[Federal Register Volume 85, Number 166 (Wednesday, August 26, 2020)]
[Rules and Regulations]
[Pages 52471-52479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18701]



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 Rules and Regulations
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  Federal Register / Vol. 85, No. 166 / Wednesday, August 26, 2020 / 
Rules and Regulations  

[[Page 52471]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 278 and 279

[FNS-2018-0021]
RIN 0584-AE63


Taking Administrative Actions Pending Freedom of Information Act 
(FOIA) Processing

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

ACTION: Final rule.

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

SUMMARY: This final rule amends the Supplemental Nutrition Assistance 
Program (SNAP or Program) regulations to ensure that retail food stores 
can no longer use the Freedom of Information Act (FOIA) process to 
delay FNS' administrative actions to sanction a retail food store for 
SNAP violations. Under this rule, FNS will process FOIA requests and 
FOIA appeals separately from the administrative action for all SNAP 
violations, as originally proposed. The processing of FOIA requests and 
appeals during the administrative and judicial review process will have 
no impact on when the agency can take administrative action.

DATES: This rule is effective October 26, 2020 and will apply to any 
FOIA request or appeal received by the agency on or after the effective 
date.

FOR FURTHER INFORMATION CONTACT: Vicky T. Robinson, Chief, Retailer 
Management and Issuance Branch, Retailer Policy and Management, 1320 
Braddock Place, Alexandria, Virginia 22314, by phone at 703-305-2476, 
or by email at [email protected].

SUPPLEMENTARY INFORMATION: 

Background

Current Process

    SNAP regulations at 7 CFR 278.6 provide that retailers considered 
for a sanction as a result of committing a program violation will be 
charged with those violations and have a full opportunity to respond to 
FNS prior to FNS' making a final administrative determination and 
applying the sanction. After FNS issues a charge letter to the store 
with detailed information regarding the nature of the violations, the 
firm has 10 days to respond to the charge letter, orally or in writing, 
with any information or evidence that explains the activities that led 
to the charges outlined in the letter. FNS does not consider a FOIA 
action as an official response to the charge letter. However, if a firm 
files a FOIA request after receiving a charge letter, FNS currently 
interrupts the administrative process, such as issuing a sanction 
determination, while the agency responds to the FOIA request. Even if 
the firm submits a response to the charge letter in addition to a FOIA 
request, FNS delays the review of the firm's charge letter response 
until FNS has responded to the FOIA request.
    In the event that the firm appeals the agency's FOIA response, FNS 
again delays administrative action while it responds to the appeal. The 
FOIA requires FNS to provide a response to the initial request within 
20 days of receipt. The FOIA also requires FNS to make a determination 
with respect to any appeal within 20 days of receipt. FNS is 
continually working to improve the time it takes to process FOIA 
requests and appeals and to reduce its backlog. Today, however, firms 
continue participating in SNAP and redeeming benefits until the FOIA 
actions are complete, regardless of the seriousness of the charges 
originally outlined in the charge letter or the fact that the firm has 
not submitted a formal response to the charges. Once responses to the 
FOIA request and FOIA appeal are complete, the agency renews 
administrative proceedings by either (a) reviewing the firm's official 
response to the charge letter if one has been submitted, or (b) giving 
the firm another 10 days to provide an official response.
    If the firm's official response provides documentation supporting 
its stance relating to the charges outlined in the charge letter, FNS 
considers this documentation before issuing a notice of determination. 
It is only on the issuance of this notice of determination that FNS may 
impose sanctions against a firm.
    Holding SNAP administrative actions, particularly the issuance of a 
notice of determination, in abeyance throughout the entire FOIA process 
has had a serious impact on SNAP integrity because FNS practice has 
enabled violating firms to continue to participate in SNAP during the 
FOIA process. From Fiscal Year (FY) 2015 to FY 2018, 1,550 SNAP retail 
food stores submitted FOIA requests to FNS after receiving a charge 
letter. Of those retail food stores, 902 appealed the agency's FOIA 
response. These 1,550 firms collectively redeemed over $266 million in 
SNAP benefits while the FOIA actions were processed (see Table 1).

Proposed Action

    In the Notice of Proposed Rulemaking (NPRM), FNS proposed to amend 
SNAP regulations in order to process FOIA requests and FOIA appeals 
separately from administrative actions FNS takes against retail food 
stores.

Summary of This Final Action

    FNS adopts the NPRM as final. This final rule will apply to any 
FOIA request or appeal received by the agency on or after the 
publication date. In the final rule, FNS amends SNAP regulations in 
order to process FOIA requests and appeals separately from 
administrative actions while a sanction determination is made. In cases 
warranting permanent disqualification, the sanction is effective upon 
receipt of the agency determination notice, in accordance with 
statutory and regulatory requirements.
    This ensures firms that are found to have committed the most 
egregious Program violations, such as trafficking, will be removed from 
the Program expeditiously, as Congress intended when it amended the 
Food and Nutrition Act of 2008 (FNA) to add requirements for permanent 
disqualifications to be effective from the date of receipt of the 
agency's determination notice.
    The agency's issuance of determinations resulting in sanctions of 
non-permanent disqualification will become final and take effect 10 
days after the firm receives the determination notice, unless the firm 
makes a timely request for administrative review. If an administrative 
appeal is filed in a non-permanent disqualification case, the final 
agency determination--rendered after the administrative review has been

[[Page 52472]]

completed--will take effect 30 days after the date of delivery of the 
determination notice to the firm. With the exception of firms 
disqualified from the Special Supplemental Nutrition Program for Women, 
Infants, and Children (WIC) and reciprocally disqualified from SNAP, 
firms found to have violated program rules will continue to be afforded 
their full due process opportunities for administrative and judicial 
proceedings.

General Summary of Public Comments

    During the sixty-day comment period, which ended on April 22, 2019, 
FNS received ten public comments in response to the NPRM. Two comments 
were from retailer associations that stated they represent small 
businesses. Two comments were from public advocacy groups. One comment 
was from a State government office and one comment was received from an 
independent office within the U.S. Government's Small Business 
Administration. Four comments were received from the general public, 
and one of these was submitted on behalf of three individuals. All 
public comments can be viewed at https://www.regulations.gov/docket?D=FNS-2018-0021.
    Three commenters expressed general support for the NPRM and its 
intention to make the administrative action process more efficient. Two 
of these commenters specifically identified the ability of some 
retailers charged with trafficking to continue accepting SNAP benefits 
while an administrative action is held in abeyance during the 
processing of a FOIA request or appeal as reason alone to promulgate a 
rule to separate these two processes. Several commenters opposed to the 
NPRM also cited the importance of removing retailers that traffic 
benefits, although the commenters did not view the NPRM as a step 
towards that general goal.
    Seven commenters expressed opposition to the NPRM, primarily 
because of concerns about the impact on retailers' right to due 
process. Several of these commenters asserted that FNS' current 
administrative process makes FOIA necessary, suggesting that FNS' 
charge letter does not adequately explain the nature of the charges, 
and arguing the NPRM would take away the only available option for 
retailers to gain access to the evidence against them prior to being 
sanctioned. Some commenters also felt that the agency should release 
more records when responding to a FOIA request or during administrative 
procedures before judicial review. Some commenters questioned the 
validity of FNS' assertions in the NPRM regarding the submission of 
extensive and complex FOIA requests, and appeals that repeatedly 
request information that has been consistently denied in prior 
requests, seemingly with the intention of delaying FNS' determination 
to disqualify or impose a civil monetary penalty against the firm. 
These commenters stated that FNS must provide a much clearer 
explanation, based on actual data, for its decision to separate the 
processing of FOIA actions from administrative decision-making is the 
correct course of action. Others expressed concern that the NPRM could 
create a disparate impact on small businesses, including minority-owned 
businesses and the communities they serve. Commenters requested FNS 
offer strategies to mitigate these potential impacts.
    The comment summary and analysis in this preamble primarily focuses 
on general comment themes and those comments were considered in this 
final rule.

Analysis of Comments

Charge Letter Content and Due Process Considerations

    Several commenters suggested that FNS does not provide sufficient 
information regarding violations when charging retailers with such 
violations, thereby hampering retailers' due process rights.
    When FNS identifies a firm that appears to have violated program 
rules, the agency issues a charge letter detailing the suspected 
violations, the sanction(s) that may be imposed for these violations, 
and the steps the firm must take if it wishes to address the charges 
before a determination is made and sanctions go into effect. The 
statute directs that the Secretary promulgate regulations outlining the 
criteria by which FNS may issue a charge letter on the basis of 
evidence that may include facts established through on-site 
investigations (an ``investigative case''), inconsistent redemption 
data, or evidence obtained through a transaction report under an 
electronic benefit transfer system (a ``data case''). Current 
regulations at 7 CFR 278.6(b) outline the charge letter process.
    A data case is based on transaction data for the firm obtained 
through the SNAP Electronic Benefit Transfer (EBT) system and is 
analyzed in relation to the firm's business model and operation. For a 
data case, the charge letter provides the firm with a list of 
transactions that establish a clear and repetitive pattern of unusual, 
irregular, or inexplicable activity for the firm's business type. The 
charge letter specifies the exact charge as well as the sanction 
provided by regulation for that violation. The charge letter also 
breaks down the transaction information further by the type of unusual 
activity, such as multiple transactions made from the same household 
accounts in a set period of time, or transactions for amounts 
inconsistent with observed store food stock and firm records. The 
information currently provided to the firm in the charge letter 
includes:
     A description of the unusual activity;
     the exact date and time of each transaction;
     the terminal ID number for the device used to conduct each 
transaction;
     the entry method of each transaction (such as ``swipe'' or 
``manual key entry of card number'' at the point-of-sale);
     the exact amount of each transaction;
     the total number of transactions and dollar amount for 
each type of unusual activity; and
     the last four digits of the household account number 
associated with each transaction.
    The charge letter also explains the firm's right to respond to the 
charges by presenting evidence or explanation for the unusual activity. 
The firm must submit this response within 10 days of receiving the 
charge letter, and may do so orally or in writing. The charge letter 
provides a name and phone number of a specific FNS employee to contact 
regarding this action and a mailing address for any documentation that 
the firm would like to submit in its defense.
    For an investigative case, the charge letter provides the firm with 
a redacted copy of the investigator's report. Only information that 
would otherwise allow firms to identify undercover investigators is 
redacted. The report contains information regarding undercover visits 
to the retail food store made by the investigator and describes each 
visit in detail. The report indicates:
     The number of investigators;
     the number of visits;
     the start and end dates during which the visits occurred;
     the number of visits that resulted in a purchase that 
violated SNAP regulations;
     the date of the transaction(s);
     the exact transaction amount(s);
     the amount of SNAP benefits trafficked, if applicable; and
     the items purchased using SNAP benefits, and whether the 
item was eligible or ineligible.
    As with the charge letter for a data case, the investigative charge 
letter also

[[Page 52473]]

explains the firm's right to respond to the charges by presenting 
evidence or explanation for the transactions that violated SNAP 
regulations. The firm must submit its response to the charges within 10 
days of receiving the charge letter, and may do so orally or in 
writing. The charge letter provides a name and phone number of a 
specific FNS employee to contact, and a mailing address for any 
documentation that the firm would like to submit in its defense.
    The agency disagrees with the assertion that retailers' due process 
rights are hampered by a lack of sufficient information regarding 
violations provided in a charge letter. When issuing a charge letter, 
FNS provides a significant amount of substantial information to a 
retail food store in a clear and concise manner. As explained above, a 
firm is provided with data identifying exactly which transactions are 
violations of SNAP regulations or are suspicious, the basis for FNS' 
determination that those transactions are violations of SNAP 
regulations or are suspicious, and when those transactions occurred. 
Finally, the charge letter explains a firm's opportunity to respond to 
the charges by presenting evidence or a rational explanation for those 
transactions, should it choose to do so.
    FNS carefully considers a firm's response to the charge letter 
before issuing a notice of determination. Firms that ultimately receive 
an adverse determination are afforded extensive procedural protections 
through administrative and judicial review. Such firms may file a 
request for administrative appeal within 10 days of the date of 
delivery of the notice of determination.
    If the agency determination is upheld in administrative review, FNS 
issues a final administrative determination informing the firm that the 
adverse action will take effect 30 days from the date of delivery of 
the notice--unless the firm has been charged with a serious offense 
warranting permanent disqualification such as trafficking, in which 
case the permanent disqualification is already in effect as required by 
statute. The firm is also advised in the final administrative 
determination that it has 30 days to avail itself of the judicial 
review process by filing a complaint against the United States in 
Federal court.

Releasing Records

    A few commenters suggested that FNS could address the issue of 
lengthy delays in administrative decision-making by simply providing 
all of the records related to the charges leveled against a firm in the 
charge letter itself, when responding to the FOIA request, or during 
administrative review proceedings. As noted above, FNS already provides 
extensive data and details regarding suspected violations in the 
administrative process.
    The FOIA (5 U.S.C. 552) provides the public the right to request 
access to records from a Federal agency. Federal agencies are required 
to disclose any agency records requested under the FOIA unless they 
fall under one of nine exemptions which protect interests such as 
personal privacy, national security, and law enforcement. FNS exercises 
caution and due diligence when deciding whether to release a record in 
response to a FOIA request. For example, 5 U.S.C. 552(b)(7)(E) protects 
from disclosure information which ``would disclose techniques and 
procedures for law enforcement investigations or prosecutions, or that 
would disclose guidelines for law enforcement investigations or 
prosecutions if such disclosure could reasonably be expected to risk 
circumvention of the law. . . .'' Under this exemption, FNS does not 
disclose information that would publicly reveal methods used in 
analyzing data or in conducting an on-site investigation, as such 
information would make it possible for a retail food store to modify 
its activity in the future to avoid detection. Failing to protect this 
information from disclosure under FOIA would jeopardize FNS' ability to 
identify and investigate firms that are violating program rules.
    The release of agency records of such a sensitive nature under 
administrative review proceedings would likewise jeopardize the 
agency's ability to investigate firms. However, if, after the agency's 
findings and ruling, the firm still takes issue with FNS' 
determination, judicial review is an available option. Under the 
discovery process at judicial review, some of these records may be 
released; however, these records are typically released under a 
protective order that protects the information from public view. Such a 
protective order is not an option available through the administrative 
review process or FOIA.
    In some instances, when a firm is charged with violations, the firm 
requests the SNAP sales of individual stores that are similar to its 
store. FNS protects individual retail food store SNAP sales amounts 
(i.e., SNAP redemptions) from disclosure under FOIA exemption 4 (5 
U.S.C. 552(b)(4)), in accordance with a recent Supreme Court decision 
and subsequently issued Department of Justice guidance, both detailed 
below. This FOIA exemption protects from disclosure ``trade secrets and 
commercial or financial information obtained from a person [that is] 
privileged or confidential.''

Government

    A decision by the Supreme Court on June 24, 2019, in Food Marketing 
Institute v. Argus Leader,\1\ 139 S. Ct. 2356 (2019), addressed this 
exemption and the meaning of ``confidential.'' The Court held that, 
where commercial or financial information is treated as private by its 
owner and provided to the Government under an assurance of privacy, the 
information is considered ``confidential'' within the meaning of FOIA 
exemption 4. Id. at 2366.
---------------------------------------------------------------------------

    \1\ The Food Marketing Institute is a trade group representing 
grocery retailers, many of whom accept SNAP benefits, which argued 
store-level redemption data should be considered confidential.
---------------------------------------------------------------------------

    Following the Supreme Court decision, the Department of Justice 
(DOJ) issued guidance \2\ to USDA that the agency will follow when 
processing FOIA requests for SNAP data of this nature. The first step 
will be for the agency to determine whether the information requested 
is customarily kept private or closely-held by the submitter of the 
information. If yes, the second step is to determine whether the agency 
provided an express or implied assurance of confidentiality when the 
information was shared with the Government. If so, the information is 
confidential under exemption 4. This information, and other information 
provided to the agency by firms, may also fall under FOIA exemptions 3 
and 6. These exemptions permit withholding of information prohibited 
from disclosure by a Federal statute and when the disclosure would 
constitute a clearly unwarranted invasion of personal privacy, 
respectively.
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    \2\ Exemption 4 after the Supreme Court's Ruling in Food 
Marketing Institute v. Argus Leader Media.
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    Because the Supreme Court has held that individual store data 
submitted to the agency is protected by Exemption 4, the agency may not 
release such data in response to a FOIA request. See id. at 2363 
(noting that such data is provided by individual stores to USDA under a 
regulatory provision promising confidentiality and therefore is not 
subject to disclosure under Exemption 4).
    One commenter suggested revamping FNS' current process of utilizing 
Administrative Review Officers (AROs) and replacing them with 
Administrative Law Judges (ALJs), with the reasoning that ALJs have 
considerably more authority to convene evidentiary hearings and 
discovery proceedings.

[[Page 52474]]

Such an organizational change within the Department of Agriculture is 
not germane to this rulemaking as it is outside the scope of what was 
proposed and has no bearing on the processing of FOIA requests and 
appeals. As noted, discovery is a process that is already available to 
firms that remain aggrieved by an agency administrative action and 
choose to pursue judicial review.
    Some commenters expressed concern that providing full access to 
records only during discovery proceedings at the judicial review stage 
is not a financially viable option for small retail food stores that 
are unlikely to pursue court proceedings. Congress recognized the need 
for a robust administrative due process when retailers are charged with 
program violations, which provides for stores of any size to present 
evidence if they disagree with the agency's determination. In most 
cases, retailers are allowed to continue accepting SNAP benefits until 
after the final administrative determination is rendered, and multiple 
opportunities for retailers to rebut charges and administratively 
appeal agency determinations are provided by statute and regulation. 
The statue is clear, however, that when it comes to serious offenses 
warranting permanent disqualification, the disqualification must go 
into effect on the date of receipt of the notice of disqualification 7 
U.S.C. 2023(a)(18). The FNS administrative due process is aligned with 
the FNA, and this rule ensures that the agency is in full compliance 
with its statutory mandate to expeditiously remove stores that have 
committed serious violations from the Program.

Using FOIA To Delay FNS' Administrative Actions

    Some commenters expressed concern with the alleged lack of support 
provided in the NPRM regarding FNS' statement that attorneys for some 
firms submit extensive and complex FOIA requests and appeals, and 
repeatedly request information that has been consistently denied when 
requested through FOIA. Commenters questioned FNS' concerns that the 
seeming intention of the attorneys was delaying FNS' final 
determination to disqualify or impose a civil money penalty against the 
respective firm.
    As is evident in agency FOIA logs,\3\ a small cadre of attorneys 
regularly request FOIA information regarding SNAP firms. These 
attorneys often submit standard requests for information on behalf of 
one firm, receive a response from FNS protecting particular information 
under FOIA exemptions, and subsequently and repeatedly send equivalent 
requests on behalf of other firms. By law, the agency is obligated to 
respond to each of these FOIA requests individually. Under current 
practice, the agency delays the respective administrative action while 
responding to each of the FOIA requests. In many instances, these 
attorneys go on to file appeals for firm after firm seeking the release 
of information that was previously denied under FOIA (e.g., a request 
for the name of an undercover investigator or confidential informant), 
or information that is of a completely different nature than the 
original request. These requests cause unnecessary delays in issuing a 
determination notice to the firm, as is evidenced by the data that 
follows.
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    \3\ FNS FOIA logs: https://www.fns.usda.gov/foia/electronic-reading-room.
---------------------------------------------------------------------------

    From Fiscal Year (FY) 2015 to FY 2018, FNS issued close to 12,000 
charge letters. Firms that did not file a FOIA request after receiving 
a charge letter had their notice of determination issued, on average, 
approximately six weeks later. The 1,550 firms that did file a FOIA 
request after receiving a charge letter were able to redeem benefits 
for an average of eight weeks before the agency could respond to the 
FOIA request. Of those, the 902 firms that then appealed the agency's 
FOIA response, however, were able to redeem benefits for an average of 
eighty weeks before final action could be taken on their respective 
cases.
    This final rule will improve program integrity and reduce final 
action timeframes significantly by preventing a FOIA request and appeal 
from delaying administrative actions and allowing the agency to take 
timely action against firms that have been determined to have committed 
Program violations. This rule does not affect the right of firms 
charged with program violations to request information from FNS through 
FOIA and utilize the information provided by the agency in their case.

Mitigating Impact on the Populations Served by Small Retail Food Stores 
Who May Be Impacted by This Rule

    A few commenters expressed a general concern about the impact that 
removing a retail food store from the Program may have on the 
population served by that particular store. SNAP regulations provide 
for a retail food store to pay a civil monetary penalty (CMP) in lieu 
of a time-limited or `term' disqualification sanction when the agency 
determines that sanctioning the firm by removing it from the Program 
would cause hardship to participants. The charge letter describes this 
option and also informs the retailer of the CMP amount it would have to 
pay if determined to be eligible.
    A hardship CMP generally may not be imposed in lieu of a permanent 
disqualification, such as for trafficking benefits. However, in certain 
circumstances described in 7 CFR 278.6(i), it is possible for a 
trafficking CMP to be imposed in these cases. For example, if the firm 
timely submits to FNS substantial evidence that demonstrates that the 
firm had established and implemented an effective compliance policy and 
program to prevent violations, a CMP, as opposed to permanent 
disqualification, may be warranted.
    FNS understands the impact that removing an authorized retail food 
store for program violations, even temporarily, may have on SNAP 
participants. FNS provides ample consideration to SNAP participants' 
ability to access and purchase an adequate variety of food items at 
other SNAP-authorized retail food stores in an area when making 
administrative decisions. Firms impacted by this final rule will be 
afforded all of the appropriate considerations described here.

Summary

    As outlined in the rule, FNS will not delay administrative actions 
based on the receipt of FOIA requests. In cases where a firm submits a 
FOIA request, FNS will consider the firm's official response to the 
charge letter while simultaneously processing the firm's FOIA request. 
On completing the review of the firm's official response to the 
charges, FNS will issue a notice of determination. A firm may then 
submit additional information in support of its position to FNS or the 
court as part of its due process rights under administrative appeal or 
judicial review, including information provided by FNS' response to a 
FOIA request.
    If a firm receives an adverse notice of determination for the most 
egregious violations, such as trafficking, the permanent 
disqualification sanction shall go into effect on the firm's receipt of 
the notice of determination per statute and regulation. In fiscal year 
2018, of the 1,555 firms permanently disqualified, 1,552 were 
determined to have trafficked in SNAP benefits, two (2) falsified 
information, and one (1) was determined to have committed a third-
strike violation warranting permanent disqualification.
    Except for firms disqualified from SNAP because they were 
disqualified from the Special Supplemental Nutrition Program for Women, 
Infants,

[[Page 52475]]

and Children (WIC), which are not subject to administrative review by 
SNAP, firms will retain their right to administrative and judicial 
review of the determination made, in accordance with 7 CFR part 279. If 
a firm receives an adverse notice of determination for non-permanent 
disqualification violations, the sanctions outlined in the notice will 
be implemented once the firm has exhausted all due process proceedings. 
Firms determined to have committed offenses that warrant permanent 
disqualification will be permanently disqualified from the Program on 
delivery of the notice of determination. Through this final rule a 
retail food store's submission of a FOIA request or appeal would have 
no impact on when the agency takes administrative action. To clarify 
that a FOIA request or FOIA appeal is not a response to a letter of 
charges or a request for administrative review of the notice of 
determination, and to ensure that any request or appeal for records 
under the FOIA does not delay the effective date of the administrative 
determination, FNS is amending language at 7 CFR 278.6(p), 279.4(c), 
and 279.6(b). Removing retail food stores from the Program at the point 
FNS has determined, based on the evidence and a review of a firm's 
charge letter response (if provided), that a store engaged in a serious 
offense warranting permanent disqualification such as trafficking, is 
aligned with the FNA and helps ensure that the Program is conducted 
with integrity. Firms sanctioned for less serious, non-permanent 
disqualification violations will continue participating in SNAP, 
pending the outcome of any due process proceedings.

Procedural Matters

Executive Order 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This final rule has been determined to be significant. 
Accordingly, the rule has been reviewed by the Office of Management and 
Budget, in conformance with Executive Order 12866.

Executive Order 13771

    This final rule is considered neither an E.O. 13771 regulatory 
action nor an E.O. 13771 deregulatory action because it results in no 
more than de minimis costs.

Regulatory Impact Analysis

    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any one 
year). USDA does not anticipate this final rule is likely to have an 
economic impact of $100 million or more in any one year, and therefore, 
does not meet the definition of ``economically significant'' under 
Executive Order 12866. The changes in this final rule are not 
anticipated to have any impacts on SNAP participation or benefit 
issuance; any costs or savings will be as the result of changes that 
impact retailers who are subject to sanctions as a result of failure to 
comply with the Food and Nutrition Act of 2008, as amended.

Economic Analysis of Processing FOIA Requests and Appeals Separately 
From Administrative Actions Against SNAP Retailers

Overview of the Rule

    The rule separates the process of disqualifying or imposing fines 
on retailers from the process of responding to Freedom of Information 
Act (FOIA) requests or appeals made by retailers.
    Under current regulations, the process is as follows:
     FNS issues a charge letter to a retailer suspected of 
violating program rules. The letter describes the transactions that led 
to the charges and the possible sanctions that may be imposed as a 
result. Sanctions are not actually imposed at this point.
     The retailer has 10 days to respond to the charge letter.
     FNS examines evidence, including any response from the 
retailer, to determine whether the retailer violated program rules. If 
FNS determines that the retailer has violated program rules, FNS issues 
a notice of determination to the retailer, including a sanction if 
applicable.
    [cir] For retailers determined to have committed violations 
warranting permanent disqualification, including trafficking, the 
sanction takes effect on receipt of the notice of determination.
     For non-permanent violations, the firm may be temporarily 
disqualified and/or pay a fine. These sanctions take effect 10 days 
from receipt of the notice of determination, unless a timely request 
for an administrative review is filed.
     The notice also informs retailers that they have 10 days 
to request administrative review. If the case involves a permanent 
disqualification, the retailer will be permanently disqualified on 
receiving the initial notice of determination and remain so during the 
administrative review. If a retailer files such a request in a non-
trafficking case, the sanctions are held in abeyance while the review 
is performed. Retailers have the opportunity to provide additional 
information in support of their position in administrative review.
     FNS then makes a final determination based on the 
administrative review. If the retailer was permanently disqualified on 
receiving the original notice of determination and remained as such 
during administrative review, the permanent disqualification remains in 
effect if the final determination sustains the original determination. 
If the final determination is that the retailer committed non-permanent 
violations, sanctions go into effect 30 days after the final 
determination.
     Retailers who disagree with FNS' final determination may 
then file a complaint against the United States to obtain judicial 
review within 30 days. Retailers may submit new information to the 
reviewing court.
    Retailers considered for disqualification or imposition of a fine, 
like any citizen or company, may submit FOIA requests. Under current 
practice, when a FOIA request is submitted, FNS' determination to 
disqualify or impose a fine against the firm is delayed until the 
agency has responded to the FOIA. Retailers may also appeal the 
agency's FOIA response; again, under current practice, the 
determination is delayed until the appeal is resolved. As noted 
elsewhere in the rule, some firms have used the FOIA and FOIA appeals 
process to stall the imposition of sanctions. For example, a lawyer who 
has handled multiple FOIA requests asks for the exact same information 
(such as the name of the investigator) that has been denied repeatedly 
in previous requests. As a result, current practice has resulted in a 
delay in taking administrative actions against retailers for SNAP 
violations. Although the timeframe for making a determination is about 
1.4 months when no FOIA request is made, that timeframe is extended, 
sometimes for 2 years or longer, when a FOIA/FOIA appeal is requested.
    Under the final rule, retailers will no longer be able to use the 
FOIA process to delay FNS's administrative actions for SNAP violations. 
FNS will no longer

[[Page 52476]]

delay the determination until after the FOIA request is processed. In 
instances where violations warrant permanent disqualification, the 
permanent disqualification will go into effect immediately on issuance 
of the notice of determination. This is in keeping with Congressional 
intent as specified at 7 U.S.C. 2023(a)(18). FOIA appeals will continue 
to be handled separately and in parallel with administrative due 
process remedies that retailers may pursue.
    As a result of this change, firms found to have committed program 
violations, such as trafficking SNAP benefits, will be removed from the 
Program on a timelier basis. Firms that are determined to have 
committed program violations may avail themselves of administrative 
review and subsequent judicial review; sanctions for non-permanent 
violations would be held in abeyance during these additional 
proceedings as under current practice.

Expected Impacts

    In general, this final rule is expected to result in earlier 
implementation of sanctions against firms that violate program rules. 
As noted previously, there are no anticipated impacts on SNAP 
participation or on SNAP benefit issuance. Between FY 2015 and FY 2018, 
1,550 retailers that were charged with a violation submitted a FOIA 
request, and more than half (902) submitted a FOIA appeal.\4\ During 
the time spent processing the FOIA request, which averaged two months, 
these retailers redeemed a total of more than $44.25 million in SNAP. 
In addition, firms that submitted FOIA appeals continued to redeem SNAP 
benefits, on average, for another 20 months, and redeemed over $222.45 
million over the four-year period. In total, more than $266.70 million 
was redeemed by stores charged with violations during the time spent 
processing FOIA requests and appeals.
---------------------------------------------------------------------------

    \4\ USDA administrative data.
---------------------------------------------------------------------------

    Under this final rule, these retailers would not be able to use the 
FOIA process to delay final adjudication and thereby continue redeeming 
benefits. This loss of revenue caused by speedier disqualifications, 
and the subsequent inability to accept SNAP benefits, may result in 
some of these firms going out of business because of their violations.
    Between FY 2015 and FY 2018, 272 retailers that were charged with 
non-permanent violations submitted a FOIA request. For these retailers, 
sanctions ranged from fines to term disqualification (temporary for a 
period of 6 months or more). Under this final rule, those firms would 
now see their sanctions implemented sooner than under current practice. 
However, because of the small number of retailers involved, the annual 
impact of imposing the sanctions earlier will be minor. There will be 
no permanent dollar loss of benefits for these retailers as the 
sanctions themselves are unchanged. These changes may also result in 
fewer retailers submitting FOIA requests/appeals as a delaying tactic, 
which will reduce the amount of time the agency devotes to responding 
to these requests. As is the case under current rules, SNAP 
participants will be able to redeem their benefits at other authorized 
retailers. When a firms' non-permanent disqualification would cause a 
hardship to SNAP households because of limited food access, FNS may 
impose a fine in lieu of the non-permanent disqualification. Therefore, 
there is minimal impact on SNAP participants and the overall economy. 
There also is no impact on State agencies, as oversight of retailer 
operations is a Federal function.

            Table 1--FY 2015-FY 2018 FOIA and Benefit Redemption Data for Firms Issued Charge Letters
----------------------------------------------------------------------------------------------------------------
                                                                                      Dollars         Dollars
                                                                                   between FOIA    between FOIA
              Charge letter group and FY                    FOIA         FOIA      requests and     appeals and
                                                          requests     appeals        agency          agency
                                                                                     response        response
----------------------------------------------------------------------------------------------------------------
FY15:
    Permanent Disqualification........................          222          105     $10,961,362     $42,000,992
    Non-Permanent Disqualification....................           30            8       3,313,239       3,005,438
FY16:
    Permanent Disqualification........................          288          175       8,283,318      62,570,560
    Non-permanent Disqualification....................           40           18       2,162,874       6,371,363
FY17:
    Permanent Disqualification........................          349          211      10,062,273      47,128,737
    Non-permanent Disqualification....................           92           38       1,001,022       6,853,157
FY 18:
    Permanent Disqualification........................          419          289       6,136,318      46,114,839
    Non-permanent Disqualification....................          110           58       2,334,029       8,401,981
                                                       ---------------------------------------------------------
        Sub-Totals:
          Permanent Disqualification..................        1,278          780      35,443,271     197,815,128
          Non-permanent Disqualification..............          272          122       8,811,164      24,631,939
                                                       ---------------------------------------------------------
            Totals (Permanent and Non-permanent               1,550          902      44,254,435     222,447,067
             Disqualification)........................
                                                       ---------------------------------------------------------
            Total $ redeemed during FOIA Actions        ...........  ...........  ..............     233,258,399
             (Permanent Disqualification).............
                                                       ---------------------------------------------------------
            Total $ redeemed during FOIA Actions (Non-  ...........  ...........  ..............      33,443,103
             permanent Disqualification...............
                                                       ---------------------------------------------------------
            Total $ redeemed during FOIA Actions        ...........  ...........  ..............     266,701,502
             (Permanent and Non-permanent
             Disqualification.........................
----------------------------------------------------------------------------------------------------------------
Source: USDA administrative data.


[[Page 52477]]

Alternatives

    As discussed in the preamble of this rule, several commenters 
suggested alternative approaches to specific rule provisions. One such 
suggested alternative was that FNS provide all of the records related 
to the charges leveled against a firm in the charge letter, in order to 
reduce the delay in decision making resulting from FOIA requests and 
appeals. The agency is not adopting this suggestion for the following 
reasons. First, as described in the preamble, the agency believes that 
the charge letter already provides extensive information regarding the 
basis of the charges. Second, certain information is protected from 
disclosure under Federal law, including information that would reveal 
methods used in analyzing data or in conducting an on-site 
investigation, and therefore it would not be appropriate to include in 
the charge letter.
    The agency also considered allowing retailers determined to have 
committed a program violation that warranted non-permanent 
disqualification to hold the determination in abeyance pending the 
outcome of the FOIA response, but not any subsequent FOIA appeal. 
However, allowing firms that have been disqualified to remain on the 
Program pending outcome of the initial FOIA response would negate the 
purpose of this rule, which is to separate FNS' administrative action 
from the FOIA process. As previously stated, firms found to have 
violated program rules will continue to be afforded their full due 
process opportunities for administrative and judicial proceedings. As 
such, FNS is not adopting this alternative.
    No consideration was given in allowing retailers determined to have 
committed the most egregious violations, such as trafficking, to 
continue to participate in SNAP, as doing so would not only negate the 
purpose of this rule, but negatively impact program integrity, add 
costs associated as provided in the aforementioned Economic Analysis, 
and not conform with Congressional intent to remove egregious violators 
expeditiously. The processing of FOIA requests and appeals during the 
administrative and judicial review process will now have no impact on 
when the agency can take administrative action.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires Agencies 
to analyze the impact of rulemaking on small entities and consider 
alternatives that would minimize any significant impacts on a 
substantial number of small entities. Pursuant to that review, it has 
been certified that this rule would not have a significant impact on a 
substantial number of small entities.
    This rule regulates all SNAP-authorized retailers, not just those 
stores that are likely to fall under the Small Business Administration 
gross sales threshold to qualify as a small business for Federal 
Government programs. Small retailers (defined as small or medium-sized 
grocery stores, convenience stores, combination stores, specialty 
stores, and other retailers, but not supermarkets, super stores, or 
large groceries) represent 82 percent of all SNAP retailers. However, 
among these small retailers, SNAP redemptions accounted for less than 
one percent of all their retail sales in 2018.

      Table 2--Retail Revenue and Redemptions for Small SNAP-Authorized Retailers, by Retailer Type in 2018
----------------------------------------------------------------------------------------------------------------
                                                                                      Average       Percent of
                  Retailer type                      Number of        Average       redemption      sales from
                                                      stores       retail sales       amount        redemptions
----------------------------------------------------------------------------------------------------------------
Small Grocery...................................          11,331        $349,672         $60,512            17.3
Medium Grocery..................................           8,788         991,028         317,308            13.6
Convenience Store...............................         115,456      $3,636,610         $28,294             0.8
Combination Retailer............................          58,785      14,456,598          56,660             0.4
Specialty Store.................................           7,792       2,987,973          82,791             2.8
Other Retailer..................................           8,181       4,250,786          12,217             0.3
                                                 ---------------------------------------------------------------
    Overall Average.............................         210,333       6,236,404          43,791             0.7
----------------------------------------------------------------------------------------------------------------

    While all SNAP-authorized retailers are covered by this rule, the 
number of small businesses directly affected by this rule is expected 
to be small. This final rule only impacts those retail food stores that 
are charged with program violations, such as trafficking of benefits, 
and that submit FOIA actions to challenge penalties. Between 2015 and 
2018, 7,235 firms were charged with trafficking; 7,230 were small 
retailers. Another 3,697 were charged with other violations; 3,663 were 
small retailers. During this four-year period, 1,550 of these firms 
submitted FOIA requests, averaging 388 per year, less than one-fifth of 
a percent of all SNAP-authorized retailers that are classified as 
small.
    These firms had average annual redemptions of $170,000 and average 
annual revenue of $516,000, so their SNAP redemptions represented about 
a third of total revenue. Under this rule, retailers will experience a 
loss of revenue once the disqualification determination goes into 
effect. Revenue loss may result from lost SNAP sales as well as from 
reduced sales of items that, while not eligible for purchase using SNAP 
funds, were typically purchased in the same transaction using another 
tender type. USDA does not have data necessary to quantify the impact 
of this rule on revenue resulting from reduced non-SNAP purchases, only 
the impact on revenue resulting from lost SNAP purchases. While this 
impact would be significant for those affected, the number of affected 
retailers is not substantial: In an average year only 0.18 percent \5\ 
of all SNAP-authorized small retailers submit FOIA requests after being 
charged with trafficking or another violation.
---------------------------------------------------------------------------

    \5\ Calculated as 388 stores submitting FOIA requests in an 
average year divided by 210,333 small authorized SNAP retailers.
---------------------------------------------------------------------------

    FNS also considered if the revenue lost from disqualification was 
large enough for the firm to exit the Program, and related economic 
impact. Of the 2,982 small firms temporarily disqualified between 2015 
and 2018, FNS estimates that approximately 215 firms in an average year 
did not return to the Program. This represents .1 percent of all SNAP-
authorized small retailers impacted for the period. For firms that are 
permanently disqualified, the intent is for the firms to remain off of 
the Program, so FNS has little data to indicate whether those stores 
remain in

[[Page 52478]]

business after being removed from SNAP. However, in about one-third of 
these cases (representing 0.2 percent of authorized small retailers), 
firms were authorized to participate in SNAP under new ownership at the 
same location for this time period, which may be indicative that the 
penalized stores went out of business, but cannot be tied directly to 
the firm's permanent disqualification from SNAP. Because the number of 
stores is quite small, and because this rule is expected to result in 
penalties being applied sooner (but not expected to change the 
determination or penalty), FNS estimates that regardless of length of 
disqualification, the overall economic impact would be minimal.

    Table 3--Firms Charged With Violations, Annual Average 2015-2018
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Submitting FOIA requests................................             388
    Average no. months Between FOIA Request and Agency                 2
     Response...........................................
    Average Redemption between FOIA Request & Agency             $28,629
     Response...........................................
    Average Annual Redemption, Firms Submitted FOIA             $171,773
     Request............................................
    Average Annual Revenue, Firms Submitted FOIA Request        $515,855
    Redemptions as a Percentage of Revenue..............           33.3%
Submitting FOIA Appeals.................................             225
    Average no. months Between FOIA Request and Agency                20
     Response...........................................
    Average Redemption between FOIA Request & Agency            $234,215
     Response...........................................
    Average Annual Redemption, Firms Submitted FOIA             $140,529
     Appeal.............................................
    Average Annual Revenue, Firms Submitted FOIA Appeal.        $515,844
    Redemptions as a Percentage of Revenue..............           27.2%
------------------------------------------------------------------------

    In its comments on the NPRM, the Small Business Administration's 
Office of Advocacy (the ``Office'') raised additional concerns on 
behalf of small businesses. First, the Office is concerned about the 
basis of the determination of whether a retailer has violated SNAP 
rules. Some retailers have argued that they need to submit FOIA 
requests to better understand the charges against them. However, as 
described in more detail in the preamble, the charge letter details the 
suspected violations, the sanction(s) that may be imposed for these 
violations, and the steps that the firm must take if it wishes to 
challenge the charges. By regulation, FNS may issue a charge letter on 
the basis of evidence from an on-site investigation, inconsistent 
redemption data, or evidence obtained through electronic benefit system 
(EBT) transactions. EBT transactions are reviewed in relation to the 
store operation (including, but not limited to, size, inventory, sales 
practices). Firms are told in writing exactly which transactions are 
suspicious, when these transactions occurred, and why they are 
suspicious. Firms are given the opportunity to respond to these 
charges, and FNS carefully considers their official response before 
issuing a notice of determination. Even then, firms can file requests 
for administrative appeal and, if the determination is upheld, file a 
complaint through the judicial process.
    The Office's final concern is that small businesses will be forced 
to expend large sums of money seeking judicial review of the FNS 
determination. As noted above and elsewhere in the preamble of this 
rule, retailers will continue to be afforded their full due process 
opportunities for administrative and judicial proceedings as under 
current statute and regulations. Therefore, the Department does not 
believe that the proposed changes to the FOIA process will result in a 
change in the number of firms pursuing a judicial review.

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 by State, local or tribal 
governments, in the aggregate, or 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 most cost effective or least burdensome alternative that achieves 
the objectives of the rule.
    This final rule does not contain Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local and 
tribal governments or the private sector of $100 million or more in any 
one year. Thus, the rule is not subject to the requirements of sections 
202 and 205 of the UMRA.

Executive Order 12372

    The Supplemental Nutrition Assistance Program is listed in the 
Catalog of Federal Domestic Assistance under Number 10.551 and is not 
subject to 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. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under Section (6)(b)(2)(B) of Executive Order 13132.
    The Department has considered the impact of this rule on State and 
local governments and has determined that this rule does not have 
federalism implications. Therefore, under section 6(b) of the Executive 
Order, a federalism summary is not required.

Executive Order 12988, Civil Justice Reform

    This final 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 
and timely implementation. This rule is not intended to have 
retroactive effects unless so specified in the Effective Dates 
paragraph of the final rule. Before any judicial challenge to the 
provisions of the final rule, all applicable administrative procedures 
must be exhausted.

Civil Rights Impact Analysis

    FNS has reviewed the final rule, in accordance with the Department 
Regulation 4300-004, ``Civil Rights Impact Analysis'' to identify and

[[Page 52479]]

address any major civil rights impacts the final rule might have on 
minorities, women, and persons with disabilities. The promulgation of 
this final rule may impact a small percentage of small retail food 
stores and the SNAP customers who usually shop at those stores, however 
the mitigation strategies outlined in the CRIA provide consideration to 
SNAP recipients' ability to access and purchase an adequate variety of 
food items at other SNAP-authorized retail food stores in an area when 
making administrative decisions. Further, FNS will monitor incoming 
complaints from retailers and SNAP recipients to determine any civil 
rights impact on protected groups due to the final rule.

Executive Order 13175

    Executive Order 13175 requires Federal agencies to consult and 
coordinate with Tribes on a government-to-government basis on policies 
that have Tribal implications, including regulations, legislative 
comments or proposed legislation, and other policy statements or 
actions that have substantial direct effects on one or more Indian 
Tribes, on the relationship between the Federal Government and Indian 
Tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian Tribes.
    FNS holds regularly scheduled consultations with Tribal 
Organizations to discuss regulations. On August 15, 2018, February 14, 
2019, and October 24, 2019, FNS consulted with Tribal communities 
regarding the rule. These sessions provided Tribal communities the 
opportunity to address any concerns related to the rule. Tribal 
communities identified no issues regarding the rule. FNS is unaware of 
any current Tribal laws that could conflict with the final rule.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; 5 CFR 
1320) requires the Office of Management and Budget (OMB) to 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 the Office of Management and Budget under the Paperwork 
Reduction Act of 1995.

E-Government Act Compliance

    The Department 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.

List of Subjects

7 CFR Part 278

    Participation of Retail Food Stores, Wholesale Food Concerns and 
Insured Financial Institutions.

7 CFR Part 279

    Administrative and Judicial Review--Food Retailers and Food 
Wholesalers.

    Accordingly, 7 CFR parts 278 and 279 are amended as follows:

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

0
1. The authority citation for part 278 continues to read as follows:

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


0
2. In Sec.  278.6, add paragraph (p) to read as follows:


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

* * * * *
    (p) Freedom of Information Act (FOIA) requests and appeals. A FOIA 
request or appeal for records shall not delay or prohibit FNS from 
making a determination regarding disqualification or penalty against a 
firm under paragraphs (c) and (d) of this section, or delay the 
effective date of a disqualification or penalty listed in paragraph (e) 
of this section.

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

0
3. The authority citation for part 279 continues to read as follows:

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


0
4. In Sec.  279.4, amend paragraph (c) by:
0
a. Adding a new second sentence; and
0
b. Removing the words ``However, no'' in the last sentence and adding 
in its place the word ``No''.
    The addition reads as follows:


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

* * * * *
    (c) * * * Additionally, FNS may not grant extensions of time or 
hold the administrative review process in abeyance solely on the basis 
of a pending FOIA request or appeal. * * *

0
5. In Sec.  279.6, amend paragraph (b) by:
0
a. Adding a new second sentence; and
0
b. Removing the words ``However, no'' in the last sentence and adding 
in its place the word ``No''.
    The addition reads as follows:


Sec.  279.6  Legal advice and extensions of time.

* * * * *
    (b) * * * Additionally, the designated reviewer may not grant 
extensions of time or hold the administrative review process in 
abeyance solely on the basis of a pending FOIA request or appeal. * * *

Stephen L. Censky,
Deputy Secretary, Food, Nutrition, and Consumer Services.
[FR Doc. 2020-18701 Filed 8-25-20; 8:45 am]
BILLING CODE 3410-30-P