[Federal Register: March 3, 2008 (Volume 73, Number 42)]
[Rules and Regulations]
[Page 11305-11314]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03mr08-1]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
[[Page 11305]]
DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Part 246
RIN 0584-AD73
[FNS-2007-0009]
Special Supplemental Nutrition Program for Women, Infants and
Children (WIC): Implementation of Nondiscretionary WIC Certification
and General Administrative Provisions
AGENCY: Food and Nutrition Service, USDA.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: This interim final rule amends the regulations for the Special
Supplemental Nutrition Program for Women, Infants and Children (WIC) by
implementing most of the nondiscretionary provisions of the Child
Nutrition and WIC Reauthorization Act of 2004 that address participant
certification and general program administration in the WIC Program. It
also implements the exclusions from income eligibility determinations
set forth in the National Defense Authorization Act for Fiscal Year
(FY) 2006 and in the National Flood Insurance Act of 1968, as amended,
and clarifies an inconsistency related to fair hearings and notices of
adverse actions that was inadvertently omitted in the publication of
the Final WIC Miscellaneous Rule. Finally, this rulemaking includes
technical amendments to correct the address and telephone numbers to
which complaints alleging discrimination in the WIC Program should be
directed, and to correct the address of the Western Regional Office of
the Food and Nutrition Service (FNS).
The provisions set forth in this rulemaking are nondiscretionary,
i.e., the Department has not exercised any authority to interpret the
statutory provisions beyond the language that is specifically provided
in the legislation. However, the Department believes that at least one
of the provisions in this rulemaking may generate additional questions
or comments concerning its implementation. Therefore, the rule is being
issued as an interim final rule, to afford the public the opportunity
to comment on the possible implications of the provisions contained
herein.
DATES: Effective Date: This rule will become effective on May 2, 2008.
Implementation Date: State agencies must implement the provisions
of this rule no later than April 2, 2008.
Comment Date: To be considered, comments on this interim rule must
be postmarked on or before June 2, 2008.
ADDRESSES: The Food and Nutrition Service (FNS) invites interested
persons to submit comments on this interim rule. Comments may be
submitted by any of the following methods:
Federal eRulemaking Portal: Go to http://
www.regulations.gov. Under the ``Comment or Submission'' tab, enter
Docket ID FNS-2007-0009 to submit or view public comments and
to view supporting and related materials available electronically.
Information on using Regulations.gov, including instructions for
accessing documents, submitting comments, and viewing the docket after
the close of the comment period, is available through the site's ``User
Tips'' link.
Mail: Send comments to Patricia N. Daniels, Director,
Supplemental Food Programs Division, Food and Nutrition Service, USDA,
3101 Park Center Drive, Room 528, Alexandria, Virginia 22302, (703)
305-2746.
Comments submitted in response to this interim rule will be
included in the record and will be made available to the public. Please
be advised that the substance of the comments and the identities of the
individuals or entities submitting the comments will be subject to
public disclosure. FNS will make the comments publicly available on the
Internet via http://www.regulations.gov. Information regarding the
interim rule will be available on the FNS Web site at http://
www.fns.usda.gov/wic.
FOR FURTHER INFORMATION CONTACT: Debra R. Whitford, Chief, Policy and
Program Development Branch, Supplemental Food Programs Division, Food
and Nutrition Service, USDA, 3101 Park Center Drive, Room 528,
Alexandria, VA 22302, (703) 305-2746, or Debbie.Whitford@fns.usda.gov.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be significant and was reviewed by
the Office of Management and Budget under Executive Order 12866.
Regulatory Impact Analysis
As required for all rules that have been designated as Significant
by the Office of Management and Budget, a Regulatory Impact Analysis
was developed for this rule. A complete copy of the Impact Analysis is
available by contacting FNS as indicated in the ADDRESSES section of
this Preamble.
The following summarizes the conclusions of the regulatory impact
analysis:
Need for Action
This action is needed to implement the nondiscretionary provisions
of the Child Nutrition and WIC Reauthorization Act of 2004, Public Law
108-265, as well as several additional nondiscretionary legislative
provisions affecting the WIC Program. The rule contains several
nondiscretionary provisions related to certification, operation, and
general administration in the WIC Program, including expanded
definitions of ``nutrition education'' and ``supplemental foods''; new
exclusions from WIC income eligibility determinations; a new assurance
of nondiscrimination; new requirements affecting infant formula rebate
contracts; additional exceptions to the physical presence requirement
for certification; new requirements and stipulations regarding food
delivery systems; and expanded allowances in the areas of funding and
financial management.
Benefits
FNS has already issued policy and guidance to State agencies on
implementation of the legislative requirements addressed in this
rulemaking, since all of the provisions of the Child Nutrition and WIC
Reauthorization Act of 2004 were effective by law on either June 30,
2004; July 1, 2004; or October 1, 2004. Consequently, FNS believes that
the current rule will accomplish the goals of the Act concerning
participant certification and general program
[[Page 11306]]
administration. Additionally, the rule has provisions that improve
participant access and that give State agencies added flexibility.
Costs
Overall, most of the provisions will result in little or no change
in program costs.
Regulatory Flexibility Act
This rule has been reviewed with regard to the requirements of the
Regulatory Flexibility Act (5 U.S.C. 601-602). Although not required by
the Act, Nancy Montanez Johner, Under Secretary, Food, Nutrition, and
Consumer Services, hereby certifies that this rule will not have a
significant impact upon a substantial number of small entities. The
provisions implemented through this rulemaking apply to all State
agencies administering the WIC Program, regardless of size. Further,
several of the provisions contained in this rule represent options now
available to WIC State agencies, rather than new requirements for the
operation and administration of the Program.
Public Law 104-4, Unfunded Mandate Reform Act of 1995 (UMRA)
Title II of the UMRA establishes requirements for Federal agencies
to assess the effects of their regulatory actions on State, local, and
tribal governments and the private sector. Under Section 202 of the
UMRA, FNS must generally prepare a written statement, including a cost-
benefit analysis, for proposed and interim final/final rules with
``Federal mandates'' that may result in expenditures to State, local,
and tribal governments in the aggregate, or to the private sector, of
$100 million or more in any one year. When such a statement is needed
for a rule, Section 205 of the UMRA generally requires FNS to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, more cost-effective, or least burdensome alternative
that achieves the objectives of the rule.
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local, or tribal
governments or the private sector of $100 million or more in any one
year. This rule is therefore not subject to the requirements of
Sections 202 and 205 of the UMRA.
Executive Order 12372
The Special Supplemental Nutrition Program for Women, Infants and
Children (WIC) is listed in the Catalog of Federal Domestic Assistance
under No. 10.557. For the reasons set forth in the final rule in 7 CFR
part 3015, Subpart V and related Notice (48 FR 29115), this program is
included in the scope of Executive Order 12372, which requires
intergovernmental consultation with State and local officials.
Prior to enactment of the Child Nutrition and WIC Reauthorization
Act of 2004 (Pub. L. 108-265), the Department held listening sessions
at selected locations throughout the country at which representatives
of the WIC community had the opportunity to identify areas of interest
and concern that they wanted the Reauthorization Act to address. Staff
from FNS' headquarters and regional offices also had both formal and
informal discussions with State and local officials on an ongoing basis
regarding program operation and administration. All of these
discussions allowed State and local WIC agencies, as well as other
interested parties, to provide feedback that formed the basis for the
nondiscretionary legislative provisions contained in Pub. L. 108-265
and implemented through this rulemaking.
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. FNS 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 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 local laws, regulations, or policies that conflict with its
provisions or that would otherwise impede its full implementation. This
rule is not intended to have retroactive effect unless so specified in
the Dates or Background paragraphs of the preamble of this rule. Prior
to any judicial challenge to the application of the provisions of this
rule, all applicable administrative procedures must be exhausted.
In the Special Supplemental Food Program for Women, Infants and
Children (WIC), the administrative procedures that must be exhausted
are as follows:
State agency hearing procedures pursuant to 7 CFR 246.9
must be exhausted for participants concerning denial of participation,
disqualification, and claims;
State agency hearing procedures pursuant to 7 CFR
246.18(a)(1) must be exhausted for vendors concerning denial of
authorization, termination of agreement, disqualification, civil money
penalty or fine;
The State agency process for providing the vendor an
opportunity to justify or correct the food instrument pursuant to 7 CFR
246.12(k)(3) must be exhausted for vendors concerning delaying payment
for a food instrument or a claim;
State agency hearing procedures pursuant to 7 CFR
246.18(a)(3) must be exhausted for local agencies concerning denial of
application, disqualification, or any other adverse action affecting
participation;
FNS hearing procedures pursuant to 7 CFR 246.22 must be
exhausted for State agencies concerning sanctions imposed by FNS; and
Administrative appeal to the extent required by 7 CFR
3016.36 must be exhausted for vendors and local agencies concerning
procurement decisions of State agencies.
Civil Rights Impact Analysis
FNS has reviewed this rule in accordance with the Department
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify and
address any major civil rights impacts the rule might have on
minorities, women, and persons with disabilities. FNS has determined
that the rule's intent and provisions will not adversely affect access
to WIC services by eligible persons. All data available to FNS indicate
that protected individuals have the same opportunity to participate in
the WIC Program as non-protected individuals. FNS specifically
prohibits State and local governments that administer the WIC Program
from engaging in actions that discriminate based on race, color,
national origin, age, sex, or disability. Regulations at 7 CFR 246.8
specifically state that Department of Agriculture regulations on non-
discrimination (7 CFR parts 15, 15a, and 15b) and FNS instructions
ensure that no person shall on the basis of race, color, national
origin, age, sex, or disability be excluded from participation in, be
denied benefits of, or be otherwise subjected to discrimination under
the Program.
[[Page 11307]]
Discrimination in any aspect of program administration is
prohibited by these regulations, Department of Agriculture regulations
on non-discrimination (7 CFR parts 15, 15a, and 15b), the Age
Discrimination Act of 1975 (Pub. L. 94-135), the Rehabilitation Act of
1973 (Pub. L. 93-112, section 504), and title VI of the Civil Rights
Act of 1964 (42 U.S.C. 2000d). Enforcement action may be brought under
any applicable Federal law. Title VI complaints shall be processed in
accordance with 7 CFR part 15. Where State agencies have options, and
they choose to implement a particular provision of this rulemaking,
they must implement it in such a way that it complies with the
regulations at 7 CFR 246.8.
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 from the public
before such collection(s) may be implemented. Respondents are not
required to respond to any collection of information unless it displays
a current valid OMB control number. This interim rule contains no new
information collection requirements that are subject to OMB approval.
The existing recordkeeping and reporting requirements, which were
approved under OMB control number 0584-0043, will not change as a
result of this rule.
E-Government Act Compliance
FNS 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 other services, and for other purposes. State Plan amendments
regarding the implementation of the provisions contained in this rule,
as is the case with the entire State Plan, may be transmitted
electronically by the State agency to FNS. Also, State agencies may
provide vendor and infant formula rebate data, as well as their
financial reports, to FNS electronically.
Public Participation
This action is being finalized without prior notice or public
comment under authority of 5 U.S.C. 553(b)(3)(A) and (B). The Child
Nutrition and WIC Reauthorization Act of 2004, Public Law 108-265,
contained provisions that must be implemented exactly as set forth in
the legislation, with no discretion exercised by the Department
regarding such implementation. Further, State agencies have already
been informed that these nondiscretionary provisions must be
implemented prior to the issuance of amendments to the program
regulations. Therefore, Under Secretary Nancy Montanez Johner has
determined, in accordance with 5 U.S.C. 553(b), that a Notice of
Proposed Rulemaking and Opportunity for Public Comments is unnecessary
and contrary to the public interest and, in accordance with 5 U.S.C.
553(d), finds that good cause exists for making this rule effective
without prior public comment.
Background
The Child Nutrition and WIC Reauthorization Act of 2004 (Pub. L.
108-265, also known as the Reauthorization Act), enacted on June 30,
2004, contained a number of nondiscretionary provisions related to
certification, operation, and general administration. These provisions
include:
Expanded definitions of ``nutrition education'' and
``supplemental foods'';
New requirements affecting infant formula rebate
contracts;
Additional exceptions to the physical presence requirement
for certification;
New requirements and stipulations regarding food delivery
systems; and
Expanded allowances in the areas of funding and financial
management.
FNS issued policy and guidance to State agencies on implementation
of these nondiscretionary legislative requirements. All of the
provisions of the Child Nutrition and WIC Reauthorization Act of 2004
implemented by this rulemaking were effective by law as noted below.
Effective dates for the provisions of the National Defense
Authorization Act for Fiscal Year 2006, and amendments to the National
Flood Insurance Act of 1968 which are being incorporated into the
regulations are also indicated below. All subsequent references to
Program regulatory provisions in this preamble are to title 7, Code of
Federal Regulations, unless otherwise indicated.
June 30, 2004 (date of enactment): Sec. 246.12(g)(4); Sec.
246.14(e), Sec. 246.14(e)(1), Sec. 246.14(e)(3)(iii), Sec.
246.14(e)(4), and Sec. 246.14(e)(5); and Sec. 246.16(b)(3)(ii)(A).
July 1, 2004: Sec. 246.16a(c)(2).
October 1, 2004: Sec. 246.2 (Definitions); Sec. 246.4(a)(22);
Sec. 246.7(o)(2)(ii) and Sec. 246.7(o)(2)(iv); Sec. 246.12(r)(6);
Sec. 246.16a(c)(6)(iii) through (c)(6)(iv); Sec. 246.16a(c)(1)(ii);
Sec. 246.16a(k); and Sec. 246.16a(l)(3).
June 23, 2005: Sec. 246.16a(m).
September 20, 2005: Sec. 246.7(d)(2)(iv)(D)(34).
December 2, 2005: Sec. 246.8(b).
January 6, 2006 (date of enactment): Sec. 246.7(d)(2)(iv)(D)(33).
Additionally, two legislative exclusions from consideration in
determining income eligibility for the WIC Program are included in this
rulemaking. Both of these exclusions were effective immediately upon
the date of enactment of their respective laws.
The clarification of an inadvertent inconsistency and omission
related to fair hearings and notices of adverse actions as set forth at
Sec. 246.9(g) will be effective immediately upon publication of this
rule.
Finally, two technical amendments are included in this rule. The
first amendment applies specifically to Sec. 246.8, Nondiscrimination,
and revises the address and telephone numbers to which complaints of
alleged discrimination should be directed. The second amendment
provides the new address for the FNS Western Region, as set forth in
Sec. 246.27, Program information.
For clarity, the discussions of the regulatory amendments related
to each of these major issues are addressed by topic, rather than in
strict regulatory sequential order.
1. Expanded Definitions of ``Nutrition Education'' and ``Supplemental
Foods''
Nutrition Education (Sec. 246.2)
Section 203(a)(1) of the Reauthorization Act amends Section
17(b)(7) of the CNA by revising the definition of ``nutrition
education'' to include a reference to physical activity. It also
removes the term ``socioeconomic'' from the current definition. By law,
these changes were effective October 1, 2004. This revision recognizes
that physical activity is one of the key recommendations included in
the Dietary Guidelines for Americans 2005 (DGA). The DGAs provide the
foundation for WIC nutrition education. The promotion of the health
benefits of regular physical activity as a component of nutrition
education supports the development of lifelong habits for good health.
This legislative provision does not change the principles or
requirements previously set forth by the Department regarding the
allowable costs of physical activity promotion as a component of
nutrition education for WIC participants.
Therefore, the definition of ``nutrition education'' in Sec. 246.2
is amended to reflect the exact language set forth in Public Law 108-
265. Additionally, regulatory language related to nutrition education
at Sec. 246.11(b) is modified to conform to the new definition.
[[Page 11308]]
Supplemental Foods (Sec. 246.2)
Section 203(a)(2) of Public Law 108-265 amends Section 17(b)(14) of
the CNA, effective October 1, 2004, by revising the definition of
``supplemental foods'' to include foods that promote health as
indicated by relevant nutrition science, public health concerns, and
cultural eating patterns. This revision broadens the definition to
acknowledge that the identification of supplemental foods provided by
WIC should consider relevant nutrition science as well as current
public health concerns and cultural eating patterns.
Therefore, the definition of ``supplemental foods'' in Sec. 246.2
is amended to reflect the exact language set forth in Public Law 108-
265.
2. New Requirements Affecting Infant Formula Rebate Contracts
a. Primary Contract Infant Formula (Sec. Sec. 246.2 and 246.16a)
Section 203(a)(3) of the Reauthorization Act amends Section 17(b)
of the CNA to add a definition of ``primary contract infant formula''.
Although the term ``primary contract infant formula'' is used
throughout Sec. 246.16a (Infant formula cost containment), program
regulations do not currently include a specific definition of that
term. Including a specific definition at Sec. 246.2 is intended to
clarify the use of ``primary contract infant formula'' wherever it is
used. The definition is the same language set forth in Public Law 108-
265.
As of October 1, 2004, ``primary contact infant formula'' is used
in the WIC Program to refer to the specific infant formula for which a
manufacturer submits a bid to a State agency in response to a rebate
solicitation and for which a contract is awarded by the State agency as
a result of that bid.
Section 203(e)(4) of the Reauthorization Act also amends Section
17(h)(8)(A) of the CNA by adding language to clarify that the State
agency is required to use the primary contract infant formula as the
first choice of issuance for all WIC infants receiving infant formula
in their prescribed food packages, with all other infant formulas
issued as an alternative to the primary contract infant formula.
Current regulations at Sec. 246.16a(c)(6) provide the State agency
with the discretion to approve for issuance, in addition to the primary
contract infant formula(s), none, some, or all of the winning bidder's
other infant formulas. These other infant formulas from the winning
bidder will be considered contract brand infant formulas. If a State
agency issues separate (uncoupled) bid solicitations for milk-based and
soy-based infant formula, the State agency will have two primary
contract infant formulas, one for each contract. In addition, the State
agency may require medical documentation before issuing any contract
brand infant formula and must require medical documentation before
issuing any non-contract brand infant formula, exempt infant formula,
or WIC-eligible medical food.
Effective for all bid solicitations issued on or after October 1,
2004, the State agency must issue the primary contract infant formula,
as defined in the Reauthorization Act, as the formula of first choice.
The State agency may continue to issue contract brand and non-contract
brand alternatives to the primary contract infant formula, if
determined to be more appropriate.
b. State Alliance (Sec. Sec. 246.2, 246.16a)
Section 203(a)(3) of Public Law 108-265 amends Section 17(b) of the
CNA to include a definition of ``state alliance.'' While alliances have
existed in practice, WIC Program regulations have not contained a
specific definition for a State alliance. This rule defines ``State
alliance'' in the same manner as set forth in Public Law 108-265.
Section 203(e)(3) of the same law limits the size of State
alliances, as defined at Sec. 246.2 of this interim rule, to 100,000
infants served by the participating State agencies as of October 1,
2003, or a subsequent date determined by the Secretary for which data
is available.
For many years, WIC State agencies have entered into partnerships
to form an alliance for the purpose of promoting competitive bids and
administrative simplification. However, an unintended consequence of
large alliances is that competition is diminished because not all
infant formula manufacturers may be able to compete for larger State
alliance contracts due to production capacity. The Department believes
that limiting the size of State alliances will help to maintain
competition among infant formula manufacturers by ensuring all
manufacturers can compete for rebate contracts.
Section 203(e)(3) of Public Law 108-265 allows current State
alliances that serve more than 100,000 infant participants to continue
to exist, but prohibits them from adding new State agencies to such
alliances, except under the following circumstances:
A State alliance that serves more than 100,000 infants may
expand to include additional State agencies if the State agency to be
included is an Indian Tribal Organization that is also a WIC State
agency or a State agency that serves less than 5,000 infants as of
October 1, 2003, or a subsequent date determined by the Secretary for
which data is available.
Public Law 108-265 also allows the Secretary to grant a
waiver to the State agency alliance requirements after submitting a
written report to the Committee on Education and the Workforce of the
House of Representatives and the Committee on Agriculture, Nutrition,
and Forestry of the Senate that describes the cost-containment and
competitive benefits of the proposed waiver.
Therefore, Sec. Sec. 246.16a(c)(1)(ii) and 246.16a(c)(2) are
amended to include these limitations and their corresponding
exceptions. Also, Sec. 246.16a(k) is redesignated as Sec. 246.16a(l),
and amended to reflect changes required in Public Law 108-265. This
section addresses provisions for a national cost containment bid
solicitation and selection.
c. Rebate Invoices (Sec. 246.16a(k))
Section 203(e)(5) of Public Law 108-265 requires WIC State agencies
to have a system that ensures that infant formula rebate invoices,
under competitive bidding, provide a reasonable estimate or an actual
count of the number of units (i.e., cans) of infant formula purchased
by participants with food instruments.
Manufacturers pay rebates to the State agency based on the number
of units of contract brand infant formula indicated on monthly rebate
invoices. Historically, State agencies have based their rebate invoices
on the total number of units of formula authorized on redeemed food
instruments. Because WIC participants do not always purchase the total
amount of formula authorized, this method inadvertently bills
manufacturers for units of formula that were not purchased. Therefore,
a system that bases monthly rebate invoices on the number of units of
formula authorized on redeemed food instruments may not be a reasonable
estimate of the number of units purchased by participants.
To implement this provision, the current Sec. 246.16a(k) is
redesignated as Sec. 246.16a(l), and a new paragraph (k) is added that
sets forth the requirements for infant formula rebate invoices.
The Department recognizes the challenges some State agencies may
face in implementing this requirement. However, over the past few
years, many State agencies have worked collaboratively with infant
formula manufacturers to develop methodologies that provide a close
approximation or reasonable estimate of
[[Page 11309]]
the number of units of infant formula purchased with WIC food
instruments. State agencies that have not yet developed such
methodologies should seek information and advice from the Department,
as well as from other WIC State agencies that currently have billing
systems based on reasonable estimates or actual counts. In addition,
the Department encourages State agencies to work together with
manufacturers when developing an acceptable billing system.
Over the past few years, many State agencies have worked
collaboratively with infant formula manufacturers to develop
methodologies that provide a close approximation or reasonable estimate
of the number of units of infant formula purchased with WIC food
instruments. State agencies that need further improvements to their
methodologies should seek information and advice from the Department,
as well as from other WIC State agencies that currently have billing
systems based on reasonable estimates or actual counts. In addition,
the Department encourages State agencies to work together with
manufacturers when developing an acceptable billing system.
d. Uncoupling Milk-Based and Soy-Based Infant Formula Bids (Sec.
246.16a(c)(1)(ii))
Section 203(e)(6) of Public Law 108-265 requires any WIC State
agency or State alliance that served a monthly average of more than
100,000 infants during the preceding 12-month period to solicit
separate bids for milk-based and soy-based infant formulas. This
provision is implemented by its addition to the WIC Program regulations
at Sec. 246.16a(c)(1)(ii).
State agencies have always had the option to solicit separate bids
for milk- and soy-based infant formulas. In practice, however, most
State agencies do not exercise this option. When State agencies do
solicit separate bids, competition is open to manufacturers that
otherwise may not be able to bid if the infant formula types were
coupled due to factors such as production capacity and/or distribution
issues. The intent of this provision is to promote competition among
infant formula manufacturers by ensuring all manufacturers are able to
compete for rebate contracts. Separate bids for milk- and soy-based
infant formulas may result in a State agency having two primary
contract infant formulas, one for milk-based and one for soy-based
formulas. This provision applies to bid solicitations issued on or
after October 1, 2004.
e. Cent-for-Cent Adjustments (Sec. 246.16a(c)(6)(iv))
Section 203(e)(7) of Public Law 108-265 requires State agencies to
adjust for price increases and price decreases subsequent to the bid
opening. This provision applies to bid solicitations issued on or after
October 1, 2004.
Current regulations state that bid solicitations must require
manufacturers to adjust for price changes subsequent to the bid
opening; however, it only mandates that manufacturers provide for cost
adjustments as a result of any inflation in the wholesale prices of
infant formula. It does not include a corresponding adjustment for
decreases in wholesale prices. Section 246.16a(c)(6)(iv) reflects this
new requirement of adjusting rebates to reflect both increases and
decreases in infant formula prices.
f. Infant Formula Rebate Contracts and Civil Monetary Penalties (Sec.
246.16a(l))
This regulation also codifies, at Sec. 246.16a(m), a requirement
mandated by Section 17(h)(8)(H) of the CNA. The CNA requires any legal
entity (i.e., person, company, corporation), shall be ineligible to
submit bids for up to 2 years if it discloses the bid amount or
discloses the rebate or discount practices in advance of the bid
opening. In addition, the legal entity shall be subject to a civil
penalty of up to $100,000, as determined by the Secretary, to provide
restitution to the program for harm done.
The Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub.
L. 101-410, 28 U.S.C. 2461 note (the Act)) as amended, requires Federal
agencies periodically to adjust certain civil monetary penalties (CMPs)
for inflation. Under the Act, a CMP is defined as any penalty, fine, or
other sanction for which a Federal statute specified a monetary amount,
including a range of minimum and maximum amounts. Each Executive agency
is responsible for adjusting, pursuant to the Act, all CMPs within the
agency's jurisdiction.
The Act requires each Executive agency to make an initial inflation
adjustment for all applicable CMPs not later than 180 days after the
date of enactment of the Debt Collection Improvement Act of 1996 (Pub.
L. 104-134)--i.e., April 26, 1996--and subsequent inflation adjustments
at least once every 4 years thereafter. USDA published its initial
round of inflation adjustments in the Federal Register on July 31,
1997, and those adjustments became effective on September 2, 1997 (62
FR 40924, July 31, 1997). USDA's initial CMP adjustments are codified
in subpart E of 7 CFR 3.91. Subsequently, 7 CFR 3.91(b) was amended to
reflect a second round of inflation adjustments in the Federal Register
on May 24, 2005, and those adjustments became effective June 23, 2005
(70 FR 29573, May 24, 2005). As a result, when adjusted for inflation,
the original $100,000,000 civil penalty increases to $132,000,000. This
regulation refers to 7 CFR 3.91 when determining a CMP for any person,
company, corporation, or legal entity for violations of Sec.
246.16a(l).
Although the provision for determining CMPs with the necessary
adjustments for inflation is not contained in the Child Nutrition and
WIC Reauthorization Act of 2004 (Pub. L. 108-265), it is
nondiscretionary. Therefore, it is being included with this interim
rule because this is the first appropriate rulemaking with implications
for infant formula rebate contracts to be promulgated since the
enactment of the second round of adjustments pursuant to the Debt
Collection Improvement Act of 1996.
3. Additional Exceptions to the Physical Presence Requirement for
Certification (Sec. 246.7(p)(2))
Section 246.7(p)(2)(ii) of the current WIC Program regulations
allows a State agency to exempt from being physically present at
certification an infant or child who was present at his/her initial WIC
certification and has documented ongoing health care from a health care
provider other than the WIC local agency (as set forth in Sec.
246.7(p)(1)), if being physically present would pose an unreasonable
barrier.
Section 203(b)(2) of the Reauthorization Act amends Section
17(d)(3)(C)(ii) of the CNA to allow a State agency the option to waive
the physical presence requirement for an infant or child who was
present at his/her initial WIC certification and is receiving ongoing
health care. In addition, the Reauthorization Act provides an
additional exception from the physical presence requirement for an
infant under 8 weeks of age who cannot be present at certification for
a reason determined appropriate by the local agency, and for whom all
necessary certification information is provided. These changes are
intended to reduce the burden on WIC applicants and participants while
maintaining program integrity.
Thus, Sec. 246.7(p)(2)(ii) is revised in this rule to incorporate
the legislative option for exemption from the physical presence
requirement and applies to an infant or child receiving ongoing health
care from any health care provider,
[[Page 11310]]
including the local WIC agency. The revised regulatory language also
includes the new exemption from the physical presence requirement for
infants under 8 weeks of age who cannot be present at the time of
certification (for a reason determined appropriate by the local agency)
and for whom all necessary certification information is provided.
4. New Requirements and Stipulations Regarding Food Delivery Systems
(Sec. 246.12)
a. Participants Allowed To Receive Supplemental Foods From Any
Authorized Vendor (Sec. 246.12(r))
Section 203(c)(1)(A) of Public Law 108-265 amends Section
17(f)(1)(C)(i) of the CNA to require WIC State agencies, effective
October 1, 2004, to allow participants to receive supplemental foods
from any authorized vendor in the State under retail food delivery
systems.
This is a new requirement for WIC State agencies. Previously, State
agencies were permitted to implement retail food delivery systems in
which the name of a specific authorized store, as designated by the
participant, was printed on the WIC food instrument.
State agencies are no longer allowed to operate such ``vendor-
specific'' retail food delivery systems, i.e., systems that specify the
vendor on the food instrument or otherwise require transaction of the
food instrument at a designated vendor, even if the participant is
provided an opportunity to choose the vendor to be so designated.
Therefore, Sec. 246.12(r) is revised to add a requirement that WIC
State agencies must establish policy and revise their retail food
delivery systems to ensure that WIC participants are allowed to
transact their food instruments at any retail store authorized by the
State agency.
b. Processing Vendor Applications Outside Established Timeframes (Sec.
246.4)
Section 203(c)(1) of the Reauthorization Act amends Section
17(f)(1)(C) of the CNA by adding a new provision requiring State
agencies to include in their State plans procedures for accepting and
processing vendor applications outside the established timeframes if
the State agency determines that there will otherwise be inadequate
participant access to the WIC Program. This includes instances in which
a previously authorized vendor sells a store under circumstances that
do not permit timely notification to the State agency of the change in
ownership. By law, this provision was effective October 1, 2004.
Currently, Sec. 246.12(g)(7) of the WIC regulations requires the
State agency to develop procedures for processing vendor applications
outside of its established timeframes when it determines there will be
inadequate participant access unless additional vendors are authorized,
and Sec. 246.4(a)(14) requires a description of the participant access
criteria to be included in the State Plan of Operations. Also, Sec.
246.12(h)(3)(xvii) provides the State agency the discretion to
determine the length of advance notice required for vendors reporting
changes in ownership. Thus, all State Plans must currently describe
participant access criteria, and many State Plans also address vendor
application processing timeframes.
This provision reinforces the existing regulatory provisions by
adding the requirement for a description of these procedures as part of
the State Plan to Sec. 246.4(a)(22).
c. Prohibition Against Imposition of EBT Costs on Vendors (Sec.
246.12(g)(4))
Section 203(e)(11) of Public Law 108-265 amended Section 17(h)(12)
of the CNA, by replacing it with a new provision that prohibits the
Secretary from imposing or allowing a State agency to impose the cost
of electronic benefit transfer (EBT) equipment, systems, or processing
on retail vendors as a condition for authorization or participation in
the program. By law, this provision was effective June 30, 2004. Such
costs include EBT equipment, systems, or processing which are directly
attributable to a WIC EBT system and used solely for the WIC Program.
Retailers may, however, continue to provide funding for WIC EBT on a
voluntary basis, as a number of retailers have already done. WIC EBT is
intended to improve program efficiency, and retailers may make a
business decision to share in the costs of WIC EBT.
EBT processing is the automated data processing in support of WIC
EBT purchase transactions and the associated reimbursement to retailers
for their daily WIC EBT business. These activities may be carried out
by the State agency or a State agency's contracted EBT processor and/or
payment processor.
It is customary practice for commercial processors that support
retailer credit, debit, and food stamp EBT transactions to charge
processing fees. Banks also charge fees for automated credits to their
customers' accounts. These types of processing fees result from
specific retailer business decisions; thus, if a retailer decides to
participate in a State EBT system, this cost would not be imposed by
the State agency, but would result in a cost to the retailer as part of
its commercial relationships.
In response to the legislative provisions contained in Public Law
108-265, Sec. 246.12(g) is amended to prohibit a State agency from
imposing the costs of EBT equipment, systems, or processing on retail
vendors.
5. Expanded Allowances in Funding and Financial Management (Sec. Sec.
246.14(e) and 246.16(b))
a. Use of Local Agency Claims (Sec. 246.14(e))
Section 203(c)(3) of Public Law 108-265 amended Section 17(f)(21)
of the CNA to allow the WIC State agency to use funds collected through
claims assessed against local agencies in the same manner that it uses
claims collected from vendors and participants. WIC Program regulations
at Sec. 246.14(e) allow the State agency to keep vendor and
participant collections and use these funds in the fiscal year in which
the initial obligation was made, in which the claim arose, in which the
funds are collected, or after the funds are collected, provided certain
conditions are met. Before the State agency may credit such recoveries,
it must provide vendors and participants with a means to appeal the
claim action. For vendor claims, the State agency must provide vendors
with an opportunity to justify or correct the claim (Sec.
246.12(k)(3)); for participant claims, the State agency must provide
participants with an administrative hearing (Sec. 246.9). Because
regulations at Sec. 246.18 do not require the State agency to provide
the local agency with a full administrative review for local agency
claims, unless a claim affects the local agency's participation, the
State agency has the discretion to determine the level of review
provided for local agency claims. The State agency's review process for
local agency claims should be specified or referenced in its local
agency agreement. Consequently, a paragraph was added to the
regulations to permit the State agency to credit recoveries of local
agency claims only after any administrative review requested by the
local agency in accordance with the local agency agreement has been
completed, making this provision consistent with the requirements for
vendor and participant claims.
In addition, the paragraphs in the regulations containing the
reporting and
[[Page 11311]]
documentation requirements (Sec. 246.14(e)(4) through (e)(5)) for
vendor and participant claims were revised to include local agency
claims. Further guidance regarding State agency reporting of local
agency collections is provided in the WIC Reporting Guide.
b. Spendforward Authority (Sec. 246.16(b))
Section 203(f) of Public Law 108-265 amended Section
17(i)(3)(A)(ii)(I) of the CNA to increase the State agency's
spendforward authority for nutrition services and administration (NSA)
funds from one percent to three percent of its total grant. Regulations
at Sec. 246.16(b)(3)(ii) specify the requirements that a State agency
must follow to spend forward NSA funds into the next fiscal year. This
legislative provision simply increased the spendforward authority
without altering any of the other requirements regarding spendforward
funds. Consequently, the regulations prohibiting food fund conversions
from being spent forward, as well as those allowing an additional one-
half of one percent to be spent forward for the development of
management information and EBT systems, remain in effect.
6. Income Exclusions in Determining WIC Eligibility (Sec. 246.7(d))
a. Family Subsistence Supplemental Allowance (FSSA) Payments
Public Law 108-375, the Ronald W. Reagan National Defense
Authorization Act for Fiscal Year 2005, excluded FSSA payments, which
are provided to certain members of the Armed Forces and their families,
as income in determining eligibility for a number of child nutrition
programs, including the WIC program. This provision would have expired
September 30, 2006. However, Public Law 109-163, the National Defense
Authorization Act for Fiscal Year 2006, made the FSSA, and the
exclusion of FSSA assistance from income under other programs,
permanent. Therefore, the exclusion of FSSA payments as income for
child nutrition programs, including the WIC Program, is also permanent.
In determining income eligibility for the WIC Program, WIC State
agencies must exclude the FSSA payment. FSSA payments have been made to
certain members of the Armed Forces by the Department of Defense (DOD)
since May 2001.
b. National Flood Insurance Program Payments
Public Law 109-64, enacted September 20, 2005, which amends the
National Flood Insurance Act of 1968, states that payments made under
the National Flood Insurance Program for flood mitigation activities
shall not be counted as income or resources of the owner of the
property when determining eligibility for any Federal means-tested
program. The Federal Emergency Management Agency awards grants to
States and communities, which distribute the funds to individuals and
businesses for activities that reduce the risk of repetitive flood
damage. Therefore, in determining income eligibility for the WIC
Program, State agencies must exclude payments received by property
owners under the National Flood Insurance Program.
These income exclusions are added to Sec. 246.7(d)(2)(iv)(D) as
paragraphs (d)(2)(iv)(D)(33) and (d)(2)(iv)(D)(34), respectively.
7. Fair Hearings and Adverse Action Notification Requirements
Prior to the publication of the WIC Miscellaneous Final Rule (71 FR
56708, September 27, 2006), Sec. 246.9(g) of the WIC Program
regulations required a participant to request a fair hearing within the
15-day advance adverse action notification period in order to continue
receiving WIC benefits pending the outcome of the hearing, or
expiration of the certification period, whichever comes first. This
requirement was inadvertently removed from the regulations when
regulatory language was added to avoid the incorrect impression that a
participant must always request a fair hearing within the 15-day
advance notice period, instead of within the 60-day period required at
Sec. 246.9(e).
However, it was not the intention of the Department to rescind this
requirement; as indicated in the preamble to the Miscellaneous Final
Rule (71 FR 56718), the requirement continues to be in effect. A
participant may request a fair hearing within 60 days of the
notification of adverse action, but Sec. 246.9(g) should have stated
in the Miscellaneous Final Rule that benefits will be continued only if
the fair hearing is requested within the 15-day advance adverse action
notice period. This rule clarifies the requirement concerning
continuation of benefits during the fair hearing period by restoring
the provision in question in this interim rule in Sec. 246.9(g).
8. Technical Amendments
a. Complaints Alleging Discrimination in the WIC Program
Section 246.8(b) of the WIC regulations contains instructions on
how discrimination complaints should be filed. The address and
telephone numbers to which such complaints should be directed have been
changed, and these changes have been included in this rule.
b. New Address for FNS Western Regional Office
The FNS Western Regional Office was relocated in March of 2007.
This regulatory amendment updates the contact information provided in
Sec. 246.27(g) by providing the new address.
List of Subjects in 7 CFR Part 246
Food assistance programs, Food donations, Grant programs--Social
programs, Indians, Infants and children, Maternal and child health,
Nondiscrimination, Nutrition education, Public assistance programs,
WIC, Women.
0
Accordingly, the WIC Program regulations at 7 CFR part 246 are amended
as follows:
PART 246--SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS
AND CHILDREN
0
1. The authority citation for part 246 continues to read as follows:
Authority: 42 U.S.C. 1786.
0
2. In Sec. 246.2:
0
a. Revise the definitions of ``Nutrition education'' and ``Supplemental
foods''; and
0
b. Add in alphabetical order the new definitions ``Primary contract
infant formula'', and ``State alliance''.
The additions and revisions read as follows:
Sec. 246.2 Definitions.
* * * * *
Nutrition education means individual and group sessions and the
provision of materials that are designed to improve health status and
achieve positive change in dietary and physical activity habits, and
that emphasize the relationship between nutrition, physical activity,
and health, all in keeping with the personal and cultural preferences
of the individual.
* * * * *
Primary contract infant formula means the specific infant formula
for which manufacturers submit a bid to a State agency in response to a
rebate solicitation and for which a contract is awarded by the State
agency as a result of that bid.
* * * * *
State alliance means two or more State agencies that join together
for the purpose of procuring infant formula
[[Page 11312]]
under the Program by soliciting competitive bids for infant formula.
* * * * *
Supplemental foods means those foods containing nutrients
determined by nutritional research to be lacking in the diets of
pregnant, breastfeeding and postpartum women, infants, and children,
and foods that promote the health of the population served by the WIC
Program as indicated by relevant nutrition science, public health
concerns, and cultural eating patterns, as prescribed by the Secretary
in Sec. 246.10.
* * * * *
0
3. In Sec. 246.4, redesignate paragraphs (a)(15) through (a)(27) as
paragraphs (a)(16) through (a)(28), and add a new paragraph (a)(15), to
read as follows:
Sec. 246.4 State plan.
(a) * * *
(15) The State agency's procedures for accepting and processing
vendor applications outside of its established timeframes if the State
agency determines there will otherwise be inadequate participant access
to the WIC Program.
* * * * *
0
4. In Sec. 246.7:
0
a. The word ``and'' is removed from the end of paragraph
(d)(2)(iv)(D)(31);
0
b. Paragraph (d)(2)(iv)(D)(32) is amended by removing the period at the
end of the paragraph and adding in its place a semicolon.
0
c. New paragraphs (d)(2)(iv)(D)(33) and (d)(2)(iv)(D)(34) are added;
0
d. Paragraph (o)(2)(ii) is revised; and
0
e. A new paragraph (o)(2)(iv) is added.
The revision and additions read as follows:
Sec. 246.7 Certification of participants.
* * * * *
(d) * * *
(2) * * *
(iv) * * *
(D) * * *
(33) Payments received by members of the Armed Forces and their
families under the Family Supplemental Subsistence Allowance from the
Department of Defense (Pub. L. 109-163, sec. 608); and
(34) Payments received by property owners under the National Flood
Insurance Program (Pub. L. 109-64).
* * * * *
(o) * * *
(2) * * *
(ii) Receiving ongoing health care. The State agency may exempt
from the physical presence requirement, if being physically present
would pose an unreasonable barrier, an infant or child who was present
at his/her initial WIC certification and is receiving ongoing health
care.
* * * * *
(iv) Infants under 8 weeks of age. The State agency may exempt from
the physical presence requirement an infant under eight (8) weeks of
age who cannot be present at certification for a reason determined
appropriate by the local agency, and for whom all necessary
certification information is provided.
* * * * *
0
5. In Sec. 246.8, the first sentence of paragraph (b) is revised to
read as follows:
Sec. 246.8 Nondiscrimination.
* * * * *
(b) * * * Persons seeking to file discrimination complaints should
write to USDA, Director, Office of Adjudication and Compliance, 1400
Independence Avenue, SW., Washington, DC 20250-9410, or call (800) 795-
3272 (voice) or (202) 720-6382 (TTY). * * *
* * * * *
0
6. In 246.9, revise paragraph (g) to read as follows:
Sec. 246.9 Fair hearing procedures for participants.
* * * * *
(g) Continuation of benefits. Participants who appeal the
termination of benefits within the 15 days advance adverse action
notice period provided by Sec. 246.7(j)(6) must continue to receive
Program benefits until the hearing official reaches a decision or the
certification period expires, whichever occurs first. This does not
apply to applicants denied benefits at initial certification,
participants whose certification periods have expired, or participants
who become categorically ineligible for benefits. Applicants who are
denied benefits at initial certification, participants whose
certification periods have expired, or participants who become
categorically ineligible during a certification period may appeal the
denial or termination within the timeframes set by the State agency in
accordance with paragraph (e) of this section, but must not receive
benefits while awaiting the hearing or its results.
* * * * *
0
7. In Sec. 246.10:
0
a. Amend paragraph (d)(2)(ii) by adding the words ``other than the
primary contract infant formula'' immediately after the words ``any
contract brand infant formula''; and
0
b. Revise the third sentence of paragraph (e)(1)(iii) to read as
follows:
Sec. 246.10 Supplemental foods.
* * * * *
(e) * * *
(1) * * *
(iii) * * * Except as specified in paragraph (d) of this section,
local agencies must issue as the first choice of issuance the primary
contract infant formula, as defined in Sec. 246.2, with all other
infant formulas issued as an alternative to the primary contract infant
formula.
* * * * *
Sec. 246.11 [Amended]
0
8. In Sec. 246.11:
0
a. Remove the word ``Stress'' in paragraph (b)(1), and add in its place
the word ``Emphasize'';
0
b. Further amend paragraph (b)(1) by removing the words ``proper
nutrition and good health'' in paragraph (b)(1), and adding in their
place the words ``nutrition, physical activity and health''; and
0
c. In the first sentence of paragraph (b)(2), remove the words ``in
achieving a positive change in food habits, resulting in improved
nutritional status'', and add in their place the words ``in improving
health status and achieving a positive change in dietary and physical
activity habits,''.
0
9. In Sec. 246.12:
0
a. Redesignate paragraphs (g)(5) through (g)(9) as paragraphs (g)(6)
through (g)(10);
0
b. Add a new paragraph (g)(5); and
0
c. Add a new paragraph (r)(6).
The additions read as follows:
Sec. 246.12 Food delivery systems.
* * * * *
(g) * * *
(5) No imposition of EBT costs on retail vendors. The State agency
may not impose the costs of EBT equipment, systems, or processing
required for electronic benefit transfers on any retail store
authorized to transact food instruments, as a condition for
authorization or participation in the program. The State agency may
allow retailers to contribute to such costs on a voluntary basis.
* * * * *
(r) * * *
(6) Any authorized vendor. Each State agency shall allow
participants to receive supplemental foods from any vendor authorized
by the State agency under retail delivery systems.
* * * * *
0
10. In Sec. 246.14:
0
a. Revise the heading to paragraph (e);
0
b. Revise the first sentence of paragraph (e)(1);
0
c. Remove the word ``or'' at the end of paragraph (e)(3)(i);
[[Page 11313]]
0
d. Remove the period at the end of paragraph (e)(3)(ii) and add in its
place the word ``; or'';
0
e. Add paragraph (e)(3)(iii); and
0
f. Revise paragraphs (e)(4) and (e)(5).
The revisions and addition read as follows:
Sec. 246.14 Program costs.
* * * * *
(e) Use of funds recovered from vendors, participants, or local
agencies. (1) The State agency may keep funds collected through the
recovery of claims assessed against vendors, participants, or local
agencies. * * *
* * * * *
(3) * * *
(iii) In the case of a local agency claim, any administrative
review requested in accordance with the local agency agreement has been
completed.
(4) The State agency must report vendor, participant, and local
agency recoveries to FNS through the normal reporting process;
(5) The State agency must keep documentation supporting the amount
and use of these vendor, participant, and local agency recoveries.
0
11. In Sec. 246.16, revise the first sentence of paragraph
(b)(3)(ii)(A) to read as follows:
Sec. 246.16 Distribution of funds.
* * * * *
(b) * * *
(3) * * *
(ii) * * *
(A) The State agency may spend forward NSA funds up to an amount
equal to three (3) percent of its total grant (NSA plus food grants) in
any fiscal year. * * *
* * * * *
0
12. In Sec. 246.16a:
0
a. Remove the words ``primary contract brand infant formula'' wherever
they appear and add in their place the words ``primary contract infant
formula'';
0
b. Amend paragraph (c)(1)(i) by removing the reference ``(c)(5)'' in
the 5th sentence and adding in its place the reference ``(c)(6)'';
0
c. Add a new sentence between the first and second sentences in
paragraph (c)(1)(ii);
0
d. Redesignate paragraphs (c)(2) through (c)(6) as paragraphs (c)(3)
through (c)(7);
0
e. Add a new paragraph (c)(2);
0
f. Amend newly redesignated paragraph (c)(3) by removing the reference
``(c)(5)'' in the second sentence and adding in its place the reference
``(c)(6)'';
0
g. Remove the last sentence of newly redesignated paragraph (c)(3);
0
h. Amend the introductory text of newly redesignated paragraph (c)(4)
by removing the reference ``(c)(3)(ii)'' and adding in its place the
reference ``(c)(4)(ii)'';
0
i. Amend newly redesignated paragraph (c)(4)(ii) by removing the
reference ``(c)(3)(i)'' wherever it appears, and adding in its place
the reference ``(c)(4)(i)'';
0
j. Amend the last sentence of newly redesignated paragraph (c)(4)(iii)
by removing the reference ``(c)(4)'' and adding in its place the
reference ``(c)(5)'';
0
k. Amend newly redesignated paragraph (c)(5) by removing the reference
``(c)(3)'' in the first sentence and adding in its place the reference
``(c)(4)'';
0
l. Revise newly redesignated paragraphs (c)(6)(iii) and (c)(6)(iv);
0
m. Revise newly redesignated paragraph (c)(7);
0
n. Add a new paragraph (c)(8);
0
o. Amend paragraph (d)(2)(i)(A) and (d)(2)(i)(B) by removing the
reference ``(c)(3)'' wherever it appears and adding in its place the
reference ``(c)(4)'';
0
p. Redesignate paragraph (k) as paragraph (l);
0
q. Add a new paragraph (k);
0
r. In newly redesignated paragraph (l):
0
(i) Remove the reference ``(k)'' wherever it appears and add in its
place the reference ``(l)'';
0
(ii) Amend the last sentence of newly redesignated paragraph (l)(3) by
removing the references ``(k)(2)(ii), (k)(2)(iii) and (k)(2)(iv)'' and
adding in their places the references ``(l)(2)(ii), (l)(2)(iii) and
(l)(2)(iv)'';
0
(iii) Amend the first sentence of newly redesignated paragraph (l)(4)
by removing the references ``(k)(2) and (k)(3)'' and adding in their
places the references ``(l)(2) and (l)(3)'';
0
(iv) Amend the second sentence of newly redesignated paragraph
(l)(5)(iii) by removing the reference ``(k)(5)(iii),'' and adding in
its place the reference ``(l)(5)(iii)'';
0
(v) Amend the second sentence of newly redesignated paragraph (l)(8) by
removing the reference ``(k)(7)'' and adding in its place the reference
``(l)(7)'';
0
(vi) Amend newly redesignated paragraph (l)(9) by removing the
references ``(k)(7) and (k)(8)'' whenever they appear, and adding in
their places the references ``(l)(7), and (l)(8)'';
0
(vii) Revise newly redesignated paragraph (l)(3); and
0
s. Add a new paragraph (m).
The revisions and additions read as follows:
Sec. 246.16a Infant formula cost containment.
* * * * *
(c) * * *
(1) * * *
(ii) * * * Any State agency or alliance that served a monthly
average of more than 100,000 infants during the preceding 12-month
period shall issue separate bid solicitations for milk-based and soy-
based infant formula. * * *
(2) What is the size limitation for a State alliance? A State
alliance may exist among State agencies if the total number of infants
served by States participating in the alliance as of October 1, 2003,
or such subsequent date determined by the Secretary for which data is
available, does not exceed 100,000. However, a State alliance that
existed as of July 1, 2004, and serves over 100,000 infants may exceed
this limit to include any State agency that served less than 5,000
infants as of October 1, 2003, or such subsequent date determined by
the Secretary for which data is available, and/or any Indian State
agency. The Secretary may waive these requirements not earlier than 30
days after submitting to the Committee on Education and the Workforce
of the House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a written report that describes
the cost-containment and competitive benefits of the proposed waiver.
* * * * *
(6) * * *
(iii) Calculation of rebates during contract term. The rebates
resulting from the application of the percentage discount must remain
the same throughout the contract period except for the cent-for-cent
rebate adjustments required in paragraph (c)(6)(iv) of this section.
(iv) Cent-for-cent rebate adjustments. Bid solicitations must
require the manufacturer to adjust rebates for price changes subsequent
to the bid opening. Price adjustments must reflect any increase and
decrease, on a cent-for-cent basis, in the manufacturer's lowest
national wholesale prices for a full truckload of infant formula.
(7) What is the first choice of issuance for infant formula? The
State agency must use the primary contract infant formula(s) as the
first choice of issuance (by physical form), with all other infant
formulas issued as an alternative (see Sec. 246.10(e)(1)(iii)).
(8) Under what circumstances may the State agency issue other
contract brand formulas? Except as required in paragraph (c)(7) of this
section, the State agency may choose to approve for issuance some,
none, or all of the winning bidder's other infant
[[Page 11314]]
formula(s). In addition, the State agency may require medical
documentation before issuing any contract brand infant formula, except
as provided in paragraph (c)(7) of this section (see Sec.
246.10(c)(1)(i)) and must require medical documentation before issuing
any WIC formula covered by Sec. 246.10(c)(1)(iii).
* * * * *
(k) What are the requirements for infant formula rebate invoices? A
State agency must have a system in place that ensures infant formula
rebate invoices, under competitive bidding, provide a reasonable
estimate or an actual count of the number of units purchased by
participants in the program.
(l) * * *
(3) If FNS determines that the number of State agencies making the
request provided for in paragraph (l)(2) of this section does not
comply with the requirements of paragraph (c)(2) of this section, FNS
shall, in consultation with such State agencies, divide such State
agencies into more than one group and solicit bids for each group.
These groups of State agencies are referred to as ``bid groups.'' In
determining the size and composition of the bid groups, FNS will, to
the extent practicable, take into account the need to maximize the
number of potential bidders so as to increase competition among infant
formula manufacturers and the similarities in the State agencies'
procurement and contract requirements (as provided by the State
agencies in accordance with paragraphs (l)(2)(ii), (l)(2)(iii), and
(l)(2)(iv) of this section). FNS reserves the right to exclude a State
agency from the national bid solicitation and selection process if FNS
determines that the State agency's procurement requirements or
contractual requirements are so dissimilar from those of the other
State agencies in any bid group that the State agency's inclusion in
the bid group could adversely affect the bids.
* * * * *
(m) What are the penalties for disclosing the amount of the bid or
discount practices prior to the time bids are opened? Any person,
company, corporation, or other legal entity that submits a bid in
response to a bid solicitation and discloses the amount of the bid, or
the rebate or discount practices of such entities, in advance of the
time the bids are opened by the Secretary or the State agency, shall be
ineligible to submit bids to supply infant formula to the program for
the bidding in progress for up to 2 years from the date the bids are
opened. In addition, any person, company, corporation, or other legal
entity shall be subject to a civil money penalty as specified in Sec.
3.91(b)(3)(iv) of this title, as determined by the Secretary to provide
restitution to the program for harm done to the program.
Sec. 246.27 [Amended]
0
13. In Sec. 246.27, amend paragraph (g) by removing the words ``550
Kearny Street, room 400, San Francisco, California 94108'', and adding
in their place the words ``90 Seventh Street, Suite 10-100,
San Francisco, California 94103''.
Dated: February 20, 2008.
Nancy Montanez Johner,
Under Secretary, Food, Nutrition, and Consumer Services.
[FR Doc. E8-3880 Filed 2-29-08; 8:45 am]
BILLING CODE 3410-30-P