Food Stamp Program: Revisions to Bonding Requirements for Violating Retail and Wholesale Food Concerns, 11291-11295 [E7-4520]

Agencies

• DEPARTMENT OF AGRICULTURE
• Food and Nutrition Service

[Federal Register Volume 72, Number 48 (Tuesday, March 13, 2007)]
[Proposed Rules]
[Pages 11291-11295]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-4520]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 72, No. 48 / Tuesday, March 13, 2007 / 
Proposed Rules

[[Page 11291]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 278 and 279

RIN 0584-AD44


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

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

ACTION: Proposed rule.

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

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

DATES: Comments must be received on or before May 14, 2007 to be 
assured of consideration.

ADDRESSES: The Food and Nutrition Service invites interested persons to 
submit comments on the proposed rule. Comments may be sent to Andrea 
Gordon, Chief, Retailer Management Branch, Benefit Redemption Division, 
Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park 
Center Drive, Room 406, Alexandria, VA 22302; FAX number (703) 305-
1863; E-mail: BRDHQ-WEB@fns.usda.gov. Comments may also be sent through 
the Federal e-Rulemaking Portal by going to https://www.regulations.gov. 
Follow the online instructions for submitting comments. All submitted 
comments should refer to the title of this proposal.
    Read Comments: All written comments will be open for public 
inspection at the office of the Food and Nutrition Service during 
business hours (8:30 a.m. to 5 p.m., Monday through Friday) at 3101 
Park Center Drive, Room 406, Alexandria, Virginia.

FOR FURTHER INFORMATION CONTACT: Andrea Gordon at (703) 305-2456.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

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

Regulatory Impact Analysis

Need for Action

    The proposed regulation would reduce and better target the current 
bonding and letter of credit (LOC) requirements that are imposed on 
authorized retailers and wholesalers who violate Food Stamp Program 
rules. It would: (1) Eliminate the bond requirements for retailers who 
have never previously been disqualified and who are disqualified for 
six months or incur a civil money penalty in lieu of a six month 
disqualification; and, (2) limit the bond requirement to five years for 
retailers whose disqualification or civil money penalty exceeds six 
months. Retailers who have previously been disqualified for any length 
of time or been issued a civil money penalty and who subsequently 
become disqualified again will be subject to the five year bonding 
requirement, even if the subsequent disqualification is for a period of 
six months or less or the civil money penalty imposed is in lieu of a 
disqualification for six months or less.

Benefits

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

Costs

    These provisions are expected to produce a small dollar loss to the 
Government of $14,793 in FY 2006 and less than $75,000 over the five-
year period FY 2006 through FY 2010.
    While the reduction in labor hours for monitoring bonds and letters 
of credit cannot be counted as a direct savings to the Government, the 
time made available has significant value. It can be used to enhance 
FNS' capacity to manage the authorization and monitoring of food stamp 
retailers.
    When food stamp retailers who have secured bonds or letters of 
credit commit a subsequent violation, the Government may recover its 
losses against the bonds. Historically, such draw downs have been very 
infrequent, less than one percent of all bonds.
    The proposed rule change would eliminate the need for bonds and 
letters of credit among retailers who are disqualified for six months 
or who pay a civil money penalty in lieu of a six month 
disqualification. Approximately 44 percent of retailer violations are 
associated with a six month period of disqualification. A majority of 
these involve bonds with a face value of

[[Page 11292]]

$1,000. Based on an average of 10.8 bond or letter of credit 
forfeitures per year among this group, the potential loss of revenue to 
the Government over five years is $74,000, determined as follows:
     44% of 3,070 retailers currently in the Program who have 
prior violations that are associated with a 6 month disqualification 
period, been reinstated and submitted a bond or LOC = 1,351 retailers.
     <1% (.008) of 1,351 retailers = 10.8 who commit a second 
violation that results in bond forfeiture or letter of credit draw 
down.
     86.5% of 10.8 = 9.35 retailers with bonds/LOCs that have a 
face value of $1,000 and 13.5% = 1.45 with bonds/LOCs that have an 
average face value of $3,754.
     The annual forfeiture amount is equal to (9.35 x $1000) 
$9350 + (1.45 x $3754) $5,443 or $14,793.
     $14,793 x 5 years = $73,965.
    The estimates of revenue forfeited are reasonably certain as they 
are based on averages created from historical information from the 
Government's administrative files on food stamp retailer 
disqualifications and civil money penalties.
    The financial benefit for all food retailers (regardless of when 
they are authorized, both new and current participants) is 
substantially larger than the cost to the Federal Government. The 
proposed rule would eliminate the cost of bonds/letters of credit and 
associated processing fees for retailers disqualified for six months or 
who pay a civil money penalty in lieu of a six month disqualification:
     386 is the average number of retailers who are 
disqualified for six months or pay a civil money penalty in lieu of a 
six month disqualification per year.
     These 386 retailers pay an average cost of $668 per bond 
or LOC = $257,848 each year;
     $257,848 per year x five years = $1,289,240.
    When effective, the proposed rule would also eliminate the expense 
of maintaining a bond indefinitely to retailers who have been 
previously disqualified and reinstated or paid a civil money penalty in 
lieu of a disqualification and required to post a bond/LOC:
     3,070 retailers who previously have been disqualified or 
paid a civil money penalty in lieu of disqualification and been 
reinstated.
     3,070 retailers who pay an estimated annual renewal fee 
for bond/LOC of $100 = $307,000 for first year (2006);
     3,070 retailers x 6.1% = 187 stores who will withdraw or 
otherwise leave the Program. In 2007, 3070 stores -187 stores = 2,883 
stores who pay $100 renewal fee = $288,300.
     In 2008, 2,883 -187 stores = 2,696 retailers x $100 
renewal fee = $269,600.
     In 2009, 2,696 -187 stores = 2,509 retailers x $100 
renewal fee = $250,900.
     In 2010, 2,509 -187 stores = 2,322 retailers x $100 
renewal fee = $232,200.
     Cost over five years = $307,000 + $288,300 + $269,600 + 
$250,900 + $232,200 = $1,348,000.
    Finally, retailers who, during 2005, (1) Have a previous 
disqualification(s) or civil money penalty in lieu of disqualification 
and receive an additional disqualification penalty of any length or (2) 
are disqualified for more than six months or pay a civil money penalty 
in lieu of a disqualification period of more than six months will have 
fulfilled their bond/LOC requirement in 2010. During this five year 
period they will continue to pay the fees associated with the annual 
renewal of such bonds/LOCs. For each year beyond 2010, the number of 
retailers who no longer pay renewal fees should increase by the number 
of stores who fit into one of the two categories described above and 
remains in the Food Stamp Program. For example:
    In 2011, 2,040 + 491 retailers -6.1% of them who leave the Program 
OR 2377 retailers will no longer incur the average $100 cost of bond 
renewal fees. The total cost associated with this change in 2011 is 
$237,700.
    Since 1969, more than 75% of the stores that have been disqualified 
or subject to a civil money penalty are convenience stores and medium 
or small grocers.
    From 1998 to 2005, 2,065 stores were facing a permanent 
disqualification from participation in the Food Stamp Program because 
of indications that trafficking violations were occurring in those 
establishments. Two hundred forty-four of those stores provided 
documentation proving that in fact credit violations were taking place. 
That is equal to an average of 30.5 stores per year or 11.8% of all the 
stores facing a permanent disqualification each year between 1998 and 
2005.
    Under the proposed regulation, these stores would instead be given 
a one year disqualification and required to submit a bond or letter of 
credit for five years, upon return to the Food Stamp Program.
    Based on historical data, there would be an average out-of-pocket 
cost to each of these retailers of $668. Total cost to retailers for 
this provision is projected to be $20,374 per year and $101,870 over 
five years.
    This out-of-pocket cost is, however, offset by the opportunity for 
these businesses to resume the food stamp portion of their sales after 
the one year disqualification period.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Nancy Montanez 
Johner, Under Secretary, of the Food, Nutrition and Consumer Services 
has certified that this rule will not have a significant economic 
impact on a substantial number of small entities. This rule will impact 
FNS field offices and all participating retailers and wholesalers who 
have violated the Food Stamp Program rules. Currently, all violating 
retailers and wholesalers who have been imposed a specified period of 
time to be removed from the program or assessed a civil money penalty 
in lieu of such removal are required to submit a collateral bond or 
irrevocable letter of credit as condition of continued participation in 
the Food Stamp Program. The collateral bond or irrevocable letter of 
credit must be periodically renewed and valid at all times during the 
period in which the firm is authorized to participate in the program. 
This rule will limit the requirement to five years, benefiting the 
retailers and wholesalers who are affected by this requirement. Also, 
in this rule, a one year removal from participation in the program will 
be imposed against retailers and wholesalers that accept food stamp 
benefits in payment for items sold to a household on credit. It is 
estimated that an average of 30.5 stores per year or 11.8% of all the 
stores facing a permanent disqualification will be imposed a one year 
disqualification because of committing credit violations.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under Section 202 of the UMRA, the 
Department generally must prepare a written statement, including a 
cost/benefit analysis, for proposed and final rules with Federal 
mandates that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the Department to 
identify and consider a reasonable number of regulatory

[[Page 11293]]

alternatives and adopt the least costly, more cost-effective or least 
burdensome alternative that achieves the objectives of the rule. This 
rule contains no Federal mandates (under the regulatory provisions of 
Title II of the UMRA) that impose costs on State, local, or tribal 
governments or to the private sector of $100 million or more in any one 
year. This rule is, therefore, not subject to the requirements of 
sections 202 and 205 of the UMRA.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule in 7 CFR part 3015, subpart V and related Notice (48 FR 29115), 
June 24, 1983, this Program is excluded from the scope of Executive 
Order 12372, which requires intergovernmental consultation with State 
and local officials.

Executive Order 13132, Federalism

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

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless specified in the DATES section of the final rule. Prior to any 
judicial challenge to the provisions of this rule or the application of 
its provisions, all applicable administrative procedures must be 
exhausted.

Civil Rights Impact Analysis

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

Paperwork Reduction Act

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

E-Government Act Compliance

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

Background

    On July 12, 1984, the Department published a rule entitled, Bonding 
of Authorized Firms, that required all violating retailers and 
wholesalers that have been disqualified for a specified period of time 
or imposed a civil money penalty to submit a collateral bond if they 
wish to continue to participate in the Food Stamp Program after 
satisfying their penalty. The rule became effective on August 13, 1984. 
The bonding requirements are set forth in Section 12(d) of the Food 
Stamp Act of 1977, (Act), and Parts 278 and 279 of the Food Stamp 
Program regulations. Essentially, the bond covers the value of the food 
stamp benefits which the authorized firm may in the future accept and 
redeem in violation of the Act. The minimum face value of a bond is 
$1,000. The vast majority of the bonds, when calculated, have a face 
value of $1,000.
    Currently, the regulations require that the bond be valid at all 
times during the period which the firm is authorized to participate in 
the program. Retailers and wholesalers are required to renew their bond 
through a bonding agent or financial institution on a periodic basis. 
Most bonds are renewed on an annual basis. The renewal fee for a bond 
can range from $50 to $1,000, which does not include the accountant and 
lawyer fees that can range from $75 to more than $200. Firms have 
expressed to the Food and Nutrition Service (FNS) on numerous occasions 
their concern about the costs of renewing a collateral bond being 
exorbitant.
    Several other problems have arisen since the inception of the 
current bonding requirement. Namely, we found that collateral bonds 
from some companies do not meet the requirements set forth in the 
rules, collateral bonds are not available in some areas, and collateral 
bonds are not always available in the required increments. As a result, 
we established

[[Page 11294]]

written policy to allow firms to submit irrevocable letters of credit 
in lieu of collateral bonds.
    In accordance with Section 12(d) of the Act, the Secretary has the 
authority to prescribe the amount, terms, and conditions of this 
statutory requirement. Thus, the proposed rule would do the following: 
(1) Amend the regulation to provide for irrevocable letters of credit 
as an acceptable instrument in lieu of collateral bonds; (2) Eliminate 
the bond requirement for retailers who have never previously been 
disqualified and who are disqualified for a period of six months or 
have a civil money penalty imposed in lieu of a six month 
disqualification period; and (3) Limit the bonding requirement to five 
years for retailers who are disqualified for a specified period of time 
greater than six months or imposed a civil money penalty in lieu of a 
specified period of time greater than six months. Retailers who have 
previously been disqualified for any length of time or been issued a 
civil money penalty and who subsequently become disqualified again will 
be subject to the five year bonding requirement, even if the subsequent 
disqualification is for a period of six months or less or the civil 
money penalty imposed is in lieu of a disqualification for six months 
or less.
    Lastly, the proposed rule would also establish a specified period 
of time for firms to be removed from the program (i.e., one year) for 
accepting food stamp benefits in payment for items on credit. Section 
278.2(f) of the Food Stamp Program regulations stipulates that retail 
food stores may not accept food stamp benefits in payment for any 
eligible food sold to food stamp households on credit. We have seen an 
increase in this type of violative activity since the implementation of 
the electronic benefit transfer (EBT) system. As a result, we issued 
clarification of FNS' policy regarding such activity (Benefit 
Redemption Division Policy Memorandum 98-01, entitled, 
Handling Electronic Benefit Transfer Cases Involving Retailers Who 
Admit to Accepting Food Stamp Benefits for Payment on Credit Accounts). 
We are now proposing to establish by regulation a specific one year 
disqualification for stores that engage in credit transactions.

List of Subjects

7 CFR Part 278

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

7 CFR Part 279

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

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

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

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

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


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

* * * * *
    (b) * * *
    (4) The submission of collateral bonds or irrevocable letters of 
credit for firms with previous sanctions.
    (i) If the applicant firm has been sanctioned for violations of 
this part, by withdrawal, or disqualification for a period of more than 
six months, or by a civil money penalty in lieu of a disqualification 
period of more than six months, or if the applicant firm has been 
previously sanctioned for a violation and incurs a subsequent sanction 
regardless of the length of the disqualification period, the FNS 
officer-in-charge shall, as a condition of future authorization, 
require the applicant to present a collateral bond or irrevocable 
letter of credit that meets the following conditions:
    (A) The collateral bond must be issued by a bonding agent/company 
recognized under the law of the State in which the applicant is 
conducting business and which is represented by a negotiable 
certificate only. The irrevocable letter of credit must be issued by a 
commercial bank;
    (B) The collateral bond or irrevocable letter of credit must be 
made payable to the Food and Nutrition Service, U.S. Department of 
Agriculture;
    (C) The collateral bond cannot be canceled by the bonding agent/
company for non-payment of the premium by the applicant. The 
irrevocable letter of credit cannot be canceled by the commercial bank 
for non-payment by the applicant;
    (D) The collateral bond or irrevocable letter of credit must have a 
face value of $1,000 or an amount equal to ten percent of the average 
monthly food stamp benefit redemption volume of the applicant for the 
immediate twelve months prior to the effective date of the most recent 
sanction which necessitated the collateral bond or irrevocable letter 
of credit whichever amount is greater;
    (E) The applicant is required to submit a collateral bond or 
irrevocable letter of credit that is valid for a period of five years 
when re-entering the program; and
    (F) The collateral bond or irrevocable letter of credit shall 
remain in the custody of the Officer-in-Charge unless released to the 
applicant as a result of the withdrawal of the applicant's 
authorization, without a fiscal claim established against the applicant 
by FNS.
    (ii) Furnishing a collateral bond or irrevocable letter of credit 
shall not eliminate or reduce a firm's obligation to pay in full any 
civil money penalty or previously determined fiscal claim which may 
have been assessed against the firm by FNS prior to the time the bond 
or letter of credit was required by FNS, and furnished by the firm. A 
firm which has been assessed a civil money penalty shall pay FNS as 
required, any subsequent fiscal claim asserted by FNS. In such cases a 
collateral bond or irrevocable letter of credit shall be furnished to 
FNS with the payment, or a schedule of intended payments, of the civil 
money penalty. A buyer or transferee shall not, as a result of the 
transfer or purchase of a disqualified firm, be required to furnish a 
bond or letter of credit prior to authorization.
* * * * *
    3. In Sec.  278.2, revise paragraph (f) to read as follows:


Sec.  278.2  Participation of retail food stores.

* * * * *
    (f) Paying credit accounts. Food stamp benefits shall not be 
accepted by authorized retail food store in payment of items previously 
sold to a household on credit. A firm that commits such violations 
shall be disqualified from participation in the Food Stamp Program for 
a period of one year.
* * * * *
    4. In Sec.  278.6:
    a. Revise paragraph (e)(4); and
    b. Amend paragraph (h) by adding the words ``or irrevocable letter 
of credit'' after the word ``bond'' wherever it appears.
    The revision reads as follows:


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

* * * * *
    (e) * * *
    (4) Disqualify the firm for 1 year if:
    (i) It is to be the first sanction for the firm and the ownership 
or management personnel of the firm have committed

[[Page 11295]]

violations such as the sale of common nonfood items in amounts normally 
found in a shopping basket, and FNS had not previously advised the firm 
of the possibility that violations were occurring and of the possible 
consequences of violating the regulations; or
    (ii) The firm has accepted food stamp benefits in payment for items 
sold to a household on credit.
* * * * *
    5. In Sec.  278.7, revise paragraph (b) to read as follows:


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

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

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

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


Sec.  279.1  Jurisdiction and authority.

* * * * *
    (a) * * *
    (6) Forfeiture of part or all of a collateral bond or a draw down 
of part or all of a letter of credit under Sec.  278.1 of this chapter, 
if the request for review is made by the authorized firm. FNS shall not 
accept requests for review made by a bonding company or agent or 
commercial bank.
* * * * *
    7. In Sec.  279.4, revise the last sentence in paragraph (a) to 
read as follows:


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

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

    Dated: March 1, 2007.
Nancy Montanez Johner,
Under Secretary, Food, Nutrition, and Consumer Services.
 [FR Doc. E7-4520 Filed 3-12-07; 8:45 am]
BILLING CODE 3410-30-P