National Organic Program (NOP); Strengthening Organic Enforcement

Federal RegisterJan 19, 2023

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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.

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:

Jennifer.Tucker@usda.gov.

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”).

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.

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:

https://uscode.house.gov/view.xhtml?path=/prelim@title7/chapter94&edition=prelim

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

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

Average annual cost

3% Discount rate

7% Discount rate

Total cost

3% Discount rate

7% Discount rate

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

Total Costs

19,318,191

14,435,494

289,772,861

216,532,409

Benefits

32,944,812

24,272,099

494,172,179

364,081,491

Estimated annual averages of the 15-year Net Present Value domestic costs discounted at 3 and 7 percent.

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.

Through these regulations, AMS oversees national standards for the production, handling, labeling, and sale of organically produced agricultural products.

7 CFR part 205 National Organic Program; Final Rule. December 21, 2000. Available on the AMS website:

https://www.federalregister.gov/documents/2000/12/21/00-32257/national-organic-program

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.

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.

Organic Trade Association, Organic Industry Survey, 2022.

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

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:

• A certified organic farm produces organic corn.

• The corn is transported via an uncertified truck to a local grain elevator, where it is aggregated with other organic corn from nearby producers.

• An uncertified commodity trader buys the corn.

• 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.

• 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.

• 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.

• The certified organic grain supplier stores the corn and combines it with imported organic corn purchased from an importer via an uncertified broker.

• The certified grain supplier sells the corn to a certified organic feed processer; the corn is transported via an uncertified truck.

• The certified processer combines the corn with several other ingredients to create organic chicken feed.

• The certified processer sells the feed to a certified organic egg producer and transports it via an uncertified truck.

• The certified organic egg producer sells organic eggs to an uncertified distributor.

• 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.

• 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.

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.

https://www.justice.gov/usao-ndia/pr/field-schemes-fraud-results-over-decade-federal-prison-leader-largest-organic-fraud

• 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

2018.

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.

https://www.wisfarmer.com/story/news/2020/02/18/south-dakota-man-indicted-71-million-organics-fraud/4801207002/

https://www.justice.gov/usao-sd/pr/florida-man-sentenced-conspiracy-commit-wire-fraud-and-money-laundering

• 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.

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.

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

• 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.

https://www.justice.gov/usao-mn/pr/cottonwood-county-farmer-charged-46-million-organic-grain-fraud-scheme

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.

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.

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

https://www.ams.usda.gov/event/national-organic-standards-board-nosb-meeting-crystal-city-va-0

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:

• Direct experience in administering the NOP, particularly complaint investigations and audits of accredited certifying agents;

• The Agriculture Improvement Act of 2018,

which amended the OFPA.

The Agriculture Improvement Act of 2018, Public Law No: 115-334, is available at:

https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf

• Recommendations of a 2017 Office of Inspector General report;

USDA Office of Inspector General Audit Report 01601-0001-21: National Organic Program International Trade Arrangements and Agreements. September 2017:

https://www.usda.gov/sites/default/files/01601-0001-21.pdf

• Recommendations of the NOP's federal advisory committee, the National Organic Standards Board (NOSB); and

• 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:

•

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.

•

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).

•

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).

•

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:

• Individuals or business entities that are considering organic certification;

• Existing production and handling operations that are currently certified organic under the USDA organic regulations;

• Brokers, traders, and importers of organic products that are not currently certified under the USDA organic regulations;

• Operations that use non-retail containers for shipping or storing organic products;

• Retailers that sell organic products;

• Operations that receive or review certificates of organic operation to verify compliance with USDA organic regulations;

• USDA-accredited certifying agents, inspectors, and certification review personnel;

• Operations that import organic products into the United States; and/or

• 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.

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.

Organic Trade Association, Organic Industry Survey, 2018-2021

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

consumer.

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.

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)).”

OFPA and the USDA organic regulations do not provide authority to regulate the transport of organic agricultural products.

See section 10104(a) of the Agriculture Improvement Act of 2018, Public Law No: 115-334, available at:

https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf,

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 § 205.101(a)-(h).

The definition of

handle

includes the term

processing,

which is defined in § 205.2.

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.

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.

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.

The regulations at § 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.

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 § 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 § 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.,

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 § 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 § 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 § 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 § 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 §§ 205.103(b)(2) and 205.201(a)(3) in the section on Supply Chain Traceability and Fraud Prevention later in this rule.

Exemptions From Certification

The USDA organic regulations require certification of any operation that produces or handles organic agricultural products (§ 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 § 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 § 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 § 205.101(b) have been modified and are now listed under current § 205.101.

Responsibilities of Exempt Operations

Operations described in § 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 § 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 § 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 § 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).

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.

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 (§ 205.501(a)(21)), recordkeeping by certified operations (§ 205.103), on-site inspections (§ 205.403(d)), and fraud prevention plans (§ 205.201(a)(3)). Retail establishments that do not process agricultural products (see definition for

Handle

at § 205.2 and exemption from certification at § 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 § 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 (§ 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 § 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 § 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

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 § 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 § 205.101(b). The OFPA and § 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 § 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 (§ 205.308). Retail establishments that do not process “made with organic. . .” unpackaged products may use that claim in retail labeling and displays (§ 205.309).

Retail Establishments That Process

Retail establishments that process organic agricultural products may be exempt from certification under § 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 § 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 § 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 § 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 § 205.101(a)(3)) and operations that handle products that only identify organic ingredients on the information panel (former § 205.101(a)(4)). AMS combined these exemptions because they cover operations that handle products in the same labeling category (per § 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 (§ 205.305) and the requirements to prevent commingling and prevention of contact with prohibited substances (§ 205.272).

Handlers covered under this exemption must have the records required by § 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 § 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 § 205.101(e) and (f),

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 § 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 § 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 § 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 § 205.101(e) or (f) must use practices for preventing commingling and contamination of organic products, in compliance with § 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 . . . ”

See 19 CFR 111.1 for complete definitions of Customs broker and Customs business:

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

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

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 (§ 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 (§ 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 (§ 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.

• 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.

• 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 § 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.

• 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.

• AMS removed “or a portion of an operation” from the descriptions of each exemption; this language was redundant because it is included in § 205.100—What has to be certified.

• AMS removed references to § 205.272 because they are redundant to the reference to subpart C in the introductory paragraph of § 205.101.

• In the introductory paragraph of § 205.101, AMS replaced references to § 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.

• In § 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.

• In § 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).

• AMS revised § 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.

• AMS added new paragraph (f) in § 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.

• AMS added new paragraphs (g) and (h) to § 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.

• AMS removed recordkeeping requirements from specific exemptions and replaced them with a general “Recordkeeping by exempt operations” paragraph at § 205.101(i).

• AMS revised § 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.

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 § 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.

(

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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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

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 § 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 § 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 § 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 § 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 § 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, § 205.100(a) states that “each operation

or portion of an operation”

that handles organic agricultural products must be certified. Similarly, the exemption at § 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

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 (§ 205.103(b)(3)) and keep records to trace organic products received back to the last certified operation in the supply chain (§ 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 § 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 § 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 § 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 § 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 (§ 205.101(f)). The products must be sealed in tamper-evident

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, § 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 §§ 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 § 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 § 205.101(a)-(h).

Recordkeeping and Verification

(

Comment

) Several comments noted that proposed § 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 § 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.

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”.

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).

See sections 10104(b)(3) and 10104(c) of the Agriculture Improvement Act of 2018, Public Law 115-334. Available at:

https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf

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)).

See section 10104(c) of the Agriculture Improvement Act of 2018, Public Law 115-334. Available at:

https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf

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.

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.

See sections 10104(h) and (j) of the Agriculture Improvement Act of 2018, Public Law115-334. Available at:

https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf

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)

and norms published by the International Federation of Organic Agriculture Movements (IFOAM).

Both provide for and support the use of transaction shipment certificates such as the NOP Import Certificate.

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.

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).

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.

See section 10104(i) of the Agriculture Improvement Act of 2018, Public Law No: 115-334. Available at:

https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf

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

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 § 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 § 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.

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.

• 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.

• 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.

• AMS removed “through a U.S. Port of Entry,” as all imports must enter through such a Port, so the phrase is not needed.

• AMS removed references to “or equivalent data source” and “NOP Form 2110-1” throughout § 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.

• 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.

• 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.

• 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.

• 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.

• 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

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 § 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.,

(

e.g.,

(

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 § 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

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 § 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:

• Produce boxes, totes, bulk containers, bulk bags, flexible bulk containers, harvest crates and bins;

• Boxes, crates, cartons, and master cases of wholesale packaged products; and

• 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 §§ 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

operations to meet the requirements of § 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 § 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 § 205.307(a). This provides additional flexibility for containers that may be difficult to label due to size, shape, material, or use.

Revisions to § 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 (§ 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 § 205.2) and must identify the last certified operation that handled the product (§ 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 (§§ 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 (§§ 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 § 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 § 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 § 2

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