This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

38343

Vol. 63, No. 136

Thursday, July 16, 1998

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 246

RIN 0584–AC55

Special Supplemental Nutrition

Program for Women, Infants and

Children (WIC): Requirements for and

Evaluation of WIC Program Requests

for Bids for Infant Formula Rebate

Contracts

AGENCY: Food and Nutrition Service,

USDA.

ACTION: Proposed rule.

SUMMARY: At the time the current cost

containment regulations were published

in 1989, there were only minor

differences in infant formula wholesale

prices and few differences in types of

infant formulas offered by

manufacturers, i.e., milk-and soy-based

infant formula. However, current

wholesale prices vary considerably

among manufacturers for similar

formulas and several new infant

formulas have emerged on the market

over the last decade. Therefore, to

reflect market changes in the infant

formula industry and to optimize

competition in the WIC Program’s infant

formula rebate contracts, this proposed

rule would require WIC State agencies

to award infant formula rebate contracts

based on the lowest net price, allowing

highest gross rebate as a basis of award

only when retail prices of the different

brands of infant formula vary, on

average, by 5 percent or less.

Additionally, this proposed rule would

define the types and forms of infant

formula that must be included in cost

containment systems. It would also

expand on conditions that must be met

for the issuance of infant formulas not

covered by rebate contracts.

DATES: To be assured of consideration,

written comments on this rule must be

received on or before September 14,

1998.

ADDRESSES: Comments may be mailed to

Ronald J. Vogel, Acting Director,

Supplemental Food Programs Division,

Food and Nutrition Service, USDA,

3101 Park Center Drive, Room 540,

Alexandria, Virginia 22302, (703) 305–

2746. All written comments will be

available for public inspection during

regular business hours (8:30 a.m.–5:00

p.m., Monday through Friday) at the

above address.

FOR FURTHER INFORMATION CONTACT:

Deborah McIntosh, Chief, Program

Analysis and Monitoring Branch,

Supplemental Food Programs Division,

Food and Nutrition Service, USDA,

phone number (703) 305–2710.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been reviewed by the

Office of Management and Budget, and

has been determined to be economically

significant under Executive Order

12866, and major under the Small

Business Regulatory Enforcement

Fairness Act of 1996 (5 U.S.C. Chapter

8).

Regulatory Flexibility Act

This rule has been reviewed with

regard to the requirements of the

Regulatory Flexibility Act (5 U.S.C.

601–612). Shirley R. Watkins, Under

Secretary, Food, Nutrition and

Consumer Services, has certified that

this rule will not have a significant

economic impact on a substantial

number of small entities. This rule, if

implemented, will help ensure that WIC

State agencies will be able to serve the

maximum number of eligible applicants

possible within their grant levels

provided by the Federal government by

removing current regulatory ambiguities

that have resulted in the proliferation of

protests of infant formula rebate

contract awards. This rule further

defines evaluation procedures for WIC

State agencies’ infant formula rebate

contracts. While some WIC local

agencies and WIC vendors may be small

entities, the changes proposed by this

rule will not affect them.

Executive Order 12372

The Special Supplemental Nutrition

Program for Women, Infants and

Children (WIC) is listed in the Catalog

of Federal Domestic Assistance

Programs under No. 10.557. For the

reasons set forth in the final rule in 7

CFR 3015, Subpart V, and related Notice

(48 FR 29115, June 24, 1983), this

program is included in the scope of

Executive Order 12372 which requires

intergovernmental consultation with

State and local officials.

Executive Order 12988

This rule has been reviewed under

Executive Order 12988, Civil Justice

Reform. This rule is intended to have a

preemptive effect with respect to any

State or local laws, regulations, or

policies which conflict with its

provisions or which would otherwise

impede its full implementation. This

rule is not intended to have retroactive

effect unless so specified in the

‘‘Effective Dates’’ paragraph of this

preamble. Prior to any judicial challenge

to the provisions of this rule or the

applications of its provisions, all

applicable administrative procedures

must be exhausted.

Public Law 104–4

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), Pub. L.

104–4, establishes requirements for

Federal agencies to assess the effects of

their regulatory actions on State, local,

and tribal governments and the private

sector. Under section 202 of the UMRA,

the Food and Nutrition Service

generally must prepare a written

statement, including a cost-benefit

analysis, for proposed and final rules

with ‘‘Federal mandates’’ that may

result in expenditures to State, local, or

tribal governments, in the aggregate, or

to the private sector, of $100 million or

more in any one year. When such a

statement is needed for a rule, section

205 of the UMRA generally requires the

Food and Nutrition Service to identify

and consider a reasonable number of

regulatory alternatives and adopt the

least costly, more cost-effective or least

burdensome alternative that achieves

the objectives of the rule.

This rule contains no Federal

mandates (under the regulatory

provisions of Title II of the UMRA) for

State, local, and tribal governments or

the private section of $100 million or

more in any one year. Thus today’s rule

is not subject to the requirements of

sections 202 and 205 of the UMRA.

Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act of 1995, the Food and

Nutrition Service is submitting for
38344 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Proposed Rules

public comment the changes in the

information collection burden that

would result from the adoption of the

proposals in the rule.

Comments are invited on: (a) whether

the proposed collection of information

is necessary for the proper performance

of the functions of the agency, including

whether the information will have

practical utility; (b) the accuracy of the

agency’s estimate of the burden of the

proposed collection of information

including the validity of the

methodology and assumptions used; (c)

ways to enhance the quality, utility and

clarity of the information to be

collected; and (d) ways to minimize the

burden of the collection of information

on those who are to respond, including

through the use of appropriate

automated, electronic, mechanical, or

other technological collection

techniques or other forms of information

technology.

Comments may be sent to Laura

Oliven, Desk Officer, Officer of

Information and Regulatory Affairs,

Office of Management and Budget

(OMB), Washington, D.C. 20503 (a copy

may also be sent to Deborah McIntosh

at the address below). For further

information, or for copies of the

information collection, please contact

Deborah McIntosh, Branch Chief,

Program Analysis and Monitoring

Branch, Supplemental Food Programs

Division, Food and Nutrition Service,

U.S. Department of Agriculture, 3101

Park Center Drive, Room 540,

Alexandria, Virginia 22302–1594.

Comments and recommendations on

the proposed information collection

must be received by September 14,

1998. A comment to OMB is best

assured of having its full effect if OMB

receives it within 30 days of

publication.

Title: WIC Program Regulations.

OMB Number: 0584–0043.

Expiration Date: May 31, 1999.

Type of Request: Revision of a

currently approved collection.

Abstract: This rule proposed would

require documentation from a health

care professional for any infant formula

that is not covered by the State agency’s

infant formula rebate contract. Proposed

documentation would include the

following items: brand name of the

formula prescribed; medical diagnosis

warranting the prescribed formula;

length of time the prescribed formula is

medically required by the participant;

and signature of the health care

professional requesting the formula.

Respondents: Licensed health care

professionals.

Estimated Number of Respondents:

16,000.

Estimated Number of Responses per

Respondent: One.

Estimate of Burden: The proposed

estimates of the reporting burden for

information collections affected by this

rule are detailed below.

Licensed health care professional Respondents Frequ. Hrs/Resp Total Hrs.

Proposed .......................................................................................................................... 16,000 1 0.03 533

Estimated Total Annual Burden on

Respondents: 533 hours.

Background on Infant Formula Cost

Containment

In response to rising food costs in the

1980’s and the desire to use their food

grants more efficiently, several WIC

State agencies initiated infant formula

rebate systems. In these early, voluntary

infant formula rebate systems, a WIC

State agency received rebate payments

from one or more infant formula

manufacturers based on: (1) the number

of cans of their infant formula

purchased with WIC funds by

participants at retail outlets, or (2) the

manufacturer’s overall market share in

the State.

At the time, infant formula

expenditures represented almost 40

percent of all WIC food costs, making

infant formula rebates an important

cost-containment strategy. In fact, in

fiscal year 1988, these rebate savings

amounted to more than $30 million and

grew to about $250 million in fiscal year

1989. Rebate savings escalated to $1.18

billion in fiscal year 1996, allowing the

WIC Program to serve an additional 1.7

million participants. United States

Department of Agriculture (The

Department) figures show that nearly

one out of every four WIC participants

is supported with rebate savings.

Without these savings, millions of lowincome women, infants and children

would not have the advantage of

nutritious supplemental foods, nutrition

education, and health care referrals

provided by the WIC Program.

Legislative Background

Building on the success of voluntary

State infant formula rebate systems,

Public Law 100–460, the Department’s

fiscal year 1989 appropriations act

required all WIC State agencies (except

Indian State agencies with participation

levels under 1,000) to explore the

feasibility of cost-containment measures

for infant formula and implement such

measures where feasible. As a result of

this mandatory legislative requirement,

WIC State agencies with participation

levels over 1,000 implemented infant

formula cost-containment measures,

primarily infant formula rebate systems.

With the passage of the Child Nutrition

and WIC Reauthorization Act of 1989

(section 123(a)(6) of Public Law 101–

147), these cost containment

requirements were made a permanent

program feature. As a result, section

17(h)(8)(A) of the Child Nutrition Act of

1966 (42 U.S.C. 1786(h)(8)(A)) WIC

State agencies are required to

implement a competitive bidding

system for the procurement of infant

formula, or any other infant formula

cost containment measure that yields

savings equal to or greater than savings

generated by a competitive bidding

system. As defined in section 17(b)(17)

of the Child Nutrition Act of 1966 (42

U.S.C. 1786 (b)(17)), competitive

bidding is a process by which a WIC

State agency selects a single source

offering the lowest price, as determined

by the submission of sealed bids, for the

product(s) for which bids are sought.

Since the time when infant formula

cost containment legislation was

enacted, the infant formula industry has

changed considerably. The

manufacturers have changed and

product lines have expanded. The

Department believes that the current

rebate regulations need to be updated to

reflect these changes and should

include provisions which accommodate

future possible market dynamics.

Therefore, this proposed rule addresses

numerous major issues, discussed in

detail below.

Lowest Net Price Cost of Infant Formula

Competition is a critical factor in

achieving the lowest possible price for

infant formula. Without adequate

competition, manufacturers may offer

lower rebate bids and the WIC Program

could experience a substantial increase

in food package costs. It is imperative,

therefore, that fair and open competition

in the awarding of infant formula rebate

contracts be a major policy objective of

the national WIC Program.
Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Proposed Rules 38345

Current program regulations at 7 CFR

section 246.16(k)(1) require WIC State

agencies to evaluate infant formula

rebate bids by one of two methods: (1)

the lowest net wholesale cost, or (2) the

highest rebate offered. However,

because the current wholesale prices for

various brands of infant formula differ

considerably, manufacturers that have a

significantly lower wholesale cost(s) are

effectively placed at a competitive

disadvantage in the bidding process if a

WIC State agency evaluates bids based

on the highest rebate offered. This

competitive disadvantage was addressed

by Congress in Public Law 104–180, the

Department’s fiscal year 1997

agriculture appropriations act and again

in Public Law 105–86, the Department’s

fiscal year 1998 appropriations act. Both

laws require State agencies to award

infant formula rebate contracts on the

basis of the lowest net price, unless the

State agency demonstrates to the

satisfaction of the Secretary that the

weighted average retail price for

different brands of infant formula in the

State does not vary by more than 5

percent. ‘‘Net price’’ is defined in

section 17(b)(20) of the Child Nutrition

Act of 1966 (42 U.S.C. 1786(b)(20)) and

in section 246.2 of the program

regulations as the difference between

the manufacturer’s wholesale price for

infant formula and the rebate level or

the discount offered by the

manufacturer.

When a WIC State agency evaluates

bids based on the lowest net price per

unit, the rebate offered by the

manufacturer is subtracted from the

manufacturer’s wholesale price per unit.

With this evaluation method, the

manufacturer offering the lowest net

price for infant formula wins the bid.

This evaluation method recognizes the

highest discount a manufacturer will

provide.

New Requirement for Evaluating

Rebate Bids

This proposed rule would require in

section 246.16(k)(1)(iv) that WIC State

agencies evaluate bids for infant formula

rebate contracts on the basis of the

lowest net price, with one exception. A

WIC State agency may evaluate the bids

received based on the highest rebate

earned if the WIC State agency

demonstrates to the satisfaction of the

Food and Nutrition Service prior to the

bid solicitation that the weighted

average retail price for different brands

of iron-fortified, milk-based infant

formula in the State vary by 5 percent

or less. The retail price must include

WIC and non-WIC vendors in the State.

In these cases, the retail prices of all

manufacturer’s formulas are comparable

and consequently, highest rebate would

yield approximately the same benefit as

lowest net price.

Vendor Controls

There is concern among some WIC

State agencies that if bids are evaluated

by the lowest net price, the optimal

rebate savings from the bid evaluation

may not be realized by the WIC Program

because the actual cost of infant formula

depends on the vendor’s retail price

charged, less the rebate paid to the WIC

State agency. For example, vendors who

purchase one infant formula at a lower

wholesale price than another do not

invariably pass the savings on to their

customers. As a result, such vendors

charge a retail price for the infant

formula that is approximately the same

as for other formulas regardless of the

wholesale cost. In such instances, the

grocery store earns a larger profit on the

formula with a lower wholesale cost.

Consequently, some or all of the cost

containment advantage of the rebate

savings would be offset by the increased

retail price. State agencies should be

alert to these situations. The Department

reminds State agencies that they may

use WIC food price as a criteria when

authorizing or reauthorizing vendor

participation.

Definitions Pertaining to Infant

Formula

Compliance with the Federal Food,

Drug and Cosmetic Act (FDC Act)

ensures that all infant formulas sold in

the U.S. are safe, effective and properly

labeled. The Food and Drug

Administration (FDA), U.S. Department

of Health and Human Services (DHHS),

is the Federal agency with the exclusive

legal authority to set the standards for

infant formula and to monitor the

production of infant formulas in this

country. This proposed rule would

define infant formula and exempt infant

formula as those terms used in the FDC

Act and the FDA’s implementing

regulations. By cross referencing the

requirements in the FDC Act and

regulations, any changes to these

requirements will automatically apply

to the WIC regulations.

Currently, the FDC Act defines infant

formula as ‘‘a food which purports to be

or is represented for special dietary use

solely as a food for infants by reason of

its simulation of human milk or its

suitability as a complete or partial

substitute for human milk.’’ The FDC

Act defines exempt infant formula as an

‘‘infant formula which is represented

and labeled for use by an infant who (A)

has an inborn error of metabolism, or a

low birth weight, or (B) who otherwise

has an unusual medical or dietary

problem * * *’’ and exempts such

formulas from certain FDC Act

requirements.

Types and Forms of Infant Formula

Subject to Bid Requirement

Section 17(h)(8)(A) of the Child

Nutrition Act of 1966 requires WIC State

agencies to use a competitive bidding

system, or any other system that yields

savings equal or greater, with respect to

the procurement of infant formula.

Current regulations at section 246.16(k)

expand on the law, requiring most WIC

State agencies to ‘‘implement infant

formula cost containment measures for

each of the types and forms of infant

formulas prescribed to the majority of

participants, i.e., milk and soy-based

iron fortified, liquid concentrate

formulas, or whatever other types and

forms of formula routinely prescribed.’’

As a result of the introduction of

various infant formulas to the market,

this proposed rule would clarify and

expand what infant formulas must be

included in each State agency’s cost

containment system.

First, this proposed rule also would

change the basis by which rebate

contracts are evaluated by State

agencies. To simplify the bidding

process, section 246.16(k)(1)(i) will

require that the bid evaluation process

for infant formula rebates use as the

common basis of bids only those offered

for iron-fortified milk-based infant

formula which meet the nutritional

requirements of a Food Package I or II

formula (section 246.10(c)(1)(i) and (2))

and can be routinely issued to the

majority of generally healthy, full-term

infants. However, rebates will be

required for all non-exempt formulas

produced by the manufacturer. While

product lines vary somewhat among

manufacturers, all manufacturers offer

formulas to accommodate infants who

cannot tolerate lactose. Thus, for

bidding purposes, the estimated number

of infants shall include all infants the

State agency expects to participate less

those who are breastfeeding or

prescribed exempt formulas.

This proposed rule would require

each manufacturer awarded a WIC

infant formula rebate contract to pay a

rebate on any infant formula in its

product line that is not an exempt

formula that is issued by the WIC State

agency. This rebate must yield the same

percentage discount on the wholesale

cost as the iron-fortified milk-based

infant formula for which the

manufacturer submitted a winning bid.

For example, if the wholesale price for

the iron-fortified milk-based infant

formula is $2 per can and the rebate is

$1.50 per can (75% of the wholesale
38346 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Proposed Rules

price), the rebate for any other nonexempt infant formula (e.g., soy-based

formula) produced by the winning

manufacturer would be 75 percent of

the respective wholesale price of the

other infant formula issued. The same

infant formulas would be required to be

included in any alternate cost

containment system; the program

regulations at section 246.16(k)(2)

concerning the comparative method of

implementing a cost containment

system would continue to require the

alternative system to cover the identical

types and forms of infant formula as in

the competitive bidding system.

This requirement does not obligate

WIC State agencies to approve or issue

all the types of infant formula covered

in the contract. In fact, State agencies

are encouraged to carefully limit the

issuance of all alternative formulas

under WIC Food Packages I and II to

only those infants who have warranted

nutritional needs that cannot be

appropriately met by the iron-fortified

milk-based infant formula upon which

the bid was submitted. Limiting the

issuance of formulas other than these is

important to WIC State agencies for

several reasons: manageability, ease of

transition to another WIC contract

formula manufacturer that has a

different product line, and WIC vendor

integrity.

Infant Formula Documentation

Requirements

This proposed rule also would revise

existing language in section 246.10

concerning a physician’s determination

of the need for a particular formula and

documentation of that determination.

Current WIC regulations state that a

physician must authorize the issuance

of any formula that does not meet the

requirements of an iron-fortified infant

formula as described in section

246.10(c)(1)(i). Examples of formulas

that do not meet these requirements

include low-iron infant formulas and

many designed to meet the nutritional

needs of infants with documented

medical conditions. Questions have

arisen about whether a medical

prescription is required for

documentation in these instances and

whether someone other than a physician

may make the determination in those

State in which other health care

professionals are authorized to write

medical prescriptions. This proposed

rule would make clear that the

determination of the need for an

alternate formula may be made by any

health care professional authorized by

State law to write medical prescriptions

and that medical documentation must

be issued by that health care

professional before an alternate formula

may be issued by WIC local agencies.

This proposed rule would also

strengthen medical documentation

requirements. First, it would include all

noncontract formulas among those

formulas requiring medical

documentation whether or not they

comply with the requirements of an

iron-fortified infant formula as

described in section 246.10(c)(1)(i). This

addition is intended to appropriately

limit the issuance of noncontract infant

formulas to those cases warranted for

medical reasons so WIC State agencies

can maximize their infant formula

contract rebate savings to serve the

greatest number of needy participants.

Second, the proposed rule would

clarify that all exempt infant formulas

(i.e., those designed for use with infants

who have special dietary needs or

serious medical conditions) must be

supported with medical documentation.

This requirement is not new; however,

because this proposed rule introduces

the term ‘‘exempt infant formula,’’ the

Department believes it will be helpful to

include this new term in connection

with existing medical documentation

requirements.

To summarize the medical

documentation requirements, this

proposed rule would require medical

documentation for all noncontract

infant formula. Medical documentation

would continue to be required for lowiron infant formula and for all exempt

infant formulas.

The Department encourages

comments specifically regarding the

requirement of medical documentation

for all non-contract infant formula.

List of Subjects in 7 CFR Part 246

Administrative practice and

procedure, Civil rights, Food assistance

programs, Food donations, Grant

programs—health, Grant programs—

social programs, Indians, Infants and

children, Maternal and child health,

Nutrition, Nutrition education,

Penalties, Reporting and recordkeeping

requirements, Public assistance

programs, WIC, Women.

PART 246—SPECIAL SUPPLEMENTAL

NUTRITION PROGRAM FOR WOMEN,

INFANTS AND CHILDREN

Accordingly, 7 CFR Part 246 is

proposed to be amended as follows:

1. The authority citation for part 246

continues to read as follows:

Authority: 42 U.S.C. 1786.

2. In section 246.2, the definitions of

Exempt infant formula and Infant

formula are added in alphabetical order

to read as follows:

§ 246.2 Definitions

* * * * *

Exempt infant formula means an

infant formula that meets the

requirements for an exempt formula

under section 412(h) of the Federal

Food, Drug and Cosmetic Act (21 U.S.C.

350a(h)) and the regulations at 21 U.S.C.

Parts 106 and 107.

* * * * *

Infant formula means infant formula

as defined in section 201(z) of the

Federal Food, Drug and Cosmetic Act

(21 U.S.C. 321(z)) and that meets the

requirements for infant formula under

section 412 of the Federal Food, Drug

and Cosmetic Act (21 U.S.C. 321) and

the regulations at 21 U.S.C. Part 106 and

107.

* * * * *

3. In section 246.10:

a. Sentences 1 through 4 in paragraph

(c)(1)(i) are revised.

b. The introductory text in paragraph

(c)(3) is revised.

The revisions read as follows:

§ 246.10 Supplemental foods

* * * * *

(c) * * *

(1) Food Package I—Infants 0

Through 3 Months. (i) Iron-fortified

infant formula, which is a complete

formula not requiring the addition of

any ingredients other than water prior to

being served in a liquid state, and which

contains at least 10 milligrams of iron

per liter of formula at standard dilution

which supplies 67 kilocalories per 100

milliliters; i.e., approximately 20

kilocalories per fluid ounce of formula

at standard dilution. The State agency’s

contract brand of such iron-fortified

formula shall be provided, unless a

licensed health care professional

authorized to write medical

prescriptions under State law

determines that the infant has a medical

condition which dictates the use of

other infant formula including, but not

limited to, medical conditions which

contraindicate the use of iron-fortified

formula, metabolic disorders, inborn

errors of amino acid metabolism,

gastrointestinal disorders,

malabsorption syndromes, and allergies.

Provision of formula, other than the

State agency’s contract brand ironfortified formula, shall be supported

with medical documentation. This

documentation shall be kept in the

participant’s certification file and shall

include the: brand name of the formula

prescribed; medical diagnosis

warranting the prescribed formula;

length of time the prescribed formula is

medically required by the participant;

and signature of the health care
Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Proposed Rules 38347

professional requesting the formula.

Low-calorie formulas may not be

prescribed solely for the purpose of

managing body weight of infants. * * *

* * * * *

(3) Food Package III—Children/

Women with Special Dietary Needs.

Children and women with special

dietary needs may receive the following

supplemental foods if a licensed health

care professional, authorized to write

medical prescriptions under State law,

determines that the participant has a

medical condition which precludes or

restricts the use of conventional foods

and necessitates the use of a formula

including, but not limited to, metabolic

disorders, inborn errors of amino acid

metabolism, gastrointestinal disorders,

malabsorption syndrome and allergies.

The supplemental foods described

below are not authorized solely for the

purpose of enhancing nutrient intake or

managing body weight of children and

women participants. Any formula

issued shall be supported with a

medical documentation. This

documentation shall be kept in the

participant’s certification file and shall

include at a minimum the: brand name

of the formula prescribed; medical

diagnosis warranting the prescription;

length of time the prescribed formula is

medically required by the participant;

and signature of the health care

professional requesting the formula.

* * * * *

4. In section 246.16:

a. The introductory text of paragraph

(k) is revised.

b. Paragraph (k)(1) is revised.

c. The first sentence in paragraph

(k)(2)(i)(A) is revised.

The revisions read as follows:

§ 246.16 Distribution of funds.

* * * * *

(k) Requirements for infant formula

procurement. Unless granted a waiver

under paragraph (l) of this section, all

State agencies with retail food delivery

systems (except Indian State agencies

with 1000 or fewer participants in April

of any fiscal year, which shall be

exempted for the following fiscal year)

shall implement an infant formula cost

containment measure through one of the

two methods cited below:

(1) Single-supplier competitive

method. The single-supplier

competitive method is a solicitation of

sealed competitive bids for rebates from

infant formula manufacturers, as

follows:

(i) Invitations for bids shall be for

each of the forms (e.g., concentrated

liquid, powdered and ready-to-feed) of a

single iron-fortified, milk-based infant

formula that:

(A) Meets the requirements of an ironfortified infant formula as described in

§ 246.10(c)(1)(i);

(B) Can be routinely issued to the

majority of generally healthy, full-term

infants.

(ii) State agencies shall solicit bids

based on an estimated total amount of

infant formula it expects to issue. Such

estimates shall be based on the current

number of infant participants, excluding

those infants exclusively breastfed and

those issued an exempt infant formula.

The estimated total amount of infant

formula shall be expressed in terms of

the proportion of each form of formula

expected to be issued (e.g., concentrated

liquid, powdered and ready-to-feed).

(iii) Invitations for bid and contracts

shall require the manufacturer to pay a

rebate for any nonexempt infant formula

the winning bidder produces that is

issued by the State agency. The rebate

for each of these other infant formulas

shall yield the same percentage discount

on the wholesale cost as the rebate for

the infant formula described in

paragraph (k)(1)(i) of this section.

(iv) State agencies shall award the

contract(s) as follows:

(A) Based on the lowest net price for

the infant formula described in

paragraph (k)(1)(i) of this section; or

(B) Based on the highest rebate,

provided the State agency demonstrates

to the satisfaction of FNS before issuing

the invitation for bids that the weighted

average retail prices for different brands

of infant formula in the State that meet

the requirements of paragraph (k)(1)(i)

of this section vary by 5 percent or less.

The weighted average retail price must

take into account the proportion of each

infant formula the State agency expects

to issue and both authorized food

vendors and stores which do not

participate in the program in the State.

(2) * * *

(i) Food cost savings.

(A) Single Supplier Competitive

System. The State agency shall project

food costs savings in the single-supplier

competitive system based on the net

wholesale price or highest rebate, as

described in paragraph (k)(1)(v)(B) of

this section, the total number of units of

the specified types and forms of infant

formula to be purchased under the

program less the number of units of

alternative brands anticipated to be

prescribed by physicians and purchased

by participants. * * *

* * * * *

Dated: July 10, 1998.

Shirley R. Watkins,

Under Secretary, Food, Nutrition and

Consumer Services.

[FR Doc. 98–18957 Filed 7–15–98; 8:45 am]

BILLING CODE 3410–30–U

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV98–905–3 PR]

Oranges, Grapefruit, Tangerines, and

Tangelos Grown in Florida; Increased

Assessment Rate

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Proposed rule.

SUMMARY: This rule would increase the

assessment rate from $0.0035 to

$0.00385 per 4/5 bushel carton

established for the Citrus

Administrative Committee (Committee)

under Marketing Order No. 905 for the

1998–99 and subsequent fiscal periods.

The Committee is responsible for local

administration of the marketing order

which regulates the handling of citrus

grown in Florida. Authorization to

assess citrus handlers enables the

Committee to incur expenses that are

reasonable and necessary to administer

the program. The fiscal period begins

August 1 and ends July 31. The

assessment rate would remain in effect

indefinitely unless modified,

suspended, or terminated.

DATES: Comments must be received by

August 17, 1998.

ADDRESSES: Interested persons are

invited to submit written comments

concerning this rule. Comments must be

sent to the Docket Clerk, Fruit and

Vegetable Programs, AMS, USDA, room

2525-S, P.O. Box 96456, Washington,

DC 20090–6456; Fax: (202) 205–6632.

Comments should reference the docket

number and the date and page number

of this issue of the Federal Register and

will be available for public inspection in

the Office of the Docket Clerk during

regular business hours.

FOR FURTHER INFORMATION CONTACT:

Doris Jamieson, Southeast Marketing

Field Office, Fruit and Vegetable

Programs, AMS, USDA, P.O. Box 2276,

Winter Haven, FL 33883–2276;

telephone: (941) 299–4770, Fax: (941)

299–5169; or George Kelhart, Technical

Advisor, Marketing Order

Administration Branch, Fruit and

Vegetable Programs, AMS, USDA, room

2525-S, P.O. Box 96456, Washington,

DC 20090–6456; telephone: (202) 720-

2491, Fax: (202) 205–6632. Small

businesses may request information on

compliance with this regulation by

contacting Jay Guerber, Marketing Order

Administration Branch, Fruit and

Vegetable Programs, AMS, USDA, room

2525-S, P.O. Box 96456, Washington,