Taking Administrative Actions Pending Freedom of Information Act (FOIA) Processing
| Published date | 26 August 2020 |
| Citation | 85 FR 52471 |
| Record Number | 2020-18701 |
| Section | Rules and Regulations |
| Court | Food And Nutrition Service |
Federal Register, Volume 85 Issue 166 (Wednesday, August 26, 2020)
[Federal Register Volume 85, Number 166 (Wednesday, August 26, 2020)]
[Rules and Regulations]
[Pages 52471-52479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18701]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 85, No. 166 / Wednesday, August 26, 2020 /
Rules and Regulations
[[Page 52471]]
DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 278 and 279
[FNS-2018-0021]
RIN 0584-AE63
Taking Administrative Actions Pending Freedom of Information Act
(FOIA) Processing
AGENCY: Food and Nutrition Service (FNS), USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule amends the Supplemental Nutrition Assistance
Program (SNAP or Program) regulations to ensure that retail food stores
can no longer use the Freedom of Information Act (FOIA) process to
delay FNS' administrative actions to sanction a retail food store for
SNAP violations. Under this rule, FNS will process FOIA requests and
FOIA appeals separately from the administrative action for all SNAP
violations, as originally proposed. The processing of FOIA requests and
appeals during the administrative and judicial review process will have
no impact on when the agency can take administrative action.
DATES: This rule is effective October 26, 2020 and will apply to any
FOIA request or appeal received by the agency on or after the effective
date.
FOR FURTHER INFORMATION CONTACT: Vicky T. Robinson, Chief, Retailer
Management and Issuance Branch, Retailer Policy and Management, 1320
Braddock Place, Alexandria, Virginia 22314, by phone at 703-305-2476,
or by email at [email protected].
SUPPLEMENTARY INFORMATION:
Background
Current Process
SNAP regulations at 7 CFR 278.6 provide that retailers considered
for a sanction as a result of committing a program violation will be
charged with those violations and have a full opportunity to respond to
FNS prior to FNS' making a final administrative determination and
applying the sanction. After FNS issues a charge letter to the store
with detailed information regarding the nature of the violations, the
firm has 10 days to respond to the charge letter, orally or in writing,
with any information or evidence that explains the activities that led
to the charges outlined in the letter. FNS does not consider a FOIA
action as an official response to the charge letter. However, if a firm
files a FOIA request after receiving a charge letter, FNS currently
interrupts the administrative process, such as issuing a sanction
determination, while the agency responds to the FOIA request. Even if
the firm submits a response to the charge letter in addition to a FOIA
request, FNS delays the review of the firm's charge letter response
until FNS has responded to the FOIA request.
In the event that the firm appeals the agency's FOIA response, FNS
again delays administrative action while it responds to the appeal. The
FOIA requires FNS to provide a response to the initial request within
20 days of receipt. The FOIA also requires FNS to make a determination
with respect to any appeal within 20 days of receipt. FNS is
continually working to improve the time it takes to process FOIA
requests and appeals and to reduce its backlog. Today, however, firms
continue participating in SNAP and redeeming benefits until the FOIA
actions are complete, regardless of the seriousness of the charges
originally outlined in the charge letter or the fact that the firm has
not submitted a formal response to the charges. Once responses to the
FOIA request and FOIA appeal are complete, the agency renews
administrative proceedings by either (a) reviewing the firm's official
response to the charge letter if one has been submitted, or (b) giving
the firm another 10 days to provide an official response.
If the firm's official response provides documentation supporting
its stance relating to the charges outlined in the charge letter, FNS
considers this documentation before issuing a notice of determination.
It is only on the issuance of this notice of determination that FNS may
impose sanctions against a firm.
Holding SNAP administrative actions, particularly the issuance of a
notice of determination, in abeyance throughout the entire FOIA process
has had a serious impact on SNAP integrity because FNS practice has
enabled violating firms to continue to participate in SNAP during the
FOIA process. From Fiscal Year (FY) 2015 to FY 2018, 1,550 SNAP retail
food stores submitted FOIA requests to FNS after receiving a charge
letter. Of those retail food stores, 902 appealed the agency's FOIA
response. These 1,550 firms collectively redeemed over $266 million in
SNAP benefits while the FOIA actions were processed (see Table 1).
Proposed Action
In the Notice of Proposed Rulemaking (NPRM), FNS proposed to amend
SNAP regulations in order to process FOIA requests and FOIA appeals
separately from administrative actions FNS takes against retail food
stores.
Summary of This Final Action
FNS adopts the NPRM as final. This final rule will apply to any
FOIA request or appeal received by the agency on or after the
publication date. In the final rule, FNS amends SNAP regulations in
order to process FOIA requests and appeals separately from
administrative actions while a sanction determination is made. In cases
warranting permanent disqualification, the sanction is effective upon
receipt of the agency determination notice, in accordance with
statutory and regulatory requirements.
This ensures firms that are found to have committed the most
egregious Program violations, such as trafficking, will be removed from
the Program expeditiously, as Congress intended when it amended the
Food and Nutrition Act of 2008 (FNA) to add requirements for permanent
disqualifications to be effective from the date of receipt of the
agency's determination notice.
The agency's issuance of determinations resulting in sanctions of
non-permanent disqualification will become final and take effect 10
days after the firm receives the determination notice, unless the firm
makes a timely request for administrative review. If an administrative
appeal is filed in a non-permanent disqualification case, the final
agency determination--rendered after the administrative review has been
[[Page 52472]]
completed--will take effect 30 days after the date of delivery of the
determination notice to the firm. With the exception of firms
disqualified from the Special Supplemental Nutrition Program for Women,
Infants, and Children (WIC) and reciprocally disqualified from SNAP,
firms found to have violated program rules will continue to be afforded
their full due process opportunities for administrative and judicial
proceedings.
General Summary of Public Comments
During the sixty-day comment period, which ended on April 22, 2019,
FNS received ten public comments in response to the NPRM. Two comments
were from retailer associations that stated they represent small
businesses. Two comments were from public advocacy groups. One comment
was from a State government office and one comment was received from an
independent office within the U.S. Government's Small Business
Administration. Four comments were received from the general public,
and one of these was submitted on behalf of three individuals. All
public comments can be viewed at https://www.regulations.gov/docket?D=FNS-2018-0021.
Three commenters expressed general support for the NPRM and its
intention to make the administrative action process more efficient. Two
of these commenters specifically identified the ability of some
retailers charged with trafficking to continue accepting SNAP benefits
while an administrative action is held in abeyance during the
processing of a FOIA request or appeal as reason alone to promulgate a
rule to separate these two processes. Several commenters opposed to the
NPRM also cited the importance of removing retailers that traffic
benefits, although the commenters did not view the NPRM as a step
towards that general goal.
Seven commenters expressed opposition to the NPRM, primarily
because of concerns about the impact on retailers' right to due
process. Several of these commenters asserted that FNS' current
administrative process makes FOIA necessary, suggesting that FNS'
charge letter does not adequately explain the nature of the charges,
and arguing the NPRM would take away the only available option for
retailers to gain access to the evidence against them prior to being
sanctioned. Some commenters also felt that the agency should release
more records when responding to a FOIA request or during administrative
procedures before judicial review. Some commenters questioned the
validity of FNS' assertions in the NPRM regarding the submission of
extensive and complex FOIA requests, and appeals that repeatedly
request information that has been consistently denied in prior
requests, seemingly with the intention of delaying FNS' determination
to disqualify or impose a civil monetary penalty against the firm.
These commenters stated that FNS must provide a much clearer
explanation, based on actual data, for its decision to separate the
processing of FOIA actions from administrative decision-making is the
correct course of action. Others expressed concern that the NPRM could
create a disparate impact on small businesses, including minority-owned
businesses and the communities they serve. Commenters requested FNS
offer strategies to mitigate these potential impacts.
The comment summary and analysis in this preamble primarily focuses
on general comment themes and those comments were considered in this
final rule.
Analysis of Comments
Charge Letter Content and Due Process Considerations
Several commenters suggested that FNS does not provide sufficient
information regarding violations when charging retailers with such
violations, thereby hampering retailers' due process rights.
When FNS identifies a firm that appears to have violated program
rules, the agency issues a charge letter detailing the suspected
violations, the sanction(s) that may be imposed for these violations,
and the steps the firm must take if it wishes to address the charges
before a determination is made and sanctions go into effect. The
statute directs that the Secretary promulgate regulations outlining the
criteria by which FNS may issue a charge letter on the basis of
evidence that may include facts established through on-site
investigations (an ``investigative case''), inconsistent redemption
data, or evidence obtained through a transaction report under an
electronic benefit transfer system (a ``data case''). Current
regulations at 7 CFR 278.6(b) outline the charge letter process.
A data case is based on transaction data for the firm obtained
through the SNAP Electronic Benefit Transfer (EBT) system and is
analyzed in relation to the firm's business model and operation. For a
data case, the charge letter provides the firm with a list of
transactions that establish a clear and repetitive pattern of unusual,
irregular, or inexplicable activity for the firm's business type. The
charge letter specifies the exact charge as well as the sanction
provided by regulation for that violation. The charge letter also
breaks down the transaction information further by the type of unusual
activity, such as multiple transactions made from the same household
accounts in a set period of time, or transactions for amounts
inconsistent with observed store food stock and firm records. The
information currently provided to the firm in the charge letter
includes:
A description of the unusual activity;
the exact date and time of each transaction;
the terminal ID number for the device used to conduct each
transaction;
the entry method of each transaction (such as ``swipe'' or
``manual key entry of card number'' at the point-of-sale);
the exact amount of each transaction;
the total number of transactions and dollar amount for
each type of unusual activity; and
the last four digits of the household account number
associated with each transaction.
The charge letter also explains the firm's right to respond to the
charges by presenting evidence or explanation for the unusual activity.
The firm must submit this response within 10 days of receiving the
charge letter, and may do so orally or in writing. The charge letter
provides a name and phone number of a specific FNS employee to contact
regarding this action and a mailing address for any documentation that
the firm would like to submit in its defense.
For an investigative case, the charge letter provides the firm with
a redacted copy of the investigator's report. Only information that
would otherwise allow firms to identify undercover investigators is
redacted. The report contains information regarding undercover visits
to the retail food store made by the investigator and describes each
visit in detail. The report indicates:
The number of investigators;
the number of visits;
the start and end dates during which the visits occurred;
the number of visits that resulted in a purchase that
violated SNAP regulations;
the date of the transaction(s);
the exact transaction amount(s);
the amount of SNAP benefits trafficked, if applicable; and
the items purchased using SNAP benefits, and whether the
item was eligible or ineligible.
As with the charge letter for a data case, the investigative charge
letter also
[[Page 52473]]
explains the firm's right to respond to the charges by presenting
evidence or explanation for the transactions that violated SNAP
regulations. The firm must submit its response to the charges within 10
days of receiving the charge letter, and may do so orally or in
writing. The charge letter provides a name and phone number of a
specific FNS employee to contact, and a mailing address for any
documentation that the firm would like to submit in its defense.
The agency disagrees with the assertion that retailers' due process
rights are hampered by a lack of sufficient information regarding
violations provided in a charge letter. When issuing a charge letter,
FNS provides a significant amount of substantial information to a
retail food store in a clear and concise manner. As explained above, a
firm is provided with data identifying exactly which transactions are
violations of SNAP regulations or are suspicious, the basis for FNS'
determination that those transactions are violations of SNAP
regulations or are suspicious, and when those transactions occurred.
Finally, the charge letter explains a firm's opportunity to respond to
the charges by presenting evidence or a rational explanation for those
transactions, should it choose to do so.
FNS carefully considers a firm's response to the charge letter
before issuing a notice of determination. Firms that ultimately receive
an adverse determination are afforded extensive procedural protections
through administrative and judicial review. Such firms may file a
request for administrative appeal within 10 days of the date of
delivery of the notice of determination.
If the agency determination is upheld in administrative review, FNS
issues a final administrative determination informing the firm that the
adverse action will take effect 30 days from the date of delivery of
the notice--unless the firm has been charged with a serious offense
warranting permanent disqualification such as trafficking, in which
case the permanent disqualification is already in effect as required by
statute. The firm is also advised in the final administrative
determination that it has 30 days to avail itself of the judicial
review process by filing a complaint against the United States in
Federal court.
Releasing Records
A few commenters suggested that FNS could address the issue of
lengthy delays in administrative decision-making by simply providing
all of the records related to the charges leveled against a firm in the
charge letter itself, when responding to the FOIA request, or during
administrative review proceedings. As noted above, FNS already provides
extensive data and details regarding suspected violations in the
administrative process.
The FOIA (5 U.S.C. 552) provides the public the right to request
access to records from a Federal agency. Federal agencies are required
to disclose any agency records requested under the FOIA unless they
fall under one of nine exemptions which protect interests such as
personal privacy, national security, and law enforcement. FNS exercises
caution and due diligence when deciding whether to release a record in
response to a FOIA request. For example, 5 U.S.C. 552(b)(7)(E) protects
from disclosure information which ``would disclose techniques and
procedures for law enforcement investigations or prosecutions, or that
would disclose guidelines for law enforcement investigations or
prosecutions if such disclosure could reasonably be expected to risk
circumvention of the law. . . .'' Under this exemption, FNS does not
disclose information that would publicly reveal methods used in
analyzing data or in conducting an on-site investigation, as such
information would make it possible for a retail food store to modify
its activity in the future to avoid detection. Failing to protect this
information from disclosure under FOIA would jeopardize FNS' ability to
identify and investigate firms that are violating program rules.
The release of agency records of such a sensitive nature under
administrative review proceedings would likewise jeopardize the
agency's ability to investigate firms. However, if, after the agency's
findings and ruling, the firm still takes issue with FNS'
determination, judicial review is an available option. Under the
discovery process at judicial review, some of these records may be
released; however, these records are typically released under a
protective order that protects the information from public view. Such a
protective order is not an option available through the administrative
review process or FOIA.
In some instances, when a firm is charged with violations, the firm
requests the SNAP sales of individual stores that are similar to its
store. FNS protects individual retail food store SNAP sales amounts
(i.e., SNAP redemptions) from disclosure under FOIA exemption 4 (5
U.S.C. 552(b)(4)), in accordance with a recent Supreme Court decision
and subsequently issued Department of Justice guidance, both detailed
below. This FOIA exemption protects from disclosure ``trade secrets and
commercial or financial information obtained from a person [that is]
privileged or confidential.''
Government
A decision by the Supreme Court on June 24, 2019, in Food Marketing
Institute v. Argus Leader,\1\ 139 S. Ct. 2356 (2019), addressed this
exemption and the meaning of ``confidential.'' The Court held that,
where commercial or financial information is treated as private by its
owner and provided to the Government under an assurance of privacy, the
information is considered ``confidential'' within the meaning of FOIA
exemption 4. Id. at 2366.
---------------------------------------------------------------------------
\1\ The Food Marketing Institute is a trade group representing
grocery retailers, many of whom accept SNAP benefits, which argued
store-level redemption data should be considered confidential.
---------------------------------------------------------------------------
Following the Supreme Court decision, the Department of Justice
(DOJ) issued guidance \2\ to USDA that the agency will follow when
processing FOIA requests for SNAP data of this nature. The first step
will be for the agency to determine whether the information requested
is customarily kept private or closely-held by the submitter of the
information. If yes, the second step is to determine whether the agency
provided an express or implied assurance of confidentiality when the
information was shared with the Government. If so, the information is
confidential under exemption 4. This information, and other information
provided to the agency by firms, may also fall under FOIA exemptions 3
and 6. These exemptions permit withholding of information prohibited
from disclosure by a Federal statute and when the disclosure would
constitute a clearly unwarranted invasion of personal privacy,
respectively.
---------------------------------------------------------------------------
\2\ Exemption 4 after the Supreme Court's Ruling in Food
Marketing Institute v. Argus Leader Media.
---------------------------------------------------------------------------
Because the Supreme Court has held that individual store data
submitted to the agency is protected by Exemption 4, the agency may not
release such data in response to a FOIA request. See id. at 2363
(noting that such data is provided by individual stores to USDA under a
regulatory provision promising confidentiality and therefore is not
subject to disclosure under Exemption 4).
One commenter suggested revamping FNS' current process of utilizing
Administrative Review Officers (AROs) and replacing them with
Administrative Law Judges (ALJs), with the reasoning that ALJs have
considerably more authority to convene evidentiary hearings and
discovery proceedings.
[[Page 52474]]
Such an organizational change within the Department of Agriculture is
not germane to this rulemaking as it is outside the scope of what was
proposed and has no bearing on the processing of FOIA requests and
appeals. As noted, discovery is a process that is already available to
firms that remain aggrieved by an agency administrative action and
choose to pursue judicial review.
Some commenters expressed concern that providing full access to
records only during discovery proceedings at the judicial review stage
is not a financially viable option for small retail food stores that
are unlikely to pursue court proceedings. Congress recognized the need
for a robust administrative due process when retailers are charged with
program violations, which provides for stores of any size to present
evidence if they disagree with the agency's determination. In most
cases, retailers are allowed to continue accepting SNAP benefits until
after the final administrative determination is rendered, and multiple
opportunities for retailers to rebut charges and administratively
appeal agency determinations are provided by statute and regulation.
The statue is clear, however, that when it comes to serious offenses
warranting permanent disqualification, the disqualification must go
into effect on the date of receipt of the notice of disqualification 7
U.S.C. 2023(a)(18). The FNS administrative due process is aligned with
the FNA, and this rule ensures that the agency is in full compliance
with its statutory mandate to expeditiously remove stores that have
committed serious violations from the Program.
Using FOIA To Delay FNS' Administrative Actions
Some commenters expressed concern with the alleged lack of support
provided in the NPRM regarding FNS' statement that attorneys for some
firms submit extensive and complex FOIA requests and appeals, and
repeatedly request information that has been consistently denied when
requested through FOIA. Commenters questioned FNS' concerns that the
seeming intention of the attorneys was delaying FNS' final
determination to disqualify or impose a civil money penalty against the
respective firm.
As is evident in agency FOIA logs,\3\ a small cadre of attorneys
regularly request FOIA information regarding SNAP firms. These
attorneys often submit standard requests for information on behalf of
one firm, receive a response from FNS protecting particular information
under FOIA exemptions, and subsequently and repeatedly send equivalent
requests on behalf of other firms. By law, the agency is obligated to
respond to each of these FOIA requests individually. Under current
practice, the agency delays the respective administrative action while
responding to each of the FOIA requests. In many instances, these
attorneys go on to file appeals for firm after firm seeking the release
of information that was previously denied under FOIA (e.g., a request
for the name of an undercover investigator or confidential informant),
or information that is of a completely different nature than the
original request. These requests cause unnecessary delays in issuing a
determination notice to the firm, as is evidenced by the data that
follows.
---------------------------------------------------------------------------
\3\ FNS FOIA logs: https://www.fns.usda.gov/foia/electronic-reading-room.
---------------------------------------------------------------------------
From Fiscal Year (FY) 2015 to FY 2018, FNS issued close to 12,000
charge letters. Firms that did not file a FOIA request after receiving
a charge letter had their notice of determination issued, on average,
approximately six weeks later. The 1,550 firms that did file a FOIA
request after receiving a charge letter were able to redeem benefits
for an average of eight weeks before the agency could respond to the
FOIA request. Of those, the 902 firms that then appealed the agency's
FOIA response, however, were able to redeem benefits for an average of
eighty weeks before final action could be taken on their respective
cases.
This final rule will improve program integrity and reduce final
action timeframes significantly by preventing a FOIA request and appeal
from delaying administrative actions and allowing the agency to take
timely action against firms that have been determined to have committed
Program violations. This rule does not affect the right of firms
charged with program violations to request information from FNS through
FOIA and utilize the information provided by the agency in their case.
Mitigating Impact on the Populations Served by Small Retail Food Stores
Who May Be Impacted by This Rule
A few commenters expressed a general concern about the impact that
removing a retail food store from the Program may have on the
population served by that particular store. SNAP regulations provide
for a retail food store to pay a civil monetary penalty (CMP) in lieu
of a time-limited or `term' disqualification sanction when the agency
determines that sanctioning the firm by removing it from the Program
would cause hardship to participants. The charge letter describes this
option and also informs the retailer of the CMP amount it would have to
pay if determined to be eligible.
A hardship CMP generally may not be imposed in lieu of a permanent
disqualification, such as for trafficking benefits. However, in certain
circumstances described in 7 CFR 278.6(i), it is possible for a
trafficking CMP to be imposed in these cases. For example, if the firm
timely submits to FNS substantial evidence that demonstrates that the
firm had established and implemented an effective compliance policy and
program to prevent violations, a CMP, as opposed to permanent
disqualification, may be warranted.
FNS understands the impact that removing an authorized retail food
store for program violations, even temporarily, may have on SNAP
participants. FNS provides ample consideration to SNAP participants'
ability to access and purchase an adequate variety of food items at
other SNAP-authorized retail food stores in an area when making
administrative decisions. Firms impacted by this final rule will be
afforded all of the appropriate considerations described here.
Summary
As outlined in the rule, FNS will not delay administrative actions
based on the receipt of FOIA requests. In cases where a firm submits a
FOIA request, FNS will consider the firm's official response to the
charge letter while simultaneously processing the firm's FOIA request.
On completing the review of the firm's official response to the
charges, FNS will issue a notice of determination. A firm may then
submit additional information in support of its position to FNS or the
court as part of its due process rights under administrative appeal or
judicial review, including information provided by FNS' response to a
FOIA request.
If a firm receives an adverse notice of determination for the most
egregious violations, such as trafficking, the permanent
disqualification sanction shall go into effect on the firm's receipt of
the notice of determination per statute and regulation. In fiscal year
2018, of the 1,555 firms permanently disqualified, 1,552 were
determined to have trafficked in SNAP benefits, two (2) falsified
information, and one (1) was determined to have committed a third-
strike violation warranting permanent disqualification.
Except for firms disqualified from SNAP because they were
disqualified from the Special Supplemental Nutrition Program for Women,
Infants,
[[Page 52475]]
and Children (WIC), which are not subject to administrative review by
SNAP, firms will retain their right to administrative and judicial
review of the determination made, in accordance with 7 CFR part 279. If
a firm receives an adverse notice of determination for non-permanent
disqualification violations, the sanctions outlined in the notice will
be implemented once the firm has exhausted all due process proceedings.
Firms determined to have committed offenses that warrant permanent
disqualification will be permanently disqualified from the Program on
delivery of the notice of determination. Through this final rule a
retail food store's submission of a FOIA request or appeal would have
no impact on when the agency takes administrative action. To clarify
that a FOIA request or FOIA appeal is not a response to a letter of
charges or a request for administrative review of the notice of
determination, and to ensure that any request or appeal for records
under the FOIA does not delay the effective date of the administrative
determination, FNS is amending language at 7 CFR 278.6(p), 279.4(c),
and 279.6(b). Removing retail food stores from the Program at the point
FNS has determined, based on the evidence and a review of a firm's
charge letter response (if provided), that a store engaged in a serious
offense warranting permanent disqualification such as trafficking, is
aligned with the FNA and helps ensure that the Program is conducted
with integrity. Firms sanctioned for less serious, non-permanent
disqualification violations will continue participating in SNAP,
pending the outcome of any due process proceedings.
Procedural Matters
Executive Order 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This final rule has been determined to be significant.
Accordingly, the rule has been reviewed by the Office of Management and
Budget, in conformance with Executive Order 12866.
Executive Order 13771
This final rule is considered neither an E.O. 13771 regulatory
action nor an E.O. 13771 deregulatory action because it results in no
more than de minimis costs.
Regulatory Impact Analysis
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any one
year). USDA does not anticipate this final rule is likely to have an
economic impact of $100 million or more in any one year, and therefore,
does not meet the definition of ``economically significant'' under
Executive Order 12866. The changes in this final rule are not
anticipated to have any impacts on SNAP participation or benefit
issuance; any costs or savings will be as the result of changes that
impact retailers who are subject to sanctions as a result of failure to
comply with the Food and Nutrition Act of 2008, as amended.
Economic Analysis of Processing FOIA Requests and Appeals Separately
From Administrative Actions Against SNAP Retailers
Overview of the Rule
The rule separates the process of disqualifying or imposing fines
on retailers from the process of responding to Freedom of Information
Act (FOIA) requests or appeals made by retailers.
Under current regulations, the process is as follows:
FNS issues a charge letter to a retailer suspected of
violating program rules. The letter describes the transactions that led
to the charges and the possible sanctions that may be imposed as a
result. Sanctions are not actually imposed at this point.
The retailer has 10 days to respond to the charge letter.
FNS examines evidence, including any response from the
retailer, to determine whether the retailer violated program rules. If
FNS determines that the retailer has violated program rules, FNS issues
a notice of determination to the retailer, including a sanction if
applicable.
[cir] For retailers determined to have committed violations
warranting permanent disqualification, including trafficking, the
sanction takes effect on receipt of the notice of determination.
For non-permanent violations, the firm may be temporarily
disqualified and/or pay a fine. These sanctions take effect 10 days
from receipt of the notice of determination, unless a timely request
for an administrative review is filed.
The notice also informs retailers that they have 10 days
to request administrative review. If the case involves a permanent
disqualification, the retailer will be permanently disqualified on
receiving the initial notice of determination and remain so during the
administrative review. If a retailer files such a request in a non-
trafficking case, the sanctions are held in abeyance while the review
is performed. Retailers have the opportunity to provide additional
information in support of their position in administrative review.
FNS then makes a final determination based on the
administrative review. If the retailer was permanently disqualified on
receiving the original notice of determination and remained as such
during administrative review, the permanent disqualification remains in
effect if the final determination sustains the original determination.
If the final determination is that the retailer committed non-permanent
violations, sanctions go into effect 30 days after the final
determination.
Retailers who disagree with FNS' final determination may
then file a complaint against the United States to obtain judicial
review within 30 days. Retailers may submit new information to the
reviewing court.
Retailers considered for disqualification or imposition of a fine,
like any citizen or company, may submit FOIA requests. Under current
practice, when a FOIA request is submitted, FNS' determination to
disqualify or impose a fine against the firm is delayed until the
agency has responded to the FOIA. Retailers may also appeal the
agency's FOIA response; again, under current practice, the
determination is delayed until the appeal is resolved. As noted
elsewhere in the rule, some firms have used the FOIA and FOIA appeals
process to stall the imposition of sanctions. For example, a lawyer who
has handled multiple FOIA requests asks for the exact same information
(such as the name of the investigator) that has been denied repeatedly
in previous requests. As a result, current practice has resulted in a
delay in taking administrative actions against retailers for SNAP
violations. Although the timeframe for making a determination is about
1.4 months when no FOIA request is made, that timeframe is extended,
sometimes for 2 years or longer, when a FOIA/FOIA appeal is requested.
Under the final rule, retailers will no longer be able to use the
FOIA process to delay FNS's administrative actions for SNAP violations.
FNS will no longer
[[Page 52476]]
delay the determination until after the FOIA request is processed. In
instances where violations warrant permanent disqualification, the
permanent disqualification will go into effect immediately on issuance
of the notice of determination. This is in keeping with Congressional
intent as specified at 7 U.S.C. 2023(a)(18). FOIA appeals will continue
to be handled separately and in parallel with administrative due
process remedies that retailers may pursue.
As a result of this change, firms found to have committed program
violations, such as trafficking SNAP benefits, will be removed from the
Program on a timelier basis. Firms that are determined to have
committed program violations may avail themselves of administrative
review and subsequent judicial review; sanctions for non-permanent
violations would be held in abeyance during these additional
proceedings as under current practice.
Expected Impacts
In general, this final rule is expected to result in earlier
implementation of sanctions against firms that violate program rules.
As noted previously, there are no anticipated impacts on SNAP
participation or on SNAP benefit issuance. Between FY 2015 and FY 2018,
1,550 retailers that were charged with a violation submitted a FOIA
request, and more than half (902) submitted a FOIA appeal.\4\ During
the time spent processing the FOIA request, which averaged two months,
these retailers redeemed a total of more than $44.25 million in SNAP.
In addition, firms that submitted FOIA appeals continued to redeem SNAP
benefits, on average, for another 20 months, and redeemed over $222.45
million over the four-year period. In total, more than $266.70 million
was redeemed by stores charged with violations during the time spent
processing FOIA requests and appeals.
---------------------------------------------------------------------------
\4\ USDA administrative data.
---------------------------------------------------------------------------
Under this final rule, these retailers would not be able to use the
FOIA process to delay final adjudication and thereby continue redeeming
benefits. This loss of revenue caused by speedier disqualifications,
and the subsequent inability to accept SNAP benefits, may result in
some of these firms going out of business because of their violations.
Between FY 2015 and FY 2018, 272 retailers that were charged with
non-permanent violations submitted a FOIA request. For these retailers,
sanctions ranged from fines to term disqualification (temporary for a
period of 6 months or more). Under this final rule, those firms would
now see their sanctions implemented sooner than under current practice.
However, because of the small number of retailers involved, the annual
impact of imposing the sanctions earlier will be minor. There will be
no permanent dollar loss of benefits for these retailers as the
sanctions themselves are unchanged. These changes may also result in
fewer retailers submitting FOIA requests/appeals as a delaying tactic,
which will reduce the amount of time the agency devotes to responding
to these requests. As is the case under current rules, SNAP
participants will be able to redeem their benefits at other authorized
retailers. When a firms' non-permanent disqualification would cause a
hardship to SNAP households because of limited food access, FNS may
impose a fine in lieu of the non-permanent disqualification. Therefore,
there is minimal impact on SNAP participants and the overall economy.
There also is no impact on State agencies, as oversight of retailer
operations is a Federal function.
Table 1--FY 2015-FY 2018 FOIA and Benefit Redemption Data for Firms Issued Charge Letters
----------------------------------------------------------------------------------------------------------------
Dollars Dollars
between FOIA between FOIA
Charge letter group and FY FOIA FOIA requests and appeals and
requests appeals agency agency
response response
----------------------------------------------------------------------------------------------------------------
FY15:
Permanent Disqualification........................ 222 105 $10,961,362 $42,000,992
Non-Permanent Disqualification.................... 30 8 3,313,239 3,005,438
FY16:
Permanent Disqualification........................ 288 175 8,283,318 62,570,560
Non-permanent Disqualification.................... 40 18 2,162,874 6,371,363
FY17:
Permanent Disqualification........................ 349 211 10,062,273 47,128,737
Non-permanent Disqualification.................... 92 38 1,001,022 6,853,157
FY 18:
Permanent Disqualification........................ 419 289 6,136,318 46,114,839
Non-permanent Disqualification.................... 110 58 2,334,029 8,401,981
---------------------------------------------------------
Sub-Totals:
Permanent Disqualification.................. 1,278 780 35,443,271 197,815,128
Non-permanent Disqualification.............. 272 122 8,811,164 24,631,939
---------------------------------------------------------
Totals (Permanent and Non-permanent 1,550 902 44,254,435 222,447,067
Disqualification)........................
---------------------------------------------------------
Total $ redeemed during FOIA Actions ........... ........... .............. 233,258,399
(Permanent Disqualification).............
---------------------------------------------------------
Total $ redeemed during FOIA Actions (Non- ........... ........... .............. 33,443,103
permanent Disqualification...............
---------------------------------------------------------
Total $ redeemed during FOIA Actions ........... ........... .............. 266,701,502
(Permanent and Non-permanent
Disqualification.........................
----------------------------------------------------------------------------------------------------------------
Source: USDA administrative data.
[[Page 52477]]
Alternatives
As discussed in the preamble of this rule, several commenters
suggested alternative approaches to specific rule provisions. One such
suggested alternative was that FNS provide all of the records related
to the charges leveled against a firm in the charge letter, in order to
reduce the delay in decision making resulting from FOIA requests and
appeals. The agency is not adopting this suggestion for the following
reasons. First, as described in the preamble, the agency believes that
the charge letter already provides extensive information regarding the
basis of the charges. Second, certain information is protected from
disclosure under Federal law, including information that would reveal
methods used in analyzing data or in conducting an on-site
investigation, and therefore it would not be appropriate to include in
the charge letter.
The agency also considered allowing retailers determined to have
committed a program violation that warranted non-permanent
disqualification to hold the determination in abeyance pending the
outcome of the FOIA response, but not any subsequent FOIA appeal.
However, allowing firms that have been disqualified to remain on the
Program pending outcome of the initial FOIA response would negate the
purpose of this rule, which is to separate FNS' administrative action
from the FOIA process. As previously stated, firms found to have
violated program rules will continue to be afforded their full due
process opportunities for administrative and judicial proceedings. As
such, FNS is not adopting this alternative.
No consideration was given in allowing retailers determined to have
committed the most egregious violations, such as trafficking, to
continue to participate in SNAP, as doing so would not only negate the
purpose of this rule, but negatively impact program integrity, add
costs associated as provided in the aforementioned Economic Analysis,
and not conform with Congressional intent to remove egregious violators
expeditiously. The processing of FOIA requests and appeals during the
administrative and judicial review process will now have no impact on
when the agency can take administrative action.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires Agencies
to analyze the impact of rulemaking on small entities and consider
alternatives that would minimize any significant impacts on a
substantial number of small entities. Pursuant to that review, it has
been certified that this rule would not have a significant impact on a
substantial number of small entities.
This rule regulates all SNAP-authorized retailers, not just those
stores that are likely to fall under the Small Business Administration
gross sales threshold to qualify as a small business for Federal
Government programs. Small retailers (defined as small or medium-sized
grocery stores, convenience stores, combination stores, specialty
stores, and other retailers, but not supermarkets, super stores, or
large groceries) represent 82 percent of all SNAP retailers. However,
among these small retailers, SNAP redemptions accounted for less than
one percent of all their retail sales in 2018.
Table 2--Retail Revenue and Redemptions for Small SNAP-Authorized Retailers, by Retailer Type in 2018
----------------------------------------------------------------------------------------------------------------
Average Percent of
Retailer type Number of Average redemption sales from
stores retail sales amount redemptions
----------------------------------------------------------------------------------------------------------------
Small Grocery................................... 11,331 $349,672 $60,512 17.3
Medium Grocery.................................. 8,788 991,028 317,308 13.6
Convenience Store............................... 115,456 $3,636,610 $28,294 0.8
Combination Retailer............................ 58,785 14,456,598 56,660 0.4
Specialty Store................................. 7,792 2,987,973 82,791 2.8
Other Retailer.................................. 8,181 4,250,786 12,217 0.3
---------------------------------------------------------------
Overall Average............................. 210,333 6,236,404 43,791 0.7
----------------------------------------------------------------------------------------------------------------
While all SNAP-authorized retailers are covered by this rule, the
number of small businesses directly affected by this rule is expected
to be small. This final rule only impacts those retail food stores that
are charged with program violations, such as trafficking of benefits,
and that submit FOIA actions to challenge penalties. Between 2015 and
2018, 7,235 firms were charged with trafficking; 7,230 were small
retailers. Another 3,697 were charged with other violations; 3,663 were
small retailers. During this four-year period, 1,550 of these firms
submitted FOIA requests, averaging 388 per year, less than one-fifth of
a percent of all SNAP-authorized retailers that are classified as
small.
These firms had average annual redemptions of $170,000 and average
annual revenue of $516,000, so their SNAP redemptions represented about
a third of total revenue. Under this rule, retailers will experience a
loss of revenue once the disqualification determination goes into
effect. Revenue loss may result from lost SNAP sales as well as from
reduced sales of items that, while not eligible for purchase using SNAP
funds, were typically purchased in the same transaction using another
tender type. USDA does not have data necessary to quantify the impact
of this rule on revenue resulting from reduced non-SNAP purchases, only
the impact on revenue resulting from lost SNAP purchases. While this
impact would be significant for those affected, the number of affected
retailers is not substantial: In an average year only 0.18 percent \5\
of all SNAP-authorized small retailers submit FOIA requests after being
charged with trafficking or another violation.
---------------------------------------------------------------------------
\5\ Calculated as 388 stores submitting FOIA requests in an
average year divided by 210,333 small authorized SNAP retailers.
---------------------------------------------------------------------------
FNS also considered if the revenue lost from disqualification was
large enough for the firm to exit the Program, and related economic
impact. Of the 2,982 small firms temporarily disqualified between 2015
and 2018, FNS estimates that approximately 215 firms in an average year
did not return to the Program. This represents .1 percent of all SNAP-
authorized small retailers impacted for the period. For firms that are
permanently disqualified, the intent is for the firms to remain off of
the Program, so FNS has little data to indicate whether those stores
remain in
[[Page 52478]]
business after being removed from SNAP. However, in about one-third of
these cases (representing 0.2 percent of authorized small retailers),
firms were authorized to participate in SNAP under new ownership at the
same location for this time period, which may be indicative that the
penalized stores went out of business, but cannot be tied directly to
the firm's permanent disqualification from SNAP. Because the number of
stores is quite small, and because this rule is expected to result in
penalties being applied sooner (but not expected to change the
determination or penalty), FNS estimates that regardless of length of
disqualification, the overall economic impact would be minimal.
Table 3--Firms Charged With Violations, Annual Average 2015-2018
------------------------------------------------------------------------
------------------------------------------------------------------------
Submitting FOIA requests................................ 388
Average no. months Between FOIA Request and Agency 2
Response...........................................
Average Redemption between FOIA Request & Agency $28,629
Response...........................................
Average Annual Redemption, Firms Submitted FOIA $171,773
Request............................................
Average Annual Revenue, Firms Submitted FOIA Request $515,855
Redemptions as a Percentage of Revenue.............. 33.3%
Submitting FOIA Appeals................................. 225
Average no. months Between FOIA Request and Agency 20
Response...........................................
Average Redemption between FOIA Request & Agency $234,215
Response...........................................
Average Annual Redemption, Firms Submitted FOIA $140,529
Appeal.............................................
Average Annual Revenue, Firms Submitted FOIA Appeal. $515,844
Redemptions as a Percentage of Revenue.............. 27.2%
------------------------------------------------------------------------
In its comments on the NPRM, the Small Business Administration's
Office of Advocacy (the ``Office'') raised additional concerns on
behalf of small businesses. First, the Office is concerned about the
basis of the determination of whether a retailer has violated SNAP
rules. Some retailers have argued that they need to submit FOIA
requests to better understand the charges against them. However, as
described in more detail in the preamble, the charge letter details the
suspected violations, the sanction(s) that may be imposed for these
violations, and the steps that the firm must take if it wishes to
challenge the charges. By regulation, FNS may issue a charge letter on
the basis of evidence from an on-site investigation, inconsistent
redemption data, or evidence obtained through electronic benefit system
(EBT) transactions. EBT transactions are reviewed in relation to the
store operation (including, but not limited to, size, inventory, sales
practices). Firms are told in writing exactly which transactions are
suspicious, when these transactions occurred, and why they are
suspicious. Firms are given the opportunity to respond to these
charges, and FNS carefully considers their official response before
issuing a notice of determination. Even then, firms can file requests
for administrative appeal and, if the determination is upheld, file a
complaint through the judicial process.
The Office's final concern is that small businesses will be forced
to expend large sums of money seeking judicial review of the FNS
determination. As noted above and elsewhere in the preamble of this
rule, retailers will continue to be afforded their full due process
opportunities for administrative and judicial proceedings as under
current statute and regulations. Therefore, the Department does not
believe that the proposed changes to the FOIA process will result in a
change in the number of firms pursuing a judicial review.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local and tribal
governments and the private sector. Under section 202 of the UMRA, the
Department generally must prepare a written statement, including a cost
benefit analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures by State, local or tribal
governments, in the aggregate, or the private sector, of $100 million
or more in any one year. When such a statement is needed for a rule,
Section 205 of the UMRA generally requires the Department to identify
and consider a reasonable number of regulatory alternatives and adopt
the most cost effective or least burdensome alternative that achieves
the objectives of the rule.
This final rule does not contain Federal mandates (under the
regulatory provisions of Title II of the UMRA) for State, local and
tribal governments or the private sector of $100 million or more in any
one year. Thus, the rule is not subject to the requirements of sections
202 and 205 of the UMRA.
Executive Order 12372
The Supplemental Nutrition Assistance Program is listed in the
Catalog of Federal Domestic Assistance under Number 10.551 and is not
subject to Executive Order 12372, which requires intergovernmental
consultation with State and local officials.
Federalism Summary Impact Statement
Executive Order 13132 requires Federal agencies to consider the
impact of their regulatory actions on State and local governments.
Where such actions have federalism implications, agencies are directed
to provide a statement for inclusion in the preamble to the regulations
describing the agency's considerations in terms of the three categories
called for under Section (6)(b)(2)(B) of Executive Order 13132.
The Department has considered the impact of this rule on State and
local governments and has determined that this rule does not have
federalism implications. Therefore, under section 6(b) of the Executive
Order, a federalism summary is not required.
Executive Order 12988, Civil Justice Reform
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is intended to have preemptive effect
with respect to any State or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
and timely implementation. This rule is not intended to have
retroactive effects unless so specified in the Effective Dates
paragraph of the final rule. Before any judicial challenge to the
provisions of the final rule, all applicable administrative procedures
must be exhausted.
Civil Rights Impact Analysis
FNS has reviewed the final rule, in accordance with the Department
Regulation 4300-004, ``Civil Rights Impact Analysis'' to identify and
[[Page 52479]]
address any major civil rights impacts the final rule might have on
minorities, women, and persons with disabilities. The promulgation of
this final rule may impact a small percentage of small retail food
stores and the SNAP customers who usually shop at those stores, however
the mitigation strategies outlined in the CRIA provide consideration to
SNAP recipients' ability to access and purchase an adequate variety of
food items at other SNAP-authorized retail food stores in an area when
making administrative decisions. Further, FNS will monitor incoming
complaints from retailers and SNAP recipients to determine any civil
rights impact on protected groups due to the final rule.
Executive Order 13175
Executive Order 13175 requires Federal agencies to consult and
coordinate with Tribes on a government-to-government basis on policies
that have Tribal implications, including regulations, legislative
comments or proposed legislation, and other policy statements or
actions that have substantial direct effects on one or more Indian
Tribes, on the relationship between the Federal Government and Indian
Tribes, or on the distribution of power and responsibilities between
the Federal Government and Indian Tribes.
FNS holds regularly scheduled consultations with Tribal
Organizations to discuss regulations. On August 15, 2018, February 14,
2019, and October 24, 2019, FNS consulted with Tribal communities
regarding the rule. These sessions provided Tribal communities the
opportunity to address any concerns related to the rule. Tribal
communities identified no issues regarding the rule. FNS is unaware of
any current Tribal laws that could conflict with the final rule.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; 5 CFR
1320) requires the Office of Management and Budget (OMB) to approve all
collections of information by a Federal agency before they can be
implemented. Respondents are not required to respond to any collection
of information unless it displays a current valid OMB control number.
This rule does not contain information collection requirements subject
to approval by the Office of Management and Budget under the Paperwork
Reduction Act of 1995.
E-Government Act Compliance
The Department is committed to complying with the E-Government Act,
to promote the use of the internet and other information technologies
to provide increased opportunities for citizen access to Government
information and services, and for other purposes.
List of Subjects
7 CFR Part 278
Participation of Retail Food Stores, Wholesale Food Concerns and
Insured Financial Institutions.
7 CFR Part 279
Administrative and Judicial Review--Food Retailers and Food
Wholesalers.
Accordingly, 7 CFR parts 278 and 279 are amended as follows:
PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD
CONCERNS AND INSURED FINANCIAL INSTITUTIONS
0
1. The authority citation for part 278 continues to read as follows:
Authority: 7 U.S.C. 2011-2036.
0
2. In Sec. 278.6, add paragraph (p) to read as follows:
Sec. 278.6 Disqualification of retail food stores and wholesale food
concerns, and imposition of civil money penalties in lieu of
disqualifications.
* * * * *
(p) Freedom of Information Act (FOIA) requests and appeals. A FOIA
request or appeal for records shall not delay or prohibit FNS from
making a determination regarding disqualification or penalty against a
firm under paragraphs (c) and (d) of this section, or delay the
effective date of a disqualification or penalty listed in paragraph (e)
of this section.
PART 279--ADMINISTRATIVE AND JUDICIAL REVIEW--FOOD RETAILERS AND
FOOD WHOLESALERS
0
3. The authority citation for part 279 continues to read as follows:
Authority: 7 U.S.C. 2011-2036.
0
4. In Sec. 279.4, amend paragraph (c) by:
0
a. Adding a new second sentence; and
0
b. Removing the words ``However, no'' in the last sentence and adding
in its place the word ``No''.
The addition reads as follows:
Sec. 279.4 Action upon receipt of a request for review.
* * * * *
(c) * * * Additionally, FNS may not grant extensions of time or
hold the administrative review process in abeyance solely on the basis
of a pending FOIA request or appeal. * * *
0
5. In Sec. 279.6, amend paragraph (b) by:
0
a. Adding a new second sentence; and
0
b. Removing the words ``However, no'' in the last sentence and adding
in its place the word ``No''.
The addition reads as follows:
Sec. 279.6 Legal advice and extensions of time.
* * * * *
(b) * * * Additionally, the designated reviewer may not grant
extensions of time or hold the administrative review process in
abeyance solely on the basis of a pending FOIA request or appeal. * * *
Stephen L. Censky,
Deputy Secretary, Food, Nutrition, and Consumer Services.
[FR Doc. 2020-18701 Filed 8-25-20; 8:45 am]
BILLING CODE 3410-30-P
