Funds for nutrition services and administration

(A) Each fiscal year, the Secretary shall make available, from amounts appropriated for such fiscal year under subsection (g)(1) and amounts remaining from amounts appropriated under such subsection for the preceding fiscal year, an amount sufficient to guarantee a national average per participant grant to be allocated among State agencies for costs of nutrition services and administration incurred by State and local agencies for such year.

(B) (i) The amount of the national average per participant grant for nutrition services and administration for any fiscal year shall be an amount equal to the amount of the national average per participant grant for nutrition services and administration issued for the preceding fiscal year, as adjusted. (ii) Such adjustment, for any fiscal year, shall be made by revising the national average per participant grant for nutrition services and administration for the preceding fiscal year to reflect the percentage change between— (I) the value of the index for State and local government purchases, as published by the Bureau of Economic Analysis of the Department of Commerce, for the 12-month period ending June 30 of the second preceding fiscal year; and (II) the best estimate that is available as of the start of the fiscal year of the value of such index for the 12-month period ending June 30 of the previous fiscal year.

(C) Remaining amounts.— (i) In general .— Except as provided in clause (ii), in any fiscal year, amounts remaining from amounts appropriated for such fiscal year under subsection (g)(1) and from amounts appropriated under such section for the preceding fiscal year, after carrying out subparagraph (A), shall be made available for food benefits under this section, except to the extent that such amounts are needed to carry out the purposes of subsections (g)(4) and (g)(5). (ii) Breast pumps .— A State agency may use amounts made available under clause (i) for the purchase of breast pumps.

(A) The Secretary shall allocate to each State agency from the amount described in paragraph (1)(A) an amount for costs of nutrition services and administration on the basis of a formula prescribed by the Secretary. Such formula— (i) shall be designed to take into account— (I) the varying needs of each State; (II) the number of individuals participating in each State; and (III) other factors which serve to promote the proper, efficient, and effective administration of the program under this section; (ii) shall provide for each State agency— (I) an estimate of the number of participants for the fiscal year involved; and (II) a per participant grant for nutrition services and administration for such year; (iii) shall provide for a minimum grant amount for State agencies; and (iv) may provide funds to help defray reasonable anticipated expenses associated with innovations in cost containment or associated with procedures that tend to enhance competition.

(B) (i) Except as provided in clause (ii) and subparagraph (C), in any fiscal year, the total amount allocated to a State agency for costs of nutrition services and administration under the formula prescribed by the Secretary under subparagraph (A) shall constitute the State agency’s operational level for such costs for such year even if the number of participants in the program at such agency is lower than the estimate provided under subparagraph (A)(ii)(I). (ii) If a State agency’s per participant expenditure for nutrition services and administration is more than 10 percent (except that the Secretary may establish a higher percentage for State agencies that are small) higher than its per participant grant for nutrition services and administration without good cause, the Secretary may reduce such State agency’s operational level for costs of nutrition services and administration.

(C) In any fiscal year, the Secretary may reallocate amounts provided to State agencies under subparagraph (A) for such fiscal year. When reallocating amounts under the preceding sentence, the Secretary may provide additional amounts to, or recover amounts from, any State agency.

(A) Except as provided in subparagraphs (B) and (C), in each fiscal year, each State agency shall expend— (i) for nutrition education activities and breastfeeding promotion and support activities, an aggregate amount that is not less than the sum of— (I) ⅙ of the amounts expended by the State for costs of nutrition services and administration; and (II) except as otherwise provided in subparagraphs (F) and (G), an amount equal to a proportionate share of the national minimum breastfeeding promotion expenditure, as described in subparagraph (E), with each State’s share determined on the basis of the number of pregnant women and breastfeeding women in the program in the State as a percentage of the number of pregnant women and breastfeeding women in the program in all States; and (ii) for breastfeeding promotion and support activities an amount that is not less than the amount determined for such State under clause (i)(II).

(B) The Secretary may authorize a State agency to expend an amount less than the amount described in subparagraph (A)(ii) for purposes of breastfeeding promotion and support activities if— (i) the State agency so requests; and (ii) the request is accompanied by documentation that other funds will be used to conduct nutrition education activities at a level commensurate with the level at which such activities would be conducted if the amount described in subparagraph (A)(ii) were expended for such activities.

(C) The Secretary may authorize a State agency to expend for purposes of nutrition education an amount that is less than the difference between the aggregate amount described in subparagraph (A) and the amount expended by the State for breastfeeding promotion and support programs if— (i) the State agency so requests; and (ii) the request is accompanied by documentation that other funds will be used to conduct such activities.

(D) The Secretary shall limit to a minimal level any documentation required under this paragraph.

(E) For each fiscal year, the national minimum breastfeeding promotion expenditure means an amount that is— (i) equal to $21 multiplied by the number of pregnant women and breastfeeding women participating in the program nationwide, based on the average number of pregnant women and breastfeeding women so participating during the last 3 months for which the Secretary has final data; and (ii) adjusted for inflation on October 1, 1996 , and each October 1 thereafter, in accordance with paragraph (1)(B)(ii).

(A) In general .— The Secretary shall— (i) in consultation with the Secretary of Health and Human Services, develop a definition of breastfeeding for the purposes of the program under this section; (ii) authorize the purchase of breastfeeding aids by State and local agencies as an allowable expense under nutrition services and administration; (iii) require each State agency to designate an agency staff member to coordinate breastfeeding promotion efforts identified in the State plan of operation and administration; (iv) require the State agency to provide training on the promotion and management of breastfeeding to staff members of local agencies who are responsible for counseling participants in the program under this section concerning breastfeeding; (v) not later than 1 year after November 2, 1994 , develop uniform requirements for the collection of data regarding the incidence and duration of breastfeeding among participants in the program; (vi) partner with communities, State and local agencies, employers, health care professionals, and other entities in the private sector to build a supportive breastfeeding environment for women participating in the program under this section to support the breastfeeding goals of the Healthy People initiative; and (vii) annually compile and publish breastfeeding performance measurements based on program participant data on the number of partially and fully breast-fed infants, including breastfeeding performance measurements for— (I) each State agency; and (II) each local agency; (viii) in accordance with subparagraph (B), implement a program to recognize exemplary breastfeeding support practices at local agencies or clinics participating in the special supplemental nutrition program established under this section; and (ix) in accordance with subparagraph (C), implement a program to provide performance bonuses to State agencies.

(B) Exemplary breastfeeding support practices.— (i) In general .— In evaluating exemplary practices under subparagraph (A)(viii), the Secretary shall consider— (I) performance measurements of breastfeeding; (II) the effectiveness of a peer counselor program; (III) the extent to which the agency or clinic has partnered with other entities to build a supportive breastfeeding environment for women participating in the program; and (IV) such other criteria as the Secretary considers appropriate after consultation with State and local program agencies. (ii) Authorization of appropriations .— There is authorized to be appropriated to carry out the activities described in clause (viii) of subparagraph (A) such sums as are necessary.

(C) Performance bonuses.— (i) In general .— Following the publication of breastfeeding performance measurements under subparagraph (A)(vii), the Secretary shall provide performance bonus payments to not more than 15 State agencies that demonstrate, as compared to other State agencies participating in the program— (I) the highest proportion of breast-fed infants; or (II) the greatest improvement in proportion of breast-fed infants. (ii) Consideration .— In providing performance bonus payments to State agencies under this subparagraph, the Secretary shall consider the proportion of fully breast-fed infants in the States. (iii) Use of funds .— A State agency that receives a performance bonus under clause (i)— (I) shall treat the funds as program income; and (II) may transfer the funds to local agencies for use in carrying out the program. (iv) Implementation .— The Secretary shall provide the first performance bonuses not later than 1 year after December 13, 2010 , and may subsequently revise the criteria for awarding performance bonuses; and 1 1 So in original. The “; and” probably should be a period.

(A) Subject to subparagraph (B), in any fiscal year that a State agency submits a plan to reduce average food costs per participant and to increase participation above the level estimated for the State agency, the State agency may, with the approval of the Secretary, convert amounts allocated for food benefits for such fiscal year for costs of nutrition services and administration to the extent that such conversion is necessary— (i) to cover allowable expenditures in such fiscal year; and (ii) to ensure that the State agency maintains the level established for the per participant grant for nutrition services and administration for such fiscal year.

(B) If a State agency increases its participation level through measures that are not in the nutritional interests of participants or not otherwise allowable (such as reducing the quantities of foods provided for reasons not related to nutritional need), the Secretary may refuse to allow the State agency to convert amounts allocated for food benefits to defray costs of nutrition services and administration.

(C) For the purposes of this paragraph, the term “acceptable measures” includes use of cost containment measures, curtailment of vendor abuse, and breastfeeding promotion activities.

(D) Remote indian or native villages .— For noncontiguous States containing a significant number of remote Indian or Native villages, a State agency may convert amounts allocated for food benefits for a fiscal year to the costs of nutrition services and administration to the extent that the conversion is necessary to cover expenditures incurred in providing services (including the full cost of air transportation and other transportation) to remote Indian or Native villages and to provide breastfeeding support in remote Indian or Native villages.

In each fiscal year, each State agency shall provide, from the amounts allocated to such agency for such year for costs of nutrition services and administration, an amount to each local agency for its costs of nutrition services and administration. The amount to be provided to each local agency under the preceding sentence shall be determined under allocation standards developed by the State agency in cooperation with the several local agencies, taking into account factors deemed appropriate to further proper, efficient, and effective administration of the program, such as—

(A) local agency staffing needs;

(B) density of population;

(C) number of individuals served; and

(D) availability of administrative support from other sources.

The State agency may provide in advance to any local agency any amounts for nutrition services and administration deemed necessary for successful commencement or significant expansion of program operations during a reasonable period following approval of—

(A) a new local agency;

(B) a new cost containment measure; or

(C) a significant change in an existing cost containment measure.

(A) (i) Except as provided in subparagraphs (B) and (C)(iii), any State that provides for the purchase of foods under the program at retail grocery stores shall, with respect to the procurement of infant formula, use— (I) a competitive bidding system; or (II) any other cost containment measure that yields savings equal to or greater than savings generated by a competitive bidding system when such savings are determined by comparing the amounts of savings that would be provided over the full term of contracts offered in response to a single invitation to submit both competitive bids and bids for other cost containment systems for the sale of infant formula. (ii) In determining whether a cost containment measure other than competitive bidding yields equal or greater savings, the State, in accordance with regulations issued by the Secretary, may take into account other cost factors (in addition to rebate levels and procedures for adjusting rebate levels when wholesale price levels change), such as— (I) the number of infants who would not be expected to receive the primary contract infant formula under a competitive bidding system; (II) the number of cans of infant formula for which no rebate would be provided under another rebate system; and (III) differences in administrative costs relating to the implementation of the various cost containment systems (such as costs of converting a computer system for the purpose of operating a cost containment system and costs of preparing participants for conversion to a new or alternate cost containment system). (iii) Competitive bidding system .— A State agency using a competitive bidding system for infant formula shall award contracts to bidders offering the lowest net price for a specific infant formula for which manufacturers submit a bid 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. (iv) Size of state alliances.— (I) In general .— Except as provided in subclauses (II) through (IV), no State alliance may exist among States if the total number of infants served by States participating in the alliance as of October 1, 2003 , or such subsequent date determined by the Secretary for which data is available, would exceed 100,000. (II) Addition of infant participants .— In the case of a State alliance that exists on June 30, 2004 , the alliance may continue and may expand to serve more than 100,000 infants but, except as provided in subclause (III), may not expand to include any additional State agency. (III) Addition of small state agencies and indian state agencies .— Except as provided in paragraph (9)(B)(i)(II), any State alliance may expand to include any State agency that served less than 5,000 infant participants as of October 1, 2003 , or such subsequent date determined by the Secretary for which data is available, or any Indian State agency, if the State agency or Indian State agency requests to join the State alliance. (IV) Secretarial waiver .— The Secretary may waive the requirements of this clause not earlier than 30 days after submitting to the Committee on Education and the Workforce of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a written report that describes the cost-containment and competitive benefits of the proposed waiver. (v) First choice of issuance .— The State agency shall use the primary contract infant formula as the first choice of issuance (by formula type), with all other infant formulas issued as an alternative to the primary contract infant formula. (vi) Rebate invoices .— Effective beginning October 1, 2004 , each State agency shall have a system to ensure that infant formula rebate invoices, under competitive bidding, provide a reasonable estimate or an actual count of the number of units sold to participants in the program under this section. (vii) Separate solicitations .— In soliciting bids for infant formula under a competitive bidding system, any State agency, or State alliance, that served under the program a monthly average of more than 100,000 infants during the preceding 12-month period shall solicit bids from infant formula manufacturers under procedures that require that bids for rebates or discounts are solicited for milk-based and soy-based infant formula separately. (viii) Cent-for-cent adjustments .— A bid solicitation for infant formula under the program shall require the manufacturer to adjust for price changes subsequent to the opening of the bidding process in a manner that requires— (I) a cent-for-cent increase in the rebate amounts if there is an increase in the lowest national wholesale price for a full truckload of the particular infant formula; and (II) a cent-for-cent decrease in the rebate amounts if there is a decrease in the lowest national wholesale price for a full truckload of the particular infant formula. (ix) List of infant formula wholesalers, distributors, retailers, and manufacturers .— The State agency shall maintain a list of— (I) infant formula wholesalers, distributors, and retailers licensed in the State in accordance with State law (including regulations); and (II) infant formula manufacturers registered with the Food and Drug Administration that provide infant formula. (x) Purchase requirement .— A vendor authorized to participate in the program under this section shall only purchase infant formula from the list described in clause (ix).

(B) (i) The Secretary shall waive the requirement of subparagraph (A) in the case of any State that demonstrates to the Secretary that— (I) compliance with subparagraph (A) would be inconsistent with efficient or effective operation of the program operated by such State under this section; or (II) the amount by which the savings yielded by an alternative cost containment system would be less than the savings yielded by a competitive bidding system is sufficiently minimal that the difference is not significant. (ii) The Secretary shall prescribe criteria under which a waiver may be granted pursuant to clause (i). (iii) The Secretary shall provide information on a timely basis to the Committee on Education and Labor of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate on waivers that have been granted under clause (i).

(C) (i) The Secretary shall provide technical assistance to small Indian State agencies carrying out this paragraph in order to assist such agencies to achieve the maximum cost containment savings feasible. (ii) The Secretary shall also provide technical assistance, on request, to State agencies that desire to consider a cost containment system that covers more than 1 State agency. (iii) The Secretary may waive the requirement of subparagraph (A) in the case of any Indian State agency that has not more than 1,000 participants.

(D) No State may enter into a cost containment contract (in this subparagraph referred to as the “original contract”) that prescribes conditions that would void, reduce the savings under, or otherwise limit the original contract if the State solicited or secured bids for, or entered into, a subsequent cost containment contract to take effect after the expiration of the original contract.

(E) The Secretary shall offer to solicit bids on behalf of State agencies regarding cost-containment contracts to be entered into by infant formula manufacturers and State agencies. The Secretary shall make the offer to State agencies once every 12 months. Each such bid solicitation shall only take place if two or more State agencies request the Secretary to perform the solicitation. For such State agencies, the Secretary shall solicit bids and select the winning bidder for a cost containment contract to be entered into by State agencies and infant formula manufacturers or suppliers.

(F) In soliciting bids for contracts for infant formula for the program authorized by this section, the Secretary shall solicit bids from infant formula manufacturers under procedures in which bids for rebates or discounts are solicited for milk-based and soy-based infant formula, separately, except where the Secretary determines that such solicitation procedures are not in the best interest of the program.

(G) To reduce the costs of any supplemental foods, the Secretary may make available additional funds to State agencies out of the funds otherwise available under paragraph (1)(A) for nutrition services and administration in an amount not exceeding one half of 1 percent of the amounts to help defray reasonable anticipated expenses associated with innovations in cost containment or associated with procedures that tend to enhance competition.

(H) (i) Any person, company, corporation, or other legal entity that submits a bid to supply infant formula to carry out the program authorized by this section and announces or otherwise discloses the amount of the bid, or the rebate or discount practices of such entities, in advance of the time the bids are opened by the Secretary or the State agency, or any person, company, corporation, or other legal entity that makes a statement (prior to the opening of bids) relating to levels of rebates or discounts, for the purpose of influencing a bid submitted by any other person, shall be ineligible to submit bids to supply infant formula to the program for the bidding in progress for up to 2 years from the date the bids are opened and shall be subject to a civil penalty of up to $100,000,000, as determined by the Secretary to provide restitution to the program for harm done to the program. The Secretary shall issue regulations providing such person, company, corporation, or other legal entity appropriate notice, and an opportunity to be heard and to respond to charges. (ii) The Secretary shall determine the length of the disqualification, and the amount of the civil penalty referred to in clause (i) based on such factors as the Secretary by regulation determines appropriate. (iii) Any person, company, corporation, or other legal entity disqualified under clause (i) shall remain obligated to perform any requirements under any contract to supply infant formula existing at the time of the disqualification and until each such contract expires by its terms.

(I) Not later than the expiration of the 180-day period beginning on October 24, 1992 , the Secretary shall prescribe regulations to carry out this paragraph.

(J) A State shall not incur any interest liability to the Federal Government on rebate funds for infant formula and other foods if all interest earned by the State on the funds is used for program purposes.

(K) Reporting .— Effective beginning October 1, 2011 , each State agency shall report rebate payments received from manufacturers in the month in which the payments are received, rather than in the month in which the payments were earned.

(L) Infant formula cost containment contract requirement.— (i) In general .— The Secretary shall require that each infant formula cost containment contract renewed or entered into on or after May 21, 2022 , includes remedies in the event of an infant formula recall, including how an infant formula manufacturer would protect against disruption to program participants in the State. (ii) Rebates .— In the case of an infant formula recall, an infant formula manufacturer contracted to provide infant formula under this section shall comply with the contract requirements under clause (i).

(M) Memorandum of understanding .— Not later than 30 days after May 21, 2022 , the Secretary shall ensure there is a memorandum of understanding between the Secretary and the Secretary of Health and Human Services that includes procedures to promote coordination and information sharing between the Department of Agriculture and the Department of Health and Human Services regarding any supply chain disruption, including a supplemental food recall.

(A) Definition of cost containment measure .— In this subsection, the term “cost containment measure” means a competitive bidding, rebate, direct distribution, or home delivery system implemented by a State agency as described in the approved State plan of operation and administration of the State agency.

(B) Solicitation and rebate billing requirements .— Any State agency instituting a cost containment measure for any authorized food, including infant formula, shall— (i) in the bid solicitation— (I) identify the composition of State alliances for the purposes of a cost containment measure; and (II) verify that no additional States shall be added to the State alliance between the date of the bid solicitation and the end of the contract; (ii) have a system to ensure that rebate invoices under competitive bidding provide a reasonable estimate or an actual count of the number of units sold to participants in the program under this section; (iii) open and read aloud all bids at a public proceeding on the day on which the bids are due; and (iv) unless otherwise exempted by the Secretary, provide a minimum of 30 days between the publication of the solicitation and the date on which the bids are due.

(C) State alliances for authorized foods other than infant formula .— Program requirements relating to the size of State alliances under paragraph (8)(A)(iv) shall apply to cost containment measures established for any authorized food under this section.

(A) In general .— For each of fiscal years 2010 through 2015, the Secretary shall use for the purposes specified in subparagraph (B) $139,000,000 (as adjusted annually for inflation by the same factor used to determine the national average per participant grant for nutrition services and administration for the fiscal year under paragraph (1)(B)).

(B) Purposes .— Subject to subparagraph (C), of the amount made available under subparagraph (A) for a fiscal year— (i) $14,000,000 shall be used for— (I) infrastructure for the program under this section; (II) special projects to promote breastfeeding, including projects to assess the effectiveness of particular breastfeeding promotion strategies; and (III) special State projects of regional or national significance to improve the services of the program; (ii) $35,000,000 shall be used to establish, improve, or administer management information systems for the program, including changes necessary to meet new legislative or regulatory requirements of the program, of which up to $5,000,000 may be used for Federal administrative costs; and (iii) $90,000,000 shall be used for special nutrition education (such as breastfeeding peer counselors and other related activities), of which not more than $10,000,000 of any funding provided in excess of $50,000,000 shall be used to make performance bonus payments under paragraph (4)(C).

(C) Adjustment .— Each of the amounts referred to in clauses (i), (ii), and (iii) of subparagraph (B) shall be adjusted annually for inflation by the same factor used to determine the national average per participant grant for nutrition services and administration for the fiscal year under paragraph (1)(B).

(D) Proportional distribution .— The Secretary shall distribute funds made available under subparagraph (A) in accordance with the proportional distribution described in subparagraphs (B) and (C).

(A) Peer groups.— (i) In general .— The State agency shall— (I) establish a vendor peer group system; (II) in accordance with subparagraphs (B) and (C), establish competitive price criteria and allowable reimbursement levels for each vendor peer group; and (III) if the State agency elects to authorize any types of vendors described in subparagraph (D)(ii)(I)— (aa) distinguish between vendors described in subparagraph (D)(ii)(I) and other vendors by establishing— (AA) separate peer groups for vendors described in subparagraph (D)(ii)(I); or (BB) distinct competitive price criteria and allowable reimbursement levels for vendors described in subparagraph (D)(ii)(I) within a peer group that contains both vendors described in subparagraph (D)(ii)(I) and other vendors; and (bb) establish competitive price criteria and allowable reimbursement levels that comply with subparagraphs (B) and (C), respectively, and that do not result in higher food costs if program participants redeem supplemental food vouchers at vendors described in subparagraph (D)(ii)(I) rather than at vendors other than vendors described in subparagraph (D)(ii)(I). Nothing in this paragraph shall be construed to compel a State agency to achieve lower food costs if program participants redeem supplemental food vouchers at vendors described in subparagraph (D)(ii)(I) rather than at vendors other than vendors described in subparagraph (D)(ii)(I). (ii) Exemptions .— The Secretary may exempt from the requirements of clause (i)— (I) a State agency that elects not to authorize any types of vendors described in subparagraph (D)(ii)(I) and that demonstrates to the Secretary that— (aa) compliance with clause (i) would be inconsistent with efficient and effective operation of the program administered by the State under this section; or (bb) an alternative cost-containment system would be as effective as a vendor peer group system; or (II) a State agency— (aa) in which the sale of supplemental foods that are obtained with food instruments from vendors described in subparagraph (D)(ii)(I) constituted less than 5 percent of total sales of supplemental foods that were obtained with food instruments in the State in the year preceding a year in which the exemption is effective; and (bb) that demonstrates to the Secretary that an alternative cost-containment system would be as effective as the vendor peer group system and would not result in higher food costs if program participants redeem supplemental food vouchers at vendors described in subparagraph (D)(ii)(I) rather than at vendors other than vendors described in subparagraph (D)(ii)(I).

(B) Competitive pricing.— (i) In general .— The State agency shall establish competitive price criteria for each peer group for the selection of vendors for participation in the program that— (I) ensure that the retail prices charged by vendor applicants for the program are competitive with the prices charged by other vendors; and (II) consider— (aa) the shelf prices of the vendor for all buyers; or (bb) the prices that the vendor bid for supplemental foods, which shall not exceed the shelf prices of the vendor for all buyers. (ii) Participant access .— In establishing competitive price criteria, the State agency shall consider participant access by geographic area. (iii) Subsequent price increases .— The State agency shall establish procedures to ensure that a retail store selected for participation in the program does not, subsequent to selection, increase prices to levels that would make the store ineligible for selection to participate in the program.

(C) Allowable reimbursement levels.— (i) In general .— The State agency shall establish allowable reimbursement levels for supplemental foods for each vendor peer group that ensure— (I) that payments to vendors in the vendor peer group reflect competitive retail prices; and (II) that the State agency does not reimburse a vendor for supplemental foods at a level that would make the vendor ineligible for authorization under the criteria established under subparagraph (B). (ii) Price fluctuations .— The allowable reimbursement levels may include a factor to reflect fluctuations in wholesale prices. (iii) Participant access .— In establishing allowable reimbursement levels, the State agency shall consider participant access in a geographic area.

(D) Exemptions .— The State agency may exempt from competitive price criteria and allowable reimbursement levels established under this paragraph— (i) pharmacy vendors that supply only exempt infant formula or medical foods that are eligible under the program; and (ii) vendors— (I) (aa) for which more than 50 percent of the annual revenue of the vendor from the sale of food items consists of revenue from the sale of supplemental foods that are obtained with food instruments; or (bb) who are new applicants likely to meet the criteria of item (aa) under criteria approved by the Secretary; and (II) that are nonprofit.

(E) Cost containment .— If a State agency elects to authorize any types of vendors described in subparagraph (D)(ii)(I), the State agency shall demonstrate to the Secretary, and the Secretary shall certify, that the competitive price criteria and allowable reimbursement levels established under this paragraph for vendors described in subparagraph (D)(ii)(I) do not result in average payments per voucher to vendors described in subparagraph (D)(ii)(I) that are higher than average payments per voucher to comparable vendors other than vendors described in subparagraph (D)(ii)(I).

(F) Limitation on private rights of action .— Nothing in this paragraph may be construed as creating a private right of action.

(G) Implementation .— A State agency shall comply with this paragraph not later than 18 months after June 30, 2004 .

(A) Definitions .— In this paragraph: (i) Electronic benefit transfer .— The term “electronic benefit transfer” means a food delivery system that provides benefits using a card or other access device approved by the Secretary that permits electronic access to program benefits. (ii) Program .— The term “program” means the special supplemental nutrition program established by this section.

(B) Requirements.— (i) In general .— Not later than October 1, 2020 , each State agency shall be required to implement electronic benefit transfer systems throughout the State, unless the Secretary grants an exemption under subparagraph (C) for a State agency that is facing unusual barriers to implement an electronic benefit transfer system. (ii) Responsibility .— The State agency shall be responsible for the coordination and management of the electronic benefit transfer system of the agency.

(C) Exemptions.— (i) In general .— To be eligible for an exemption from the statewide implementation requirements of subparagraph (B)(i), a State agency shall demonstrate to the satisfaction of the Secretary 1 or more of the following: (I) There are unusual technological barriers to implementation. (II) Operational costs are not affordable within the nutrition services and administration grant of the State agency. (III) It is in the best interest of the program to grant the exemption. (ii) Specific date .— A State agency requesting an exemption under clause (i) shall specify a date by which the State agency anticipates statewide implementation described in subparagraph (B)(i).

(D) Reporting.— (i) In general .— Each State agency shall submit to the Secretary electronic benefit transfer project status reports to demonstrate the progress of the State toward statewide implementation. (ii) Consultation .— If a State agency plans to incorporate additional programs in the electronic benefit transfer system of the State, the State agency shall consult with the State agency officials responsible for administering the programs prior to submitting the planning documents to the Secretary for approval. (iii) Requirements .— At a minimum, a status report submitted under clause (i) shall contain— (I) an annual outline of the electronic benefit transfer implementation goals and objectives of the State; (II) appropriate updates in accordance with approval requirements for active electronic benefit transfer State agencies; and (III) such other information as the Secretary may require.

(E) Imposition of costs on vendors.— (i) Cost prohibition .— Except as otherwise provided in this paragraph, the Secretary may not impose, or allow a State agency to impose, the costs of any equipment or system required for electronic benefit transfers on any authorized vendor in order to transact electronic benefit transfers if the vendor equipment or system is used solely to support the program. (ii) Cost-sharing .— The Secretary shall establish criteria for cost-sharing by State agencies and vendors of costs associated with any equipment or system that is not solely dedicated to transacting electronic benefit transfers for the program. (iii) Fees.— (I) In general .— A vendor that elects to accept electronic benefit transfers using multifunction equipment shall pay commercial transaction processing costs and fees imposed by a third-party processor that the vendor elects to use to connect to the electronic benefit transfer system of the State. (II) Interchange fees .— No interchange fees shall apply to electronic benefit transfer transactions under this paragraph. (iv) Statewide operations .— After completion of statewide expansion of a system for transaction of electronic benefit transfers— (I) a State agency may not be required to incur ongoing maintenance costs for vendors using multifunction systems and equipment to support electronic benefit transfers; and (II) any retail store in the State that applies for authorization to become a program vendor shall be required to demonstrate the capability to accept program benefits electronically prior to authorization, unless the State agency determines that the vendor is necessary for participant access.

(F) Minimum lane coverage.— (i) In general .— The Secretary shall establish minimum lane coverage guidelines for vendor equipment and systems used to support electronic benefit transfers. (ii) Provision of equipment .— If a vendor does not elect to accept electronic benefit transfers using its own multifunction equipment, the State agency shall provide such equipment as is necessary to solely support the program to meet the established minimum lane coverage guidelines.

(G) Technical standards .— The Secretary shall— (i) establish technical standards and operating rules for electronic benefit transfer systems; and (ii) require each State agency, contractor, and authorized vendor participating in the program to demonstrate compliance with the technical standards and operating rules.

(A) In general .— Not later than 2 years after December 13, 2010 , the Secretary shall establish a national universal product code database to be used by all State agencies in carrying out the requirements of paragraph (12).

(B) Funding.— (i) In general .— On October 1, 2010 , and on each October 1 thereafter, out of any funds in the Treasury not otherwise appropriated, the Secretary of the Treasury shall transfer to the Secretary to carry out this paragraph $1,000,000, to remain available until expended. (ii) Receipt and acceptance .— The Secretary shall be entitled to receive, shall accept, and shall use to carry out this paragraph the funds transferred under clause (i), without further appropriation. (iii) Use of funds .— The Secretary shall use the funds provided under clause (i) for development, hosting, hardware and software configuration, and support of the database required under subparagraph (A).

A State agency shall not authorize or make payments to a vendor described in paragraph (11)(D)(ii)(I) that provides incentive items or other free merchandise, except food or merchandise of nominal value (as determined by the Secretary), to program participants unless the vendor provides to the State agency proof that the vendor obtained the incentive items or merchandise at no cost.