 
average out-of-pocket cost to each of these retailers of $668. Total 
cost to retailers for this provision is therefore projected to be 
$20,374 per year (30.5 retailers times $668 = $20,374) and $101,870 
over five years. This out-of-pocket expense is, however, offset by the 
opportunity for these businesses to resume the food stamp portion of 
their sales after the one year disqualification period.

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). Nancy Montanez 
Johner, 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. This rule will impact FNS field 
offices and all participating retailers and wholesalers who have 
violated the Food Stamp Program rules. Currently, all violating 
retailers and wholesalers who have been removed from the program for a 
specified period of time or assessed a civil money penalty in lieu of 
such removal are required to submit a collateral bond or irrevocable 
LOC as a condition of continued participation in the Food Stamp 
Program. The collateral bond or irrevocable LOC must be periodically 
renewed and valid at all times during the period in which the firm is 
authorized to participate in the program. This rule will limit the 
requirement to five years, benefiting the retailers and wholesalers who 
are affected by this requirement. Also, in this rule, a one year 
removal from participation in the program will be imposed against 
retailers and wholesalers that accept food stamp benefits in payment 
for items sold to a household on credit. It is estimated that only an 
average of 30.5 stores per year of all the stores commit credit 
violations and will be subject to a one year disqualification.

Unfunded Mandates Reform Act

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

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), 
June 24, 1983, this Program is excluded from the scope of Executive 
Order 12372, which requires intergovernmental consultation with State 
and local officials.

[[Page 79593]]

Executive Order 13132, Federalism

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

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 specified in the DATES section of the final rule. Prior to any 
judicial challenge to the provisions of this rule or the application of 
its provisions, all applicable administrative procedures must be 
exhausted.

Civil Rights Impact Analysis

    FNS has reviewed this rule in accordance with Departmental 
Regulations 4300-4, ``Civil Rights Impact Analysis'', and 1512-1, 
``Regulatory Decision Making Requirements.'' After a careful review of 
the rule's intent and provisions, FNS has determined that this rule 
will not in any way limit or reduce the ability of protected classes of 
individuals to receive food stamp benefits on the basis of their race, 
color, national origin, sex, age, disability, religion or political 
belief nor will it have a differential impact on minority owned or 
operated business establishments, and woman owned or operated business 
establishments that participate in the Food Stamp Program.
    The changes in this regulation do not apply to the food stamp 
recipients participating in the Food Stamp Program. The regulation 
affects or may potentially affect the retail food stores and wholesale 
food concerns that participate (accept or redeem food stamp benefits) 
in the Food Stamp Program. The only retail food stores and wholesale 
food concerns that will be directly affected, however, are those firms 
that violate the Food Stamp Program rules and regulations.
    FNS does not collect data from retail food stores or wholesale food 
concerns regarding any of the protected classes under Civil Rights. As 
long as a retail food store or wholesale food concern meets the 
eligibility criteria stipulated in the Section 3 of the Food Stamp Act 
and 7 CFR 278.1 of the Food Stamp Program regulations they can 
participate in the Food Stamp Program. Also, FNS specifically prohibits 
retailers and wholesalers that participate in the Food Stamp Program to 
engage in actions that discriminate based on race, color, national 
origin, sex, age, disability, religion or political belief.
    This rule will not change any requirements related to the 
eligibility or participation of protected classes or individuals, 
minority owned or operated business establishments, or woman owned or 
operated business establishments in the Food Stamp Program. As a 
result, this rule will have no differential impact on protected classes 
of individuals, minority owned or operated business establishments, or 
woman owned or operated business establishments.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
1320) requires that the Office of Management and Budget (OMB) approve 
all collections of information by a Federal agency before they can be 
implemented. Respondents are not required to respond to any collection 
of information unless it displays a current valid OMB control number. 
This rule does not contain information collection requirements subject 
to approval by OMB under the Paperwork Reduction Act of 1995.

E-Government Act Compliance

    The Food and Nutrition Service is committed to complying with the 
E-Government Act, to promote the use of the Internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

Background

    On July 12, 1984, the Department published a rule entitled, Bonding 
of Authorized Firms, that required all violating retailers and 
wholesalers that have been disqualified for a specified period of time 
or have had a civil money penalty imposed in lieu of such 
disqualification to submit a collateral bond if they wish to continue 
to participate in the Food Stamp Program after satisfying their 
penalty. The rule became effective on August 13, 1984. The bonding 
requirements are authorized by section 12(d) of the Food Stamp Act of 
1977, (Act), and set out in Parts 278 and 279 of the Food Stamp Program 
regulations. Essentially, the bond covers the value of the food stamp 
benefits which the authorized firm may in the future accept and redeem 
in violation of the Act. The minimum face value of a bond is $1,000. 
The vast majority of the bonds have a face value of $1,000.
    Currently, the regulations require that the bond be valid at all 
times during the period which the firm is authorized to participate in 
the program. Retailers and wholesalers are required to renew their 
bonds through a bonding agent or financial institution on a periodic 
basis. Most bonds are renewed on an annual basis. The renewal fee for a 
bond can range from $50 to $1,000, and does not include the accountant 
and lawyer fees that can range from $75 to more than $200. Firms have 
expressed concern to FNS on numerous occasions about the exorbitant 
costs of renewing a collateral bond.
    Several other problems have arisen since the inception of the 
current bonding requirement. Namely, we found that collateral bonds 
from some companies do not meet the requirements set forth in the 
rules, collateral bonds are not available in some areas, and collateral 
bonds are not always available in the required increments. As a result, 
we established written policy to allow firms to submit irrevocable 
letters of credit in lieu of collateral bonds.
    In accordance with section 12(d) of the Act, the Secretary has the 
authority to prescribe the amount, terms, and conditions of this 
statutory requirement. Thus, on March 13, 2007, the FNS published a 
proposed rule that would do the following: (1) Amend the regulation to 
provide for irrevocable letters of credit as an acceptable instrument 
in lieu of collateral bonds; (2) Eliminate the bond requirement for 
retailers who have never previously been disqualified and who are 
disqualified for a period of six months or have a civil money penalty 
imposed in lieu of a six month disqualification period; and (3) Limit 
the bonding requirement to five years for retailers who are 
disqualified for a specified period of time greater than six months or 
for retailers who have been assessed a civil money penalty in lieu of a 
specified period of disqualification of greater than six months. [72 FR 
11291].

[[Page 79594]]

Under the proposed rule, retailers who have previously been 
disqualified for any length of time or been issued a civil money 
penalty and who subsequently become disqualified again would be subject 
to the five year bonding requirement, even if the subsequent 
disqualification is for a period of six months or less or the civil 
money penalty imposed is in lieu of a disqualification for six months 
or less.
    One June 18, 2008, Congress passed the Food, Conservation, and 
Energy Act. Effective on October 1, 2008, the Food and Nutrition Act of 
2008 directs the Secretary to require a retail food store or wholesale 
food concern that has been disqualified for more than 6 months, or has 
been subjected to a civil penalty in lieu of a disqualification period 
of more than 6 months, to furnish a collateral bond or irrevocable 
letter of credit for a period of not more than 5 years to cover the 
value of benefits that the store or concern may in the future accept 
and redeem in violation of the Act.
    Lastly, the proposed rule addressed a separate issue pertaining to 
stores that accepted food stamp benefits for items sold on credit, a 
violation of the food stamp rules. The rule proposed to establish a 
specified period of time for firms to be removed from the program 
(i.e., one year) for accepting food stamp benefits in payment for items 
on credit. Food Stamp Program regulations at 7 CFR 278.2(f) stipulate 
that retail food stores may not accept food stamp benefits in payment 
for any eligible food sold to food stamp households on credit. 
Nevertheless, the Agency has seen an increase in this type of violative 
activity since the implementation of the electronic benefit transfer 
(EBT) system. Though this has been prohibited behavior, there has been 
no specific penalty associated with that violation. As a result, the 
Agency proposed a specific one year disqualification for stores that 
engage in credit transactions.
    Three comments were received in response to the proposed rule. Two 
of the comments were received from the public at large and one was 
received from the Food Marketing Institute. In general, the commenters 
supported the proposed revisions to the current regulatory bonding 
requirement. The Food Marketing Institute applauded the Department's 
effort to eliminate the bond requirement for retailers who have never 
previously been disqualified from the Food Stamp Program and who are 
disqualified for six months, as well as allowing irrevocable letters of 
credit as an acceptable instrument in lieu of collateral bonds. One 
commenter agreed that there should be limitations on the bonding 
requirement and that violating retailers should not be required to 
submit a collateral bond or letter of credit indefinitely. Two 
commenters asked that we define ``less egregious violations.'' In the 
preamble of the proposed rule and in this final rule we have stated 
that retailers who commit less egregious violations would be exempt 
from the bonding requirement. ``Less egregious violations'' is a term 
meant to describe those violations that would not typically lead to 
more than a six month disqualification (in this rule the threshold 
beyond which a bond is necessary). So, while it is based on specific 
violative circumstances, we offer the following as an example: The sale 
of inexpensive, conspicuous non-food items such as toothpaste, toilet 
paper, toothpicks, etc., usually committed by store clerks because of 
careless and poor supervision of store ownership or management. A six 
month disqualification is normally imposed against stores that commit 
such violations. Under this rulemaking, a firm that receives a six 
month disqualification period will not be required to submit a 
collateral bond or letter of credit.
    The comments were supportive of the revisions to the bonding 
requirement established in the proposed rule and this rule is being 
published in final without change. Moreover, no comments were received 
with regard to establishing a one year disqualification in the 
regulations for retailers who commit credit violations. No revisions 
have been made to the final rule regarding credit violations.

List of Subjects

7 CFR Part 278

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

7 CFR Part 279

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

    Accordingly, 7 CFR parts 278 and 279 are amended as follows:
    1. The authority citation for parts 278 and 279 continues to read 
as follows:

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

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

0
2. In Sec.  278.1, revise paragraph (b)(4) to read as follows:


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

* * * * *
    (b) * * *
    (4) The submission of collateral bonds or irrevocable letters of 
credit for firms with previous sanctions. (i) If the applicant firm has 
been sanctioned for violations of this part, by withdrawal, or 
disqualification for a period of more than six months, or by a civil 
money penalty in lieu of a disqualification period of more than six 
months, or if the applicant firm has been previously sanctioned for 
violations and incurs a subsequent sanction, regardless of the 
disqualification period, FNS shall, as a condition of future 
authorization, require the applicant to present a collateral bond or 
irrevocable letter of credit that meets the following conditions:
    (A) The collateral bond must be issued by a bonding agent/company 
recognized under the law of the State in which the applicant is 
conducting business and which is represented by a negotiable 
certificate only. The irrevocable letter of credit must be issued by a 
commercial bank;
    (B) The collateral bond or irrevocable letter of credit must be 
made payable to the Food and Nutrition Service, U.S. Department of 
Agriculture;
    (C) The collateral bond cannot be canceled by the bonding agent/
company for non-payment of the premium by the applicant. The 
irrevocable letter of credit cannot be canceled by the commercial bank 
for non-payment by the applicant;
    (D) The collateral bond or irrevocable letter of credit must have a 
face value of $1,000 or an amount equal to ten percent of the average 
monthly food stamp benefit redemption volume of the applicant for the 
immediate twelve months prior to the effective date of the most recent 
sanction which necessitated the collateral bond or irrevocable letter 
of credit, whichever amount is greater;
    (E) The applicant is required to submit a collateral bond or 
irrevocable letter of credit that is valid for a period of five years 
when re-entering the program; and

    (F) The collateral bond or irrevocable letter of credit shall 
remain in the custody of FNS unless released to the applicant as a 
result of the withdrawal of the applicant's authorization, without a 
fiscal claim established against the applicant by FNS.
    (ii) Furnishing a collateral bond or irrevocable letter of credit 
shall not eliminate or reduce a firm's obligation to pay in full any 
civil money penalty or previously determined fiscal claim which may 
have been assessed against the firm by FNS prior to the time the bond 
or letter of credit was required by

[[Page 79595]]

FNS, and furnished by the firm. A firm which has been assessed a civil 
money penalty shall pay FNS as required, any subsequent fiscal claim 
asserted by FNS. In such cases a collateral bond or irrevocable letter 
of credit shall be furnished to FNS with the payment, or a schedule of 
intended payments, of the civil money penalty. A buyer or transferee 
shall not, as result of the transfer or purchase of a disqualified 
firm, be required to furnish a bond or letter of credit prior to 
authorization.
* * * * *

0
3. In Sec.  278.2, revise paragraph (f) to read as follows:


Sec.  278.2  Participation of retail food stores.

* * * * *
    (f) Paying credit accounts. Food stamp benefits shall not be 
accepted by an authorized retail food store in payment for items sold 
to a household on credit. A firm that commits such violations shall be 
disqualified from participation in the Food Stamp Program for a period 
of one year.
* * * * *

0
4. In Sec.  278.6:
0
a. Revise paragraph (e)(4); and
0
b. Amend paragraph (h) by adding the words ``or irrevocable letter of 
credit'' after the word ``bond'' wherever it appears. The revision 
reads as follows:


Sec.  278.6  Disqualification of retail food stores and wholesale food 
concerns, and imposition of civil money penalties in lieu of 
disqualifications.

* * * * *
    (e) * * *
    (4) Disqualify the firm for 1 year if:
    (i) It is to be the first sanction for the firm and the ownership 
or management personnel of the firm have committed violations such as 
the sale of common nonfood items in amounts normally found in a 
shopping basket, and FNS had not previously advised the firm of the 
possibility that violations were occurring and of the possible 
consequences of violating the regulations; or
    (ii) The firm has accepted food stamp benefits in payment for items 
sold to a household on credit.
* * * * *

0
5. In Sec.  278.7, revise paragraph (b) to read as follows:


Sec.  278.7  Determination and disposition of claims--retail food 
stores and wholesale food concerns.

* * * * *
    (b) Forfeiture of a collateral bond or draw down on an irrevocable 
letter of credit. If FNS establishes a claim against an authorized firm 
which has previously been sanctioned, collection of the claim may be 
through total or partial forfeiture of the collateral bond or draw down 
of the irrevocable letter of credit. If FNS determines that forfeiture 
or a draw down is required for collection of the claim, FNS shall take 
one or more of the following actions, as appropriate.
    (1) Determine the amount of the bond to be forfeited or irrevocable 
letter of credit drawn down on the basis of the loss to the Government 
through violations of the Act, and this Part, as detailed in a letter 
of charges to the firm;
    (2) Send written notification by method of proof of delivery to the 
firm and the bonding agent or commercial bank of FNS' determination 
regarding forfeiture or draw down of all or specified part of the 
collateral bond or irrevocable letter of credit and the reasons for the 
forfeiture or draw down action;
    (3) Advise the firm and the bonding agent or commercial bank of the 
firm's right to administrative review of the claim determination;
    (4) Advise the firm and the bonding agent or commercial bank that 
if payment of the current claim is not received directly from the firm, 
FNS shall obtain full payment through forfeiture of the bond or draw 
down of the irrevocable letter of credit;
    (5) Proceed with collection of the bond or irrevocable letter of 
credit in the amount forfeited or drawn down if a request for review is 
not filed by the firm within the period established in Sec.  279.5 of 
this chapter, or if such review is unsuccessful; and
    (6) Upon the expiration of time permitted for the filing of a 
request for administrative and/or judicial review, deposit the bond or 
irrevocable letter of credit in a Federal Reserve Bank account or in 
the Treasury Account, General. If FNS requires only a portion of the 
face value of the bond or irrevocable letter of credit to satisfy a 
claim, the entire bond or irrevocable letter of credit will be 
negotiated, and the remaining amount returned to the firm.
* * * * *

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

0
6. In Sec.  279.1, revise paragraph (a)(6) to read as follows:


Sec.  279.1  Jurisdiction and authority.

* * * * *
    (a) * * *
    (6) Forfeiture of part or all of a collateral bond or a draw down 
of part or all of a letter of credit under Sec.  278.1 of this chapter, 
if the request for review is made by the authorized firm. FNS shall not 
accept requests for review made by a bonding company or agent or 
commercial bank.
* * * * *

0
7. In Sec.  279.4, revise the last sentence in paragraph (a) to read as 
follows:


Sec.  279.4  Action upon receipt of a request for review.

    * * * If the administrative action in question involves the denial 
of a claim brought by a firm against FNS, or the forfeiture of a 
collateral bond or the draw down on an irrevocable letter of credit, 
the designated reviewer shall direct the firm not be approved for 
participation, not be paid any part of the disputed claim, or not be 
reimbursed for any bond forfeiture or irrevocable letter of credit 
withdrawal, as appropriate until the designated reviewer has made a 
determination.
* * * * *

    Dated: December 18, 2008.
Nancy Montanez Johner,
Under Secretary, Food, Nutrition and Consumer Services.
 [FR Doc. E8-30951 Filed 12-29-08; 8:45 am]
BILLING CODE 3410-30-P