Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 51745 

§ 2424.22 [Amended] 

■ 15. Amend section 2424.22 as follows: 

■ a. In paragraph (b)(3), add ‘‘and’’ after 

the semi-colon; 

■ b. In paragraph (b)(4), remove the 

semi-colon and the word ‘‘and’’ from 

the end of the paragraph and add a 

period in their place; and 

■ c. Remove paragraph (b)(5). 

§ 2424.24 [Amended] 

■ 16. Amend section 2424.24 as follows: 

■ a. In paragraph (c)(3), add the word 

‘‘and’’ after the semi-colon; 

■ b. In paragraph (c)(4), remove the 

semi-colon and the word ‘‘and’’ from 

the end of the paragraph and add a 

period in their place; and 

■ c. Remove paragraph (c)(5). 

§ 2424.25 [Amended] 

■ 17. Amend section 2424.25 by 

removing paragraph (c)(3). 

§ 2424.26 [Amended] 

■ 18. Amend section 2424.26 as follows: 

■ a. Add the word ‘‘and’’ after the semicolon at the end of paragraph (c)(1)(iv); 

■ b. In paragraph (c)(2), remove the 

semi-colon and the word ‘‘and’’ from 

the end of the paragraph and add a 

period in their place; and 

■ c. Remove paragraph (c)(3). 

PART 2429—MISCELLANEOUS AND 

GENERAL REQUIREMENTS 

■ 19. The authority cited for part 2429 

continues to read as follows: 

Authority: 5 U.S.C. 7134; § 2429.18 also 

issued under 28 U.S.C. 2112(a). 

■ 20. Section 2429.21 is amended by 

revising paragraph (b) to read as follows: 

§ 2429.21 Computation of time for filing 

papers. 

* * * * * 

(b) Except when filing an unfair labor 

practice charge pursuant to part 2423 of 

this subchapter, a representation 

petition pursuant to part 2422 of this 

subchapter, and a request for an 

extension of time pursuant to 

§ 2429.23(a) of this part, when this 

subchapter requires the filing of any 

paper with the Authority, the General 

Counsel, a Regional Director, or an 

Administrative Law Judge, the date of 

filing shall be determined by the date of 

mailing indicated by the postmark date 

or the date a facsimile is transmitted. If 

no postmark date is evident on the 

mailing, it shall be presumed to have 

been mailed 5 days prior to receipt. If 

the date of facsimile transmission is 

unclear, the date of transmission shall 

be the date the facsimile transmission is 

received. If the filing is by personal 

delivery, it shall be considered filed on 

the date it is received by the Authority 

or the officer or agent designated to 

receive such materials. If the filing is 

deposited with a commercial delivery 

service that will provide a record 

showing the date the document was 

tendered to the delivery service, it shall 

be considered filed on the date when 

the matter served is deposited with the 

commercial delivery service. 

* * * * * 

■ 21. Section 2429.22 is revised to read 

as follows: 

§ 2429.22 Additional time after service by 

mail or commercial delivery. 

Except as to the filing of an 

application for review of a Regional 

Director’s Decision and Order under 

§ 2422.31 of this subchapter, whenever 

a party has the right or is required to do 

some act pursuant to this subchapter 

within a prescribed period after service 

of a notice or other paper upon such 

party, and the notice or paper is served 

on such party by mail or commercial 

delivery, 5 days shall be added to the 

proscribed period: Provided, however, 

that 5 days shall not be added in any 

instance where an extension of time has 

been granted. 

■ 22. Section 2429.25 is revised to read 

as follows: 

§ 2429.25 Number of copies and paper 

size. 

Unless otherwise provided by the 

Authority or the General Counsel, or 

their designated representatives, as 

appropriate, or under this subchapter, 

and with the exception of any 

prescribed forms, any document or 

paper filed with the Authority, General 

Counsel, Administrative Law Judge, 

Regional Director, or Hearing Officer, as 

appropriate, under this subchapter, 

together with any enclosure filed 

therewith, shall be submitted on 8c by 

11 inch size paper, using normal 

margins and font sizes. The original and 

four (4) legible copies of each document 

or paper must be submitted. Where 

facsimile filing is permitted pursuant to 

§ 2429.24(e), one (1) legible copy, 

capable of reproduction, shall be 

sufficient. A clean copy capable of being 

used as an original for purposes such as 

further reproduction may be substituted 

for the original. 

■ 23. Section 2429.27 is amended by 

revising paragraph (d) to read as 

follows: 

§ 2429.27 Service; statement of service. 

* * * * * 

(d) The date of service or date served 

shall be the day when the matter served 

is deposited in the U.S. mail, delivered 

in person, deposited with a commercial 

delivery service that will provide a 

record showing the date the document 

was tendered to the delivery service or, 

in the case of facsimile transmissions, 

the date transmitted. 

■ 24. Add § 2429.29 to subpart B to read 

as follows: 

§ 2429.29 Content of filings. 

Any document that a party files in a 

proceeding covered by this subchapter 

that is before the Authority or the Office 

of Administrative Law Judges must 

include a table of contents if the 

document exceeds 10 double-spaced 

pages in length. 

Dated: September 25, 2009. 

Carol Waller Pope, 

Chairman. 

[FR Doc. E9–23552 Filed 10–7–09; 8:45 am] 

BILLING CODE 6727–01–P 

DEPARTMENT OF AGRICULTURE 

Food and Nutrition Service 

7 CFR Part 246 

[FNS–2009–0001] 

RIN 0584–AD71 

Special Supplemental Nutrition 

Program for Women, Infants and 

Children (WIC): Vendor Cost 

Containment 

AGENCY: Food and Nutrition Service, 

USDA. 

ACTION: Final rule. 

SUMMARY: This final rule adopts, with 

changes, an interim rule published on 

November 29, 2005 amending the WIC 

regulations. The final rule incorporates 

into program regulations new legislative 

requirements for vendor cost 

containment that affect the selection, 

authorization, and reimbursement of 

retail vendors. These requirements are 

contained in the Child Nutrition and 

WIC Reauthorization Act of 2004, 

enacted on June 30, 2004. The final rule 

reflects the statutory provisions that 

require State agencies to implement a 

vendor peer group system, competitive 

price criteria, and allowable 

reimbursement levels in a manner that 

ensures the WIC Program pays 

authorized vendors competitive prices 

for supplemental foods. It also requires 

State agencies to ensure vendors that 

derive more than 50 percent of their 

annual food sales revenue from WIC 

food instruments (‘‘above-50-percent 

vendors’’) do not cause higher food 

costs for the program than do other 

vendors (‘‘regular vendors’’). The intent 


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51746 Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 

of these provisions is to maximize the 

number of eligible women, infants, and 

children served with available Federal 

funding. 

DATES: Effective Date: This rule is 

effective November 9, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Debra Whitford, Chief, Policy and 

Program Development Branch, 

Supplemental Food Programs Division, 

Food and Nutrition Service, 3101 Park 

Center Drive, Room 522, Alexandria, 

Virginia 22302, (703) 305–2746. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866 

This 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 Summary 

As required for all rules designated as 

Significant by the Office of Management 

and Budget, a Regulatory Impact 

Analysis was developed for the WIC 

Vendor Cost Containment Final Rule. A 

complete copy of the Impact Analysis is 

available by contacting the person 

indicated in the FOR FURTHER

INFORMATION CONTACT section of this 

Preamble. 

Need for Action 

This action is needed to implement 

the vendor cost containment provisions 

of the Child Nutrition and WIC 

Reauthorization Act of 2004, Public Law 

108–265, which amended the Child 

Nutrition Act (CNA). The rule requires 

WIC State agencies to operate vendor 

management systems that effectively 

contain food costs by ensuring that 

prices paid for supplemental foods are 

competitive. The rule also responds to 

data which indicate that WIC food 

expenditures increasingly include 

payments to above-50-percent vendors 

whose prices are not governed by the 

market forces that affect most retail 

grocers. As a result, the prices charged 

by these vendors tend to be higher than 

those of other retail grocery stores 

participating in the program. To ensure 

the program pays competitive prices, 

this rule confirms the codification of the 

new statutory requirements in the 

interim rule for State agencies to use in 

evaluating vendor applicants’ prices 

during the vendor selection process and 

when paying vendors for supplemental 

foods following authorization, with a 

few exceptions. However, in response to 

comments, the interim rule’s 

requirement for weighting food 

instruments in quarterly cost neutrality 

assessments has been made optional in 

§ 246.12(g)(4)(i)(D) of this final rule. 

Also, the requirement for recouping 

excess payments or terminating vendor 

agreements based on food instruments 

which had exceeded cost neutrality 

levels calculated during quarterly cost 

neutrality assessments, but were 

submitted for redemption within the 

maximum allowable reimbursement 

levels in effect at the time of 

redemption, has been removed from 

§ 246.12(g)(4)(i)(D). Further, the final 

rule includes one new requirement 

based on the comments received; a 

sentence has been added to 

§ 246.12(g)(4) stating the State agency 

must inform all vendors of the criteria 

for peer groups, and must inform each 

individual vendor of its peer group 

assignment. This one new requirement 

is not expected to increase the 

administrative burden of State agencies 

since State agencies are already doing 

this, as indicated during the processing 

of the certification and exemption 

requests. 

While the Child Nutrition and WIC 

Reauthorization Act mandates that State 

agencies establish peer groups, 

competitive price criteria and allowable 

reimbursement levels, and states that 

these requirements must result in the 

outcome of paying above-50-percent 

vendors no more than regular vendors, 

the Act does not specify particular 

criteria for peer groups or acceptable 

methods of setting competitive price 

criteria and allowable reimbursement 

levels. The Food and Nutrition Service 

(FNS) considered using the interim rule 

to mandate specific means of 

developing peer groups, competitive 

price criteria and allowable 

reimbursement levels in order to ensure 

the outcome of this legislation was 

achieved. However, given the 

responsibility of the State agencies to 

manage WIC as a discretionary grant 

program, the varying retail food market 

conditions in each State, and the wide 

variations in current vendor cost 

containment systems operated by State 

agencies, the interim rule provided State 

agencies with flexibility to develop their 

own peer groups, competitive price 

criteria and allowable reimbursement 

levels. 

The State agency vendor cost 

containment plans and exemption 

requests approved by FNS following the 

implementation of the interim rule 

reflected considerable diversity in peer 

group criteria, competitive price criteria, 

and allowable reimbursement levels. 

Paragraph 246.12(g)(4)(vi) of the interim 

rule required State agencies which 

authorized above-50-percent vendors to 

obtain certification for their vendor cost 

containment systems from FNS. Also, 

State agencies could seek an exemption 

from the requirement to establish peer 

groups under § 246.12(g)(4)(v), from the 

requirements for a geographic peer 

group criterion, or for the use of more 

than one peer group criterion under 

§ 246.12(g)(4)(ii)(A). The peer group 

requirements applied to all State 

agencies, regardless of whether above50-percent vendors were authorized. 

These vendor cost containment 

certification submissions and requests 

for exemption provided the data needed 

to determine whether State agency 

vendor cost containment systems 

actually reflected the flexibility 

intended by the interim rule. The 

following chart summarizes this data 

from the vendor cost containment plans 

submitted by the 32 State agencies 

which sought certification from FNS: 

Peer group criteria/reimbursement policy 

Number of State 

agencies using the 

peer group criteria/ 

reimbursement 

policy 

Geography/Population Density .................................................................................................................................................... 26 

Number of Cash Registers .......................................................................................................................................................... 11 

Type of Ownership (e.g., Sole Proprietorship, Corporate) .......................................................................................................... 3 

Size (e.g., Square Footage) ........................................................................................................................................................ 6 

Type of Store (e.g., Small Neighborhood Store, Chain) ............................................................................................................. 11 

WIC Sales Volume ...................................................................................................................................................................... 10 

Separate Peer Groups for Supercenter Stores or Commissaries .............................................................................................. 9 

Separate Peer Groups for Above-50-Percent Vendors; Paid Statewide Average ..................................................................... 13 

Above-50-Percent Vendors in Same Peer Groups with Regular Vendors; Paid Statewide Average ........................................ 16 

Above-50-Percent Vendors in Same Peer Groups with Regular Vendors; Paid Peer Group Average ..................................... 3 


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Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 51747 

Further, FNS granted exemptions 

from the peer group requirements in 

entirety to 28 State agencies which did 

not authorize above-50-percent vendors. 

In addition, FNS granted exemptions 

from the requirement for a geographic 

peer group criterion to all 10 State 

agencies which had requested such 

exemptions. Finally, FNS granted 

exemptions from the requirement to use 

more than one peer group criterion to 

both State agencies which had requested 

such exemptions; for both of these State 

agencies, the geographic peer group 

criterion is the only peer group 

criterion. 

Thus, the interim rule gave State 

agencies flexibility to design cost 

containment practices that would be 

effective in their own markets and 

would ensure adequate participant 

access. The final rule maintains this 

flexibility, while continuing to ensure 

that above-50-percent vendors do not 

result in higher costs to the program 

than regular vendors as required by the 

CNA. 

Benefits 

The WIC Program will benefit from 

the provisions of this rule by reducing 

unnecessary food expenditures, thereby 

increasing the potential to serve more 

eligible women, infants, and children 

for the same cost. The rule should 

ensure that payments to vendors reflect 

competitive prices for WIC foods, 

particularly regarding above-50-percent 

vendors. Previously, the WIC Program 

paid above-50-percent vendors more for 

supplemental foods than it paid other 

authorized vendors. Under the interim 

rule, State agencies that chose to 

authorize these vendors needed to 

demonstrate in their certification 

requests that payments to such vendors 

would not be higher on average per food 

instrument than payments to 

comparable vendors. 

FNS conservatively estimated that 

implementation of the interim rule 

would result in a cost savings of 

approximately $75 million annually, as 

discussed in the Regulatory Impact 

Analysis for the interim rule. As 

previously noted, one State agency has 

already reported that it has been able to 

serve more than 40,000 additional 

participants because of the savings 

resulting from implementation of the 

interim rule. However, due to other 

factors which impact on food costs, 

such as inflation in commodity prices, 

it is not possible to confirm with 

absolute certainty that food costs for the 

Program have declined because of the 

interim rule. Even so, FNS stands by its 

estimate of savings since it was based on 

a comparison of regular vendor prices 

and above-50-percent vendor prices 

before the interim rule, when the prices 

of above-50-percent vendors were 

usually higher than the prices of regular 

vendors. 

Costs 

In order to comply with the interim 

rule, State agencies needed to make onetime changes in their vendor cost 

containment systems. Some State 

agencies were already in full or partial 

compliance with the rule, while others 

needed to demonstrate that they met the 

conditions for an exemption from all or 

some of the vendor peer group system 

requirements. As indicated by the State 

agency comments on the interim rule, 

many State agencies, particularly those 

that chose to authorize above-50-percent 

vendors, incurred additional costs and 

administrative burdens to achieve 

compliance with its provisions. 

Of the eleven WIC State agencies 

which submitted comments on the 

interim rule, nine addressed the 

administrative burden resulting from 

implementation of the interim rule. All 

nine of these State agencies stated that 

implementation of the interim rule had 

required a substantial increase in the 

administrative burden, citing particular 

requirements of the interim rule, 

including the requirements to weight 

food instrument redemption amounts in 

cost neutrality assessments; collect food 

prices from vendors at least every six 

months following authorization; 

document the above-50-percent vendor 

status for all vendors; document the 

above-50-percent vendor status for 

pharmacies; and to conduct quarterly 

cost neutrality assessments for State 

agencies which do not have automated 

systems for performing statistical 

analyses. The requirement in the 

interim rule for weighting food 

instrument redemption amounts for cost 

neutrality assessments has been made 

optional in this final rule, and 

requirement for collecting food prices 

from vendors at least every six months 

following authorization have been 

modified in this final rule to provide for 

exemptions. 

Also, FNS has provided State agencies 

with methodologies for reducing the 

administrative burden of identifying 

above-50-percent vendors and of the 

quarterly cost neutrality assessments. 

Over ninety percent of WIC vendors are 

also authorized by the Supplemental 

Nutrition Assistance Program (SNAP, 

formerly the Food Stamp Program). To 

assist the State agencies, FNS 

established a process for comparing WIC 

redemptions to SNAP redemptions; this 

process established that about 88 

percent of authorized WIC vendors had 

greater SNAP redemptions than WIC 

redemptions. As a result, there was no 

need to obtain further documentation 

from these vendors, such as tax returns 

or other verifiable documentation, to 

establish whether more than 50 percent 

of a vendor’s food sales were derived 

from WIC purchases. Further, the State 

agency workload for this redemption 

comparison process is negligible 

because FNS maintains the fully 

automated reporting process which 

matches the redemption data 

maintained by the WIC The Integrity 

Profile (TIP) and the SNAP Store 

Tracking and Redemption System 

(STARS) systems. 

One State agency commented that this 

process should not use annualized WIC 

redemption data for a new WIC vendor 

because this may erroneously indicate 

that this vendor is an above-50-percent 

vendor, resulting in the restriction of 

payments to this vendor at the 

maximum allowable redemption levels 

permitted for above-50-percent vendors. 

However, the WIC–SNAP redemption 

match cannot result in a determination 

that a vendor is an above-50-percent 

vendor because this match does not 

include eligible food sales made with 

cash, credit cards, personal checks, etc. 

Instead, this process has one of two 

results: Either the vendor is not an 

above-50-percent vendor, or the vendor 

is potentially an above-50-percent 

vendor. If a vendor is designated as a 

potential above-50-percent vendor, the 

State agency needs to obtain further 

documentation before determining 

whether the vendor is in fact an above50-percent vendor. Also, as discussed 

more fully below in the Background 

section of this preamble, the State 

agency must ask all vendor applicants 

whether they expect to become above50-percent vendors, and, if not, the 

vendor must provide supporting 

documentation to the State agency. 

Regulatory Flexibility Act 

This rule has been reviewed with 

regard to the requirements of the 

Regulatory Flexibility Act (5 U.S.C. 

601–612). Although not required by the 

Act, the Food, Nutrition, and Consumer 

Services hereby certifies that this rule 

will not have a significant economic 

impact on 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, as 

pointed out above, several provisions of 

this rule provide considerable flexibility 

to WIC State agencies regarding the 

manner of implementing its 

requirements, rather than new 

prescriptive requirements for the 


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51748 Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 

operation and administration of the 

Program. 

Public Law 104–4 

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, 

FNS generally must prepare a written 

statement, including a cost benefit 

analysis, for proposed and final rules 

with ‘‘Federal mandates’’ that may 

result in expenditures by State, local or 

tribal governments, in the aggregate, or 

the private sector, of $100 million or 

more in any one year. When such a 

statement is needed for a rule, section 

205 of the UMRA generally requires 

FNS to identify and consider a 

reasonable number of regulatory 

alternatives and adopt the most costeffective or least burdensome alternative 

that achieves the objectives of the rule. 

This final rule contains no Federal 

mandates (under the provisions of Title 

II of the UMRA) for State, local and 

tribal governments or the private sector 

of $100 million or more in any one year. 

Thus, the rule is not subject to the 

requirements of sections 202 and 205 of 

the UMRA. 

Executive Order 12372 

WIC is listed in the Catalog of Federal 

Domestic Assistance under 10.557. For 

the reasons set forth in 7 CFR 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. 

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 following 

three categories called for under section 

(6)(b)(2)(B) of Executive Order 13132. 

Prior Consultation With State Officials 

State agencies have expressed 

concerns and shared information 

regarding implementation of the interim 

rule. Because the WIC Program is a 

State-administered, federally funded 

program, FNS regional offices have 

formal and informal discussions with 

State agencies on an ongoing basis 

regarding program implementation and 

policy issues. This arrangement allows 

State agencies to raise questions and 

provide comments that form the basis 

for many of the implementation detail 

decisions in this and other WIC Program 

rules. Prior to the implementation of the 

interim rule, several regional offices 

convened meetings with State WIC staff 

that included discussion of the vendor 

cost containment provisions of this law. 

In addition, in October 2004, FNS’ 

Supplemental Food Programs Division 

convened a meeting of WIC State agency 

representatives, USDA headquarters and 

regional office staff, and an outside 

expert on competitive pricing systems, 

to obtain more information on State 

agencies’ current vendor cost 

containment systems. During the 

implementation of the interim rule, FNS 

further clarified the meaning of the cost 

containment provisions in response to 

numerous issues raised by the 

certification and exemption requests 

submitted by State agencies. These 

questions and informal comments 

received on the interim rule have 

assisted FNS in making the final rule 

responsive to State agency concerns. 

Nature of Concerns and the Need To 

Issue This Rule 

The comments of most of the State 

agencies on the interim rule reflected 

concerns about FNS interpretations of 

Public Law 108–265, the extent of the 

flexibility provided to the State agencies 

by the interim rule, and the 

administrative burden of implementing 

the interim rule. These concerns 

focused on several of the interim rule’s 

requirements, including: above-50- 

percent vendors may not be paid more 

on average per food instrument type 

than regular vendors; food instrument 

redemption amounts must be weighted 

in cost neutrality assessments; food 

prices must be collected from vendors at 

least every six months following 

authorization; and verifiable 

documentation must be used to identify 

above-50-percent vendors. 

Extent to Which Those Concerns Have 

Been Met 

As discussed more fully below in the 

Background section of this preamble, 

most of the provisions of the interim 

rule reflected the explicit requirements 

of Public Law 108–265 and thus cannot 

be eliminated or altered. However, as 

also discussed below, some provisions 

of the interim rule which were not 

based on the explicit requirements of 

Public Law 108–265 have been modified 

in this final rule. Also, several of these 

modified provisions had been viewed as 

administratively burdensome in the 

comments of State agencies, including 

the weighting of food redemption 

amounts in cost neutrality calculations, 

which has been made optional in the 

final rule, and the collection of food 

prices from vendors every six months 

following authorization, from which a 

State agency may be exempted under 

the final rule but not under the interim 

rule. Additionally, as discussed more 

fully in the Regulatory Impact Analysis 

section of this preamble, FNS has also 

reduced the administrative burden by 

developing a methodology which has 

eliminated the need to obtain 

documentation from approximately 88 

percent of authorized vendors regarding 

whether they are above-50-percent 

vendors. Finally, this final rule 

continues the considerable flexibility 

provided by the interim rule for the 

manner of State agency implementation, 

in particular the broad range of peer 

group criteria available to State agencies 

as noted above in the Regulatory Impact 

Analysis section of this preamble. 

Indeed, the peer group exemption 

process of the interim rule is continued 

in the final rule so State agencies may 

request exemptions from some or all of 

the peer group requirements; 40 State 

agencies were granted such exemptions 

under the interim rule. 

Executive Order 12988 

This final rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform, and is intended to have 

preemptive effect with respect to any 

State or local laws, regulations or 

policies which conflict with its 

provisions, or otherwise impede its full 

implementation. This final rule is not 

intended to have retroactive effect 

unless so specified in the DATES 

paragraph of this preamble. Prior to any 

judicial challenge to the provisions of 

this rule or the application of its 

provisions, all applicable administrative 

procedures must be exhausted. 

Civil Rights Impact Analysis 

FNS has reviewed this final rule in 

accordance with Departmental 

Regulation 4300–4, ‘‘Civil Rights Impact 

Analysis,’’ to identify and address any 

major civil rights impacts the final rule 

might have on minorities, women, and 

persons with disabilities. FNS has 

determined that this final 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 government agencies 

that administer the WIC Program from 

engaging in actions that discriminate 

based on race, color, national origin, 


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Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 51749 

sex, age or disability. Section 246.8 of 

the WIC regulations (7 CFR part 246) 

indicates 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 grounds 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. 

Discrimination in any aspect of 

program administration is prohibited by 

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, they must 

implement it in such a way that it 

complies with § 246.8 of the WIC 

regulations. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. Chap. 35; see 5 CFR 1320) 

requires 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. Some of the information 

collections in this final rule have been 

previously approved under OMB No. 

0584–0043, based on the information 

reporting requirements outlined in the 

interim rule WIC Vendor Cost 

Containment Interim Rule, published on 

November 29, 2005 at 70 FR 71708. The 

information collection for this final rule 

has been submitted to OMB with 

revisions based on comments and new 

information, as discussed below. 

The preamble of the interim rule 

separated the reporting burden of that 

rule into three parts. The first part, 

listed under § 246.4(a)(14)(xv), 

included: The description of the vendor 

cost containment system (peer groups, 

maximum allowable reimbursement 

levels, average redemption amounts for 

selected food instruments) in the State 

Plan, which is an annual requirement; 

State agency notification to FNS 

concerning non-profit above-50-percent 

vendors exempted by the State agency 

from cost containment requirements, 

which could occur at any time; request 

for exemption from vendor peer group 

requirements, which must be reapproved triennially; information 

required for FNS for certification of the 

State agency’s vendor cost containment 

system, which must be re-approved 

triennially; and, detailed assurances 

concerning the implementation of the 

commitments made under existing 

certifications, which must be provided 

annually in the State Plan. The second 

part, listed under § 246.12(g)(4)(i), 

concerns the identification of above-50- 

percent vendors. The third part, listed 

under § 246.12(g)(4)(ii)(B), concerns the 

collecting of vendor food prices every 

six months following authorization of 

the vendor. 

Comments 

As noted in the Regulatory Impact 

Analysis Summary of this preamble, 

nine commenters, all of them State 

agencies, addressed the administrative 

burden of the interim rule. However, 

only two of these State agencies 

suggested different burden hours than 

set forth in the interim rule. One of 

these State agencies stated that at least 

one-half of a staff position would be 

needed to manage ongoing reporting 

activities, without indicating how this 

staff time would be distributed between 

the different reporting burdens set forth 

in the preamble of the interim rule, 

including the burdens which have been 

modified in this final rule. Similarly, 

the other State agency stated that eight 

new staff had been requested to address 

the new administrative needs resulting 

from the interim rule, including all of 

the reporting burdens, but also to 

address the administrative needs 

unrelated to vendor cost containment— 

the State agency’s emerging Electronic 

Benefits Transfer (EBT) system. 

Although lacking in specificity, these 

comments indicate that FNS may have 

underestimated the reporting burden 

hours. 

The Regulatory Impact Analysis 

Summary of this preamble also 

discusses the other comments on the 

administrative burden and how the final 

rule reflects accommodations intended 

to reduce those burdens. All nine of 

these State agencies stated that 

implementation of the interim rule had 

required a substantial increase in the 

administrative burden, citing particular 

requirements of the interim rule, 

including the requirements to weight 

food instrument redemption amounts in 

cost neutrality assessments; collect food 

prices from vendors at least every six 

months following authorization; 

document the above-50-percent vendor 

status for all vendors; document the 

above-50-percent vendor status for 

pharmacies; and to conduct quarterly 

cost neutrality assessments for State 

agencies which do not have automated 

systems for performing statistical 

analyses. The information collection 

burden hours have also been adjusted 

due to these comments, as discussed 

below. 

Collections Added by the Final Rule 

Unlike the interim rule, this final rule 

includes a provision which permits 

State agencies to seek approval of their 

methodologies for excluding partiallyredeemed food instruments from the 

required quarterly cost-neutrality 

assessments. The commenters who 

stated that such food instruments 

should be excluded from the cost 

neutrality assessments included two 

State agencies. Paragraph 

246.4(a)(14)(xv) requires State agencies 

include information in their State Plan 

submissions to FNS demonstrating 

compliance with the cost containment 

provisions of § 246.12(g)(4), which 

includes the quarterly cost neutrality 

assessment requirement of 

§ 246.12(g)(4)(i)(D). Thus a State agency 

would need FNS approval of a State 

Plan amendment setting forth a 

methodology for excluding partiallyredeemed food instruments. This is one 

of the reasons why the information 

burden hourly rate for the State Plan 

submissions under the interim rule has 

been doubled under this final rule. 

Burden hours have been added in the 

final rule to account for an exemption 

process which, unlike the interim rule, 

would permit State agencies to seek 

exemptions from the requirement set 

forth in § 246.12(g)(4)(ii)(B) for biannual 

collection of vendor shelf prices. FNS 

estimates that 15 State agencies will 

seek such exemptions at the same rate 

of 16 hours per response used in 

connection with the request for 

exemption from the peer group 

requirement under § 246.4(a)(14)(xv), 

resulting in 240 burden hours (15 × 16 

= 240). This change in the burden hours 

based on the addition of an exemption 

process under § 246.12(g)(4)(ii)(B) is the 

only change of burden hours due to 

program changes. All of the other 

changes in burden hours are considered 

to be adjustments. 

The burden hours per response set 

forth in connection with 

§ 246.12(g)(4)(ii)(B) of the interim rule 

for the collection of vendor food prices 

every six months following 

authorization has been increased in this 

final rule from one to two hours for both 

State agencies and vendors in 

recognition of the aforementioned 

comments. Although this provision has 

been modified in the final rule to 


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51750 Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 

provide for exemptions, the overall 

result is a net increase of 223,154 

burden hours for the biannual shelf 

price collection process. (The final rule 

allots 313,332 burden hours for the 

collection of shelf prices by the State 

agencies and vendors combined, while 

the interim rule allotted 90,178 hours 

for this.) Such exemptions could be 

based on numerous different reasons. As 

indicated in the Regulatory Impact 

Analysis, 67 percent of the State 

agencies are in compliance with the 

price collection requirement. Thus the 

exemptions would involve some 

proportion of the other 33 percent of the 

90 State agencies (30 State agencies). 

FNS estimates that as many as one half 

of these State agencies may be granted 

exemptions, i.e., 15 State agencies. (See 

section 4 of the Background part of this 

preamble for more information on this 

exemption process.) Thus the chart 

below shows that 75 State agencies will 

need to collect vendor shelf prices 

biannually under § 246.12(g)(4)(ii)(B), 

about 83.3 percent of the State agencies, 

and that about 83.3 percent of the 

vendors—39,167 vendors—will need to 

cooperate with this price collection 

process. As a result, the chart also 

shows that each of the 75 State agencies 

will need to collect prices from 1,044 

vendors on average twice per year, i.e., 

(39,167 ÷ 75 = 546.5) × 2 = 1,044. 

Unlike the interim rule, § 246.12(g)(4) 

of this final rule states that the State 

agency must inform all vendors of the 

criteria for peer groups and each 

individual vendor of its peer group 

assignment. State agencies have been 

advising vendors of their peer group 

assignments and the peer group criteria, 

but, for added assurance, a sentence has 

been added to § 246.12(g)(4) in this final 

rule to state that the State agency must 

inform all vendors of the criteria for 

peer groups and each individual vendor 

of its peer group assignment. Thus this 

new requirement set forth in 

§ 246.12(g)(4) would not result in any 

new information collection burden 

hours. 

Reducing the Collections 

As noted in the Regulatory Impact 

Analysis section of this preamble, four 

State agencies commented that the 

interim rule’s requirement for weighting 

food instrument redemption amounts 

made the cost neutrality assessment 

process more burdensome. In response, 

FNS has eliminated the requirement for 

weighting food instrument redemption 

amounts in the cost neutrality 

assessment process. Also, FNS expects 

certification requests, exemption 

requests, and State Plan submissions in 

the future will only involve 

amendments and/or updating 

information for most State agencies. 

Numbers of Certifications and 

Exemptions 

The previous estimates of 65 State 

agencies seeking certification and 30 

State agencies seeking exemptions need 

to be replaced with numbers based on 

actual experience. The certifications 

concern the cost neutrality of above-50- 

percent vendors with regards to 

comparable regular vendors. The 

exemptions concern the peer group 

requirements for all vendors. All State 

agencies are subject to the peer group 

requirements unless granted an 

exemption by FNS, but only those State 

agencies which authorize above-50- 

percent vendors need to be certified by 

FNS regarding their processes for 

maintaining the cost neutrality of above50-percent vendors in comparison to 

comparable regular vendors. In Fiscal 

Years 2005 and 2006, 32 State agencies 

requested certification and 42 requested 

exemptions. 

Conclusions 

Balancing the State agency comments 

and new requirements against the 

factors reducing the paperwork burden 

expected for future certification 

requests, exemption requests, and State 

Plan submissions, the burden hours per 

response estimated for the final rule will 

be doubled for three of the four 

information burden categories related to 

these requests and submissions, as 

detailed in the chart below. This 

includes increasing the hourly 

information burden rate for the State 

Plan description of the vendor cost 

containment system from 4 to 8 hours, 

for exemptions from the peer group 

requirements from 8 to 16 hours, and for 

information related to the certification 

and monitoring of the vendor cost 

containment system from 8 to 16 hours. 

FNS has not been notified by any 

State agency that it has authorized a 

non-profit above-50-percent vendor, as 

required by § 246.12(g)(4)(iv); such 

notification would be provided as a 

State Plan submission under 

§ 246.4(a)(14)(xv). FNS does not know if 

any State agencies will elect to 

authorize such vendors in the future. 

Thus the current estimate of the number 

of State agencies and annual burden 

hours related to this notification 

requirement will remain unchanged: 

five State agencies with one annual 

burden hour for each, resulting in a total 

of annual five burden hours. This is the 

only information burden category 

related to certification requests, 

exemption requests, and State Plan 

submissions for which the burden hours 

will not be doubled. 

The paperwork burden for the annual 

identification of above-50-percent 

vendors, per § 246.12(g)(4)(i), was 

previously set at 2 hours per response. 

As previously noted, the comparison of 

WIC and SNAP redemptions has made 

it possible to eliminate about 88 percent 

of authorized vendors from any need for 

further documentation since this 

comparison has confirmed that about 88 

percent of authorized vendors have 

more SNAP redemptions than WIC 

redemptions. FNS has established an 

automated process which matches the 

redemption data maintained by the WIC 

TIP and the SNAP STARS systems. The 

State agency workload for use of this 

process is negligible. 

FNS recognizes that obtaining 

additional documentation of above-50- 

percent status for the remaining 12 

percent of vendors is more burdensome 

than the WIC–SNAP redemption match, 

for both State agencies and vendors. 

Accordingly, in consideration of the 

comments on the reporting burden, the 

burden hours per response for the State 

agencies has been increased from 2 to 4 

hours, and for the vendors from 1 to 2 

hours for the data collection related to 

identifying above-50-percent vendors. 

However, this higher number of burden 

hours for vendors will only be applied 

to the 12 percent of vendors which have 

been designated as potential above-50- 

percent vendors based on the WIC– 

SNAP redemption match (5,640 

vendors), since those vendors which 

have been designated as not being 

above-50-percent vendors as a result of 

the WIC–SNAP redemption match will 

not need to provide any documentation 

to the State agency at all. 

The chart below sets forth the 

estimated annual reporting burden for 

the final rule to reflect the above-noted 

revisions based on State agency 

comments and information not available 

when the interim rule was published. 

Decimals are not included in the chart. 


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Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 51751 

FINAL RULE ESTIMATED ANNUAL REPORTING BURDEN

Section of the regulations 

Estimated 

Number of 

respondents 

Data 

collections 

or reports 

required 

annually 

Estimated 

average burden 

hours per 

response 

Estimated annual 

burden hours 

§ 246.4(a)(14)(xv): 

• Description of vendor peer group system and allowable reimbursement levels; average redemption amounts for selected 

food instruments.

90 1 ...................... 8 720 

• Notification of exemption of non-profit vendors ....................... 5 1 ...................... 1 5 

• Request for exemption from vendor peer group requirement 42 1—(triennial) ... 16 224 

• Information required for certification of vendor cost containment system and to monitor ongoing compliance with certification requirements.32 1—(triennial) ... 16 171 

32 1 ...................... 8 256 

§ 246.4(a)(14)(xv) Total ...................................................................... 90 3.66 ................. ............................ 1,376 

§ 246.12(g)(4)(i) .................................................................................. 90 63 .................... 4 22,560 

Above-50-Percent Determination ....................................................... 5,640 1 ...................... 2 11,280 

§ 246.12(g)(4)(ii)(B) ............................................................................. 75 1,044 ............... 2 156,666 

Biannual Price Collection ................................................................... 39,167 2 ...................... 2 156,666 

§ 246.12(g)(4)(ii)(B) Biannual Price Collection Exemption ................. 15 1 ...................... 16 240 

Total Burden Hours Due to Program Changes ............................................................................................................................... 240 

Total Burden Hours Due to Adjustments ........................................................................................................................................ 143,629 

Total Burden Hours for the Final Rule ............................................................................................................................................ 143,869 

Currently Approved WIC Reporting and Recordkeeping Burden Hours ......................................................................................... 3,451,206 

Total Proposed WIC Reporting and Recordkeeping Burden Hours ............................................................................................... 3,595,075 

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 

services, and for other purposes. 

Background 

Ninety-two letters and electronic mail 

messages of comment were submitted 

on the interim rule during the comment 

period, from 37 WIC-authorized 

vendors; 22 WIC local agencies; 13 WIC 

State agencies; 8 members of Congress 

(in one joint letter); 5 retailer advocacy 

organizations; 5 social service advocacy 

organizations; 4 law firms representing 

WIC-authorized vendors; 3 general 

public individuals; and 2 non-WIC State 

agencies. Many of these comment letters 

and electronic mail messages addressed 

multiple issues. 

1. Definitions of ‘‘Above-50-Percent 

Vendor’’ and ‘‘Food Sales’’ (§ 246.2) 

Definition of ‘‘Above-50-Percent 

Vendor’’ 

Section 246.2 of the interim rule 

defined ‘‘Above-50-percent vendors’’ as 

referring to vendors that derive more 

than 50 percent of their annual food 

sales revenue from WIC food 

instruments, and new vendor applicants 

expected to meet this criterion under 

guidelines approved by FNS. Two 

commenters opposed this definition. 

One of these commenters stated that this 

group of vendors should be defined 

based on 70 percent of food sales 

derived from WIC, so small stores and 

convenience stores will not go out of 

business due to the requirement that the 

redemption amounts of above-50- 

percent vendors must be comparable to 

the redemption amounts of chain stores, 

potentially leading to inadequate 

participant access. The other commenter 

stated that the final rule should focus on 

vendors with WIC redemptions close to 

100 percent of their food sales since 

these are the vendors which have 

proven to be so costly, not small 

vendors with a regular retail vendor 

business model who serve a high 

percentage of WIC participants in lowincome areas. 

The definition of ‘‘above-50-percent 

vendor’’ is based on a legislative 

requirement in section 17(h)(11)(D)(ii)(I) 

of the CNA, i.e., vendors with more than 

50 percent of annual food sales revenue 

derived from WIC sales. Therefore, this 

definition remains as set forth in the 

interim rule. 

Definition of ‘‘Food Sales’’ 

Three commenters opposed the 

definition of ‘‘food sales’’ in § 246.2 of 

the interim rule as referring to all SNAPeligible foods. One of these commenters 

stated that ‘‘food sales’’ as defined in the 

interim rule cannot be easily verified by 

many stores because their scanners 

cannot identify SNAP-eligible food or, if 

they do, they cannot tally the amounts 

and that federal tax forms and other 

documentation maintained by the 

vendors do not show the sales based on 

SNAP-eligible foods. Another 

commenter asserted that State tax forms 

in one State were not helpful for 

determining above-50-percent status 

because these forms do not require a 

total sales amount from which taxable 

non-food sales could be subtracted to 

result in an estimate of food sales, and 

some foods are taxable; therefore this 

commenter stated that a vendor should 

be defined as an above-50-percent 

vendor based on total sales, not total 

food sales. One other commenter stated 

that there is no universal definition of 

‘‘food sales,’’ resulting in WIC State 

agencies using a variety of conflicting 

approaches with disparate results. This 

commenter argued that State agencies 

should be allowed to accept selfdeclaration of vendors with legal 

penalties for inaccuracy, instead of 

imposing burdensome data collection 

processes on vendors. 

However, section 17(h)(11)(D)(ii)(I) of 

the CNA identifies above-50-percent 

vendors based on more than 50 percent 

of annual revenue from the sale of food 

items for WIC food instruments, not 

food and all other items. Thus the final 

rule cannot permit total sales instead of 

total food sales as the basis for 

identifying above-50-percent vendors. 

Also, self-declaration would generally 

not serve as a proper basis for 

compliance with this provision of the 

CNA, since self-declaration would be an 

opinion, not objective data. Therefore, 


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51752 Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 

the definition of ‘‘food sales’’ remains as 

set forth in the interim rule. 

2. Assessment of Above-50-Percent 

Vendor Status (§ 246.12(g)(4)(i)) 

Methodologies for Determining the 

Above-50-Percent Status of Vendor 

Applicants 

Three commenters objected to the 

statement at 70 FR 71715 of the 

preamble of the interim rule that State 

agencies must review invoices as one of 

the steps needed to determine the 

above-50-percent status of vendor 

applicants. These commenters view this 

requirement as unduly burdensome, 

recommending instead that State 

agencies be permitted to review stock 

for this purpose during the preauthorization visit or at some other 

time, and to consider the history of the 

vendor. One of these commenters also 

stated that a review of invoices might be 

misleading because the State agency has 

no way of knowing if it has received all 

of a vendor’s invoices. FNS agrees with 

the commenters that a review of 

invoices should not be required. 

Instead, the State agency should have 

the option to rely only on a review of 

stock at the preauthorization visit, as 

recommended by the commenters, or 

even to use both methodologies. 

Accordingly, new paragraphs 

246.12(g)(4)(i)(E) and (g)(4)(i)(F) have 

been established in the final rule to set 

forth the required methodologies, 

previously discussed in the preamble to 

the interim rule and in FNS guidance, 

for determining the above-50-percent 

status of vendor applicants and current 

vendors, including the other 

methodologies set forth at 70 FR 71715 

of the preamble of the interim rule, but 

including the review of invoices only as 

one option. Also, a reference to these 

two new paragraphs has been added to 

the second sentence of paragraph 

246.12(g)(4)(i). 

Timing of Determinations of Above-50- 

Percent Status 

One commenter would prefer to 

conduct the annual review of the above50-percent status of its vendors at their 

individual annual agreement renewal 

dates rather than reviewing all of them 

at the same time once a year. Like many 

State agencies, this State agency 

processes vendor applications for 

authorization on an ongoing basis. 

Paragraph 246.12(g)(4)(i) of the interim 

rule stated that each State agency must 

annually implement procedures 

approved by FNS to identify authorized 

vendors and vendor applicants as either 

above-50-percent vendors or regular 

vendors. The definition of the term 

‘‘above-50-percent vendor’’ in § 246.2 of 

the interim rule refers to vendors that 

derive more than 50 percent of their 

annual food sales revenue from WIC 

food instruments, and new vendor 

applicants expected to meet this 

criterion. These provisions did not 

specify that a State agency must make 

this determination for all vendors at the 

same time. Thus, under these 

provisions, FNS may approve 

procedures which permit a State agency 

to conduct the annual review of the 

above-50-percent status of its vendors at 

their individual annual agreement 

renewal dates. These provisions remain 

unchanged in the final rule. 

Assessment of Above-50-Percent Status 

of Pharmacies 

Three commenters recommended 

greater discretion for State agencies to 

exclude pharmacies from above-50- 

percent status. One of these commenters 

stated that pharmacies generally do not 

meet the above-50-percent vendor 

definition and thus the expenditure of 

administrative resources is not justified 

to determine their above-50-percent 

status. Another commenter contended 

that it is inconsistent to permit 

exemption of pharmacies which only 

provide exempt infant formula and 

WIC-eligible medical foods, but not if 

these pharmacies also provide contract 

infant formula. One other commenter 

stated that State agencies should be able 

to exempt pharmacies that are 

authorized to provide exempt infant 

formula, even if they also provide 

contract infant formula. 

Paragraph 246.12(g)(4)(iv) states that 

the State agency may except from the 

competitive price criteria and allowable 

reimbursement levels pharmacy vendors 

that supply only exempt infant formula 

and/or WIC-eligible medical foods, and 

non-profit vendors for which more than 

50 percent of their annual revenue from 

food sales consists of revenue derived 

from WIC food instruments. This 

provision is based on section 

17(h)(11)(D) of the CNA, which permits 

an exemption from competitive price 

criteria and allowable reimbursement 

levels for pharmacies that supply only 

exempt infant formula and WIC-eligible 

medical foods, but not for pharmacies 

which also transact food instruments for 

contract infant formula. Therefore, this 

final rule must reflect the requirement 

in the CNA. 

State Agency Choice To Authorize 

Above-50-Percent Vendors 

One commenter recommended a 

statement be added to § 246.12(g)(4)(i) to 

the effect that a State agency may 

choose to not authorize above-50- 

percent vendors. The interim rule 

included the equivalent statement in the 

last sentence of § 246.12(g)(4)(i) and in 

the first sentence of § 246.12(g)(4)(v)(A), 

by referring to State agencies choosing 

or not choosing to authorize above-50- 

percent vendors. This language mirrors 

the language of section 17(h)(11) of the 

CNA, which refers to State agencies 

electing to authorize or not authorize 

above-50-percent vendors. Therefore, 

this final rule adopts the language of the 

interim rule on this subject. 

3. Cost Neutrality Standards and 

Assessment—(§ 246.12(g)(4)(i)(D)) 

Under § 246.12(g)(4)(i)(D) of the 

interim rule, the State agency is 

required to ensure that the prices of 

above-50-percent vendors do not result 

in higher total food costs if program 

participants transact their food 

instruments at above-50-percent 

vendors rather than at other vendors 

that do not meet the above-50-percent 

criterion. (These other vendors were 

referred to as ‘‘regular vendors.’’) The 

State agency must not permit the 

average cost of each type of food 

instrument redeemed by above-50- 

percent vendors to exceed the average 

cost of the same type of food instrument 

redeemed by regular vendors; the State 

agency must compute statewide average 

costs per food instrument at least 

quarterly to monitor compliance with 

this requirement. In addition, 

§ 246.12(g)(4)(i)(D) also requires that the 

average cost per food instrument must 

be weighted to reflect the relative 

proportion of food instruments 

redeemed by each category of vendors 

in the peer group system. 

Under § 246.12(g)(4)(vi) of the interim 

rule, which concerned FNS certification 

of State agency vendor cost containment 

systems, a State agency is required to 

demonstrate to FNS that its competitive 

price criteria and allowable 

reimbursement levels did not result in 

average payments per food instrument 

to above-50-percent vendors that are 

higher than average payments per food 

instrument to comparable vendors that 

are not above-50-percent vendors. The 

commenters who opposed the statewide 

average requirement of 

§ 246.12(g)(4)(i)(D) supported the 

comparable vendor average requirement 

of § 246.12(g)(4)(vi). The term 

‘‘comparable vendor’’ refers to the 

regular vendors which share common 

characteristics or criteria with above-50- 

percent vendors that affect food prices, 

as determined by the State agency, for 

the purpose of applying appropriate 

competitive price criteria to vendors at 

authorization and limiting payments for 

food to competitive levels. 


srobinson on DSKHWCL6B1PROD with RULES
Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 51753 

Twenty-four commenters supported 

the requirement that the average 

redemption amount per food instrument 

for all above-50-percent vendors must 

not exceed the average redemption 

amount per food instrument of all 

regular vendors statewide. Thirty-six 

commenters opposed it. The opponents 

stated that this provision exceeded the 

intent of section 17(h)(11)(A)(i)(III)(bb) 

of the CNA, which requires State 

agencies to establish competitive price 

criteria and allowable reimbursement 

levels which do not result in higher 

food costs if participants transact food 

instruments with above-50-percent 

vendors rather than regular vendors. 

These commenters stated that cost 

neutrality for above-50-percent vendors 

should be based on the peer group 

average per food instrument, not the 

statewide average of all regular vendors 

per food instrument, since the statewide 

average does not take into account 

pricing differences based on location 

(e.g., rural/urban) or type of vendor (e.g., 

large/small/military commissaries/ 

supercenter stores). 

One of these commenters pointed out 

that section 17(h)(11)(A)(i)(III)(bb) of the 

CNA requires that food costs not be 

higher if participants use their food 

instruments with above-50-percent 

vendors than with regular vendors, 

unlike section 17(h)(11)(E) of the CNA, 

which requires that above-50-percent 

vendors not be paid more on average per 

food instrument than comparable 

regular vendors. According to this 

commenter, the absence of the average 

payment per food instrument language 

in section 17(h)(11)(A)(i)(III)(bb) shows 

that Congress intended to permit State 

agencies the discretion to consider 

participant preferences for above-50- 

percent vendors or other factors that 

may affect the different redemption 

levels of above-50-percent vendors in 

comparison to regular vendors. This 

commenter also stated that the final rule 

should include the statement in section 

17(h)(11) of the CNA to the effect that 

the cost containment requirements may 

not be construed to compel a State 

agency to achieve lower food costs if 

participants transact WIC food 

instruments with above-50-percent 

vendors rather than regular vendors. 

FNS does not agree with these 

comments. Section 

17(h)(11)(A)(i)(III)(bb) of the CNA does 

not distinguish between vendors based 

on size or location, and does not 

provide discretion based on participant 

preferences or other factors. Such 

interpretations would undermine the 

point of this provision—that above-50- 

percent vendors must be cost neutral in 

comparison to all other retail vendors. 

Indeed, such interpretations would 

make this provision little different from 

section 17(h)(11)(E), which allows for 

distinctions based on comparability. 

Instead, the CNA requires above-50- 

percent vendors to be cost-neutral with 

respect to both comparable vendors and 

all other retail vendors. Moreover, the 

interim rule did not compel State 

agencies to achieve lower food costs if 

participants transact WIC food 

instruments with above-50-percent 

vendors rather than regular vendors, 

and thus a statement to this effect is not 

needed in the final rule. 

Twelve commenters stated that 

Congress did not intend to put above50-percent vendors out of business. 

However, the purpose of the interim 

rule was not to put above-50-percent 

vendors out of business. Instead, the 

interim rule intended to make above50-percent vendors cost-neutral in 

comparison to regular vendors, both 

with respect to peer groups and all 

regular vendors statewide, as required 

by the CNA. Ensuring the availability of 

funds to serve program participants is 

the paramount consideration. Therefore, 

the cost neutrality standard remains as 

set forth in the interim rule. 

Weighting 

Paragraph 246.12(g)(4)(i)(D) of the 

interim rule required the average cost 

per food instrument to be weighted to 

reflect the relative proportion of food 

instruments redeemed by each category 

of vendors in the peer group system. As 

discussed in the preamble of the interim 

rule, a weighted average enables the 

State agency to take into account the 

frequency with which vendors redeem 

food instruments of varying redemption 

amounts. If a State agency makes more 

payments to vendors that offer the 

lowest prices for WIC foods, a weighted 

average will reflect this fact more than 

a simple average. The weighted average 

correlates with WIC participants’ 

shopping patterns by giving the most 

weight to redemption prices of stores 

with the largest number of WIC 

transactions. However, following 

issuance of the interim rule, FNS issued 

guidance making this requirement 

optional, pending the final rule, to 

prevent any administrative difficulties 

in determining the weighted average 

from interfering with the certification of 

State agency vendor cost containment 

systems as required by the statute. Only 

one State agency has chosen to use 

weighting. 

Seven comments were submitted on 

weighting; three of these comments 

supported the weighting requirement, 

while four opposed it. Two of the 

supporting comments stated that the 

rationale for the weighting requirement, 

as set forth in the preamble of the 

interim rule, was sound. The third 

supporting comment stated that the 

weighting requirement and the adding 

of standard deviations to redemption 

averages would help to avoid price 

adjustments unfairly based only on 

exceeding a simple average. Three of the 

opponents, all State agencies, stated that 

the weighting requirement would 

greatly complicate cost neutrality 

calculations which had already required 

a significant expenditure of 

administrative funds to modify their 

Management Information Systems. 

These three State agencies and one 

other, also an opponent of this 

requirement, stated that weighting 

should be an option, not a mandate. 

FNS agrees with these commenters; 

the use of weighting in cost neutrality 

calculations should be optional, not 

mandatory. This requirement is not 

necessary to implement the cost 

neutrality requirements of the CNA, and 

some State agencies feel it is 

administratively burdensome. However, 

as noted above, one State agency has 

chosen to use weighting. Accordingly, 

weighting has been made optional in 

§ 246.12(g)(4)(i)(D) of the final rule. 

Recoupment and Termination Based on 

Cost Neutrality Assessments 

Paragraph 246.12(g)(4)(i)(D) of the 

interim rule required the State agency to 

conduct quarterly cost neutrality 

assessments to ensure that above-50- 

percent vendors are not paid on average 

per food instrument more than all 

regular vendors statewide. In the event 

that the above-50-percent vendors are 

paid more on average than the regular 

vendors, the State agency had to take 

action to ensure compliance, such as 

adjusting payment levels. This 

provision also states that such action 

may have included recouping excess 

payments and terminating the vendor 

agreements of vendors whose prices are 

least competitive and which are not 

needed to ensure participant access. 

FNS has reconsidered this issue and 

decided that State agencies must not 

recoup monies that were paid to a 

vendor for food instruments redeemed 

within the established maximum 

allowable reimbursement level for that 

vendor, in order to achieve cost 

neutrality. Likewise, since a State 

agency cannot recoup monies paid to a 

vendor for food instruments redeemed 

within the established maximum 

allowable reimbursement level for that 

vendor in order to achieve cost 

neutrality, it follows that a State agency 

may not terminate the vendor agreement 

of a vendor that redeemed food 


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51754 Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 

instruments within the established 

maximum allowable reimbursement 

level for that vendor in order to achieve 

cost neutrality. Accordingly, the abovenoted language in § 246.12(g)(4)(i)(D) of 

the interim rule which referred to the 

recoupment of monies and the 

termination of vendor agreements has 

been deleted in this final rule. 

This does not preclude a State agency 

from making price adjustments to food 

instruments in accordance with 

§ 246.12(h)(3)(viii) of this final rule and 

recouping amounts paid to the vendor 

above the established maximum 

allowable reimbursement level 

applicable to the vendor. This also does 

not preclude a State agency from 

terminating the vendor agreement of a 

vendor for failure to remain pricecompetitive in accordance with 

§ 246.12(h)(3)(viii) of this final rule, i.e., 

for failure to maintain shelf prices at 

levels acceptable for authorization, or 

for failure to submit food instruments 

for redemption within the established 

maximum allowable reimbursement 

level applicable to that vendor. 

Partially-Redeemed Food Instruments 

Fifteen commenters stated that 

partially-redeemed food instruments 

should not be included in cost 

neutrality determinations because 

above-50-percent vendors typically 

redeem all of the supplemental foods 

authorized for a food instrument while 

many regular vendors do not; a vendor 

providing all of the supplemental food 

authorized for a food instrument should 

not be held to a redemption level based 

on food instruments redeemed by other 

vendors for less than all of the 

supplemental food authorized for a food 

instrument. One of these commenters 

stated that State agencies should have 

the discretion to compensate for relative 

rates of partial redemption. FNS agrees 

that State agencies should be able to 

exclude partially-redeemed food 

instruments from the quarterly cost 

neutrality assessments. 

However, the identification of 

partially-redeemed food instruments to 

be excluded must be based on an 

empirical methodology. For example, a 

State agency could exclude a food 

instrument because its purchase price is 

less than the total of the vendor’s least 

expensive food items authorized for that 

food instrument. A sentence has been 

added to § 246.12(g)(4)(i)(D) in the final 

rule to allow a State agency to exclude 

partially-redeemed food instruments 

from a quarterly cost neutrality 

assessment if FNS approves the State 

agency’s empirical methodology for 

identifying the partially-redeemed food 

instruments to be excluded. 

Another sentence has been added to 

§ 246.12(g)(4)(i)(D) in the final rule to 

clarify that a State agency may not 

exclude food instruments from the 

quarterly cost neutrality assessment 

based on a rate of partially-redeemed 

food instruments. A rate of partiallyredeemed food instruments, such as a 

percentage of food instruments with the 

lowest purchase prices, might include 

food instruments which reflect a 

vendor’s lower prices instead of partial 

redemptions. Also, a definition of 

‘‘partially-redeemed food instrument’’ 

has been added to the definitions in 

§ 246.2 to ensure there is a clear 

understanding of the meaning of this 

term. 

Other Cost Neutrality 

One commenter recommended that 

State agencies be permitted to review no 

more than 80 percent of the most 

commonly used food instruments to 

determine cost neutrality, excluding 

food instruments which are not 

redeemed very often. However, the CNA 

does not provide that a food instrument 

may be excluded from cost neutrality 

requirements based on how often food 

instruments for the same authorized 

supplemental foods are redeemed. 

Another commenter stated that a State 

agency should be able to assess overall 

cost neutrality without the redemptions 

of competitively priced as well as 

noncompetitively priced above-50- 

percent vendors needed for participant 

access. FNS does not agree. The 

exclusion of the redemptions of 

noncompetitively priced above-50- 

percent vendors needed for participant 

access is intended to prevent the high 

prices of these above-50-percent 

vendors from jeopardizing the State 

agency’s efforts to achieve overall cost 

neutrality, given these State agencies 

have little choice but to authorize these 

vendors. Since the prices of 

competitively priced above-50-percent 

vendors would not jeopardize the State 

agency’s efforts to achieve overall cost 

neutrality, there is no reason for the 

exclusion of their prices, even though 

these vendors were needed for 

participant access. 

Finally, two commenters 

recommended that quarterly cost 

neutrality assessments should not be 

required for State agencies which 

establish maximum allowable 

reimbursement levels for above-50- 

percent vendors based on the statewide 

average redemption amount of regular 

vendors per food instrument type. FNS 

does not agree, since the quarterly 

review mechanism would be needed to 

ensure this process is working 

effectively. 

Exemption From Cost Neutrality 

Requirements 

One commenter stated that a State 

agency should be granted an exemption 

from the cost neutrality requirements if 

the redemptions of above-50-percent 

vendors comprise less than five percent 

of total WIC redemptions, as long as the 

State agency has implemented 

measurable competitive pricing criteria 

and allowable reimbursement levels. 

Paragraph 246.12(g)(4)(v) states that a 

State agency may use a vendor cost 

containment approach other than a peer 

group system if the State agency 

determines that food instruments 

redeemed by above-50-percent vendors 

comprise less than five percent of the 

total WIC redemptions in the State in 

the fiscal year prior to a fiscal year in 

which the exemption is effective, and 

the State agency’s alternative vendor 

cost containment system would be as 

effective as a peer group system and 

would not result in higher costs if 

program participants redeem food 

instruments at above-50-percent 

vendors rather than at regular vendors. 

(This provision also permits an 

exemption from peer group 

requirements for a State agency which 

chooses not to authorize above-50- 

percent vendors and meets certain other 

conditions.) 

This provision is based on section 

17(h)(11)(A)(ii) of the CNA, which 

permits an exemption from the peer 

group requirements if less than five 

percent of total WIC redemptions 

consist of above-50-percent vendor 

redemptions, and for other reasons. The 

CNA does not provide for exemptions 

from the cost neutrality requirements for 

above-50-percent vendors. This rule 

cannot establish an exemption from the 

cost neutrality requirements which is 

not permitted by the CNA. 

4. Shelf Price Collection— 

(§ 246.12(g)(4)(ii)(B)) 

Paragraph 246.12(g)(4)(ii)(B) of the 

interim rule required the State agency to 

collect and monitor each vendor’s shelf 

prices at least once every six months 

following authorization. FNS 

established this requirement to help 

State agencies to ensure the shelf prices 

of above-50-percent vendors do not 

exceed those of regular vendors at 

authorization, and to establish 

reimbursement levels for above-50- 

percent vendors, as required by 

§ 246.12(g)(4)(i)(C); to ensure the State 

agency has sufficient data to assess the 

effectiveness of peer groups and 

competitive price criteria every three 

years, and to change a vendor’s peer 

group placement when warranted, as 


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Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 51755 

required by § 246.12(g)(4)(ii)(C); and to 

ensure vendors have not, subsequent to 

authorization, raised their shelf prices to 

a level that would exceed the 

competitive price selection criteria 

under which they were authorized, 

contrary to § 246.12(g)(4)(iii). Otherwise, 

State agencies would need to rely on 

redemption data alone to fulfill these 

requirements. 

Two commenters supported the 

semiannual price collection 

requirement, but on the condition that 

this would not involve an 

administrative burden for vendors. Four 

commenters opposed this requirement. 

The opponents stated that comparing 

prices to redemptions semiannually is 

not useful and is burdensome. They 

stated that State agencies should be 

permitted to use other methodologies, 

such as comparing the redemption 

amounts of vendors in the same peer 

group, to ensure vendor shelf prices are 

appropriate. One of these commenters, a 

State agency, bases its competitive price 

criteria and maximum allowable 

reimbursement levels for above-50- 

percent vendors on the statewide 

redemption averages per food 

instrument type of the regular vendors, 

and thus states that § 246.12(g)(4)(i)(C) 

should be revised to provide State 

agencies with flexibility regarding the 

evaluation of the shelf prices of above50-percent vendors as long as cost 

neutrality is achieved. 

Another commenter stated that FNS 

should grant an exemption from the 

semiannual price collection requirement 

to a State agency using an efficient and 

effective alternative methodology for 

monitoring compliance with 

§§ 246.12(g)(4)(i)(C), (g)(4)(ii)(C), and 

(g)(4)(iii), and that collection of shelf 

prices should be required annually 

instead of every six months. FNS agrees 

that an exemption process should be 

available and has added this to 

§ 246.12(g)(4)(ii)(B). 

However, although a State agency 

may be able to demonstrate that an 

alternative monitoring process provides 

an efficient and effective means to 

ensure such compliance with 

§§ 246.12(g)(4)(i)(C), (g)(4)(ii)(C), and 

(g)(4)(iii), frequent collection of shelf 

prices may be needed for other reasons. 

Shelf price data collected at least 

semiannually may provide the only 

empirical basis for detecting and 

excluding partial redemptions from cost 

neutrality calculations. Further, some 

State agencies establish maximum 

allowable reimbursement levels based 

on shelf prices; such State agencies 

would also need frequent shelf price 

data. Thus such State agencies would 

probably not be eligible for an 

exemption on the basis that the frequent 

collection of price data is not needed. 

Accordingly, the requirement in 

§ 246.12(g)(4)(ii)(B) for State agencies to 

collect vendor shelf prices at least once 

every six months has been modified in 

the final rule to provide that FNS may 

grant an exemption from this 

requirement if a State agency 

demonstrates that its alternative 

methodology for monitoring vendor 

compliance with §§ 246.12(g)(4)(i)(C), 

(g)(4)(ii)(C), and (g)(4)(iii) is efficient 

and effective and if other State agency 

policies and procedures are not 

dependent on frequent collection of 

shelf price data. This exemption will 

remain in effect until the State agency 

no longer meets the conditions on 

which the exemption was based, until 

FNS revokes the exemption, or for three 

years, whichever occurs first. 

5. Miscellaneous Issues Regarding 

Competitive Price Criteria and 

Maximum Allowable Reimbursement 

Levels—(§ 246.12(g)(4), (g)(4)(i)(D), 

(g)(4)(iii), and § 246.12(h)(3)(viii)) 

Six comments addressed a variety of 

issues and provisions of the interim rule 

concerning competitive price criteria 

and maximum allowable reimbursement 

levels. 

Undercharges 

One commenter stated that 

undercharges on the redemption 

amounts of food instruments should be 

subtracted from the vendor’s 

redemption amounts on other food 

instruments which exceed maximum 

allowable amounts. However, this 

would be inconsistent with the 

definition of ‘‘price adjustment’’ in 

§ 246.2, which refers to an adjustment to 

the purchase price on a food instrument, 

not on a group of food instruments. 

Moreover, an undercharge on a food 

instrument may indicate only that the 

prices charged for the food items 

covered by that food instrument 

resulted in a combined price which was 

within the maximum allowable 

reimbursement level for that food 

instrument. This is not truly an 

undercharge, since a maximum 

allowable reimbursement level is not 

the expected purchase price; rather, it is 

expected that the purchase price should 

be lower since the maximum allowable 

reimbursement level is the maximum 

amount which the State agency will pay 

for that food instrument. Thus, the 

submission of a food instrument with a 

purchase price below the maximum 

allowed amount does not offset the 

submission of another food instrument 

with a purchase price exceeding the 

maximum allowed amount. 

Category Pricing 

Two commenters objected to 

‘‘category pricing,’’ i.e., a State agency 

establishing a price limit or maximum 

allowable reimbursement level for an 

entire food category, such as cereal, 

instead of allowing for the different 

prices of the various products within 

that category. One of these commenters 

stated that the State agency must be able 

to inform vendors of the price limit for 

each food product of a food category. 

The other commenter contended that it 

is unfair to require vendors to base their 

prices on a category of food product 

instead of individual food products, 

because this forces the vendors to adjust 

the prices on all of the food products in 

that food category for all customers. 

These commenters want such category 

pricing to be prohibited or limited. 

However, this would infringe on the 

flexibility which FNS wants the State 

agencies to retain. The State agency 

needs the flexibility to balance vendor 

cost containment and fairness to the 

vendor. Some State agencies determine 

the per product price limit by averaging 

the high and low prices for the different 

products of a food product category; 

other State agencies base the per 

product price limit on the highest price 

of the different products of a food 

category. 

Exclusion of Above-50-Percent Vendor 

Prices From Determinations of 

Maximum Allowable Reimbursement 

Levels 

One commenter contended that it is 

unfair to exclude the food prices of 

above-50-percent vendors from the 

determination of peer group maximum 

allowable reimbursement levels. 

However, section 17(h)(11)(A)(i)(III) of 

the CNA clearly requires the State 

agency to distinguish between above-50- 

percent vendors and regular vendors by 

either establishing separate peer groups 

for above-50-percent vendors, or distinct 

competitive price criteria and maximum 

allowable reimbursement levels for 

above-50-percent vendors within a peer 

group which also contains regular 

vendors. Likewise, section 17(h)(11)(E) 

of the CNA states that a State agency 

must demonstrate, in order to obtain 

certification for its vendor cost 

containment system, that the 

competitive price criteria and maximum 

allowable reimbursement levels do not 

result in higher payments per food 

instrument for above-50-percent 

vendors than for regular vendors. To 

comply with these provisions, the food 

prices of above-50-percent vendors must 

not be included in the determination of 

peer group maximum allowable 


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51756 Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 

reimbursement levels. Accordingly, 

unchanged from the interim rule, 

§ 246.12(g)(4)(i)(D) of this final rule 

requires State agencies to ensure the 

prices of above-50-percent vendors do 

not inflate the competitive price criteria 

and allowable reimbursement levels of 

peer groups consisting of both above-50- 

percent and regular vendors. 

Necessity for Maximum Allowable 

Reimbursement Levels When 

Competitive Price Criteria Have Been 

Met 

One commenter stated that the 

redemption amounts of a vendor which 

meets competitive price criteria should 

logically not exceed maximum 

allowable reimbursement levels, and 

thus should not be subject to price 

adjustments. This commenter also 

suggested the use of weighting or 

standard deviations may be more likely 

to result in fair maximum allowable 

reimbursement levels. This commenter 

and one other commenter both viewed 

the price adjustments applied to the 

food instruments of regular vendors as 

excessive. The coordination of 

competitive price criteria and maximum 

allowed amounts is an ongoing process. 

Paragraph 246.12(g)(4)(iii) of the interim 

rule, adopted by this final rule, states 

that the State agency must establish 

procedures to ensure a vendor selected 

for participation in the program does 

not, subsequent to selection, increase 

prices to levels that would make the 

vendor ineligible for authorization. 

Also, § 246.12(h)(3)(viii) states that as 

part of the redemption procedures, the 

State agency must establish and apply 

limits on the amount of reimbursement 

allowed for food instruments based on 

a vendor’s peer group and competitive 

price criteria, and that in setting 

allowable reimbursement levels, the 

State agency may include a factor to 

reflect fluctuations in wholesale prices. 

It does not follow that meeting 

competitive price criteria should 

guarantee that price adjustments need 

not occur. Vendor prices change over 

time, so that maximum allowable 

reimbursement levels will also change 

over time. Per § 246.12(h)(1)(i), vendor 

agreement periods may not exceed three 

years; meeting competitive price criteria 

at the beginning of an agreement period 

does not ensure a vendor will continue 

to do so throughout the agreement 

period. State agencies typically use 

standard deviations or a percentage 

inflator to account for a reasonable 

variation in the prices charged by the 

vendors in the same peer group. FNS 

agrees with the commenter that such 

methods will help to ensure price 

adjustments are fair. 

Maximum Allowable Reimbursement 

Levels That Allow Participants To 

Purchase All of the Prescribed Foods 

One commenter recommended that 

the statement in the preamble of the 

interim rule that a State agency must set 

maximum allowable reimbursement 

levels that allow WIC participants to 

purchase all of the foods prescribed on 

the food instrument from any 

authorized vendor be included in 

§ 246.12(g)(4) and (h)(3)(viii). While 

FNS continues to support this 

statement, there is no need to include it 

in the Federal WIC Regulations. FNS 

believes this statement is self-evident. 

The WIC Program is a nutrition 

program. If the participant cannot 

purchase all of the food authorized by 

a food instrument, then the program’s 

goal of enhancing the nutrition of the 

participant is undermined. 

6. Participant Access Criteria 

(§ 246.12(g)(4)) 

Paragraph 246.12(g)(4) of the interim 

rule stated that in establishing 

competitive price criteria and allowable 

reimbursement levels, the State agency 

must consider participant access by 

geographic area. One commenter 

recommended that FNS revise 

§ 246.12(g)(4) by adding a sentence 

stating that geographic determinations 

regarding participant access must be 

narrowly tailored to ensure that 

participants have reasonable access to 

authorized vendors, including vendors 

offering exempt formula. The 

commenter noted that this added 

statement would better assure 

participant access currently jeopardized 

by redemption difficulties, the stigma 

resulting from redemption difficulties, 

lack of transportation, and difficulties 

encountered by participants attempting 

to obtain exempt formula. The 

commenter suggests above-50-percent 

vendors should be authorized without 

competitive price criteria and maximum 

allowable reimbursement levels since 

these vendors are needed to address 

these forms of inadequate participant 

access. 

FNS does not agree with this 

comment. FNS recognizes that such 

barriers to participation exist. It does 

not follow, however, that authorization 

of above-50-percent vendors is the only 

answer. A State agency may, for 

example, intensify its training and 

monitoring of vendors to reemphasize 

stock requirements and the proper 

handling of food instruments at the cash 

register. Indeed, vendors may be 

terminated per § 246.12(g)(3) or 

sanctioned per § 246.12(l)(2) based on 

such deficiencies. In one innovative 

effort, a State agency contracted with a 

faith-based health and human service 

agency to provide direct distribution of 

supplemental foods to participants 

through eighteen sites in a large city. 

Moreover, the high prices frequently 

charged by above-50-percent vendors 

authorized to ensure participant access 

would reduce the program’s ability to 

provide benefits to participants. Thus 

State agencies should explore all 

alternatives for addressing such 

participant access issues. 

FNS is not aware of a participant 

access problem regarding exempt infant 

formula. Moreover, State agencies need 

not rely on retail food vendors for 

providing exempt infant formula to 

participants; State agencies may 

authorize pharmacies for this purpose, 

and many State agencies do so. Further, 

State agencies may order exempt 

formula from the manufacturer or from 

wholesalers such as, for example, a nonprofit organization which currently 

provides exempt infant formula to 

participants in six States. Therefore, the 

participant access criteria in the final 

rule remains as set forth in the interim 

rule. 

7. The Geographic Requirement for Peer 

Groups (§ 246.12(g)(4)(ii)(A)) 

Paragraph 246.12(g)(4)(ii)(A) of the 

interim rule required State agencies 

include at least two criteria for 

establishing peer groups, one of which 

must be a measure of geography, such 

as metropolitan or other statistical areas 

that form distinct labor and products 

markets, unless the State agency 

receives FNS approval to use a single 

criterion. Four comments addressed this 

requirement; one of these comments 

supported this requirement, two 

opposed it, and one supported it 

conditionally. 

One of the opposing comments 

expressed doubt that geography is a 

reliable indicator of pricing, particularly 

for small vendors, and that the use of 

geographic criteria results in peer 

groups with small numbers of vendors; 

this commenter stated that further study 

is needed. The other opposing 

commenter noted that several studies 

conducted by WIC State agencies have 

shown that geographic location is not a 

key ingredient in pricing. 

The comment conditionally 

supporting the requirement stated that 

the geographic component of peer 

groups should conform to vendor 

pricing zones or commonly accepted 

geographic regions. The comment 

supporting the geographic requirement 

stated that geographic zones alone were 

sufficient for vendor cost containment 

in one State. 


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Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 51757 

FNS is not persuaded that the 

geographic requirement should be 

removed. Further study and experience 

may result in reconsideration of this 

requirement. In the meantime, 

§ 246.12(g)(4)(ii)(A) of the final rule 

provides a mechanism for obtaining an 

exemption from this requirement. Thus 

far, only 10 State agencies have 

requested an exemption from this 

requirement, suggesting most State 

agencies are also not persuaded that the 

geographic requirement should be 

removed. The exemption alternative is 

available for State agencies which learn 

through study or experience that the 

geographic component is not conducive 

for vendor cost containment in their 

circumstances. All 10 of the requests 

which have thus far been made for this 

exemption have been granted. Thus the 

existing exemption mechanism is 

sufficient for ensuring the geographic 

peer group requirement is not imposed 

in inappropriate circumstances. 

Therefore, the geographic requirement 

for peer groups is adopted as final 

without change. 

8. Peer Group Transparency 

(§ 246.12(g)(4)) 

Two commenters stated that the peer 

group process needs to be transparent. 

They stated that State agencies should 

ensure key information is available to 

vendors, including peer group criteria 

and the resulting peer groups, to ensure 

that vendors understand their peer 

groups and can advise the State agency 

if the peer group is inappropriate. One 

of these commenters cited an example 

of a State agency which allegedly had 

not provided this information. 

According to this comment, the State 

agency provided the vendors with a 

description of the peer groups, 

including a listing of the vendor types, 

geographic locations, and number of 

cash registers for each peer group. As 

part of this description, the State agency 

published a chart listing the counties 

included in each geographic area. The 

commenter then contacted the State 

agency for clarification about how the 

geographic areas had been created, 

which had not been published. The 

State agency then explained the basis 

for the geographic areas to the 

commenter. The comment stated that 

this explanation should have been 

published. 

Thus the State agency had published 

the peer group criteria, but had not, in 

the commenter’s opinion, published an 

adequate explanation for the basis of 

one of its criteria. FNS believes this 

State agency’s publication of its peer 

group criteria was adequate, and that 

the State agency should not be required 

to publish explanations for its criteria. 

The State agency is responsible for 

establishing the peer group criteria, 

subject only to FNS approval. The State 

agency needs to inform the vendor of 

the peer group criteria which will 

determine how the State agency 

calculates the maximum allowable 

reimbursement amounts applicable to 

the vendor. FNS encourages State 

agencies to consider the views of 

vendors during the development of such 

criteria, such as in vendor advisory 

councils, but this does not necessarily 

involve publication. State agencies have 

been advising vendors of their peer 

group assignments and the peer group 

criteria, but, for added assurance, a 

sentence has been added to 

§ 246.12(g)(4) in this final rule to state 

that the State agency must inform all 

vendors of the criteria for peer groups, 

and must inform each individual vendor 

of its peer group assignment. 

Providing vendors with a description 

of the peer groups resulting from use of 

the criteria does not include a listing of 

the individual vendor peer group 

assignments. State agencies must not 

share the peer group assignment of a 

vendor with other vendors or their 

representatives or the public, since this 

would violate vendor confidentiality per 

§ 246.26(e). 

9. Administrative Review of Peer Group 

Designation and Above-50-Percent 

Status (§ 246.18(a)(1)(iii)(B)) 

One commenter stated that a vendor 

should be able to appeal peer group 

assignments because a vendor may be 

eligible for different peer groups in a 

State using multiple criteria, e.g., a 

vendor might qualify for one peer group 

based on the number of cash registers, 

and also qualify for another peer group 

based on sales volume; an opportunity 

to appeal would provide the vendor 

with an opportunity to provide 

information ensuring the peer group 

assignment is equitable. FNS agrees. 

Paragraph 246.18(a)(1)(iii)(B) of the 

interim rule stated that the validity or 

appropriateness of the State agency’s 

vendor peer group criteria and the 

criteria used to identify vendors that are 

above-50-percent vendors or comparable 

to above-50-percent vendors are not 

subject to administrative review. 

This provision does not preclude 

administrative review regarding the 

application of the State agency’s peer 

group and above-50-percent vendor 

status criteria to an individual vendor 

when this application of criteria is the 

basis for adverse actions (denial of 

authorization and termination of a 

vendor agreement for cause). For 

example, administrative review of such 

adverse actions could cover whether the 

State agency had considered all of the 

SNAP-eligible food sales documentation 

for the 12-month period used by the 

State agency to determine a vendor’s 

above-50-percent status, or whether the 

State agency had used the correct square 

footage of the store if such criteria is 

used by the State agency to determine 

peer group designations for vendors, 

although such issues would only be 

subject to administrative review under 

the current regulations if the State 

agency had initiated an adverse action 

as a result of the application of this 

criteria. 

A vendor should be able to seek 

administrative review regarding the 

State agency’s peer group assignment or 

above-50-percent vendor status 

determination for that vendor even 

though a vendor has not been denied 

authorization or terminated. The peer 

group assignment and above-50-percent 

vendor status determination play crucial 

roles in the calculation of the maximum 

allowable reimbursement levels applied 

to a vendor, i.e., the level of 

compensation which a vendor will 

receive upon redemption of food 

instruments. Thus the peer group 

assignment and above-50-percent 

vendor status determination have a 

major and immediate economic impact 

on the vendor. Previously, the adverse 

actions subject to administrative review 

included only denials of authorization, 

terminations of vendor agreements for 

cause, disqualifications, and civil 

money penalties and fines. Given the 

economic impact of peer group 

assignments and above-50-percent 

vendor status determinations, these 

actions are included under 

§ 246.18(a)(1)(ii)(C) of this final rule as 

adverse actions by themselves. 

However, given the narrow factual focus 

of such issues, full administrative 

reviews per § 246.18(a)(1)(i) would not 

be necessary; abbreviated administrative 

reviews per § 246.18(a)(1)(ii) would be 

sufficient. 

The peer group assignment and 

above-50-percent vendor status 

determination also play crucial roles in 

the calculation of the competitive price 

levels which will determine whether an 

applicant vendor is eligible for 

authorization under the competitive 

price criteria. Paragraph 

246.18(a)(1)(iii)(A) of the WIC 

regulations states that the validity or 

appropriateness of the State agency’s 

vendor limiting or selection criteria are 

not subject to administrative review. 

Thus administrative review for 

competitive price criteria other than 

peer group assignments and above-50- 

percent vendor status determinations 


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51758 Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 

are also limited to the application of 

such criteria and also have a narrow 

factual focus, such as the percentage or 

number of standard deviations above a 

peer group’s average prices permitted 

for an applicant vendor’s prices in order 

for the vendor to be authorized. 

Therefore, this final rule includes a new 

§ 246.18(a)(1)(ii)(B) which will provide 

abbreviated administrative review for 

appeals concerning the application of 

any competitive price criteria which 

results in the denial of authorization. 

Paragraph 246.12(g)(4)(vii) of the 

interim rule indicated that the 

competitive pricing provisions of 

§ 246.12(g)(4) do not create a private 

right of action based on facts that arise 

from the impact or enforcement of these 

provisions. Paragraph 246.12(g)(4)(vii) 

was not intended to prevent a vendor 

from obtaining administrative review 

concerning the application of a 

competitive price criterion. However, 

the reference to facts that arise from the 

impact or enforcement of the 

competitive price provisions might be 

misinterpreted to prevent such 

administrative review. Thus the 

reference to facts that arise from the 

impact or enforcement of the 

competitive price provisions has been 

removed from § 246.12(g)(4)(vii) of this 

final rule. 

As pointed out above in connection 

with the transparency of peer group 

criteria, State agencies must not share 

the peer group assignment of a vendor 

with other vendors, their representatives 

or the public, since this would violate 

vendor confidentiality per § 246.26(e) of 

the WIC regulations. Thus vendors 

would not be entitled to such 

information as part of the administrative 

review process. 

This final rule also includes 

conforming revisions of § 246.18(a)(1). 

The final rule deletes the application of 

competitive price criteria from 

§ 246.18(a)(1)(i)(A), which previously 

included the application of competitive 

price criteria as subject to full 

administrative review. Additionally, the 

final rule revises the references in 

§ 246.18(a)(1) to paragraphs of 

§ 246.12(g) to correspond with the 

revisions of § 246.12(g) introduced by 

the interim rule and retained in this 

final rule. 

List of Subjects in 7 CFR Part 246 

Food assistance programs, Food 

donations, Grant programs—Social 

programs, Infants and children, 

Maternal and child health, Nutrition 

education, Public assistance programs, 

WIC, Women. 

■ Accordingly, the interim rule 

amending 7 CFR part 246 which was 

published on November 29, 2005 at 70 

FR 71708 is adopted as final with the 

following changes: 

PART 246—SPECIAL SUPPLEMENTAL 

NUTRITION PROGRAM FOR WOMEN, 

INFANTS AND CHILDREN 

■ 1. The authority citation for part 246 

continues to read as follows: 

Authority: 42 U.S.C. 1786. 

■ 2. In § 246.2, add in alphabetical order 

the definition of partially-redeemed 

food instrument, to read as follows: 

§ 246.2 Definitions. 

* * * * * 

Partially-redeemed food instrument 

means a paper food instrument which is 

redeemed for less than all of the 

supplemental foods authorized for that 

food instrument. 

* * * * * 

■ 3. In § 246.12: 

■ a. Paragraph (g)(4) is amended by 

adding a new sentence to the end of the 

introductory text; 

■ b. Paragraph (g)(4)(i), end of the 

second sentence is amended by adding 

the words ‘‘, in accordance with 

paragraphs (g)(4)(i)(E) and (g)(4)(i)(F) of 

this section.’’; 

■ c. Paragraph (g)(4)(i)(D), third 

sentence is amended by revising the 

word ‘‘must’’ to read ‘‘may’’; the fifth 

sentence by removing the words ‘‘, 

recouping excess payments, or 

terminating vendor agreements with 

above-50-percent vendors whose prices 

are least competitive and that are not 

needed to ensure participant access’’; 

and by adding two sentences at the end 

of the paragraph. 

■ d. Add new paragraphs (g)(4)(i)(E) and 

(F); 

■ e. Revise paragraph (g)(4)(ii)(B); and 

■ f. Paragraph (g)(4)(vii) is amended by 

removing the words ‘‘based on facts that 

arise from the impact or enforcement of 

these provisions’’. 

The additions and revision read as 

follows: 

§ 246.12 Food delivery systems. 

* * * * * 

(g) * * * 

(4) * * * The State agency must 

inform all vendors of the criteria for 

peer groups, and must inform each 

individual vendor of its peer group 

assignment. 

(i) * * * 

(E) Must determine whether vendor 

applicants are expected to be above-50- 

percent vendors. The State agency must 

ask vendor applicants whether they 

expect to derive more than 50 percent 

of their annual revenue from the sale of 

food items from transactions involving 

WIC food instruments. This question 

applies whether or not the State agency 

chooses to authorize above-50-percent 

vendors. A vendor who answers in the 

affirmative must be treated as an above50-percent vendor. The State agency 

must further assess a vendor who 

answers in the negative, by first 

calculating WIC redemptions as a 

percent of total food sales in existing 

WIC-authorized stores owned by the 

vendor applicant. Second, the State 

agency must calculate or request from 

the vendor applicant the percentage of 

anticipated food sales by type of 

payment, i.e., cash, Supplemental 

Nutrition Assistance Program, WIC, and 

credit/debit card. Third, the State 

agency must review either the inventory 

invoices for food items, or the actual 

food items present at the 

preauthorization visit required by 

paragraph (g)(5) of this section, or both. 

Fourth, the State agency must determine 

whether WIC authorization is required 

in order for the store to open for 

business. If the vendor would be 

expected to be an above-50-percent 

vendor under any of these criteria, then 

the vendor must be treated as an above50-percent vendor. State agencies may 

use additional data sources and 

methodologies, if approved by FNS. 

(F) Must determine whether a 

currently authorized vendor meets the 

above-50-percent criterion, based on the 

State agency’s calculation of WIC 

redemptions as a percent of the vendor’s 

total foods sales for the same period. If 

WIC redemptions are more than 50 

percent of the total food sales, the 

vendor must be deemed to be an above50-percent vendor. As an initial step in 

identifying above-50-percent vendors, 

the State agency may compare each 

vendor’s WIC redemptions to 

Supplemental Nutrition Assistance 

Program redemptions for the same 

period. If more than one WIC State 

agency authorizes a particular vendor, 

then each State agency must obtain and 

add the WIC redemptions for each State 

agency that authorizes the vendor to 

derive the total WIC redemptions. If 

Supplemental Nutrition Assistance 

Program redemptions exceed WIC 

redemptions, no further assessment is 

required since the vendor would not be 

an above-50-percent vendor. For 

vendors whose WIC redemptions exceed 

their Supplemental Nutrition Assistance 

Program redemptions, or if this 

comparison of redemptions was not 

made, the State agency must obtain from 

these vendors a statement of the total 

amount of revenue derived from the sale 

of foods that could be purchased using 


srobinson on DSKHWCL6B1PROD with RULES
Federal Register / Vol. 74, No. 194 / Thursday October 8, 2009 / Rules and Regulations 51759 

Supplemental Nutrition Assistance 

Program benefits. The State agency must 

also obtain from these vendors 

documentation (such as tax documents 

or other verifiable documentation) to 

support the amount of food sales 

claimed by the vendor. After evaluating 

the documentation received from the 

vendor, the State agency must calculate 

WIC redemptions as a percent of total 

food sales and classify the vendor as 

meeting or not meeting the above-50- 

percent criterion. State agencies may 

use additional methods, if approved by 

FNS. 

(ii) * * * 

(B) Routine collection of vendor shelf 

prices at least every six months 

following authorization to monitor 

vendor compliance with paragraphs 

(g)(4)(i)(C), (g)(4)(ii)(C), and (g)(4)(iii) of 

this section and to ensure State agency 

policies and procedures dependent on 

shelf price data are efficient and 

effective. FNS may grant an exemption 

from this shelf price collection 

requirement if the State agency 

demonstrates to FNSs’ satisfaction that 

an alternative methodology for 

monitoring vendor compliance with 

paragraphs (g)(4)(i)(C), (g)(4)(ii)(C), and 

(g)(4)(iii) of this section is efficient and 

effective and other State agency policies 

and procedures are not dependent on 

frequent collection of shelf price data. 

Such exemption would remain in effect 

until the State agency no longer meets 

the conditions on which the exemption 

was based, until FNS revokes the 

exemption, or for three years, whichever 

occurs first; 

* * * * * 

■ 4. In § 246.18: 

■ a. Revise paragraph (a)(1)(i)(A); 

■ b. Paragraph (a)(1)(ii)(A) is amended 

by revising ‘‘(§ 246.12(g)(3)(iii) and 

(g)(3)(iv))’’ to read ‘‘(§ 246.12(g)(3)(ii) 

and (g)(3)(iii))’’; 

■ c. Redesignate paragraphs (a)(1)(ii)(B) 

through (a)(1)(ii)(J) as paragraphs 

(a)(1)(ii)(D) through (a)(1)(ii)(L), and add 

new paragraphs (a)(1)(ii)(B) and 

(a)(1)(ii)(C). 

■ d. In newly redesignated paragraph 

(a)(1)(ii)(F), revise ‘‘§ 246.12(g)(7)’’ to 

read ‘‘§ 246.12(g)(8)’’; 

■ e. Revise paragraphs (a)(1)(iii)(A) and 

(a)(1)(iii)(B). 

The revisions and additions read as 

follows: 

§ 246.18 Administrative review of State 

agency actions. 

(a) * * * 

(1) * * * 

(i) * * * 

(A) Denial of authorization based on 

the application of the vendor selection 

criteria for minimum variety and 

quantity of authorized supplemental 

foods (§ 246.12(g)(3)(i)), or on a 

determination that the vendor is 

attempting to circumvent a sanction 

(§ 246.12(g)(6)); 

* * * * * 

(ii) * * * 

(B) Denial of authorization based on 

the application of the vendor selection 

criteria for competitive price 

(§ 246.12(g)(4)); 

(C) The application of the State 

agency’s vendor peer group criteria and 

the criteria used to identify vendors that 

are above-50-percent vendors or 

comparable to above-50-percent 

vendors; 

* * * * * 

(iii) * * * 

(A) The validity or appropriateness of 

the State agency’s vendor limiting 

criteria (§ 246.12(g)(2)) or vendor 

selection criteria for minimum variety 

and quantity of supplemental foods, 

business integrity, and current 

Supplemental Nutrition Assistance 

Program disqualification or civil money 

penalty for hardship (§ 246.12(g)(3)); 

(B) The validity or appropriateness of 

the State agency’s selection criteria for 

competitive price (§ 246.12(g)(4)), 

including, but not limited to, vendor 

peer group criteria and the criteria used 

to identify vendors that are above-50- 

percent vendors or comparable to above50-percent vendors; 

* * * * * 

Dated: September 30, 2009. 

Kevin W. Concannon, 

Under Secretary for Food, Nutrition, and 

Consumer Services. 

[FR Doc. E9–24143 Filed 10–7–09; 8:45 am] 

BILLING CODE 3410–30–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 25 

[Docket No. NM403; Special Conditions No. 

25–385–SC] 

Special Conditions: Boeing Model 747– 

8/–8F Airplanes, Structural Design 

Requirements for Four-Post Main 

Landing Gear System 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final special conditions. 

SUMMARY: These special conditions are 

issued for the Boeing Model 747–8/–8F 

airplane. This airplane will have novel 

or unusual design features associated 

with a four-post main landing gear 

system. The applicable airworthiness 

regulations do not contain adequate or 

appropriate safety standards for this 

design feature. These special conditions 

contain the additional safety standards 

that the Administrator considers 

necessary to establish a level of safety 

equivalent to that established by the 

existing airworthiness standards. 

DATES: Effective Date: November 9, 

2009. 

FOR FURTHER INFORMATION CONTACT: 

Mark Freisthler, FAA, Airframe & Cabin 

Safety Branch, ANM–115, Transport 

Airplane Directorate, Aircraft 

Certification Service, 1601 Lind 

Avenue, SW., Renton, Washington 

98057–3356; telephone (425) 227–1119; 

facsimile (425) 227–1149. 

SUPPLEMENTARY INFORMATION: 

Background 

On November 4, 2005, The Boeing 

Company, P.O. Box 3707, Seattle, WA 

98124, applied for an amendment to 

Type Certificate Number A20WE to 

include the new Model 747–8 passenger 

airplane and the new Model 747–8F 

freighter airplane. The Model 747–8 and 

the Model 747–8F are derivatives of the 

747–400 and the 747–400F, 

respectively. Both the Model 747–8 and 

the Model 747–8F are four-engine jet 

transport airplanes that will have a 

maximum takeoff weight of 970,000 

pounds and new General Electric GEnx– 

2B67 engines. The Model 747–8 will 

have two flight crew and the capacity to 

carry 660 passengers. The Model 747– 

8F will have two flight crew and a zero 

passenger capacity, although Boeing has 

submitted a petition for exemption to 

allow the carriage of supernumeraries. 

Type Certification Basis 

Under the provisions of 14 CFR 

21.101, Boeing must show that the 

Model 747–8 and 747–8F (hereafter 

referred as 747–8/–8F) meet the 

applicable provisions of part 25, as 

amended by Amendments 25–1 through 

25–117, except for earlier amendments 

as agreed upon by the FAA. These 

regulations will be incorporated into 

Type Certificate No. A20WE after type 

certification approval of the 747–8/–8F. 

In addition, the certification basis 

includes other regulations, special 

conditions and exemptions that are not 

relevant to these special conditions. 

Type Certificate No. A20WE will be 

updated to include a complete 

description of the certification basis for 

these model airplanes. 

If the Administrator finds that the 

applicable airworthiness regulations 

(i.e., 14 CFR part 25) do not contain 

adequate or appropriate safety standards 

for the 747–8/–8F because of a novel or 


srobinson on DSKHWCL6B1PROD with RULES