[Federal Register: March 13, 2000 (Volume 65, Number 49)]
[Proposed Rules]
[Page 13611-13658]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr00-23]
[[pp. 13611-13658]] National Organic Program
[[Continued from page 13610]]
[[Page 13611]]
Excluded methods. Refers to a variety of methods used to
genetically modify organisms or influence their growth and development
by means that are not possible under natural conditions or processes
and are not considered compatible with organic production. Such methods
would include recombinant DNA, cell fusion, and micro- and
macroencapsulation. Such methods would not include the use of
traditional breeding, conjugation, fermentation, hybridization, in
vitro fertilization, or tissue culture.
Feed. Edible materials which are consumed by livestock for their
nutritional value. Feed may be concentrates (grains) or roughages (hay,
silage, fodder). The term, ``feed,'' encompasses all agricultural
commodities, including pasture ingested by livestock for nutritional
purposes.
Feed Additive. A substance or combination of substances added to
feed in micro quantities to fulfill a specific nutritional need, i.e.,
nutrients in the form of amino acids, vitamins, and minerals.
Feed Supplement. A feed used with another feed to improve the
nutrient balance or performance of the total ration and intended to be:
(1) Diluted with other feeds when fed to livestock;
(2) Offered free choice with other parts of the ration if
separately available; or
(3) Further diluted and mixed to produce a complete feed.
Fertilizer. A single or blended substance containing one or more
recognized plant nutrient(s) which is used primarily for its plant
nutrient content and which is designed for use or claimed to have value
in promoting plant growth.
Field. An area of land identified as a discrete unit within a
production operation.
Forage. Vegetable material in a fresh, dried, or ensiled state
(pasture, hay, or silage) which is fed to livestock.
Handle. To sell, process, or package agricultural products, except
such term shall not include the sale, transportation, or delivery of
crops or livestock by the producer thereof to a handler.
Handler. Any person engaged in the business of handling
agricultural products, including producers who handle crops or
livestock of their own production, except such term shall not include
final retailers of agricultural products that do not process
agricultural products.
Handling operation. Any operation or portion of an operation
(except final retailers of agricultural products that do not process
agricultural products) that receives or otherwise acquires agricultural
products and processes, packages, or stores such products.
Immediate family. The spouse, minor children, or blood relatives
who reside in the immediate household of a certifying agent or an
employee, inspector, contractor, or other personnel of the certifying
agent. For the purpose of this part, the interest of a spouse, minor
child, or blood relative who is a resident of the immediate household
of a certifying agent or an employee, inspector, contractor, or other
personnel of the certifying agent shall be considered to be an interest
of the certifying agent or an employee, inspector, contractor, or other
personnel of the certifying agent.
Inert ingredient. Any substance (or group of substances with
similar chemical structures if designated by the Environmental
Protection Agency) other than an active ingredient which is
intentionally included in any pesticide product used in organic crop or
livestock production and handling (40 CFR 152.3(m)).
Information panel. That part of the label of a packaged product
that is immediately contiguous to and to the right of the principal
display panel as observed by an individual facing the principal display
panel, unless another section of the label is designated as the
information panel because of package size or other package attributes
(e.g., irregular shape with one usable surface).
Ingredient. Any substance used in the preparation of an
agricultural product that is still present in the final commercial
product as consumed.
Ingredients statement. The list of ingredients contained in a
product shown in their common and usual names in the descending order
of predominance.
Inspector. Any person retained or used by a certifying agent to
conduct inspections of certification applicants or certified production
or handling operations.
Inspection. The act of examining and evaluating the production or
handling operation of an applicant for certification or certified
operation to determine compliance with the Act and the regulations in
this part.
Label. A display of written, printed, or graphic material on the
immediate container of an agricultural product or any such material
affixed to any agricultural product or affixed to a bulk container
containing an agricultural product, except for package liners or a
display of written, printed, or graphic material which contains only
information about the weight of the product.
Labeling. All written, printed, or graphic material accompanying an
agricultural product at any time or written, printed, or graphic
material about the agricultural product displayed at retail stores
about the product.
Livestock. Any cattle, sheep, goat, swine, poultry, or equine
animals used for food or in the production of food, fiber, feed, or
other agricultural-based consumer products; wild or domesticated game;
or other nonplant life, except such term shall not include aquatic
animals or bees for the production of food, fiber, feed, or other
agricultural-based consumer products.
Lot. Any number of containers which contain an agricultural product
of the same kind located in the same conveyance, warehouse, or packing
house and which are available for inspection at the same time.
Market information. Any written, printed, audiovisual, or graphic
information, including advertising, pamphlets, flyers, catalogues,
posters, and signs, distributed, broadcasted, or made available outside
of retail outlets that are used to assist in the sale or promotion of a
product.
Mulch. Any material, such as wood chips, leaves, straw, paper, or
plastic (on the National List), that serves to suppress weed growth,
moderate soil temperature, or conserve soil moisture.
National List. A list of allowed and prohibited substances as
provided for in section 6517 of the Act (7 U.S.C. 6517).
National Organic Program (NOP). The program authorized by the Act
for the purpose of implementing its provisions.
National Organic Standards Board (NOSB). A Board established by the
Secretary under 7 U.S.C. 6518 to assist in the development of standards
for substances to be used in organic production and to advise the
Secretary on any other aspects of the implementation of the National
Organic Program.
Natural resources of the operation. The physical, hydrological, and
biological features of a production operation, including soil, water,
wetlands, woodlands, and wildlife.
Nonagricultural substance. A substance that is not a product of
agriculture, such as a mineral or a bacterial culture, that is used as
an ingredient in an agricultural product. For the purposes of this
part, a nonagricultural ingredient also includes any substance, such as
gums, citric acid, or pectin, that is extracted from, isolated from, or
a fraction of an agricultural product, so that the identity of the
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agricultural product is unrecognizable in the extract, isolate, or
fraction.
Nonsynthetic (natural). A substance that is derived from mineral,
plant, or animal matter and does not undergo a synthetic process as
defined in section 6502(21) of the Act (7 U.S.C. 6502(21)). For the
purposes of this part, nonsynthetic is used as a synonym for natural as
the term is used in the Act.
Nontoxic. Not known to cause any adverse physiological effects in
animals, plants, humans, or the environment.
Nonretail container. Any container used for shipping or storage of
an agricultural product that is not used in the retail display or sale
of the product.
Organic. A labeling term that refers to an agricultural product
produced in accordance with the Act and the regulations in this part.
Organic matter. The remains, residues, or waste products of any
organism.
Organic system plan. A plan of management of an organic production
or handling operation that has been agreed to by the producer or
handler and the certifying agent and that includes written plans
concerning all aspects of agricultural production or handling described
in the Act and the regulations in subpart C of this part.
Peer review panel. A panel of individuals who have expertise in
organic production and handling methods and certification procedures
and who are appointed by the Administrator to assist in evaluating
applicants for accreditation as certifying agents.
Person. An individual, group of individuals, contractor,
corporation, association, organization, cooperative, or other entity.
Pesticide. Any substance which alone, in chemical combination, or
in any formulation with one or more substances is defined as a
pesticide in section 2(u) of the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. 136(u) et seq).
Petition. A request to amend the National List that is submitted by
any person in accordance with this part.
Planting stock. Any plant or plant tissue, including rhizomes,
shoots, leaf or stem cuttings, roots, or tubers, used in plant
production or propagation.
Practice standard. The guidelines and requirements through which a
production or handling operation implements a required component of its
production or handling organic system plan. A practice standard
integrates a series of allowed and prohibited actions, materials, and
conditions to establish a minimum level performance for planning,
conducting, and maintaining a function, such as livestock health care
or facility pest management, essential to an organic operation.
Principal display panel. That part of a label that is most likely
to be displayed, presented, shown, or examined under customary
conditions of display for sale.
Private entity. Any domestic or foreign nongovernmental for-profit
or not-for-profit organization providing certification services.
Processing. Cooking, baking, curing, heating, drying, mixing,
grinding, churning, separating, extracting, cutting, fermenting,
eviscerating, preserving, dehydrating, freezing, or otherwise
manufacturing and includes the packaging, canning, jarring, or
otherwise enclosing food in a container.
Producer. A person who engages in the business of growing or
producing food, fiber, feed, and other agricultural-based consumer
products.
Production lot number/identifier. Identification of a product based
on the production sequence of the product showing the date, time, and
place of production used for quality control purposes.
Prohibited substance. A substance whose use in any aspect of
organic production or handling is prohibited or not provided for in the
Act or the regulations of this part.
Records. Any information in written, visual, or electronic form
that documents the activities undertaken by a producer, handler, or
certifying agent to comply with the Act and regulations in this part.
Residue testing. An official or validated analytical procedure that
detects, identifies, and measures the presence of chemical substances,
their metabolites, or degradations products in or on raw or processed
agricultural products.
Responsibly connected. Any person who is a partner, officer,
director, holder, manager, or owner of 10 percent or more of the voting
stock of an applicant or a recipient of certification or accreditation.
Retail food establishment. A restaurant; delicatessen; bakery;
grocery store; or any retail outlet with an in-store restaurant,
delicatessen, bakery, salad bar, or other eat-in or carry-out service
of processed or prepared raw and ready-to-eat-food.
Routine use of parasiticide. The regular, planned, or periodic use
of parasiticides.
Secretary. The Secretary of Agriculture or a representative to whom
authority has been delegated to act in the Secretary's stead.
Sewage sludge. A solid, semisolid, or liquid residue generated
during the treatment of domestic sewage in a treatment works. Sewage
sludge includes, but is not limited to: domestic septage; scum or
solids removed in primary, secondary, or advanced wastewater treatment
processes; and a material derived from sewage sludge. Sewage sludge
does not include ash generated during the firing of sewage sludge in a
sewage sludge incinerator or grit and screenings generated during
preliminary treatment of domestic sewage in a treatment works.
Slaughter stock. Any animal that is intended to be slaughtered for
consumption by humans or other animals.
Soil and water quality. Observable indicators of the physical,
chemical, or biological condition of soil and water, including the
presence of environmental contaminants.
State. Any of the several States of the United States of America,
its territories, the District of Columbia, and the Commonwealth of
Puerto Rico.
State certifying agent. A certifying agent accredited by the
Secretary under the National Organic Program and operated by the State
for the purposes of certifying organic production and handling
operations in the State.
State entity. Any domestic, tribal government, or foreign
governmental subdivision providing certification services.
State organic certification program. A State program that meets the
requirements of section 6506 of the Act, is approved by the Secretary,
and is designed to ensure that a product that is sold or labeled as
organically produced under the Act is produced and handled using
organic methods.
State program's governing State official. The chief executive
official of a State or, in the case of a State that provides for the
statewide election of an official to be responsible solely for the
administration of the agricultural operations of the State, such
official, who administers a State organic certification program.
Synthetic. A substance that is formulated or manufactured by a
chemical process or by a process that chemically changes a substance
extracted from naturally occurring plant, animal, or mineral sources,
except that such term shall not apply to substances created by
naturally occurring biological processes.
System of organic production and handling. A system that is
designed to produce agricultural products by the use of methods and
substances that maintain the integrity of organic
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agricultural products until they reach the consumer. This is
accomplished by using, where possible, cultural, biological, and
mechanical methods, as opposed to using substances, to fulfill any
specific function within the system so as to: Maintain long-term soil
fertility; increase soil biological activity; ensure effective pest
management; recycle wastes to return nutrients to the land; provide
attentive care for farm animals; and handle the agricultural products
without the use of extraneous synthetic additives or processing in
accordance with the Act and regulations in this part.
Transplant. A seedling which has been removed from its original
place of production, transported, and replanted.
Tolerance. The maximum legal level of a pesticide residue in or on
a raw or processed agricultural commodity as set by the Environmental
Protection Agency under FFDCA, Section 408.
Unavoidable residual environmental contamination (UREC). Background
levels of naturally occurring or synthetic chemicals that are present
in the soil or present in organically produced agricultural products
that are below established tolerances.
Wild crop. Any plant or portion of a plant that is collected or
harvested from an area of land that is not maintained under cultivation
or other agricultural management.
Subpart B--Applicability
Sec. 205.100 What has to be certified.
(a) Except for operations exempt or excluded in Sec. 205.101, each
production or handling operation or specified portion of a production
or handling operation that produces or handles crops, livestock,
livestock products, or other agricultural products that are intended to
be sold, labeled, or represented as ``100 percent organic,''
``organic,'' or ``made with organic (specified ingredients)'' must be
certified according to the provisions of subpart E of this part and
must meet all other applicable requirements of this part.
(b) Any production or handling operation that has been certified by
a certifying agent on the date that the certifying agent first receives
its accreditation under this part shall be considered certified to the
national standards until the operation's anniversary date of
certification. Such recognition shall only be available to those
operations certified by a certifying agent that receives its
accreditation within 18 months from the date of publication of the
final rule implementing this part.
Sec. 205.101 Exemptions and exclusions from certification.
(a) Exemptions.
(1) A production or handling operation that sells agricultural
products as ``organic'' but whose gross agricultural income from
organic sales totals $5,000 or less annually is exempt from
certification under subpart E of this part and from submitting an
organic system plan for acceptance or approval under Sec. 205.201 but
must comply with the applicable organic production and handling
requirements of subpart C of this part and the labeling requirements of
Sec. 205.309.
(2) A handling operation that is a retail food establishment or
portion of a retail food establishment that handles organically
produced agricultural products but does not process them is exempt from
the requirements in this part.
(3) A handling operation or portion of a handling operation that
handles agricultural products that contain less than 50 percent organic
ingredients by total weight of the finished product (excluding water
and salt) is exempt from the requirements in this part, except:
(i) The provisions for prevention of contact of organic products
with prohibited substances set forth in Sec. 205.272 with respect to
any organically produced ingredients used in an agricultural product;
(ii) The labeling provisions of Sec. 205.309; and
(iii) The recordkeeping provisions in paragraph (c) of this
section.
(4) A handling operation or portion of a handling operation that
handles agricultural products that contain at least 50 percent organic
ingredients by total weight of the finished product (excluding water
and salt) that chooses to not use the word, ``organic,'' on any panel
other than the information panel is exempt from the requirements in
this part, except:
(i) The provisions for prevention of contact of organic products
with prohibited substances set forth in Sec. 205.272 with respect to
any organically produced ingredients used in an agricultural product;
(ii) The labeling provisions of Sec. 205.309; and
(iii) The recordkeeping provisions in paragraph (c) of this
section.
(b) Exclusions.
(1) A handling operation or portion of a handling operation is
excluded from the requirements of this part, except for the
requirements for the prevention of commingling and contact with
prohibited substances as set forth in Sec. 205.272 with respect to any
organically produced products if such operation or portion of the
operation only sells organic agricultural products labeled as ``100
percent organic,'' ``organic,'' or ``made with organic (specified
ingredients)'' that:
(i) Are packaged or otherwise enclosed in a container prior to
being received or acquired by the operation; and
(ii) Remain in the same package or container and are not otherwise
processed while in the control of the handling operation.
(2) A handling operation that is a retail food establishment or
portion of a retail food establishment that processes or prepares, on
the premises of the retail food establishment, raw and ready-to-eat
food from agricultural products that are previously labeled as ``100
percent organic,'' ``organic,'' or ``made with organic (specified
ingredients)'' is excluded from the requirements in this part, except:
(i) The requirements for the prevention of contact with prohibited
substances as set forth in Sec. 205.272; and
(ii) The labeling provisions of Sec. 205.309.
(c) Records to be maintained by exempt operations.
(1) Any handling operation exempt from certification pursuant to
paragraph (a)(3) or (a)(4) of this section must maintain records
sufficient to:
(i) Prove that ingredients identified as organic were organically
produced and handled; and
(ii) Verify quanities produced from such ingredients.
(2) Records must be maintained for no less than 3 years beyond
their creation and the operations must allow representatives of the
Secretary and the applicable State program's governing State official
access to these records for inspection and copying during normal
business hours to determine compliance with the applicable regulations
set forth in this part.
Sec. 205.102 Use of the term, ``organic.''
Any agricultural product that is sold, labeled, or represented as
``100 percent organic,'' ``organic,'' or ``made with organic (specified
ingredients)'' must be:
(a) Produced in accordance with the requirements specified in
Sec. 205.101 or Secs. 205.202 through 205.207 or Secs. 205.236 through
205.239 and all other applicable requirements of part 205;
(b) Handled in accordance with the requirements specified in
Sec. 205.101 or Secs. 205.270 through 205.272 and all other applicable
requirements of this part 205; and
(c) Produced and handled in compliance with the Federal Meat
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Inspection Act (21 U.S.C. 601 et seq.), the Poultry Products Inspection
Act (21) U.S.C. 451 et seq.), and the Egg Products Inspection Act (21
U.S.C. 1031 et seq.), concerning meat, poultry, and egg products; the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.); the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et
seq.); and any other applicable Federal statute and its implementing
regulations.
Sec. 205.103 Recordkeeping by certified operations.
(a) A certified operation must maintain records concerning the
production, harvesting, and handling of agricultural products that are
or that are intended to be sold, labeled, or represented as ``100
percent organic,'' ``organic,'' or ``made with organic (specified
ingredients).''
(b) Such records must:
(1) Be adapted to the particular business that the certified
operation is conducting;
(2) Fully disclose all activities and transactions of the certified
operation in sufficient detail as to be readily understood and audited;
(3) Be maintained for not less than 5 years beyond their creation;
and
(4) Be sufficient to demonstrate compliance with the Act and the
regulations in this part.
(c) The certified operation must make such records available for
inspection and copying during normal business hours by authorized
representatives of the Secretary, the applicable State program's
governing State official, and the certifying agent.
Sec. 205.104 Foreign applicants.
The regulations in this part, as applicable, apply equally to
domestic and foreign applicants for accreditation, accredited
certifying agents, domestic and foreign applicants for certification as
organic production or handling operations, and certified organic
production and handling operations unless otherwise specified.
Secs. 205.105--205.199 [Reserved]
Subpart C--Organic Production and Handling Requirements
Sec. 205.200 General.
The producer or handler of a production or handling operation
wishing to sell, label, or represent agricultural products as ``100
percent organic,'' ``organic,'' or ``made with organic (specified
ingredients)'' must comply with the applicable provisions of this
subpart. Practices implemented in accordance with this subpart must
maintain or improve the natural resources of the operation, including
soil and water quality.
Sec. 205.201 Organic production and handling system plan.
(a) The producer or handler of a production or handling operation,
except as exempt or excluded under Sec. 205.101, wishing to sell,
label, or represent agricultural products as ``100 percent organic,''
``organic,'' or ``made with organic (specified ingredients)'' must
develop an organic production or handling system plan that is agreed to
by the producer or handler and an accredited certifying agent. An
organic system plan must meet the requirements set forth in this
section to establish a system of organic production or handling. An
organic production or handling system plan must include:
(1) A description of practices and procedures to be performed and
maintained, including the frequency with which they will be performed;
(2) A list of each substance to be used as a production or handling
input, indicating its composition, source, and location(s) where it
will be used;
(3) A description of the monitoring practices and procedures to be
performed and maintained, including the frequency with which they will
be performed, to verify that the plan is effectively implemented;
(4) A description of the recordkeeping system implemented to comply
with the requirements established in Sec. 205.103;
(5) A description of practices and procedures to prevent
commingling of organic and nonorganic products and to prevent contact
of organic production and handling operations and products with
prohibited substances; and
(6) Additional information deemed necessary by the certifying agent
to evaluate compliance with the regulations.
(b) A producer may substitute a plan prepared to meet the
requirements of another Federal, State, or local government regulatory
program for the organic system plan: Provided, That, the submitted plan
meets all the requirements of this subpart.
Sec. 205.202 Land requirements.
Any field or farm parcel from which harvested crops are intended to
be sold, labeled, or represented as ``100 percent organic,''
``organic,'' or ``made with organic (specified ingredients)'' must:
(a) Have been managed in accordance with the provisions of
Secs. 205.203 through 205.206;
(b) Have had no prohibited substances, as listed in Sec. 205.600,
applied to it for a period of 3 years immediately preceding harvest of
the crop; and
(c) Have distinct, defined boundaries and buffer zones such as
runoff diversions to prevent the unintended application of a prohibited
substance to the crop or contact with a prohibited substance applied to
adjoining land that is not under organic management.
Sec. 205.203 Soil fertility and crop nutrient management practice
standard.
(a) The producer must select and implement tillage and cultivation
practices that maintain or improve the physical, chemical, and
biological condition of soil and minimize soil erosion.
(b) The producer must budget and supply crop nutrients by properly
utilizing manure or other animal and plant materials, mined mineral
substances, and substances approved in Sec. 205.601.
(c) The producer must manage animal and plant waste materials to
maintain or improve soil organic matter content in a manner that does
not contribute to contamination of crops, soil, or water by plant
nutrients, pathogenic organisms, heavy metals, or residues of
prohibited substances. Animal and plant waste materials include:
(1) Raw animal manure, which must be composted unless it is:
(i) Applied to land used for a crop not intended for human
consumption;
(ii) Incorporated into the soil not less than 120 days prior to the
harvest of a product whose edible portion has direct contact with the
soil surface or soil particles; or
(iii) Incorporated into the soil not less than 90 days prior to the
harvest of a product whose edible portion does not have direct contact
with the soil surface or soil particles;
(2) Other uncomposted plant or animal wastes, such as aged, fully
decomposed animal manure;
(3) A composted product produced in a facility in compliance with
the Natural Resources Conservation Service's practice standard for a
composting facility (Code 317); and
(4) A composted or uncomposted plant or animal waste material that
has been chemically altered by a manufacturing process: Provided, That,
the material is included on the National List of synthetic substances
allowed for use in organic crop production established in Sec. 205.601.
(d) In addition to crop rotations and plant and animal waste
materials, a producer may supply soil and crop nutrients by applying:
(1) A mined substance of low solubility;
(2) A mined substance of high solubility, when justified by soil or
crop tissue analysis;
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(3) Ash obtained from the burning of a plant or animal material,
except as prohibited in paragraph (e) of this section: Provided, That,
the material burned has not been treated or combined with a prohibited
substance or the ash is not included on the National List of
nonsynthetic substances prohibited for use in organic crop production;
and
(4) A crop nutrient supplement included on the National List of
synthetic substances allowed for use in organic production, when
justified by soil or crop tissue analysis.
(e) The producer must not use:
(1) Any fertilizer or commercially blended fertilizer or composted
product that contains a synthetic substance not included on the
National List of synthetic substances allowed for use in organic
production;
(2) Sewage sludge (biosolids) as defined in 40 CFR part 503; and
(3) Burning as a means of disposal for crop residues produced on
the operation: Except, That, prunings from perennial crops may be
burned to suppress the spread of disease.
Sec. 205.204 Seeds and planting stock practice standard.
(a) The producer must use organically grown seeds, annual
seedlings, and planting stock: Except, That,
(1) Nonorganically produced untreated seeds and planting stock may
be used to produce an organic crop when an equivalent organically
produced variety is not commercially available;
(2) Nonorganically produced seeds and planting stock that have been
treated with a substance included on the National List of synthetic
substances allowed for use in organic crop production may be used to
produce an organic crop when an equivalent organically produced or
untreated variety is not commercially available;
(3) Nonorganically produced annual seedlings may be used to produce
an organic crop when a temporary variance has been granted in
accordance with Sec. 205.290(a)(2);
(4) Nonorganically produced planting stock to be used to produce a
perennial crop may be sold, labeled, or represented as organically
produced only after the planting stock has been maintained under a
system of organic management for a period of no less than 1 year; and
(5) Seeds, annual seedlings, and planting stock treated with
prohibited substances may be used to produce an organic crop when the
application of the materials is a requirement of Federal or State
phytosanitary regulations.
(b) The producer of an organic operation must not use seeds or
planting stock produced with excluded methods.
Sec. 205.205 Crop rotation practice standard.
The producer must implement a crop rotation including, but not
limited to, sod, cover crops, green manure crops, and catch crops that
provide the following functions that are applicable to the operation:
(a) Maintain or improve soil organic matter content;
(b) Provide for pest management in annual and perennial crops;
(c) Manage deficient or excess plant nutrients; and
(d) Provide erosion control.
Sec. 205.206 Crop pest, weed, and disease management practice
standard.
(a) The producer must use management practices to prevent crop
pests, weeds, and diseases including, but not limited to:
(1) Crop rotation and soil and crop nutrient management practices,
as provided for in Secs. 205.203 and 205.205;
(2) Sanitation measures to remove disease vectors, weed seeds, and
habitat for pest organisms; and
(3) Cultural practices that enhance crop health, including
selection of plant species and varieties with regard to suitability to
site-specific conditions and resistance to prevalent pests, weeds, and
diseases.
(b) Pest problems may be controlled through mechanical or physical
methods including, but not limited to:
(1) Augmentation or introduction of predators or parasites of the
pest species;
(2) Development of habitat for natural enemies of pests;
(3) Nonsynthetic, nontoxic controls such as lures, traps, and
repellents.
(c) Weed problems may be controlled through:
(1) Mulching with fully biodegradable materials;
(2) Mowing;
(3) Livestock grazing;
(4) Hand weeding and mechanical cultivation;
(5) Flame, heat, or electrical means; or
(6) Plastic or other synthetic mulches: Provided, That, they are
removed from the field at the end of the growing or harvest season.
(d) Disease problems may be controlled through:
(1) Management practices which suppress the spread of disease
organisms; or
(2) Application of nonsynthetic biological, botanical, or mineral
inputs.
(e) When the practices provided for in paragraphs (a) through (d)
of this section are insufficient to prevent or control crop pests,
weeds, and diseases, a biological or botanical substance or a substance
included on the National List of synthetic substances allowed for use
in organic production may be applied to prevent, suppress, or control
pests, weeds, or diseases: Provided, That, the producer implements
measures to evaluate and mitigate the effects of repetitive use of the
same or similar materials on pest resistance and shifts in pest, weed,
or disease types, and the substance is used in compliance with the
Federal Insecticide, Fungicide, and Rodenticide Act.
(f) The producer or handler of an organic operation must not use a
pest, weed, or disease control substance produced through excluded
methods.
Sec. 205.207 Wild-crop harvesting practice standard.
(a) Any area from which a wild crop that is intended to be sold,
labeled, or represented as organic is harvested must have had no
prohibited substance, as set forth in Sec. 205.600, applied to it for a
period of 3 years immediately preceding the harvest of the wild crop.
(b) A wild-crop must be harvested in a manner that ensures that
such harvesting or gathering will not be destructive to the environment
and will sustain the growth and production of the wild crop.
Secs. 205.208--205.235 [Reserved]
Sec. 205.236 Origin of livestock.
(a) Livestock or edible livestock products that are to be sold,
labeled, or represented as organic must be from livestock under
continuous organic management from birth or hatching: Except, That,
(1) Poultry. Poultry or edible poultry products must be from
poultry that has been under continuous organic management beginning no
later than the second day of life;
(2) Dairy Animals. Milk or milk products must be from animals that
have been under continuous organic management beginning no later than 1
year prior to the production of the milk or milk products that are to
be sold, labeled, or represented as organic.
(3) Nonedible products. Nonedible livestock products must be from
animals that have been under continuous organic management not less
than 1 year prior to harvest of the nonedible product.
(4) Breeder stock. Livestock used as breeder stock may be brought
from a nonorganic operation onto an organic operation at any time:
Provided, That, if such livestock are gestating and the offspring are
to be raised as organic
[[Page 13616]]
livestock, the breeder stock must be brought onto the facility prior to
the last third of pregnancy.
(b) The following are prohibited:
(1) Livestock or edible livestock products that are removed from an
organic operation and subsequently managed on a nonorganic operation
may be not sold, labeled, or represented as organically produced.
(2) Breeder or dairy stock that has not been under continuous
organic management since birth may not be sold, labeled, or represented
as organic slaughter stock; and
(3) No organism produced by excluded methods may be used for
breeding purposes or for the production of livestock products intended
to be sold, labeled, or represented as organic.
(c) The producer of an organic livestock operation must maintain
records sufficient to preserve the identity of all organically managed
animals and edible and nonedible animal products produced on the
operation.
Sec. 205.237 Livestock feed.
(a) The producer of an organic livestock operation must provide
livestock with a total feed ration composed of agricultural products,
including pasture and forage, that is organically produced and, if
applicable, organically handled: Except, That, nonagricultural products
and synthetic substances allowed under Sec. 205.603 may be used as feed
additives and supplements.
(b) The producer of an organic operation must not:
(1) Use animal drugs, including hormones, to promote growth;
(2) Provide feed supplements or additives in amounts above those
needed for adequate nutrition and health maintenance for the species at
its specific stage of life;
(3) Feed plastic pellets for roughage;
(4) Feed formulas containing urea or manure;
(5) Feed mammalian or poultry slaughter by-products to mammals or
poultry; or
(6) Use feed, feed additives, and feed supplements in violation of
the Federal Food, Drug, and Cosmetic Act.
Sec. 205.238 Livestock health care practice standard.
(a) The producer must establish and maintain preventive livestock
health care practices, including:
(1) Selection of species and types of livestock with regard to
suitability for site-specific conditions and resistance to prevalent
diseases and parasites;
(2) Provision of feedstuffs sufficient to meet nutritional
requirements, including vitamins, minerals, and other additives or
supplements;
(3) Establishment of appropriate housing, pasture conditions, and
sanitation practices to minimize the occurrence and spread of diseases
and parasites;
(4) Provision of conditions which allow for exercise, freedom of
movement, and reduction of stress appropriate to the species;
(5) Performance of physical alterations as needed to promote the
animal's welfare and in a manner that minimizes pain and stress; and
(6) Administration of vaccines and other veterinary biologics.
(b) When preventive practices and veterinary biologics are
inadequate to prevent sickness, a producer may administer synthetic
medications: Provided, That, such medications are allowed under
Sec. 205.603. Parasiticides allowed under Sec. 205.603 may be used on
(1) Breeder stock, when used prior to the last third of gestation
for progeny that are to be sold, labeled, or represented as organically
produced; and
(2) Dairy stock, when used a minimum of 90 days prior to the
production of milk or milk products that are to be sold, labeled, or
represented as organic.
(c) The producer of an organic livestock operation must not:
(1) Sell, label, or represent as organic any animal or edible
product derived from any animal treated with antibiotics, any substance
that contains a synthetic substance not allowed under Sec. 205.603, or
any substance that contains a nonsynthetic substance prohibited in
Sec. 205.604.
(2) Administer any animal drug, other than vaccinations, in the
absence of illness;
(3) Administer hormones;
(4) Administer synthetic parasiticides on a routine basis;
(5) Administer synthetic parasiticides to slaughter stock;
(6) Administer animal drugs in violation of the Federal Food, Drug,
and Cosmetic Act; or
(7) Withhold medical treatment from a sick animal in an effort to
preserve its organic status. All appropriate medications must be used
to restore an animal to health when methods acceptable to organic
production fail. Livestock treated with a prohibited substance must be
clearly identified and shall not be sold, labeled, or represented as
organically produced.
Sec. 205.239 Livestock living conditions.
(a) The producer of an organic livestock operation must establish
and maintain livestock living conditions which accommodate the health
and natural behavior of animals, including:
(1) Access to shade, shelter, exercise areas, fresh air, and direct
sunlight suitable to the species, its stage of production, the climate,
and the environment;
(2) Access to pasture for ruminants;
(3) Appropriate clean, dry bedding. If the bedding is typically
consumed by the animal species, it must comply with the feed
requirements of Sec. 205.237;
(4) Shelter designed to allow for:
(i) Natural maintenance, comfort behaviors, and opportunity to
exercise;
(ii) Temperature level, ventilation, and air circulation suitable
to the species; and
(iii) Reduction of potential for livestock injury;
(b) The producer of an organic livestock operation may provide
temporary confinement for an animal because of:
(1) Inclement weather;
(2) The animal's stage of production;
(3) Conditions under which the health, safety, or well being of the
animal could be jeopardized; or
(4) Risk to soil or water quality.
(c) The producer of an organic livestock operation must manage
manure in a manner that does not contribute to contamination of crops,
soil, or water by plant nutrients, heavy metals, or pathogenic
organisms and optimizes recycling of nutrients.
Secs. 205.240--205.269 [Reserved]
Sec. 205.270 Organic handling requirements.
(a) Mechanical or biological methods, including, but not limited
to, cooking, baking, heating, drying, mixing, grinding, churning,
separating, extracting, slaughtering, cutting, fermenting,
eviscerating, preserving, dehydrating, freezing, chilling, or otherwise
manufacturing, and the packaging, canning, jarring, or otherwise
enclosing food in a container may be used to process an agricultural
product intended to be sold, labeled, or represented as ``100 percent
organic,'' ``organic,'' or ``made with organic (specified
ingredients)'' for the purpose of retarding spoilage or otherwise
preparing the agricultural product for market.
(b) Nonagricultural substances allowed under Sec. 205.605 and
nonorganically produced agricultural products allowed under
Sec. 205.606 may be used in or on a processed agricultural product
intended to be sold, labeled, or represented as ``organic'' or ``made
with organic (specified ingredients).''
(c) The handler of an organic handling operation must not use in or
on an
[[Page 13617]]
agricultural product intended to be sold, labeled, or represented as
``100 percent organic,'' ``organic,'' or ``made with organic (specified
ingredients)'':
(1) Ionizing radiation for any purpose;
(2) An ingredient produced with excluded methods; or
(3) A volatile synthetic solvent or any other synthetic processing
aid not allowed under Sec. 205.605 as ingredients in or on processed
products labeled as organic or made with organic ingredients.
Sec. 205.271 Facility pest management practice standard.
(a) The producer or handler of an organic facility must use
management practices to prevent pests, including, but not limited to:
(1) Removal of pest habitat, food sources, and breeding areas;
(2) Prevention of access to handling facilities; or
(3) Management of environmental factors, such as temperature,
light, humidity, atmosphere, and air circulation to prevent pest
reproduction.
(b) Pests may be controlled through:
(1) Augmentation or introduction of predators or parasites for the
pest species;
(2) Mechanical or physical controls including, but not limited to,
traps, light, or sound; or
(3) Nontoxic, nonsynthetic controls, such as lures and repellents.
(c) If the practices provided for in paragraphs (a) and (b) of this
section are not effective to prevent or control facility pests, a
nonsynthetic biological or botanical substance or a synthetic substance
may be applied to prevent, suppress, or control pests: Provided, That,
the substance is applied in the manner consistent with its label as
approved by the Federal, State, and local regulatory authorities.
(d) The handler of an organic handling operation who applies a
nonsynthetic biological or botanical substance or a synthetic substance
for the prevention or control of a pest must include in the organic
handling plan a list of all measures taken or intended to be taken to
prevent contact between the substance and any ingredient or finished
product intended to be sold, labeled, or represented as ``organic'' or
``made with organic (specified ingredients).''
(e) The handler of an organic handling operation who applies a
nonsynthetic biological or botanical substance or a synthetic substance
for the prevention or control of a pest must include in the organic
handling plan an evaluation of the effects of repetitive use of the
same or similar materials on pest resistance and shifts in pest types.
Sec. 205.272 Commingling and contact with prohibited substance
prevention practice standard.
(a) The handler of an organic handling operation must implement
measures necessary to prevent the commingling of organic and nonorganic
products and protect organic products from contact with prohibited
substances.
(b) The following methods and substances are prohibited for use in
the handling of any agricultural product intended to be sold, labeled,
or represented as ``100 per cent organic,'' ``organic,'' or ``made with
organic (specified ingredients)'':
(1) Packaging materials and storage containers or bins that contain
a synthetic fungicide, preservative, or fumigant;
(2) The use or reuse of any bag or container that had previously
been in contact with any substance in such a manner as to compromise
the organic integrity of any products unless, after use for
conventional products, the reusable bin or container has been
thoroughly cleaned and poses no risk of prohibited materials contacting
the organic product.
Secs. 205.273--205.289 [Reserved]
Sec. 205.290 Temporary variances.
(a) Temporary variances from the requirements in Secs. 205.203
through 205.207, 205.236 through 205.239, and 205.270 through 205.272
may be established by the Administrator for the following reasons:
(1) Natural disasters declared by the Secretary;
(2) Damage caused by wind, flood, excessive moisture, tornado,
earthquake, fire, or other business interruption; and
(3) Practices used for the purpose of conducting research or trials
of techniques, varieties, or ingredients used in organic production or
handling.
(b) A certifying agent may recommend in writing to the
Administrator a temporary variance from a standard set forth in subpart
C of this part for organic production or handling operations: Provided,
That, such variance may only be recommended for the reasons listed in
paragraph (a) of this section.
(c) The Administrator will provide written notification to
certifying agents upon establishment of a temporary variance applicable
to the certifying agent's certified production or handling operations.
When establishing a temporary variance, the Administrator shall specify
the period of time it shall remain in effect, subject to extension as
the Administrator deems necessary.
(d) A certifying agent, upon notification from the Administrator of
the establishment of a temporary variance, must notify each production
or handling operation it certifies within the affected geographical
area or the individual organic production or handling operation(s) to
which the temporary variance applies.
(e) Temporary variances may not be requested for any practice,
material, or procedure otherwise prohibited in these regulations.
Subpart D--Labels, Labeling, and Market Information
Sec. 205.300 Use of the term, ``organic.''
(a) The term, ``organic,'' may only be used on labels and in
labeling of raw or processed agricultural products, including
ingredients, that have been produced and handled in accordance with the
regulations in this part.
(b) Products for export, produced and certified to foreign national
organic standards or foreign contract buyer requirements, may be
labeled in accordance with the organic labeling requirements of the
receiving country or contract buyer: Provided, That, the shipping
containers and shipping documents meet the labeling requirements
specified in Sec. 205.306(c).
(c) Products produced in a foreign country and exported for sale in
the United States must be certified pursuant to subpart E of this part
and labeled pursuant to this subpart D.
Sec. 205.301 Product composition.
(a) Products sold, labeled, or represented as ``100 percent
organic.'' A raw or processed agricultural product sold, labeled, or
represented as ``100 percent organic'' must contain (by weight or fluid
volume, excluding water and salt) not less than 100 percent organically
produced raw or processed agricultural product. No such product or
product ingredient may contain or be created using excluded methods or
be produced using sewage sludge or ionizing radiation. If labeled as an
organic food product, such product must be labeled pursuant to
Sec. 205.303.
(b) Products sold, labeled, or represented as ``organic.'' A raw or
processed agricultural product sold, labeled, or represented as
``organic'' must contain (by weight or fluid volume, excluding water
and salt) not less than 95 percent organically produced raw or
processed agricultural product. Any remaining product ingredients must
consist of nonagricultural substances or nonorganically produced
agricultural products approved in the National List of Allowed and
Prohibited Substances in subpart G of this part and must not
[[Page 13618]]
contain or be created using excluded methods or be produced using
sewage sludge or ionizing radiation. If labeled as an organic food
product, such products must be labeled pursuant to Sec. 205.303.
(c) Products sold, labeled, or represented as ``made with organic
(specified ingredients).'' Multiingredient agricultural product sold,
labeled, or represented as ``made with organic (specified
ingredients)'' must contain (by weight or fluid volume, excluding water
and salt) at least 50 percent organically produced agricultural
products which are produced and handled pursuant to requirements in
subpart C of this part. The nonorganic ingredients must not contain or
be created using excluded methods or be produced using sewage sludge or
ionizing radiation. If labeled as an organic food product, such
products must be labeled pursuant to Sec. 205.304.
(d) Products with less than 50 percent organic ingredients. The
organic ingredients in multiingredient agricultural product containing
less than 50 percent organic ingredients (by weight or fluid volume,
excluding water and salt) must be produced and handled pursuant to
requirements in subpart C of this part. The nonorganic ingredients may
be produced and handled without regard to the requirements of this
part. Multiingredient agricultural product containing less than 50
percent organically produced ingredients may represent the organic
nature of the product only as provided in Sec. 205.305.
(e) All ingredients identified as ``organic'' in the ingredient
statement of any product must not:
(1) Be produced using excluded methods or products of excluded
methods as ingredients or processing aids;
(2) Be produced using sewage sludge;
(3) Be processed using ionizing radiation;
(4) Be processed using processing aids not approved on the National
List of Allowed and Prohibited Substances in subpart G of this part:
Except, That, products labeled as ``100 percent organic,'' if
processed, must be processed using no processing aids;
(5) Contain sulfites, nitrates, or nitrites added during the
production or handling process;
(6) Be produced using nonorganic ingredients when organic
ingredients are not available; or
(7) Include organic and nonorganic forms of the same ingredient.
Sec. 205.302 Calculating the percentage of organically produced
ingredients.
(a) The percentage of all organically produced ingredients in an
agricultural product sold, labeled, or represented as ``100 percent
organic,'' ``organic,'' or ``made with organic (specified
ingredients),'' or that include organic ingredients must be calculated
by:
(1) Dividing the total net weight (excluding water and salt) of
combined organic ingredients by the total weight (excluding water and
salt) of the finished product.
(2) Dividing the fluid volume of all organic ingredients (excluding
water and salt) by the fluid volume of the finished product (excluding
water and salt) if the product and ingredients are liquid. If the
liquid product is identified on the principal display panel or
information panel as being reconstituted from concentrates, the
calculation should be made on the basis of single-strength
concentrations of the ingredients and finished product.
(3) For products containing organic ingredients in both solid and
liquid form, dividing the combined weight of the solid ingredients and
the weight of the liquid ingredients (excluding water and salt) by the
total weight (excluding water and salt) of the finished product.
(b) The percentage of all organically produced ingredients in an
agricultural product must be rounded down to the nearest whole number
and indicated on the information panel above the ingredient statement
with the words, ``contains X percent organic ingredients.''
(c) The percentage must be calculated by the handler who affixes
the label on the consumer package and verified by the certifying agent
of the handler.
Sec. 205.303 Packaged products labeled ``100 percent organic'' or
``organic.''
(a) Agricultural products in packages described in Sec. 205.301(a)
and (b) may display, on the principal display panel, information panel,
and any other panel of the package and on any labeling or market
information concerning the product, the following terms:
(1) The term, ``100 percent organic'' or ``organic,'' as
applicable, to modify the name of the product;
(2) The USDA Seal;
(3) The seal, logo, or other identifying mark of the certifying
agent which certified the production or handling operation producing
the finished product and any other certifying agent which certified
production or handling operations producing raw organic product or
organic ingredients used in the finished product: Provided, That, the
handler producing the finished product maintain records, pursuant to
this part, verifying organic certification of the operations producing
such ingredients, and: Provided further, That, such seals or marks are
not, individually, displayed more prominently than the USDA Seal.
(b) Agricultural products in packages described in Sec. 205.301(a)
and (b) must:
(1) On the information panel of multiingredient products and
consistent with the labeling requirements of the Food and Drug
Administration, declare the total percentage of organic ingredients in
the product.
(2) In the ingredient statement, modify each organic ingredient of
multiingredient products with the word, ``organic'': Except, That,
ingredients in multiingredient products labeled ``100 percent organic''
are not required to modified with the term ``organic.'' Any water or
salt included as an ingredient will not be identified as organic.
(3) On the information panel, below the information identifying the
handler or distributor of the product and preceded by the statement,
``Certified organic by * * *,'' or similar phrase, identify the name of
the certifying agent that certified the handler of the finished
product: Except, That, the business address or telephone number of the
certifying agent may be included in such label.
Sec. 205.304 Packaged products labeled ``made with organic (specified
ingredients).''
(a) Agricultural products in packages described in Sec. 205.301(c)
may display on the principal display panel, information panel, and any
other panel and on any labeling or market information concerning the
product:
(1) The statement, ``made with organic (specified ingredients)'':
Provided, That, display of the statement is consistent with labeling
requirements of the Food and Drug Administration and:
(i) Does not list more than three organic ingredients;
(ii) Does not exceed one-half the size of the largest type size on
the panel; and
(iii) Appears in its entirety in the same type size, style, and
color without highlighting; and
(2) The seal, logo, or other identifying mark of the certifying
agent that certified the handler of the finished product.
(b) Agricultural products in packages described in Sec. 205.301(c)
must:
(1) On the information panel and consistent with the labeling
requirements of the Food and Drug Administration, declare the total
percentage of organic ingredients in the product.
[[Page 13619]]
(2) In the ingredient statement, modify each organic ingredient
with the word, ``organic.'' Any water or salt included as an ingredient
will not be identified as organic.
(3) On the information panel, below the information identifying the
handler or distributor of the product and preceded by the statement,
``Certified organic by * * *,'' or similar phrase, identify the name of
the certifying agent that certified the handler of the finished
product: Except, That, the business address or telephone number of the
certifying agent may be included in such label.
(c) Agricultural products in packages described in Sec. 205.301(c)
must not display the USDA Seal.
Sec. 205.305 Multiingredient packaged products with less than 50
percent organic ingredients.
(a) Agricultural products with less than 50 percent organic
ingredients must:
(1) On the information panel and consistent with the labeling
requirements of the Food and Drug Administration, declare the total
percentage of organic ingredients in the product.
(2) In the ingredient statement, modify each organic ingredient
with the word, ``organic.''
(b) Agricultural products with less than 50 percent organic
ingredients must not display:
(1) The USDA Seal and
(2) Any certifying agent's seal, logo, or other identifying mark.
Sec. 205.306 Labeling of nonretail containers used for only shipping
or storage of raw or processed agricultural products labeled as ``100
percent organic,'' ``organic,'' or ``made with organic (specified
ingredients).''
(a) Nonretail containers used only to ship or store raw or
processed agricultural product labeled as containing organic
ingredients may display the following terms or marks:
(1) The name and contact information of the certifying agent which
certified the handler which assembled the final product;
(2) Identification of the product as ``organic product'';
(3) Special handling instructions needed to maintain the organic
integrity of the product;
(4) The USDA Seal;
(5) The seal, logo, or other identifying mark of the certifying
agent that certified the organic production or handling operation that
produced or handled the finished product.
(b) If not required under other Federal labeling regulations,
nonretail containers used to ship or store raw or processed
agricultural product labeled as containing organic ingredients must
display the production lot number of the product, if applicable.
(c) Shipping containers of domestically produced product labeled as
organic intended for export to international markets may be labeled
consistent with any shipping container labeling requirements of the
foreign country of destination or the container labeling specifications
of a foreign contract buyer: Provided, That, the shipping containers
and shipping documents accompanying such organic product be clearly
marked ``For export only'' and: Provided further, That, proof of such
container marking and export must be maintained by the handler,
consistent with recordkeeping requirements for exempt and excluded
operations under Sec. 205.101.
Sec. 205.307 Agricultural products in other than packaged form at the
point of retail sale that are sold, labeled, or represented as ``100
percent organic'' or ``organic.''
(a) Agricultural products labeled or represented as ``100 percent
organic'' or ``organic'' in retail display, labeling, and display
containers may use the term, ``100 percent organic'' or ``organic,'' as
applicable, to modify the name of the product: Provided, That, such
products are assembled in a manufacturing facility certified in
accordance with the requirements of this part; and, Provided further,
Than, the word, ``organic,'' is used to modify the organic ingredients
listed in the ingredient statement of the products.
(b) The retail display, labeling, and display containers may use:
(1) The USDA Seal;
(2) The seal, logo, or other identifying mark of the certifying
agent that certified the production or handling operation producing the
finished product and any other certifying agent which certified
operations producing raw organic product or organic ingredients used in
the finished product: Provided, That, such seals or marks are not,
individually, displayed more prominently than the USDA Seal.
Sec. 205.308 Agricultural products in other than packaged form at the
point of retail sale that are sold, labeled, or represented as ``made
with organic (specified ingredients).''
(a) Retail displays, display containers, and market information of
agricultural products containing between 50 and 95 percent organic
ingredients may use the phrase, ``made with organic (specified
ingredients)'' Provided, That, such products have been assembled at a
manufacturing facility certified in accordance with the requirements of
this part, and:
(1) Such statement does not list more than three organic
ingredients, and
(2) In any such display of the product's ingredient statement, the
organic ingredients must be modified as ``organic.''
(b) Such agricultural products labeled as ``made with organic
(specified ingredients)'' in retail displays, display containers, and
market information may display the certifying agent's seal, logo, or
other identifying mark.
Sec. 205.309 Agricultural products produced on an exempt or excluded
operation.
(a) An agricultural product organically produced or handled on an
exempt or excluded operation must not:
(1) Display the USDA Seal or any certifying agent's seal or other
identifying mark which represents that the production or handling
operation as a certified organic operation, or
(2) Be represented as a certified organic product to any buyer.
(b) An agricultural product organically produced or handled on an
exempt or excluded operation may be identified as an organic product or
organic ingredient in a multiingredient product produced by the exempt
or excluded operation. Such product or ingredient must not be
identified as ``organic'' in a product processed by others.
(c) Such product is subject to labeling requirements specified in
paragraph (a) of Sec. 205.300, and paragraphs (e)(1) through (e)(7) of
Sec. 205.301.
Sec. 205.310 USDA Seal.
(a) The USDA Seal described in paragraphs (b) and (c) of this
section may be used only for agricultural products (raw or processed)
described in Sec. 205.301(a) and (b).
(b) The USDA Seal must replicate the form and design of the example
in figure 1 and must be printed legibly and conspicuously:
(1) On a white, light colored, or transparent background with
contrasting dark color words and shield outline or on a dark colored
background with contrasting white or light colored words and shield
outline; or
(2) On a white background with dark blue colored words and red
shield outline.
BILLING CODE 3410-02-P
[[Page 13620]]
[GRAPHIC] [TIFF OMITTED] TP13MR00.000
BILLING CODE 3410-02-C
Subpart E--Certification
Sec. 205.400 General requirements for certification.
A person seeking to receive or maintain organic certification under
the regulations in this part must:
(a) Comply with the Act and applicable organic production and
handling regulations of this part;
(b) Establish, implement, and update annually an organic production
or handling system plan that is submitted to an accredited certifying
agent as provided for in Sec. 205.200;
(c) Permit on-site inspections with complete access to the
production or handling operation, including noncertified areas and
structures, by the certifying agent as provided for in Sec. 205.403;
(d) Maintain all records applicable to the organic operation for
not less than 5 years beyond their creation and allow authorized
representatives of the Secretary, the applicable State program's
governing State official, and the certifying agent access to such
records during normal business hours for review and copying to
determine compliance with the Act and the regulations in this part, as
provided for in Sec. 205.104;
(e) Submit the applicable fees charged by the certifying agent; and
(f) Immediately notify the certifying agent concerning any:
(1) Application, including drift, of a prohibited substance to any
field, production unit, site, facility, livestock, or product that is
part of an operation; and
(2) Change in a certified operation or any portion of a certified
operation that may affect its compliance with the Act and the
regulations in this part.
Sec. 205.401 Application for Certification.
A person seeking certification of a production or handling
operation under this subpart must submit a request for certification to
a certifying agent. The request must include the following information:
(a) An organic production or handling system plan, as required in
Sec. 205.200;
(b) The name of the person completing the application; the
applicant's business name, address, and telephone number; and, when the
applicant is a corporation, the name, address, and telephone number of
the person authorized to act on the applicant's behalf.
(c) The name(s) of any organic certifying agent(s) to which
application has previously been made, the year(s) of application, and
the outcome of the application(s) submission, including a copy of any
notification of noncompliance or denial of certification issued to the
applicant for certification and a description of the actions taken by
the applicant to correct the deficiencies noted in the notification of
noncompliance, including evidence of such correction and;
(d) Other information necessary to determine compliance with the
Act and the regulations in this part.
Sec. 205.402 Review of application.
(a) Upon acceptance of an application for certification a
certifying agent must:
(1) Review the application to ensure completeness pursuant to
Sec. 205.401;
(2) Determine by a review of the application materials whether the
applicant appears to comply or may be able to comply with the
applicable requirements of subpart C of this part;
(3) Verify that an applicant who previously applied to another
certifying agent and received a notification of noncompliance, pursuant
to Sec. 205.405(a), has submitted documentation to support the
correction of any deficiencies identified in such notification, as
required in Sec. 205.405(b); and
(4) Schedule an on-site inspection of the operation to determine
whether the applicant qualifies for certification if the review of
application materials reveals that the production or handling operation
may be in compliance with the applicable requirements of subpart C of
this part.
(b) The certifying agent shall communicate to the applicant its
findings on the review of application materials specified in
Sec. 205.402(a).
(c) The applicant may withdraw its application at any time. An
applicant who withdraws its application shall be liable for the costs
of services provided up to the time of withdrawal of its application.
An applicant that voluntarily withdrew its application prior to the
issuance of a notice of noncompliance will not be issued a notice of
noncompliance. Similarly, an applicant that voluntarily withdrew its
application prior to the issuance of a notice of certification denial
will not be issued a notice of certification denial.
Sec. 205.403 On-site inspections.
(a) On-site inspections.
(1) A certifying agent must conduct an initial on-site inspection
of each production unit, facility, and site that is included in an
operation for which certification is requested and an on-site
inspection of each certified operation annually thereafter, for the
purpose of determining whether to approve the request for certification
or whether the certification of the operation should continue.
(2)(i) A certifying agent may conduct additional on-site
inspections of applicants for certification and certified operations to
determine compliance with the Act and the regulations in this part.
(ii) The Administrator or State program's governing State official
may require that additional inspections be performed by the certifying
agent for the purpose of determining compliance with the Act and the
regulations in this part.
(iii) Additional inspections may be announced or unannounced at the
discretion of the certifying agent or as required by the Administrator
or State program's governing State official.
(b) Scheduling. The initial on-site inspection must be conducted
within a reasonable time following a determination that the applicant
appears to comply or may be able to comply with the requirements of
subpart C of this part. On-site inspections must be conducted when the
applicant or an authorized representative of the applicant who is
knowledgeable about the operation is present and at a time when land,
facilities, and activities that demonstrate the operation's compliance
with or capability to comply with the applicable provisions of subpart
C of this part can be observed, except that this requirement does not
apply to unannounced on-site inspections.
(c) Verification of information. The on-site inspection of an
operation must verify:
(1) The operation's compliance or capability to comply with the Act
and the regulations in this part;
(2) That the information, including the organic production or
handling system plan, provided in accordance with Secs. 205.401,
205.406, and 205.200, accurately reflects the practices used or to be
used by the applicant for
[[Page 13621]]
certification or by the certified operation;
(3) That prohibited substances have not been and are not being
applied to the operation through means which, at the discretion of the
certifying agent, may include the collection and testing of soil;
water; waste; seeds; plant tissue; and plant, animal, and processed
products samples.
(d) Exit interview. The inspector must conduct an exit interview
with an authorized representative of the inspected operation to confirm
the accuracy and completeness of inspection observations and
information gathered during the on-site inspection. The inspector must
also address the need for any additional information as well as any
issues of concern.
Sec. 205.404 Approval of certification.
(a) Within a reasonable time after completion of the initial on-
site inspection, a certifying agent must review the on-site inspection
report, the results of any analyses for substances conducted, and any
additional information requested from or supplied by the applicant. If
the certifying agent determines that the organic system plan and all
procedures and activities of the applicant's operation are in
compliance with the requirements of this part and that the applicant is
able to conduct operations in accordance with the plan, the agent shall
approve certification. The approval may include restrictions as a
condition of continued certification.
(b) The certifying agent must issue a certificate of organic
operation which specifies the:
(1) Name and address of the certified operation;
(2) Effective date of certification;
(3) Categories of organic operation, including crops, wild crops,
livestock, or processed products produced by the certified operation;
and
(4) Name, address, and telephone number of the certifying agent.
(c) Once certified, a production or handling operation's organic
certification continues in effect until surrendered by the organic
operation or suspended or revoked by the certifying agent, the State
program's governing State official, or the Administrator.
Sec. 205.405 Denial of certification.
(a) When the certifying agent has reason to believe, based on a
review of the information specified in Sec. 205.402 or Sec. 205.404,
that an applicant for certification is not able to comply or is not in
compliance with the requirements of this part, the certifying agent
must provide a written notification of noncompliance to the applicant
pursuant to Sec. 205.662(a). When correction of a noncompliance is not
possible, a notification of noncompliance and a notification of denial
of certification may be combined in one notification.
(b) Upon receipt of such notification of noncompliance, the
applicant may:
(1) Correct deficiencies and submit a description of the corrective
actions taken with supporting documentation to the certifying agent;
(2) Correct deficiencies and submit a new application to another
certifying agent: Provided, That, the applicant must include a complete
application, the notification of noncompliance received from the first
certifying agent, and a description of the corrective actions taken
with supporting documentation; or
(3) Submit written information to rebut the noncompliance described
in the notification of noncompliance.
(c) After issuance of a notification of noncompliance, the
certifying agent must:
(1) Evaluate the applicant's corrective actions taken and
supporting documentation submitted or the written rebuttal, conduct an
on-site inspection if necessary, and;
(i) When the corrective action or rebuttal is sufficient for the
applicant to qualify for certification, issue the applicant an approval
of certification pursuant to Sec. 205.404; or
(ii) When the corrective action or rebuttal is not sufficient for
the applicant to qualify for certification, issue the applicant a
written notice of denial of certification.
(2) Issue a written notice of denial of certification to an
applicant who fails to respond to the notification of noncompliance.
(3) Provide notice of approval or denial to the Administrator,
pursuant to Sec. 205.501(a)(14).
(d) A notice of denial of certification must state the reason(s)
for denial and the applicant's right to:
(1) Reapply for certification pursuant to Secs. 205.401 and
205.405(e);
(2) Request mediation pursuant to Sec. 205.663 or, if applicable,
pursuant to a State program; or
(3) File an appeal pursuant to Sec. 205.681 or, if applicable,
pursuant to a State program of the denial of certification.
(e) An applicant for certification who has received a written
notification of noncompliance or a written notice of denial of
certification may apply for certification again at any time with any
certifying agent, in accordance with Secs. 205.401 and 205.405(e). When
such applicant submits a new application to a certifying agent other
than the agent who issued the notification of noncompliance or notice
of denial of certification, the applicant for certification must
include a copy of the notification of noncompliance or notice of denial
of certification and a description of the actions taken, with
supporting documentation, to correct the deficiencies noted in the
notification of noncompliance.
(f) A certifying agent who receives a new application for
certification, which includes a notification of noncompliance or a
notice of denial of certification, must treat the application as a new
application and begin a new application process pursuant to
Sec. 205.402.
(g) Notwithstanding paragraph (a) of this section, if a certifying
agent has reason to believe that an applicant for certification has
willfully made a false statement or otherwise purposefully
misrepresented the applicant's operation or its compliance with the
certification requirements pursuant to this part, the certifying agent
may deny certification pursuant to paragraph (c)(1)(ii) of this section
without first issuing a notification of noncompliance.
Sec. 205.406 Continuation of certification.
(a) To continue certification, a certified operation must annually
submit the following information, as applicable, to the certifying
agent:
(1) An updated organic production or handling system plan which
includes:
(i) A summary statement, supported by documentation, detailing any
deviations from, changes to, modifications to, or other amendments made
to the previous year's organic system plan during the previous year;
and
(ii) Any additions or deletions to the previous year's organic
system plan, intended to be undertaken in the coming year, detailed
pursuant to Sec. 205.200;
(2) Any additions to or deletions from the information required
pursuant to Sec. 205.401(b); and (3) Other information as deemed
necessary by the certifying agent to determine compliance with the Act
and the regulations in this part.
(b) Following the receipt of the information specified in paragraph
(a) of this section, the certifying agent shall arrange and conduct an
on-site inspection of the certified operation, pursuant to
Sec. 205.403.
(c) If the certifying agent has reason to believe, based on the on-
site inspection and a review of the information specified in
Sec. 205.404, that a certified operation is not complying with the
requirements of the Act and the
[[Page 13622]]
regulations in this part, the certifying agent shall provide a written
notification of noncompliance to the operation in accordance with
Sec. 205.662.
(d) If the certifying agent determines that the certified operation
is complying with the Act and the regulations in this part and that any
of the information specified on the certificate of organic operation
has changed, the certifying agent must issue an updated certificate of
organic operation pursuant to Sec. 205.404(b).
Secs. 205.407-205.499 [Reserved]
Subpart F--Accreditation of Certifying Agents
Sec. 205.500 Areas and duration of accreditation.
(a) The Administrator shall accredit a qualified domestic or
foreign applicant in the areas of crops, livestock, wild crops, or
handling or any combination thereof to certify a domestic or foreign
production or handling operation as a certified operation.
(b) Accreditation shall be for a period of 5 years from the date of
approval of accreditation pursuant to Sec. 205.506.
(c) In lieu of accreditation under paragraph (a) of this section,
USDA will accept a foreign certifying agent's accreditation to certify
organic production or handling operations if:
(1) USDA determines, upon the request of a foreign government, that
the standards under which the foreign government authority accredited
the foreign certifying agent meet the requirements of this part; or
(2) The foreign government authority that accredited the foreign
certifying agent acted under an equivalency agreement negotiated
between the United States and the foreign government.
Sec. 205.501 General requirements for accreditation.
(a) A private or State entity accredited as a certifying agent
under this subpart must:
(1) Have sufficient expertise in organic production or handling
techniques to fully comply with and implement the terms and conditions
of the organic certification program established under the Act and the
regulations in this part;
(2) Demonstrate the ability to fully comply with the requirements
for accreditation set forth in this subpart;
(3) Carry out the provisions of the Act and the regulations in this
part, including the provisions of Secs. 205.402 through 205.406 and
Sec. 205.670;
(4) Use a sufficient number of adequately trained personnel,
including inspectors and certification review personnel, to comply with
and implement the organic certification program established under the
Act and the regulations in subpart E of this part;
(5) Ensure that its responsibly connected persons, employees, and
contractors with inspection, analysis, and decision-making
responsibilities have sufficient expertise in organic production or
handling techniques to successfully perform the duties assigned.
(6) Conduct an annual performance appraisal for each inspector used
by the certifying agent and implement measures to correct any
deficiencies in compliance with the Act and the regulations in this
part that are identified in the appraisal;
(7) Have an annual program evaluation of its certification
activities conducted by the certifying agent's staff, an outside
auditor, or a consultant who has expertise to conduct such evaluations
and implement measures to correct any deficiencies in compliance with
the Act and the regulations in this part that are identified in the
evaluation;
(8) Provide sufficient information to persons seeking certification
to enable them to comply with the applicable requirements of the Act
and the regulations in this part;
(9) Maintain all records pursuant to Sec. 205.510(b) and make all
such records available for inspection and copying during normal
business hours by authorized representatives of the Secretary and the
applicable State program's governing State official;
(10) Maintain strict confidentiality with respect to its clients
under the applicable organic certification program and not disclose to
third parties (with the exception of the Secretary or the applicable
State program's governing State official or their authorized
representatives) any business-related information concerning any client
obtained while implementing the regulations in this part, except as
provided for in Sec. 205.504(b)(5);
(11) Prevent conflicts of interest by:
(i) Not certifying a production or handling operation if the
certifying agent or a responsibly connected party of such certifying
agent has or has held a commercial interest in the production or
handling operation, including an immediate family interest or the
provision of consulting services, within the 12-month period prior to
the application for certification;
(ii) Excluding any person, including contractors, with conflicts of
interest from work, discussions, and decisions in all stages of the
certification process and the monitoring of certified production or
handling operations for all entities in which such person has or has
held a commercial interest, including an immediate family interest or
the provision of consulting services, within the 12-month period prior
to the application for certification;
(iii) Not permitting any employee, inspector, contractor, or other
personnel to accept payment, gifts, or favors of any kind, other than
prescribed fees, from any business inspected, except that a certifying
agent that is a not-for-profit organization with an Internal Revenue
Code tax exemption, or in the case of a foreign certifying agent a
comparable recognition of not-for-profit status from its government,
may accept voluntary labor from certified operations;
(iv) Not providing advice concerning organic practices or
techniques to any certification applicant or certified operation for a
fee, other than as part of the fees under the applicable certification
program established under the Act; and
(v) Requiring all persons identified in Sec. 205.504(a)(2) to
complete an annual conflict of interest disclosure report.
(12) Accept the certification decisions made by another USDA-
accredited certifying agent as equivalent to its own;
(13) Refrain from making false or misleading claims about its
accreditation status, the USDA accreditation program for certifying
agents, or the nature or qualities of products labeled as organically
produced;
(14) Submit to the Administrator:
(i) A copy of any notice of denial of certification issued pursuant
to Sec. 205.405, notification of noncompliance, notification of
noncompliance correction, notification of proposed suspension or
revocation, and notification of suspension or revocation sent pursuant
to Sec. 205.662, simultaneously with its issuance and
(ii) On a quarterly calender basis, the name, address, and
telephone number of each operation granted certification;
(15) Charge applicants for certification and certified production
and handling operations only those fees and charges that it has filed
with the Administrator;
(16) Pay and submit fees to AMS in accordance with Sec. 205.640;
and
(17) Comply with, implement, and carry out any other terms and
conditions determined by the Administrator to be necessary.
(b) A private or State entity accredited as a certifying agent
under this subpart may establish a seal, logo, or other identifying
mark to be used by production and handling operations certified by the
certifying agent to indicate affiliation with the certifying
[[Page 13623]]
agent: Provided, That, the certifying agent:
(1) Does not require use of its seal, logo, or other identifying
mark on any product sold, labeled, or represented as organically
produced as a condition of certification and
(2) Does not require compliance with any production or handling
practices other than those provided for in the Act and the regulations
in this part as a condition of use of its identifying mark: Provided,
That, this provision does not apply to States with more restrictive
requirements approved by the Secretary or private entity certifying
agents certifying production and handling operations within States with
more restrictive requirements approved by the Secretary.
(c) A private entity accredited as a certifying agent must:
(1) Hold the Secretary harmless for any failure on the part of the
certifying agent to carry out the provisions of the Act and the
regulations in this part;
(2) Furnish reasonable security, in an amount and according to such
terms as the Administrator may by regulation prescribe, for the purpose
of protecting the rights of production and handling operations
certified by such certifying agent under the Act and the regulations in
this part; and
(3) Transfer to the Administrator and make available to any
applicable State program's governing State official all records or
copies of records concerning the person's certification activities in
the event that the certifying agent dissolves or loses its
accreditation.
(d) No private or State entity accredited as a certifying agent
under this subpart shall exclude from participation in or deny the
benefits of the National Organic Program to any person due to
discrimination because of race, color, national origin, gender,
religion, age, disability, political beliefs, sexual orientation, or
marital or family status.
Sec. 205.502 Applying for accreditation.
(a) A private or State entity seeking accreditation as a certifying
agent under this subpart must submit an application for accreditation
which contains the applicable information and documents set forth in
Secs. 205.503 through 205.505 and the fees required in Sec. 205.640 to:
Program Manager, USDA-AMS-TMP-NOP, Room 2945-South Building, PO Box
96456, Washington, DC 20090-6456.
(b) Following the receipt of the information and documents, the
Administrator will determine, pursuant to Sec. 205.506, whether the
applicant for accreditation should be accredited as a certifying agent.
Sec. 205.503 Applicant information.
A private or State entity seeking accreditation as a certifying
agent must submit the following information:
(a) The business name, primary office location, mailing address,
name of the person(s) responsible for the certifying agent's day-to-day
operations, contact numbers (telephone, facsimile, and Internet
address) of the applicant, and, for an applicant who is a private
person, the entity's taxpayer identification number;
(b) The name, office location, mailing address, and contact numbers
(telephone, facsimile, and Internet address) for each of its
organizational units, such as chapters or subsidiary offices, and the
name of a contact person for each unit;
(c) Each area of operation (crops, wild crops, livestock, or
handling) for which accreditation is requested and the estimated number
of each type of operation anticipated to be certified annually by the
applicant along with a copy of the applicant's schedule of fees for all
services to be provided under these regulations by the applicant;
(d) The type of entity the applicant is (e.g., government
agricultural office, for-profit business, not-for-profit membership
association) and for:
(1) A State entity, a copy of the official's authority to conduct
certification activities under the Act and the regulations in this
part,
(2) A private entity, documentation showing the entity's status and
organizational purpose, such as articles of incorporation and by-laws
or ownership or membership provisions, and its date of establishment;
and
(e) A list of each State or foreign country in which the applicant
currently certifies production and handling operations and a list of
each State or foreign country in which the applicant intends to certify
production or handling operations.
Sec. 205.504 Evidence of expertise and ability.
A private or State entity seeking accreditation as a certifying
agent must submit the following documents and information to
demonstrate its expertise in organic production or handling techniques;
its ability to fully comply with and implement the organic
certification program established in Secs. 205.100 and 205.101,
Secs. 205.201 through 205.203, Secs. 205.300 through 205.303,
Secs. 205.400 through 205.406, and Secs. 205.661 and 205.662; and its
ability to comply with the requirements for accreditation set forth in
Sec. 205.501:
(a) Personnel.
(1) A copy of the applicant's policies and procedures for training,
evaluating, and supervising personnel;
(2) The name and position description of all personnel to be used
in the certification operation, including administrative staff,
certification inspectors, members of any certification review and
evaluation committees, contractors, and all parties responsibly
connected to the certifying agent;
(3) A description of the qualifications, including experience,
training, and education in agriculture, organic production, and organic
handling, for:
(i) Each inspector to be used by the applicant and
(ii) Each person to be designated by the applicant to review or
evaluate applications for certification; and
(4) A description of any training that the applicant has provided
or intends to provide to personnel to ensure that they comply with and
implement the requirements of the Act and the regulations in this part.
(b) Administrative policies and procedures.
(1) A copy of the procedures to be used to evaluate certification
applicants, make certification decisions, and issue certification
certificates;
(2) A copy of the procedures to be used for reviewing and
investigating certified operation compliance with the Act and the
regulations in this part and the reporting of violations of the Act and
the regulations in this part to the Administrator;
(3) A copy of the procedures to be used for complying with the
recordkeeping requirements set forth in Sec. 205.501(a)(9);
(4) A copy of the procedures to be used for maintaining the
confidentiality of any business-related information as set forth in
Sec. 205.501(a)(10);
(5) A copy of the procedures to be used for making the following
information available to any member of the public upon request:
(i) Certification certificates issued during the current and 3
preceding calender years;
(ii) A list of producers and handlers whose operations it has
certified, including for each the name of the operation, type(s) of
operation, and the effective date of the certification, during the
current and 3 preceding calender years;
(iii) The results of laboratory analyses for residues of pesticides
and other prohibited substances conducted during the current and 3
preceding calender years; and
(iv) Other business information as permitted in writing by the
producer or handler; and
[[Page 13624]]
(6) A copy of the procedures to be used for sampling and residue
testing pursuant to Sec. 205.670.
(c) Conflicts of interest.
(1) A copy of procedures intended to be implemented to prevent the
occurrence of conflicts of interest, as described in
Sec. 205.501(a)(11).
(2) For each person identified in Sec. 205.504(a)(2), a conflict of
interest disclosure report, identifying any food- or agriculture-
related business interests, including business interests of immediate
family members, that cause a conflict of interest.
(d) Current certification activities. An applicant who currently
certifies production or handling operations must submit:
(1) A list of all production and handling operations currently
certified by the applicant;
(2) Copies of at least 3, the Administrator may require additional,
different inspection reports and certification evaluation documents for
production or handling operations certified by the applicant during the
previous year for each area of operation for which accreditation is
requested; and
(3) The results of any accreditation process of the applicant's
operation by an accrediting body during the previous year for the
purpose of evaluating its certification activities.
(e) Other information. Any other information the applicant believes
may assist in the Administrator's evaluation of the applicant's
expertise and ability.
Sec. 205.505 Statement of agreement.
(a) A private or State entity seeking accreditation under this
subpart must sign and return a statement of agreement prepared by the
Administrator which affirms that, if granted accreditation as a
certifying agent under this subpart, the applicant will carry out the
provisions of the Act and the regulations in this part, including:
(1) Accept the certification decisions made by another USDA
accredited certifying agent as equivalent to its own;
(2) Refrain from making false or misleading claims about its
accreditation status, the USDA accreditation program for certifying
agents, or the nature or qualities of products labeled as organically
produced;
(3) Conduct an annual performance appraisal for each inspector to
be used by the certifying agent and implement measures to correct any
possible deficiencies identified in compliance with the Act and the
regulations in this part;
(4) Have an annual internal program evaluation conducted of its
certification activities by certifying agent staff, an outside auditor,
or a consultant who has the expertise to conduct such evaluations and
implement measures to correct any deficiencies identified in compliance
with the Act and the regulations in this part;
(5) Pay and submit fees to AMS in accordance with Sec. 205.640; and
(6) Comply with, implement, and carry out any other terms and
conditions determined by the Administrator to be necessary.
(b) A private entity seeking accreditation as a certifying agent
under this subpart must additionally agree to:
(1) Hold the Secretary harmless for any failure on the part of the
certifying agent to carry out the provisions of the Act and the
regulations in this part;
(2) Furnish reasonable security, in an amount and according to such
terms as the Administrator may by regulation prescribe, for the purpose
of protecting the rights of production and handling operations
certified by such certifying agent under the Act and the regulations in
this part; and
(3) Transfer to the Administrator and make available to the
applicable State program's governing State official all records or
copies of records concerning the certifying agent's certification
activities in the event that the certifying agent dissolves or loses
its accreditation.
Sec. 205.506 Approval of accreditation.
(a) Accreditation will be approved when:
(1) The accreditation applicant has submitted the information
required by Secs. 205.503 through 205.505;
(2) The accreditation applicant pays the required fee in accordance
with Sec. 205.640(c); and
(3) The Administrator determines that the applicant for
accreditation meets the requirements for accreditation as stated in
Sec. 205.501, as determined by a review of the information submitted in
accordance with Secs. 205.503 through 205.505 and, if necessary, a
review of the information obtained from a site evaluation as provided
for in Sec. 205.508.
(b) On making a determination to approve an application for
accreditation, the Administrator will notify the applicant of approval
of accreditation in writing, stating:
(1) The area(s) for which accreditation is given;
(2) The effective date of the accreditation; and
(3) For a certifying agent who is a private entity, the amount and
type of security that must be established to protect the rights of
production and handling operations certified by such certifying agent.
(c) The accreditation of a certifying agent shall continue in
effect until such time as the certifying agent fails to renew
accreditation as provided in Sec. 205.510(b), the certifying agent
voluntarily ceases its certification activities, or accreditation is
suspended or revoked pursuant to Sec. 205.665.
Sec. 205.507 Denial of accreditation.
(a) If the Administrator has reason to believe, based on a review
of the information specified in Secs. 205.503 through 205.505 or after
a site evaluation as specified in Sec. 205.508, that an applicant for
accreditation is not able to comply or is not in compliance with the
requirements of the Act and the regulations in this part, the
Administrator shall provide a written notification of noncompliance to
the applicant in accordance with Sec. 205.665(a).
(b) The applicant may:
(1) File, with the Administrator, an appeal of the deficiencies
identified in the notification of noncompliance; or
(2) Submit to the Administrator a description of the actions taken
to correct the deficiencies identified in the notification of
noncompliance and evidence demonstrating such corrections.
(c) If an applicant fails to correct the deficiencies, fails to
report the corrections by the date specified in the notification of
noncompliance, fails to file an appeal of the notification of
noncompliance by the date specified, or is unsuccessful in its appeal,
the Administrator will provide the applicant with written notification
of accreditation denial. An applicant who has received written
notification of accreditation denial may apply for accreditation again
at any time in accordance with Sec. 205.502.
(d) If the certifying agent was accredited prior to the site
evaluation and the certifying agent fails to correct the deficiencies,
fails to report the corrections by the date specified in the
notification of noncompliance, or fails to file an appeal of the
notification of noncompliance by the date specified, the Administrator
will begin proceedings to suspend or revoke the certifying agent's
accreditation. An applicant who has had its accreditation suspended may
apply for accreditation again at any time in accordance with
Sec. 205.502. A private entity certifying agent whose accreditation is
revoked will be ineligible for accreditation for a period of not less
than 3 years following the date of such determination.
[[Page 13625]]
Sec. 205.508 Site evaluations.
(a) Site evaluations of accredited certifying agents shall be
conducted for the purpose of examining the certifying agent's
operations and evaluating its compliance with the Act and the
regulations of this part. Site evaluations shall include an on-site
review of the certifying agent's certification procedures, decisions,
facilities, administrative and management systems, and production or
handling operations certified by the certifying agent. Site evaluations
shall be conducted by a representative(s) of the Administrator.
(b) An initial site evaluation of an accreditation applicant shall
be conducted before or within a reasonable period of time after
issuance of the applicant's ``notification of accreditation.'' A site
evaluation shall be conducted after application for renewal of
accreditation but prior to the issuance of a notice of renewal of
accreditation. One or more site evaluations will be conducted during
the period of accreditation to determine whether an accredited
certifying agent is complying with the general requirements set forth
in Sec. 205.501.
Sec. 205.509 Peer review panel.
The Administrator may establish a peer review panel to assist in
evaluating applicants for accreditation, amendment to an accreditation,
and renewal of accreditation as certifying agents. Peer reviewers will
serve without compensation.
(a) Peer review panel(s).
(1) A peer review panel shall review the documentation provided by
the Administrator after any site evaluation performed pursuant to
Secs. 205.508 and 205.510.
(2) The Administrator shall consider the reports received from each
individual member of a peer review panel when determining whether to
continue or renew the accreditation of a certifying agent.
(3) A peer review panel meeting shall be held solely for the
purposes of giving and receiving information. Any meeting or conference
call shall be conducted in a manner that will ensure the actions of
panel members are carried out on an individual basis with any opinions
and recommendations by a member being made individually.
(b) Eligibility for peer review panels.
(1) Applicants for membership in the peer review panel pool must:
(i) Provide the Administrator with a written description and, upon
request, supporting documentation of their qualifications to conduct
peer reviews. Such description must include information concerning the
applicant's training and expertise in organic production or handling
methods and in evaluating whether production or handling operations are
using a system of organic production or handling.
(ii) Address possible limitations on availability to serve.
(iii) Include information concerning their commercial interests and
those of their immediate family members, within the 12-month period
prior to application, with any person who may seek to become or who is
an accredited certifying agent. No person who has or has had a
commercial interest, including an immediate family interest or the
provision of consulting services, in an applicant for accreditation or
renewal of accreditation within the preceding 12-month period shall be
appointed to or accept appointment to a panel evaluating such applicant
for accreditation or renewal of accreditation.
(2) Persons accepted to the pool may serve until notified that
their appointment has been rescinded by the Administrator or until they
are no longer qualified, whichever occurs first.
(c) Composition of peer review panels.
(1) Peer review panels convened by the Administrator shall consist
of at least three but no more than five members.
(2) Peer review panels must include:
(i) A Department representative who shall preside over the panel
and
(ii) No fewer than two members, drawn from the peer review pool,
who possess sufficient expertise, as determined by the Administrator,
in the areas of accreditation described in the application for
accreditation or the notice of approval of accreditation for each
certifying agent whose operations and performance are to be reviewed.
(3) Peer review panels may include:
(i) Up to two members with expertise in other disciplines,
including organizational management and finance;
(ii) Member(s) from the approved State organic certification
program when the applicant is a private entity that will operate within
the State; and
(iii) Member(s) from a foreign government's organic program when
the applicant is a private entity that will operate within the country.
(d) Duties and responsibilities of panel members.
(1) Each person on a peer review panel must individually review the
site evaluation report prepared by the Department's evaluator(s) and
any other information that may be provided by the Administrator
relevant to continuing or renewing the accreditation status of a
certifying agent;
(2) Information about the certifying agent received as part of the
review process is confidential information, and peer reviewers must not
release, copy, quote, or otherwise use material from the information
received, other than in the report required to be submitted;
(3) Each peer reviewer must agree to treat the information received
for review as confidential; and
(4) Each person on a peer review panel must provide an individual
written report, including recommendations, to the Administrator
regarding a certifying agent's ability to conduct and perform
certification activities.
(e) Peer review panel reports. Copies of the peer review panel
reports will be provided upon request to the certifying agent, and
written responses from the certifying agent may be submitted for
consideration by the Administrator.
Sec. 205.510 Annual report, recordkeeping, and renewal of
accreditation.
(a) Annual report and fees. An accredited certifying agent must
submit annually to the Administrator, on or before the anniversary date
of the issuance of the notification of accreditation, the following
reports and fees:
(1) A complete and accurate update of information submitted
pursuant to Secs. 205.503 and 205.504;
(2) Information supporting any changes being requested in the areas
of accreditation described in Sec. 205.500;
(3) A description of the measures implemented in the previous year
and any measures to be implemented in the coming year to satisfy any
terms and conditions determined by the Administrator to be necessary,
as specified in the most recent notification of accreditation or notice
of renewal of accreditation;
(4) The results of the most recent inspector performance appraisals
and annual program evaluation and a description of adjustments to the
certifying agent's operation and procedures implemented or to be
implemented in response to the appraisals and evaluation; and
(5) The fees required in Sec. 205.640(a).
(b) Recordkeeping. Certifying agents must maintain records
according to the following schedule:
(1) Records obtained from applicants for certification and
certified operations must be maintained for not less than 5 years
beyond their receipt;
(2) Records created by the certifying agent regarding applicants
for certification and certified operations must be maintained for not
less than 10 years beyond their creation; and
[[Page 13626]]
(3) Records created or received by the certifying agent pursuant to
the accreditation requirements of this subpart F, excluding any records
covered by Secs. 205.510(b)(2), must be maintained for not less than 5
years beyond their creation or receipt.
(c) Renewal of accreditation.
(1) An accredited certifying agent's application for accreditation
renewal must be received 6 months prior to the fifth anniversary of
issuance of the notification of accreditation and each subsequent
renewal of accreditation. The accreditation of certifying agents who
make timely application for renewal of accreditation will not expire
during the renewal process. The accreditation of certifying agents who
fail to make timely application for renewal of accreditation will
expire as scheduled unless renewed prior to the scheduled expiration
date. Certifying agents with an expired accreditation must not perform
certification activities under the Act and these regulations.
(2) Following receipt of the information submitted by the
certifying agent in accordance with paragraph (a) of this section, the
results of a site evaluation, and, if applicable, the reports submitted
by a peer review panel, the Administrator will determine whether the
certifying agent remains in compliance with the Act and the regulations
of this part and should have its accreditation renewed.
(d) Notice of renewal of accreditation. Upon a determination that
the certifying agent is in compliance with the Act and the regulations
of this part, the Administrator will issue a notice of renewal of
accreditation. The notice of renewal will specify any terms and
conditions that must be addressed by the certifying agent and the time
within which those terms and conditions must be satisfied.
(e) Noncompliance. Upon a determination that the certifying agent
is not in compliance with the Act and the regulations of this part, the
Administrator will initiate proceedings to suspend or revoke the
certifying agent's accreditation.
Secs. 205.511--205.599 [Reserved]
Subpart G--Administrative
The National List of Allowed and Prohibited Substances
Sec. 205.600 Allowed and prohibited substances and ingredients in
organic production and handling.
To be sold or labeled as ``organic,'' or ``made with organic
(specified ingredients),'' the product must be produced and handled
without the use of:
(a) Synthetic substances and ingredients, except as provided in
Sec. 205.601 and Sec. 205.603.
(b) Nonagricultural substances used in or on processed products,
except as otherwise provided in Sec. 205.605;
(c) Nonsynthetic substances prohibited in Sec. 205.602 or
Sec. 205.604; and
(d) Materials, processes, or techniques prohibited in Sec. 205.301.
Sec. 205.601 Synthetic substances allowed for use in organic crop
production.
In accordance with restrictions specified in this section and
Sec. 205.102 and Sec. 205.200 through Sec. 205.207, the following
synthetic substances may be used:
(a) As algicides, disinfectants and sanitizers, including
irrigation system cleaning systems
(1) Alcohols
(i) Ethanol
(ii) Isopropanol
(2) Chlorine Materials--Except, That, residual chlorine levels in
the water shall not exceed the maximum residual disinfectant limit
under the Safe Drinking Water Act.
(i) Calcium Hypochlorite
(ii) Chlorine Dioxide
(iii) Sodium Hypochlorite
(3) Hydrogen Peroxide
(4) Soap-Based Algicides/Demossers
(b) As herbicides, weed barriers, as applicable.
(1) Herbicides, Soap-Based--for use in farmstead maintenance
(roadways, ditches, right of ways, building perimeters) and ornamental
crops
(2) Mulches
(i) Newspaper or other recycled paper, without glossy or colored
inks.
(ii) Plastic mulch and covers (petroleum-based other than polyvinyl
chloride (PVC))
(c) As compost feedstocks--Newspapers or other recycled paper,
without glossy or colored inks
(d) As animal repellents--Soaps, Ammonium--for use as a large
animal repellant only, no contact with soil or edible portion of crop
(e) As insecticides (including acracides or mite control)
(1) Ammonium Carbonate--for use as bait in insect traps only, no
direct contact with crop or soil
(2) Boric Acid--structural pest control, no direct contact with
organic food or crops
(3) Elemental Sulfur
(4) Lime Sulfur--including calcium polysulfide, fungicides, or
insecticides if no alternatives
(5) Oils, Horticultural--as dormant, suffocating, and summer oils
(6) Petroleum-Based Oils--on woody plants for dormant and summer
pest control, Except, That, a petroleum-based material allowed as a
pesticide is prohibited for use as a herbicide. Aromatic petroleum
solvents as a subclass of petroleum-based oils are prohibited.
(7) Soaps, Insecticidal
(8) Sticky Traps/Barriers
(f) As insect attractants--Pheromones
(g) As rodenticides
(1) Sulfur Dioxide--underground rodent control only (smoke bombs)
(2) Vitamin D3
(h) As slug or snail bait--[Reserved]
(i) As plant disease control
(1) Coppers, Fixed--Copper Hydroxide, Copper Oxide, Copper
Oxychloride, Includes products exempted from EPA tolerance, Except,
That, copper-based materials shall be managed in a way that prevents
excessive accumulation in the soil and shall not be used as herbicides.
(2) Copper Sulfate--Substance must be used in a manner that
minimizes accumulation of copper in the soil.
(3) Hydrated Lime--not permitted for soil application or to
cauterize mutilations or deodorize animal wastes
(4) Hydrogen Peroxide
(5) Oils, Horticultural, as dormant, suffocating, and summer oils,
insecticides only
(6) Petroleum-Based Oils--Except, That, aromatic petroleum solvents
as a subclass of petroleum-based oils are prohibited.
(7) Potassium Bicarbonate
(8) Elemental Sulfur
(j) As plant or soil amendments.
(1) Aquatic Plant Extracts (other than hydrolyzed)--Extraction
process is limited to the use of Potassium Hydroxide or Sodium
Hydroxide; solvent amount used is limited to that amount necessary for
extraction.
(2) Humic Acids--naturally occurring deposits, water and alkali
extracts only
(3) Lignin Sulfonate--chelating agent, dust suppressant, floatation
agent
(4) Micronutrients--not to be used as a defoliant, herbicide, or
desiccant. Those made from nitrates or chlorides are not allowed. Soil
deficiency must be documented by soil or tissue test.
(i) Soluble Boron Products
(ii) Sulfates, carbonates, oxides, or silicates of zinc, iron,
magnesium, manganese, molybdenum, selenium, and cobalt
(5) Liquid Fish Products--can be pH adjusted with sulfuric, citric
or phosphoric acid. The amount of acid used shall not exceed the
minimum needed to lower the pH to 3.5
(6) Vitamins, B1, C, and E
(k) As plant growth regulators--[Reserved]
[[Page 13627]]
(l) As floating agents in postharvest handling
(1) Lignin Sulfonate
(2) Sodium Silicate--for tree fruit and fiber processing
(m) As synthetic inert ingredients as classified by the
Environmental Protection Agency (EPA), for use with a synthetic
substance listed in this section and used as an active ingredient in
accordance with any limitations on the use of such synthetic
substances--EPA List 4--Inerts of Minimal Concern
(n)-(z) [Reserved]
Sec. 205.602 Nonsynthetic substances prohibited for use in organic
crop production.
(a) Ash from manure burning
(b) Arsenic
(c) Lead salts
(d) Sodium Fluoaluminate (Mined)
(e) Strychnine
(f) Tobacco Dust
(g)-(z) [Reserved]
Sec. 205.603 Synthetic substances allowed for use in organic livestock
production.
Any substance in the following categories may be used in organic
livestock production in accordance with any restrictions specified in
this section and Sec. 205.102 and Sec. 205.236 through Sec. 205.239.
(a) As disinfectants, sanitizers, and medical treatments as
applicable
(1) Alcohols
(i) Ethanol--disinfectant and sanitizer only, prohibited as a feed
additive
(ii) Isopropanol--disinfectant only
(2) Aspirin--approved for health care use to reduce inflammation
(3) Chlorine Materials--disinfecting and sanitizing facilities and
equipment. Residual chlorine levels in the water shall not exceed the
maximum residual disinfectant limit under the Safe Drinking Water Act
(i) Calcium Hypochlorite
(ii) Chlorine Dioxide
(iii) Sodium Hypochlorite
(4) Chlorohexidine--Allowed for surgical procedures conducted by a
veterinarian. Allowed for use as a teat dip when alternative germicidal
agents and/or physical barriers have lost their effectiveness
(5) Electrolytes--without antibiotics
(6) Glucose
(7) Glycerin--Allowed as a livestock teat dip, must be produced
through the hydrolysis of fats or oils
(8) Iodine
(9) Hydrogen Peroxide
(10) Magnesium Sulfate
(11) Parasiticides--Ivermectin--Prohibited in slaughter stock,
allowed in emergency treatment for dairy and breeder stock when organic
system plan-approved preventive management does not prevent
infestation. Milk or milk products from a treated animal cannot be
labeled as provided for in subpart D of this part for 90 days following
treatment. In breeder stock, treatment cannot occur during the last
third of gestation if the progeny will be sold as organic
(12) Phosphoric Acid--allowed as an equipment cleaner
(13) Vaccines and Biologics
(b) As topical treatment, external parasiticide or local anesthetic
as applicable.
(1) Iodine
(2) Lidocaine--as a local anesthetic. Use requires a withdrawal
period of 90 days after administering to livestock intended for
slaughter and 7 days after administering to dairy animals
(3) Lime, Hydrated--(Bordeaux mixes)
(4) Mineral Oil--for topical use and as a lubricant
(5) Procaine--as a local anesthetic, use requires a withdrawal
period of 90 days after administering to livestock intended for
slaughter and 7 days after administering to dairy animals
(6) Copper Sulfate
(c) As feed supplements--Milk Replacers--without antibiotics, as
emergency use only, no nonmilk products or products from BST treated
animals
(d) As feed additives
(1) Trace Minerals, including:
(i) Copper Sulfate
(ii) Magnesium Sulfate
(2) Vitamins--accepted for enrichment or fortification, limited to
those approved by the FDA for livestock use
(e) As fillers and excipients
(f)-(z) [Reserved]
Sec. 205.604 Nonsynthetic substances prohibited for use in organic
livestock production. [Reserved]
Sec. 205.605 Nonagricultural (nonorganic) substances allowed as
ingredients in or on processed products labeled as ``organic'' or
``made with organic (specified ingredients).''
The following nonagricultural substances may be used only in
accordance with any restrictions specified in this section and
Sec. 205.102, Sec. 205.270, and Sec. 205.300 through Sec. 205.310.
(a) Nonsynthetics allowed:
(1) Agar-agar
(2) Acids
(i) Alginic
(ii) Citric--produced by microbial fermentation of carbohydrate
substances
(iii) Lactic
(3) Baking Powder--aluminum-free
(4) Bentonite
(5) Calcium Carbonate
(6) Calcium Chloride
(7) Carrageenan
(8) Cornstarch (Native)
(9) Dairy Cultures--non-EM
(10) Diatomaceous Earth--food filtering aid only
(11) Enzymes--must be derived from edible, nontoxic plants,
nonpathogenic fungi, or nonpathogenic bacteria
(12) Gums--Water extracted only (arabic, guar, locust bean, carob
bean)
(13) Kaolin
(14) Kelp--for use only as a thickener and dietary supplement
(15) Lecithin--unbleached
(16) Nitrogen--Oil-free grades
(17) Oxygen--Oil-free grades
(18) Pectin (high-methoxy)
(19) Perlite--for use only as a filter aid in food processing
(20) Potassium Chloride
(21) Potassium Iodide
(22) Sodium Bicarbonate
(23) Sodium Carbonate
(24) Yeast--Nonsynthetic, non-EM
(i) Autolysate
(ii) Bakers
(iii) Brewers
(iv) Nutritional
(v) Smoked--growth on petrochemical substrate and sulfite waste
liquor prohibited. Nonsynthetic smoke flavoring process must be
documented
(b) Synthetics allowed:
(1) Alginates
(2) Ammonium Bicarbonate--for use only as a leavening agent
(3) Ammonium Carbonate--for use only as a leavening agent
(4) Ascorbic Acid
(5) Calcium Citrate
(6) Calcium Hydroxide
(7) Calcium Phosphates (monobasic and dibasic)
(8) Carbon Dioxide
(9) Chlorine Materials--disinfecting and sanitizing food contact
surfaces, Except, That, residual chlorine levels in the water shall not
exceed the maximum residual disinfectant limit under the Safe Drinking
Water Act.
(i) Calcium Hypochlorite
(ii) Chlorine Dioxide
(iii) Sodium Hypochlorite
(10) Ethylene--allowed for post harvest ripening of tropical fruit
(11) Ferrous Sulfate--for iron enrichment or fortification of foods
when required by regulation or recommended (independent organization)
(12) Glycerides (mono and di)--for use only in drum drying of food
(13) Glycerin--produced by hydrolysis of fats and oils
(14) Hydrogen peroxide
[[Page 13628]]
(15) Lecithin--bleached
(16) Magnesium Carbonate--for use only in agricultural products
labeled ``made with organic (specified ingredients),'' prohibited in
agricultural products labeled ``organic''
(17) Magnesium Chloride--derived from sea water
(18) Magnesium Stearate--for use only in agricultural products
labeled ``made with organic (specified ingredients),'' prohibited in
agricultural products labeled ``organic''
(19) Magnesium Sulfate
(20) Nutrient vitamins and minerals, in accordance with 21 CFR
104.20, Nutritional Quality Guidelines For Foods
(21) Ozone
(22) Pectin (low-methoxy)
(23) Phosphoric Acid--cleaning of food-contact surfaces and
equipment only
(24) Potassium Acid Tartrate
(25) Potassium Tartrate made from Tartaric acid
(26) Potassium Carbonate
(27) Potassium Citrate
(28) Potassium Hydroxide--prohibited for use in lye peeling of
fruits and vegetables
(29) Potassium Iodide--for use only in agricultural products
labeled ``made with organic (specified ingredients),'' prohibited in
agricultural products labeled ``organic''
(30) Potassium Phosphate--for use only in agricultural products
labeled ``made with organic (specific ingredients),'' prohibited in
agricultural products labeled ``organic''
(31) Silicon Dioxide
(32) Sodium Citrate
(33) Sodium Hydroxide--prohibited for use in lye peeling of fruits
and vegetables
(34) Sodium Phosphates--for use only in dairy foods
(35) Tocopherols--derived from vegetable oil when rosemary extracts
are not a suitable alternative
(36) Xanthan gum
(c)-(z) [Reserved]
Sec. 205.606 Nonorganically produced agricultural products allowed as
ingredients in or on processed products labeled as organic or made with
organic ingredients.
Any nonorganically produced agricultural product may be used in
accordance with any restrictions specified in this section and
Sec. 205.102, Sec. 205.270, and Sec. 205.300 through Sec. 205.310.
Sec. 205.607 Amending the National List.
(a) Any person may petition the National Organic Standard Board for
the purpose of having a substance evaluated for recommendation to the
Secretary for inclusion on or deletion from the National List in
accordance with section 6517 of the Act.
(b) A person petitioning for amendment of the National List should
request a copy of the petition procedures from the USDA at the address
in Sec. 205.607(c).
(c) A petition to amend the National List must be submitted to:
Program Manager, USDA/AMS/TM/NOP, Room 2945 South Building, PO Box
96456, Washington, DC 20090-6456.
(d) A substance may be added to the National List only in the
following categories:
(1) Synthetic substances allowed for use in organic crop or
livestock production;
(2) Nonsynthetic substances prohibited for use in organic crop or
livestock production; or
(3) Nonagricultural substances allowed for use as ingredients in or
on processed products labeled as ``organic'' or ``made with organic
(specified ingredients).''
State Programs
Sec. 205.620 Requirements of State organic certification programs.
(a) A State may establish a State organic certification program for
production and handling operations within the State which produces and
handles organic agricultural products.
(b) A State organic certification program must meet the general
requirements for organic programs specified in the Act and be at least
equivalent to the regulations in this part.
(c) A State organic certification program may contain more
restrictive requirements based on unique environmental conditions or
specific production or handling practices particular to the State or
region of the United States, which necessitates the more restrictive
requirement. Such additional requirements must further the purposes and
be consistent with the Act and regulations in this part.
(d) A State organic certification program must assume enforcement
obligations in the State for the requirements of this part and any more
restrictive requirements approved by the Secretary.
(e) A State organic certification program and any amendments to
such program must be approved by the Secretary prior to being
implemented by the State.
Sec. 205.621 Submission and determination of proposed State organic
certification programs and amendments to approved State organic
certification programs.
(a) A State program's governing State official must submit to the
Secretary a proposed State organic certification program and any
proposed amendments to such approved program.
(1) Such submission must contain supporting materials that include
statutory authorities, program description, a statement of acceptance
of the general requirements for organic programs specified in the Act,
documentation of unique environmental or ecological conditions or
specific production practices particular to the State which necessitate
more restrictive requirements than the requirements of this part, and
other information as may be required by the Secretary.
(2) Submission of a request for amendment of an approved State
organic certification program must contain supporting material that
includes an explanation and documentation of the unique environmental
or ecological conditions or specific production practices particular to
the State or region, which necessitates the proposed amendment.
Supporting material also must explain how the proposed amendment
furthers and is consistent with the purposes of the Act and the
regulations of this part.
(b) Within 6 months of receipt of submission, the Secretary will:
(1) Publish in the Federal Register for public comment, a summary
of a proposed State organic certification program, and a summary of any
proposed amendment to such program.
(2) After review of materials and documentation accompanying the
proposal and consideration of comments received, notify the State
program's governing State official of approval or disapproval of the
proposed program or amendment of an approved program and, if
disapproved, the reasons for the disapproval.
(c) After receipt of a notice of disapproval, the State program's
governing State official may resubmitt a revised State organic
certification program or amendment of such a program at any time.
Sec. 205.622 Review of approved State organic certification programs.
The Secretary will review a State organic certification program not
less than once during each 5-year period following the date of the
initial program approval. The Secretary will notify the State program's
governing State official of approval or disapproval of the
[[Page 13629]]
program within 6 months after initiation of the review.
Fees
Sec. 205.640 Fees and other charges for accreditation.
Fees and other charges equal as nearly as may be to the cost of the
accreditation services rendered under the regulations, including
initial accreditation, review of annual reports, and renewal of
accreditation, shall be assessed and collected from applicants for
initial accreditation and accredited certifying agents submitting
annual reports or seeking renewal of accreditation in accordance with
the following provisions.
(a) Fees-for-Service.
(1) Except as otherwise provided in this section, fees-for-service
shall be based on the time required to render the service provided
calculated to the nearest 15-minute period, including the review of
applications and accompanying documents and information, evaluator
travel, the conduct of on-site evaluations, review of annual reports
and updated documents and information, and the time required to prepare
reports and any other documents in connection with the performance of
service. The hourly rate shall be the same as that charged by the
Agricultural Marketing Service (AMS), through its Quality Systems
Certification Program, to certification bodies requesting conformity
assessment to the International Organization for Standardization
``General Requirements for Bodies Operating Product Certification
Systems'' (ISO Guide 65).
(2) Applicants for initial accreditation and accredited certifying
agents submitting annual reports or seeking renewal of accreditation
during the first 18 months following the effective date of subpart F of
this part shall receive service without incurring an hourly charge for
service.
(3) Applicants for initial accreditation and renewal of
accreditation must pay at the time of application, effective 18 months
following the effective date of subpart F of this part, a nonrefundable
fee of $500.00 which shall be applied to the applicant's fees-for-
service account.
(b) Travel charges. When service is requested at a place so distant
from the evaluator's headquarters that a total of one-half hour or more
is required for the evaluator(s) to travel to such place and back to
the headquarters or at a place of prior assignment on circuitous
routing requiring a total of one-half hour or more to travel to the
next place of assignment on the circuitous routing, the charge for such
service shall include a mileage charge administratively determined by
the Department and travel tolls, if applicable, or such travel prorated
among all the applicants and certifying agents furnished the service
involved on an equitable basis or, where the travel is made by public
transportation (including hired vehicles), a fee equal to the actual
cost thereof. Travel charges shall become effective for all applicants
for initial accreditation and accredited certifying agents on the
effective date of subpart F of this part. The applicant or certifying
agent will not be charged a new mileage rate without notification
before the service is rendered.
(c) Per diem charges. When service is requested at a place away
from the evaluator's headquarters, the fee for such service shall
include a per diem charge if the employee(s) performing the service is
paid per diem in accordance with existing travel regulations. Per diem
charges to applicants and certifying agents will cover the same period
of time for which the evaluator(s) receives per diem reimbursement. The
per diem rate will be administratively determined by the Department.
Per diem charges shall become effective, for all applicants for initial
accreditation and accredited certifying agents on the effective date of
subpart F of this part. The applicant or certifying agent will not be
charged a new per diem rate without notification before the service is
rendered.
(d) Other costs. When costs, other than costs specified in
paragraphs (a), (b), and (c) of this section are associated with
providing the services, the applicant or certifying agent will be
charged for these costs. Such costs include, but are not limited to,
equipment rental, photocopying, delivery, facsimile, telephone, or
translation charges incurred in association with accreditation
services. The amount of the costs charged will be determined
administratively by the Department. Such costs shall become effective
for all applicants for initial accreditation and accredited certifying
agents on the effective date of subpart F of this part.
Sec. 205.641 Payment of fees and other charges.
(a) Applicants for initial accreditation and renewal of
accreditation must remit the nonrefundable fee, pursuant to
Sec. 205.640(a)(3), along with their application. Remittance must be
made payable to the Agricultural Marketing Service, USDA, and mailed
to: Program Manager, USDA-AMS-TMP-NOP, Room 2945-South Building, PO Box
96456, Washington, DC 20090-6456 or such other address as required by
the Program Manager.
(b) Payments for fees and other charges not covered under paragraph
(a) of this section must be:
(1) Received by the due date shown on the bill for collection;
(2) Made payable to the Agricultural Marketing Service, USDA; and
(3) Mailed to the address provided on the bill for collection.
(c) The Administrator shall assess interest, penalties, and
administrative costs on debts not paid by the due date shown on a bill
for collection and collect delinquent debts or refer such debts to the
Department of Justice for litigation.
Sec. 205.642 Fees and other charges for certification.
Fees charged by a certifying agent must be reasonable, and a
certifying agent shall charge applicants for certification and
certified production and handling operations only those fees and
charges that it has filed with the Administrator. The certifying agent
shall provide each applicant with an estimate of the total cost of
certification and an estimate of the annual cost of updating the
certification. The certifying agent may require applicants for
certification to pay at the time of application a nonrefundable fee of
no more than $250.00, which shall be applied to the applicant's fees-
for-service account. The certifying agent shall provide all persons
inquiring about the application process with a copy of its fee
schedule.
Secs. 205.643--205.649 [Reserved]
Compliance
Sec. 205.660 General.
(a) The National Organic Program's Program Manager, on behalf of
the Secretary, may inspect and review certified production and handling
operations and accredited certifying agents for compliance with the Act
or regulations in this part.
(b) The Program Manager may initiate suspension or revocation
proceedings against a certified operation:
(1) When the Secretary has reason to believe that a certified
operation has violated or is not in compliance with the Act or
regulations in this part.
(2) When a certifying agent or a State program's governing State
official fails to take appropriate action to enforce the Act or
regulations in this part; or
(c) The Program Manager may initiate suspension or revocation of a
certifying agent's accreditation if the certifying agent fails to meet,
conduct, or maintain
[[Page 13630]]
accreditation requirements pursuant to the Act or this part.
Sec. 205.661 Investigation of certified operations.
(a) A certifying agent may investigate complaints of noncompliance
with the Act or regulations of this part concerning production and
handling operations certified as organic by the certifying agent. A
certifying agent must notify the Program Manager of all compliance
proceedings and actions taken pursuant to this part.
(b) A State program's governing State official may investigate
complaints of noncompliance with the Act or regulations in this part
concerning organic production or handling operations operating in the
State.
Sec. 205.662 Noncompliance procedure for certified operations.
(a) Notification. When an inspection, review, or investigation of a
certified operation by a certifying agent or a State program's
governing State official reveals any noncompliance with the Act or
regulations in this part, a written notification of noncompliance shall
be sent to the certified operation. Such notification shall provide:
(1) A description of each noncompliance;
(2) The facts upon which the notification of noncompliance is
based; and
(3) The date by which the certified operation must rebut or correct
each noncompliance and submit supporting documentation of each such
correction when correction is possible.
(b) Resolution. When a certified operation demonstrates that each
noncompliance has been resolved, the certifying agent or the State
program's governing State official, as applicable, will send the
certified operation a written notification of noncompliance resolution.
(c) Proposed suspension or revocation. When rebuttal is
unsuccessful or correction of the noncompliance is not completed within
the prescribed time period or is not adequate to demonstrate that each
noncompliance has been corrected, the certifying agent or State
program's governing State official shall send the certified operation a
written notification of proposed suspension or revocation of
certification of the entire operation or a portion of the operation, as
applicable to the noncompliance. When correction of a noncompliance is
not possible, the notification of noncompliance and the proposed
suspension or revocation of certification may be combined in one
notification. The notification of proposed suspension or revocation of
certification shall state:
(1) The reasons for the proposed suspension or revocation;
(2) The proposed effective date of such suspension or revocation;
(3) The impact of a suspension or revocation on future eligibility
for certification; and
(4) The right to request mediation pursuant to Sec. 205.663 or to
file an appeal pursuant to Sec. 205.681.
(d) Willfull violations. Notwithstanding paragraph (a) of this
section, if a certifying agent or State program's governing State
official has reason to believe that a certified operation has willfully
violated the Act or regulations in this part, the certifying agent or
State program's governing State official shall send the certified
operation a notification of proposed suspension or revocation of
certification of the entire operation, or a portion of the operation,
as applicable to the noncompliance.
(e) Suspension or revocation.
(1) If the certified operation fails to correct the noncompliance,
to resolve the issue through rebuttal or mediation, or to file an
appeal of the proposed suspension or revocation of certification, the
certifying agent or State program's governing State official shall send
the certified operation a written notification of suspension or
revocation.
(2) A certifying agent or State program's governing State official
must not send a notification of suspension or revocation to a certified
operation that has requested mediation pursuant to Sec. 205.663 or
filed an appeal pursuant to Sec. 205.681.
(f) Ineligibility. A certified operation or a person responsibly
connected with an operation whose certification has been revoked will
not be eligible to receive certification for a period of not more than
5 years following the date of such revocation, as determined by the
Secretary.
Sec. 205.663 Mediation.
Any dispute with respect to proposed suspension or revocation of
certification under this part shall, at the request of the applicant
for certification or certified operation, be mediated by a qualified
mediator mutually agreed upon by the parties to the mediation. If a
State Program is in effect, the mediation procedures established in the
State Program, as approved by the Secretary, will be followed.
Mediation shall be requested in writing to the applicable certifying
agent. The parties to the mediation shall have no more than 30 days to
reach an agreement following a mediation session. If mediation is
unsuccessful, the applicant for certification or certified operation
shall have 30 days from termination of mediation to appeal the
certifying agent's decision to the Administrator, pursuant to
Sec. 205.681. Any agreement reached during or as a result of the
mediation process shall be in compliance with the Act and these
regulations. The Secretary may review any mediated agreement for
conformity to the Act and these regulations.
Sec. 205.664 [Reserved]
Sec. 205.665 Noncompliance procedure for certifying agents.
(a) Noncompliance. When an inspection, review, or investigation of
an accredited certifying agent by the Program Manager reveals any
noncompliance with the Act or regulations in this part, a written
notification of noncompliance shall be sent to the certifying agent, as
applicable. Such notification shall provide:
(1) A description of each noncompliance found;
(2) The facts upon which the notification of noncompliance is
based; and
(3) The date by which the certifying agent must rebut or correct
each noncompliance when correction is possible.
(b) Resolution. When each noncompliance has been resolved, the
Program Manager shall send the certifying agent a written notification
of noncompliance resolution.
(c) Proposed suspension or revocation. If rebuttal is unsuccessful
or if correction of the noncompliance is not made within the prescribed
time period or is not adequate to demonstrate that each noncompliance
has been corrected, the Program Manager shall send a written
notification of proposed suspension or revocation of accreditation to
the certifying agent. The notification of proposed suspension or
revocation shall state whether the certifying agent's accreditation or
specified areas of accreditation are to be suspended or revoked. When
correction of a noncompliance is not possible, the notification of
noncompliance and the proposed suspension or revocation may be combined
in one notification. The notification of proposed suspension or
revocation of accreditation shall state:
(1) The reasons for the proposed suspension or revocation;
(2) The proposed effective date of the suspension or revocation;
(3) The impact of a suspension or revocation on future eligibility
for accreditation; and
[[Page 13631]]
(4) The right to file an appeal pursuant to Sec. 205.681.
(d) Willfull violations. Notwithstanding paragraph (a) of this
section, if the Program Manager has reason to believe that a certifying
agent has willfully violated the Act or regulations in this part, the
Program Manager shall send a written notification of proposed
suspension or revocation of accreditation to the certifying agent.
(e) Suspension or revocation. When the accredited certifying agent
fails to file an appeal of the proposed suspension or revocation of
accreditation, the Program Manager shall send a written notice of
suspension or revocation of accreditation to the certifying agent.
(f) Cessation of certification activities. A certifying agent whose
accreditation is suspended or revoked must:
(1) Cease all certification activities in each area of
accreditation which its accreditation is suspended or revoked.
(2) Transfer to the Secretary and make available to any applicable
governing State official all records concerning its certification
activities that were suspended or revoked.
(g) Eligibility.
(1) A certifying agent whose accreditation is suspended by the
Secretary under this section may at any time submit a new request for
accreditation, pursuant to Sec. 205.502. The request must be
accompanied by evidence demonstrating correction of each noncompliance
and corrective actions taken to comply with and remain in compliance
with the Act and the regulations in this part.
(2) A certifying agent whose accreditation is revoked by the
Secretary shall be ineligible to be accredited as a certifying agent
under the Act and the regulations in this part for a period of not less
than 3 years following the date of such revocation.
Secs. 205.666 and 205.667 [Reserved]
Sec. 205.668 Noncompliance procedures under State organic
certification programs.
(a) A State program's governing State official must promptly notify
the Secretary of commencement of any enforcement proceeding against a
certified operation and forward to the Secretary a copy of each notice
issued.
(b) A noncompliance proceeding, brought by a State program's
governing State official against a certified operation, shall be
appealable pursuant to the appeal procedures of the State organic
certification program. There shall be no subsequent rights of appeal to
the Secretary. Final decisions of a State may be appealed to the United
States District Court for the district in which such certified
operation is located.
(c) A State program's governing State official may review and
investigate complaints of noncompliance with the Act or regulations
concerning accreditation of certifying agents operating in the State.
When such review or investigation reveals any noncompliance, the State
program's governing State official shall send a written report of
noncompliance to the Program Manager. The report shall provide a
description of each noncompliance and the facts upon which the
notification of noncompliance is based.
Sec. 205.669 [Reserved]
Inspection and Testing, Reporting, and Exclusion from Sale
Sec. 205.670 Inspection and testing of agricultural product to be sold
or labeled organic.
(a) All agricultural products that are to be sold, labeled, or
represented as ``100 percent organic,'' ``organic,'' or ``made with
organic (specified ingredients)'' must be made accessible by certified
organic production or handling operations for examination by the
Administrator, the applicable State program's governing State official,
or the certifying agent.
(b) The Administrator, applicable State program's governing State
official, or the certifying agent may require preharvest or postharvest
testing of any agricultural input used or agricultural product to be
sold, labeled, or represented as ``100 percent organic,'' ``organic,''
or ``made with organic (specified ingredients)'' when there is
reasonable cause to believe that the agricultural input or product has
come into contact with a prohibited substance. Such tests must be
conducted by the applicable State program's governing State official or
the certifying agent at the official's or certifying agent's own
expense.
(c) The preharvest or postharvest tissue test sample collection
pursuant to paragraph (b) of this section must be performed by an
inspector representing the Administrator, certifying agent, or
applicable State program's governing State official. Sample integrity
must be maintained in transit, and residue testing must be performed in
an accredited laboratory. Chemical analysis must be made in accordance
with the methods described in the 16th edition of the Official Methods
of Analysis of the AOAC International or other applicable validated
methodology determining the presence of contaminants in agricultural
products.
(d) Results of all analyses and tests performed under this section:
(1) Must be provided to the Administrator promptly upon receipt;
and
(2) Will be available for public access, unless the testing is part
of an ongoing compliance investigation.
Sec. 205.671 Exclusion from organic sale.
(a) When residue testing detects prohibited substances at levels
that are greater than the estimated national mean of detected residues
for specific commodity/pesticide pairs, as demonstrated by USDA's
Pesticide Data Program, or unavoidable residual environmental
contamination, as determined by the Administrator, the agricultural
product must not be sold, labeled, or represented as organically
produced. The Administrator, the applicable State program's governing
State official, or the certifying agent may conduct an investigation of
the certified operation to determine the cause of the prohibited
substance residue.
(b) If test results indicate a specific agricultural product
contains pesticide residues or environmental contaminants that exceed
the Food and Drug Administration's or the Environmental Protection
Agency's regulatory tolerances, the data must be reported promptly to
the appropriate public health agencies.
Sec. 205.672 Emergency pest or disease treatment.
When a prohibited substance is applied to a certified operation due
to Federal or State emergency pest eradication or disease treatment
program and the certified operation otherwise meets the requirements of
this part, the certification status of the operation shall not be
affected as a result of the application of the prohibited synthetic
substance: Provided, That:
(a) Any harvested crop or plant part to be harvested that has
contact with a prohibited substance applied as the result of a Federal
or State emergency pest eradication or disease treatment program cannot
not be sold, labeled, or represented as organically produced; and
(b) Any livestock that are treated with a prohibited substance
applied as the result of a Federal or State emergency pest or disease
treatment program or product derived from such treated livestock cannot
be sold, labeled, or represented as organically produced: Except, That:
(1) Milk or milk products may be sold, labeled, or represented as
organically
[[Page 13632]]
produced beginning 12 months following the last date that the dairy
animal was treated with the prohibited substance; and
(2) The offspring of gestating mammalian breeder stock treated with
a prohibited substance may be considered organic: Provided, That, the
breeder stock was not in the last third of gestation on the date that
the breeder stock was treated with the prohibited substance.
Secs. 205.673--205.679 [Reserved]
Adverse Action Appeal Process
Sec. 205.680 General.
Persons subject to the Act who believe they are adversely affected
by a noncompliance proceeding decision of the National Organic
Program's Program Manager or a certifying agent may appeal such
decision to the Administrator.
Sec. 205.681 Appeals.
(a) Certification appeals. An applicant for certification may
appeal a certifying agent's notice of denial of certification, and a
certified operation may appeal a certifying agent's notification of
proposed suspension or revocation of certification to the
Administrator: Except, That, when the applicant or certified operation
is subject to an approved State organic certification program and the
decision to deny, suspend, or revoke a certification is made by a
certifying agent or a State program's governing State official, the
appeal must be made to the State program's governing State official or
such official's designee who will carry out the appeal pursuant to the
State program's appeal procedures approved by the Secretary.
(1) If the Administrator sustains a certification applicant's or
certified operation's appeal of a certifying agent's decision, the
applicant will be issued organic certification, or a certified
operation will continue its certification, as applicable to the
operation. The act of sustaining the appeal shall not be an adverse
action subject to appeal by the affected certifying agent.
(2) If the Administrator denies an appeal, a formal administrative
proceeding will be initiated to deny, suspend, or revoke the
certification. Such proceeding shall be conducted pursuant to the
Department's Uniform Rules of Practice.
(b) Accreditation appeals. An applicant for accreditation and an
accredited certifying agent may appeal a Program Manager's denial of
accreditation or proposed suspension or revocation of accreditation to
the Administrator.
(1) If the Administrator sustains an appeal, an applicant will be
issued accreditation, or a certifying agent will continue its
accreditation, as applicable to the operation.
(2) If the Administrator denies an appeal, a formal administrative
proceeding to deny, suspend, or revoke the accreditation will be
initiated. Such proceeding shall be conducted pursuant to the
Department's Uniform Rules of Practice.
(c) An appeal of a noncompliance decision must be filed within the
time period provided in the letter of notification or at least 30 days
from the receipt of the notification. The appeal will be considered
``filed'' on the date received by the Administrator or by the State
program's governing State official or such official's designee as
provided in the State's approved appeal procedures. A decision to deny,
suspend, or revoke certification or accreditation will become final and
nonappealable unless the decision is appealed in a timely manner.
(d) All appeals to the Administrator must be filed in writing and
addressed to Administrator, USDA-AMS, Room 3071-S, PO Box 96456,
Washington, DC 20090-6456, and be copied to the certifying agent
completely and simultaneously with submission to the Administrator.
Appeals must include a copy of the adverse decision and a statement of
the appellant's position that the decision was not made in accordance
with applicable program regulations, policies, or procedures.
Secs. 205.682--205.689 [Reserved].
Miscellaneous
Sec. 205.690 OMB control number.
The control number assigned to the information collection
requirements by the Office of Management and Budget pursuant to the
Paperwork Reduction Act of 1980, Public Law 96-511, is OMB number 0581-
0181.
Secs. 205.691--205.699 [Reserved]
PARTS 206-209--[RESERVED]
Dated: March 3, 2000.
Kathleen A. Merrigan,
Administrator, Agricultural Marketing Service.
Appendices to the Preamble
Appendix A.--Regulatory Impact Assessment for Proposed Rules
Implementing the Organic Foods Production Act of 1990 (Executive Order
12866)
The following regulatory assessment is provided to fulfill the
requirements of Executive Order 12866. This assessment consists of a
statement of the need for the proposed action, a description of the
baseline for the analysis, an examination of alternative approaches,
and an analysis of the benefits and costs. Much of the analysis is
necessarily descriptive of the anticipated effects of the proposed
rule. Because basic market data on the prices and quantities of
organic goods and services and the costs of organic production are
limited, it is not possible to provide quantitative estimates of all
benefits and costs of the proposed rule. The cost of fees and
recordkeeping proposed by U.S. Department of Agriculture (USDA) are
quantified, but the anticipated benefits are not. Consequently, the
analysis does not estimate the magnitude or the direction (positive
or negative) of net benefits.
The Need for the Proposed Action
The Organic Foods Production Act of 1990, Title XXI of the Food,
Agriculture, Conservation and Trade Act of 1990, U.S.C. Title 7,
mandates that the Secretary of Agriculture develop a national
organic program. The OFPA states that the Secretary shall establish
an organic certification program for farmers, wild-crop harvesters,
and handlers of agricultural products that have been produced using
organic methods as provided for in the OFPA. In addition, section
6514 of the OFPA requires the Secretary to establish and implement a
program to accredit a State program's governing State official or
any private person, who meets the requirements of the Act, as a
certifying agent to certify that farm, wild-crop harvesting, or
handling operations are in compliance with the standards set out in
the regulation. As stated by the OFPA in section 6501, the
regulations are proposed for the following purposes: (1) to
establish national standards governing the marketing of certain
agricultural products as organically produced products; (2) to
assure consumers that organically produced products meet a
consistent standard; and (3) to facilitate interstate commerce in
fresh and processed food that is organically produced.
The OFPA was introduced at the request of the organic community
after it experienced a number of problems in the marketing of
organic products. Many consumers are willing to pay price premiums
for organic food; hence, producers (farmers, ranchers, and wild-crop
harvesters) and handlers have an economic incentive to label their
products
[[Page 13633]]
organic. Because organic products cannot be distinguished from
conventionally produced products by sight inspection, consumers rely
on verification methods, such as certification by private entities
or verification by retailers to ensure that organic claims are true.
Where there has been no mandatory certification, consumers have been
unable to verify organic product claims on their own, and may have
been vulnerable to fraud from the mislabeling of organic products.
As organic production became better established in the 1980's,
new certifying agencies were formed, and some States passed laws
establishing standards for organic production. However, the
standards for organic production, processing, handling, and labeling
were different to some degree, causing disagreements between
certifying agents over whose standards would apply to ingredients
used in multi-ingredient organic processed products. Disagreements
about standards also created sourcing problems for handlers of these
multiingredient products.
Certifying agents are able to negotiate and maintain reciprocity
agreements at some cost. These reciprocity agreements specify the
conditions under which certifying agents recognize each others'
standards. The current system of variable standards has led the
organic industry to take on costs of private accreditation or
shipment-by-shipment certification, required to gain access to some
foreign markets such as the European Union (EU). These costs would
be avoided if a national program were in place.
Baseline
The organic industry is characterized by an array of production
and handling practices, self regulation and state regulation, and
consumer perceptions. However, there are commonalities throughout
the industry.
Certification
The United States currently has 49 certifying agents. There are
36 private certifying agencies and 13 States which have
certification programs. Private certifying agents range from small
nonprofit associations that certify only a few growers to large for-
profit businesses operating in numerous States and certifying
hundreds of producers. Typically, certifying agents review
producers' organic production plans, inspect the farm fields and
facilities to be certified, periodically reinspect, and may conduct
soil tests and tests for residues of prohibited substances. In some
cases, certifying agents negotiate reciprocity agreements with other
agents.
State laws vary widely on organic certification and
registration. Some States require only that an organic producer
register and make certification voluntary. California is an example.
Other States require certification by the State's own agents, while
others accept certification by a private certifying agent. The least
stringent requirement among States with organic legislation is that
products marketed as organic comply with their definition of organic
but both registration and certification are voluntary. Approximately
half of the States have laws which regulate organic production and
processing. Thirteen States operate programs to certify organic
production. In many States producers may claim their product is
organic but operate without certification or well-defined standards.
On the other hand, many organic producers operate in States with no
program and voluntarily secure third party certification to well-
defined standards. Certification costs vary with farm size and
across certifying agents. Illustrative certification costs are
presented in Tables 2A and 2B.
Very few certifying agents operate with an external
accreditation. There is no law which requires them to be accredited:
The price may be unacceptably high in relation to expected benefits;
the certifying agent may be unable to find an accrediting party
willing to accredit the particular organic program the certifying
agent is marketing; and State programs may believe that their status
as a government entity obviates the need for external accreditation.
In 1999 USDA began verifying certifying agents to International
Organization for Standardization (ISO) Guide 65. It is a valuable
recognition that the certifying entity satisfies the business
capacity standards of ISO Guide 65. European Union authorities have
accepted verification of certifying agents to ISO Guide 65 as an
interim measure to facilitate exports pending the establishment of a
national organic program.
Organic Food Production
Organic production occurs in all States. An estimated 12,000
organic producers are operating in the United States. Most organic
producers are small both in terms of value of sales and acreage.
Small producers do not necessarily farm full-time, and may not
depend solely on farm income for a livelihood. Some organic
production occurs as a distinct part of a larger operation that
includes conventional production practices.
Key production practices followed by certified organic producers
include: abstaining from use of certain crop chemicals and animal
drugs; ecologically based pest and nutrient management; segregation
of organic fields and animals from nonorganic fields and animals;
following an organic production plan with multiple goals, including
sustainability; and record keeping to document practices and
progress toward the plan's goals. Specific elements of organic
production will vary, but organic systems generally share a core set
of practices. For example, the certification standards of virtually
all State and private U.S. certifying agents prohibit the use
synthetic chemical herbicides and insecticides or animal growth
hormones. And most certification standards include a three year ban
on the use of prohibited substances on cropland before production
can be certified as organic.
On the other hand, certification standards for organic livestock
production have been more variable, for pasture, feed, and other
practices. Until 1999, the USDA Food Safety and Inspection Service
(FSIS) withheld approval for the use of organic labels on meat and
poultry products pending the outcome of this rulemaking. However,
the Secretary announced a change in policy in January 1999. Meat and
poultry products may be labeled ``certified organic by (name of the
certifying agent)'' if processors obtain prior label approval from
FSIS and the claim meets certain basic criteria. However, many
private and State certifying programs have not developed standards
for livestock production.
The provisions of the New Hampshire organic program are
summarized below to illustrate key elements of current organic
standards. The New Hampshire program provisions are not
substantially different from provisions in some State programs,
private programs, and mirror provisions of USDA's proposed national
program. Soil tests are required for initial certification and every
three years afterward. Soil testing measures the quality of the soil
for agricultural production and is different from residue testing.
New Hampshire requires residue testing ``if the department believes
that the produce or soil which certified produce was grown may have
become contaminated with prohibited substances.'' (New Hampshire
Rule AGR 906 Certification of Organically Grown Food, Agr 906.05
Laboratory Analysis) Other production standards include a written
rotation plan, tillage systems that incorporate organic matter
wastes into the topsoil, compliance with limits on the sources of
manure and the timing of its application, prohibitions on the use of
certain substances (e.g., sewage sludge, synthetic sources of
nitrates, synthetic growth regulators, and anhydrous ammonia), a
list of accepted and prohibited weed and pest control practices,
segregation of organic and nonorganic production, record keeping
regarding fertilization, cropping, and pest management histories,
separate sales records for organic and nonorganic production, and
records of all laboratory analyses.
The New Hampshire program requires growers to pay a $100 annual
inspection fee, and to provide a written description of their farm
operation including the size of the farm, a field map, a three-year
history of crop production, pest control, and fertilizer use, a crop
rotation and a soil management plan, and a description of post-
harvest storage and handling methods. Applicants for certification
must also agree to comply with regulations controlling the use of
the New Hampshire certified organic logo.
Organic Food Handling
In addition to growers, who actually produce and harvest
products to be marketed as organic, there are handlers who transform
and resell the organic products. Not all certifying agents have
standards for handling organic products. Some have standards for
parts of the food marketing system, such as retail food
establishments, that are not explicitly covered by the OFPA or by
the proposed regulation.
Definitions of processing and handling differ across certifying
agents and State laws. Some States, such as Washington, distinguish
between a processor and a handler, specifying 21 actions which
constitute processing and defining a handler as anyone who sells,
distributes, or packs organic products. Washington does not consider
retail grocery stores and restaurants to be organic handlers or
processors.
[[Page 13634]]
Marketing of Organic Food--Domestic and International
The marketing practices of organic producers range from roadside
stands marketing directly to consumers, to marketing through
wholesale markets, to direct marketing to restaurants and
supermarkets. USDA does not have official national level statistics
on organic retail sales. An industry trade publication reported
estimates of retail sales of organic foods for a number of years in
the 1990's (Table 1). The last published estimate was $3.5 billion
in 1996 ($3.6 billion in 1998 dollars). To put this figure in
context, total food expenditures by families and individuals were
$606 billion in 1996 ($629 billion in 1998 dollars).
The United States is both an importer and an exporter of organic
foods. The United States does not restrict imports of organic foods.
In fact, U.S. Customs accounts do not distinguish between organic
and conventional products. The largest markets for organic foods
outside the United States are in Europe, Japan, and Canada. There is
increasing pressure, particularly in Europe and Japan, for U.S.
exports to demonstrate that they meet a national standard rather
than a variety of private and State standards.
The EU is the largest market for organic food outside the United
States. The organic food market in the EU was estimated to be worth
$5.2 billion in 1997 (International Trade Centre UNCTAD/WTO 1999).
The largest organic retail sales markets in the EU in 1997 were
Germany ($1.8 billion), France ($720 million), and Italy ($750
million). Large organic markets outside the EU include Canada and
Australia, with approximately $60 million and $68 million,
respectively, in organic retail sales in 1997 (Lohr 1998). Import
share of the organic food market in Europe ranged from 10 percent in
France to 70 percent in the United Kingdom, was 80 percent in
Canada, and varied from 0 to 13 percent in various Australian
states.
Japan is another important market for U.S. organic products.
Currently, Japan has voluntary labeling guidelines for 6 categories
of non-conventional agricultural products: organic, transitional
organic, no pesticide, reduced pesticide, no chemical fertilizer,
and reduced chemical fertilizer. Total sales, including foods
marketed as ``no chemical,'' and ``reduced chemical'' are forecast
to jump 15 percent in 1999 to almost $3 billion. Imports of organic
agricultural products were valued at $90 million in 1998. Given
Japan's limited agricultural acreage, imports will likely provide an
increasingly significant share of Japan's organic food supply (USDA
FAS 1999a).
Recently, these markets have adopted or are considering to adopt
procedures that may impede the importing of organic food. The EU
regulations establishing the basis for equivalency in organic
production among EU members and for imports from outside the EU were
adopted in 1991 (Council Regulation 2092/91). The EU regulations
only allow imports from non-EU countries whose national standards
have been recognized as equivalent to the EU standards (Commission
Regulation 94/92).
The Ministry of Agriculture, Forestry, and Fisheries (MAFF) in
Japan recently announced proposed standards and third-party
certification requirements. Under Japan's proposed standards,
certifying agents from countries without national organic standards
administered by a federal government will have to be accredited
(registered) with MAFF to obtain approval to certify products
destined for the Japanese market. The Japanese proposal includes
provisions for country-to-country equivalency recognition of other
national programs.
The Proposed Rule
The proposed rule follows the structure established in the OFPA.
By adopting this alternative, the Department would follow
legislative direction in the OFPA. All products marketed as organic
will have to be produced and handled as provided in the OFPA and the
regulations. Compared to current organic practices, the proposed
rule sets a more stringent system of requirements.
Accreditation and Certification
The rule specifies the accreditation and certification process.
Persons providing certification of organic production and handling
must be accredited by USDA through the NOP. Applicants for
accreditation must document their abilities to certify according to
the national standards and to oversee their clients' compliance with
the requirements of the OFPA and NOP regulations. Producers and
handlers of organic products must be certified by an accredited
certifying agent. Producers and handlers are required to document
their organic plans and procedures to ensure compliance with the
OFPA.
All certifying agents would have to be accredited, and
certification by producers and handlers would not be voluntary. The
exceptions are: (1) Growers and handlers with gross organic sales of
$5,000 or less would be exempt from certification; and (2) a
handling operation may be exempt or excluded from certification
according to provisions described in the rule's subpart B,
Applicability. For example, a handling operation that is a retail
food establishment or portion of a retail food establishment would
be exempt if it handles organically produced agricultural products
but does not process them, and would be excluded from the
requirement to be certified if it processes or prepares, on the
premises of the retail food establishment, raw and ready-to-eat-food
from agricultural products that are previously labeled as ``100
percent organic,'' ``organic,'' or ``made with organic (specified
ingredients).'' However, this exemption does not extend to other
provisions of the proposed rule such as prevention of contact with
prohibited substances.
USDA will charge applicants for accreditation a $500 fee at the
time of application. USDA will also charge applicants for costs over
$500 for site evaluation of the applicant's business. The applicant
would be charged for travel costs, per diem expenses, and any
miscellaneous costs incurred with a site evaluation. Review of
documents for renewal of accreditation will be charged at an hourly
rate.
Producers and handlers will not pay certification fees to USDA.
Certification fees will be established by the accredited certifying
agents. USDA will not set fees. The rule requires certifying agents
to submit a copy of their fee schedules to USDA, post their fees,
and provide applicants estimates of the costs for initial
certification and for renewal of certification.
Production and Handling
The rule establishes standards for organic production of crops
and livestock and handling of organic products. These standards were
developed from specific requirements in the OFPA, recommendations
from the National Organic Standards Board (NOSB), review of existing
organic industry practices and standards, public comments received
on the 1997 proposal and subsequent issue papers, and public
meetings.
The proposed rule establishes a number of requirements for
producers and handlers of organic food. These requirements will
affect farming operations, packaging operations, processing
operations and retailers. Some of the major provisions are: (1) Land
requirements; (2) crop nutrient requirements; (3) crop rotation
requirements; (4) pest management requirements; (5) livestock
management requirements; (6) processing and handling requirements;
and (7) commingling requirements.
National List
The National List lists allowed synthetic substances and
prohibited non-synthetic substances that may or may not be used in
organic production and handling operations. The list identifies
those synthetic substances, which would otherwise be prohibited,
that may be used in organic production based on the recommendations
of the NOSB. Only those substances on the National List may be used.
The National List also identifies those natural substances that may
not be used in organic production, as determined by the Secretary
based on the NOSB recommendations.
Testing
When certifying agents have reason to believe organic products
contain a prohibited substance, they may conduct residue tests. The
rule incorporates the national mean of detected residues for
specific commodity/pesticide pairs and clarifies how unavoidable
residual environmental contamination would be used in residue
testing.
Labeling
The rule also states how organic products may be labeled and
permitted uses of the USDA organic seal. In addition to the USDA
seal and the certifying agent's seal, information on organic food
content may be displayed. It is important to note that small
businesses who are certified may use the USDA seal.
Recordkeeping
The rule will require certifying agents, producers, and handlers
to keep certain records. Certifying agents will be required to file
periodic reports with USDA. Producers and handlers will be required
to notify and submit reports to their certifying agent. While
recordkeeping is a standard practice in
[[Page 13635]]
conventional and organic farming, the proposal adds recordkeeping
and reporting requirements which do not exist for growers and
handlers operating without certification. Similarly, certifying
agents would face additional recordkeeping and reporting
requirements, particularly those certifying agents operating without
external accreditation. State and private certifying agents regulate
the use of organic seals and logos. The proposed rule permits
certifying agent logos and requires the name of the certifying agent
on processed organic foods.
Alternatives to the Proposed Rule
As required by E.O. 12866, alternatives to the proposed rule
were considered. The identified alternatives were the Status Quo and
Industry-Developed Standards. The costs and benefits of each
alternative were assessed to the extent possible.
Status Quo: The Organic Market in the Absence of Federal Regulation
This is the no program alternative. There would be no national
standard or national program of accreditation and certification.
Certification would be voluntary and certifying agents would not
have third party accreditation. Some producers and handlers would
operate with certification provided by private organizations or
State programs. Other producers and handlers would characterize
their foods as organic but would not be certified.
A mix of State and private programs may continue to operate
according to varying standards. In States without organic laws or
States where certification is voluntary, goods would be marketed as
organic without third party certification. Even under this scenario,
organic food produced in States with production standards and
certification may be produced using similar practices because most
State standards follow similar requirements: A 3 year transition,
prohibited use of certain substances (lists of substances tend to
overlap), practices which prevent commingling with conventional
products, and where livestock standards exist, organic feed.
In addition, at the time the OFPA was enacted, the industry had
been unable to agree on organic standards. Recently, there has been
movement toward shared standards partly in response to efforts to
develop national organic standards including the 1997 proposal and
the public NOSB process. The Organic Trade Association (OTA) has
developed ``American Organic Standards'' which the OTA Board
recently ratified. The OTA describes itself as `` * * * a national
association representing the organic industry in Canada, the United
States and Mexico. Members include growers, shippers, processors,
certifying agents, farmer associations, brokers, consultants,
distributors and retailers. Established in 1985 as the Organic Foods
Production Association of North America, the Organic Trade
Association works to promote organic products in the marketplace and
to protect the integrity of organic standards.'' (OTA website).
Although there is substantial consensus on the draft standards,
acceptance is not unanimous.
The draft standards developed through OTA correspond closely to
many elements in the proposed national organic program. OTA
envisions a system of accreditation and certification of producers
and handlers but not restaurants and grocery stores. The list of
allowed and prohibited substances mirrors the list developed by the
NOSB. Production practices for crops and livestock include the
common features in most State and private programs--a 3 year
transition, no commingling, use of organic feed, limits on the use
of antibiotics, requirements for an organic plan and recordkeeping.
Hence, even in the absence of a national program, the organic
industry may be moving toward a common standard.
Under the status quo-no national program alternative, producers
and handlers who chose to be certified, or who are required by State
laws to be certified, would pay fees that would vary depending on
the market for the particular private certifying agent's service and
whether a State certification program was operating with subsidized
fees.
No federal funds would be used, there would be no transfer from
federal taxpayers at large to organic market participants, and there
would be no federal regulatory barriers to entry into organic
production and handling.
International access for domestic organic products may be very
influential on development of the organic industry in the United
States. A food trade publication (The Natural Foods Merchandiser)
tracked organic sales for a while in the 1990s showing annual growth
in retail sales of 20-25 percent between 1990 and 1996 (Table 1).
This growth took place in the absence of a national program.
In the absence of national standards, U.S. organic producers
have been able to access European markets only by obtaining specific
product permissions granted to individual importers by organic
regulatory authorities in an EU member state (Byng, p. 27-28 1994).
This process has required the importer to satisfy the authorities,
through documentation and possible site inspection, that the product
in question has been certified to and produced under equivalent
standards of production and inspection. This case-by-case process of
approving imports was intended as a temporary arrangement to
accommodate non-EU countries that had not yet established government
systems regulating organic production and certification. Another
step State and private organic certifying agencies have taken to
access international markets in the absence of a national program
has been a voluntary, fee-for-service program to verify that they
comply with the requirements prescribed under ISO Guide 65.
Governments in foreign markets and foreign private processors
and retailers are expected to insist on additional verification that
goods have been produced to acceptable organic standards. This would
likely lead to an increased use of private accreditation services
and of USDA's ISO Guide 65 verification service. USDA's ISO Guide 65
verification services are provided on a user fee basis with full
cost recovery. These private accreditations and USDA's verifications
would increase costs for certifying agents and producers and
handlers. In addition, establishing reciprocity between certifying
agents in the domestic organic market involves some cost and may
stifle growth in trade of organic products, although the magnitude
of these costs and their effects on growth is unknown.
Under the proposed national program, all applicants for
accreditation will be assessed against ISO Guide 65, eliminating the
need for a separate ISO Guide 65 assessment that exists for those
exporting to the EU in the absence of a national program. Growth in
the trade of organic products, particularly exports, may be
jeopardized by a status quo-no program alternative because there
would be no national program upon which to establish equivalency.
Industry-Developed Standards
As an alternative to the proposed national program, another
national program could adopt industry-developed standards. For
example, USDA could adopt the standards recently developed by the
Organic Trade Association or other consensus standards and enforce
those standards. Certification to these standards could be performed
as it is currently, by private certifiers or by state programs.
There could be variation among certifiers' standards, but producers
and certifiers would not be able to prohibit use of a product
meeting the national standard from the production of other
``organic'' products.
There are various enforcement mechanisms that are available
under this alternative. The USDA could choose to enforce the adopted
standards. Enforcement could be left to other federal agencies or
State governments. For example, the Federal Trade Commission could
regulate truth in advertising with respect to organic food; the USDA
Food Safety Inspection Service could regulate labeling of organic
meat and poultry products.
Adopting the industry standard as the USDA standard, the USDA
could provide an acceptable national standard that would be
necessary in establishing equivalency to access international
organic markets, and eliminate the problems associated with
establishing reciprocity in the domestic organic market.
It is important to note that it may be difficult to develop
consensus industry standards. For example, while standards recently
proposed by OTA were developed with significant industry input they
may not represent the kind of consensus that is the result of this
proposed rule.
Number of Affected Parties and Projections
In assessing the impacts of the rule, we have attempted to
determine the number of certifying agents, private and State, that
are currently operating, and considered the factors likely to affect
the number of certifying agents after the rule is implemented. We
have attempted to determine the number of currently operating
producers and handlers that would be affected. And, we have
considered the factors which might affect the number of producers
and handlers after the program has been implemented.
[[Page 13636]]
For the analysis, the USDA assumes the following:
1. Forty-nine domestic certifying agents and ten foreign
certifying agents will be affected by the proposed regulation.
2. Approximately 12,200 certified and non-certified organic
producers will be affected by the proposed regulation. With the
assumed growth rate of 14% for certified organic producers and
approximately 8% for non-certified organic producers, the number of
organic producers will grow to 17,150 in 2002.
3. Approximately 1,250 processors and handlers of organic food
will be affected by the proposed action. This number will grow to
2,150 by 2002.
4. The number of retailers affected by the proposed action is
not quantified.
Certifying Entities
We place the number of certifying agents currently operating at
49, including 13 State programs. The number of certifying agents has
remained fairly stable, between 40 and 50, for some years, with
entries and exits tending to offset each other. For purposes of
estimating the paperwork burden described elsewhere, we assume no
growth in the number of domestic certifying agents but project 10
foreign certifying agents in the first 3 years of the program.
Organic Producers
It is more difficult to establish the number of organic
producers. Organic farming was not distinguished from conventional
agriculture in the 1997 Census of Agriculture. Among the sources
which give insight into the number of producers, the Organic Farming
Research Foundation (OFRF) has conducted nationwide surveys of
certified organic producers from lists provided by cooperating
certifying agents (OFRF 1999). OFRF sent its 1997 survey to 4,638
organic producers.
Because OFRF did not obtain lists from all certifying
organizations or their chapters (55 out of a total of 64 identified
entities provided lists), its list count of 4,638 producers is
likely an underestimate of the number of certified organic farms. If
the average producer-to-certifying agent ratio (55 certifying agents
to 4,638 producers) holds for the 9 certifying organizations that
did not provide the list (9 certifying agents out of a 64 certifying
agents), then the number of producer grows to 5,397 producers.
The different estimates of the number of certifying agents
should be noted. The USDA estimates 49 certifying agents; the OFRF
estimates 64 certifying agents. The difference stems from the USDA's
not counting different chapters of certifying organizations
separately.
The California Department of Food and Agriculture's organic
registration program suggests that, at least for California, most
organic producers are not certified. For the 1994-95 reporting
period, CDFA reported that 1,372 farms registered as organic
producers but only 517 of these farms were certified (Klonsky and
Tourte, 1998a). Thus, one approach to projecting national totals
from OFRF survey lists of certified producers would be to apply the
1994-95 ratio between producers registered and certified in
California to the OFRF 1997 list count. This would suggest the
number of non-certified producers to be 8,918, resulting in the
total number of organic producers to be 14,315. However, it is
important to note that California's structure of organic production
may not be representative of the national profile. The number of
non-certified producers may be higher or lower.
CDFA also reports the number of registered and certified
producers by sales class. Many producers would likely be eligible
for the small farm (sales less than $5,000) exemption provided for
in the OFPA. Of 1,372 registered organic farms in California, 907
had sales of less than $10,000. Of the 517 certified farms, 188 had
sales of under $10,000. If these ratios are applied to the number of
producers calculated, then the number of certified producers with
sales under $10,000 would be 1,962, and the number of organic
producers in general with sales under $10,000 would be 9,463. Thus,
there are potentially a large number of farms which could be exempt
from certification requirements.
Dunn (1995a, 1995b, and 1997) has estimated the number of
certified organic producers in the United States. Dunn (1995a,
1995b) estimated the number of certified producers at 4,060 in 1994.
Dunn (1997) reported 4,856 certified organic farms in 1995. USDA's
1997 proposal relied on Dunn's 1995 estimate of 4,060 total
certified producers. Dunn's numbers have been used because Dunn's
1995 work was an official USDA study. The methods used were reviewed
by USDA and the resulting estimates are official USDA statistics.
Although Dunn's 1997 estimates were not a USDA study, the 1997 study
used the same approach as the 1995 study.
An adjustment is needed to account for the number of producers
who are practicing organic agriculture but who are uncertified and
would be affected by this proposed rule. We reject the idea of
expanding by the certified-to-registered ratio reported in
California for reasons previously stated. We assume that the number
of organic-but-not-certified producers in 1999 is about 4,000. We
adopt this figure recognizing that there may be 1,000 such farms in
California, given that there were 855 in CDFA's report on 1995
registrations. The total number of organic farms for assessing the
impact of the rule is 12,200 in 1999.
Data collected by AMS indicate that the number of certified
organic farmers increased about 12 percent per year during the
period 1990 to 1994. OFRF survey efforts indicate that growth has
continued, though it is not clear whether the growth rate has
changed. We use the average growth rate from Dunn's time series from
1991-1994, which was about 14 percent. The true rate of growth could
be higher or lower. By applying the 14-percent growth rate to Dunn's
(1995) estimate, the number of certified organic producer
potentially affected in 1999 is 8,200 and 12,150 in 2002.
We have no national-level growth rates for not-certified organic
farms. The limited times series from CDFA is of limited value in
estimating a growth rate. We suspect it is less than the rate for
certified farms because certification has value and organic
producers would be expected to take advantage of the marketing
advantages of certification. Furthermore, the emergence of State
certification programs that appear to have lower certification fees
than private certification entities may have encouraged more organic
producers to be certified. Therefore, for purposes of analyzing the
impacts of the rule for the Paperwork Reduction Act, we assume
growth of non-certified organic producers from 4,000 in 1999 to
5,000 non-certified farms by 2002, making the total number of farms
potentially affected by the rule, 17,150 farms. However, we request
comment and/or data on the number and the growth of certified and
non-certified organic farms.
Organic Handlers
Little information exists on the number of handlers. They
include processors such as organic soup manufacturers, organic food
packaging operations, and organic food wholesalers. USDA has
estimated that there were 600 entities in this category in 1994
(Dunn 1995b). AMS estimated that the growth rate was 11 percent from
1990 through 1994 (Dunn 1995b). More recent data from CDFA
registration records suggest a growth rate of about 28 percent
(California Department of Health Services 1999). For projection
purposes, we use a growth rate of 20 percent, which makes the number
of handlers for 1999 1,250 and for 2002 2,150. Reasons for growth
include the general increase in organic production and growth in the
market for processed organic foods, including multiingredient
products. Again, these projections are based on limited data from
the early 1990's, and growth may have slowed or increased. We
request comment and/or data on the number and the growth rate of
processors and handlers in the organic industry.
Retail Food Establishments
Retailers of organic food are grocery stores, bakeries,
restaurants and other establishments that process or prepare raw and
ready-to-eat food. Most are not currently subject to either
voluntary practices or mandatory standards of the organic industry.
Although they are excluded from the certification requirements, they
are subject to other processing, handling, and other production
related requirements of the proposed rule. Hence, a new stratum of
the organic industry will be regulated by the proposed rule.
Dunn's (1995a) estimates the number of certified retailers to be
31 in 1995. It is not clear whether Dunn's (1995a) definition of
retailers and the proposed definition stated above are consistent.
Hence, the total number of retailers that may be regulated remains
unknown. USDA's Economic Research Service (ERS) reports there were
161,707 grocery stores in 1997 (ERS website). Many of these stores
sell organic products and may be affected by the proposed rule. The
effect of the proposed regulation on the growth of retailers remains
unknown. We request comment and/or data on the number and the growth
rate on the retailers of organic food.
[[Page 13637]]
Foreign Entities
The discussion of the number of affected parties has focused on
domestic certifying agents, producers, and handlers. We recognize
that foreign entities may apply for accreditation and foreign
producers and handlers may be certified under the NOP. Furthermore,
upon request of a foreign government, a foreign certifying agent may
meet the requirements for accreditation when the Administrator
determines that the certifying agent meets the requirements of the
NOP.
At this time, we have no information regarding the number of
foreign entities which may enter the NOP. We do not know how many
foreign producers and handlers are marketing goods as organic, nor
do we know how many will seek to be certified under the NOP.
Accredited certifying agents will be able to certify operations
outside the United States and foreign certifying agents may become
accredited by USDA. It is likely that the costs for accreditation
will be higher for foreign applicants for accreditation. Foreign
applicants will face the same costs as domestic applicants but the
levels of cost would reflect generally higher costs of foreign
travel and per diem expenses for site evaluation and miscellaneous
costs such as for translation of documents. For purposes of
estimating the paperwork burden described elsewhere, we assume 10
foreign certifying agents in the first 3 years of the program. We
request comment and/or data on the number and the growth rate of
foreign entities that may export to the U.S. organic market.
Benefits of the Proposed Rule
The benefits from implementation of the proposed rule are: (1)
Improved protection of buyers from misleading claims and more
information on organic food; (2) reduced administrative costs; and
(3) improved access to international organic markets. Not all
benefits that may arise from the rule are quantifiable. Where
economic data are available, they may relate to costs and are
generally not adequate to quantify economic benefits.
Information
Potential benefits to consumers as a result of the proposed rule
include more information on organic food, and protection from false
and misleading organic food claims. Consumers may be misled by
labels on processed and raw products claiming to be organic. In
particular, with processed food, some of the ingredients may not be
organically produced, or the product may contain less organic
content than the consumer assumes. The USDA organic seal will
provide consumers a quick tool to verify that goods offered for sale
as organic are in fact organic. To the extent that consumers view
the seal as an important information too, that is, product with the
seal is perceived as more desirable, they may enhance the ability of
producers to realize the price premiums associated with certified
products.
There is anecdotal evidence to suggest that consumer fraud
involving organic food does occur (Mergentime 1997). Criminal
prosecutions involving felony pleas and fines have taken place
(Mergentime 1997). However, we have no evidence to suggest that this
problem is wide-spread (Mergentime 1995). Also, it is important to
recognize that the organic industry's effort to police itself and
the remedies provided by the judicial system may be adequate to
address consumer fraud. Mergentime (1997) documents the effect of
litigating fraud cases on the industry. However, we request comment
and/or data on the extent and the severity of consumer fraud that
may exist.
Some producers may have limited their organic livestock
production because of uncertainty regarding the standards that would
be used in the NOP. By removing the uncertainty, producers may
increase production, thereby increasing the quantity of livestock
products.
Reduced Administrative Costs
The proposed rule addresses the problem of existing certifying
agents using different standards and not granting reciprocity to
other certifying agents. By accrediting certifying agents, the rule
would establish the requirements and enforcement mechanisms that
would reduce inconsistent certification services and lack of
reciprocity between certifying agents. In the current system, the
certifying agent of a final product is not required to recognize the
certification of an intermediate product. Both primary farmers and
food handlers may face a risk of being unable to sell a certified
organic product when more than one certifying agent is involved. By
imposing a uniform standard of certification and production, costs
associated with establishing reciprocity between certifying agents
will be eliminated. However, the magnitude of this benefit cannot be
gauged without quantification. In particular, with the increasing
consensus within the organic industry, the benefit may not be large.
It is important to distinguish between consensus with respect to
standards of production and consensus with respect to certifying
agents practices. There is growing consensus regarding crop
standards, livestock standards are more problematic. And, consensus
is least evolved regarding standards of conduct and practice for
certifying agents. There is no consensus regarding whether
certifying agents should be accredited or who the accrediting body
should be.
Industry-wide training costs may decrease. The proposed uniform
standards of production, certification should enable organic
inspectors to move more easily from one certifying agent to another
than the current system.
In addition, USDA accreditation of certifying agents would
present opportunities for sharing information about standards,
practices, and the general requirements of the program through the
NOP staff. USDA will undertake a number of outreach and education
efforts in connection with the launch of the NOP. Compliance guides
and other printed material will be prepared which will be more
readily understood than the Federal Register document. NOP staff
will participate at industry meetings and will likely host public
information exchange meetings.
International Markets
The final national program rule is expected to lead to EU
acceptance of NOP certified organic products. That is, it is
anticipated that the EU would determine that the NOP is acceptable
vis-a-vis EU regulation 2092/91. Article 11 of EU Reg. 2092/91
establishes the conditions under which organic products may be
imported from third countries and addresses the framework for
equivalency. The NOP is a national program that should be acceptable
to the EU and other governments. The result would be the removal of
trade restrictions, thereby possibly increasing the growth in
exports of organic food products.
Currently, despite restricted access to the European market, the
United States is the most important non-EU supplier of organic
products to EU countries (Foreign Agriculture Service (FAS), 1995).
Import authorizations have been granted for a number of raw and
processed commodities, including sunflowers, buckwheat, beans,
sugar, and apples. Demand is strong throughout the European market,
and the organic market share was 1-2 percent of total food sales in
1997 (Collins).
Lohr (1998) cites several growth projections:
Annual growth rates of 25% to 30% have been experienced in the
EU, the United States, and Japan for over five years, but growth is
already slowing in some product categories (PSC, Scott) * * * Segger
projects that the EU market will reach $58 billion and the U.S.
market $47 billion by 2006. Ahmed suggests that the Australian
market could grow to $571 million by 2000, whereas LaFond projects
that the value of Canadian organics will reach $145 million by 2006.
Mergentime forecasts the Japanese market will reach $2.6 billion by
2000 (Lohr, 1126).
Lohr further states that these projected future growth rates are
based on straight-line extrapolations of current sales and growth
rates without understanding the underlying market mechanisms and
price elasticities (Lohr 1998).
Foreign acceptance of the U.S. national standard can be expected
to expand the universe of consumers for U.S. producers and reduce
costs of negotiating and documenting shipment by shipment.
Costs of the Proposed Rule
The costs of the proposed regulation are the direct costs of
complying with the specific standards. It is important to note that
while some costs associated with accreditation and certification are
quantified, costs stemming from other provisions of the proposed
regulations are not. In addition, this is a short-run analysis. The
analysis examines the costs that may be incurred from 1999 to 2002.
It is not possible at this time to conduct a longer-run analysis
because we do not know enough about the fundamental supply and
demand relationships to make economically sound long run
projections.
Accreditation Costs
USDA has identified 36 private certifying agents and 13 State
programs providing certification. These 49 entities are considered
likely applicants during the first 18 months
[[Page 13638]]
during which USDA will not charge application fees or hourly fees
for accreditation. An unknown number of new entrants to the
certifying business may also apply. However, over the last 10 years,
the number of certifying agents does not appear to have grown
significantly, with the net effect of entries and exits maintaining
a population of certifying agents at about 40-50.
The proposed rule would allow USDA to collect fees from
certifying agents for USDA accreditation. Collecting fees from
certifying agents only is administratively simpler and will enable
State programs that want to keep client costs low to do so.
Applicants for accreditation will be required to submit a
nonrefundable fee of $500 at the time of application, which is
applied to the applicant's fees for service account. This means that
the $500 fee paid at the time of application is credited against any
subsequent costs of accreditation arising from the site evaluation.
The $500 fee is the direct cost to applicants who are denied
accreditation based on the initial review of the information
submitted with their application. Charges for the site evaluation
visit will cover travel costs from the USDA employees' duty station,
per diem expenses for USDA employees performing the site evaluation,
an hourly charge that we anticipate will not exceed $95 per hour
(per each employee) for services during normal working hours (higher
hourly rates will be charged for overtime and for work on holidays),
and other costs associated with providing service to the applicant
or certifying agent.
The anticipated hourly rate is the rate that USDA will charge
for services under the Quality Systems Certification Program (QSCP).
A separate rulemaking will establish the precise hourly rate that
will be charged. Our preliminary estimate that the fee will be no
more than $95 per hour is presented to give the public some
indication of the rate that will be charged following the 18-month
transition period. QSCP is an audit-based program administered by
AMS, which provides meat packers, processors, producers, and other
businesses in the livestock and meat trade with the opportunity to
have special processes or documented quality management systems
verified. The procedures for accreditation evaluation are similar to
those used to certify other types of product or system certification
programs under QSCP.
At present, the base per diem for places in the United States is
$80 ($50 for lodging and $30 for meals and incidental expenses). Per
diem rates are higher than $80 in most large cities and urbanized
places. Travel costs will depend on where the certifying agent is
located.
USDA estimates the costs of a site evaluation visit after the
transition period will average $3,070-$4,850 depending on the
characteristics of the applicant. This estimate is based on
experience with the QSCP and more limited experience performing
audits verifying that certifying agents meet ISO Guide 65. The cost
of a site evaluation visit will vary with the cost of travel from
the USDA reviewer's duty station to the applicant's place of
business. In general, more distant and more remote locations will
involve higher travel costs.
Accreditation will include verification of adherence to ISO
Guide 65. Recent experience with USDA's program to verify organic
certifying agents to ISO Guide 65 indicates that roughly 32 staff
hours are required. Although much of the accreditation site
evaluation will involve comparisons against ISO Guide 65, additional
hours will be required because USDA will be evaluating additional
aspects of the applicant's operation to determine if the applicant
is qualified to perform as an accredited agent for the NOP. Based on
experience with ISO Guide 65 verifications, we project that small
applicants with a simple business structure will require 3 days and
large applicants with more complex business structure will require 5
days. Thus, the total number of hours to be charged would range from
24 to 40 hours. At the base rate of $95.00, the charge for hours of
service would be $2,280-$3,800.
Per diem costs would cover 3 to 5 days, totaling $240-$400. A
review of domestic travel by USDA staff during fiscal year 1999,
indicates that transportation costs ranging from $500-$600.
Miscellaneous costs are estimated to add another $50 to each site
visit. Thus, the total site visit cost would range from $3,070 to
$4,850.
During the 18-month transition period, USDA intends to use 2
reviewers for site evaluation visits. One reviewer will come from
the QSCP audit staff and will be familiar with the ISO Guide 65
verification; the other reviewer will come from the NOP staff and
will be familiar with requirements of the organic program. The two
will conduct the site evaluation jointly. We anticipate only one
reviewer will be required after the transition period. During the 18
month transition period, applicants will be charged for travel and
per diem costs for two persons, but not application fees or hourly
fees. Thus, the estimated expenditures (travel and per diem) for
these initial accreditations will be $1,530-$2,050. Table 3
estimates the total initial costs for an applicant to become
accredited.
Currently few private certifying agents are operating with third
party accreditation. Fetter (1999) reports that in a sample of 18
certification programs four programs were accredited and one had
accreditation pending. All of these were large, private certifying
agents. Those certifying agents currently accredited by third
parties will likely pay less for USDA accreditation. In its first
proposal, USDA stated at FR 62:65860, ``We are aware that certifiers
currently may pay in excess of $15,000 for accreditation by a
private organization.'' Commenters thought this figure was too high.
One commenter, which operates the International Federation of
Organic Agriculture Movements (IFOAM) Accreditation Programme under
license to IFOAM, stated ``It is possible that the largest programme
operating a chapter system with activities in many countries (which
is included in their IFOAM evaluation) paid this amount in their
first year. On the other hand the average cost to a medium sized
certifier works out at around $3000 to $4000 per year.'' Another
commenter stated ``At the present time IFOAM accreditation costs
less than $10,000/year for the largest certifier and $3-5,000 for
smaller certifiers.''
The direct costs of accreditation, if all currently operating
certifying agents become accredited during the first 18 months
following the final rule, is approximately $75,000 to $100,000. This
figure is derived from the per firm costs in Table 3. After the
first 18 months, the direct cost for accrediting 49 certifying
agents would be approximately $150,000 to $238,000.
The 18 month period affects the distribution of program costs
between the organic industry and the taxpayer. Some of the costs of
accreditation would be absorbed by the NOP operation budget
appropriated by Congress. In effect, the taxpayers are subsidizing
the organic industry. Without this subsidy, the total cost of
accreditation may approach $1 million.
Private certifying agents and state programs that do not mirror
the proposed regulation may incur additional costs to change their
programs to adopt the proposed national standards. The discussion on
the effect of the proposed regulation on existing state programs is
in ``State Program Costs.'' The cost associated with changing
existing private certifying programs is not quantified.
Also, certifying agents who have been operating without third
party accreditation will face new costs. Compared to the direct
costs of $3,000-$5,000 per year indicated by the commenters, the
direct costs of USDA accreditation will be smaller. The direct costs
for certifying agents obtaining accreditation during the first 18
months, when USDA will not impose an application fee or hourly
charges, will be limited to travel and per diem costs. Furthermore,
USDA's charges are imposed every 5 years, not annually.
A national accreditation program may shrink the market for a
third-party accreditation. Certifying agents will have little
incentive to maintain or seek a second accreditation by a private
organization unless that accreditation sufficiently enhances the
market value of the certifying agent's services. Thus, the market
will determine whether other accrediting entities continue to have a
U.S. market for their services.
Training programs are currently offered by the Independent
Organic Inspectors Association (IOIA), an organization of
approximately 165 organic certification inspectors, and by some of
the larger certifying agents (IOIA, p. 1). Costs to existing
certifying agents to provide additional training to other staff are
difficult to measure in the absence of information on current staff
skill levels or the existence of formal training other than
inspector training. Some agencies rely on volunteer staff who may
have had no formal training, but the extent of this practice is
unknown. AMS intends to offer assistance to certifying agents,
producers, and handlers by providing guide books and other printed
material that would enable participants to better understand the
regulations. In addition, AMS intends to continue open and frequent
communication with certifying agents and inspectors to provide as
much information as possible to aid them in fulfilling the
requirements of the regulations.
[[Page 13639]]
The OFPA requires that private certifying agents furnish
reasonable security, such as a bond, for the purpose of protecting
the rights of participants in the organic certification program.
Specifics requirements regarding reasonable security have not yet
been established. It is expected that there will be costs to
certifying agents from these requirements.
Certification Costs
State laws vary widely on organic certification and
registration. Some States require only that an organic producer
register and make certification voluntary. Other States require
certification by the State's own agents, while others accept
certification by a private certifying agent. The least stringent
requirement among States with organic legislation is that products
marketed as organic comply with their definition of organic but both
registration and certification are voluntary. Thirteen States
operate programs to certify organic production. In many States
producers may claim their product is organic but operate without
certification or well-defined standards. On the other hand, many
organic producers operate in States with no program and voluntarily
secure third party certification to well-defined standards.
Under the proposed rule, USDA will not impose any direct fees on
producers and handlers. Certifying agents will establish a fee
schedule for their certification services that will be filed with
the Secretary. Certifying agents will provide all persons inquiring
about the application process with a copy of their fees. The
certifying agent will provide each applicant with an estimate of the
total cost of certification and an estimate of the annual costs of
updating the certification. However, the certifying agent may
require applicants to pay at the time of application a nonrefundable
fee of no more than $250 which must be applied to the applicants'
fee-for-services account. The $250 limit is proposed as a reasonable
figure considering the interests of certifying agents and
applicants.
The proposed maximum nonrefundable fee protects certifying
agents by ensuring that they receive some payment for their work for
applicants should the applicant lose interest or be found
unqualified for certification. For the purposes of estimating the
cost of the paperwork burden on certifying agents, USDA has valued
their time at $27 per hour. Thus, the $250 limit, if the certifying
agent chooses to require it, would cover approximately 9 hours of
work. The $250 limit protects applicants from paying large fees up
front when their ultimate eligibility for certification is unknown.
The $250 limit is believed to be low enough to ensure producers and
handlers can afford to take the first steps for certification but
high enough to ensure certifying agents will have an incentive to
initiate certification when the prospects that the applicant will
qualify are unknown.
Some States charge minimal fees for certification by subsidizing
operating costs from general revenues. The majority of certifying
agents structure their fee schedules on a sliding scale based on a
measure of size, usually represented by the client's gross sales of
organic products but sometimes based on the acres operated (Fetter
1999 and Graf and Lohr 1999). Some certifying agents charge an
hourly rate for inspection and audit services.
Graf and Lohr have applied fee schedules provided by nine
certifying agents to four hypothetical farms--small, medium, large,
and a super farm. Tables 2A and 2B summarizes the fees that Graf and
Lohr found by applying schedules of each certifying agent to
hypothetical farms. Total first-year costs and subsequent (renewal)
year costs for certification are shown. The average cost for each
size class should be interpreted with care because the reported
average is not weighted by the number of clients certified. In their
study, the Texas Department of Agriculture program is the low-cost
certifying agent for all-size operations. The high-cost certifying
agent differs across farm sizes. None of these certification
programs mentions costs for residue testing, which the NOP will
require in the form of preharvest testing when there is reason to
believe that agricultural products have come in contact with
prohibited substances. Preharvest testing is expected to be
infrequent. Some certifying agents currently require soil nutrient
testing and water quality testing. The estimated total initial costs
for a producer or handler to become certified are presented in Table
3.
We have not extended the average costs reported in Tables 2A and
2B to aggregate certification costs for all organic farms because
the number of organic farms is not known with precision, nor is
their geographic location and there are no data to distribute the
population of organic farms across size classes. Like conventional
agriculture, the largest percentage of farms would be expected to
fall in the smallest sales class. Many of the smallest farms would
qualify for the small farm exemption from certification.
In addition, organic producers and handlers would incur the
costs associated with becoming familiar with the national program.
We request comment and/or data on the certification costs that may
be imposed on the organic producers, handlers, processors, and
retailers.
Production and Handling Costs
Producers and handlers currently active in the organic industry
may bear costs under the proposed national standards. We believe
that while some provisions of the proposed program mirror current
industry practices, others differ. In addition to the cost
associated with becoming familiar with the national program, any
adjustments stemming from these differences will result in costs.
These costs are only qualitatively discussed. This assessment does
not include a provision-by-provision analysis of possible
alternatives.
Producers
Producers of organic food will face numerous provisions that
will regulate their production methods. As indicated in the Baseline
section, many of the requirements are currently practiced by
certified organic farmers. Farming operations that are not
certified, but are registered with a State government such as
California, receive copies of the State laws to which they must
comply. Some organic producers are neither certified nor registered
and therefore may not practice the requirements proposed. Major
provisions are discussed to illustrate costs; other provisions may
also impose additional costs. We request comment and/or data on the
costs that may be imposed on the producers of organic products. In
addition, we request comment and/or data on the similarities and
differences between the current practices of private and State
programs and the proposed requirements.
Land Requirement. The transition period, which would specify the
time during which prohibited materials cannot be applied before a
field can be certified as organic, is included in many private and
State organic standards. The OFPA specifies a required transition
period of 3 years before certifying a field. The effect of this
provision on the currently certified organic farming operations may
be minimal. Certifying agents currently enforce the 3 year
transition period required by the OFPA. Producers who are registered
in States requiring registration, receive copies of the State laws
governing organic production which generally require a 3 year
transition period.
The effect on small farming operations that are neither
certified or registered may be significant. Small farming operations
that have completed a 3 year transition period and can document the
transition will not be affected by this requirement. To stay in the
organic industry, those who have not completed the 3 year transition
period must comply with the transition period requirement. They may
incur the cost of organic production for a significant length of
time, yet not be allowed to sell their products as organic. Hence,
some small organic operations may exit the industry. We request
comment and/or data on the magnitude of the cost associated with the
provision. In addition, we request comment and/or data on the
similarities and differences between the current practices of
private and state programs and the proposed requirements.
Soil fertility and crop nutrients. Lacking information, we have
not quantified the cost associated with this provision, but we
assume that it may have costs Organic production historically rests
on soil fertility management. Private and State certifying agents
have well developed standards addressing care and treatment of the
soil. The proposed rule includes requirements for the use of manure
and a practice standard for composting which may impose additional
costs to producers. However, not all organic farmers use manure for
soil fertility and many farmers use composting practices that are
consistent with the proposed rule. We believe that this requirement
will have minimal impact on certified or registered organic
producers. We request comment and/or data on the magnitude of the
cost associated with the provision. In addition, we request comment
and/or data on the similarities and differences between the current
practices of private and State programs and the proposed
requirements.
Materials list. Lists of approved synthetic materials, including
soil amendments and
[[Page 13640]]
pesticides, vary from one State program to another. A detailed
analysis of specific differences in the various existing materials
lists shows them to be overlapping in most cases. The impact of the
national program will be determined by how the national standards
differ from current certification standards and from actual
practice.
Farming operations, both certified and registered, may need to
adjust their production methods to comply with the list. These
adjustments will impose costs on these operations. However, most
currently certified operations and those operating under a State
program already adhere to a materials list. These lists overlap in
most cases with each other and the National List in this proposal
which should mitigate the costs for these operations. The magnitude
of the costs resulting from these adjustments is not quantified. We
request comment and/or data on the magnitude of the costs associated
with the provision. In addition, we request comment and/or data on
the similarities and differences between the current practices of
private and state programs and the proposed requirements.
Animal drug use. Another common feature of organic standards is
the restricted use of animal drugs for livestock. Where livestock
standards have been adopted by existing State programs and by
private certifying agents, most prohibit the use of animal drugs
except for the treatment of a specific disease condition, and use of
animal drugs is generally prohibited within 90 days prior to the
sale of milk or eggs as organic. Some State and private certifiers
allow the use of animal drugs in animals for slaughter if the
producer extends the withholding period. Others prohibit the use of
animal drugs. The standards in the proposed rule would prohibit the
sale as organic of an edible products derived from an animal treated
with antibiotics or other unapproved substances.
The proposed standards may not differ from existing State or
private standards in prohibiting the use of drugs on healthy
animals. However, the effect of this provision may differ among
certified and registered organic farms. The effect on the certified
farming operations is unknown. We assume that this provision may
have costs, but the magnitude of these costs is not quantified. We
request comment and/or data on the magnitude of the costs associated
with the provision. In addition, we request comment and/or data on
the similarities and differences between the current practices of
private and state programs and the proposed requirements.
Other livestock requirements. Lacking information, we have not
quantified the cost associated with this provision, but we assume
that this provision may have costs due to the variability in current
housing, feed and health care practices. We request comment and/or
data on the magnitude of the costs associated with the provision. In
addition, we request comment and/or data on the similarities and
differences between the current practices of private and state
programs and the proposed requirements.
Residue Testing. Lacking information, we have not quantified the
cost associated with this provision, but we assume that this
provision may have costs. We request comment and/or data on the
magnitude of the costs associated with the provision. In addition,
we request comment and/or data on the similarities and differences
between the current practices of private and state programs and the
proposed requirements.
Handling requirements. These requirements prohibit a handler
from using ionizing radiation for any purpose, an ingredient
produced with excluded methods, or a volatile synthetic solvent in
or on a processed agricultural product intended to be sold, labeled,
or represented as ``100 percent organic'', ``organic'' or ``made
with organic (specified ingredients).'' We believe, however, that
the additional costs associated with compliance may be small. We
base this assumption on the thousands of comments on the first
proposal, including comments from the organic industry, indicating
that these practices are widely considered to be inconsistent with
organic production and handling. Lacking information, we have not
quantified the cost associated with this provision. We request
comment and/or data on the magnitude of the costs associated with
the provision In addition, we request comment and/or data on the
similarities and differences between the current practices of
private and state programs and the proposed requirements.
Handlers
Handlers of organic food may be defined and regulated
differently across different certifying agents and States. Handlers
may incur some cost associated with complying with the requirements
of the proposed regulation. We request comment and/or data on the
costs that may be imposed on the retailers of organic products. In
particular, we request comment and/or data on costs associated with
excluded methods, residue testing, and labeling. In addition, we
request comment and/or data on the similarities and differences
between the current practices of private and state programs and the
proposed requirements.
Retail Food Establishments
Largely, retailers of organic food are not regulated. However,
they are still subject to other requirements such as prevention of
contamination of organic products with prohibited substances, and
commingling organic with non organic products. Complying with these
provisions may incur some cost. We request comment and/or data on
the costs that may be imposed on the retailers of organic products.
Labeling Costs
Certified handlers will have to comply with requirements
regarding the approved use of labels. The estimated annual cost for
1,977 certified handlers to determine the composition of 20 products
to be reported on labels is $948,960. This figure is based on an
average of 1 hour per product and an hourly cost of $27. Similarly,
certified handlers will have to design their labels to comply with
the regulation. This is expected to take 1 hour per label at $27 per
hour for a compliance cost of $948,960. Total label costs for
certified handlers are $1.9 million.
Any producers, processors, and retailers who are not currently
certified but who package organic products are also subject to the
labeling requirements. Any changes to existing labels and new labels
that need to conform to the proposed regulation will incur a cost.
The costs associated with these activities are not quantified.
Hence, the lower bound on the labeling cost is approximately $2
million. We request comment and/or data on the extent the current
labels will need to change to conform to the proposed regulation. In
addition, we request comment and/or data on the similarities and
differences between the current practices of private and state
programs and the proposed requirements.
State Program Costs
A national program may impose additional costs on States by
requiring changes in their existing programs. The proposed rule
encompasses most of the principles of existing State programs.
However, there are also departures.
Where State standards are below Federal standards or where
elements of the Federal standards are missing from a State program,
these States would be required to make changes in their programs
that they might otherwise not make. Where State programs have
standards in addition to the Federal standards and they are not
approved by the Secretary, States also would be required to make
changes in their programs. States without organic standards or whose
current standards either would conform to those of the national
program or would be approved by the Secretary would not incur
additional costs resulting from required changes. Currently, USDA
cannot predict which States may be required to adjust their existing
programs.
States will be charged for accreditation, something none of them
pay for now. The cost associated with this provision is discussed in
the Accreditation Section.
Enforcement Costs
Enforcement costs will fall upon USDA's NOP, States operating
State programs, and on certifying agents. Certifying agents will
review clients' operations and will notify clients of deficiencies.
Certifying agents can initiate suspension or revocation of
certification. Certifying agents will be aware of these overhead
costs and we assume that they will establish fee schedules that will
cover these costs. Actual costs to certifying agents for enforcement
activities will depend on the number of clients, how well informed
clients are of their obligations, and client conduct. State programs
will face the same obligations and types of costs as private
certifying agents.
USDA's enforcement costs are costs associated with ensuring
private certifying agents and State programs fulfill their
obligations. USDA will bear costs of investigating complaints,
monitoring use of the USDA organic seal and organic labeling, and
taking corrective action when needed. USDA will bear costs related
to reviewing an applicant's or certified operation's appeal and for
administrative proceedings. We request comment on the costs of the
[[Page 13641]]
enforcement provisions of the proposed regulation.
Reporting and Recordkeeping Costs
The Paperwork Reduction Act of 1995 requires an estimate of the
annual reporting and recordkeeping burden of the proposed NOP.
Detailed descriptions of individual elements of that burden are
presented in the proposal under the heading Paperwork Reduction Act
of 1995. The estimated annual reporting and recordkeeping burden
reported is approximately $6.8 million. This figure should be
understood within the context of the requirements of the Paperwork
Reduction Act. The Paperwork Reduction Act requires the estimation
of the amount of time necessary for participants to comply with the
proposed regulation in addition to the burden they currently have.
Information gathered by AMS in auditing activities in conjunction
with ISO Guide 65 verifications, leads us to believe that the
paperwork burden on current certifying agents and certified
operators will be 10 to 15 percent greater than their current
business practices as a result of this proposal.
Certifying Agents. The regulation will impose administrative
costs on certifying agents for reporting and recordkeeping. The
actual amount of the additional administrative costs that would be
imposed by the proposed rule is expected to be different for those
entities which would begin their activities only after the national
program is implemented. Certifying agents that currently are active
in the organic industry already perform most of these administrative
functions; therefore, the additional costs to them would depend upon
the extent to which their current practices are different from the
requirements of the proposed regulation. An estimate of the cost of
compliance is the annual reporting and recordkeeping burden
documented in the Paperwork Reduction Act of 1995 analysis. Table 4
shows the estimated annual costs for State certifying agents and for
private or foreign certifying agents. Based on the projected number
of States agents (13) and private or foreign agents (46) the total
reporting and recordkeeping cost, which captures much of the
compliance costs of the rule, is $1,113,192.
The following list describes several of the most significant
proposed administrative requirements or optional submissions and the
probable resources required for compliance. Details on the reporting
and recordkeeping burdens estimated for each item are in the
paperwork analysis.
1. A list of farmers, wild crop harvesters and handlers
currently certified. This information can be compiled from existing
records. After implementation, certifying agents will be required to
submit on a quarterly basis a list of operations certified during
that quarter.
2. A copy of procedures used for certification decisions,
complying with recordkeeping requirements, maintaining
confidentiality of clients' business-related information, preventing
conflicts of interest, sampling and residue testing, training and
supervising personnel, and public disclosure of prescribed
information concerning operations they have certified and laboratory
analyses. These policies may have to be created or modified to
conform to the regulation.
3. Documentation on the qualifications of all personnel used in
the certification operation, annual performance appraisals for each
inspector and personnel involved in the certification, and an annual
internal program evaluation. Existing certifying agents may already
perform these operations. New certifying agents will have to
establish procedures to achieve these things.
4. Documentation on the financial capacity and compliance with
other administrative requirements (e.g., fee structure, reasonable
security to protect the rights of the certifying agents' clients as
provided in the NOP, and business relationships showing absence of
conflicts of interest). Some of this information can be compiled
from existing records, e.g., fee schedules, and some may be
generated from other sources.
5. Copies, submitted to USDA, of notices issued involving
denials of certification, noncompliance, and suspension or
revocation of certification. This requirement will be fulfilled
simultaneously with sending notices to applicants or clients.
6. An annual report to the Administrator including an update of
previously submitted business information, information supporting
any requested changes in the areas of accreditation, and steps taken
to respond to previously identified concerns of the Administrator
regarding the certifying agent's suitability for continued
accreditation. The annual report requirement will draw on records
created in the normal course of business.
7. Retention of records created by the certifying agent
regarding applicants and certified operations for not less than 10
years, retention of records obtained from applicants and certified
operations for not less than 5 years, and retention of other records
created or received for USDA accreditation for not less than 5
years. This activity requires records and database management
capabilities and resources (storage space, file cabinets, electronic
storage, etc.). In an informal inquiry, AMS found that most existing
certifying agents currently retain records for at least 10 years and
use both electronic and paper storage. We believe that this
requirement will not pose an additional burden on existing
certifying agents.
8. Public access to certification records, such as a list of
certified farmers and handlers, their dates of certification,
products produced, and the results of pesticide residue tests. This
requirement will have minimal impact given the requirements for
retaining records.
9. Providing program information to certification applicants. To
comply with this requirement, certifying agents may need to modify
existing standards and practices. The criteria for qualified
personnel in the proposed rule may likely result in an increase in
labor costs for some existing certifying agents and, initially, an
increase in training costs. The amount of additional costs to these
certifying agents would depend on the level of expertise among
current certification agency staff, the extent to which certifying
agents currently rely on volunteers, and the current costs of
training certification staff.
Producers and Handlers. The regulation will impose
administrative costs on producers and handlers for reporting and
recordkeeping. The actual amount of the additional administrative
costs that would be imposed by the final rule is expected to be
different for those entities that would begin their activities only
after the national program is implemented. Producers and handlers
who currently are active in the organic industry already perform
most of these administrative functions; therefore, the additional
costs to them would depend upon the extent to which their current
practices are different from the requirements of the final
regulation. An estimate of the cost of compliance is the annual
reporting and recordkeeping burden documented in the Paperwork
Reduction Act of 1995 analysis.
The following list describes several proposed administrative
requirements or optional submissions and the probable resources
required for compliance.
1. Establish, implement, and update annually an organic
production or handling plan. Organic plans are a standard feature in
the organic industry and are required by certifying agents. Thus,
producers and handlers who are already involved in organics, can
rely on their current plan with revisions as needed to meet elements
of the national program which are new to them or differ from their
current practice. Although producers and handlers are generally
aware of the goals of organic plans, current practice may fall short
of the rigor that will be required by the national program. New
producers and handlers will have higher costs because they will have
to prepare a plan from scratch.
2. Maintain records pertaining to their organic operation for at
least 5 years and allow authorized representatives of the Secretary,
the applicable State program's governing State official, and the
certifying agent access to records. Existing organic producers and
handlers maintain records. New producers and handlers will have to
develop records systems. Access is expected to be infrequent, will
require little time of the certified entity, and will not require
buildings or equipment other than what is required for storing
records.
3. Notify the certifying agent as required, e.g., when drift of
a prohibited substance may have occurred, and complete a statement
of compliance with the provisions of the NOP. Notifications are
expected to be infrequent.
The total reporting burden includes creation and submission of
documents. It covers the greatest amount of reporting burden that
might occur for any single creation or submission of a document
during any one of the first 3 years following program
implementation, i.e., 2000, 2001, and 2002. The total estimated
reporting burden reflects the average burden for each reporting
activity that might occur in 1 year of this 3-year period.
The total recordkeeping burden is the amount of time needed to
store and maintain records. For the purpose of measuring the
recordkeeping burden, the year 2002 is used
[[Page 13642]]
as the reporting year for which the largest number of records might
be stored and maintained. The annual reporting and recordkeeping
burdens on producers, handlers, and certifying agents is summarized
in Table 4.
Certified operations. The annual burden on certified producers
is estimated at 10 hours and $229. Certified handlers have an
estimated burden of 50 hours valued at $1,189. Certifying agencies
have an estimated burden of 700 hours valued at roughly $18,900.
Exempt operations. The burden on small producers and handlers,
who choose to operate as exempt entities, is minimal, 0.5 hour of
recordkeeping valued at $12. Exempt operations are exempt from
reporting and recordkeeping burdens. However, small producers and
handlers will have to invest some time and review documents to
determine whether they qualify for exemption or exclusion. Exempt
operations that produce multiingredient products containing less
than 50 percent organic ingredient will be required to maintain
records documenting the organic ingredients purchased. Since records
of purchases would be part of the normal recordkeeping for handlers,
we do not consider this a recordkeeping burden.
Based on the projected number of producers (17,150) and handlers
(2,150), the total reporting and recordkeeping cost, which captures
much of the compliance costs of the rule for this group, is
$5,200,721. We request comment and/or data on the costs that may be
imposed by the recordkeeping requirements of the proposed
regulation. In addition, we request comment and/or data on the
similarities and differences between the current practices of
private and state programs and the proposed requirements.
Barriers to Entry--Importers of Organic Products
Currently, there are no federal restrictions on importing
organic products to the United States in addition to those
regulations applying to conventional products. However, some States
require organic products sold within the State to be produced
according the State's standards. Thus, some State programs are
barriers to importers. The proposed regulation imposes a national
standard that these importers must meet, and may incur some cost. We
request comment and/or data on the extent of the organic food
imports and the costs that may be imposed on these importers to meet
the proposed standards.
Small Business Ramifications
USDA has proposed an 18-month period during which applicants for
accreditation would not be billed for hourly services. The rationale
for this transition period is to reduce the costs to certifying
agents and, thus, increase the prospect that certifying agents,
producers, and handlers will be able to afford to participate in the
national program. The choice of 18 months is intended to provide
sufficient time for parties desiring accreditation to submit their
application and prepare for a site evaluation.
USDA has proposed to operate the program partially with
appropriated funds, in effect sharing the cost of the program
between taxpayers and the organic industry, to respond to public
concerns regarding the effects of the proposed regulation on small
businesses. Thousands of comments were received opposing the first
proposal's fee provisions with most focusing on the substantial
impact on small certifying agents.
Congress has expressed public policy concern with the impacts of
regulations on small entities generally and with the impacts on the
NOP regulations on small entities particularly. The Small Business
Regulatory Enforcement Fairness Act of 1996 and the Regulatory
Flexibility Act express Congressional concern regarding regulatory
burden on small businesses. The Report from the Committee on
Appropriations regarding the Agriculture, Rural Development, Food
and Drug Administration, and Related Agencies Appropriations Bill,
2000, includes the following language (U.S. Senate 1999):
``The Committee continues to recognize the importance of organic
markets for small farmers and fishermen. The Committee expects the
Secretary to construct a national organic program that takes into
consideration the needs of small farmers and fishermen. * * *
Furthermore, the Committee expects that of the funding available for
the National Organic Program, necessary funds should be used to
offset the initial costs of accreditation services, a subsidy
necessary due to the lack of expertise in the Department of
Agriculture in the areas of organic accreditation and insufficient
data on the industry.''
Certifying agents applying for accreditation during the first 18
months following the final regulation will face lower direct costs
than subsequent applicants. The cost for later applicants for
accreditation will be higher because they will have to pay a $500
application fee and hourly charges for completing their site
evaluation. The requirement for accreditation was established in the
OFPA in 1990 and the proposed accreditation program was part of the
1997 proposal. Because in this proposal USDA is using appropriated
funds to cover some of the costs of initial accreditation during the
first 18 months of the program, certifying agents may set lower fees
initially benefitting the producers and handlers who are certified
during this period.
It is important to note that many small organic operations may
not be certified currently. In California, for example, many small
farms are registered, but not certified. Even if certifying agents
pass on the cost savings of the 18 month period provision to
applicants for certification, the cost of certification may be
higher than the cost of registration. Hence, becoming a certified
operation for small organic producers and handlers may be more
costly than the current practices.
The costs imposed on small operations may be mitigated by a
$5000 certification exemption to aid the smallest organic
operations. However, these operations are still subject to other
requirements of the proposed regulation. To the extent that these
requirements differ from their current practices, complying with the
national standards may be costly for exempt operations.
In addition, the certification exemption allowed under the
proposed regulation includes limits on what an exempt operation may
do. Without the certification, small organic operations may not
display the USDA seal and may not use a certifying agent's seal.
However, we are asking for public comment on whether exempt
operations should have the marketing option of selling their
products to handlers who can claim the products as organic in multi-
ingredient products. If the consumers of organic food view the seals
as important information tools on organic food, that is, if
consumers of organic products insist on only certified organic
products, the inability of small operations to display these seals
may prevent them from realizing the price premiums associated with
certified organic products.
Industry Composition
The imposition of the national standards may change the
composition of the organic industry. Even with the small business
exemptions, some small organic operations may choose to exit the
industry and small organic operations may also be discouraged from
entering the industry, resulting in a higher concentration of larger
firms. On the other hand, it may be easier for small operations to
comply with certain NOP standards, such as the livestock standards
which prohibit confinement production systems and require 100
percent organic feed.
Conclusion
Ideally, the net benefits of the proposed rule would be
estimated by employing a welfare analysis. In a welfare model, the
quantitative assessment of benefits would be represented by net
changes in consumer and producer surplus, i.e., the difference
between the willingness to pay (or firm cost structure in the case
of producers) and the market price of organic food. These net
changes would be estimated using information about the cost
structure of the industry, the demand for organic food, and
projected shifts in supply and demand resulting from the various
factors discussed in the assessment. Although researchers have
conducted numerous small-scale studies to determine consumers'
willingness to pay for certain organic products (primarily fresh
produce) and to identify reasons why conventional food buyers do not
choose organic food products (Hammitt, 1990 and 1993; Jolly; Misra
et al.; Park and Lohr; Weaver et al.), the available data are
insufficient to support a quantitative assessment of this type. A
1998 review of studies of consumer demand for organic foods
concluded, ``Attitudes, motives, and willingness to pay for organic
products have been measured, but apparently no retail data have been
available to estimate own-price, cross-price, and income
elasticities.'' (Thompson 1998).
USDA has identified the entities that may be affected by the
proposed rule and has analyzed the anticipated business-associated
impacts on them of the rule based on our knowledge of the industry
and limited data. We have drawn on industry studies, including
studies completed since the 1997 proposed rule was published, and
[[Page 13643]]
information provided in comments on the 1997 proposed rule.
The primary benefits from implementation of the proposed rule
are improved protection of buyers from a reduction in market
confusion including protection from false and misleading claims, and
improved access to markets from the reciprocity inherent in national
standards. These benefits have not been quantified.
The costs of the proposed regulation are the direct costs for
accreditation and the costs of complying with the specific standards
in the proposal including the reporting and recordkeeping
requirements. Other than accreditation fees, recordkeeping and
reporting costs, we did not quantify the magnitude of the compliance
costs or the costs of adhering to other provisions of this
regulation. We have also not quantified the impact of all these
provisions on small business but we believe there impact to be
significant.
The direct costs of accreditation if all currently operating
certifying agents become certified during the first 18 months
following the final rule is approximately $75,000 to $100,000. After
the first 18 months, the direct cost for accrediting would be
approximately $150,000 to $238,000. During the 18-month period
during which the NOP is not recovering the full costs of
accreditation services, the organic industry is being subsidized
with appropriated funded derived from the taxpayers. For existing
certifying agents compliance costs include costs to become familiar
with and adopt NOP standards. The aggregate cost of complying with
reporting and recordkeeping requirements of the rule are
approximately $6.8 million. Appropriated NOP funds used to operate
the National Organic Program are transfers from the taxpayers to the
participants in the organic sector.
References
Byng, John. 1994. UK and European Community (EC) Legislation. In,
Handbook of Organic Food Processing and Production. Simon Wright
(ed.). pp. 17-30. Glasgow: Blackie Academic and Professional.
California Department of Health Services (DHS). 1999. Report on the
Registration of California Organic Processed Food Firms. Sacramento:
State of California. September 1999. Figures obtained via personal
communication with DHS.
California Department of Health Services. 1995. Report on the
Registration of California Organic Processed Food Firms. Sacramento:
State of California.
Collins, Shane. 1999. ``Rosy future forecast for Europe's organic
market,'' Eurofruit Magazine, September.
Dunn, Julie Anton. 1995a. Organic Food and Fiber: An Analysis of
1994 Certified Production in the United States. U.S. Department of
Agriculture, Agricultural Marketing Service.
Dunn, Julie Anton. 1995b. ``Organic Foods Find Opportunity in
Natural Foods Industry,'' Food Review, Vol. 18, Issue 3, Sep.-Dec.
Dunn, Julie Anton. 1997. AgriSystems International Reports Certified
Organic production in the United States: Half a Decade of Growth.
AgriSystems International: Wind Gap, PA.
Emerich, Monica. 1996. Industry Growth: 22.6%. Natural Foods
Merchandiser (June):1-39.
Fetter, Robert T. 1999. Economic Impacts of Alternative Scenarios of
Organic Products Regulation. Senior Honors Thesis. University of
Massachusetts, Amherst, MA.
Graf, Anita and Luanne Lohr. 1999. ``Analysis of certification
program costs,'' Working Paper, Fund for Rural America project,
Market Development for Organic Agriculture Products, Grant No. 97-
36200-5.
Hammitt, James K. 1990. Risk Perceptions and Food Choice: An
Exploratory Analysis of Organic--Versus Conventional-Produce Buyers.
Risk Analysis, Vol. 10, No. 3: 367-374.
Hammitt, James K. 1993. Consumer Willingness to Pay to Avoid
Pesticide Residues. Statistica Sinica, 3.
Independent Organic Inspectors Association. 1996. IOIA 1996
Membership Directory. Winona, MN.
International Trade Centre UNCTAD/WTO. 1999. Organic Food and
beverages: World Supply and major European Markets. Geneva: ITC,
xiv, 271 p.
Jolly, Desmond A., Howard G. Schutz, Katherine V. Diaz-Knauf, and
Jagjeet Johal. 1989. Organic Foods: Consumer Attitudes and Use. Food
Technology (November): 60-66.
Jolly, Desmond A. 1991. Differences Between Buyers and Nonbuyers of
Organic Produce and Willingness to Pay Organic Price Premiums.
Journal of Agribusiness (Spring): 97-111.
Klonsky, Karen and Laura Tourte. 1995. Statistical Review of
California's Organic Agriculture, 1992-93. Report prepared for the
California Department of Food and Agriculture Organic Program.
Cooperative Extension, Department of Agricultural Economics,
University of California, Davis.
Klonsky, Karen and Laura Tourte. 1998a. Statistical Review of
California's Organic Agriculture, 1992-95. Report prepared for the
California Department of Food and Agriculture Organic Program.
Cooperative Extension, Department of Agricultural Economics,
University of California, Davis.
Klonsky, Karen and Laura Tourte. 1998b. Organic Agricultural
Production in the United States: Debates and Directions. Amer. J.
Agr. Econ. Vol. 80, No. 5: 1119-1124.
Lohr, Luanne. 1998. Implications of Organic Certification for Market
Structure and Trade. Amer. J. Agr. Econ. Vol. 80, No. 5: 1125-1129.
Mergentime, Ken. 1997. ``Organic Fraud Case Deepens; Possible Link
Causes OCIA Turmoil'', the Natural Foods Merchandiser, March.
Mergentime, Ken and Monica Emerich. 1995. Organic Sales Jump Over $2
Billion Mark in 1994. Natural Foods Merchandiser (June): 74-76.
Mergentime, Ken and Monica Emerich. 1996. Widening Market Carries
Organic Sales to $2.8 Billion in 1995. Natural Foods Merchandiser
(June): 36-38.
Misra, Sukant, Chung L. Huang, and Stephen L. Ott. 1991. Georgia
Consumers' Preference for Organically Grown Fresh Produce. Journal
of Agribusiness (Fall): 53-65.
Natural Foods Merchandiser. 1995. Organic Update: Reciprocity
Controversies Intensify, Exacerbating Certifier/Manufacturer
Tensions. April.
Organic Farming Research Foundation. 1999. Final Results of the
Third Biennial National Organic Farmers' Survey. E. Walz, Program
Coordinator. Santa Cruz, CA.
Park, Timothy A. and Luanne Lohr. 1996. Supply and Demand Factors
for Organic Produce. American Journal of Agricultural Economics,
Vol. 78 (August): 647-655.
Thompson, Gary D. 1998. Consumer Demand for Organic Foods: What We
Know and What We Need to Know. Amer. J. Agr. Econ. Vol. 80, No. 5:
1113-1118.
Underhill, S. E. and E. E. Figueroa. 1993. Consumer Preferences for
Non-Conventionally Grown Produce. Paper presented at the Valuing
Food Safety and Nutrition Conference, organized by the NE-165
Regional Research Project. Alexandria, VA, June 2-4.
USDA Foreign Agricultural Service. 1995. Agricultural Situation:
Agricultural Highlights, Winter 1995. Report from Austria. Code 24,
Sequence No. 007.
USDA Foreign Agricultural Service. 1995. Agricultural Situation:
Organic Food. Report from Germany. Code 24, Sequence No. 011.
USDA Foreign Agricultural Service. 1996. Agricultural Situation:
Organic Food Market Potential and Regulations. Report from France.
Code 24, Sequence No. 002.
USDA Foreign Agricultural Service. 1999a. Report on organic
agriculture in Japan. Attache report JA91234. October 5.
USDA Foreign Agricultural Service. 1999b. Report on organic
agriculture in France. Attache report FR9070. October 18.
U.S. Senate. 1999. Report 106-80. Agriculture, Rural Development,
Food and Drug Administration, and Related Agencies Appropriation
Bill 2000. Committee on Appropriations. Page 56.
Weaver, Robert D., David J. Evans, and A. E. Luloff. 1992. Pesticide
Use in Tomato Production: Consumer Concerns and Willingness-to-Pay.
Agribusiness, Vol. 8 No. 2: 131-142. Table 1.
Table 1.--Organic Food Sales
[$ billions]
------------------------------------------------------------------------
Sales
Year Sales (1998
dollars)
------------------------------------------------------------------------
1990.............................................. 1.000 1.25
1991.............................................. 1.250 1.50
1992.............................................. 1.540 1.79
1993.............................................. 1.890 2.13
1994.............................................. 2.310 2.54
1995.............................................. 2.800 2.99
1996.............................................. 3.500 3.64
------------------------------------------------------------------------
Source: Mergentime and Emerich in Natural Foods Merchandiser.
[[Page 13644]]
Table 2A.--First Year Certification Costs, From Graf and Lohr Analysis
[In dollars]
------------------------------------------------------------------------
Small Medium Large Super
Certifying agent farm farm farm farm
------------------------------------------------------------------------
CCOF........................ 750 1,650 4,750 51,150
FVO......................... 585 1,624 5,101 51,437
FOG......................... 325 845 2,525 25,525
NOFA-VT..................... 335 535 585 585
OTCO-In..................... 608 1,766 2,517 11,518
OTCO-Out.................... 568 1,498 2.352 11,353
OCIA-WI..................... 315 1,590 6,090 75,090
OCIA-VA..................... 258 320 495 1,745
TDA......................... 90 155 200 515
WSDA........................ 330 1,375 2,800 12,000
NC/SCS...................... n/a n/a n/a n/a
Average cost................ 416 1,136 2,742 24,092
------------------------------------------------------------------------
Notes:
CCOF--California Certified Organic Farmers
FVO--Farm Verified Organic
FOG--Florida Certified Organic Growers & Consumers
NOFA-VT--Northeast Organic Farming Association-Vermont
OTCO-In--Oregon Tilth Certified Organic, inside Oregon
OTCO-Out--Oregon Tilth Certified Organic, outside Oregon
OCIA-WI--Organic Crop Improvement Association, Wisconsin chapter
OCIA-VA--Organic Crop Improvement Association, Virginia chapter
TDA--Texas Department of Agriculture
WSDA--Washington State Department of Agriculture
NC/SCS--NutriClean/Scientific Certification Systems
Small farm--25 acres with annual sales of $30,000.
Medium farm--150 acres with annual sales of $200,000.
Large farm--500 acres with annual sales of $800,000.
Super farm--3,000 acres with annual sales of $10,000,000.
Table 2B.--Subsequent Year Certification Costs, From Graf and Lohr
Analysis
[In dollars]
------------------------------------------------------------------------
Small Medium Large Super
Certifying agent farm farm farm farm
------------------------------------------------------------------------
CCOF........................ 425 1,300 4,350 50,550
FVO......................... 510 1,499 4,851 51,187
FOG......................... 325 845 2,525 25,525
NOFA-VT..................... 300 500 550 550
OTCO-In..................... 454 1,611 2,362 11,363
OTCO-Out.................... 424 1,353 2,207 11,208
OCIA-WI..................... 290 1,565 6,065 75,065
OCIA-VA..................... 233 295 470 1,720
TDA......................... 90 155 200 515
WSDA........................ 330 1,375 2,800 12,000
NC/SCS...................... 700 900 1,000 2,000
Average cost................ 371 1,036 2,489 21,971
------------------------------------------------------------------------
Notes:
CCOF--California Certified Organic Farmers
FVO--Farm Verified Organic
FOG--Florida Certified Organic Growers & Consumers
NOFA-VT--Northeast Organic Farming Association--Vermont
OTCO-In--Oregon Tilth Certified Organic, inside Oregon
OTCO-Out--Oregon Tilth Certified Organic, outside Oregon
OCIA-WI--Organic Crop Improvement Association, Wisconsin chapter
OCIA-VA--Organic Crop Improvement Association, Virginia chapter
TDA--Texas Department of Agriculture
WSDA--Washington State Department of Agriculture
NC/SCS--NutriClean/Scientific Certification Systems
Small farm--25 acres with annual sales of $30,000.
Medium farm--150 acres with annual sales of $200,000.
Large farm--500 acres with annual sales of $800,000.
Super farm--3,000 acres with annual sales of $10,000,000.
[[Page 13645]]
Table 3.--Costs of Accreditation and Certification
------------------------------------------------------------------------
------------------------------------------------------------------------
Estimated costs to certifying agents during first 18 months
------------------------------------------------------------------------
Application fee <SUP>1</SUP> $0
Site evaluation costs (two person
team):.
Per diem (3 to 5 days)............. $480 to $800
Travel (domestic).................. $1,000 to $1,200
Hourly charges (not billed)........ $0
Miscellaneous charges (copying, $50
phone, and similar costs).
------------------------------------------------------------------------
Total............................ $1,530 to $2,050
------------------------------------------------------------------------
Estimated costs to certifying agents for initial accreditation after
first 18 months
------------------------------------------------------------------------
Application fee <SUP>1</SUP>.................... $500
Site evaluation costs (one person):
Per diem (3 to 5 days)............. $240 to $400
Travel (domestic).................. $500 to $600
Hourly charges (24 to 40 hours at $2,280 to $3,800
$95/hour)).
Miscellaneous charges (copying, $50
phone, and similar costs).
Total............................ $3,070 to $4,850
Annual review fees for certifying $190 to $760
agents (2 to 8 hours at $95/hour) <SUP>2</SUP>.
------------------------------------------------------------------------
------------------------------------------------------------------------
Estimated costs to producers for certification <SUP>3</SUP>
------------------------------------------------------------------------
Certification fee (initial $800
certification).
Certification fee (renewals)....... $730
------------------------------------------------------------------------
Estimated costs to handlers for certification <SUP>4</SUP>
------------------------------------------------------------------------
Certification fee (initial $1,825
certification).
Certification fee (renewals)......... $1,665
------------------------------------------------------------------------
<SUP>1</SUP> Nonrefundable fee that will be applied to the applicant's fee for
service account.
<SUP>2</SUP> Certifying agents are required to submit annual reports to USDA.
Review of these reports is expected to range from 2 to 8 hours at an
approximate rate of $95 per hour.
<SUP>3</SUP> Estimated certification fees are calculated from Graf and Lohr 1999
which, for a selection of certification agents, provides certification
costs for four hypothetical farm sizes: (1) Small Farm (``Family
Farm''): 25 acres, $30,000 annual sales, 5 hours to certify; (2)
Medium Farm (``Cottage Industry''): 150 acres, $200,000 annual sales,
6 hours to certify; (3) Large Farm (``Commercial Farm''): 500 acres,
$800,000 annual sales, 8 hours to certify; and (4) Super Farm: 3,000
acres, $10,000,000 annual sales, 16 hours to certify. Our estimated
certification fees only include those charged for small and medium
farms, because most organic producers fall into these categories as
defined by Graf and Lohr. In the 1997 OFRF survey, 90 percent of
respondents had gross organic farming income less than $250,000, with
82 percent less than $100,000.
The average current certification cost for most organic producers is
about $775 for the first year of certification ($416 for small and
$1,136 for medium farms) and about $705 for subsequent years ($371 for
small and $1,036 for medium farms). Approximately $25 is added to
cover the costs associated with the National Organic Program for an
estimated first year certification fee of $800 and subsequent year
certification fee of $730 for producers. Larger producers could expect
higher fees.
<SUP>4</SUP> Because Graf and Lohr do not estimate certification fees for handlers,
we estimate these fees by applying a ratio of handler-to-producer
certification fees from the regulatory impact assessment from 1997.
The ratio is 2.28 results in estimated fees of $1,825 and $1,665,
respectively.
Table 4.--Estimated Annual Reporting and Recordkeeping Burden
------------------------------------------------------------------------
Annual
Type of respondent hours per Hourly rate Annual cost
respondent
------------------------------------------------------------------------
Certified producer............... 10 $24 $229
Exempt producer.................. 0.5 24 12
Certified handler................ 50 24 1,189
Exempt handler................... 0.5 24 12
State certifying agency.......... 696 27 18,778
Private or foreign certifying 700 27 18,893
agency..........................
------------------------------------------------------------------------
Note: Estimates derived from Paperwork Reduction Act of 1995 analysis.
Appendix B.--Unfunded Mandates Reform Act
This proposed rule has been reviewed under the Unfunded Mandates
Reform Act (P.L.104-4). The Act requires that agencies prepare a
qualitative and quantitative assessment of the anticipated costs and
benefits before proposing any rule that may result in annual
expenditures by State, local, and tribal governments, in the
aggregate, or by the private sector, of $100 million (adjusted
annually for inflation) in any one year. According to the Act, the
term Federal mandate means any provision in legislation, statute, or
regulation that would impose an enforceable duty upon State, local,
or tribal governments, or the private sector, except a duty arising
from participation in a voluntary Federal program.
The National Organic Foods Production Act (OFPA) of 1990
mandates that the Secretary develop a National Organic Program (NOP)
to accredit eligible governing State officials or private persons as
certifying agents who would certify producers or handlers of
agricultural products that have been produced using organic methods
as provided for in the OFPA. The OFPA also permits a governing State
official to voluntarily establish a State organic certification
program if the program is approved by the Secretary and meets the
requirements of the OFPA. The OFPA does not require that States
establish their own organic certification programs or that State,
local or tribal governments, or the private sector, become
accredited; therefore, the OFPA is not subject to the Unfunded
Mandates Reform Act because it is a voluntary program.
Although USDA has determined that this proposed rule is not
subject to the Unfunded Mandates Reform Act, USDA has sought to
consider the rule's impact on various entities. USDA prepared a
Regulatory Impact Assessment (RIA) that is discussed in the section
titled ``Executive Order 12866'' (also attached as an appendix to
this proposed regulation). The RIA consists of a statement of the
need for the proposed action, an examination of alternative
approaches, and an analysis of the benefits and costs. Much of the
analysis is necessarily descriptive of the anticipated impacts of
the proposed rule. Because basic market data on the prices and
quantities of organic goods and services and the costs of organic
production is limited, it is not possible to provide quantitative
estimates of all benefits and costs of the proposed rule. The cost
of fees and recordkeeping proposed by the USDA are quantified, but
the anticipated benefits are not. Consequently, the analysis does
not contain an estimate of net benefits.
The analysis employed in reaching a determination that this
proposed rule is the least costly and least burdensome to the
regulated parties is discussed in the sections titled ``The
Regulatory Flexibility Act and the Effects on Small Businesses'' and
``Paperwork Reduction Act of 1995.'' The
[[Page 13646]]
proposed rule has been designed to be as consistent as possible with
existing industry practices, while satisfying the specific
requirements of the OFPA.
We have had numerous occasions to communicate with various
entities during the development of the proposed rule; States, for
example. Currently there are 27 States with some standards governing
the production or handling of organic food and 13 States with
organic certifying programs. Representatives of State governments
have participated in public meetings with the NOSB, while the NOP
staff has made presentations, received comments, and consulted with
States and local and regional organic conferences, workshops, and
trade shows. States have been actively involved in training sessions
for organic inspectors; public hearings concerning standards for
livestock products during 1994; a national Organic Certifiers
meeting on July 21, 1995; a USDA-hosted meeting on February 26,
1996; a State certifiers meeting in February 1999; and an ISO 65
assessment training session for certifiers in April-May 1999. It is
unknown at this time how many States, if any, might voluntarily
establish their own organic certification programs pursuant to the
OFPA and the regulations.
Appendix C.--The Regulatory Flexibility Act and the Effects on Small
Businesses
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (Act)
requires agencies to consider the economic impact of each proposed
rule on small entities and evaluate alternatives that would
accomplish the objectives of the rule without unduly burdening small
entities or erecting barriers that would restrict their ability to
compete in the market. The purpose is to fit regulatory actions to
the scale of businesses subject to the action.
In the first proposal published in December 1997, the initial
Regulatory Flexibility Analysis (RFA), describing the impact of the
National Organic Program and evaluating the alternatives, was
written with guidance from the U.S. Small Business Administration
(SBA). The RFA of this proposal was written following consideration
of comments received in response to the first proposal, other
information that has become available since the first proposal, the
Regulatory Impact Assessment (RIA) that is discussed in the section
entitled ``Executive Order 12866'' (also attached as an appendix to
this proposal), and the information collection burden discussed in
the section entitled ``Paperwork Reduction Act of 1995'' (PRA).
Reasons for Proposal
Currently, organic certification is voluntary and self-imposed.
Members of organic industries across the U.S. have experienced
numerous problems marketing their organically produced and handled
agricultural products. Inconsistent and conflicting organic
production standards may have been an obstacle to the effective
marketing of organic products. There are currently 36 private and 13
State organic certification agencies (certifying agents) in the
United States, each with its own standards and identifying marks.
Some existing private certifying agents are concerned that
States might impose registration or licensing fees which would limit
or prevent private certification activities in those States.
Labeling problems have confronted manufacturers of multi ingredient
organic food products containing ingredients certified by different
certifying agents because reciprocity agreements have to be
negotiated between certifying agents. Consumer confusion may exist
because of the variety of seals, labels, and logos used by
certifying agents and State programs. Also, there is no industry
wide agreement on an accepted list of substances that should be
permitted or prohibited for use in organic production and handling.
Finally, a lack of national organic standards may inhibit organic
producers and handlers in taking full advantage of international
organic markets and may reduce consumer choices in the variety of
organic products available in the marketplace.
To address these problems in the late 1980's, the organic
industry attempted to establish a national voluntary organic
certification program. At that time, the industry could not develop
consensus on the standards that should be adopted, so Congress was
petitioned by the Organic Trade Association to establish national
standards for organic food and fiber products.
Recently, the Organic Trade Association published American
Organic Standards, Guidelines for the Organic Industry (AOS).
However, not all participants in the organic industry elected to
participate in developing the AOS. Many certifying agents preferred
to wait for implementation of the National standards, and some
certifying agents disagree with portions of the AOS. For these
reasons, the USDA is proposing a regulation for the National Organic
Program.
Legal Basis for and Objectives of Proposal
In 1990, Congress enacted the Organic Foods Production Act of
1990, as amended (7 U.S.C. 6501 et seq.) (OFPA). The OFPA requires
all agricultural products labeled as ``organically produced'' to
originate from farms or handling operations certified by a State or
private agency that has been accredited by USDA.
The purposes of the OFPA, set forth in section 2102 (7 U.S.C.
6501), are to: (1) Establish national standards governing the
marketing of certain agricultural products as organically produced
products; (2) assure consumers that organically produced products
meet a consistent standard; and (3) facilitate commerce in fresh and
processed food that is organically produced. The National Organic
Program, which this rule proposes, is the result of the OFPA.
Applicability of Proposal
This proposal will directly affect three sectors of the organic
industry: certifying agents, producers, and handlers. The OFPA
provides for the collection of reasonable fees by USDA from
producers, handlers, and certifying agents who participate in the
national program. This proposal will impose direct costs on
certifying agents in the form of a fee paid to the Federal
Government for USDA accreditation. This proposal does not impose
direct costs in the form of fees on producers and handlers.
Certifying agents will establish a fee schedule for their
certification services for producers and handlers. All three sectors
are subject to indirect costs of compliance.
The term, ``certifying agent,'' means the chief executive
officer of a State or, in the case of a State that provides for the
statewide election of an official to be responsible solely for the
administration of the agricultural operations of a State, such
official and any person (including private entities) who is
accredited by the Secretary as a certifying agent for the purpose of
certifying a farm or handling operation as a certified organic farm
or handling operation. The term, ``producer,'' means a person who
engages in the business of growing or producing food or feed. The
term, ``handler,'' means any person engaged in the business of
handling agricultural products, excluding final retailers of
agricultural products that do not process agricultural products.
Subpart B, section 205.101 in the proposed regulation provides
information about exemptions and exclusions from certification.
According to the most complete data available to USDA's
Agricultural Marketing Service (AMS), there are 49 certifying agents
(36 private and 13 State) in the U.S. Over half of the private and
State certifying agents certify both producers and handlers, while
the others certify only producers. Over three-fourths of private and
State certifying agents each certify fewer than 150 producers and 20
handlers. The number of certifying agents has remained fairly stable
between 40 and 50 for some years, with entries and exits tending to
offset each other. The National Organic Program staff anticipates
that, in addition to the 49 domestic certifying agents, 10 foreign
certifying agents may seek accreditation during the initial phase of
the program.
It is more difficult to establish the number of organic
producers. Organic farming was not distinguished from conventional
agriculture in the 1997 Census of Agriculture. There are sources
which give insight into the number of producers. The Organic Farming
Research Foundation (OFRF), a California-based nonprofit
organization, has conducted three nationwide surveys of certified
organic producers from lists provided by cooperating certifying
agents. The most recent survey applies to the 1997 production
year.\1\ OFRF sent its 1997 survey to 4,638 names and received 1,192
responses. Because OFRF did not obtain lists from all certifying
organizations or their chapters (55 out of a total of 64 identified
entities provided lists), their list count is likely an
understatement of the number of certified organic producers. Note
that the estimated number of organic producers includes only
certified organic farms. Comments filed in response to the first
proposal and studies indicate that the total number of organic farms
is higher.
---------------------------------------------------------------------------
\1\ Organic Farming Research Foundation. 1999. Final Results of
the Third Biennial National Organic Farmers' Survey. Santa Cruz, CA.
---------------------------------------------------------------------------
[[Page 13647]]
Dunn has estimated the number of certified organic producers in
the U.S.\2\ \3\ Dunn's 1995 work, a USDA study, estimated the number
of certified producers at 4,060 in 1994; this estimate was used in
the first proposal. Dunn's 1997 work reported 4,060 certified
organic farms in 1994 and 4,856 in 1995.
---------------------------------------------------------------------------
\2\ Dunn, Julie Anton. 1995. Organic Food and Fiber: An Analysis
of 1994 Certified Production in the United States. U.S. Department
of Agriculture, Agricultural Marketing Service.
\3\ Dunn, Julie Anton. 1997. AgriSystems International Reports
Certified Organic Production in the United States: Half a Decade of
Growth. AgriSystems International: Wind Gap, PA.
---------------------------------------------------------------------------
Data collected by AMS indicate that the number of organic
farmers increased about 12 percent per year and the number of
organic handlers increased at about 11 percent per year during the
period 1990 to 1994. OFRF survey efforts indicate that growth has
continued, although it is not clear whether the growth rate has
changed. Similarly, growth in retail sales, the addition of meat and
poultry to organic production, and the possibility of increased
exports suggest that the number of operations has continued to
increase. Lacking an alternative estimate of the growth rate for the
number of certified organic producers, we use the average growth
rate of about 14 percent from Dunn's 1997 study. The true rate of
growth could be higher or lower. Applying the 14-percent growth rate
to Dunn's estimate of certified producers in 1995 gives an estimate
of 8,200 organic producers for 1999.
An adjustment is needed to account for the number of producers
who are practicing organic agriculture but who are not certified and
who would be affected by this proposal. We assume that the number of
organic but not certified producers in 1999 is about 4,000. This
assumption is based on very limited information about the number of
registered but not certified organic producers in California in
1995. Thus, the total number of organic producers used in assessing
the impact of the rule is 12,176 in 1999.
Little information exists on the numbers of handlers and
processors. USDA has estimated that there were 600 entities in this
category in 1994. In California, there were 208 registered organic
processed food firms in 1995 and 376 in 1999, a growth rate of 20
percent.\4\ We assume that this growth rate is applicable to the
U.S. and project 1,250 handlers in 1999. Again, the rate of growth
could be higher or lower.
---------------------------------------------------------------------------
\4\ California Department of Health Services (DHS). 1995. Report
on the Registration of California Organic Processed Food Firms.
Sacramento: State of California. September 1999 figures obtained via
personal communication with California DHS.
---------------------------------------------------------------------------
SBA Definitions of Small Entities
Small business size standards, Standard Industrial Code (SIC)
(13 CFR part 121), are developed by an inter-agency group, published
by the Office of Management and Budget, and used by SBA to identify
small businesses. These standards represent the number of employees
or annual receipts constituting the largest size that a for-profit
enterprise (together with its affiliates) may be and remain eligible
as a small business for various SBA and other Federal Government
programs.
Small businesses in the agricultural services sector, such as
certifying agents, include firms with average annual revenues of
less than $5 million (SIC Division A Major Group 7). Producers with
crop production (SIC Division A Major Group 1) and annual average
revenues under $500,000 are small businesses. Producers with
livestock or animal specialities are also considered small if annual
average revenues are under $500,000 (SIC Division A Major Group 2),
with the exception of custom beef cattle feedlots and chicken eggs,
which are considered small if annual average revenues are under
$1,500,000. In handling operations, a small business has fewer than
500 employees (SIC Division D Major Group 20).
Based on SBA's small business size standards for the
agricultural services sector, it is not likely that many, if any, of
the 49 domestic certifying agents have annual revenue greater than
$5 million. Based on anecdotal information, only a few private, for-
profit, certifying agents might be categorized as a large business.
All private, non profit, and State certifying agents would be
considered small by SBA's standards. Even if State certifying agents
do not exceed the revenue threshold, they would not be considered to
be small entities under the Act if the agents are an arm of state
government. Only government jurisdictions with populations under
50,000 are considered to be small entities under section 601(5) of
the Act.
Based on SBA's small business size standards for producers, it
is likely that almost all organic producers would be considered
small. The OFRF survey asked for the producer's total gross organic
farming income during 1997. Only 35 (less than 3 percent) of the
survey respondents reported gross income greater than $500,000, the
SBA's cutoff between small and large businesses. Over 70 percent
reported gross income of less than $50,000. The OFRF survey does
caution readers about potential survey ``errors.'' It is
particularly important to emphasize potential ``non-response
error,'' that is, it is unknown if those who responded to the survey
accurately represent the entire population of certified organic
growers. Also, some producers combine organic and conventional
production on the same operation, some with total sales that may
exceed $500,000. However, it is likely that a majority of organic
producers would be considered small.
It is also likely that the vast majority of handlers would be
considered small, based on SBA's small business size standards for
handlers. Based on informal conversations with organic certifying
agents, about 25 (about 2 percent) of the estimated 1,250 organic
handlers have more than 500 employees. This includes firms that
handle or process both organic and conventional foods.
Costs of This Proposal
Several requirements to complete this RFA overlap with the RIA
and the PRA. In order to avoid duplication, we combine some analyses
as allowed in section 605(b) of the Act. This RFA provides
information specific to small entities, while the RIA or PRA should
be referred to for more detail. For example, the RFA requires an
analysis of the proposed rule's costs to small entities. The RIA
provides an analysis of the benefits and costs of this proposal.
This RFA uses the RIA information to estimate the impact on small
entities. Likewise, the RFA requires a description of the projected
reporting, recordkeeping, and other compliance requirements of the
proposed rule. The PRA section estimates the reporting and
recordkeeping (information collection) requirements that would be
required by this proposal from individuals, businesses, other
private institutions, and State and local governments. The burden of
these requirements is measured in terms of the amount of time
required of program participants and its cost. This RFA uses the PRA
information to estimate the burden on small entities.
The estimated direct costs of accreditation for certifying
agents and certification for producers and handlers under the first
proposal issued in December 1997 and this proposal are shown in
table 1 and discussed in the following sections. More specific
details regarding these costs are found in the RIA.
Table 1.--Estimated Direct Costs of Accreditation and Certification
----------------------------------------------------------------------------------------------------------------
First proposal This proposal
---------------------------------------------------------------
1st year cost 2nd year cost 1st year cost 2nd year cost
----------------------------------------------------------------------------------------------------------------
Certifying Agents:
Accreditation application fee............... $640 $640 $0 $0
USDA administrative fee..................... 2,000 2,000 0 0
Estimated site evaluation fee............... 3,500 <SUP>1</SUP> 1,530 to <SUP>3</SUP> <SUP>1</SUP>
2,050
Annual review fee........................... <SUP>2</SUP> <SUP>2</SUP> 190 to 760
---------------------------------------------------------------
[[Page 13648]]
Total Fees.............................. 6,140 min. 2,640 min. 1,530 min. 190
===============================================================
Producers:
Estimated certification fee <SUP>4</SUP>............... 413 413 800 730
USDA fee.................................... 50 50 0 0
---------------------------------------------------------------
Total Fees.............................. 463 463 800 730
===============================================================
Handlers:
Estimated certification fee <SUP>4</SUP>............... 943 943 1,825 1,665
USDA fee.................................... 500 500 0 0
---------------------------------------------------------------
Total Fees.............................. 1,443 1,443 1,825 1,665
----------------------------------------------------------------------------------------------------------------
<SUP>1</SUP> Should certifying agents wish to become accredited in additional areas for which they have not been accredited
previously, site evaluation fees will be charged.
<SUP>2</SUP> First proposal: Included in application and administrative fees. This proposal: Certifying agents are required
to submit annual reports to USDA. Review of these reports is expected to range from 2 to 8 hours at an
approximate rate of $95 per hour.
<SUP>3</SUP> During the first 18 months, site evaluation for initial accreditation will involve two reviewers. One reviewer
would come from the Quality Systems Certification Program audit staff and would be familiar with ISO Guide 65
verification; the other reviewer would come from the National Organic Program staff and would be familiar with
requirements of the organic program. The two would conduct the site evaluation jointly. We anticipate only one
reviewer would be required after the 18-month transition period. The estimated site evaluation fee shown here
includes per diem and travel costs for two reviewers plus miscellaneous charges related to accreditation. Site
evaluations for smaller certifying agents are estimated to take 3 days, with 5 days for larger certifying
agents.
For the first 18 months after implementation of the NOP, hourly rates will not be charged to certifying agents
for accreditation. The estimated fee shown here includes only travel and per diem expenses. At an approximate
rate of $95 per hour, hourly charges would add an estimated $4,560 to $7,600 for 2 reviewers during the first
18 months, and $2,280 to $3,800 for 1 reviewer after the first 18 months or for renewal of accreditation.
<SUP>4</SUP> First proposal: Estimated certification fees at that time were based on the average of fees charged by a
representative group of certifying agents (private non-profit, private for-profit and a State agency).
This proposal: Estimated certification fees are calculated from a 1999 study by Graf and Lohr <SUP>5</SUP> which, for a
selection of certification agents, provides certification costs for four hypothetical farm sizes: (1) Small
Farm (``Family Farm''): 25 acres, $30,000 annual sales, 5 hours to certify; (2) Medium Farm (``Cottage
Industry''): 150 acres, $200,000 annual sales, 6 hours to certify; (3) Large Farm (``Commercial Farm''): 500
acres, $800,000 annual sales, 8 hours to certify; and (4) Super Farm: 3,000 acres, $10,000,000 annual sales,
16 hours to certify. Our estimated certification fees only include those charged for small and medium farms,
because most organic producers fall into these categories as defined by Graf and Lohr. In the 1997 OFRF
survey, 90 percent of respondents had gross organic farming income less than $250,000, with 82 percent less
than $100,000.
The average current certification cost for most organic producers is about $775 for the first year of
certification ($416 for small and $1,136 for medium farms) and about $705 for subsequent years ($371 for small
and $1,036 for medium farms). An estimated $25 is added to cover the costs associated with the National
Organic Program for an estimated first year certification fee of $800 and subsequent year certification fee of
$730 for producers. Larger producers could expect higher fees.
Because Graf and Lohr do not estimate certification fees for handlers, we estimate these fees by applying the
December 1997 ratio of handler-to-producer certification fees, 2.28, to the estimated first and subsequent
year certification fees for producers, resulting in fees of $1,825 and $1,665, respectively.
Direct Costs to Certifying Agents
We have identified 36 private certifying agents and 13 State
programs providing certification. These 49 domestic entities are
considered likely applicants during the first 12 months, as are an
estimated 10 foreign certifying agents. An unknown number of new
entrants to the certifying business may also apply. However, over
the last 10 years, the number of certifying agents does not appear
to have grown significantly, with the net effect of entries and
exits maintaining a population of U.S.-based certifying agents at
about 40 to 50. Of the 49 domestic certifying agents, based on
information discussed previously, we estimate that the 36 private
certifying agents are small.
---------------------------------------------------------------------------
\5\ Graf, Anita and Luanne Lohr. 1999. Analysis of certification
program costs. Working Paper, Fund for Rural America project, Market
Development for Organic Agriculture Projects, Grant No. 97-36200-5.
---------------------------------------------------------------------------
In order to identify the certifying agents that might be
expected to face more significant impacts as a result of this
proposal, we analyzed the amount of revenues from certification fees
received by certifying agents. Total certification fees collected by
the certifying agents in 1994 ranged from about $2,500 to about
$400,000, with most certifying agents clustered around the low or
high end of this range. This amount is based on information
collected by AMS from a sample of 16 private and State certifying
agents for certification fees collected in 1994. To determine a
cutoff point for small certifying agents, the State certifying
agents were eliminated from the sample because these agents are an
arm of State government and are not considered small entities. Of
the remaining 11 private certifying agents, 6 (or 55 percent)
collected less than $25,000 each in total certification fees, and
the other 5 (45 percent) each collected more than $200,000. Based on
this information and knowledge of the organic industry, for purposes
of analyzing the cost of accreditation, we estimate that about 55
percent of private certifying agents are small with total annual
revenue from certification of less than $25,000.
Certification fees probably do not constitute total income for
most private certifying agents and, thus, are not a complete measure
of economic size. Some certifying agents also earn revenue from a
number of other sources, such as sale of publications, membership
dues, training workshop and conference fees, farmers markets,
grants, or donations.
Certifying agents will be assessed for the actual time and
travel expenses necessary for the National Organic Program to
perform accreditation services. The National Organic Program will
charge the same hourly fees as are charged for the voluntary, fee-
for-service program provided by AMS to certification bodies
requesting conformity assessment to the International Organization
for Standardization (ISO) Guide 65, ``General Requirements for
Bodies Operating Product Certification Systems.'' We expect that at
the time the National Organic Program's final rule is implemented,
the fees will be approximately $95 per hour, with higher overtime
and holiday rates. Certifying agents will be charged for travel, per
diem, and other related costs associated with accreditation.
Applicants for accreditation will be required to pay at the time of
application a nonrefundable fee of $500, which is applied to the
applicant's fee for services account. This fee is credited against
[[Page 13649]]
any subsequent costs of accreditation arising from the site
evaluation.
During the first 18 months after the National Organic Program
has been implemented, USDA will not impose hourly charges on
certifying agents. The direct costs for certifying agents to obtain
accreditation will be limited to per diem and transportation costs
for the site evaluation, which is required every 5 years. We
estimate these costs to be $1,530 for a small certifying agent and
$2,050 for a larger certifying agent. These estimates are based on,
for small and larger certifying agents, two reviewers with 3 and 5
days of per diem, $500 to $600 in transportation costs, and $50 in
miscellaneous charges related to accreditation. \6\ In subsequent
years, certifying agents will be required to submit an annual
report. Review of this report is anticipated to range from 2 to 8
hours at the ISO Guide 65 hourly rate. If certifying agents wish to
become accredited in additional areas for which they were not
accredited previously, site evaluation fees will be charged.
---------------------------------------------------------------------------
\6\ During the first 18 months, site evaluation for initial
accreditation will be conducted jointly by two reviewers. Two
reviewers offers: (1) anticipated faster turn-around; (2) different
areas of expertise--one reviewer would come from the Quality Systems
Certification Program audit staff and would be familiar with ISO
Guide 65 verification, while the other reviewer would come from the
National Organic Program staff and would be familiar with the
requirements of the program; and (3) consistency with the organic
industry's desire to have reviewers from both areas of expertise
during ISO Guide 65 assessments. AMS would consider sending one
reviewer, rather than two, for the site evaluation of small
certification agents if an individual possessing both reviewing
skill and knowledged of the NOP is available. We anticipate only one
reviewer would be required after the 18-month transition period.
---------------------------------------------------------------------------
After the first 18 months of the National Organic Program, USDA
estimates that the costs of a site evaluation visit, required every
5 years, could be $3,070 for small certifying agents and $4,850 for
larger certifying agents. These estimates are based on, for small
and larger certifying agents, one reviewer with 3 and 5 days of per
diem, $500 to $600 in transportation costs, $50 in miscellaneous
charges related to accreditation, and 24 to 40 hours (3 to 5 work
days) at an anticipated maximum hourly rate under ISO Guide 65 of
$95. Higher hourly rates will be charged for overtime and for work
on holidays.
The cost of a site evaluation will vary with the cost of travel
from the auditor's work station to the applicant's place of
business. Auditors live in different parts of the country, and
travel costs might be reduced when the distance traveled is reduced.
The lowest cost airfare would be used whenever possible. In some
cases, site evaluations might be grouped geographically in order to
reduce travel expenses. The per diem rate will also vary depending
on the rate set for the certifying agent's location as established
by the General Services Administration.
Several factors will influence the amount of time needed to
complete an accreditation audit. An operation in which documents are
well organized and that has few nonconformities within the quality
system will require less time for an audit than an organization in
which documents are scattered and there are many nonconformities.\7\
Similarly, in a follow up audit, operations that lack organization
in their documents and that had a large number of nonconformities
during previous audits will require a greater amount of time. The
scope of a follow up audit is to verify the correction of
nonconformities and to evaluate the effectiveness of the
corrections. Certifying agents are able to control these cost
factors by making certain that documents are well organized and by
educating themselves about quality systems.
---------------------------------------------------------------------------
\7\ Adequate advance notice will be given to certifying agents
to allow them the opportunity to organize their records prior to the
audit and minimize the costs of accreditation.
---------------------------------------------------------------------------
The complexity of an certification agency's organization also
will affect the time needed to complete an audit. An agency with a
central office in which all certification activities take place will
require less time for document review and site evaluation than a
chapter organization or a business structured so that responsibility
for making certification decisions is delegated outside of the
central office. In the latter cases, the auditors' document review
would require additional time and site evaluation that would extend
from the central office to one or more of the chapters or to the
site to which the certification decision making is delegated.
Other factors determine the amount of time needed to complete an
accreditation audit. For an agency with numerous clients, auditors
may need to spend more time reviewing client files or examining
business operations than they would have to spend for a smaller
agency. Audit of an agency with a large number of processor clients
may require an extended amount of time to follow audit trails,
confirm that organic ingredients remain segregated from nonorganic
ingredients, and establish that foreign-produced ingredients
originate from approved entities. Finally, the complexity of the
agricultural practices certified could influence the amount of time
necessary to complete an accreditation audit. An agency whose
certification covers only producers who grow and harvest one crop
per field per year, such as wheat or sugar beets, could quickly be
audited. An agency whose producers grow several different crops per
field per year or an agency that certifies producers of crops and
livestock as well as handlers would require a greater amount of
time.
All of these factors will impact both small and large certifying
agents. A small certifying agent could be assumed to have a less
complex organization or have fewer clients, and, thus, potentially
less time would be necessary for review. However, other factors,
such as the degree of paperwork organization or the complexity of
the agricultural practices certified, may influence the time needed
for review for any size of business.
Comments from the first proposal indicate that the average
accreditation cost for a certifying agent may range from $3,000 to
$5,000 per year for small to medium-size certifying agents to less
than $10,000 per year for the largest certifying agents.
Currently, relatively few certifying agents have third party
accreditation because accreditation of certifying agents is
voluntary. Fetter reports that in a sample of 18 certification
programs, selected to include six large, private programs, six
smaller private programs, and six State programs, four programs were
accredited and one had accreditation pending.\8\ All of these were
large private certifying agents. Three of the certifying agents
identified by Fetter as accredited requested ISO Guide 65
assessments by USDA and have been approved for selling organic
products into the international market. Those certifying agents
currently accredited by third parties will likely pay less for USDA
accreditation because their documents are organized and they have
fewer nonconformities.
---------------------------------------------------------------------------
\8\ Fetter, Robert T. 1999. Economic Impacts of Alternative
Scenarios of Organic Products Regulation. Senior Honors Thesis.
University of Massachusetts, Amhearst, MA.
---------------------------------------------------------------------------
Those certifying agents who have been operating without third
party accreditation will face new costs--the costs of
accreditation--under this proposal. Compared to the direct costs of
$3,000 to $5,000 per year indicated by the commenters, the direct
costs of USDA accreditation will be smaller, with estimated site
evaluation fees (covering 5 years) ranging from $3,070 to $4,850 for
the first year and an annual review fee ranging from $190 to $760
for subsequent years. Furthermore, the direct costs would be
substantially less for those certifying agents obtaining
accreditation during the first 18 months while USDA does not impose
an application fee or hourly charges and limits direct costs to
travel and per diem costs.
It is expected that all certifying agents will set their fee
schedule to recover costs for their certification services,
including the costs of accreditation. The larger the number of
clients per certifying agent, the more fixed costs can be spread
out. It is possible, however, that small certifying agents could be
significantly impacted by this proposal and may not be able to
continue in business from a financial standpoint.
Projected Reporting, Recordkeeping, and Other Compliance
Requirements of Certifying Agents
In addition to the direct costs, the regulation will impose
administrative costs on certifying agents for reporting,
recordkeeping, residue testing, and other compliance requirements.
The actual amount of the additional administrative costs that would
be imposed by the final rule is expected to be different for those
entities that would begin their activities only after the national
program is implemented. Certifying agents that currently are active
in the organic industry already perform most of these administrative
functions; therefore, the additional costs to them would depend upon
the extent to which their current practices are different from the
requirements of the final regulation. Projected reporting,
recordkeeping, and other compliance requirements of certifying
agents are discussed in greater detail in the PRA and the RIA.
[[Page 13650]]
Costs to Producers and Handlers
Under this proposal, USDA will not impose any direct fees on
producers and handlers. Certifying agents will establish a fee
schedule for their certification services that will be filed with
the Secretary and posted in a place accessible to the public.
Certifying agents will provide all persons inquiring about the
application process with a copy of their fees. The certifying agent
may only charge those fees that it has filed with the Secretary.
Furthermore, the certifying agent will provide each applicant with
an estimate of the total cost of certification and an estimate of
the annual costs of updating the certification. However, the
certifying agent may require applicants to pay at the time of
application a nonrefundable fee of no more than $250 which must be
applied to the applicant's fee for services account.
Currently, supply and demand for certification services
determine the fees charged in most areas. Some States charge minimal
fees for certification and instead subsidize operating costs from
general revenues. According to separate studies by Fetter, and Graf
and Lohr, the majority of certifying agents structure their fee
schedules on a sliding scale based on a measure of size, usually
represented by the client's gross sales of organic products but
sometimes based on the acres operated. Some certifying agents charge
an hourly rate for inspection and audit services.
Graf and Lohr have applied fee schedules provided by nine
certifying agents to four hypothetical farms--small, medium, large,
and a super farm. They define ``small'' as a 25-acre farm with
annual sales of $30,000 that would take 5 hours to certify. Note
that our alternative definition of small (under $5,000) is
different. Table 2 shows the total first-year cost and subsequent-
year cost for certification for small farms; the RIA shows detail on
other size farms.
Table 2.--Certification Costs Among a Selection of Certifying Agents
[For a small farm: 25 acres, $30,000 annual sales, 5 hours to certify]
------------------------------------------------------------------------
Total cost to
Total cost to certify in
Certifying agent certify in subsequent
first year years
------------------------------------------------------------------------
California Certified Organic Farmers.... $750 $425
Farm Verified Organic................... 585 510
Florida Certified Organic Growers and 325 325
Consumers..............................
Northeast Organic Farming Association-- 335 300
Vermont................................
Oregon Tilth Certified Organic:
--Inside Oregon..................... 608 454
--Outside Oregon.................... 568 424
Organic Crop Improvement Association:
--Wisconsin chapter................. 315 290
--Virginia chapter.................. 258 233
Texas Department of Agriculture......... 90 90
Washington State Department of 330 330
Agriculture............................
NutriClean/Scientific Certification n/a 700
Systems................................
Average cost............................ 416 371
------------------------------------------------------------------------
The Texas Department of Agriculture program is the low-cost
certifying agent. The high-cost certifying agent differs from first-
year to subsequent-year certification. Graf and Lohr's study
indicates that even small farms require significant time for the
certification process and this time does not increase
proportionately as farm size increases. None of these certification
programs mentions costs for residue testing which the National
Organic Program will require in the form of preharvest testing when
there is reason to believe that agricultural products have come in
contact with prohibited substances. Preharvest testing is expected
to be infrequent. Certifiers will recover the costs of preharvest
testing through explicit charges to the producer whose crop is
tested, or through a generally higher fee structure that spreads the
expected costs of tests over all clients.
Certifying agents will continue to set their own fee schedules
under the organic program. Certifying agents will have to set fees
to cover any net additional costs of doing business under the
National Organic Program. Accreditation and administrative costs are
incremental costs to existing certifying agents' businesses. Some
certifying agents might drop their third party accreditation saving
perhaps $3,000 to $5,000 per year, but most certifying agents are
not currently paying for accreditation.
This proposal imposes no requirements that would cause
certifying agents that are presently using a sliding scale type fee
schedule to abandon their current fee system. Certifying agents
could recover their net additional costs by increasing their flat
fee component, their incremental charges, or both. Because
accreditations are renewed only every 5 years, certifying agents
will have 5 years to recover their net new costs. Certifying agents
who become accredited during the first year of the program would
have fewer direct costs to recover, because they will not be charged
the application fee and hourly charges for accreditation services.
The OFPA established a small farmer exemption from certification
and submission of organic plans for small producers with a maximum
of $5,000 in gross sales of organic products. For purposes of the
exemption, the OFPA defines a ``small farmer'' as those who sell no
more than $5,000 annually in value of agricultural products. In this
proposal, we have clarified that the exemption applies to those who
sell no more than $5,000 annually in value of organic products.\9\
According to the OFRF survey, 27 percent of currently certified
farms that responded to the survey would fall under this exemption.
This percentage does not take into account those organic farms that
are not currently certified by a private or State certifying agent.
A study of California organic farms found that, of all organic farms
\10\ in 1994-95, about 66 percent have revenues less than
$10,000.\11\ If California is representative and the distribution
within the sub-$10,000 category is uniform, then a third of the
farms would be classified as small for purposes of the statutory
exemption with annual sales less than $5,000. Based on the
California study and the OFRF survey results, we estimate that
between 25 and 33 percent of organic producers are small and would
qualify for exemption from the certification requirements.
---------------------------------------------------------------------------
\9\ We asked for comments on the first proposal as to whether
the current statutory limitation of $5,000 for exemption from
certification should be raised to $10,000 or to another amount and
why such an increased monetary limitation for exemption from
certification would be appropriate. Few commenters offered
recommendations as to a maximum sales volume to exempt producers.
Amounts ranged from $2,000 to $50,000, with a few suggesting $10,000
and $20,000 exemptions. These proposed exemption levels and
justifications in comments received are not sufficiently consistent
enough for us to recommend changing the statute requirement of the
$5,000 maximum sales volume exemption.
\10\ California State law requires organic farmers to register
with the State. Certification is voluntary at the current time.
\11\ Klonsky, Karen, and Laura Tourte. 1998. Statistical Review
of California's Organic Agriculture, 1992-95. Report prepared for
the California Department of Food and Agriculture Organic Program.
Cooperative Extension, Department of Agricultural Economics,
University of California, Davis.
---------------------------------------------------------------------------
We have estimated that there are between 3,000 and 4,000 small
organic producers that will be exempt from certification. These
producers would be required to comply with
[[Page 13651]]
the production and handling standards and labeling requirements set
forth under the National Organic Program. We anticipate that this
exemption will be used primarily by small market gardeners and
hobbyists who sell produce and other agricultural products at
farmers markets and roadside stands to consumers within their
communities. By being exempt from certification, the current
certification costs (table 2) estimated at an average $416 for the
first year and an average $370 for subsequent years have been
eliminated.
Exempt producers will be allowed to market their products as
organically produced without being certified by a certifying agent.
Products marketed by exempt producers cannot be represented as
certified organic or display the USDA organic seal. Products
produced or handled on an exempt operation may be identified as
organic ingredients in a multiingredient product produced by the
exempt operation, but they may not be identified as organic in a
product processed by others. These limitations may discourage some
small producers from seeking exemption, who instead may choose to
become certified. In this case, the costs of certification would
apply. The value associated with having organic certification may
outweigh the costs of certification.
Those currently receiving voluntary certification will likely
see a modest increase as the certifying agent passes on its cost
incurred under the National Organic Program. Those not currently
receiving certification and producing over $5,000 annually in
organic products will be required to become certified, and they will
incur the actual costs of certification.
We have estimated that there about 98 percent of the 1,250
organic handlers are small. A handling operation or a portion of a
handling operation is exempt from certification requirements if it
has annual gross sales of less than $5,000; is a retail food
establishment that handles organically produced agricultural
products but does not process them; handles agricultural products
that contain less than 50 percent organic ingredients by weight of
finished product; or does not use the word, ``organic,'' on any
package panel other than the information panel if the agricultural
product contains at least 50 percent organic ingredients by weight
of finished product. A handling operation or specific portion of a
handling operation is excluded from certification if it handles
packaged certified organic products that were enclosed in their
packages or containers prior to being acquired and remain in the
same package and are not otherwise processed by the handler, or it
is a retail food establishment that processes or prepares on its own
premises raw and ready-to-eat food from certified organic products.
Otherwise, to be certified organic, handlers must pay for
certification fees estimated at $1,800 per year and fulfill
recordkeeping requirements.
In order to identify handlers that might be expected to face
more significant impacts as a result of this proposal, we attempted
to analyze handlers' revenue from organic sales. Sales data indicate
that gross sales of organic production total less than $500,000 per
firm for most certified handlers. Information from the California
DHS, where State law requires organic processors to register, gives
some indication of the size distribution. Of the 208 processors
registered with the State in 1995, 80 firms (38 percent) reported
gross sales of $50,000 or less, and 50 firms (24 percent) had gross
sales exceeding $500,000. In mid-September 1999, 376 processors were
registered with the State, with 107 firms (28 percent) reporting
gross sales of $50,000 or less and 112 firms (30 percent) reporting
gross sales exceeding $500,000. We use this California information
to estimate that 25 to 30 percent of handlers have gross sales of
$50,000 or less and could be significantly impacted by this
proposal. Information needed to estimate the number of exempt or
excluded handlers is not available.
Some States, such as Texas and Washington, charge producers and
handlers nominal fees for certification, and it is possible that
more States might provide certification services as the National
Organic Program is implemented. Other States, such as Minnesota,
have cost-share programs to help offset costs for organic producers.
Projected Reporting, Recordkeeping, and Other Compliance
Requirements for Producers and Handlers
In addition to the fees for certification, the regulation will
impose administrative costs on producers and handlers for reporting,
recordkeeping, residue testing, and other compliance requirements.
The actual amount of the additional administrative costs that would
be imposed by the final rule is expected to be different for those
entities that would begin their activities only after the national
program is implemented. Producers and handlers who currently are
active in the organic industry already perform most of these
administrative functions; therefore, the additional costs to them
would depend upon the extent to which their current practices are
different from the requirements of the final regulation. Projected
reporting, recordkeeping, and other compliance requirements of
certifying agents are discussed in greater detail in the PRA and the
RIA.
Federal Rules
No other burdens are expected to fall upon the organic industry
as a result of overlapping Federal rules. This proposed regulation
would not duplicate, overlap or conflict with any existing Federal
rules. In preparing this proposed regulation, AMS consulted other
Federal agencies such as the Food and Drug Administration (FDA), the
Environmental Protection Agency (EPA), the Bureau of Alcohol,
Tobacco and Firearms (ATF), and the USDA's Food Safety and
Inspection Service (FSIS) to ensure that this proposed regulation
would complement existing regulations.
Alternatives to This Proposal
We believe that our proposed regulation could have a significant
impact on a substantial number of small businesses. However, we have
considered several options with the intention of mitigating negative
economic impacts of the fees. We did not consider alternatives,
beyond the previously discussed exemptions, that would mitigate the
indirect costs of this rule on small entities. The following options
were considered by AMS prior to and during the development of this
proposal:
Option 1: First Proposal Issued December 1997
The first proposal suggested a fee for direct services model
which combined a fixed fee for all farmers, handlers, and certifying
agents, with a variable fee for certain direct services provided by
AMS in the accreditation of certifying agents.
Table 1 includes estimated direct costs of accreditation and
certification for the first proposal and this proposal; the fees in
this proposal are discussed in prior sections of this RFA. The fee
provisions in this proposal have been changed significantly, due in
large part to comments received regarding the first proposal.
In overall design, the first proposal is similar to this
proposal. USDA would accredit certifying agents who would in turn
certify producers and handlers. USDA proposed to charge certifying
agents a $640 application fee, costs for a site evaluation fee that
were estimated at $3,500, and a $2,000 administrative fee. Producers
would be charged a $50 USDA fee in addition to the fees imposed by
the certifying agent. Handlers would be charged a $500 USDA fee on
top of the certifying agent's fees. The fee structure was intended
to recover the full costs of operating the National Organic Program,
which was estimated at $1 million annually. Producers with $5,000 or
less in annual gross sales of agricultural products and handlers
with annual gross sales of less than $5,000 were exempt from
certification as provided for in the OFPA.
The OFPA permitted but did not obligate USDA to charge fees. The
first proposal sought to set fees to recover the full costs of the
National Organic Program. Public comment generally stressed that the
fees were too high. Most certifying agents have operated without
third party accreditation. Thus, USDA fees were a substantial
increase in the costs of doing business for most certifiers. For
producers the direct fee of $50 was a 12 percent increase over the
estimated average fee paid for certification. For certifying agents
the $500 fee would have been a 53 percent increase over estimated
average certification fees. To the extent the program raised
certifying agent costs, these costs would have been passed through
to producers and handlers. Commenters stated that many certifying
agents had few clients and to pass through the estimated direct
costs of accreditation ($6,140) would make the costs of
certification higher than producers could afford.
Comments were received opposing fee provisions in the first
proposal. Most of these commenters expressed the belief that the
proposed fees would price small farmers, handlers, and certifying
agents out of the organic industry. Many commenters stated that the
proposed fees favored large farming operations and suggested a
sliding scale fee system, rather than the flat fee system discussed
in the first proposal, to
[[Page 13652]]
accommodate the economic needs of small farmers, handlers, and
certifying agents. Most suggested that small farmers and processors
be exempt from the payment of fees. A more comprehensive review of
the comments appears in subpart G entitled ``Administrative'' of
this proposal.
Additional comments were received that specifically referred to
the section entitled ``Regulatory Flexibility Act and Effects on
Small Businesses'' in the first proposal. Most of these commenters
expressed the belief that costs were understated and benefits were
overstated. Commenters thought the proposed fees were excessive,
unacceptable, and burdensome and would price many small farmers,
handlers, and certifying agents out of the organic industry. Some
thought that this appeared to be the actual intent of the first
proposal. They also supported a sliding scale fee system, rather
than the flat fee system originally proposed. Some stated that the
$5,000 exemption level was much too low. Producers objected to
having to pay the certification and inspection fees prior to knowing
whether they would actually set a crop, if the crop would grow, or
what percentage of the crop might be harvested.
Compared to this proposal, the first proposal would have been
more costly to the organic industry in terms of direct costs for
accreditation, and to producers and handlers in terms direct fees
and the costs which certifying agents would have attempted to pass
through. However, the current proposal has not set fees at levels to
recover all program costs and during an 18 month transition period
will not require application fees or charge for hourly services.
Costs that are not recovered through fees will be covered by
appropriated funds, meaning that taxpayers at large will bear some
of the costs of the proposed organic program. Thus, in terms of fees
and other direct costs, the first proposal was more burdensome on
the organic industry.
The first proposal also contained new information collection
requirements, a description of those requirements, and an estimate
of the annual economic burden on the organic industry. We received
responses specifically referring to the information collection
requirements of the first proposal. Among the comments made were
that the requirements would be unaffordable by small businesses and
that paperwork requirements should be kept small, simple, and to a
bare minimum, especially for small producers.
Recordkeeping requirements for certifying agents in the first
proposal that required certifying agents to maintain all records
concerning their activities for 10 years have been changed to reduce
the burden. Commenters expressed concern that this requirement was
excessive and unnecessary. We agree and are instead proposing that
there be three categories of records with retention periods: (1)
Records created by certifying agents regarding applicants for
certification and certified operations to be maintained 10 years,
consistent with OFPA requirement for maintaining all records
concerning activities of certifying agents; (2) records obtained
from applicants for certification and certified operations to be
maintained 5 years, the same as OFPA requirement for the retention
of records by certified operations; and (3) other records created or
received by certifying agents to be maintained for five years.
Option 2: Fee per Certification Model
A fee per certification model was considered but not used. This
model would have based accreditation fees on the numbers of farmers
and handlers certified. Specifically, certifying agents would pay a
fee to USDA for each certification performed. The smallest one-half
of certifying agents, who certify about 10 percent of organic
operations, would pay about 10 percent of the estimated costs
associated with accreditation. The largest 10 percent of certifying
agents, who certify about 45 percent of organic operations, would
pay about 45 percent of accreditation costs. The remaining 40
percent of certifying agents in the middle would pay 45 percent of
the costs. The fee per certification would be fixed, regardless of
the size of the operation being certified. This feature has the
potential to create a barrier to market access for the smaller
operations. Certifying agents who charge farmers and handlers for
certification based on size and scope of the operation would
maximize their profits by certifying only the larger farmers and
handlers from whom they would realize a higher return. If certifying
agents were to discriminate in this manner in favor of larger
operations, smaller farmers and handlers would find the
certification services available to them to be relatively limited
and possibly more expensive than under the fee for direct services
model that includes a variable fee for site visits. A fixed fee per
certification also would not take into account, in the distribution
of costs, the large difference in size between processors and
primary producers. Processors are generally much larger than primary
producers in terms of both total output and total revenue.
Option 3: Exemption of Small Certifying Agents From Accreditation
Small certifying agents (those with annual revenues of $25,000
or less) may not have the resources to meet all of the requirements
of the rule, such as accreditation fees, administrative and
personnel requirements, and conflict of interest restrictions, based
on their current structure and revenues. Therefore, exempting the
smallest certifying agents from the accreditation requirement,
similar to small producers being exempt from certification
requirements, could mitigate any potential adverse impact of the
rule on this group. This option, however, would require a
legislative amendment to the OFPA.
The exemption of the smaller certifying agents from
accreditation would carry with it many of the limitations resulting
from the absence of Federal oversight. International trade would
likely be limited to products certified by accredited certifying
agents. Protecting domestic consumers from inappropriate organic
claims on the labels of products certified by exempt certifying
agents would likely lead to greater confusion over labels in the
marketplace. Federal enforcement agencies such as the FDA, the ATF,
and FSIS might wish to distinguish accredited certifying agents from
those certifying agents who are exempt, perhaps by requiring
accredited certifying agents' clients to include the USDA seal on
their product labels.
One of the purposes of the OFPA described in the statute is to
assure consumers that organically produced products meet a
consistent standard. Without Federal oversight of certifying agents,
it would be difficult to ensure that one national standard of
production and handling for agricultural products would be employed.
The result could be the continuation of reciprocity agreements
between small, exempt certifying agents and large accredited ones.
This could result in a cost for small entities, while providing less
benefit to certified producers and handlers than would be provided
them by accreditation of all certifying agents.
We request comments from all interested parties, particularly
small businesses, as to whether a small certifier exemption would be
beneficial or practical given the constraints explained in this
option.
Option 4: This Proposal
The new proposal includes provisions that will mitigate the
impact of the National Organic Program, especially for small
businesses. Fixed administration fees for producers, handlers and
certification agents have been eliminated. The fixed application fee
for accreditation also has been eliminated. This will positively
affect small producers and handlers because fixed fees expend a
larger percentage of a smaller operation's total revenue.
As indicated earlier in this discussion, certifying agent
evaluation fees would reflect actual costs for the time and travel
required to do the evaluation. It is anticipated that smaller
certification agents would benefit because they are small and less
complex than larger certification agents. The proposed accreditation
costs would be proportional to the actual time required to perform
the service. Several small operations could be grouped by area to
reduce travel expenses of the evaluators.
The new labeling requirements that allow the use of a
certification agent's seal on the principal display panel and on the
information panel of processed product labels also may benefit small
operations. Certification agents that have an established consumer
base may benefit by displaying their identifying seal. Small
certification agents, whose clients more likely produce ingredients
for processed products, could also be identified and thus share in
this benefit. Certification agents also may wish to expand their
operation by offering verification of truthful labeling claims which
will be allowed under this proposal.
This proposal has three elements of flexibility that are
advantageous to small entities: performance-based production and
handling standards and certifying agent requirements; production and
handling standards that contain a range of allowable practices; and
temporary variances.
The standards in this proposal are performance standards based
on the results of a management system, rather than prescriptive or
design standards that prescribe specific technology or a precise
[[Page 13653]]
procedure for compliance. Performance standards allow for
flexibility in compliance, which is especially important to organic
farmers, handlers and certifying agents with limited resources.
Performance standards promote innovation and the development of new
technologies which would help the industry as a whole be more
efficient. Finally, they provide a less costly means of compliance
than design standards. Small entities, in particular, benefit
because compliance with performance standards allows for the
adaptation of existing systems without costly capital investment.
This proposal allows for flexibility by providing a range of
production and handling practices that can be used to maintain the
organic integrity of the operation. The use of an allowed practice
or substance must be described in the organic plan as a record for
consideration by the certifying agent during a certification review.
The proposal provides temporary variances in the case of natural
disasters, damage from wind, floods and the like, and for research
trials. The benefit of variances is that a producer or handler would
not lose its investment in an organic operation because of certain
conditions that are beyond the producer or handler's control.
Variances also enhance performance standards by allowing additional
innovation and experimentation. This is especially important to
producers and handlers who depend on the organic price premium.
Conclusion
USDA has identified the entities that may be affected by this
proposal and has analyzed the anticipated impacts of the proposal on
them based on our knowledge of the industry and limited data. We
have drawn on industry studies, including studies completed since
the first proposal was published in 1997, as well as information
provided in comments on the first proposal. However, we lack data to
thoroughly and quantitatively describe the existing organic industry
and quantitatively analyze the effects of this proposal.
Whether using SBA's small business size standards by SIC or the
alternative definitions created for this analysis, we believe that
this proposal could have a significant impact on a substantial
number of small businesses. Even with the flexibility proposed in
the regulation and the expanded market opportunities brought about
by implementation of the National Organic Program, some small
certifying agents may choose not to become accredited to provide
certifying services, and some small producers and handlers may
choose not to continue being certified organic because the proposed
fees would be passed down to them as certification fees. We invite
comments about the expected benefits and costs to small entities as
presented in this analysis. Specifically, we invite comments
regarding the impact of the proposed National Organic Program on
small certifying agents, producers, and handlers so that we might
uncover potential unintended negative impacts on small entities.
The proposed structure of user fees outlined in this proposal
attempts to minimize the burden of administrative costs which will
be assumed by small-scale organic certifying agents and the
producers and handlers who use these certification services.
Certifying agents already performing organic certification services
in a State or private capacity on the date that the proposed
national accreditation program for organic certification is
implemented will not be required to pay the administrative costs of
applying for initial national accreditation status; the
administrative costs involved in evaluating the accreditation status
of these agents will be absorbed by a portion of the National
Organic Program operating budget appropriated by Congress. They will
be required to pay travel expenses for the reviewers. New applicants
seeking national accreditation for organic certification services
will be charged a fee to cover the administrative costs of
evaluating their suitability for accreditation, their application
fees will be structured to reflect the actual hourly costs of having
an AMS evaluator conduct a site visit (including travel time to and
from the evaluator's duty station and per diem travel expenses). The
departures from the first proposal--which would have imposed a
uniform flat fee on all applicants for national accreditation--along
with the adoption of an application fee structure which attempts to
relate the imposition of fees to the actual costs involved in
administering the national accreditation program, should contribute
to a less burdensome and more equitable distribution of
administrative costs across all segments of the organic industry.
Appendix D--Paperwork Reduction Act of 1995
The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506 and
3507) is designed to minimize the burden of reporting and
recordkeeping (information collection requirements) required by
Federal regulations on individuals, businesses, other private
institutions, and State and local governments. The burden is an
estimate of the amount of time and the cost required of program
participants to fulfill the information collection requirements.
Information collection requirements must have Office of
Management and Budget (OMB) review and approval before they can
become effective. They must also be made available for public
comment, and the comments become part of the public record. This
notice requests comments on the proposed information collection
requirements of this proposal.
Title: National Organic Program.
OMB Number: New collection.
Expiration Date of Approval: Three years from date of approval.
Type of Request: New.
Abstract: The Organic Foods Production Act (OFPA) of 1990
mandates that the Secretary develop a National Organic Program (NOP)
to accredit eligible State program's governing State officials or
private persons as certifying agents who would certify producers or
handlers of agricultural products that have been produced using
organic methods as provided for in the OFPA. This regulation is
proposed: (1) To establish national standards governing the
marketing of certain agricultural products as organically produced
products; (2) to assure consumers that organically produced products
meet a consistent standard; and (3) to facilitate interstate
commerce in fresh and processed food that is organically produced.
The OFPA was requested by the organic community because of
problems encountered in the marketing of organic products. First,
there was fraudulent use of the term, ``organic,'' resulting in the
mislabeling of products, caused in part because many consumers are
willing to pay premium prices for organic foods. Second, there was a
lack of uniformity in standards defining organic production, causing
trade disruption and confusion among buyers, sellers, and users of
organic products. Third, there was constraint on market growth due
to the prohibition on labeling meat and poultry products as organic.
After implementation of the NOP, any agricultural product labeled
``organic'' will have to be from a production or handling operation
that is certified by a certifying agent who is accredited by the
U.S. Department of Agriculture (USDA).
A proposed rule to implement the OFPA was published in December
1997. It contained information collection requirements, an estimate
of the annual economic burden on the organic industry, and a request
for comments about the burden. A few general comments were received
about the burden and they were considered when this proposal was
prepared. Also taken into account was other information about
existing industry practices and documents, the Initial Regulatory
Flexibility Analysis that is discussed in the section entitled
``Regulatory Flexibility Act and the Effects on Small Businesses,''
and the Regulatory Impact Assessment (RIA) that is discussed in the
section entitled ``Executive Order 12866.'' The numbers of entities
affected by this proposal are estimated in the RIA. The RIA is
attached as an appendix to this proposal.
Reporting and recordkeeping are essential to the integrity of
the organic certification system. They create a paper trail that is
a critical element in carrying out the mandate of the OFPA. They
serve the Agency mission, program objectives, and management needs
by providing information on the efficiency and effectiveness of the
program. The information affects decisions because it is the basis
for evaluating compliance with the OFPA and the regulations, for
administering the program, for management decisions and planning,
and for establishing the cost of the program. It supports
administrative and regulatory actions in response to noncompliance
with the OFPA and the regulations.
In general, the information collected will be used by USDA,
State program's governing State officials, and certifying agents. It
will be created and submitted by State and foreign program
officials, peer review panel members, accredited certifying agents,
organic inspectors, certified organic producers and handlers, those
seeking accreditation or certification, and parties interested in
changing the National List. Additionally, it will necessitate that
all of these entities have procedures and space for recordkeeping.
[[Page 13654]]
The burden on each entity is discussed below. One major estimate
made about each entity is the number of entities likely to
participate in the NOP. The information collection burden attempts
to incorporate the burden that will be in addition to the burden
that current organic marketers have with the burden required of new
entrants into the field.
USDA. USDA will be the accrediting authority. USDA will accredit
domestic and foreign certifying agents who will certify domestic and
foreign organic producers and handlers, using information from the
agents documenting their business operations and program expertise.
USDA will also permit State program's governing State officials to
establish their own organic certification programs after the
programs are approved by the Secretary, using information from the
States documenting their ability to operate such programs and
showing that such programs meet the requirements of the OFPA and the
regulations.
States. State program's governing State officials may operate
their own organic certification programs. State officials will
obtain the Secretary's approval of their programs by submitting
information to USDA documenting their ability to operate such
programs and showing that such programs meet the requirements of the
OFPA and the regulations. More than half of the States currently
have some standards governing the production, handling, or labeling
of organic food and 13 States have organic certifying programs.
These programs require reporting and recordkeeping burdens similar
to those required by the NOP. It is unknown at this time how many
States, if any, will establish their own organic certification
programs pursuant to the OFPA and the regulations. Estimates: 13
States will operate their own certification programs. The annual
burden for each State will be an average of 52.308 hours or if
calculated at a rate of $27 per hour, (rounded up to the next
dollar), it would be $1,413.
Peer review panels. Panels will assist the Agricultural
Marketing Service (AMS) Administrator in evaluating applicants for
accreditation as certifying agents. Individuals will apply to USDA
for membership in a pool from which the panels are selected,
submitting to USDA information documenting their qualifications to
conduct such reviews. This will be a new burden for those serving on
the panels. Estimates: 40 people will participate in peer review
panels. The annual burden for each panel member will be an average
of 10 hours or if calculated at and $27 per hour, it would be $270.
Certifying agents. Certifying agents may be State program's
governing State officials, private entities, or foreign entities who
are accredited by USDA to certify domestic and foreign producers and
handlers as organic in accordance with the OFPA and the regulations.
Each entity wanting to be an agent will seek accreditation from
USDA, submitting information documenting its business operations and
program expertise. Accredited agents will determine if a producer or
handler meets organic requirements, using detailed information from
the operation documenting its specific practices and on-site
inspection reports from organic inspectors. Estimates: 59 entities
are expected to apply for certification (13 State programs, 36
private entities, 10 foreign entities). The annual burden for each
State program will be an average of 695.428 hours or if calculated
at $18,778. The annual burden for each private or foreign entity
will be 699.678 hours or $27 per hour (rounded up to the next
dollar) it would be $18,893.
Administrative costs for reporting, disclosure of information,
and recordkeeping are expected to vary among certifying agents.
Entities which begin their activities only after the national
program is implemented would be expected to incur the greatest cost
as they set up an operation that conforms to the OFPA and the
regulations. For agents who are currently active in the organic
industry, follow ISO guidelines, and already perform many of these
administrative functions, costs will vary depending upon the extent
to which their current practices are different from requirements in
the OFPA and the regulations. Agents will be expected to provide the
public with information concerning their clients. Efforts were made
to incorporate existing industry practices and documents into this
proposal. A list of several proposed administrative requirements and
the probable resources required for compliance is included in the
Regulatory Impact Assessment.
When an entity applies for accreditation as a certifying agent,
it must provide a copy of its procedures for complying with
recordkeeping requirements (Sec. 205.504(b)(3)). Once certified,
agents will have to make their records available for inspection and
copying by authorized representatives of the Secretary
(Sec. 205.501(a)(9)). USDA will charge certifying agents for the
time required to do these document reviews. Audits will require less
time if the documents are well organized and centrally located, than
if they are in disarray and in several locations. Certifying agents
will have control over these conditions, but making documents
accessible to the public may bring about a substantial change in the
way some agents currently operate.
Recordkeeping requirements for certifying agents in the first
proposal were changed to reduce the burden. They required certifying
agents to maintain all records concerning their activities for 10
years. Commenters expressed concern that this requirement was
excessive and unnecessary. We agree and are instead proposing three
categories of records with varying retention periods: (1) records
created by certifying agents regarding applicants for certification
and certified operations, maintain 10 years, consistent with OFPA's
requirement for maintaining all records concerning activities of
certifying agents; (2) records obtained from applicants for
certification and certified operations, maintain 5 years, the same
as OFPA's requirement for the retention of records by certified
operations; and (3) records created or received by certifying agents
regarding accreditation, maintain 5 years, consistent with OFPA's
requirement for renewal of agent's accreditation (Sec. 205.510(b)).
Residue testing requirements in the first proposal were changed
to reduce the burden. They required certifying agents to undertake
residue testing every 5 years to determine if products from
certified operations contained a detectable residue level of a
prohibited substance and to report such findings to appropriate
authorities. Commenters expressed concern that the requirement was
too costly. We agree and are instead proposing that the State
program's governing State officials or certifying agents may conduct
testing at their own expense only if they suspect a crop has come
into contact with a prohibited substance. Test results must be
submitted to the Administrator (Sec. 205.672(b)).
Organic inspectors. Inspectors will conduct on-site inspections
for the certifying agents of each applicant for certification and
annually of each certified operation. They will determine whether or
not certification should continue and will report this finding to
the certifying agent. Inspectors will be the agents themselves,
employees of the agents, or individual contractors. We estimate that
about half will be certifying agents and their employees and half
will be individual contractors. Individuals who apply for positions
as inspectors will submit to the agents information documenting
their qualifications to conduct such inspections. Estimates: 293
inspectors (147 certifying agents and their employees, 146
individual contractors) will be used. The annual burden for each
inspector will be an average of 48.304 hours or if calculated at $27
per hour (rounded up to the next dollar), it would be $1,305.
Producers and handlers. Producers and handlers, domestic and
foreign, will apply to certifying agents for organic certification,
to renew their certification, or to report changes in their
practices, submitting to the agents detailed information documenting
their specific practices. Producers include farmers, livestock and
poultry producers, and wild crop harvesters. Handlers include those
who transport or transform food and may include millers, bulk
distributors, food manufacturers, processors, repackagers, or
packers. Some handlers may be part of a retail operation that
processes organic products in a location other than the premises of
the retail outlet.
The OFPA requires certified operators to maintain their records
for 5 years. Estimates: 19,300 total operators (14,153 certified and
5,147 exempt), including 17,150 producers (12,176 certified and
4,974 exempt) and 2,150 handlers (1,977 certified and 173 exempt).
We do not have an estimate of the number of foreign producers and
handlers that will apply for organic certification. The annual
burden for each domestic operator will be: certified producer--
average of 9.521 hours or if calculated at $24 per hour, it would be
$229; certified handler--average of 49.521 hours or if calculated at
$24 per hour, it would be $1,189; exempt/excluded operator--average
of 0.5 hour or if calculated at $24. per hour, it would be $12.
The proposed regulation exempts certain operations from
certification: (1) Producers and handlers whose gross agricultural
income from organic sales totals $5,000 or less annually; (2)
handlers selling only agricultural products that contain less than
50 percent organic ingredients by total
[[Page 13655]]
weight of the finished product; (3) handlers that handle
agricultural products that contain at least 50 percent organic
ingredients and choose to use the word ``organic'' only on the
information panel of a packaged product; and (4) handlers that are
retail food establishments that handler organic food but do not
process it. The proposed regulation also excludes certain operations
from certification: (1) Handlers selling only agricultural products
labeled as organic or made with organic ingredients that are
enclosed in a container prior to being received, remain in the same
container, and are not otherwise processed while in the control of
the operation; and (2) handlers that are retail food establishments
that process or prepare, on the premises, raw and ready-to-eat food
from organic agricultural products.
Administrative costs for reporting and recordkeeping are
expected to vary among certified operators. Entities which begin
their activities only after the national program is implemented
would be expected to incur the greatest cost as they set up an
operation that conforms to the OFPA and the regulations. For
operators who are currently active in the organic industry and
already perform many of these administrative functions, costs would
vary depending upon the extent to which their current practices are
different from requirements in the OFPA and the regulations. Efforts
were made to incorporate existing industry practices and documents
into this proposal. A list of several proposed administrative
requirements and the probable resources required for compliance is
included in the Regulatory Impact Assessment.
Research studies have indicated that operations using product
labels containing the term ``organic'' handle an average of 19.5
labels annually, that there are about 16,000 products with the term
organic on the label, and that the number of such products increased
by 250 annually from 1994 through 1996. We estimate that by the year
2001, 17,000 products will be marketed with the term ``organic'' on
the label. This proposal includes an estimate of the time needed to
develop labels for products sold, labeled, or represented as ``100
percent organic,'' ``organic,'' ``made with organic (specified
ingredients),'' or which use the term organic to modify an
ingredient in the ingredients statement. Also included is the time
spent deciding about use of the USDA seal, a State emblem, or the
seal, logo, or other identifying marks of a private certifying agent
(Sec. 205.300-Sec. 205.310). Because the labeling requirements in
this proposal are in addition to FDA and FSIS requirements, the
burden measurement does not include the hours necessary to develop
the entire label. For purposes of calculating the burden, it was
estimated that each handler will develop 20 labels annually.
Interested parties. Any interested party may petition the NOSB
for the purpose of having a substance evaluated for recommendation
to the Secretary for inclusion on or deletion from the National
List. Estimates: 25 interested parties may petition the NOSB. The
annual burden for each interested party will be an average of 104
hours and $2,496 ($24 per hour).
Cost. The following table shows the salary rates used to
calculate the cost of the burden. We believe the increased rates for
this proposal over the first proposal are more realistic in terms of
the responsibilities and requirements of each entity.
------------------------------------------------------------------------
First This
Estimated hourly rates proposal proposal
------------------------------------------------------------------------
Certified and exempt operators, interested $10 $24
parties......................................
State program's governing State officials, 20 27
peer review panel members, certifying agents,
organic inspectors...........................
------------------------------------------------------------------------
Annual Reporting and Recordkeeping Burden:
Estimated Number of Respondents: 19,730.
Total Annual Hours: 269,622.
Total Cost: $6,780,348.
Comments. Comments are requested on these proposed information
collection requirements. Comments are specifically invited on: (1)
Whether the proposed collection of information is necessary for the
proper performance of the functions of USDA, including whether the
information would have practical utility; (2) the accuracy of USDA's
estimate of the burden of the proposed collection of information,
including the validity of the methodology and assumptions used; (3)
ways to enhance the quality, utility, and clarity of the information
to be collected; and (4) ways to minimize the burden of the
collection of information on those who are to respond, including the
use of appropriate automated, electronic, mechanical, or other
technological collection techniques or other forms of information
technology.
Comments should be submitted by the date stated in the section
entitled Dates at the beginning of this proposal. However, they
should be sent to (1) Office of Management and Budget, New Executive
Office Building, 725 17th Street, NW, Room 725, Washington, D. C.
20503, Attention: Desk Officer, and to (2) Clearance Officer, USDA-
OCIO, Room 404W, Jamie Whitten Building, STOP 7602, 1400
Independence Avenue, SW, Washington, D.C. 20250-7602. Additionally,
comments may be sent by fax to (202) 690-4632 or submitted via the
Internet through the National Organic Program's homepage at http://
www.ams.usda.gov/nop.
Appendix E.--Executive Order 12988, Civil Justice Reform
Executive Order 12988, Civil Justice Reform, instructs each
executive agency to adhere to certain requirements in the
development of new and revised regulations in order to avoid unduly
burdening the court system. The first proposal was reviewed under
this Executive Order. No comments were received on that review and
no additional related information has been obtained since then. This
rule is not intended to have retroactive effect.
States and local jurisdictions are preempted under section 2115
of the OFPA (7 U.S.C. 6514) from creating programs of accreditation
for private persons or State officials who want to become certifying
agents of organic farms or handling operations. A governing State
official would have to apply to the USDA to be accredited as a
certifying agent, as described in section 2115(b) of the OFPA (7
U.S.C. 6514(b)). States also are preempted under sections 2104
through 2108 of the OFPA (7 U.S.C. 6503 through 6507) from creating
certification programs to certify organic farms or handling
operations unless the State programs have been submitted to, and
approved by, the Secretary as meeting the requirements of the OFPA.
Pursuant to section 2108(b)(2) of the OFPA (7 U.S.C.
6507(b)(2)), a State organic certification program may contain
additional requirements for the production and handling of
organically produced agricultural products that are produced in the
State, and for the certification of organic farm and handling
operations located within the State, under certain circumstances.
Such additional requirements must: (a) Further the purposes of the
OFPA; (b) not be inconsistent with the OFPA; (c) not be
discriminatory towards agricultural commodities organically produced
in other States; and (d) not be effective until approved by the
Secretary.
Pursuant to section 2120(f) of the OFPA (7 U.S.C. 6519(f)), this
proposal would not alter the authority of the Secretary under the
Federal Meat Inspection Act (21 U.S.C. 601 et seq.), the Poultry
Products Inspections Act (21 U.S.C. 451 et seq.) or the Egg Products
Inspection Act (21 U.S.C. 1031 et seq.), concerning meat, poultry,
and egg products, nor any of the authorities of the Secretary of
Health and Human Services under the Federal Food, Drug and Cosmetic
Act (21 U.S.C. 301 et seq.), nor the authority of the Administrator
of the Environmental Protection Agency (EPA) under the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136 et seq.).
Section 2121 of the OFPA (7 U.S.C. 6520) provides for the
Secretary to establish an expedited administrative appeals procedure
under which persons may appeal an action of the Secretary, the
applicable governing State official, or a certifying agent under
this title that adversely affects such person or is inconsistent
with the organic certification program established under this title.
The Act also provides that the U.S. District Court for the district
in which a person is located has jurisdiction to review the
Secretary's decision.
Appendix--Executive Order 13132, Federalism
This proposal has been reviewed under Executive Order 13132,
Federalism. This
[[Page 13656]]
Order requires that regulations that have federalism implications
provide a federalism impact statement that: (1) Demonstrates the
Agency consulted with the State and local officials before
developing the proposed regulation, (2) summarizes State concerns,
(3) provides the Agency's position supporting the need for the
regulation, and, (4) describes how the concerns of State officials
have been met. The Order indicates that where National standards are
required by Federal statutes, Agencies shall consult with
appropriate State and local officials in developing those standards.
Further, Agencies are required to interpret Federal statutes to
preempt State law only where the statute contains an express
preemption provision. In such a case, any regulatory preemption of
State law shall be restricted to the minimum necessary to meet the
objectives of the statute.
The Organic Foods Production Act (OFPA) of 1990 (7 U.S.C. 6514)
establishes national standards regarding the marketing of
agricultural products as organically produced, assures consumers
that organically produced products meet a consistent standard, and
facilitates interstate commerce in fresh and processed food that is
organically produced. In carrying out these purposes, the Act
contemplates a significant role for the States and, in fact,
envisions a partnership between the States and the Federal
Government in meeting the requirements of the Statute. The Act
specifies the State role and gives States recognition for their
activities in organic agriculture in several ways. First, 7 CFR 6507
provides that States may establish a State organic certification
program consistent with the national program. Second, these programs
may contain more restrictive requirements than the National Organic
Program established by the Secretary of Agriculture. To be more
restrictive, State Organic programs are required to: further the
purposes of the Act, be consistent with the Act, not discriminate
against organic products of another State, and be approved by the
Secretary. Third, States can choose to be accredited as certifying
agents under the Act and carry out a State organic program. Fourth,
the Act allows the States to determine the manner in which they
choose to be involved in the organic program. States may choose to
carry out the requirements of the Act by establishing a State
program and becoming accredited as certifying agents, they may
establish a State program and utilize private certifying agents to
implement the program, or they may choose to utilize the national
organic program as implemented by the Secretary.
In recognition of their role in carrying out the provisions of
OFPA, the Department has reached out to States and actively sought
their input throughout the entire process of developing the proposed
organic rule. The Department drew extensively on the organic
expertise of States and the organic industry by working closely with
the National Organic Standards Board. The National Organic Standards
Board, established under Section 2119 of the OFPA (7 CFR 6518), has
provided a broad and inclusive forum for public participation in
developing the recommendations and concepts that underpin the
proposed organic rule. Section 2104(c) of the OFPA (7 CFR 6503(c))
requires the Secretary to consult with the National Organic
Standards Board in developing the organic program and the National
List set forth in Section 2118 of the OFPA (7 CFR 6517).
The Secretary has received extensive input from the Board,
interested persons, and the States regarding the establishment of
the National Organic Program and this reproposal. The Board met 12
times before publication of the proposed rule on December 16, 1997,
and has met five times during 1998 and 1999. States were invited to
attend each of these meetings, and official State certifier
representatives participated in Board deliberations in meetings held
in July 1998 and July 1999. Public input sessions were held at each
meeting to gather information from all interested persons, including
State and local jurisdictions.
Section 2110(g) of the OFPA (7 U.S.C. 6509(g)) requires the
Secretary to hold public hearings to gather information to guide
development of standards for livestock products. Four hearings were
held during 1994 in Washington, D.C.; Rosemont, IL; Denver, CO; and,
Sacramento, CA. States were invited to participate in each of these
hearings.
National Organic Program staff also received comments and
consulted with States at public events. They made presentations,
received comments, and consulted with States at local and regional
organic conferences and workshops and at national and international
organic and natural food shows.
Further, States were provided the opportunity to comment
specifically on State issues at a National Organic Certifiers
meeting held on July 21, 1995, to discuss accreditation issues; a
meeting held on February 26, 1996, to discuss the role of States in
the National Organic Program; and a February 1999 State Certifiers
meeting to discuss State issues. Further, States were consulted in
training sessions held for organic inspectors, as well as numerous
question and answer sessions at speaking engagements of the
Agricultural Marketing Service Administrator, the National Organic
Program Program Manager, and the staff.
On publication of the first proposal on December 16, 1997, an
announcement and information packet summarizing the first proposal
were sent to over 1,000 interested parties, including State
governors and State department of agriculture secretaries,
commissioners, or directors. Subsequent to publication of the first
proposal, State and local jurisdictions had the opportunity to
provide input at four listening sessions held in February-March 1998
on the first proposal in Austin, TX; Ames, IA; Seattle, WA; and New
Brunswick, NJ.
Finally, States had the opportunity to comment on the first
proposal. More than 275,000 comments were received on the first
proposal, including State commenters.
Through this extensive outreach and consultation process, States
identified a number of issues with the first proposal. States
expressed several specific concerns regarding accreditation
requirements as they affect State programs. These issues are
described below, along with the Department's response in the
reproposal.
(1) Under OPFA 2108 (7 CFR 6507), States may establish
additional standards, approved by the Secretary. First, State
commenters objected to the provision in the first proposal that
would have prohibited States from requiring compliance with these
additional standards as a condition for use of the organically
produced State logo on products within the borders of such State. We
agree with the commenters, as we did not intend to prohibit States
from requiring that these more restrictive standards be met as a
requirement to the State's logo on organically produced products.
Accordingly, this proposal will permit States with more restrictive
requirements approved by the Secretary and private certifiers
certifying production and handling operations within these States to
require that the State's more restrictive standards be met in order
to use the State logo.
(2) The first proposal required annual organic inspector
performance appraisal and annual program evaluations for certifying
agents. State commenters objected that these requirements would
duplicate State requirements. We do not intend for States to develop
dual performance appraisal and program evaluation systems because we
believe that programs already conducted by the States will meet the
requirements of this proposal. These programs would be expected to
conform with good management practices appropriate to an
organization's size and structure. The questioned provisions have
not been changed, but this proposal has been revised to clarify that
the annual program evaluation can be conducted by the certifying
agency staff, an auditing entity, or a consultant with appropriate
expertise.
(3) The first proposal set forth confidentiality requirements
for certifying agents. Commenters stated that these confidentiality
requirements might conflict with State requirements for ``open
records.'' While we recognize this potential for conflicting
requirements, records collected under the National Organic Program
would be subject to the requirements of the Act. Where the Act and
State requirements conflict, the Act would take precedence. There is
no change to the confidentiality provision.
To clarify that authorized representatives of the Secretary or
the applicable Stae program's governing State official may act on
their behalf and must be given access to the records, this proposal
adds the phrase ``and their authorized representatives.''
(4) This proposal will require that accredited certifying agents
accept certification decisions made by another USDA-accredited
certifying agent as equivalent. State commenters said that States
should be able to control which certifying agents operate within
their State.
The first proposal provided that accredited certifying agents
accept the certification decisions made by another USDA-accredited
certifying agent as equivalent to their own. Commenters representing
State programs said that States should be able to control which
certifying agents operate within their
[[Page 13657]]
State. Several commenters asked whether States with more restrictive
standards could challenge certification decisions made by other
accredited certifying agents. Under the Act, no organic product may
be produced or handled to organic standards lower than the standards
of the National Organic Program. A State Government may not prevent
the marketing or sale within a given State of organic product
produced in another State according to this proposal. While States
may, with the approval of the Secretary, set more restrictive
standards than the national organic standards for product produced
or handled within their State, these requirements do not apply to
products produced or handled in another State.
State programs approved by the Secretary will be required to
treat all accredited certifying agents equally, and accredited
certifying agents in one State cannot refuse to recognize another
State's product certified to national standards. Accordingly, the
requirement remains unchanged that a certifying agent accept
certification decisions by another USDA-accredited certifying agent
as equivalent.
(5) The first proposal required all certifying agents to submit
documents and information on personnel, administrative, and
financial policies and procedures to demonstrate organic expertise
and ability to implement the National Organic Program. States
commented that State certifying agents should not be required to
submit such information, stating that these requirements should not
apply to States with established personnel, administrative, and
financial procedures. They also indicated that the review should be
limited to organic program administration only, not to agencywide
policies and procedures. We recognize that States have established
personnel, administrative, and financial procedures and that these
procedures would apply to State certifying agents. However, a stated
purpose of the Act is establishment of national standards. Such
standards should extend to uniform requirements for State and
private certifying agents unless otherwise provided in the Act.
Further, such information is necessary for the Administrator to make
a determination on approval of an application for accreditation.
Accordingly, the requirements for demonstrating organic expertise
and ability to implement the National Organic Program remain the
same for private and State certifying agents.
(6) The first proposal required a certifying agents to provide a
description of procedures to prevent conflicts of interest and the
identification of any food or agriculture-related business interests
of all personnel intended to be used in the certifying operation.
Commenters stated that existing State policies should be sufficient
to prevent conflicts of interest for a State certifying agent and
that lists of the business interests of all inspectors, program
staff, and their families are not necessary.
We agree that existing State policies should be sufficient to
prevent conflicts of interest but disagree that lists of the
business interests of all inspectors, program staff, and their
families are unnecessary. The Act (CFR 6515(h)) places
responsibility for the prevention of conflicts of interest with the
certifying agent. However, the Department is responsible for
ensuring that the certifying agent complies with that
responsibility. The requirement to provide such a listing provides
the Administrator information essential to identifying conflicts of
interest. In addition, a stated purpose of the Act is to establish
uniform national standards. These uniform standards should extend to
uniform conflict of interest requirements for State and private
certifying agents. The commenters have said that most States already
have established conflict of interest policies and procedures so
that the required information should be easily available for
submission to the Administrator. Accordingly, no change has been
made in this proposal.
Certification, the process of qualifying a producer or handler
to sell agricultural products labeled as organic, raised several
issues for States.
(1) The first proposal required an applicant for certification
to supply required documentation to provide information necessary to
allow a certifying agent to evaluate the application. State
commenters suggested a provision be added to allow a certifying
agent to require documentation from applicants in addition to that
required by the first proposal.
A certifying agent can, if necessary, follow up on an initial
application with requests for additional information, provided that
information is needed to evaluate the application and determine
compliance with the Act and regulations. We did not make the
suggested change, as the existing language already allows the
certifying agent to request additional information necessary to
determine compliance with the Act and regulations.
(2) The first proposal laid out a certification program that
provided for updates to a continuous organic certification. To meet
continuation of certification requirements, the first proposal
required an on-site inspection after receipt of the update to the
application. A State certifying agent objected, saying that an on-
site inspection after receipt of a renewal application is not
consistent with current practice. Currently, on-site inspections
conducted during the prior year are used to determine compliance
with certification requirements at the time of renewal, along with a
review of information submitted by the certified operation. The
State certifying agent stated that an additional inspection at
renewal time would not be useful if it was not an appropriate time
to observe the certified unit in operation.
We disagree with the commenters, since certifiers are required
to schedule on-site inspections when the certified operation can be
observed for its compliance or ability to comply with the provisions
of the National Organic Program. The initial certification,
therefore, should have been granted when the on-site inspection
verified compliance with certification requirements. The certified
operation should be fulfilling its annual continuation of
certification at a time when it can demonstrate its compliance with
the Act.
States commented on several compliance issues included in the
first proposal.
(1) The Administrator had sole authority to suspend or revoke
the accreditation of certifying agents in the first proposal.
Commenters indicated that State program's governing State officials
should have the authority to suspend or revoke the accreditation of
private certifying agents.
We agree that in a State with a program approved by the
Secretary, the State program's governing State official should be
authorized to suspend or revoke an accreditation granted by the
Secretary to certifying agents operating within the State. We concur
because of the Department's role in providing oversight to the State
program, including its enforcement procedures, and have made that
change in this proposal.
(2) Many commenters stated that the first proposal lacked
adequate enforcement provisions, including enforcement by States
with an approved State program.
We agree with the commenters that additional enforcement
provisions are necessary for the National Organic Program. The
following changes have been made in this proposal.
(a) As noted above, the State program's governing State official
will now be authorized to suspend or revoke accreditation granted by
the Secretary to certifying agents operating in the State.
(b) An enforcement proceeding brought by a State program's
governing State official against a certified operation or certifying
agent shall be appealable pursuant to the appeal procedures of the
State program with no subsequent appeal rights to the Secretary.
States commented on several fees provisions in the first
proposal.
(1) The first proposal required that payment of fees and charges
to the Department be by certified check or money order. State
commenters objected, saying it was insulting for USDA to require a
State government agency to pay for its accreditation with a
certified check.
Accordingly, we have removed this requirement, simply requiring
that payments for fees and other charges for accreditation must be
made payable to the Agricultural Marketing Service.
(2) Several State agencies objected to the fee provisions in the
first proposal, expressing the belief that the proposed fees would
price small producers and handlers out of the organic industry. Some
State agencies commented that those small organic producers
conducting their own on-farm handling would be forced out of the
organic industry by the excessive handler fee and reporting burdens.
After review of the comments, we acknowledge that the fees
charged in the first proposal may have discouraged industry growth
and may not have facilitated interstate commerce of organic product.
We have thus, modified the fee structure to reduce costs to all
organic sectors and have removed the requirement that provided for
payment of fees to the Department by certified production and
handling operations. Instead, the Department will charge certifying
agents only for fees and charges related to accreditation, with the
balance of the costs of the program to be funded through
appropriations.
[[Page 13658]]
(3) Some State certifying agents commented that State certifying
agents should not be assessed accreditation fees. They stated that
most State certifying agents could face large accreditation costs
because they have many county or regional offices which would be
considered subsidiaries, adding that these costs would be passed on
to producers and handlers or paid with supplemental State funds. A
few State certifying agents asserted that USDA should pay the States
because of the State's contribution to the national program. One
State representative said that accreditation fees for State
certifying agents should be less than for private certifying agents,
as State certifying agents should involve less AMS review and
oversight.
We disagree with those commenters who say that State certifying
agents should not be assessed accreditation charges, be charged
less, or be paid to certify production and handling operations.
These actions would constitute unacceptable preferential treatment
of State certifying agents to the detriment of private certifying
agents. This proposal will assess State certifying agents the same
fees for accreditation under the same fee structure as private
certifying agents.
We invite States and local jurisdictions to comment on the
issues raised in this Federalism impact statement. We also encourage
States and local jurisdictions to review and comment on this
proposal as it relates to the operation of State organic programs.
[FR Doc. 00-5723 Filed 3-7-00; 10:42 am]
BILLING CODE 3410-02-P
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