Rule2023-00702
National Organic Program (NOP); Strengthening Organic Enforcement
Primary source
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Published
January 19, 2023
Effective
March 20, 2023
Issuing agencies
Agriculture DepartmentAgricultural Marketing Service
Abstract
This rulemaking amends the United States Department of Agriculture (USDA) organic regulations to strengthen oversight and enforcement of the production, handling, and sale of organic agricultural products. The amendments protect integrity in the organic supply chain and build consumer and industry trust in the USDA organic label by strengthening organic control systems, improving farm to market traceability, and providing robust enforcement of the USDA organic regulations. Topics addressed in this rulemaking include: applicability of the regulations and exemptions from organic certification; National Organic Program Import Certificates; recordkeeping and product traceability; certifying agent personnel qualifications and training; standardized certificates of organic operation; unannounced on-site inspections of certified operations; oversight of certification activities; foreign conformity assessment systems; certification of producer group operations; labeling of nonretail containers; annual update requirements for certified operations; compliance and appeals processes; and calculating organic content of multi-ingredient products.
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[Federal Register Volume 88, Number 12 (Thursday, January 19, 2023)]
[Rules and Regulations]
[Pages 3548-3627]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-00702]
[[Page 3547]]
Vol. 88
Thursday,
No. 12
January 19, 2023
Part III
Department of Agriculture
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7 CFR Part 205
National Organic Program (NOP); Strengthening Organic Enforcement;
Final Rule
Federal Register / Vol. 88 , No. 12 / Thursday, January 19, 2023 /
Rules and Regulations
[[Page 3548]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 205
[Doc. No. AMS-NOP-17-0065; NOP-17-02]
RIN 0581-AD09
National Organic Program (NOP); Strengthening Organic Enforcement
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This rulemaking amends the United States Department of
Agriculture (USDA) organic regulations to strengthen oversight and
enforcement of the production, handling, and sale of organic
agricultural products. The amendments protect integrity in the organic
supply chain and build consumer and industry trust in the USDA organic
label by strengthening organic control systems, improving farm to
market traceability, and providing robust enforcement of the USDA
organic regulations. Topics addressed in this rulemaking include:
applicability of the regulations and exemptions from organic
certification; National Organic Program Import Certificates;
recordkeeping and product traceability; certifying agent personnel
qualifications and training; standardized certificates of organic
operation; unannounced on-site inspections of certified operations;
oversight of certification activities; foreign conformity assessment
systems; certification of producer group operations; labeling of
nonretail containers; annual update requirements for certified
operations; compliance and appeals processes; and calculating organic
content of multi-ingredient products.
DATES:
Effective date: March 20, 2023
Implementation date: March 19, 2024.
FOR FURTHER INFORMATION CONTACT: Jennifer Tucker, Ph.D., Deputy
Administrator, National Organic Program. Telephone: 202-720-3252.
Email: <a href="/cdn-cgi/l/email-protection#f6bc9398989f909384d8a283959d9384b683859297d8919980"><span class="__cf_email__" data-cfemail="0c46696262656a697e2258796f67697e4c797f686d226b637a">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
This rulemaking amends several sections of the USDA organic
regulations, 7CFR part 205, to strengthen oversight of the production,
handling, certification, marketing, and sale of organic agricultural
products as established by the Organic Foods Production Act of 1990
(OFPA, or ``the Act'').\1\ When implemented, this rulemaking will
improve organic integrity across the organic supply chain, and benefit
stakeholders throughout the organic industry. These amendments close
gaps in the current regulations to build consistent certification
practices to deter and detect organic fraud, and improve transparency
and product traceability. In addition, the amendments will assure
consumers that organic products meet a robust, consistent standard and
reinforce the value of the organic label.
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\1\ The Organic Foods Production Act of 1990, 7 U.S.C. 6501-
6524, is the statute from which the Agricultural Marketing Service
derives authority to administer the NOP and authority to amend the
regulations as describedin thisrulemaking. This document is
available at: <a href="https://uscode.house.gov/view.xhtml?path=/prelim@title7/chapter94&edition=prelim">https://uscode.house.gov/view.xhtml?path=/prelim@title7/chapter94&edition=prelim</a>
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The need for this rulemaking is driven by organic market growth and
increasingly complex organic supply chains. Today's organic market is
characterized by long--and often global--supply chains where organic
products are handled by many businesses before reaching the consumer.
Often, these businesses are not certified organic--and therefore have
no oversight from the USDA or USDA-accredited certifying agents. The
absence of direct enforcement over some entities in the organic supply
chain, in combination with price premiums for organic products, has
created the opportunity for organic fraud. The amendments in this
rulemaking are designed to mitigate the occurrence of organic fraud.
The Agricultural Marketing Service (AMS) is confident in the
integrity and value of the USDA organic seal. Consumers can trust the
organic label due to a rigorous oversight system that operates
globally. However, the challenges of modern organic supply chains
demand action to strengthen enforcement and uphold the integrity of the
USDA organic label.
This rulemaking strengthens enforcement of the USDA organic
regulations through several actions mandated by the Agriculture
Improvement Act of 2018:
1. Reduce the types of uncertified entities in the organic supply
chain that operate without USDA oversight--including importers, certain
brokers, and traders of organic products. This will safeguard organic
product integrity and improve traceability.
2. Require the use of NOP Import Certificates for all organic
products entering the United States. This change expands the use of NOP
Import Certificates to all organic products imported into the United
States, improving the oversight and traceability of imported organic
products.
3. Clarify the NOP's authority to oversee certification activities,
including the authority to act against an agent or office of a
certifying agent. Additionally, certifying agents must notify the NOP
upon opening a new office, which will allow the NOP to provide more
effective and consistent oversight of certifying agents and their
activities.
Additionally, this rule includes several essential actions that
work in alignment with the provisions above to further strengthen
enforcement of the USDA organic regulations:
1. Require that nonretail containers used to ship or store organic
products are labeled with organic identity and are traceable to audit
trail documentation. This information will clearly identify organic
products, reduce the mishandling of organic products, and support
traceability.
2. Require certifying agents to conduct unannounced inspections of
at least 5% of the operations they certify, complete mass-balance
audits during annual on-site inspections, and verify traceability back
to the previous certified operation in the supply chain during annual
on-site inspections.
3. Require certifying agents to issue standardized certificates of
organic operation generated from the USDA's Organic Integrity Database
(OID); this will simplify the verification of valid certificates of
organic operation. Certifying agents must also keep accurate and
current certified operation data in OID, which will further support
verification of operations' certified status.
4. Clarify how certified operations may submit changes to their
organic system plan, with the goal of reducing paperwork burden for
organic operations and certifying agents. This rule also builds
consistency in certification practices by clarifying that certifying
agents must conduct on-site inspections at least once per calendar
year.
5. Establish specific qualification and training requirements for
certifying agent personnel, including inspectors and certification
reviewers. Requiring that personnel meet minimum education and
experience qualifications and requiring continuing education will
ensure high-quality and consistent certification activities across all
certifying agents.
6. Clarify conditions for establishing, evaluating, and terminating
equivalence determinations with foreign government organic programs,
based on an
[[Page 3549]]
evaluation of their organic foreign conformity systems. This will
ensure the compliance of organic products imported from countries that
have organic trade arrangements or agreements with the United States.
7. Clarify that the NOP may initiate enforcement action against any
violator of the OFPA, including uncertified operations and responsibly
connected parties; clarify what actions may be appealed and by whom;
and clarify NOP's appeal procedures and options for mediation
(alternative dispute resolution).
8. Specify certification requirements for producer group
operations, to provide consistent, enforceable standards and ensure
compliance with the USDA organic regulations. Producer groups must meet
certain criteria to qualify for certification, and must use an internal
control system to monitor compliance.
9. Clarify the method of calculating the percentage of organic
ingredients in a multi-ingredient product to promote consistent
interpretation and application of the regulation.
10. Require certified operations to develop and implement improved
recordkeeping and organic fraud prevention processes and procedures;
require certifying agents to conduct supply chain traceability audits
and to develop and implement information-sharing processes.
Costs and Benefits
AMS estimates the following costs and benefits of this rule:
Costs and Benefits of SOE Rulemaking
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Average annual cost \a\ Total cost \b\
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3% Discount 7% Discount 3% Discount 7% Discount
rate rate rate rate
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Domestic Costs.................................. $10,548,510 $7,884,601 $158,227,651 $118,269,011
Foreign Costs................................... 8,769,681 6,550,892 131,545,210 98,263,398
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Total Costs................................. 19,318,191 14,435,494 289,772,861 216,532,409
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Benefits.................................... 32,944,812 24,272,099 494,172,179 364,081,491
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\a\ Estimated annual averages of the 15-year Net Present Value domestic costs discounted at 3 and 7 percent.
\b\ Estimated total domestic costs for affected industry in Net Present Value discounted at 3 and 7 percent.
Table of Contents
I. Executive Summary
II. Background
A. Authority
B. Purpose and Need for the Rule
C. History
D. Public Comment
E. Terminology
F. Does this action apply to me?
G. Compliance Date
III. Overview of Amendments
A. Applicability and Exemptions From Certification
B. Imports to the United States
C. Labeling of Nonretail Containers
D. On-Site Inspections
E. Certificates of Organic Operation
F. Continuation of Certification
G. Paperwork Submissions to the Administrator
H. Personnel Training and Qualifications
I. Oversight of Certification Activities
J. Accepting Foreign Conformity Assessment Systems
K. Compliance and Noncompliance Procedures
L. Mediation
M. Adverse Action Appeal Process
N. Producer Group Operations
O. Calculating the Percentage of Organically Produced
Ingredients
P. Supply Chain Traceability and Organic Fraud Prevention
Q. Technical Corrections
R. Additional Amendments Considered but Not Included in This
Rule
IV. Regulatory Analyses
A. Summary of Economic Analyses
B. Regulatory Impact Analysis
C. Executive Order 12988
D. Paperwork Reduction Act
E. Executive Order 13175
F. Executive Order 13132
G. Civil Rights Impact Analysis
H. Related Documents
II. Background
A. Authority
The Organic Foods Production Act of 1990 (OFPA) (7 U.S.C. 6501-
6524), authorizes the Agricultural Marketing Service (AMS) to establish
and maintain national standards governing the marketing of organically
produced agricultural products. AMS administers these standards through
the National Organic Program (NOP). Final regulations implementing the
NOP, also referred to as the USDA organic regulations, were published
on December 21, 2000 (65 FR 80548) and became effective on October 21,
2002.\2\ Through these regulations, AMS oversees national standards for
the production, handling, labeling, and sale of organically produced
agricultural products.
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\2\ 7 CFR part 205 National Organic Program; Final Rule.
December 21, 2000. Available on the AMS website: <a href="https://www.federalregister.gov/documents/2000/12/21/00-32257/national-organic-program">https://www.federalregister.gov/documents/2000/12/21/00-32257/national-organic-program</a>
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B. Purpose and Need for the Rule
Since full implementation of the USDA organic regulations, the
organic industry has experienced significant change. Both demand for
and sales of organic products have risen steadily; total U.S. sales of
organic products reached more than $63 billion in 2021.\3\ The number
of businesses producing, handling, marketing, and selling organic
products has also grown to meet consumer demand. Rapid growth has
attracted many businesses to the USDA organic label and increased the
complexity of global organic supply chains.
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\3\ Organic Trade Association, Organic Industry Survey, 2022.
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Complexity makes oversight and enforcement of the organic supply
chains difficult because organic products are credence goods, which
means that their organic attributes, or ``integrity,'' cannot be easily
verified by consumers or businesses who buy organic products for use or
resale. The elements needed to guarantee organic integrity--transparent
supply chains, trusted interactions between businesses, and mechanisms
to verify product legitimacy--are more difficult to achieve in the
increasingly complex modern organic industry. This is further
compounded by inconsistent interpretation and implementation of the
USDA organic regulations, caused by a lack of clarity in some portions
of the regulation.
AMS is confident in the integrity and value of the USDA organic
seal. Consumers can trust the organic label due to a rigorous oversight
system that operates globally. However, the above challenges sometimes
cause
[[Page 3550]]
mishandling of organic products, where integrity is compromised due to
improper handling. Additionally, high demand for organic products, the
absence of direct enforcement over some entities in the organic supply
chain, and organic price premiums increase the opportunity and
incentive for organic fraud (when nonorganic products are deceptively
represented as organic).
This rule addresses these risks and challenges by expanding
oversight to higher-risk portions of organic supply chains, requiring
organic operations to implement traceability and verification best
practices, and clarifying oversight and enforcement practices to ensure
more consistent implementation by certifying agents. This rule will
help prevent loss of organic integrity--which can occur both through
unintentional mishandling of organic products, and intentional fraud
meant to deceive--and strengthen the trust consumers, farmers, and
businesses have in the USDA organic label.
Mishandling of Organic Products and Complex Supply Chains
One of the most common risks to the integrity of an organic product
is mishandling--when an entity unintentionally compromises the unique
attributes that make a product organic. Once organic integrity is
compromised, that product can no longer be sold as organic, and both
its unique attributes and price premium are forfeit. Mishandling can
occur at any point in a supply chain, including production, handling,
transport, storage, sale, and processing. Examples of mishandling that
can cause a loss of integrity include exposure to pesticides,
fertilizers, fumigants, or cleaning agents that are not permitted in
organic production; mixing (``commingling'') of organic and nonorganic
products; relabeling or repackaging with incorrect identification; and
inability to demonstrate organic status due to poor or incomplete
information in records or transaction paperwork. The likelihood of such
mishandling is greater in long, complex supply chains where many
businesses, including businesses not certified organic, handle and sell
organic products.
When the organic regulations were published in 2000, organic
products were marketed mostly locally or regionally, and supply chains
tended to be short and transparent; for example, farm to wholesale to
retail to consumer. Demand and sales have grown considerably since
then. This significant market growth has attracted more producers,
handlers, product suppliers, importers, brokers, distributors, and
others to the organic market. Consider the example of an organic egg
supply chain in the United States, beginning with the production of
certified organic corn and ending with the sale of eggs to the
consumer. This demonstrates the typical entities and transactions in an
organic supply chain under the existing regulations:
<bullet> A certified organic farm produces organic corn.
<bullet> The corn is transported via an uncertified truck to a
local grain elevator, where it is aggregated with other organic corn
from nearby producers.
<bullet> An uncertified commodity trader buys the corn.
<bullet> The corn is transported via uncertified truck to an
uncertified storage facility; both transport and storage are
subcontracted and are not owned by the commodity trader.
<bullet> The commodity trader sells the corn to a certified organic
grain supplier; the two parties remain anonymous because they use an
uncertified broker to facilitate the transaction.
<bullet> The corn is transported via uncertified rail and river
barge to the grain supplier; it is transloaded and stored temporarily
several times before being delivered to the certified grain supplier.
<bullet> The certified organic grain supplier stores the corn and
combines it with imported organic corn purchased from an importer via
an uncertified broker.
<bullet> The certified grain supplier sells the corn to a certified
organic feed processer; the corn is transported via an uncertified
truck.
<bullet> The certified processer combines the corn with several
other ingredients to create organic chicken feed.
<bullet> The certified processer sells the feed to a certified
organic egg producer and transports it via an uncertified truck.
<bullet> The certified organic egg producer sells organic eggs to
an uncertified distributor.
<bullet> The uncertified distributor sells the organic eggs to a
retailer prior to final sale to the consumer.
This example illustrates the supply chain for a single ingredient--
organic feed corn. The supply chain for the organic eggs at the end of
this example is even more complex because it includes other ingredients
that go into the chicken feed (e.g., soybean meal, oats, wheat, seed
oils). Many of these ingredients are sourced both domestically and
internationally. Each ingredient has its own unique supply chain;
together they create a complex web converging on a single organic
product. It is largely because of this complexity that this rule
introduces more specific traceability, verification, oversight, and
enforcement practices for high-risk portions of organic supply chains.
Organic Fraud
In addition to mishandling, a growing risk to organic integrity is
fraud--the deceptive representation, sale, or labeling of nonorganic
agricultural products as organic. High demand for organic products, the
absence of direct enforcement over some entities in the organic supply
chain, and organic price premiums have increased the opportunity and
incentive for organic fraud. Both NOP and organic stakeholders have
uncovered organic fraud in organic supply chains, particularly in
organic grain and oilseed supply chains. Because such supply chains are
complex and involve multiple changes in ownership of high demand
products, the incentive for fraud is high. Federal investigations show
that organic grain and oilseed fraud can lead to tens of millions of
dollars in fraudulent sales within just a few months. The following
examples highlight some of the types of organic fraud that this rule
seeks to prevent. The examples also demonstrate the magnitude of total
organic fraud and how this rule's additional oversight and enforcement
mechanisms will reduce fraud.
<bullet> In 2019, four individuals were sentenced to prison terms
for their roles in an organic grain fraud ring. The charges were
brought by the U.S. Attorney's Office for the Northern District of
Iowa. All four were sentenced to prison terms. The lead defendant, who
was sentenced to more than ten years, pled guilty to defrauding
customers in a scheme involving at least $142 million in nonorganic
grains sold as organic. The lead defendant sold fraudulent grain to
customers over a period of seven years, claiming the product was
organically grown in Nebraska and Missouri.\4\ This rule includes more
robust traceability and verification practices that would have helped
identify and stop this type of fraud earlier, preventing further sale
of the fraudulent products and reducing the impact of the fraud.
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\4\ <a href="https://www.justice.gov/usao-ndia/pr/field-schemes-fraud-results-over-decade-federal-prison-leader-largest-organic-fraud">https://www.justice.gov/usao-ndia/pr/field-schemes-fraud-results-over-decade-federal-prison-leader-largest-organic-fraud</a>.
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<bullet> In February 2020, a federal grand jury indicted an
individual in South Dakota for allegedly selling $71 million of
nonorganic grains and oilseeds falsely labeled organic between 2012 and
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2018.\5\ The defendant pled guilty and was sentenced in 2021 to 51
months in federal prison. He was also ordered to pay more than $15
million in restitution. The fraud ring spanned multiple states. After
NOP revoked the business' organic certifications, the responsible
parties established new brokerage firms to continue their fraud. Under
the current organic regulations, these brokerages did not require
organic certification and NOP had no oversight of their activities.
This rule will require the certification and oversight of brokers like
those involved in this case. This would allow the NOP to identify and
prevent the fraud, minimizing damage to the U.S. market.
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\5\ <a href="https://www.wisfarmer.com/story/news/2020/02/18/south-dakota-man-indicted-71-million-organics-fraud/4801207002/">https://www.wisfarmer.com/story/news/2020/02/18/south-dakota-man-indicted-71-million-organics-fraud/4801207002/</a>. <a href="https://www.justice.gov/usao-sd/pr/florida-man-sentenced-conspiracy-commit-wire-fraud-and-money-laundering">https://www.justice.gov/usao-sd/pr/florida-man-sentenced-conspiracy-commit-wire-fraud-and-money-laundering</a>.
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<bullet> In 2017, an investigation revealed three shipments of
imported ``organic'' corn and soybeans--each weighing between 36 and 46
million pounds--were fraudulently labeled as organic. The associated
transaction records indicated that all three shipments originated from
producers in the Black Sea region that were not certified organic, and
that the shipments were originally sold at lower conventional prices.
In one case, a shipment of soybeans had been fumigated with aluminum
phosphide, which is prohibited for use in organic production and
handling. By the time this fraud was discovered, about 21 million
pounds of this same shipment of soybeans had already been distributed--
primary to organic producers as livestock feed.\6\ This rule will
require the use of NOP Import Certificates to verify the source and
integrity of organic imports, which will help detect and prevent
fraudulently labeled imports, such as those in this example, from
entering domestic supply chains.
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\6\ <a href="https://www.washingtonpost.com/business/economy/the-labels-said-organic-but-these-massive-imports-of-corn-and-soybeans-werent/2017/05/12/6d165984-2b76-11e7-a616-d7c8a68c1a66_story.html">https://www.washingtonpost.com/business/economy/the-labels-said-organic-but-these-massive-imports-of-corn-and-soybeans-werent/2017/05/12/6d165984-2b76-11e7-a616-d7c8a68c1a66_story.html</a>.
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<bullet> In July 2022, a Minnesota farmer was indicted for growing
and selling fraudulent organic grains worth more than $46 million. The
farmer was certified organic but was growing grains with synthetic
fertilizers and pesticides in violation of the USDA organic
regulations. He sold this conventional grain (both what he produced
conventionally as well as conventional grain he purchased) as organic,
fraudulently presenting his certificate of organic operation to claim
the grain was organic and withholding the grain's true status from
buyers.\7\ This rule includes more robust traceability and verification
practices that would have helped identify and stop this type of fraud
earlier, preventing further sale of the fraudulent products and
reducing the impact of the fraud.
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\7\ <a href="https://www.justice.gov/usao-mn/pr/cottonwood-county-farmer-charged-46-million-organic-grain-fraud-scheme">https://www.justice.gov/usao-mn/pr/cottonwood-county-farmer-charged-46-million-organic-grain-fraud-scheme</a>.
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In several of the above examples, fraudulent livestock feed was
sold to certified organic livestock producers, magnifying the effects
of the fraud. NOP continues to investigate complaints and multiple
cases of organic fraud at the production and handling levels. These
examples demonstrate the magnitude of fraud that NOP intercepts with
current oversight and enforcement techniques. SOE will significantly
bolster the oversight and enforcement mechanisms that NOP, certifying
agents, and operations have at their disposal. In the fraud cases
discussed above, these mechanisms would have allowed earlier fraud
detection and more effective enforcement action and would have greatly
reduced or even prevented the fraud.
Patterns in USDA Organic Certification and Organic Imports
The scope and distribution of potential organic fraud can also be
seen in changes in the number of operations certified to the USDA
organic standards and changes in the amount of organic imports from
certain regions. Two recent NOP efforts show both the potential type
and magnitude of fraud in the marketplace; more importantly, they also
demonstrate the potential of improved oversight and enforcement
mechanisms.
In 2018 and 2019, NOP began making changes to improve oversight of
organic imports, especially grain and oilseed imports from the Black
Sea region. NOP conducted farm-level yield analysis to compare expected
and actual yield, supply chain research to better understand the roles
and relationships of high-risk entities, and targeted import
surveillance to investigate credible reports of suspected fraud. As a
result of this heightened oversight and enforcement action, at least
180 operations (60 percent) in the Black Sea region have lost their
organic certification. In 2016, imports from the Black Sea region
represented 49 percent of the total dollar value of imported organic
grain and oilseeds (including corn, soybeans, wheat, barley,
sunflowers, flaxseed, and peas). In 2018, imports of these grains and
oilseeds from the region had dropped to 21 percent of the total dollar
value. The steep drop in organic certification and downward supply
trend in the Black Sea region give an indication of the magnitude and
type of fraud, as well as the success of stronger oversight and
enforcement strategy. Despite this enforcement success, key gaps in
oversight remain, such as uncertified entities in import supply chains
and non-mandatory use of NOP Import Certificates. This rule will help
close these gaps and bolster NOP's ability to detect and prevent
fraudulent organic imports.
In January 2021, AMS announced it would end its U.S.-India organic
recognition, which had allowed India's Agricultural and Processed Food
Products Export Development Authority (APEDA) to accredit certifying
agents to provide USDA organic certification in India. AMS ended this
recognition because NOP audits consistently found India's organic
control system to be insufficient to protect the integrity of the USDA
organic seal. In late 2020, prior to the end of U.S.-India recognition,
there were 4,023 operations certified to the USDA organic standard in
India. Operations formerly certified by AEDPA-accredited certifying
agents were given an 18-month transition period to become certified by
a USDA-accredited certifying agent. Since the end of the transition
period in July 2022, only 1,471 operations in India remain certified to
the USDA organic standard. Because failure to become recertified may
indicate an inability to comply with the USDA organic regulations, this
significant (63 percent) drop in the number of certified operations may
indicate the general volume of noncompliant activity (including
mishandling and fraud) that may have been taking place under the former
recognition. Additionally, following the end of the U.S. -India
recognition, imports of certified organic products from India has
dropped from an average per quarter value of $15.6 million to $9.4
million, a 39 percent decrease. This drop in import value suggests that
a significant number of organic imports from India may not have been
fully compliant with the USDA organic standard. The end of the U.S.-
India recognition demonstrates both the magnitude of potential fraud in
the market, and how more effective oversight (in this case,
certification only by USDA-accredited certifying agents) can
successfully safeguard the integrity of the USDA organic label. Despite
this success, there are still gaps in the oversight of foreign-
accredited certifying agents and imports from these countries.
[[Page 3552]]
This rule will allow NOP to more fully implement its oversight
authority by codifying specific procedures for evaluating, accepting,
and continuing equivalency or recognition with foreign organic
programs.
These examples demonstrate how applying oversight and enforcement
best practices can reduce organic fraud. SOE will reduce fraud by
codifying best practices in critical areas--exemptions from
certification, import oversight, traceability, recordkeeping,
inspections and audits, oversight of certifying agents, and assessment
of organic trade partners. Additionally, the examples above only show
the positive results of improved oversight and enforcement at the
federal level; SOE will build upon this success by requiring certifying
agents and organic operations to use similar techniques. This means
proven oversight and enforcement techniques will be deployed closer to
where fraud occurs, which will facilitate earlier detection, stop more
fraud before it cascades further into supply chains, and more directly
deter fraudulent actors. Because this rule codifies best practices and
requires key parties in organic supply chains use these practices, AMS
expects that SOE's benefits will exceed those demonstrated in the
examples above.
C. History
In response to their experiences in the organic system,
stakeholders have called for the NOP to take steps to improve oversight
of organic systems and enforcement of the USDA organic regulations.
Commonly cited areas for improvement include certification of excluded
handlers, organic import oversight, fraud prevention, organic trade
arrangements, and organic inspector qualifications. Public discussions
on many topics included in this rule occurred during multiple National
Organic Standards Board (NOSB) meetings.\8\
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\8\ The April 2021 NOSB meeting is the most recent example of a
public discussion to address fraud concerns in the organic supply
chain. A discussion document, meeting transcripts, and public
comments are available at <a href="https://www.ams.usda.gov/event/national-organic-standards-board-nosb-meeting-crystal-city-va-0">https://www.ams.usda.gov/event/national-organic-standards-board-nosb-meeting-crystal-city-va-0</a>.
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This rule seeks to strengthen enforcement of the USDA organic
regulations and protect the integrity of the organic label by (1)
strengthening organic control systems; (2) improving organic import
oversight; (3) clarifying organic certification standards; and (4)
enhancing supply chain traceability. AMS identified the need for these
changes through:
<bullet> Direct experience in administering the NOP, particularly
complaint investigations and audits of accredited certifying agents;
<bullet> The Agriculture Improvement Act of 2018,\9\ which amended
the OFPA.
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\9\ The Agriculture Improvement Act of 2018, Public Law No: 115-
334, is available at: <a href="https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf">https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf</a>.
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<bullet> Recommendations of a 2017 Office of Inspector General
report; \10\
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\10\ USDA Office of Inspector General Audit Report 01601-0001-
21: National Organic Program International Trade Arrangements and
Agreements. September 2017: <a href="https://www.usda.gov/sites/default/files/01601-0001-21.pdf">https://www.usda.gov/sites/default/files/01601-0001-21.pdf</a>.
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<bullet> Recommendations of the NOP's federal advisory committee,
the National Organic Standards Board (NOSB); and
<bullet> Industry stakeholder and consumer feedback.
AMS expects the amendments will bring more effective oversight and
enforcement, improve organic integrity and product traceability,
clarify existing standards to ensure fair competition, bolster consumer
trust in the organic label, reduce organic fraud, and support continued
industry growth. Information about each amendment is described in more
detail below.
D. Public Comment
AMS published the Strengthening Organic Enforcement proposed rule
on August 5, 2020, opening a 60-day public comment period. AMS received
more than 1,500 public comments from a variety of stakeholders,
including certifying agents, certified organic producers and handlers,
uncertified handlers, retailers, organic inspectors, trade
associations, organic advocates, scientific organizations, government
organizations, and consumers. The majority of public comments supported
the proposed amendments and agreed that the rule is needed to improve
oversight and enforcement, drive consistent implementation of the
organic regulations, and reduce organic fraud.
Many stakeholders provided meaningful feedback about the proposed
policy revisions, including recommendations to improve the rule through
greater specificity and clarity. Others discussed how the proposed
amendments would affect them or suggested alternatives to the proposed
policies. Popular topics of discussion included the need for
certification; excluded handlers; exemptions from certification;
implementation of the mandatory NOP Import Certificate requirements;
supply chain traceability audits; recordkeeping and verification
requirements; fraud prevention plans for certified operations;
oversight of producer groups; qualifications and training requirements
for certifying agent personnel; labeling of nonretail containers; and
unannounced inspections.
Some comments also discussed the proposed implementation timeframe
of one year after publication of the final rule. Some comments asked
AMS to implement the rule immediately, while others agreed that a one-
year timeframe is reasonable and gives stakeholders time to comply with
the new requirements. A few comments noted that some parts of the rule
may require more than one year to implement and asked AMS to consider
this in the final rule. Few comments addressed the costs and benefits
of the rule in detail, but many comments noted in general that the
costs of the rule are acceptable and outweighed by the benefits.
AMS took these public comments into consideration when revising the
policy, implementation timeframe, and cost-benefit analysis of this
rulemaking. For more information on the comments received and AMS's
response to specific comments, refer to ``III. Overview of
Amendments.''
E. Terminology
Throughout this rule, AMS refers to four concepts--organic
integrity, organic fraud, audit trails, and supply chain traceability--
which are integral to the purpose of this rule. AMS is explaining these
concepts upfront to assist reader understanding:
<bullet> Organic integrity: The unique attributes that make a
product organic and define its status as organic. A product that fully
complies with the USDA organic regulations has integrity, and its
organic qualities have not been compromised.
<bullet> Organic fraud: Deceptive representation, sale, or labeling
of nonorganic agricultural products or ingredients as ``100 percent
organic,'' ``organic,'' or ``made with organic (specified ingredients
or food group(s))'' (7 CFR 205.2).
<bullet> Audit trail: Documentation that is sufficient to determine
the source, transfer of ownership, and transportation of any
agricultural product labeled as ``100 percent organic,'' the organic
ingredients of any agricultural product labeled as ``organic'' or
``made with organic (specified ingredients)'' or the organic
ingredients of any agricultural product containing less than 70 percent
organic ingredients identified as organic in an ingredients statement
(7 CFR 205.2).
[[Page 3553]]
<bullet> Supply chain traceability: The ability to identify and
track the movement, sale, custody, handling, and organic status of an
agricultural product along a supply chain. Supply chain traceability
audits are used to verify an agricultural product's compliance with the
USDA organic regulations.
F. Does this action apply to me?
You may be affected by this action if you are engaged in the
organic industry. Potentially affected entities may include, but are
not limited to, the following:
<bullet> Individuals or business entities that are considering
organic certification;
<bullet> Existing production and handling operations that are
currently certified organic under the USDA organic regulations;
<bullet> Brokers, traders, and importers of organic products that
are not currently certified under the USDA organic regulations;
<bullet> Operations that use non-retail containers for shipping or
storing organic products;
<bullet> Retailers that sell organic products;
<bullet> Operations that receive or review certificates of organic
operation to verify compliance with USDA organic regulations;
<bullet> USDA-accredited certifying agents, inspectors, and
certification review personnel;
<bullet> Operations that import organic products into the United
States; and/or
<bullet> Operations that export organic products to the United
States and the corresponding certifying agents.
This list is not exhaustive but identifies key entities likely to
be affected by this action. Other types of entities may also be
affected. To determine whether you or your business may be affected by
this action, you should carefully examine the regulatory text and
discussion below.
G. Compliance Date
AMS is establishing a compliance date for this final rule of March
19, 2024, or 12 months after the effective date of this final rule.
This means that all entities affected by this rule, including certified
operations and certifying agents, must comply with the provisions of
this final rule by this date. This also means that operations requiring
organic certification because of this final rule must be certified by
the compliance date. AMS is setting this compliance date to allow
affected entities time to read and understand this final rule, obtain
organic certification if needed, and prepare for and implement other
changes in this final rule.
III. Overview of Amendments
A. Applicability and Exemptions From Certification
The table below includes the regulatory provisions related to this
section of the rule. A discussion of the policy follows.
------------------------------------------------------------------------
Section Final regulatory text
------------------------------------------------------------------------
205.2..................................... Terms Defined.
Definitions for Handle,
Handler, Handling
operation, and Retail
establishment.
205.100................................... What has to be certified.
Paragraph (a).
205.101................................... Exemptions from
certification.
Entire section.
205.310................................... Agricultural products
produced or processed by an
exempt operation.
Paragraphs (a) and (b).
------------------------------------------------------------------------
The USDA organic regulations require organic certification of
businesses that sell, process, or package organic agricultural products
as handling operations. This rulemaking clarifies that most operations
that operate in the middle of organic supply chains must be certified
organic. This may include entities that sell, trade, distribute, or
import organic products. The activities of these operations may affect
organic integrity; therefore, certification is necessary to assure
consumers that organically produced products meet a consistent
standard. In addition to clarifying who needs certification, this
rulemaking also provides limited exemptions to organic certification
for certain entities and activities that present a low risk to organic
integrity.
This action may affect noncertified operations that handle organic
products, sell organic products, or facilitate the sale or trade of
organic products on behalf of a seller or oneself; certified organic
operations; organic inspectors; and certifying agents. Readers should
carefully examine the regulatory text and policy discussion to
determine if they are affected.
Background
The organic market has grown considerably since the USDA organic
regulations took effect in 2002. The Organic Trade Association reports
that total U.S. organic sales grew from $3.4 billion in 1997 to $61.9
billion in 2020.\11\ This growth has created increasingly complex
organic supply chains as additional domestic and international
businesses choose to produce and sell organic products for the U.S.
market. Some segments of organic supply chains remain uncertified under
current regulation, creating gaps in oversight, increasing the
opportunity for fraud, and complicating enforcement by the USDA and its
enforcement partners.
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\11\ Organic Trade Association, Organic Industry Survey, 2018-
2021
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Oversight and enforcement of organic supply chains are challenging
because organic products are credence goods, which means that their
organic attributes, or ``integrity,'' cannot be easily verified by an
individual. Guaranteeing organic integrity requires transparent supply
chains, trusted interactions between businesses, and mechanisms to
verify product legitimacy. This is best accomplished via certification,
which requires operations to follow traceability and verification
practices, and provides regular oversight in the form of audits and
annual inspection. This rulemaking broadens the scope of who must be
certified, opening more of the organic supply chain to oversight and
mitigating the risks of noncertified businesses handling organic
product.
OFPA authorizes the USDA to regulate and enforce the production,
handling, and sale of organic products (7 U.S.C. 6503). This includes
activity within organic supply chains, from production through final
sale to the
[[Page 3554]]
consumer.\12\ AMS is exercising its authority to regulate entities in
organic supply chains by requiring certification of some types of
currently noncertified operations. This action is mandated by the 2018
Farm Bill, which states that the USDA must ``issue regulations to limit
the type of organic operations that are excluded from certification
under section 205.101'' of the organic regulations.\13\ This rulemaking
supports the OFPA's purpose ``to assure consumers that organically
produced products meet a consistent standard (7 U.S.C. 6506(a)(11)).''
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\12\ OFPA and the USDA organic regulations do not provide
authority to regulate the transport of organic agricultural
products.
\13\ See section 10104(a) of the Agriculture Improvement Act of
2018, Public Law No: 115-334, available at: <a href="https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf">https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf</a>,
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Who needs to be certified?
Section 205.100(a) of the organic regulations states that any
operation that produces or handles organic agricultural products must
be certified organic. This means that operations conducting activities
described in the definition of handle must be certified organic and
must follow all applicable portions of the OFPA and the USDA organic
regulations. In general, handle means to ``sell, process, or package''
organic agricultural products. Limited exemptions for operations that
handle organic agricultural products are described in Sec. 205.101(a)-
(h).
The definition of handle includes the term processing, which is
defined in Sec. 205.2.\14\ Operations that process organic
agricultural products must be certified. Handle further explains what
to ``sell'' and ``package'' mean by including additional examples of
handling activities. The examples represent typical supply chain
activities that may affect organic integrity. This includes activities
where there is physical contact with agricultural products, such as
combining, aggregating, culling, conditioning, treating, packing,
containerizing, repackaging, labeling, storing, receiving, or
loading.\15\ Examples of operations that often conduct these activities
may include grain elevators; bulk grain handlers; warehouses that cull,
label, or repackage; central bakeries or kitchens that serve grocery
chains; or ports of entry.
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\14\ 7 CFR 205.2 Processing. Cooking, baking, curing, heating,
drying, mixing, grinding, churning, separating, extracting,
slaughtering, cutting, fermenting, distilling, eviscerating,
preserving, dehydrating, freezing, chilling, or otherwise
manufacturing and includes the packaging, canning, jarring, or
otherwise enclosing food in a container.
\15\ The regulations at Sec. 205.2 define ``label'' and
``labeling'' to explain the type and location of information
covered. Labeling as a handling activity refers to the act of
applying a label to a product with an organic claim; applying other
types of labels, such as for inventory or information accompanying a
product, may not need certification.
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Handle also includes activities where there may not be physical
contact with agricultural products, such as selling, trading,
facilitating sale or trade on behalf of a seller or oneself, importing
to the United States, or exporting from a foreign country for sale in
the United States. These activities are included in the definition of
handle because they have the potential to affect organic integrity.
Operations that conduct these activities must be certified (unless
exempt per Sec. 205.101). Examples of operations that often conduct
these activities may include sales brokers, commodity traders,
ingredient sourcers, importers, or exporters.
The definition of handle is not an exhaustive list of activities
that must be certified. There may be additional activities not listed
in the definition that are similar to the listed activities and require
certification, or different words or synonyms for the same or similar
activities. The absence of a specific term in the definition of handle
does not mean the activity is not handling or that an operation
conducting this activity does not need certification.
What are the certification requirements for handlers?
All certified organic operations must follow the portions of the
USDA organic regulations that apply to activities they conduct.
Conversely, some portions of the regulation will not apply to every
operation (e.g., a certified operation that only produces crops does
not have to follow the livestock requirements of subpart C). Similarly,
the scope of a handling operation's certification only covers the
activities it conducts. For example, the OSP of a certified importer
would likely describe the operation's system to maintain transaction
records and audit trails, verify suppliers and NOP Import Certificates,
and verify traceability. On-site inspection of such an operation would
likely focus on a records review and evaluation, rather than evaluation
of physical facilities.
Contractors are sometimes used in the organic industry to provide
services to certified operations. Contractors that qualify for an
exemption per Sec. 205.101(a)-(f) do not need to be certified. Any
contractor performing handling activities on behalf of an operation
must be certified or described in the OSP of a certified operation.
It is common for some operations to handle both organic and
nonorganic agricultural products (i.e., a split operation). For a split
operation, only the portion(s) of the operation that produces or
handles organic agricultural products must be certified. If a portion
of an operation qualifies for an exemption from certification described
in Sec. 205.101(a)-(h), only that portion may be exempt, and the
remainder of the operation must be certified if it produces or handles
organic agricultural products. For example, a grocery store chain's
retail locations may be exempt under Sec. 205.101(b) or (c), but its
importing and some distribution activities would likely need to be
certified.
Organic Agricultural Products Received From an Exempt Operation
Agricultural products produced or processed on an exempt operation
must follow all requirements of Sec. 205.310. This means that an
operation receiving products produced or processed by an exempt
operation cannot represent the products as certified organic, cannot
display the USDA organic seal on the products, and cannot use the
products as organic ingredients in a product produced by the receiving
operation. In effect, product received and then processed by an exempt
operation loses its certified organic status and cannot be represented
as organic.
However, exempt operations may perform limited handling of
certified organic products, as described in each exemption at Sec.
205.101; i.e., if an exempt operation handles certified organic
products in a manner consistent with its applicable exemption, the
products maintain their organic status. This means, for example, that
an exempt warehouse may receive, store, and prepare for shipment
packaged certified organic products. Conversely, if this warehouse
opens or relabels such packaged products, then the certified organic
status of the products is lost, and an operation receiving these
products must not represent them as certified organic.
The USDA organic regulations require certified operations to
implement recordkeeping and verification practices that ensure the
integrity of organic agricultural products they receive, including
products received from exempt or uncertified operations. Records must
trace organic products back through any exempt operations to the last
certified operation in the supply chain, and operations must verify
their suppliers, including exempt operations. See Sec. Sec.
205.103(b)(2) and 205.201(a)(3) in the section on Supply Chain
Traceability and Fraud Prevention later in this rule.
[[Page 3555]]
Exemptions From Certification
The USDA organic regulations require certification of any operation
that produces or handles organic agricultural products (Sec.
205.100(a)). However, the regulations provide limited exemptions to
certain types of operations that conduct low-risk activities, and are
therefore less likely to compromise organic integrity of the
agricultural products they handle. These exemptions, and the conditions
that must be met to qualify for each, are described in Sec. 205.101.
The USDA organic regulations formerly used the terms ``exemption''
and ``exclusion'' to describe activities that do not require organic
certification. This final rule removes use of the term ``exclusion''
from Sec. 205.101 and throughout the organic regulation to reduce
confusion and misinterpretation about who needs to be certified. The
term ``exemption'' is now used exclusively to describe activities that
do not require organic certification. Previous ``exclusions'' listed
under former Sec. 205.101(b) have been modified and are now listed
under current Sec. 205.101.
Responsibilities of Exempt Operations
Operations described in Sec. 205.101 are exempt from the
requirement to be certified organic under subpart E. However, these
exempt operations must still follow all other applicable portions of
the organic regulations, including the production and handling
requirements of subpart C. For example, a very small vegetable farm may
be exempt from certification per Sec. 205.101(a); this means the farm
does not have to be certified and inspected annually, and does not have
to develop and submit an organic system plan. However, the farm must
follow the other organic production and handling requirements of
subpart C, including soil and fertility practices, crop rotation, weed
management, and seed use practices. Exempt operations must also comply
with Sec. 205.272 and practices to prevent commingling and contact
with prohibited substances.
Exempt operations must also follow the applicable labeling
requirements of subpart D. Critically, this means exempt operations
must not represent the agricultural products they produce or process as
certified organic and must not use the USDA organic seal. Additionally,
agricultural products produced or processed by an exempt operation must
not be identified or represented as organic in a product processed by
another operation (See Sec. 205.310, Agricultural products produced or
processed on an exempt operation). Additionally, exempt operations are
only permitted to perform the limited handling activities described in
the applicable exemption; any handling outside of that described in the
exemption may result in loss of organic status of products.
Operations that qualify for an exemption may voluntarily choose to
become certified. By becoming certified, the operation may market the
products it produces and processes as certified organic, display the
USDA organic seal on its products, and represent these products as
ingredients for use in other organic products.
Like certified operations, exempt operations are subject to
penalties for violating the OFPA and the organic regulations. Section
205.100(c) of the organic regulations states that any person or
responsibly connected person--including exempt operations--that
knowingly sells or labels a product as organic, except in accordance
with the Act, shall be subject to a civil penalty as specified in 7 CFR
3.91(b)(1)(xxxvi).\16\
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\16\ 7 CFR 3.91(b)(xxxvi): Civil penalty for knowingly labeling
or selling a product as organic except in accordance with the
Organic Foods Production Act of 1990, codified at 7 U.S.C. 6519(c).
As of the publication of this rule the civil penalty amount is a
maximum of $20,130 per violation.
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Recordkeeping by Exempt Operations
Like certified operations, exempt operations play a critical role
in maintaining the integrity of organic products as they travel from
production to consumer. Therefore, exempt operations must maintain
records of the organic products they produce and handle, including
records that: demonstrate that agricultural products identified as
organic were organically produced and handled; and verify quantities of
organic agricultural products received and shipped or sold. Such
records are necessary to maintain an audit trail for organic products;
this will facilitate many other provisions of this rule, including
supply chain traceability audits (Sec. 205.501(a)(21)), recordkeeping
by certified operations (Sec. 205.103), on-site inspections (Sec.
205.403(d)), and fraud prevention plans (Sec. 205.201(a)(3)). Retail
establishments that do not process agricultural products (see
definition for Handle at Sec. 205.2 and exemption from certification
at Sec. 205.101(b)) do not need to maintain such records. Exempt
handlers must have required records available and must show those
records to a representative of the Secretary upon request. Failure to
produce compliant records may lead to enforcement action.
Small Producers and Handlers
Small organic producers and handlers are exempt from certification
at Sec. 205.101(a). This exemption is limited to producers and
handlers with gross agricultural income from organic sales of no more
than $5,000 annually. These operations are exempt from certification
under subpart E and from submitting an organic system plan, but must
follow all applicable organic production and handling requirements of
subpart C and labeling requirements of subpart D. This includes the
requirements to prevent commingling and prevention of contact with
prohibited substances (Sec. 205.272).
Such operations must not represent the agricultural products they
produce or process as certified organic and must not use the USDA
organic seal. Agricultural products produced or processed by these
exempt operations must not be identified or represented as organic in a
product processed by another operation (see Sec. 205.310).
Retail Establishments
Retail businesses that handle organic agricultural products and
sell directly to consumers may be exempt from certification. To qualify
for an exemption, the operation must be a retail establishment and meet
the conditions for the exemptions in Sec. 205.101(b) and (c).
The regulations define retail establishment to include a range of
transaction modes for selling to consumers that commonly occur in the
modern marketplace. Retail establishment includes restaurants,
delicatessens, bakeries, grocery stores, or any retail business with a
restaurant, delicatessen, bakery, salad bar, bulk food self-service
station, or other eat-in, carry-out, mail-order, or delivery service of
raw or processed agricultural products. Retail is commonly described as
selling directly to consumers, end-users, or the public. The definition
for retail establishment aligns with that concept. Businesses which
sell to other businesses (wholesale) do not qualify as retail
establishments. Retail establishments may use virtual transactions for
sales, but they must also have a physical location for consumers to
purchase products.
Only operations that are retail establishments are eligible for the
retailer exemptions. The definitions for handler and handling operation
do not include final retailers of agricultural products that do not
process agricultural products. This exemption from certification is
also reinforced at section 205.101(b), which exempts retail
establishments that sell, but do not
[[Page 3556]]
process, organic agricultural products to consumers.
Section 205.101(c) exempts retail establishments that process
certified organic agricultural products at the point of sale to the
consumer. Distributors or brand name owners that do not qualify as
retail establishments should review the exemptions from certification
at Sec. 205.101(e) and (f), as those may apply to their activities.
Retail Operations That Don't Process
Retail establishments that do not process agricultural products are
not handlers or handling operations and may be exempt from
certification under Sec. 205.101(b). The OFPA and Sec. 205.2 define
processing as cooking, baking, heating, drying, mixing, grinding
churning, separating, extracting, cutting, fermenting, eviscerating,
pre-serving, dehydrating, freezing, or otherwise manufacturing, and
includes the packaging, canning jarring, or otherwise enclosing food in
a container. A retail establishment that is not processing may do other
handling activities without certification. This could include, for
example, removing produce from shipping boxes and washing and
transferring product to display cases or opening bags of oats and
transferring contents to bulk food dispensers. Although a retailer
performing such handling activities may be exempt from certification,
all retail establishments must comply with Sec. 205.272, which
requires measures to prevent commingling of organic products and
contact with prohibited substances.
Retail establishments that do not process ``100% organic'' and
``organic'' unpackaged products may use the USDA organic seal and/or
seal of the certifying agent in retail labeling and display of these
unpackaged products (Sec. 205.308). Retail establishments that do not
process ``made with organic. . .'' unpackaged products may use that
claim in retail labeling and displays (Sec. 205.309).
Retail Establishments That Process
Retail establishments that process organic agricultural products
may be exempt from certification under Sec. 205.101(c). To qualify for
this exemption, a retail establishment must process organic products at
the point of final sale to the consumer. This means that the products
must be processed and sold in the same physical location. This could
include repackaging bulk containers of organic product into individual
units for retail sale within an individual grocery store or a retail
establishment that prepares ready-to-eat meals and sells them online to
consumers from the processing location.
Per Sec. 205.310, organic agricultural products that are processed
by exempt retail establishments (such as in the examples above) must
not be sold, labeled or represented as ``certified'' organic, must not
display the USDA seal or identify the certifying agent, and must not be
used by another operation as ingredients in a certified organic
product. Only retail establishments that are certified organic may use
the USDA organic seal (or make certified organic claims) on products
they process.
This exemption does not cover retail establishments that sell
organic products to consumers which are processed at a location
separate from the point of sale. This could include, for example, an
online retailer that sells products processed at an uncertified
facility or a central processing facility that prepares food sold in
bakery and deli sections of grocery stores. In these scenarios, the
processing facility is not co-located in the same physical location as
the point of sale and the retail establishment exemption does not cover
separate processing facilities. The processors would need to be
separately certified in order for a retail establishment to sell their
products as organic.
In addition, this exemption does not cover retailers that process
and sell to consumers only via virtual transactions. ``Virtual
transaction'' describes any form of transaction that does not occur in-
person (e.g., telephone, mail-order, and/or online sales). Retailers
that process and sell to consumers virtually without having a physical
location for retail sales must be certified. These businesses do not
meet the definition for retail establishment, and, by extension, the
conditions for exemption from certification.
All exempt retail establishments must comply with the requirements
of Sec. 205.272, which describes handling requirements to prevent
commingling and contact with prohibited substances. In addition, exempt
retail establishments that process organic products must follow the
labeling provisions specified in Sec. 205.310 and maintain records to
(1) demonstrate that agricultural products identified as organic were
organically produced and handled; and (2) verify quantities received,
sold, or produced from such agricultural products. Exempt handlers must
have these records available and must show them to a representative of
the Secretary upon request (7 U.S.C. 6519(a)(1)). Failure to produce
compliant records may lead to enforcement action.
Operations That Handle Only Products With Less Than 70 Percent Organic
Ingredients
Section 205.101(d) exempts from certification operations that only
handle agricultural products with less than 70 percent organically
produced ingredients, and operations that only identify organic
ingredients on the product informational panel. This exemption is not
new policy. It combines two existing exemptions: operations that handle
products with less than 70 percent organic ingredients (former Sec.
205.101(a)(3)) and operations that handle products that only identify
organic ingredients on the information panel (former Sec.
205.101(a)(4)). AMS combined these exemptions because they cover
operations that handle products in the same labeling category (per
Sec. 205.305), and because these operations must follow identical use
and labeling requirements. Operations that qualify for this exemption
are exempt from certification under subpart E and from submitting an
organic system plan, but must follow all applicable organic production
and handling requirements of subpart C and labeling requirements of
subpart D. This includes the labeling requirements for products with
less than 70 percent organic content (Sec. 205.305) and the
requirements to prevent commingling and prevention of contact with
prohibited substances (Sec. 205.272).
Handlers covered under this exemption must have the records
required by Sec. 205.101(i) available and show them to a
representative of the Secretary upon request (7 U.S.C. 6519(a)(1)).
Failure to produce compliant records may lead to enforcement action.
Such operations must not represent the agricultural products they
produce or process as certified organic and must not use the USDA
organic seal. Agricultural products produced or processed by these
exempt operations must not be identified or represented as organic in a
product processed by another operation (see Sec. 205.310).
Storing or Selling Packaged Organic Products
The movement of packaged and sealed organic products through the
supply chain is a lower-risk activity. Packaged products are less
likely to be commingled, exposed to contaminants, or tampered with, and
alterations are easier to detect. Handling operations that sell,
distribute, or store packaged organic agricultural products may be
exempt from organic certification. Two exemptions, at Sec. 205.101(e)
and (f),
[[Page 3557]]
apply to limited handling activities involving only organic
agricultural products that are in sealed, tamper-evident packaging or
containers. The key distinctions between these exemptions are that
205.101(f) covers operations that buy and sell, in addition to
receiving, storing and/or preparing for shipment, and that 205.101(f)
covers only retail-packaged products versus packaged products that are
not in final retail packaging. Tamper-evident packaging or container
means that the contents are sealed in a manner where an attempt to
break the seal, access the contents, or reclose the package would be
obvious. These exemptions cover only the specified handling activities.
These exemptions do not, for example, cover buying, selling, receiving,
storing, or loading of unpackaged products; those activities require
certification.
The exemption at Sec. 205.101(e) is intended primarily for storage
and warehouse facilities. Section 205.101(e) applies to handlers that
are only receiving, storing and/or preparing for shipment products that
are received in and remain in sealed, tamper-evident packaging until
the products leave their custody. This allowance may cover, for
example, warehouses and storage facilities, including some cold storage
facilities that only receive and store packaged products and prepare
them for shipment to another entity. Examples of tamper-evident
packaging include produce boxes with ``DO NOT TAMPER WITH'' tape placed
across the box flaps, sealed bulk bags of flour, or sealed drums and
totes of olive oil. Storage facilities or warehouses that receive
products that are not in sealed, tamper-evident packaging must be
certified.
The exemption at Sec. 205.101(f) is intended primarily for
distributors. Section 205.101(f) applies to handlers that only buy,
sell, receive, store and/or prepare for shipment retail-packaged
organic agricultural products. This allowance may cover, for example,
some distributors, brand name owners, and sales brokers that purchase
and/or receive products in their finished retail packaging. Products
must be received in and remain in the final retail packaging without
alteration throughout their custody. This exemption does not apply to
sales brokers, traders, or other handlers that buy and sell products
that are not in their final retail packaging.
Preparing for shipment is an activity that is covered under both
exemptions at Sec. 205.101(e) and (f). This may include various tasks
that must be performed with the sealed, tamper-evident packaging
remaining intact and without altering product contents or any retail
labeling. Examples of preparing for shipment include putting packaged
products into shipping containers, applying internal tracking numbers,
shrink-wrapping shipping cartons to a pallet, breaking down pallets of
fully packaged products, adding protective packaging to nonretail
containers or retail displays of organic products, packing individual
packaged products onto a shipping pallet, loading/unloading packaged
products onto or from transport vehicles, and placing individual retail
packages into a retail display which the certifying agent of the last
certified handling operation has verified as compliant.
Handlers that qualify for an exemption at Sec. 205.101(e) or (f)
must use practices for preventing commingling and contamination of
organic products, in compliance with Sec. 205.272. In addition, exempt
handlers must have records available and must show those records to a
representative of the Secretary upon request, to show that organic
products are organically produced and handled and to verify quantities
of organic product received and shipped or sold. Failure to produce
compliant records may lead to enforcement action.
Customs Brokers
Section 205.101(g) exempts Customs brokers from organic
certification. Customs brokers facilitate the entry of products into
the United States by helping meet import documentation and filing
requirements and by acting as intermediaries between importers and the
U.S. government. Customs brokers do not take ownership or physical
possession of organic products and their actions present minimal risk
to organic integrity. They are often distinct from sales or commodity
brokers, who sell or facilitate the sale of organic products--those
operations must be certified if they handle organic products. Customs
brokers also play a critical role by filing NOP Import Certificate data
in the U.S. Custom and Border Protection's (CBP) Automated Commercial
Environment (ACE) import entry system.
This exemption is limited to Customs brokers as defined by 19 CFR
111.1: ``a person who is licensed under this part to transact customs
business on behalf of others.'' Customs business is further defined in
19 CFR 111.1 and includes ``activities involving transactions with CBP
[U.S. Customs and Border Protection] concerning the entry and
admissibility of merchandise . . . payment of duties, taxes, or other
charges . . . the preparation . . . of documents in any format and the
electronic transmission of documents . . . intended to be filed with
CBP in furtherance of any other customs business activity . . . '' \17\
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\17\ See 19 CFR 111.1 for complete definitions of Customs broker
and Customs business: <a href="https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=ab6e30d35ef538ce07bc8021d6e1d4c3&mc=true&n=sp19.1.111.a&r=SUBPART&ty=HTML#se19.1.111_11">https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=ab6e30d35ef538ce07bc8021d6e1d4c3&mc=true&n=sp19.1.111.a&r=SUBPART&ty=HTML#se19.1.111_11</a>.
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To qualify for this exemption, Customs brokers must only conduct
customs business. If a Customs broker conducts any additional activity
within the definition of handle--such as selling, importing, or
trading--the Customs broker must be certified.
Logistics Brokers
Section 205.101(h) exempts from certification operations that only
arrange for the shipping, storing, transport, or movement of organic
agricultural products. Sometimes known as ``logistics brokers,'' these
operations facilitate the movement and storage of agricultural products
by connecting a consigner (or consignee) with a carrier who can
transport/store the products. Logistics brokers do not take ownership
or physical possession of organic products. The activities they conduct
present minimal risk to organic integrity because they only secure
transport/storage to meet the needs of a third party who owns or is
responsible for the agricultural product.
This exemption is limited to operations that only arrange for the
shipping, storing, transport, or movement of agricultural products and
do not conduct any other activity in the definition of handle. If such
an operation conducts other handling activities--such as selling,
importing, or trading--the operation must be certified.
Transport
Transport of agricultural products alone is not a handling activity
and does not require certification (see definitions of handle in 7 CFR
205.2 and 7 U.S.C. 2502(8)). Transport generally refers to the movement
of products in commerce. Examples of activities which are
transportation and do not require certification include: moving organic
hay or milk from a certified producer to a certified organic buyer or
certified processing facility, moving organic grain or organic
livestock from certified organic farms to a certified handling or
slaughter facility, and food delivery services transporting prepared
foods from a retail establishment to a consumer.
Any activities other than the movement of product on a
transportation vehicle or moving products between transportation
[[Page 3558]]
vehicles (transloading) are handling and require certification.
Handling activities which are adjacent to transport require
certification unless they are covered by exemptions 205.101(e) or (f)
for packaged products. Examples of adjacent activities which do not
qualify as transport include combining, splitting, containerizing,
packing/repacking, treating, sorting, opening, enclosing, or labeling/
relabeling. In addition, loading or unloading of unpackaged products
into or from a storage facility is not a form of transportation; this
activity must be certified.
Certified operations are responsible for verifying that products
handled by uncertified entities in their supply chain remain in
compliance with the organic regulations. This includes verifying
organic products transported by an uncertified transporter. A certified
operation needs to describe procedures for verifying suppliers in the
supply chain and the organic status of products received (Sec.
205.201(a)(3)). In addition, certified operations must maintain records
back to last certified operation, which may encompass uncertified
operations that fall between certified entities (Sec. 205.103(b)(2)).
The certified organic operation responsible for the organic products
that are transported must: maintain records, for the audit trail and
traceability, in sufficient detail as to be readily understood and
audited; demonstrate prevention of commingling and contamination during
transportation (Sec. 205.272); fully describe the transportation
practices in the organic system plan; and ensure that the
transportation records for organic products are available for
inspection. Certified operations that load or receive products from
uncertified transporters can verify prevention of contamination/contact
with prohibited substances through, for example, affidavits or other
documentation of vehicle clean out.
Summary of Changes to the Final Rule
AMS made several revisions to the proposed regulatory text when
writing this rulemaking. Changes to the rulemaking are discussed below.
This is then followed by responses to specific themes from public
comment.
<bullet> AMS revised the definition of handle to include additional
examples of activities that require organic certification. AMS added
these activities in response to public comments, which asked for
additional clarity about who must be certified. The additional
activities in the definition more clearly indicate activities that
require certification and will help businesses determine whether they
need organic certification.
<bullet> AMS simplified the term handler and removed ``except for
operations that are exempt from certification'' and ``or a portion of
[an operation]'' from handling operation. These phrases are redundant
because they are explained in Sec. 205.100--What has to be certified.
AMS also added ``except final retailers of agricultural products that
do not process agricultural products'' to both definitions. This
clarifies that certain final retailers are not handlers or handling
operations and aligns the definitions with OFPA. The two definitions
are now mostly synonymous, differing only in their reference to either
a person or an operation.
<bullet> The proposed rule would have replaced the defined term
retail food establishment with the updated term retail operation, which
focused on the key activities of retailers, notably those selling
``directly to final consumers.'' Many public comments noted that the
proposed phrase ``direct to final consumers'' was imprecise and would
not be interpreted consistently by stakeholders. These comments also
indicated that stakeholders are familiar with the meaning of the
original defined term retail food establishment and how to apply it.
Therefore, this final rule uses the defined term retail establishment,
which has language very similar to the original retail food
establishment, to ensure consistent stakeholder understanding. This
final defined term removes the word ``food'' because retailers
sometimes sell non-food items; it also avoids the potentially confusing
phrase ``directly to final consumers.'' Finally, this definition for
retail establishment adds more examples of types of retail
establishments to help stakeholders determine whether they are a retail
establishment.
<bullet> AMS removed ``or a portion of an operation'' from the
descriptions of each exemption; this language was redundant because it
is included in Sec. 205.100--What has to be certified.
<bullet> AMS removed references to Sec. 205.272 because they are
redundant to the reference to subpart C in the introductory paragraph
of Sec. 205.101.
<bullet> In the introductory paragraph of Sec. 205.101, AMS
replaced references to Sec. 205.310 with a reference to subpart D.
This more broadly references the labeling requirements exempt
operations must follow, including use of the USDA seal and labeling in
retail environments.
<bullet> In Sec. 205.101(b), AMS removed ``sells'' to clarify that
retail establishments may also perform some handling (not just selling)
in the regular course of business.
<bullet> In Sec. 205.101(c), AMS removed the reference to
agricultural products ``previously labeled for retail sale'' and
replaced it with the statement ``certified under this part'' to clarify
that retailers may process certified organic products regardless of
whether the products are labeled for retail sale or for other use
(e.g., organic products labeled for food service).
<bullet> AMS revised Sec. 205.101(e) to exempt only storage of
products sealed in tamper-evident packaging. Storage of unpackaged
organic products is a high-risk activity that requires certification to
maintain integrity. Sealed, tamper-evident packaging makes organic
products less susceptible to fraud and mishandling and helps maintain
organic integrity during storage and handling by uncertified
operations.
<bullet> AMS added new paragraph (f) in Sec. 205.101 to exempt the
sale of retail products sealed in tamper-evident packaging. Sale of
this type of packaged retail products presents little risk to organic
integrity, and operations storing and selling these products do not
require organic certification.
<bullet> AMS added new paragraphs (g) and (h) to Sec. 205.101 to
exempt Customs brokers and logistics brokers because these operations
only facilitate entry of imports into the United States, and their
activities do not present a risk to organic integrity.
<bullet> AMS removed recordkeeping requirements from specific
exemptions and replaced them with a general ``Recordkeeping by exempt
operations'' paragraph at Sec. 205.101(i).
<bullet> AMS revised Sec. 205.310 to remove ``or excluded'' and
replaced ``handled'' with ``processed'' to more clearly indicate that
products processed by an exempt operation must not be used as an
ingredient in an organic product processed by others.
Summary of Public Comment
AMS received many public comments from stakeholders across the
organic industry discussing this section of the proposed rule. The
majority of comments generally supported AMS's proposed revisions and
agreed that the organic regulations must clearly indicate who needs to
be certified and reduce the types of uncertified operations in organic
supply chain. Many commenters requested further clarification of the
proposed changes, particularly about the need for organic certification
and exemptions from certification.
[[Page 3559]]
Revised Definitions
The revised definition of handle was discussed in many comments.
Some commenters requested expanding the definition to include terms
such as ``port,'' ``transload,'' and ``brand owner'' to the regulatory
text. Commenters also requested specific distinctions be made between
``transport'' and ``transload,'' noting current inconsistency in how
these are interpreted by the industry.
Some comments discussed further clarification needed, including how
``cold storage'' fits into the rule. Other comments requested to
further clarify handle by better defining ``split.'' Another commenter
requested clarification for operations that repackage or repurpose
certified organic products for on-site sale (e.g., delis). A few
commenters also requested AMS discuss virtual transactions more
clearly.
In response to AMS's request for additional activities that may
need to be certified, commenters suggested the following be added to
the definition of handle: split, open, close, sort, combine,
consolidate, aggregate, enclose, condition, treat, size, grade,
transload, brand ownership, private label, import, export, commingle,
transport, and deliver.
Exemptions
Certification of and exemption for brokers was frequently discussed
in comments. Many commenters requested that brokering activities be
exempt, with some requesting broad exemptions for all brokers and
others favoring exemptions for certain brokering activities. These
comments explained that exemptions are warranted because brokers
typically do not take physical possession of the products. Many
commenters also stated that all brokering activity should be certified,
regardless of physical or financial possession.
Several comments requested changes or clarifications to the
exemption for operations with organic sales of less than $5,000,
although the proposed rule did not revise existing policy. Most of
these comments wrote in support of this exemption, though some proposed
changes such as raising the maximum receipts to $10,000 while still
maintaining exempt status.
In general, some comments requested fewer exemptions, and asked AMS
to implement a transition period for operations that would require
certification under the rulemaking. Further comments wrote that
operations that sell direct to consumers should be eligible for
exemption. Several comments requested that storage facilities which
only receive product packaged by a certified operation be exempt. One
comment requested that products, not operations, be eligible for
exemption because operations can interact with organic and non-organic
products.
Some comments also requested clarification about private label
brands. There was no clear consensus among comments about the need to
certify such operations. Many comments stated that these operations
must be certified, and that doing so would improve traceability and
integrity. Others requested that private labels be exempt to avoid
additional costs and labeling inconsistencies. Further comments
requested that ``private label'' be added to the definition of ``retail
establishment'' because retail brands often sell private-labeled
product.
Comments disagreed about the specific requirements exempt
operations must follow. Some comments argued for more specific
regulatory requirements for exempt operations (i.e., clarify what
exempt operations can and cannot do). Many comments discussed the use
of the USDA organic label by exempt operations, stating that exempt
operations should not be permitted to use the certified organic label.
They requested that whenever the organic label is used, the business
must be certified.
Transport
Many comments requested specific exemptions for most transportation
of organic products. Specifically, several comments requested that milk
hauling and transportation between two certified operations should be
exempt from certification. While the majority of comments requested
these types of transportation be exempt, some comments disagreed,
requesting limits on transportation exemptions. Other comments
requested clarification for whether third-party delivery services that
restaurants use are exempt. Finally, some comments also asked AMS to
clarify whether transloading activities need to be certified.
Recordkeeping and Compliance
Some comments were concerned with verifying exempt operations
compliance. Several commenters suggested requiring universal use of
affidavits when doing business with exempt operations. Another
suggested utilizing invoices to track compliance using mass-balance
audits.
Many comments addressed recordkeeping. Several comments requested
modifying recordkeeping requirements to require exempt operations to
maintain records for five years to align requirements for certified and
exempt operations. Other comments wrote that the recordkeeping
requirements are burdensome for exempt businesses and asked AMS to not
require certain recordkeeping practices.
Responses to Public Comment
Definition of Handle
(Comment) AMS received many comments about the definition of handle
and activities that should or should not require certification.
Comments discussed a wide range of activities spanning all segments of
the supply chain and suggested many additional activities to include in
the definition of handle, including to split, open, close, sort,
combine, consolidate, aggregate, enclose, condition, treat, size,
grade, transload, brand ownership, private label, import, export,
commingle, transport, and deliver. Conversely, comments also provided
examples of activities that should not require certification, including
storing packaged products, transporting, delivering, repackaging or
splitting cases of retail-packaged products, loading, receiving,
brokering, selling or trading packaged products, selling retail
products, or labeling for inventory purposes.
(Response) AMS agrees that some of the activities presented by
commenters require certification and has added more examples to the
definition of handle to help clarify who and what activities must be
certified. The definition of handle is not an exhaustive list of
activities that must be certified. There may be additional activities
not listed in the definition that require certification, or different
words or synonyms for the same or similar activities. The absence of a
specific term in the definition of handle does not mean the activity is
not handling or that an operation conducting this activity does not
need certification. More specific responses to certain activities are
discussed below.
(Comment) Several comments noted the difference between the
definitions of handler and handling operation and asked AMS to either
clarify this difference, or harmonize the two definitions.
(Response) AMS simplified handler and removed ``except for
operations that are exempt from certification'' and ``or a portion of
[an operation]'' from handling operation. These phrases are redundant
because they are explained in Sec. 205.100--What has to be certified.
AMS also added ``except final retailers
[[Page 3560]]
of agricultural products that do not process agricultural products'' to
both definitions. This clarifies that certain final retailers are not
handlers or handling operations, and aligns the definitions with OFPA.
The two definitions are now mostly synonymous, differing only in their
reference to either a person or an operation.
(Comment) Several comments asked AMS to include importing and
exporting to the definition of handle, noting that the mandatory use of
NOP Import Certificates requires certification of importers and
exporters.
(Response) AMS agrees with these comments and has added importing
to the United States and exporting for sale in the United States to the
definition to help clarify that these activities require certification,
and to support the mandatory use of NOP Import Certificates described
in Section 2 of this rule, Imports to the United States.
(Comment) Commenters questioned the inclusion of ``facilitating
sale or trade'' in the definition for handle. The comments explained
that the meaning is vague and too broad and would result in customs
brokers, freight forwarders, sales brokers, and administrative
activities requiring certification.
(Response) The original definition for handle covered many
activities in the supply chain, from post-production to retail sale.
The updated definition is specific about which activities are included
in ``sell, process or package.'' However, the list of activities is not
exhaustive and does not capture all activities that may be considered
as selling, processing, or packaging an agricultural product. AMS
included ``facilitating sale or trade on behalf of a seller or
oneself'' as a general category to capture activities which are
integral to selling a product and may be known by various names. The
definition for handle includes handling activities that fall under
AMS's authority, although sometimes certain activities listed in handle
may not require certification. For example, entities that perform lower
risk activities--such as Customs brokers, logistics providers (e.g.,
freight forwarders), and limited handling of packaged products--may be
exempt from certification (see Sec. 205.101(e)--(h)).
Retail
(Comment) AMS received comments requesting clarification regarding
whether distribution centers and transport vehicles associated with a
retail establishment are exempt from certification. Some commenters
requested that off-site warehouses and distribution centers not be
exempt unless they meet proposed Sec. 205.101(e). According to
commenters, this clarification is needed to ensure that distribution
centers do not avoid certification by claiming to be an exempt retail
establishment.
(Response) A warehouse or distribution center associated with a
retail establishment is only exempt if it meets the criteria described
in Sec. 205.101(e) or (f). Transport vehicles associated with a retail
establishment do not require certification if they only transport and
do not handle organic agricultural products per Sec. 205.2.
(Comment) AMS received comments asking whether virtual transactions
with a final consumer are exempt from certification. Although a few
comments asked NOP to either exempt or require certification of this
activity, most comments did not give an opinion and only asked NOP for
clarification.
(Response) AMS has provided additional clarification by noting that
only businesses that meet the definition for retail establishment are
exempt under Sec. 205.101(b) and (c). Virtual businesses that only
sell retail packaged products to consumers, but do not qualify as
retail establishments, may be exempt from certification if they meet
the criteria of Sec. 205.101(f). AMS provides further detail in the
``Retail establishments'' section of the preamble.
(Comment) Comments noted that the proposed definition of retail
operation did not include the list of examples that was provided in the
preamble, and asked AMS to add them to the definition.
(Response) AMS agrees that the examples help clarify the definition
and has added them to the final definition of retail establishment.
(Comment) Comments requested revising the exemption for retailers
that process by not limiting this to processing only products that were
previously labeled for retail sale. Comments indicated that retailers
commonly source products labeled for food service.
(Response) AMS has removed that qualification from Sec. 205.101(c)
to clarify that exempt retail establishments may process certified
organic products regardless of whether the products are labeled for
retail sale.
(Comment) AMS received comments asking about the status of food
delivery services, specifically those affiliated with or serving retail
operations. Although a few comments asked NOP to either exempt or
require certification of this activity, most comments did not give an
opinion and only asked NOP for clarification.
(Response) Services which deliver products from a retail
establishment to a consumer may not require certification. A service
which delivers product from the retailer to the consumer after final
sale and does not engage in handling is transport and does not require
certification.
(Comment) Comments requested clearer guidance on what handling
activities retail operations could engage in and remain exempt.
Comments explained that the exemption for retailers that only sell and
retailers that process creates uncertainty for the many retail
operations that sell and handle. A few comments gave specific examples
of activities that exempt retail establishments should be allowed to
conduct, including removing/unpacking products, washing and
transferring products to retail displays, and breaking down master
cases of individual packaged products. However, most comments did not
give an opinion and only asked NOP for clarification.
(Response) AMS has revised the definitions of handler and handling
operation to exclude retailers that do not process organic agricultural
products; these operations may not require certification. This is
reinforced by the exemption for retailers that handle but do not
process at Sec. 205.101(b), which acknowledges that exempt retail
establishments may perform some handling activities. AMS has also
revised the definition for handle to be more specific about the types
of activities included. The additional description will help to clarify
the differences and overlap in handling and processing activities.
(Comment) Comments asked to clarify the meaning of ``point of
sale'' in reference to virtual transactions for retailers. There was a
suggestion to allow virtual transactions only when the sale occurs from
a brick-and-mortar retail location, to prohibit retailers that sell
only via an online platform.
(Response) The definition for retail establishment allows for
virtual retail transactions. For a retail establishment to be exempt,
the sales must occur at the same location as the processing, and there
must also be a physical location for consumers to purchase products.
Storage
(Comment) AMS received comments stating that storage of unpackaged
or bulk organic products is high-risk and should require certification.
They also noted that the proposed rule eliminated the distinction
between packaged and unpackaged product relating to receiving, storing,
and loading activities; this could allow high-risk operations
[[Page 3561]]
such as grain elevators and ports of entry to be exempt from
certification. Some comments requested AMS only exempt the storage of
sealed, tamper-evident packaged products.
(Response) AMS has revised the exemption at Sec. 205.101(e) to
exempt only operations that store, receive, and prepare for shipment
organic products in sealed, tamper-evident packages. Products must
remain in their packages and the exempt operation must not handle the
product beyond storing, loading, and preparing for shipment. Operations
that store bulk products or products not packaged in sealed, tamper-
evident packaging must be certified.
AMS made this change because the proposed rule would have exempted
operations that store unpackaged or bulk organic products. Many public
comments noted that storage of unpackaged organic products is a high-
risk activity that requires certification to maintain integrity. AMS
agrees that storage of unpackaged products is a high-risk activity.
Lack of sealed or protective packaging increases the likelihood of
contamination with prohibited materials (e.g., pesticides and
fumigants), commingling with nonorganic products, and
misidentification. These risks are especially great in high-activity
areas, and storage of unpackaged products requires additional care and
oversight to ensure organic integrity is maintained. Therefore, AMS is
requiring certification of operations that store unpackaged products.
Conversely, because packaging reduces the risk of contamination,
commingling, and misidentification, AMS is granting an exemption from
certification for operations that only store packaged products that are
sealed upon arrival and remain in their packaging.
AMS has narrowed the exemption to include only operations that
store, receive, and/or prepare for shipment organic products in sealed,
tamper-evident packaging. Sealed, tamper-evident packaging makes
organic products less susceptible to fraud and mishandling and helps
maintain organic integrity during storage and handling by uncertified
operations.
(Comment) Commenters requested AMS exempt from certification
activities where packaged product remains in its container, such as
breaking up pallets of packaged organic products that remain in its
original inner packaging, or placing such products into a retail
display.
(Response) Section 205.101(e) and (f) exempt operations that
receive, store, and prepare for shipment organic products enclosed in
sealed, tamper-evident packages or containers. Preparing for shipment
may include various tasks that must be performed with the sealed,
tamper-evident packaging remaining intact and without altering product
contents or any retail labeling. Examples of preparing for shipment
include putting packaged products into shipping containers, applying
internal tracking numbers, shrink-wrapping shipping cartons to a
pallet, breaking down pallets of fully packaged products, adding
protective packaging to nonretail containers or retail displays of
organic products, packing individual packaged products onto a shipping
pallet, placing individual retail packages into a retail display, and
loading/unloading packaged products onto or from transport vehicles.
(Comment) Several comments asked if cold storage of organic
agricultural products is exempt from certification, pointing to the
inclusion of ``chilling'' in the definition of processing.
(Response) Cold storage of organic agricultural products may be
exempt from organic certification if the activity meets the criteria of
Sec. 205.101(e), i.e., only sealed, tamper-proof packaged organic
products are stored. The act of cooling packaged organic products is a
common low-risk storage activity that is different from ``chilling''
performed as part of organic product processing.
(Comment) Several commenters requested that AMS remove the verb
``loads'' from proposed Sec. 205.101(e) for operations that storage
organic products, arguing that ``load'' could be conflated with
handling activities such as placing or packaging bulk products into
containers.
(Response) AMS uses ``prepare for shipment'' in exemptions at Sec.
205.101(e)-(f) to clarify that these exempt operations may not perform
activities such as packaging or loading bulk products into containers.
Prepare for shipment means that these operations may move products into
or onto a mode of transport, provided that the products are packaged
per Sec. 205.101(e)-(f).
(Comment) One commenter asked AMS to require certification of
storage facilities that store both organic and nonorganic agricultural
products. They argue that such ``split'' storage operations are a known
source of contamination and commingling, and that certification is
necessary to prevent this.
(Response) This rulemaking addresses the risks of contamination and
commingling by split storage operations by (1) requiring the
certification of operations that handle unpackaged organic products and
(2) limiting the exemption for storage operations to only those that
handle sealed, tamper-proof packaged organic products. AMS believes
these changes will mitigate the risks of split operations.
Additionally, Sec. 205.100(a) states that ``each operation or
portion of an operation'' that handles organic agricultural products
must be certified. Similarly, the exemption at Sec. 205.101(e), which
allows storage of packaged organic products without certification,
would be limited to only the portions of an operation that meet the
narrow criteria of this exemption. This means that a portion of a split
operation that stores unpackaged organic products needs to be
certified.
Transport
(Comment) Commenters requested that AMS explicitly state what
transportation activities are exempt from certification. They also
noted that the regulatory text and preamble lack a specific exemption
for transport of agricultural products.
(Response) The OFPA provides AMS authority to regulate the handling
(i.e., selling, processing, or packaging) of organic agricultural
products; however, transportation activities are not included in this
authority. Transport is generally described as the movement of products
in commerce. Based on the OFPA, transport of organic agricultural
products does not need to be certified; however, any handling
activities that occur during transport must be. See the definition of
handle for examples of activities that may require certification.
(Comment) AMS received several comments asking if milk haulers will
require organic certification. Most comments requested only
clarification on this topic, but several specifically requested that
milk haulers be exempted from certification.
(Response) AMS is defining the need for certification based on
activities performed, not type of business, because this will ensure
that businesses conducting high-risk activities require certification
(and conversely that businesses that conduct low-risk activities remain
exempt). A milk hauler would be exempt from certification if they only
transport organic milk (e.g., move milk from a dairy to a processor)
but do not otherwise handle the milk (e.g., process or package loads of
milk). Transport alone does not require certification.
(Comment) AMS received comments requesting that the transport
exemption be limited to transport from one certified operator to
another, or to a
[[Page 3562]]
final retailer, to ensure traceability of product throughout supply
chains.
(Response) AMS is not restricting transport of organic agricultural
products from one certified operation to another. This rule ensures
traceability via other means: certified operations must maintain audit
trail documentation for products they produce or handle (Sec.
205.103(b)(3)) and keep records to trace organic products received back
to the last certified operation in the supply chain (Sec.
205.103(b)(2)). This means that certified operations must ensure
traceability of products transported by uncertified operations,
including if several uncertified transporters are used in sequence.
(Comment) Many comments discussed transloading organic agricultural
products and asked AMS to clarify if this activity requires
certification.
(Response) Transloading is commonly defined as the movement of
agricultural products between modes of transport. AMS does not have the
authority to regulate transport. Therefore, transloading strictly
between modes of transportation does not need to be certified.
However, transloading is sometimes used to describe the movement of
agricultural products from storage to transport or transport to
storage. AMS considers these activities to be loading and receiving
(see Sec. 205.2 and the definition of handle). Moving unpackaged
organic agricultural products from storage to transport, or from
transport to storage, requires certification. If the organic
agricultural products are enclosed in sealed, tamper-proof containers
or packages, then loading and receiving is exempt from certification.
Small Operations
(Comment) Several comments discussed the exemption for small
operations at Sec. 205.101(a). A few commenters asked AMS to clarify
if the exemption applies to both production and handling operations.
Others requested that AMS allow ingredients produced or processed by
such exempt operations to be used as certified organic ingredients
produced by other operations. One commenter requested AMS increase the
gross sales limit of $5,000.
(Response) This rulemaking does not modify current policy regarding
the exemption for small operations. Section 205.101(a) exempts
operations that produce or handle agricultural products as ``organic''
but whose gross agricultural income from organic sales totals $5,000 or
less annually. However, these operations must not sell, label, or
represent agricultural products they produce or process as certified
organic, and such products must not be used as certified organic
ingredients in products processed by another operation (see Sec.
205.310). Additionally, the $5,000 gross sales threshold is set by the
OFPA, and AMS does not have authority to increase this limit.
Selling and Representing
(Comment) Many comments requested that AMS provide exemptions for
operations that do not physically handle or contact organic
agricultural products, arguing that such operations do not threaten
organic integrity.
(Response) AMS disagrees with commenters' claim that lack of
physical contact equals low risk. Organic integrity depends on
oversight and transparency across the entire organic supply chain--
including some operations that may never physically contact organic
products. The need for certification is based on risk and this rule
requires certification of high-risk operations such as importers,
traders, and others that facilitate the sale of organic products.
Although these operations may not physically contact organic products,
they control critical events along organic supply chains where organic
integrity can be compromised, including purchase, sale, transport,
storage, and combining or splitting products. For example, an importer,
broker, or trader could unintentionally compromise the integrity of
organic products they buy or sell by not seeking or keeping records to
demonstrate traceability and verify organic integrity. Without these
records, there is no way to verify that a product was properly handled
by the multiple physical handlers in a supply chain. A breach of
integrity could go unreported, and the importer or trader would
unintentionally sell a product that has lost its organic status and
integrity. Similarly, brokers and traders could mistakenly direct
contracted storage facilities and transporters to perform activities
that compromise organic integrity, such as directing a storage facility
to fumigate a container of organic wheat or directing a transporter to
combine loads of organic and nonorganic corn.
Additionally, because importers, brokers, traders and others that
facilitate sales have direct financial interest in the transaction of
organic products, they have the incentive and opportunity to commit
fraud. For example, an operation could falsify records to claim that a
nonorganic product is certified organic, or direct a contracted storage
facility or transporter to mix organic and nonorganic products, and
then claim the entire load is organic. NOP has investigated many
notable cases of fraud committed by uncertified operations that did not
physically contact the products in question (see the discussion on
fraud under ``Purpose and Need for the Rule'').
The risk of both unintentional breach of integrity and fraud has
grown with the organic market as supply chains increase in complexity
and more uncertified parties affect control of organic products and
their transaction. Requiring certification based on risk ensures
traceability, verification, accountability, and oversight at the most
critical points of the supply chain, including the activities of
brokers, traders, importers, and others who facilitate sale but may not
physically contact organic products. The rule also provides reasonable
exemptions for low-risk operations to reduce cost and administrative
burden to the industry.
(Comment) Many comments discussed private labeling and brand
ownership of organic products. Opinions differed about the need to
certify these operations. Some commenters argued that requiring
certification of these operations would improve transparency and
traceability of products, while others claimed that doing so would be
unnecessary and create potential problems with labeling and
traceability.
(Response) ``Brand owners'' or operations that sell or distribute
organic products produced by another operation on their behalf may be
exempt from certification if they meet the criteria of Sec.
205.101(f). This exemption allows the buying, selling, receiving,
storing, and preparing for shipment of organic products that are
packaged for retail sale. The products must be sealed in tamper-evident
packaging ready for retail sale, and the operation must not open or
otherwise handle the retail packages. Private labeling operations that
process organic agricultural products must be certified.
(Comment) Commenters asked AMS to clarify if sales brokers need to
be certified, including businesses that buy or sell only packaged
organic products.
(Response) Operations that sell, trade, or facilitate sale or trade
of organic agricultural products on behalf of a seller or oneself must
be certified. However, AMS is providing an exemption for operations
that only buy, sell, receive, store, or prepare for shipment organic
products packaged for retail sale (Sec. 205.101(f)). The products must
be sealed in tamper-evident
[[Page 3563]]
packaging labeled for retail sale, and the operation must not open or
otherwise handle the retail packages. Sale of organic products not
packaged for retail sale (e.g., bulk; unpackaged; packaged for
nonretail sale; unsealed, non-tamper-evident packaging) must be
certified.
Supply Chain Logistics
(Comment) Many comments asked AMS to provide a specific exemption
for Customs brokers licensed by U.S. Customs and Border Protection,
arguing that these operations only facilitate entry of imports into the
United States, and that their activities do not present a risk to
organic integrity.
(Response) AMS agrees that the activities of Customs brokers do not
threaten organic integrity. Therefore, Sec. 205.101(g) exempts from
certification licensed Customs brokers that only conduct Customs
business per 19 CFR 111.1. This exemption is limited to Customs
business; other activities conducted by a Customs broker that fall
within the definition of handle--including selling, importing, or
trading organic agricultural products--may require certification.
(Comment) Several comments asked AMS to clarify if businesses that
facilitate the storage and transport of organic agricultural products,
such as logistics brokers and freight forwarders, require
certification.
(Response) Logistics brokers, freight forwarders, and other
businesses that facilitate storage and transport of agricultural
products may be exempt if they meet the criteria of Sec. Sec.
205.101(e) or (h). These exemptions only apply to operations that
conduct or facilitate specific shipping, storing, or transport
activities. This may include logistics brokers or freight forwarders
who do not take ownership or physical possession of organic products
and only provide a service by connecting a consigner (or consignee)
with a carrier who transports/stores the products. Additionally,
transport of organic agricultural products does not require
certification if the transport operation does not handle the products
(see definition of handle in Sec. 205.2). Other handling activities--
such as selling, importing, or trading--must be certified.
(Comment) Many commenters responded to AMS's request for comment
about ports of entry. Most commenters agreed that the activities of
ports--such as loading, storing, receiving, combining, and splitting--
must be certified if unpackaged products are being handled. Comments
stated that handling of unpackaged goods at ports should be certified
because ports conduct physical activities that can compromise organic
integrity. Ports unload, move, split, combine, and store both organic
and nonorganic products, increasing the risk of commingling organic and
nonorganic products, and the risk of contamination with substances not
allowed in organic handling. In contrast, several comments from trade
associations state that requiring certification of port activities may
cause delays, increase costs, and may have limited positive impacts on
organic integrity. Several comments asked AMS for more clarification
about the need for ports of entry to be certified.
(Response) Ports of entry must be certified if the activities they
conduct meet the definition of handle and do not clearly fit an
exemption at Sec. 205.101(a)-(h).
Recordkeeping and Verification
(Comment) Several comments noted that proposed Sec. 205.101 did
not clearly explain the requirements and recordkeeping practices each
exempt operation must follow. A few comments also asked AMS to increase
the recordkeeping requirement for exempt operations to five years to be
consistent with requirements for certified operations.
(Response) AMS has revised Sec. 205.101 to clarify the
requirements and recordkeeping practices that exempt operations must
follow. Specific references to individual requirements are removed from
each exemption, and the introductory paragraph explains universally
that all exempt operations must follow the applicable production,
handling, and labeling requirements of subparts C and D. The preamble
further explains with specific examples of requirements exempt
operations may have to follow.
AMS has also removed recordkeeping requirements from individual
exemptions and replaced them with a single, consistent recordkeeping
requirement that applies universally to most exempt operations. AMS
retained the requirements for exempt operations to maintain records for
at least three years because there was not a compelling reason for
increasing that timeframe without prior notice.
(Comment) AMS received several comments asking who is responsible
for verifying exempt operations' compliance with the organic
regulations.
(Response) Certified operations are responsible for verifying the
compliance of the certified organic products they receive, including
those received from exempt operations. Section 205.201(a)(3) requires a
certified operation's OSP to include monitoring practices and
procedures to verify suppliers (including exempt suppliers) and the
organic status of products they receive. AMS is not prescribing how
certified operations should verify suppliers and products; this
provides flexibility for operations to develop and implement practices
that best suit their business and the products they handle.
B. Imports to the United States
The table below includes the regulatory text related to this
section of the rule. A discussion of the policy follows.
------------------------------------------------------------------------
Section Final regulatory text
------------------------------------------------------------------------
205.2..................................... Terms Defined.
Definitions for Organic
exporter and Organic
importer.
205.273................................... Imports to the United
States.
Entire section.
205.300................................... Use of the term,
``organic.''
Paragraph (c).
------------------------------------------------------------------------
Purpose, Scope, and Authority
AMS is amending the USDA organic regulations by adding a new
section (205.273) requiring the use of the National Organic Program
Import Certificate (``NOP Import Certificate''). The NOP Import
Certificate is a transaction certificate, or data set, that contains
detailed information about the quantity and origin of organic product
being imported into the United States. Any organic agricultural product
imported to the United States must be associated with a valid NOP
Import Certificate, generated by the certifying agent of the final
certified exporter sending the product to the United States.
[[Page 3564]]
The purpose of the NOP Import Certificate is to document the
organic status and quantity of imported organic products as they travel
from a certified organic exporter in a foreign country to a certified
organic importer in the United States. The NOP Import Certificate
ensures an auditable business transaction by documenting that the
products in the shipment are organic and may be sold, represented, and
distributed as organic within the United States.
The mandatory use of NOP Import Certificates is authorized by the
Organic Foods Production Act (OFPA), as amended by the ``2018 Farm
Bill''.\18\ The OFPA specifies what information an NOP Import
Certificate must include (7 U.S.C. 6502(13)) and also stipulates that
the NOP Import Certificate must ``be available as an electronic
record'' and captured in a tracking system maintained by the U.S.
Government (7 U.S.C. 6514(d)). The OFPA also provides the Secretary
with broad authority to establish appropriate and adequate enforcement
procedures and any other requirements that the Secretary may determine
to be necessary (7 U.S.C. 6506).
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\18\ See sections 10104(b)(3) and 10104(c) of the Agriculture
Improvement Act of 2018, Public Law 115-334. Available at: <a href="https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf">https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf</a>.
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The NOP Import Certificate must be presented to U.S. Customs and
Border Protection (CBP) through the CBP Automated Commercial
Environment (ACE). The use of this standardized electronic format will
ensure consistency in data for auditing, surveillance, and enforcement
purposes. The OFPA, as amended by the 2018 Farm Bill, states that AMS
must establish a system of tracking NOP Import Certificates, and that
AMS ``may integrate the system into any existing information tracking
systems for imports of agricultural products'' (7 U.S.C. 6514(d) and
6522(c)).\19\
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\19\ See section 10104(c) of the Agriculture Improvement Act of
2018, Public Law 115-334. Available at: <a href="https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf">https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf</a>.
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Because the OFPA enables AMS to access information available in ACE
(7 U.S.C. 6521(c)), AMS is using ACE to accept NOP Import Certificate
data.\20\ ACE is an automated and electronic system for processing
commercial trade data. It is the primary system through which the
global trade community files information about imports and exports so
that admissibility into the United States may be determined by
government agencies (including AMS) to ensure compliance.
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\20\ See sections 10104(h) and (j) of the Agriculture
Improvement Act of 2018, Public Law115-334. Available at: <a href="https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf">https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf</a>.
---------------------------------------------------------------------------
The data to be entered into ACE include fields for the information
needed to meet the requirements of an NOP Import Certificate as defined
in the OFPA: origin; destination; the certifying agent issuing the NOP
Import Certificate; harmonized tariff code, when applicable; total
weight; and the organic standard the product was certified to (7 U.S.C.
6502(13)). For the purposes of uploading and tracking NOP Import
Certificates, the data must be available as an electronic format to
meet the requirements of the OFPA (7 U.S.C. 6514(d)(1)).
Both the OFPA and the USDA organic regulations require certified
operations to maintain and make available to the Secretary records that
concern the production, harvesting, and handling of agricultural
products that are or that are intended to be sold, labeled, or
represented as organic. This includes sufficient records to provide an
audit trail to determine the source, type and quantity, transfer of
ownership, and transportation of any agricultural product labeled as
organic. Likewise, both the OFPA and the USDA organic regulations
require certifying agents to maintain and make available to the
Secretary records concerning its activities.
This policy also aligns with international guidelines and norms
related to organic oversight. NOP considered international standards
established by the Codex Alimentarius Commission (Codex) \21\ and norms
published by the International Federation of Organic Agriculture
Movements (IFOAM).\22\ Both provide for and support the use of
transaction shipment certificates such as the NOP Import Certificate.
---------------------------------------------------------------------------
\21\ Section 7 of the Codex Guidelines for the Production,
Processing, Labelling and Marketing of Organically Produced Foods
recommends imported organic products to be marketed only where the
competent authority or designated body in the exporting country has
issued a certificate of inspection stating that the lot designated
in the certificate was obtained within an organic system of
production, preparation, marketing, and inspection.
\22\ IFOAM Norms define a transaction certificate as a
``document issued by a certification body or by the operator,
declaring that a specified lot or consignment of goods is
certified.''
---------------------------------------------------------------------------
Change From Current Policy
NOP Import Certificates are currently only used for organic
products imported from countries with which AMS has an equivalence
determination. The USDA has established equivalence determinations with
Canada, the European Union, Switzerland, Japan, South Korea, Taiwan,
and the United Kingdom. Organic imports from Canada are accompanied by
an organic certificate that includes an attestation statement that the
products comply with the terms of the United States-Canada Organic
Equivalency Arrangement. Organic imports from the European Union,
Switzerland, Japan, South Korea, Taiwan, and the United Kingdom are
accompanied by an NOP Import Certificate. The certifying agent of the
exporter evaluates the request for an NOP Import Certificate, and upon
verification of the organic shipment, completes and issues an NOP
Import Certificate. Form NOP 2110-1 is currently used for this purpose.
In the past, AMS has not required NOP Import Certificates for
organic exports from countries with which the United States does not
have an organic equivalence determination. The rulemaking changes this
to make the use of NOP Import Certificates mandatory, regardless of an
imported product's country of origin or if that country has an
equivalency determination with USDA. Specifically, this rulemaking
requires that all imported products intended to be sold, represented,
labeled, or marketed as organic in the United States must be declared
as organic to U.S. Customs and Border Protection (CBP), using an NOP
Import Certificate.
Alignment of Policy With U.S. Customs and Border Protection Policies
and Systems
The OFPA, as amended by the 2018 Farm Bill, requires the
establishment of an Organic Agricultural Product Imports Interagency
Working Group, consisting of members of both the USDA and CBP (see 7
U.S.C. 6521a).\23\ The mandatory use of NOP Import Certificates
supports the working group's goal to ensure the compliance of organic
agricultural products imported into the United States.
---------------------------------------------------------------------------
\23\ See section 10104(i) of the Agriculture Improvement Act of
2018, Public Law No: 115-334. Available at: <a href="https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf">https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf</a>.
---------------------------------------------------------------------------
Under this policy, AMS and CBP will collaborate to verify that
imported organic products are associated with NOP Import Certificates.
In April 2020, the electronic version of the NOP Import Certificate was
deployed in ACE as an optional filing step for organic imports. The use
of the electronic NOP Import Certificate will be mandatory once this
rule is fully implemented.
NOP Import Certificates will be required for any commodity imported
into the United States that is being
[[Page 3565]]
manifested, sold, marketed, or labeled organic. NOP Import Certificates
are required for organic commodities regardless of value or size and is
not applicable for any di Minimis exemptions under current CBP
regulations.
Generating the NOP Import Certificate
This section describes how the NOP Import Certificate data are
generated. NOP Import Certificates must be generated using the USDA's
Organic Integrity Database. By the time the rule is fully implemented,
both USDA-accredited certifying agents and organic certifying agents
accredited by countries with which USDA holds an organic trade
arrangement or agreement (equivalence determination or recognition
arrangement) will have access to the Organic Integrity Database to
generate NOP Import Certificates. Only the Organic Integrity Database
can be used to generate valid NOP Import Certificates, and only
accredited organic certifying agents (USDA or under an organic trade
arrangement or agreement) are authorized to use the Organic Integrity
Database.
Where does the data for the NOP Import Certificate come from?
The data for the NOP Import Certificate is generated in the Organic
Integrity Database by the certifying agent of the exporter. The
exporter is responsible for facilitating the trading, selling,
consigning, shipping, or exporting of organic product from a foreign
country to the United States. An organic exporter must be certified
organic by certifying agents accredited by the USDA or certifying
agents authorized by a trade arrangement or agreement. Organic
exporters may be the final physical handler of organic products within
a foreign country, or they may be the entities that facilitate, sell,
or arrange the sale of organic products shipped to the United States.
This exporter is responsible for verifying that the organic product
complies with organic standards. This includes, but is not limited to,
verifying that the import has not been exposed to a prohibited
substance, treated with a prohibited substance as a result of
fumigation or treated with ionizing radiation at any point in the
products' movements across country borders.
How does the certifying agent evaluate the request for an NOP Import
Certificate?
The certifying agent determines the format of the NOP Import
Certificate request from the certified operation, based on the data
required for the Organic Integrity Database to generate the NOP Import
Certificate. The request for an NOP Import Certificate must include all
information required by the organic exporter's certifying agent to
complete the NOP Import Certificate. The certifying agent is required
to confirm the authenticity of the organic products covered by the NOP
Import Certificate using control systems it designs for this purpose.
The certifying agent must have and implement a documented organic
control system for intaking and approving or rejecting the validity of
an NOP Import Certificate request.
The certifying agent is responsible for ensuring that the issued
NOP Import Certificate is only associated with an amount of product
that has been verified to be certified organic. The certifying agent
has the authority to determine whether it will issue an NOP Import
Certificate for a specific shipment, or for a specific timeframe (e.g.,
weekly, monthly, season) and amount or volume ceiling. This
determination is to be based on the capacity and control systems of
both the certifying agent and the certified operation. There is no
limit on the length of timeframe a certifying agent chooses. However,
the certifying agent must choose a timeframe that is appropriate to
their administrative capacity and documented control system and allows
them to verify the integrity of the specific type and volume of import.
Once the certifying agent verifies the authenticity of the organic
export, the certifying agent enters or uploads the information needed
into the Organic Integrity Database. Each NOP Import Certificate must
be associated with a certified organic operation listed in the
database, identified by a 10-digit code. The Organic Integrity Database
will generate a unique NOP Import Certificate that includes both the
10-digit identifier for the operation and a unique numerical identifier
for the NOP Import Certificate. The certifying agent will provide the
NOP Import Certificate, or data set with the NOP Import Certificate
number, back to the certified organic exporter requesting the NOP
Import Certificate. The certifying agent can cancel or void a NOP
Import Certificate in the Organic Integrity Database at any time.
Transmitting the NOP Import Certificate From Exporter to Importer
The certified organic exporter provides the NOP Import Certificate
to the U.S. importer, who provides it to the specific entity
responsible for entering import information into the ACE system. This
is typically an importer or designated Customs broker. The NOP Import
Certificate data can be sent either electronically or via paper. The
U.S. importer or Customs broker enters the NOP Import Certificate data
into ACE as part of its standard import filing process; this process is
governed by timelines determined by CBP. Organic certifying agents will
not have access to ACE; this activity is done by the importer or its
Customs broker, using the NOP Import Certificate data provided by the
certifying agent to the exporter.
As the certified organic product itself moves from the exporting
country into the United States, all entry documentation including, but
not limited to bills of lading, bills of sale, commercial invoices, and
packing lists must clearly state that the product is organic. Exporting
and importing operations must maintain records required under Sec.
205.103. CBP may hold shipments at the border to address health and
safety issues or violations of U.S. trade laws with a specific
commodity or shipment.
Importer Responsibilities
Upon receiving a shipment, an organic importer must verify that the
organic product(s) comply with the USDA organic regulations. This
includes ensuring that an NOP Import Certificate is associated with the
product received. It also includes verifying that the import has not
been treated with a prohibited substance as a result of fumigation or
treated with ionizing radiation at any point in the products' movements
across borders. Verification may take many forms, depending on the
documentation provided, and country and commodity. The importer must
have an organic control system that documents how this verification is
conducted to protect the organic integrity of imported product. This
control system is reviewed by the importer's certifying agent.
Both the organic exporter and U.S. organic importer must maintain
records of NOP Import Certificates, and these records must be available
for inspection by the NOP and certifying agents in accordance with
Sec. 205.103. Certifying agents that are overseeing imports of organic
products into the United States must have a system for ensuring that
operations receiving organic product are receiving and maintaining NOP
Import Certificates, and that they are not accepting more product from
any providers than is authorized by NOP Import Certificates.
[[Page 3566]]
Connecting NOP Import Certificate With ACE Import Data
Once NOP Import Certificate Data is entered into ACE, the data are
transmitted to AMS for analysis, surveillance, and enforcement. AMS
will align and validate the data generated in ACE with the original NOP
Import Certificate entered into the Organic Integrity Database. This
will connect the data about the actual imported product back to the
data about the corresponding authorized export, aligning both sides of
the transaction. This alignment will allow for the identification of
any anomalies or indicators of fraud, such as: NOP Import Certificates
in ACE that were not authorized (do not have a valid certificate
number) by a certifying agent in the Organic Integrity Database (e.g.,
fraudulent certificates); volumes of product entered in ACE that exceed
those authorized in the Organic Integrity Database; and/or entries into
ACE that are associated with an operation that is no longer certified.
This type of automated data-driven surveillance is a common approach in
trade oversight.
Timing of the NOP Import Certificate
The timing of the NOP Import Certificate data entry into ACE must
comply with current CBP import filing requirements for Partner
Government Agencies. The certified organic exporter must time the NOP
Import Certificate request in such a way that the certifying agent has
time to consider the request and generate the NOP Import Certificate,
and the exporter has time to deliver it to the importer or Customs
broker before the CBP filing requirements for the product.
Requiring an NOP Import Certificate provides trackable and
auditable verification that organic products comply with the USDA
organic regulations. This requirement will also support investigations
if noncompliant products are exported and misrepresented as organic for
sale in the United States. Given that the Organic Integrity Database
will be the definitive tool for generating NOP Import Certificates,
additional guidelines on data entry to generate NOP Import Certificates
will be provided through that system.
Summary of Changes to the Final Rule
AMS made several changes to the regulatory text of the SOE proposed
rule when writing this final rule. Changes to the final rule are
discussed below and are followed by responses to specific themes from
public comment.
<bullet> AMS removed ``owner'' from the definition of organic
exporter, added ``certified'' before ``exporter,'' and ``to the United
States'' after ``from a foreign country.'' This clarifies that the
organic exporter must be certified, and that the organic exporter may
be the final physical handler of organic products within a foreign
country, or they may be the entities that facilitate, sell, or arrange
the sale of organic products shipped to the United States. This was
done to clarify questions about ``who needs to be certified'' received
during public comment.
<bullet> AMS removed ``of record'' from the definition of organic
importer and added a statement that the organic importer is responsible
for entering NOP Import Certificate data into ACE. This addresses
public commenters' request to clarify the role of the organic importer
and the person responsible for entering data into ACE.
<bullet> AMS removed ``through a U.S. Port of Entry,'' as all
imports must enter through such a Port, so the phrase is not needed.
<bullet> AMS removed references to ``or equivalent data source''
and ``NOP Form 2110-1'' throughout Sec. 205.273 and clarified that the
Organic Integrity Database must be used to issue NOP Import
Certificates. AMS has determined that the Organic Integrity Database
will be the only data source for NOP Import Certificates because it is
a preexisting, proven tool that meets U.S. government security
requirements, and already accepts data in multiple different forms to
accommodate data inputs from other systems. The Organic Integrity
Database is already used and understood by certifying agents, including
many accredited by both the USDA and trade partner countries. It is a
system that accepts data in multiple forms, that any government can
engage with, and that minimizes onboarding time and learning curve.
Using the Organic Integrity Database as a single source of
certification and import data, while allowing multiple data upload
methods, will provide secure access to import data that facilitates the
use of NOP Import Certificates.
<bullet> AMS clarified that certifying agents may issue NOP Import
Certificates for a specific timeframe, if appropriate, not limited to a
single transaction. This addresses public commenters' concerns about
generating NOP Import Certificates for multiple shipments in short
timeframes (e.g., multiple shipments of fresh produce across the
border). This change allows certifying agents to determine whether they
will issue an NOP Import Certificate for a specific shipment or for a
specific timeframe (e.g., weekly, monthly, seasonally) and amount or
volume ceiling. Because certifiers conduct certification activities on
a one-year cycle, it is expected that import certificates are unlikely
to exceed one year in duration. The certifying agent must choose a
timeframe that is appropriate to their administrative capacity and
documented control system, and allows them to verify the integrity of
the specific type and volume of import.
<bullet> AMS clarified the requirement that certifying agents must
have and implement a documented organic control system for intaking and
approving or rejecting NOP Import Certificates. This ensures that
certifying agents have auditable processes and procedures that NOP can
audit to assess certifying agents' ability to generate and approve NOP
Import Certificates.
<bullet> AMS removed the requirement that certifying agents must
issue NOP Import Certificates within 30 days. This avoids any timing
discrepancy between NOP Import Certificate data entry and CBP import
filing requirements. AMS does not have authority to change CBP entry
requirements. The timing of the NOP Import Certificate data entry into
ACE must comply with current CBP import filing requirements for Partner
Government Agencies.
<bullet> AMS clarified that organic importers must have a
documented organic control system to verify NOP Import Certificates and
verify no contact with prohibited substances or exposure to ionizing
radiation. This is necessary to ensure that organic importers have
auditable processes and procedures that certifying agents can review to
assess importers' ability to verify NOP Import Certificates and verify
the integrity of imported organic products.
<bullet> AMS clarified that organic importers must verify that the
NOP Import Certificate data accurately reflects the shipment, which may
include verification of quantities and types of product specified on
the NOP Import Certificate. This requirement more clearly states the
organic importer's responsibility in assessing and ensuring the
integrity of imported products, providing an additional layer of
oversight at a critical juncture in organic supply chains.
Summary of Public Comment
The majority of public comments were strongly in support of AMS's
proposed mandatory use of NOP Import Certificates. Many comments
discussed or recommended changes to the NOP Import Certificate process,
including the timing of NOP Import Certificates, ACE data entry, how
the certificate should travel with the import, certifying agent
[[Page 3567]]
role and capacity, and how the NOP Import Certificate would function
within organic trade arrangements and agreements.
Comments frequently asked AMS to clarify if NOP Import Certificates
can be issued before or after shipment. They also noted that the
proposed 30-day requirement to issue NOP Import Certificates does not
align with the 10-day ACE entry deadline noted in the preamble. Some
comments requested that AMS allow up to 30 days to enter NOP Import
Certificate data into ACE, while others recommended 10 days or less to
help reduce fraud.
Many comments asked AMS to clarify if an NOP Import Certificate
must ``accompany'' an import or be ``associated with'' an import.
Several comments requested that AMS require imports be ``accompanied''
by an NOP Import Certificate and that the certificate travel with the
import and be presented at entry into the United States, claiming that
this would help prevent fraudulent organic products from entering the
U.S. market. Others stated a preference to allow NOP Import
Certificates to ``be associated'' with shipments, noting that this
flexibility is needed to match the frequency and pace of land imports
via truck and rail.
Several comments noted that issuing NOP Import Certificates for
individual shipments would be difficult for high-volume, high-frequency
imports, especially those from Canada and Mexico. These comments asked
AMS to consider allowing certifying agents to issue NOP Import
Certificates that cover a specific time period (e.g., quarterly),
product type, and volume. Comments argued this would reduce
administrative burden and cost to both certified operations and
certifying agents. A few comments also claimed that some certifying
agents may not have the administrative capacity or technical expertise
to issue and verify NOP Import Certificates as proposed.
A few comments asked AMS to clarify the definitions and roles of
exporters and importers, noting that it is not clear who is responsible
for requesting NOP Import Certificates, verifying them upon import, and
entering data into ACE. Some comments also asked AMS to further define
``equivalent data.''
Finally, some comments requested clarification about the general
applicability and use of NOP Import Certificates, including their use
for very small or infrequent shipments, use by exporters in a country
AMS has a trade arrangement or agreement with, use of electronic vs.
paper certificates, and use in trade between two foreign countries.
Responses to Public Comment
Timing of NOP Import Certificates
(Comment) AMS received many comments concerning the 30-day time
frame for certifying agents to review and issue NOP Import
Certificates. Commenters stated that the 30-day timeframe will
negatively impact imports of perishable organic product from Canada and
Mexico that require a rapid import process.
Other commenters stated that the 30-calendar-day timeframe for
certifying agents to review and issue NOP Import Certificates does not
align with the existing 10-day requirement to upload the NOP Import
Certificate data into the ACE system. Others requested that the 10-day
requirement for organic exporters to enter data from an NOP Import
Certificates or equivalent into ACE align with the proposed 30-day
requirement for certifying agents to issue an NOP Import Certificate or
equivalent. Commenters also requested that the 10-day timeframe to
enter NOP Import Certificate data be reduced to prevent organic fraud.
More broadly, AMS received comments asking if NOP Import
Certificates can be issued both before and after shipment.
Additionally, commenters asked If NOP Import Certificates could be
issued after the shipment of organic product has already entered the
United States.
(Response) The timing of the NOP Import Certificate data entry into
ACE must comply with current CBP import filing requirements for Partner
Government Agencies. AMS does not have authority to change CBP entry
requirements.
The certified organic exporter must time the NOP Import Certificate
request in such a way that the certifying agent has time to consider
the request and generate the NOP Import Certificate, and the exporter
has time to deliver it to the importer or Customs broker before the CBP
filing requirements for the product.
To address the problem of generating NOP Import Certificates for
multiple shipments in short timeframes (e.g., multiple shipments of
fresh produce across the border), AMS is granting the certifying agent
the authority to determine whether it will issue an NOP Import
Certificate for a specific shipment, or for a specific timeframe (e.g.,
weekly, monthly, season) and amount or volume ceiling. The certifying
agent is responsible for ensuring that the issued NOP Import
Certificate is only associated with an amount of product that has been
verified to be certified organic.
Associated vs. Accompanying
(Comment) Several commenters noted that proposed Sec. 205.273(d)
states that the organic importer of record must ensure that the
shipment is accompanied by a verified NOP Import Certificate. This
conflicts with the preamble which states that shipments of organic
product must be associated with a valid NOP Import Certificate.
(Response) To clarify the requirement, AMS has removed the term
accompanied from the rule. The NOP Import Certificate must be
associated with a shipment. This revision accurately describes AMS's
intent that organic shipments are associated with, and not accompanied
by, a valid NOP Import Certificate at the time of entry into the United
States.
(Comment) Commenters requested that the term associated, located in
the preamble text, be changed to accompany and that AMS require NOP
Import Certificates to be available upon entry to the United States, to
prevent fraud in the organic market.
(Response) USDA is requiring that all organic exports to the United
States be associated with a valid NOP Import Certificate. By requiring
organic imports to be associated with, and not accompanied by, an NOP
Import Certificate, USDA will have access to the import data without
restricting or slowing import and trade of organic products.
Certifying Agent Capacity
(Comment) AMS received several comments highlighting that organic
certifying agents lack the capacity to issue the number of NOP Import
Certificates that would be required under the proposed rule at one per
shipment. Comments specifically referenced the high-volume of organic
products coming by truck and rail from Mexico and Canada.
(Response) It is the certifying agent's responsibility to ensure
that the exporting operation has the capacity to produce or handle the
product covered by the NOP Import Certificate. When a certifying agent
issues a NOP Import Certificate, it is validating that the product is
truly organic; therefore, it must have adequate control systems to
verify these claims.
To address the problem of generating NOP Import Certificates for
multiple shipments in short timeframes (e.g., multiple shipments of
fresh produce across the border), AMS is granting the certifying agent
the authority to determine whether it will issue an NOP Import
Certificate for a specific shipment, or for a specific timeframe
[[Page 3568]]
(e.g., weekly, monthly, season) and amount or volume ceiling. The
certifying agent is responsible for ensuring that the issued NOP Import
Certificate is only associated with an amount of product that has been
verified to be certified organic.
(Comment) AMS received several comments that recommended a
staggered implementation timeline for the NOP Import Certificate
requirement to ensure certifying agents have the administrative
capacity to process additional NOP Import Certificates. Several
comments also expressed concern about the increased cost associated
with issuing NOP Import Certificates. Comments noted that certifying
agents would need to hire and train additional technical staff to
comply with the proposed requirements for NOP Import Certificates.
(Response) Under the current USDA organic regulations, certifying
agents are not allowed to provide certification services that are
outside its administrative capacity. While a reasonable implementation
period is being provided to fully update the Organic Integrity Database
to generate NOP Import Certificates, certifying agents are not to issue
any NOP Import Certificates without having adequate expertise and
staffing to verify the organic status of products it oversees under the
organic program.
(Comment) Commenters asked how certifying agents will verify
whether a shipment is compliant with the USDA organic regulations based
on an NOP Import Certificate.
(Response) Certifying agents that are overseeing exports of organic
products to the United States must have and implement a documented
organic control system for intaking and then approving or rejecting an
NOP Import Certificate request. The certifying agent is responsible for
ensuring that the issued NOP Import Certificate is only associated with
an amount of product that has been verified to be certified organic.
Certifying agents that are overseeing importers of organic products
into the United States must have a system for ensuring that operations
receiving organic product are receiving and maintaining NOP Import
Certificates, ensuring that importers have met the requirements of this
section, and that they are not accepting more product from any
providers than is authorized by NOP Import Certificates.
General Applicability
(Comment) AMS received comments asking if NOP Import Certificates
would be required for small, retail, and mixed shipments of organic
product imported into the United States.
(Response) NOP import Certificates will be required for any
commodity imported into the United States that is being manifested,
sold, marketed, or labeled organic. NOP Import Certificates are
required for organic commodities regardless of value or size and is not
applicable for any de minimis exemptions under current CBP regulations.
A very limited number of exemptions will be allowed for items such as,
but not limited to, food donations, non-retail samples, and
humanitarian efforts.
(Comment) Commenters asked if NOP Form 2110-1, NOP Import
Certificate, is mandatory and whether a paper copy would be permitted.
Commenters also asked if certifying agents would issue physical or
digital copies of NOP-2110-1 to operations.
(Response) Only the NOP Import Certificate and its associated data,
generated from the Organic Integrity Database, is a valid NOP Import
Certificate. Either a paper-based or electronic NOP Import Certificate
may be used. Certifying agents will determine the format it will use to
provide the exporter with the NOP Import Certificate data.
ACE Data Entry
(Comment) We received comments requesting AMS clarify the
definition of ``equivalent data source'' by providing additional text
in Sec. 205.273(e). Commenters requested the requirement explicitly
state that USDA is the sole authority that determines equivalent data
sources.
(Response) In the final rule, we have removed the term ``equivalent
data source.'' All NOP Import Certificates will be generated using the
Organic Integrity Database. AMS provides multiple ways to upload or
enter data into the Organic Integrity Database. We have determined it
will be the only data source for NOP Import Certificates because it is
a preexisting, proven tool that meets U.S. government security
requirements, and a centralized system is needed to facilitate supply
chain traceability and to assess authorized import certificate data
against actual import data generated by CBP and reported back to AMS.
The Organic Integrity Database allows data submittals in multiple
formats, such as direct data entry, data spreadsheet uploads, and
automated programming interfaces. A data dictionary is also public,
allowing external parties to easily map their own systems and data
exports to the tool. The Organic Integrity Database is already used and
understood by certifying agents, including many accredited by both the
USDA and trade partner countries. It is a system that any government
can engage with that minimizes onboarding time and learning curve.
Using the Organic Integrity Database as a single source of
certification and import data, while allowing multiple data upload
methods, will provide secure access to import data that facilitates the
use of NOP Import Certificates.
(Comment) We received a number of comments about the respective
roles of the exporter and importer with respect to the NOP Import
Certificate. Several comments stated that the organic exporter does not
have access to the CBP ACE system and is not the party that would enter
the required data into ACE. Commenters recommended that the importer of
record be the entity responsible for entering data into ACE. Comments
stated that the proposed definition of organic importer of record is
unclear and does not reliably identify the party capable of ensuring
each shipment is associated with an NOP Import Certificate.
(Response) NOP Import Certificates must be generated by the
certified organic exporter's certifying agent, using the USDA's Organic
Integrity Database. Only the Organic Integrity Database can be used to
generate valid NOP Import Certificates, and only accredited organic
certifying agents (USDA or under an organic trade arrangement or
agreement) are authorized to use the Organic Integrity Database.
Once the NOP Import Certificate is generated in the Organic
Integrity Database, the exporter's certifying agent provides the NOP
Import Certificate, or data set with the NOP Import Certificate number,
back to the certified organic exporter who requested the NOP Import
Certificate. The certified organic exporter then provides the NOP
Import Certificate to the U.S. importer or buyer, who provides it to
the specific entity responsible for entering import information into
the ACE system. This is typically an importer or designated Customs
broker. That importer or Customs broker enters the NOP Import
Certificate data into the ACE system as part of its standard import
filing processes, including the Entry Summary Process. Organic
certifying agents will not have access to ACE; this activity is done by
the importer or its Customs broker, using the NOP Import Certificate
data provided by the certifying agent to the exporter.
(Comment) Commenters asked how imported organic product would be
identified in ACE without an organic
[[Page 3569]]
Harmonized Tariff Schedule (HTS) code.
(Response) The NOP Import Certificate in ACE has been programmed to
enable NOP Import Certificate entry for a wide range of products,
including agricultural products and textiles, not just those with an
organic HTS code. An organic HTS code is not required to upload NOP
Import Certificate data into ACE.
Trade Arrangements and Agreements
(Comment) AMS received comments requesting that foreign-based
certifying agents operating under recognition arrangements be required
to list organic operations in the Organic Integrity Database. As noted
by commenters, the absence of that data makes it difficult for
organizations to verify the certification status of foreign-certified
operations.
(Response) AMS is changing access to the Organic Integrity Database
to include organic certifying agents and operations operating under
organic trade arrangements or agreements, such as equivalency and
recognition arrangements. Certified organic operations covered under
trade arrangements or agreements will need to be listed in the Organic
Integrity Database by their certifying agents for the certifying agents
to be able to generate NOP Import Certificate for valid products
entering the United States as organic.
(Comment) We received comments asking how NOP Import Certificates
would apply to trade of organic products under, and outside of, an
equivalency arrangement. Additionally, commenters requested more
information about how NOP Import Certificates would apply to NOP-
certified products traded between foreign countries.
(Response) The NOP Organic Import Certificate is required for any
product imported into the United States that is being manifested, sold,
marketed, or labeled organic, regardless of the product's country of
origin or if that country has an equivalency determination with USDA.
Organic products imported from any country with which AMS has an
equivalency determination must follow the same NOP Import Certificate
requirements outlined in this rule. Other countries may also have their
own unique filing requirements for organic products coming into their
countries; organic businesses need to consult with their supply chains
to determine those requirements.
C. Labeling of Nonretail Containers
The table below includes the regulatory text related to this
section of the rule. A discussion of the policy follows.
----------------------------------------------------------------------------------------------------------------
Section Final regulatory text
----------------------------------------------------------------------------------------------------------------
205.307............................................. Labeling of nonretail containers.
Paragraphs (a) through (c).
----------------------------------------------------------------------------------------------------------------
Accurate labeling of non-retail containers used to ship or store
organic products is critical to organic integrity. Proper labeling
reduces misidentification and mishandling, facilitates traceability and
product verification, reduces the potential for organic fraud, and
allows accurate identification of organic product by customs officials
and transportation agents.
Therefore, this rulemaking requires that all nonretail container
labels must identify contents as organic and include information
linking the container to audit trail documentation. Additionally, audit
trail documentation associated with a nonretail container must identify
the last certified operation that handled the product. Affected
entities may include but are not limited to: certified and noncertified
operations that store and transport organic product in nonretail
containers; certifying agents; and inspectors.
Background
The organic regulations previously only required a production lot
number on nonretail containers labels used to ship or store organic
product. Other information--such as identification of the product as
organic, and special handling instructions--were optional, but not
required on nonretail container labels. Based on the NOP's experience
enforcing the organic regulations, this lack of information created
gaps in the organic chain of custody, complicated the verification of
organic integrity, and increased the likelihood of organic fraud.
To reduce the prevalence of organic fraud and increase oversight of
organic supply chains, nonretail containers are now required to be
marked with a statement identifying the product as organic and must
include unique information that will link the nonretail containers to
audit trail documentation. Unique identifying information could include
lot numbers, shipping information, or a unique identifier for that
shipment. Accurate labeling will identify contents as organic as a
container moves through the supply chain; this will reduce mishandling
and help maintain an audit trail and improve traceability.
Nonretail Containers: Description and Use
Nonretail containers are defined under Sec. 205.2 of the USDA
organic regulations as ``any container used for shipping or storage of
an agricultural product that is not used in the retail display or sale
of the product.'' Nonretail containers are used to ship or store either
packaged or unpackaged organic products, and may include the following:
<bullet> Produce boxes, totes, bulk containers, bulk bags, flexible
bulk containers, harvest crates and bins;
<bullet> Boxes, crates, cartons, and master cases of wholesale
packaged products; and
<bullet> Trailers, tanks, railcars, shipping containers, vessels,
cargo holds, freighters, barges, grain elevators, silos, grain bins, or
other methods of bulk transport or storage.
Nonretail containers are not used to display organic products for
sale to the consumer at retail establishments. Packages that display
organic products for retail sale to the consumer must be labeled
according to Sec. Sec. 205.303 and 205.306.
What must be included on nonretail container labels?
Nonretail containers used to ship or store organic products must be
clearly labeled with a statement that identifies the product as
organic. Clearly visible organic identification alerts handlers that
the contents of the nonretail container may require special care, thus
reducing accidental mishandling of the product, such as treatment with
a prohibited substance or commingling with conventional product during
transport and storage. Operations may use abbreviations or acronyms to
identify products as organic, provided that they are clear and easily
understood. This provides flexibility for
[[Page 3570]]
operations to meet the requirements of Sec. 205.307(a)(1) and makes it
easier to label containers with limited space or containers that are
difficult to label due to their size, shape, material, or use.
Nonretail containers must also be clearly labeled with information
that links the container to audit trail documentation (see Sec. 205.2
for definition of audit trail). This could be a production lot number,
shipping identification, or other unique information that handlers can
use to trace the container to its associated audit trail documentation.
This creates a clear link between container and audit trail and
minimizes the size of labels by allowing some information to be listed
in associated documentation, instead of directly on the nonretail
container label.
Operations may use temporary labels or signage to meet the
requirements of Sec. 205.307(a). This provides additional flexibility
for containers that may be difficult to label due to size, shape,
material, or use.
Revisions to Sec. 205.307 do not limit the information that can be
on a nonretail label. This gives operations the flexibility to include
details they deem critical to the integrity of specific products. For
example, an operation may opt to include special handling instructions,
the USDA organic seal for qualifying products, the operation or
certifying agent name, or contact information on the nonretail label.
Nonretail Containers and Audit Trail Documentation
Nonretail containers used to ship or store organic products must be
labeled with information that links the container to audit trail
documentation (Sec. 205.307(a)(2)). Such documentation must be
sufficient to determine the source, transfer of ownership, and
transportation of the product (see definition of audit trail in Sec.
205.2) and must identify the last certified operation that handled the
product (Sec. 205.307(b)).
Listing the last certified organic operation provides a point of
contact to verify the organic status of a product and supports
operations' traceability, recordkeeping, and fraud prevention
requirements (Sec. Sec. 205.103(b)(2)-(3) and 205.201(a)(3)). It also
supports on-site inspections and supply chain traceability audits
conducted by certifying agents (Sec. Sec. 205.403(d)(5) and
205.501(a)(21)) by ensuring good recordkeeping of the critical
transfers between certified operations.
Exception to Organic Identification on Nonretail Containers
Nonretail containers used to ship or store agricultural products
packaged for retail sale with organic identification visible on the
retail label are not required to identify product as organic per Sec.
205.307(a)(1). Examples include master cases and pallets where the
organic identification (e.g., the USDA organic seal) of individual
retail units is visible. These are exempt from Sec. 205.307(a)(1)
because the organic identification is visible on the retail label.
These types of nonretail containers are only excepted from the
requirements of Sec. 205.307(a)(1). All nonretail containers must be
linked or traceable to audit trail documentation per Sec.
205.307(a)(2); this ensures traceability of the product in the
containers and supports organic integrity during transport, storage,
and handling.
Summary of Changes to the Final Rule
AMS made several changes to the regulatory text of the SOE proposed
rule when writing this final rule. Changes to the proposed rule are
discussed below and are followed by specific themes from public
comment.
<bullet> AMS simplified the requirement to list full organic
identification (e.g., ``100 percent organic,'' or ``made with organic .
. .'') to ``identification of product as organic,'' which provides more
flexibility to operations and shortens the organic identification
statement without changing the statement's intent or its utility as
immediate and clear identification of nonretail containers. This change
was made in response to public comment.
<bullet> AMS revised the requirement to list production lot numbers
or shipping identification. This information is now used to link a
container to audit trail documentation. To reduce administrative burden
and cost to operations, AMS is only requiring the most critical
information on nonretail container labels: organic identification and
information that links the container to audit trail documentation. This
maintains traceability and integrity by requiring nonretail containers
to be linked to audit trail documentation, which must identify the last
certified operation that handled the product and must be sufficient to
determine the source, transfer of ownership, and transportation of the
product.
<bullet> AMS removed the requirement to identify the product's
certifying agent on nonretail labels because this information may be
included in audit trail documentation linked to nonretail containers.
Removing this requirement limits information on nonretail labels to the
most critical information, thereby reducing cost and burden without
sacrificing integrity.
<bullet> AMS added a requirement that audit trail documentation
associated with a nonretail container must identify the last certified
operation that handled the product. This allows operations to verify
the source of organic products they receive and provides a record trail
that certifying agents can use to conduct full supply chain
traceability audits and verify organic status.
<bullet> The final rule no longer requires organic identification
on nonretail containers of retail-labeled products. This avoids undue
administrative burden, cost, and redundant information when organic
identification is already visible on the products' retail labels.
<bullet> AMS removed the list of optional information that may be
listed on nonretail container labels. This list is not necessary
because operations may optionally include any additional information on
nonretail labels if they wish.
Summary of Public Comment
Public comments strongly supported mandatory organic identification
on nonretail container labels. However, many comments requested the
flexibility to use alternatives like abbreviations and common names.
Commenters stated that the proposed rule's requirement to use specific
(and sometimes lengthy) statements would add cost and be difficult to
apply to containers with limited space. Commenters also requested that
AMS require generic product names--e.g., ``organic tomatoes''--on
labels, claiming that this information is needed to quickly identify
the contents of nonretail containers.
Other commenters requested AMS mandate additional information on
large nonretail container labels to include country of origin, special
handling instructions, and the USDA organic seal. Additionally,
comments pointed out that nonretail labels should not be limited to the
information explicitly listed in Sec. 205.307, and requested that NOP
allow operations to include other types of information on labels.
Responses to Public Comment
(Comment) We received comments requesting AMS require all nonretail
containers display the information described in Sec. 205.307,
regardless of size or type (i.e., not allow exceptions for large
nonretail containers used for transport or storage). Additionally,
commenters noted that there was no definition or description outlining
what type of containers would be exempt from the labeling requirements.
[[Page 3571]]
(Response) All nonretail containers of organic products must be
labeled with information that links the container to audit trail
documentation, regardless of size, shape, or use. This ensures
information needed to verify and trace the product is available to
those handling the product. Only nonretail containers used to ship or
store agricultural products packaged for retail sale with organic
identification visible on the retail label are excepted from the
requirements of Sec. 205.307(a)(1).
(Comment) Commenters requested the name and contact information of
the certified operation be a mandatory field on all nonretail container
labels because a certifying agent name alone is not sufficient to match
a physical product to an organic certificate. Other commenters also
requested that the operation's address or the NOP operation ID also be
included.
(Response) AMS is only requiring the most critical information on
nonretail container labels: organic identification and information that
links the container to audit trail documentation. This reduces
administrative burden and cost to operations. Traceability and
integrity are maintained by requiring nonretail containers be linked to
audit trail documentation, which must identify the last certified
operation that handled the product. Audit trail documentation must be
sufficient to determine the source, transfer of ownership, and
transportation of the product (see audit trail in Sec. 205.2).
(Comment) We received comments requesting that listing the
certifying agent be optional because it was redundant for master cases
of retail-packaged product and added to the cost of the label.
(Response) AMS does not require listing the certifying agent on
nonretail container labels. Such information may be listed in audit
trail documentation; operations may choose to do this to verify organic
status of the product or determine the source, transfer of ownership,
and transportation of the product. Section 205.307(c) excepts nonretail
containers of retail-packaged products from listing organic
identification if the retail packages clearly identify the product as
organic.
(Comment) AMS received comments noting both disagreement and
confusion regarding which operation/certifying agent pair is required
to be on the nonretail label. Commenters stated that the proposed
revision (``producer of the product, or . . . the last handler that
processed the product'') may not indicate the appropriate operation for
verification purposes or in private labeling scenarios.
(Response) Section 205.307(b) requires that a nonretail container's
audit trail documentation identify the last certified operation that
handled the product. The certifying agent that certified this handler
may be listed in audit trail documentation; operations may choose to do
this to verify organic status of the product or determine the source,
transfer of ownership, and transportation of the product.
(Comment) We received comments stating that special handling
instructions are critical to the integrity of organic products in the
supply chain and requested that AMS make this information mandatory on
all labels. Commenters also inquired about what special handling
instructions should include.
(Response) We are not requiring special handling instructions on
nonretail container labels; this reduces administrative burden and cost
to operations without risking integrity. Operations may include special
handling instructions (or other information) on nonretail containers if
they deem it necessary.
(Comment) AMS received comments requesting the mandatory use of
tamper-evident seals on nonretail containers. Commenters argue that
tamper-evident seals may help prevent fraud and mishandling of organic
product.
(Response) AMS is not requiring tamper-evident seals on nonretail
containers; this avoids potential undue administrative burden and costs
to operations. Operations may use tamper-evident seals on nonretail
containers if they deem it necessary.
D. On-Site Inspections
The table below includes the regulatory text related to this
section of the rule. A discussion of the policy follows.
----------------------------------------------------------------------------------------------------------------
Section Final regulatory text
----------------------------------------------------------------------------------------------------------------
205.2............................................... Terms defined.
Definition for Unannounced inspection.
205.403............................................. On-site inspections.
Paragraphs (b)(1) and (2) and (d)(4) and (5).
----------------------------------------------------------------------------------------------------------------
On-site inspections of certified organic operations are a
critically important tool used to verify an operation's compliance with
the Act and the organic regulations. This rulemaking strengthens the
utility of on-site inspections by requiring that certifying agents:
<bullet> Conduct a minimum number of unannounced inspections each
year.
<bullet> Conduct mass-balance audits during on-site inspections.
<bullet> Verify traceability of product and ingredients within an
operation during on-site inspections.
<bullet> Verify traceability of product in an operation's supply
chain back to the last certified operation during on-site inspections.
These requirements will strengthen organic integrity and supply
chain traceability by requiring the use of proven best practices during
inspection of organic production and handling. Entities affected by
this policy may include certifying agents, certified operations, and
operations applying for certification. Organic stakeholders should
carefully examine the regulatory text and policy discussion below.
Unannounced Inspections--Background
Unannounced inspections are an effective and useful tool to ensure
compliance across certified operations and bolster consumer trust in
the organic label. NOP previously issued an instruction (NOP
Instruction 2609) on unannounced inspections, which recommends that
certifying agents conduct unannounced inspections of five percent of
their total certified operations per year as a tool for ensuring
compliance with the regulations.\24\ This NOP instruction was supported
by a recommendation made by the NOSB in December 2011.\25\ The organic
regulations previously allowed for, but did not require, unannounced
inspections, leaving this to the discretion of the certifying agent.
[[Page 3572]]
Therefore, AMS has codified the requirement for certifying agents to
conduct a minimum number of unannounced inspections annually of
certified operations.
---------------------------------------------------------------------------
\24\ NOP 2609, Instruction, Unannounced Inspections. September
12, 2012. Available in the NOP Program Handbook: <a href="https://www.ams.usda.gov/sites/default/files/media/2609.pdf">https://www.ams.usda.gov/sites/default/files/media/2609.pdf</a>.
\25\ NOSB Recommendation, Unannounced Inspections. December 2,
2011. Available on the AMS website: <a href="https://www.ams.usda.gov/sites/default/files/media/NOP%20CACC%20Final%20Rec%20on%20Unannounced%20Inspections.pdf">https://www.ams.usda.gov/sites/default/files/media/NOP%20CACC%20Final%20Rec%20on%20Unannounced%20Inspections.pdf</a>.
---------------------------------------------------------------------------
Use of Unannounced Inspections
To clarify the difference between unannounced inspections and full
annual inspections, AMS is defining the term unannounced inspection as
``The act of examining and evaluating all or a portion of the
production or handling activities of a certified operation without
advance notice to determine compliance with the Act and the regulations
in this part.'' \26\ Note that unannounced inspections are different
from a full annual inspection because the scope of the inspection may
be limited to a portion of the operation or the operation's activities,
and certifying agents must conduct the inspection without advance
notice.
---------------------------------------------------------------------------
\26\ Compare to the definition of inspection at 7 CFR 205.2: 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.
---------------------------------------------------------------------------
Scope of Unannounced Inspections
Relative to a full annual on-site inspection, an unannounced
inspection may be limited in scope, depth, and breadth and may cover
only a portion of the operation or the operation's activities, such as
parcels, facilities, products, or a review of records. This allows
unannounced inspections to be used as a risk-based tool to address
specific needs, such as investigation of a complaint or high-risk area.
Inspectors may conduct sampling during an unannounced inspection.
Samples collected may count towards the number of samples a certifying
agent must collect annually per Sec. 205.670(d) of the organic
regulations. Sample collection alone, however, does not qualify as an
unannounced inspection.
When unannounced inspections are limited in scope, they are not
required to follow the requirements of Sec. 205.403(c)(2), (d), or
(e). This means unannounced inspections:
<bullet> May be conducted when an authorized representative of the
operation is not present and the inspector is not trespassing.
<bullet> May be conducted at any time of year.
<bullet> Do not have to verify all areas or activities of the
operation like a full, annual inspection.
<bullet> Do not have to include an exit interview with an
authorized representative of the operation.
An unannounced inspection may fulfill the requirement for a full
annual on-site inspection, provided that the inspector meets all
requirements for an annual on-site inspection per Sec. 205.403. This
includes meeting the timing, scope, exit interview and documentation
requirements for annual inspections. The exception is that the
inspection would not be scheduled in advance with the operation's
awareness. If an unannounced inspection will serve as the annual
inspection, an authorized representative must be present.
Selecting Operations for Unannounced Inspections
To maximize the effectiveness of unannounced inspections,
certifying agents are encouraged to select operations from a range of
different production and handling types, products, and locations.
Operations may be selected randomly, by risk, in response to a
complaint or investigation, or other criteria. The number of
unannounced inspections to be conducted annually should be calculated
by rounding up to the nearest whole number, so that certifying agents
with very few certified operations (e.g., under 20 operations) are
still required to conduct at least one unannounced inspection per year.
Planning and Scheduling Unannounced Inspections
Unannounced inspections should be conducted without advance notice
to the operation. However, some unannounced inspections may require
advance notice (e.g., to ensure that portions of an operation are
accessible or safe to access). Therefore, a certifying agent may notify
an operation up to four hours prior to the inspector arriving onsite.
As a best practice, certifying agents are encouraged to disclose their
process for unannounced inspections, including a policy on inspector
access to certified operations, and to train inspectors to prevent
trespassing or breaking laws when accessing an operation. An
operation's refusal to allow an inspector access to any portion of the
operation is a violation of Sec. 205.403 and warrants a notification
of noncompliance.
Following an unannounced inspection, an inspection report must be
written by the inspector and reviewed by the certifying agent. The
results of the inspection must be communicated to the inspected
operation per Sec. 205.403(f) and the certifying agent's internal
protocols.
Certifying Agent Ability To Conduct Unannounced Inspections
Certifying agents must be able to conduct unannounced inspections
of any operation they certify. Therefore, AMS requires that certifying
agents only accept applications for certification or continue
certification from operations for which the certifying agent is able to
conduct unannounced inspections. To ensure consistency, transparency,
and accountability, certifying agents are expected to describe the
areas where they operate in the written materials they provide to both
applicants and certified operations, and review the locations of all
operations during their application review or annual review.
A certifying agent that cannot conduct unannounced inspections in
an applicant's or certified operation's location due to logistical
challenges, staffing, security, or other reasons, is considered to not
have the administrative capacity for certification activities in that
area, consistent with Sec. 205.501(a)(19). In this case, the
certifying agent must document the specific reasons it does not have
the administrative capacity to certify in that area, and must inform
the applicant or certified operation to seek certification from another
certifying agent. If new certification is not obtained, the operation's
certification would be suspended/revoked. This process is similar to
the current procedures used when a certifying agent surrenders its
accreditation or is suspended/revoked.
For additional information about unannounced inspections,
certifying agents may refer to NOP Instruction 2609.
Mass-Balance and Traceability Audits During On-Site Inspections
Traceability of organic products is critical to verification of
organic integrity. Therefore, AMS requires that certifying agents
verify quantities and traceability of organic products produced or
handled by an operation through mass-balance and traceability audits.
Audit tools are the premier methods to verify organic integrity. The
importance of audits has increased because transaction certificates,
which certifying agents relied upon in the past to verify the organic
status of specific loads or sales or organic products, are neither
required by the USDA organic regulations nor universally issued by
certifying agents.
Mass-Balance Audits
During on-site inspections, certifying agents must verify that the
quantities of organic product and ingredients
[[Page 3573]]
produced or purchased by an operation accounts for organic products and
ingredients used, stored, sold, or transported by the operation (Sec.
205.403(d)(4)). Commonly known as a ``mass-balance'' or ``in-out''
audit, this verification is an effective method of detecting and
discouraging organic fraud.
Mass-balances may be performed on products that are produced on an
operation, but then used or stored on-site and not sold (e.g., silage
produced on-site as feed for dairy animals). Mass-balance covers
quantities of agricultural products; other quantitative assessments
such as dry matter intake and stocking rate verification are not mass-
balances. To conduct these mass-balance audits, certifying agents may
choose a sub-set of products based on risk or other factors. With
respect to multi-ingredient products, certifying agents may choose a
single ingredient or multiple ingredients to mass-balance. When a
single ingredient is selected, a best practice is to choose an
ingredient that is high-risk or used in several products.
Mass-balances do not replace the recommended best practice of also
conducting yield analyses at producer operations. Yield analysis looks
at whether harvested quantities are consistent with expected yields.
This is an important tool to assess the potential for commingling of
noncertified/nonorganic products with organic products.
Traceability Audits
Successful traceability within organic supply chains requires three
basic elements: (1) traceability within a single operation; (2)
traceability one step back from an operation in a supply chain; and (3)
traceability by a third party along an entire supply chain, source to
consumer.
Therefore, during all annual inspections certifying agents must
verify the traceability of organic product both within an operation and
verify traceability back to an operation's suppliers (Sec.
205.403(d)(5)).\27\ This means that a certifying agent must verify that
an operation can trace the products it produces or handles during the
full time the operation possesses those products, from time of purchase
or acquisition, through production, to sale or transport. This includes
ingredients or products that the operation handles but may not own.
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\27\ The third traceability element, traceability along an
entire supply chain, is addressed in 7 CFR 205.501(a)(21), and
discussed in this rulemaking in Section P, Supply Chain Traceability
and Organic Fraud Prevention.
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Additionally, certifying agents must verify the traceability of
products from an operation's suppliers (Sec. 205.403(d)(5)). Because
supply chains sometimes include operations that are not certified,
certifying agents must verify compliance of organic products back to
the last USDA-certified organic operation. Certifying agents may verify
compliance back to the last certified operation by inspecting and
verifying audit trail documentation and other records kept by the
certified operation being inspected. This will ensure oversight of the
critical linkages between certified operations and support full
traceability and verification of organic products across supply chains.
Certifying agents must also conduct supply traceability chain
audits when circumstances meet criteria defined by the certifying agent
(Sec. Sec. 205.501(a)(21) and 205.504(b)(7)). These audits would not
be performed at every annual inspection.
Responses to Public Comment
Virtual/Remote Inspections
(Comment) Several public comments noted that during the COVID-19
pandemic, virtual inspections, or sometimes a hybrid of virtual an on-
site inspection, were temporarily used by certifying agents. Several
comments asked if AMS intends to allow the use of virtual inspections
for operations that have a demonstrated history of compliance or are at
low risk of organic fraud.
(Response) Virtual and/or remote inspections were not included in
the SOE proposed rule and AMS is therefore not setting specific policy
related to virtual or remote inspections. The final regulations provide
flexibility so that AMS may consider virtual inspection policy options
in the future.
Unannounced Inspections
(Comment) Several comments asked AMS to increase the minimum number
of operations that must receive unannounced inspections beyond the five
percent AMS proposed.
(Response) AMS is finalizing the proposed requirement that
certifying agents must conduct unannounced inspections of at least five
percent of the operations they certify. This is consistent with a 2011
NOSB recommendation and a current NOP Instruction document. AMS chose
this percentage because the majority of USDA-accredited certifying
agents currently complete unannounced inspections at this
frequency.\28\ Because most certifying agents are already completing
unannounced inspections at this level, this percent should be tenable
for certifying agents, regardless of size. To justify a higher
percentage, AMS would require additional information, industry
feedback, and data to assess the potential impact. Comments did not
provide justification or data to support a higher inspection
percentage. However, certifying agents may choose to conduct a higher
percentage of unannounced inspections to supplement their oversight and
enforcement of certified operations.
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\28\ 42 of the 49 USDA-accredited certifying agents the NOP
audited in calendar years 2018 and 2019 completed unannounced
inspections for 5% of the operations they certify.
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(Comment) Some public comments asked if AMS intends to publish
criteria for initiating or using unannounced inspections.
(Response) AMS is not adding criteria for using or initiating
unannounced inspections to the regulations. Unannounced inspections may
be triggered and selected by a variety of factors, including at random
and in response to complaints or investigations. The regulations
provide certifying agents flexibility to use unannounced inspections
when and where they are most effective.
Mass-Balances
(Comment) Several public comments asked if AMS is requiring one
mass-balance per certification scope (i.e., crops, livestock, handling,
wild crops) of an operation.
(Response) The regulatory text provides certifying agents the
flexibility to determine where such audits are most needed within a
single inspection.
(Comment) Some comments asked AMS if mass-balances should be
performed for single-ingredient or multi-ingredient products, and if
mass-balances for multi-ingredient products must balance all
ingredients in the product.
(Response) The final regulatory text provides certifying agents
flexibility to perform mass-balance audits of both single- and multi-
ingredient products. For multi-ingredient products, the certifying
agent may choose to mass-balance one or more of the ingredients.
E. Certificates of Organic Operation
The table below includes the regulatory text related to this
section of the rule. A discussion of the policy follows.
[[Page 3574]]
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Section Final regulatory text
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205.2..................................... Terms defined.
Definition for Organic
Integrity Database.
205.404................................... Granting certification.
Paragraphs (b) and (c).
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Certificates of organic operation are an important tool used by
organic stakeholders to communicate information about certified
operations. Certifying agents must generate certificates of organic
operation electronically using the Organic Integrity Database.
Standardized, electronic certificates maintained in a publicly
accessible database will help to deter and prevent the use of
fraudulent certificates of organic operation. This requirement also
ensures that certificates of organic operation have consistent
information and format, allowing certifying agents and buyers of
organic products to readily validate certificates of organic operation.
Certifying agents may add their unique addenda to certificates of
organic operation to provide additional details about the certified
operation.
Affected entities may include certifying agents, applicants for
USDA accreditation, certified operations and entities seeking to
validate the certification status of
[…truncated; see source link]Indexed from Federal Register on January 19, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.