National Organic Program

SUMMARY: The Agricultural Marketing Service (AMS) is seeking comments

on a proposal to establish a National Organic Program (NOP or program).

The program is proposed under the Organic Foods Production Act of 1990

(OFPA or Act), as amended, which requires the establishment of national

standards governing the marketing of certain agricultural products as

organically produced to facilitate commerce in fresh and processed food

that is organically produced and to assure consumers that such products

meet consistent standards. This program would establish national

standards for the organic production and handling of agricultural

products, which would include a National List of synthetic substances

approved for use in the production and handling of organically produced

products. It also would establish an accreditation program for State

officials and private persons who want to be accredited to certify

farm, wild crop harvesting, and handling operations that comply with

the program's requirements, and a certification program for farm, wild

crop harvesting, and handling operations that want to be certified as

meeting the program's requirements. The program additionally would

include labeling requirements for organic products and products

containing organic ingredients, and enforcement provisions. Further,

the proposed rule provides for the approval of State organic programs

and the importation into the United States of organic agricultural

products from foreign programs determined to have equivalent

requirements.

DATES: Comments must be submitted on or before March 16, 1998.

ADDRESSES: Interested persons are invited to submit written comments on

this proposal to: Eileen S. Stommes, Deputy Administrator, USDA-AMS-TM-

NOP, Room 4007-So., Ag Stop 0275, P.O. Box 96456, Washington, DC 20090-

6456. Comments also may be sent by fax to (202) 690-4632. Additionally,

comments may be sent via the Internet through the National Organic

Program's homepage at: http://www.ams.usda.gov/nop. See the

SUPPLEMENTARY INFORMATION section for further details on submitting

comments.

FOR FURTHER INFORMATION CONTACT: Michael I. Hankin, Senior Agricultural

Marketing Specialist, USDA-AMS-TM-NOP, Room 2510-So., P.O. Box 96456,

Washington, DC 20090-6456; Telephone: (202) 720-3252; Fax: (202) 690-

3924.

SUPPLEMENTARY INFORMATION:

Submission of Comments

Written comments submitted by regular mail and faxed comments

should be identified with the docket number found in brackets in the

heading of this document. Multiple page comments submitted by regular

mail should not be stapled or clipped to facilitate the timely scanning

and posting of these comments to the NOP homepage. Persons submitting

written or faxed comments are requested to identify the topic and

section number, if applicable, to which the comment refers: for

example, for a comment regarding feed for organic livestock, reference

Livestock and section 205.13. Topics should be selected from the

following list: General, Proposed Effective Date, Regulatory Impact

Assessment, Regulatory Flexibility Analysis, Paperwork Reduction Act,

Definitions, Applicability (section 205.3), Crops, Livestock, Handling,

National List, Labeling, Certification, Accreditation, State Programs,

Fees, Compliance, Appeals, and Equivalency.

It is our intention to have all comments, whether mailed, faxed, or

submitted via the Internet, available for viewing on the NOP homepage

at http://www.ams.usda.gov/nop in a timely manner. Comments submitted

in response to this proposal will be available for viewing at the USDA-

AMS, Transportation and Marketing, Room 2945-South Building, 14th and

Independence Ave., S.W., Washington, D.C., from 9:00 a.m. to 1:00 p.m.,

and from 2:00 p.m. to 4:30 p.m., Monday through Friday (except official

Federal holidays). Persons wanting to visit the USDA South Building to

view comments received in response to this proposal are requested to

make an appointment in advance by calling Martha Bearer at (202) 720-

8037.

Purpose and Background of the National Organic Program

Members of organic industries across the U.S. have experienced

numerous problems marketing their organically produced and handled

agricultural products. Inconsistent and conflicting organic production

standards may have been an obstacle to the effective marketing of

organic products. There are currently 33 private and 11 State organic

certification agencies (certifiers), each with their own standards and

identifying marks. Some existing private certifying agencies are

concerned that States might impose registration or licensing fees which

would limit or prevent the private certifiers from conducting

certification activities in those States. Labeling problems have

confronted manufacturers of multi-ingredient organic food products

containing ingredients certified by different certifiers because

reciprocity agreements have to be negotiated between certifiers.

Consumer confusion may exist because of the variety of seals, labels,

and logos used by certifiers and State programs. Also, there is no

industry wide agreement on an accepted list of substances that should

be permitted or prohibited for use in organic production and handling.

Finally, a lack of national organic standards may inhibit organic

farmers and handlers from taking full advantage of international

organic markets and may reduce consumer choices in the variety of

organic products available in the marketplace.

To address these problems, the organic industry trade association

attempted to establish a national voluntary organic certification

program. However, the industry could not develop a consensus on the

standards that should be adopted. Thereafter, Congress was petitioned

by the organic industry trade association to establish a mandatory

national organic program. Congress, in 1990, enacted the Organic Foods

Production Act of 1990, as amended (7 U.S.C. 6501 et seq.). The

purposes of the OFPA, set forth in section 2102 (7 U.S.C. 6501) are to:

(1) establish national standards governing the marketing of certain

agricultural products as organically produced products; (2) assure

consumers that organically produced products meet a consistent

standard; and (3) facilitate commerce in fresh and processed food that

is organically produced.

The National Organic Standards Board

Pursuant to section 2119 of the OFPA (7 U.S.C. 6518), the Secretary

of Agriculture, hereafter referred to as the Secretary, established a

National Organic Standards Board (NOSB or Board). The NOSB has assisted

the Secretary in developing a National List of substances to be used in

organic production and handling and has advised the Secretary on other

aspects

[[Page 65851]]

of implementing the National Organic Program.

The Act establishes what the composition of the Board should be. In

accordance with the Act, the Secretary appointed 14 members in January

1992 that included 4 organic farmers, 2 organic handlers, 1 owner or

operator of a retail establishment with significant trade in organic

products, 3 experts in environmental protection and resource

conservation, 3 representatives of public interest or consumer interest

groups, and 1 expert in the field of either toxicology, ecology, or

biochemistry. The 15th member, an accredited certifier, would be

appointed after certifying agents are accredited by the Secretary. The

Act also provides that members of the NOSB be appointed for 5 year

terms and that the original members be appointed to staggered terms of

3, 4 and 5 years to provide continuity of membership on the Board.

The NOSB has held 12 full Board meetings and 5 joint committee

meetings since the appointment of its members in 1992. To make

recommendations regarding specific issues, the Board formed 6 working

committees: Crops Standards; Livestock (and Livestock products)

Standards; Processing, Packaging and Labeling Standards; Materials;

Accreditation; and International Committees. Each committee reviewed

the provisions of the OFPA and standards previously established by

other organic organizations to determine for which subject areas

position papers would be developed. Based on the position papers

developed, public input given by persons at NOSB meetings, and an

extensive review and comment process used to develop draft

recommendations, the Board provided recommendations to the Secretary

about various matters. The recommendations included ones regarding

production and handling standards, labeling, accreditation, product

residue testing, and emergency spray programs.

The Board has provided recommendations regarding which synthetic

substances should be permitted to be used in organic production and

handling and which non-synthetic substances should be prohibited for

use, in order to recommend to the Secretary whether they should be

placed on the National List as synthetic substances approved for use or

non-synthetic substances not approved for use. The Board has reviewed

approximately 170 substances, including botanical pesticides as

required in section 2119(k)(4) of the OFPA (7 U.S.C. 6518(k)(4)), for

possible placement on the National List, and the Board used technical

advisory panels to provide scientific evaluation of the materials

considered in its review of the substances.

The NOSB's initial recommendations were presented to the Secretary

on August 1, 1994. The NOSB has continued to make recommendations and

has submitted 30 addenda to its initial recommendations. A copy of the

NOSB recommendations may be viewed on the NOP home page at: http://

www.ams.usda.gov/nop, or obtained by writing to: Maria Strother,

Agricultural Marketing Specialist, USDA-AMS-TM-NOP, Room 2510-So., P.O.

Box 96456, Washington, DC 20090-6456.

All of the NOSB recommendations were considered by AMS in

developing the proposed regulation for the National Organic Program.

The discussions and public input involved in generating the

recommendations have been invaluable in assisting AMS to become aware

of the complexity of various issues and to arrive at solutions that

represent the interests of farmers, handlers and consumers. We have

written a proposed regulation that incorporates to the greatest extent

possible the organic principles and specifics contained in the NOSB

recommendations. Many of the recommendations were restructured,

reordered, or combined to be compatible with the format of the proposed

rule. In the few instances where a section of our proposed rule does

not reflect the NOSB recommendation, we explain the variation in the

preamble for the specific section.

The NOSB recommendations and discussions on the following topics

were especially helpful to AMS in developing the proposed rule:

accreditation; labeling; importation; organic farm and handling plans;

split operations; planting stock policies; emergency pest or disease

treatments; livestock feed and health care; commercial availability;

drift of synthetic substances; small farmer exemption; phase-in of NOP

implementation; fiber processing; and the National List substance

review process.

Public Input

In addition to the NOSB recommendations, AMS has received

considerable input from interested persons regarding establishment of

the National Organic Program and this proposed rule.

Section 2110(g) of the OFPA (7 U.S.C. 6509(g)) requires the

Secretary to hold public hearings to obtain information to guide the

implementation of standards for livestock products. Four such hearings

were held during 1994: January 27-28 in Washington, DC; February 10 in

Rosemont, Illinois; February 24 in Denver, Colorado; and March 22 in

Sacramento, California. Oral and written testimony was received from

more than 70 persons, including livestock producers, veterinarians,

certifying agents, processors and members of the NOSB. Comments covered

livestock production and product marketing, antibiotic use, livestock

living conditions, feed availability, provisions for conversion to

organic production, and label requirements. These comments have been

beneficial in developing this proposed rule.

Prior to publication of this proposed rule, public comment also was

received at public events attended by NOP staff members. Public comment

was received at the 12 full Board and 5 joint committee meetings. NOP

staff made presentations and received comments at local and regional

organic conferences and workshops and at national and international

organic and natural food shows. Comments also were received at: a

national organic certifiers meeting held on July 21, 1995, to discuss

accreditation issues; a meeting of State officials held on February 26,

1996, to discuss the role of States in the NOP; training sessions for

organic inspectors; and numerous speaking engagements of the AMS

Administrator, the NOP program manager, and the NOP staff where the

public had an opportunity to participate in question and answer

sessions.

Proposed Effective Date of the Regulation

We have received inquiries about when the various provisions of a

final rule will be effective.

The final rule would establish a procedure and a time frame for

designating private persons and State officials as accredited

certifying agents under the program. One option would be to require

organizations desiring to be included on the initial list of certifying

agents accredited under the National Organic Program to submit their

applications within approximately two months after publication of the

final regulation. Applications submitted later than two months after

publication of the final rule would not be considered for inclusion on

the initial list of certifying agents, but would be reviewed as soon as

possible after publication of the initial list of accredited certifying

agents. Subsequent lists of accredited certifying agents would be

published as they are developed.

If we adopted this option, we would publish an initial list of

accredited certifiers in the Federal Register after

[[Page 65852]]

reviewing the applications received during the first two months after

publication of the final regulation. We will publish subsequent lists

of accredited certifying agents as new applicants become accredited. We

would expect publication of the initial list to occur within six months

after publication of the final rule. Only after publication of that

list would the provisions of the regulation applicable to certification

become effective. Thus, the provisions in the proposal that address the

application process for, and decisions to be made about, the

certification of farms, wild crop harvesting operations, and handling

operations, would become effective only after certifiers have become

accredited. Certifiers would begin certifying individual operations

under the NOP six months after publication of the final rule.

In order for accredited certifying agents to begin certifying

operations under the NOP six months after publication of the final

rule, we believe we would need, as we previously indicated, to have

accreditation applications submitted within two months after

publication of the final regulation. We believe that the initiation of

certification activities by accredited certifying agents six months

after publication of the final rule would permit the implementation of

the national standards for organic products within a reasonable time

frame after publication of the final rule.

We request comments from all interested parties, particularly small

businesses that want to obtain accreditation as certifying agents, as

to whether a two month time frame after publication of the final rule

for submission of applications for accreditation is a sufficient time

period, or whether an extended time period, such as three or four

months after publication of the final rule, should be permitted for

those who want to be listed on the initial list of accredited

certifiers. Any such extension, of course, would lengthen the

implementation schedule.

In this implementation option, we would expect to allow a 12-month

period of time after publication of the initial list of certifying

agents for operations to become certified under the relevant provision

of the final regulation. Thus, all provisions of the NOP would be

implemented 18 months after publication of the final rule. On that

date, which will be stated in the final rule, all organic operations

required to be certified will have to be certified in order to sell or

label their products as organic. Operations that are certified prior to

18 months after publication of the final regulation would be permitted

to use the USDA organic seal upon certification by a USDA accredited

certification organization.

We would like comments, particularly from small farm or handling

operations, as to whether the 12-month period of time we anticipate

allowing for farm, wild crop harvesting, and handling operations to

become certified is a reasonable period of time for such operations to

become certified. We are particularly interested in learning whether

there are any economic or other factors that would create difficulties

in obtaining certification within the 12-month time period we expect to

provide for obtaining certification.

Several people have raised questions about what the impact of the

rule would be when it is effective. Some farmers whose operations are

currently certified as organic under private or State standards have

asked what the status of their certified farming operations would be if

a substance allowed for use under their current private or State

certification is not on the National List, and, therefore, not allowed

under the National Organic Program.

The OFPA requires that a product sold or labeled as an organically

produced agricultural product must, except as otherwise provided in the

Act and excluding livestock, be produced on land to which no prohibited

substances, including synthetic chemicals, have been applied during the

three years immediately preceding harvest of the agricultural product.

We have incorporated this prohibition in our proposal. Thus, a farm

would not be able to become certified under the National Organic

Program until three years after the time any prohibited substance was

last applied. Therefore, at the time the final rule becomes effective,

such farming operations previously certified under private or State

programs would not be able to sell or represent their products as

organically produced if they could not satisfy the three year period

established for nonuse of a prohibited substance.

Petitions, however, to amend the National List may be submitted

immediately after publication of the final rule by using the petition

process proposed in section 205.28 of subpart B. It may be possible,

therefore, for a person who submits a petition immediately after

publication of the final rule to the NOSB for review of a new synthetic

substance to be included on the National List, to have this substance

approved for use by the Secretary prior to the effective date of the

program. If this were to occur, then prior use of the substance would

not prevent the products from being sold or represented as organically

produced.

Processors also have asked what impact the program's requirements

would have on their existing product and label inventories. With regard

to existing product and label inventories, we believe that our intended

18-month delayed effective date for the complete rule would provide

ample time for handlers to use up existing product and label

inventories required under their existing organic certification program

before the rule becomes effective.

States also have asked what effect the rule would have on their

current organic regulations. With regard to current State organic

regulations, we also believe that the anticipated 18-month delayed

effective date should provide State officials with ample time to make

the necessary changes to their State regulations and submit their State

proposed organic program to the Secretary for approval.

Because it is the intent of AMS to provide a final rule which

facilitates trade and which is the least disruptive as possible for the

production, handling and marketing of organic products, we request

comment on our intended schedule of effective dates for the provisions

of the rule. We also request comments on any problems that organic

farmers and handlers, States, and others may encounter when adjusting

their operations to meet the requirements of the National Organic

Program, including the OFPA requirement of a 3-year period prior to the

harvest of organic products from land to which a prohibited substance

is applied. A time-table for implementation of the program would be

published in the final rule.

Prior Documents in This Proceeding

The following notices related to the National Organic Standards

Board and the development of this proposed regulation have been

published in the Federal Register. Four notices of nominations for

membership on the National Organic Standards Board were published

between April 1991 and July 1996 (56 FR 15323, 59 FR 43807, 60 FR

40153, 61 FR 33897). Two notices of extension of time for submitting

nominations were published on September 22, 1995, and September 23,

1996 (60 FR 49246, 61 FR 49725). Twelve notices of meetings of the

National Organic Standard Board were published between March 1992 and

August 1996 (57 FR 7094, 57 FR 27017, 57 FR 36974, 58 FR 85, 58 FR 105,

58 FR 171, 59 FR 58, 59 FR 26186, 59 FR 49385, 60 FR 51980, 60 FR

15532, 61 FR

[[Page 65853]]

43520). One notice of public hearings on organic livestock and

livestock products was published on December 30, 1993 (58 FR 69315).

One notice specifying a procedure to submit names of substances for

inclusion on the National List was published on March 27, 1995 (60 FR

15744).

Executive Order 12988

This proposal has been reviewed under Executive Order 12988, Civil

Justice Reform. This rule is not intended to have retroactive effect.

States and local jurisdictions are preempted under section 2115 of

the OFPA (7 U.S.C. 6514) from creating programs of accreditation for

private persons or State officials who want to become certifying agents

of organic farms or handling operations. A governing State official

would have to apply to the USDA to be accredited as a certifying agent,

as described in section 2115(b) of the OFPA (7 U.S.C. 6514(b)). States

also are preempted under sections 2104 through 2108 of the OFPA (7

U.S.C. 6503 through 6507) from creating certification programs to

certify organic farms or handling operations unless the State programs

have been submitted to, and approved by, the Secretary as meeting the

requirements of the OFPA.

Pursuant to section 2108(b)(2) of the OFPA (7 U.S.C. 6507(b)(2)), a

State organic certification program may contain additional requirements

for the production and handling of organically produced agricultural

products that are produced in the State, and for the certification of

organic farm and handling operations located within the State, under

certain circumstances. Such additional requirements must: (a) further

the purposes of the OFPA; (b) not be inconsistent with the OFPA; (c)

not be discriminatory towards agricultural commodities organically

produced in other States; and (d) not be effective until approved by

the Secretary.

Pursuant to section 2120(f) of the OFPA (7 U.S.C. 6519(f)), this

proposal would not alter the authority of the Secretary under the

Federal Meat Inspection Act (21 U.S.C. 601 et seq.), the Poultry

Products Inspections Act (21 U.S.C. 451 et seq.) or the Egg Products

Inspection Act (21 U.S.C. 1031 et seq.), concerning meat, poultry, and

egg products, nor any of the authorities of the Secretary of Health and

Human Services under the Federal Food, Drug and Cosmetic Act (21 U.S.C.

301 et seq.), nor the authority of the Administrator of the

Environmental Protection Agency (EPA) under the Federal Insecticide,

Fungicide and Rodenticide Act (7 U.S.C. 136 et seq.).

Section 2121 of the OFPA (7 U.S.C. 6520) provides for the Secretary

to establish an expedited administrative appeals procedure under which

persons may appeal an action of the Secretary, the applicable governing

State official, or a certifying agent under this title that adversely

affects such person or is inconsistent with the organic certification

program established under this title. The Act also provides that the

U.S. District Court for the district in which a person is located has

jurisdiction to review the Secretary's decision.

Executive Order 12866

This proposed rule has been determined to be economically

significant for the purposes of Executive Order 12866 and, therefore,

has been reviewed by the Office of Management and Budget (OMB). When

proposing a regulation which has been determined to be economically

significant, agencies are required to: assess the costs and benefits of

available regulatory alternatives; base regulatory decisions on the

best reasonably obtainable technical, economic, and other information;

avoid duplicative regulations; and tailor regulations to impose the

least burden on society consistent with obtaining regulatory

objectives. Therefore, to assist in fulfilling the objectives of

Executive Order 12866, and the Unfunded Mandates Reform Act of 1995,

the USDA has prepared a Regulatory Impact Assessment (RIA) which is

attached as an appendix to this proposed rule and from which the

following summaries of the costs and benefits of the proposed National

Organic Program have been taken.

Ideally, the net benefits of the proposed rule would be estimated

by employing a quantitative analysis using information about the cost

structure of the industry, the demand for organic food, and projected

shifts in supply and demand resulting from the various factors

discussed in the assessment. However, although researchers have

conducted numerous small-scale studies to determine consumer

willingness to pay for organic products and to identify reasons why

conventional food buyers do not choose organic food products, the

available data are insufficient to support a quantitative assessment of

this type. At this time, USDA invites public input to provide

additional data that may aid in the development of a quantitative

assessment. This data should be submitted in response to the questions

included in the Conclusion section of the RIA. These questions are

intended to solicit information needed to develop baseline data about

the potential program participants, the costs of organic production,

revenues from organic sales, and the impact of the program on market

growth.

Summary of the Costs of the Proposed Rule

The proposed rule would impose direct costs in the form of fees

charged to certifiers for USDA accreditation and to farmers, wild crop

harvesters and handlers for support of the National Organic Program.

The proposed rule also would impose administrative costs, such as

submission of information, recordkeeping, and access to records that

may constitute an additional burden. The actual amount of the

additional administrative costs that would be imposed by the final rule

is expected to be different for those entities who currently are active

in the organic industry, as compared to those new entities who would

begin their activities only after the national program is implemented.

Certifiers, farmers, wild crop harvesters and handlers who currently

are active in the organic industry already perform most of these

administrative functions; therefore, the additional costs to them would

depend upon the extent to which their current practices are different

from the requirements of the final regulation.

Farmers, wild crop harvesters and handlers would be required to

produce and handle products in accordance with the standards set forth

in the rule and provide certifiers with the required information

necessary to verify certification requirements. Farmers, wild crop

harvesters, and handlers would be charged a fee by the certifying agent

for these certification services. We were not able to estimate the

exact cost of certification fees that would be charged by certifying

agents after implementation of the national program because these fees

currently vary widely among existing certifiers: some existing private

certifying agents are non-profit; some States who currently conduct

certification activities subsidize these activities from other revenue

sources; some existing certifying agents include the cost of inspection

and, in some cases, laboratory testing, in their certification fee; and

some existing larger certifying agents may charge lower fees because

they are able to spread their fixed costs over a larger number of

clients.

Farmers, wild crop harvesters, and handlers may experience certain

costs to comply with the final regulations. For example, there may be

costs associated

[[Page 65854]]

with the proposed requirement that organic products not come in contact

with prohibited substances, or with the proposed requirement that pest

control substances be used only if pest prevention measures are

ineffective. However, since the proposed rule is a synthesis of

existing State and private organic certification programs and the NOSB

recommendations, we believe that farmers, wild crop harvesters and

handlers who currently participate in existing State or private organic

certification programs would experience little or no increased

compliance costs as a result of implementation of the National Organic

Program. Additionally, farmers and handlers who would be exempted or

excluded under the rule, but who choose to become certified in order to

receive the benefits of certification, would be subject to the

additional cost of certification and recordkeeping. USDA requests data

on the costs of organic production and the revenues from organic

farming, and on a comparison of these costs and revenues to

conventional systems.

The following are the upper-bound estimates of the cost of initial

certification under the National Organic Program:

Estimated Cost to Farmers and Wild Crop Harvesters for Initial

Certification

Certification fee *................................. $413

USDA fee............................................ 50

----------

Total fees...................................... 463

----------

Paperwork reporting burden.......................... \1\ 381

Paperwork recordkeeping burden...................... 34

----------

Total reporting and recordkeeping............... 415

=========

ESTIMATED COST TO FARMERS AND WILD CROP HARVESTERS

FOR INITIAL CERTIFICATION.......................... $878

Estimated Cost to Handlers for Initial Certification

Certification fee *................................. $943

USDA fee............................................ 500

----------

Total fees...................................... 1,443

----------

Paperwork reporting burden.......................... \2\ 433

Paperwork recordkeeping burden...................... 34

----------

Total reporting and recordkeeping............... 467

=========

ESTIMATED TOTAL COST TO HANDLERS FOR INITIAL

CERTIFICATION...................................... $1,910

* The estimated certification fee is based on the average of fees

charged by a representative group of certifying agents: private non-

profit, private for-profit and a State agency. Most certifying agents

in our representative group include the cost of inspection and, if

applicable, required laboratory testing in the certification fee.

\1\ For new organic producers.

\2\ For new organic handlers.

USDA requests data on certification fees currently paid by existing

organic farmers, wild crop harvesters, and handlers in order to better

assess the impact of the proposed program.

After implementation, all organic certification agencies, whether

private or State, would be accredited by USDA and would pay fees for

the following services provided by USDA: application review, annual

report review, site evaluation visits, and administrative duties. A

certifier who currently is accredited by a private accreditation

organization might pay USDA lower site evaluation visit fees than a

certifier who is not currently accredited, because of measures that are

implemented by the certifier to receive its private accreditation.

Additionally, as required by the OFPA, a private certifying agent would

have to furnish reasonable security for the purpose of protecting the

rights of farms and handling operations certified by the agent. The

amount and type of security would be established through future

rulemaking.

States that currently perform organic certification activities

under their own regulations, or that have laws pertaining to the

certification of organically produced and handled products, or that

plan to have an organic program in the future, may incur some

additional costs. For example, States with existing organic programs or

regulations may be required to supplement or revise them in order to

meet the criteria of the OFPA, including the provisions set forth in

section 2107 of the OFPA (7 U.S.C. 6506). A State without an existing

organic program that initiates a new State organic program would be

expected to incur greater costs to establish its program.

The following are the upper-bound estimates for the cost of initial

accreditation under the National Organic Program:

Estimated Cost to Certifying Agents for Initial Accreditation

Accreditation application fee....................... $640

Site evaluation fee *............................... 3,500

USDA Administrative fee............................. 2,000

----------

Total fees...................................... 6,140

----------

Paperwork reporting burden.......................... \1\ 23,9

31

Paperwork recordkeeping burden...................... 60

----------

Total reporting and recordkeeping............... 23,991

=========

ESTIMATED TOTAL COST FOR INITIAL ACCREDITATION...... $30,131

*Each certifying agent would have a site-evaluation to confirm

accreditation, and thereafter a subsequent renewal evaluation at least

every 5 years following confirmation of accreditation. In some cases,

a pre-confirmation site visit may be necessary. We anticipate that the

frequency of site evaluations would be based on the performance of the

certifying agent and would be higher during the initial years of the

program.

\1\ For new organic certifiers.

The USDA requests data on the fees currently paid by existing

organic certifying agents for accreditation in order to better assess

the impact of the proposed program.

The requirement in the proposed rule for qualified certification

personnel to be used to evaluate certification applications and

contribute to certification decisions may result in an increase in

labor and training costs for some existing certifiers. The amount of

additional costs to these certifiers would depend on the level of

expertise among current certification personnel, the extent to which

certifiers currently rely on volunteers, and the costs of training

these persons. Our proposed inspector training requirements conform to

current established practice in the industry and are not expected to

impose an additional burden on existing certifiers who utilize

inspectors.

We also have identified non-quantifiable costs that may result.

Some certifiers consider the loss of independence in setting

certification standards under a national program as imposing a cost.

Other certifiers consider the establishment of uniform national

standards and an accreditation program as a benefit in that the risk of

potentially costly disputes over acceptance of other certifier's

standards (reciprocity) is eliminated. We anticipate that the net

impact would be positive because the reciprocity dispute problems would

be eliminated.

Another non-quantifiable cost could result from the proposed

requirements that certifiers provide access to all their records to the

Secretary and the applicable governing State official, and provide

access to laboratory analyses and certification documents, other than

[[Page 65855]]

confidential business information, to the general public. Although not

quantifiable, these requirements may represent a change in the way some

existing certifiers currently maintain these records.

Summary of Benefits of the Proposed Rule

In the absence of a nationally recognized definition of organic,

consumers may be mislead by labels on products claiming to be organic,

or claiming to contain organic ingredients, when in fact some of the

products or ingredients may not have been organically produced. Because

many consumers are willing to pay price premiums for organic food,

producers have an economic incentive to label their products organic.

But consumers generally are unable to distinguish organic products from

conventionally produced products by sight inspection; hence, consumers

rely on verification methods such as certification by private entities

or verification by retailers. The USDA requests data to determine the

extent to which mislabeling of non-organically produced products as

organic occurs and the market impacts of mislabeling in terms of

quantities of organic goods sold and the prices for organic goods.

Individual ingredients in multi-ingredient processed products may

be certified under different standards of organic production, thus

making it difficult for a consumer to determine the production

standards under which each of the ingredients was produced. The

proposed standards for organic production, enforced through

accreditation of certifiers, would assure consumers that the organic

ingredients were produced under one national standard. Furthermore,

USDA regulation of labeling claims for organic food would allow the

USDA and other federal agencies whose jurisdiction includes ensuring

the veracity of labeling claims to prosecute those who mislabel

products sold as organic.

Establishing a national definition for organic would be expected to

increase the supply and variety of organic products, especially meat

and poultry, available to consumers. The Food and Drug Administration

(FDA) and the Bureau of Alcohol, Tobacco and Firearms (ATF) currently

allow use of the word organic on most food and alcohol labels, but USDA

has withheld approval for the use of organic labels on meat and poultry

pending the outcome of this rule making. Without the regulation,

however, FDA may decide to disallow use of the term organic on labels

and USDA may continue their current restrictions on the use of organic

on meat and poultry labels. The increased variety of organic products,

especially meat and poultry, that might be marketed after

implementation of the final rule may increase the variety of available

organic products so as to parallel the variety of non-organic products.

The USDA requests data and analyses which would support projections of

the demand for organic meat and poultry.

By providing for the accreditation of certifiers, the proposed rule

would establish the requirements and enforcement mechanism to protect

producers and handlers from inconsistent certification services, lack

of reciprocity between certifiers, and competition from fraudulent

products, which can increase costs or reduce revenue for organic

farmers and handlers. In the absence of the National Organic Program,

the certifier of a final product may not be required to recognize the

certification of an intermediate organic product used in the final

product. Thus, both farmers and primary food processors face a risk of

being unable to sell an organic product identified as certified when

more than one certifier is involved. Monitoring by USDA of

certification inspections and certifier personnel training and

qualifications would help to ensure the quality of the certification,

the use of consistent criteria for certification, and the use of

certification personnel who are knowledgeable and free from conflicts

of interest.

National organic standards and the assurance provided by the USDA

accreditation of certifiers would benefit farmers and handlers by

opening access to international markets. The trade restrictions that

currently exist would be resolved if foreign countries who import

organic products recognize the National Organic Program as equivalent.

Farmers and handlers in the United States may expect larger growth in

exports of organic products to follow implementation of the final rule.

The contributions of national organic standards to increased

domestic demand and to expanded international markets for organic

products may provide opportunities for current organic producers to

expand the scale of their operations. Increased organic production also

may provide incentives for input industries to develop new technologies

which could lower producers' costs of organic production. Input costs

also may decline as a result of economies of scale being achieved in

input industries producing for the organic market. Expanded markets

could encourage additional farmers and handlers to enter the

marketplace, resulting in a potential decline of certifiers' average

costs of operation as fixed costs are spread over a growing number of

clients. The USDA requests information to determine whether the organic

industry and consumers of organic goods have benefitted from industry

growth resulting in economies of scale and production and marketing

efficiencies, and whether industry participants anticipate such

benefits from this rule.

There are three ways in which certifiers' administrative costs

could be reduced as a result of the regulation. First, certifiers'

costs of maintaining access to organic markets for their clients should

be reduced because costs associated with determining equivalency

between certifiers would be reduced or eliminated. Accreditation and

uniform national standards would alleviate the need to negotiate

individual reciprocity agreements with other certifiers. Furthermore,

USDA oversight of certifiers would simplify the process of certifying

multiple ingredient products, thus reducing certification costs. The

responsibility for meeting production and certification requirements of

each ingredient would rest with the certified producers and accredited

certifying agents of the individual ingredients. National standards

also would eliminate costly equivalency disputes between States which

may affect interstate commerce.

Second, certifiers would no longer have to pay private

organizations for the accreditation required to gain access to some

international markets. This would be of particular benefit to the

smaller certifiers who may have been unable to enter these markets

because of the high cost of international accreditation. A portion of

the administrative fees paid by each certifying agent would support

USDA activities to negotiate equivalency of organic standards in world

markets so that producer clients of all USDA accredited certifiers

could have access to these markets.

Third, in the long run, uniform standards of production,

certification and accreditation should reduce the cost of training

certification staff. Industry-wide training costs may increase

initially, but should decline as the pool of trained certifiers and

certification personnel increases and the corresponding cost of

training new certification personnel decreases, especially in those

instances where personnel transfer from one certifier to another.

Standardized materials, such as compliance guides and training manuals,

also should contribute to a reduction in the cost of training

[[Page 65856]]

certification staff. In addition, USDA accreditation of certifiers

would present opportunities for sharing information about standards,

practices and the general requirements of the program through the

National Organic Program staff.

Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act (Pub. L. 104-4) requires (in

Section 202) that agencies prepare a qualitative and quantitative

assessment of the anticipated costs and benefits before proposing any

rule that may result in annual expenditures by State, local, and tribal

governments, in the aggregate, or by the private sector, of

$100,000,000 (adjusted annually for inflation) in any one year. As

discussed in the preceding section entitled ``Executive Order 12866'',

USDA has prepared a Regulatory Impact Assessment (RIA) to assess the

costs and benefits of this proposed rule. As explained in the RIA,

which is attached as an appendix to this proposed rule, USDA was unable

to provide a quantitative assessment of the costs and benefits of the

proposed rule, except for the cost of fees and recordkeeping that would

result from the proposed rule, because of insufficient data available

to support a quantitative assessment. The cost of fees resulting from

this proposed rule is estimated to be $1,000,000 during the first year

of program implementation, and the cost of recordkeeping is estimated

not to exceed $4,700,000 during any one of the first three years of

program implementation. The RIA does, however, provide a qualitative

assessment of the proposed rule's costs and benefits.

The USDA has posed a list of questions in the RIA to assist in the

development of a quantitative assessment for the final RIA that will be

published as part of the final rule for the National Organic Program.

We will utilize public input received in response to these questions

and to other provisions of this proposed rule, as well as other

resources available to USDA before publication of the final rule, to

develop a quantitative assessment of the costs and benefits of the

final rule.

Although USDA has not determined whether this proposed rule would

result in annual expenditures by State, local, and tribal governments,

in the aggregate, or by the private sector, of $100,000,000, USDA has

sought to meet the objectives of the Unfunded Mandates Reform Act. In

addition to its qualitative cost/benefit assessment, USDA has

identified in the RIA three regulatory alternatives to the proposed

rule. We also discuss in the preamble sections entitled ``Paperwork

Reduction Act of 1995'' and ``The Regulatory Flexibility Act and the

Effects on Small Businesses'', the analysis we have employed in

reaching a determination that this proposed rule is the least costly

and least burdensome to the regulated parties, in that we have designed

the proposed rule to be as consistent as possible with existing

industry practices, while satisfying the specific requirements of the

OFPA.

Additionally, we have had numerous occasions to communicate with

State governments during the development of the proposed rule.

Representatives of various State governments participated in several

public meetings of the NOSB and they have provided valuable input to

the NOSB for its recommendations on standards and the National List.

USDA also hosted a meeting on February 26, 1996, to discuss with many

State officials the status of the proposed rule and to listen to

concerns about such topics as fees, enforcement, certifier logo use,

and the range of additional requirements that States may include in

their State programs. On numerous other occasions, AMS staff has had

discussions with a wide array of State officials on subjects related to

this proposed rule or the establishment of, or amendment to, State

organic certification programs. USDA will continue to provide effective

opportunities for the broadest possible input by States and all

interested parties throughout the rulemaking process.

The Regulatory Flexibility Act and the Effects on Small Businesses

Pursuant to the requirements set forth in the Regulatory

Flexibility Act (RFA) (5 U.S.C. 601 et seq.), the Agricultural

Marketing Service (AMS) has considered the economic impact of the

proposed rule on small entities. The AMS' analysis, as required by the

RFA, considers the impact of this proposed regulation on small entities

and evaluates alternatives that would accomplish the objectives of the

rule without unduly burdening small entities or erecting barriers that

would restrict their ability to compete in the organic market. The

following Initial Regulatory Flexibility Analysis was written with

guidance from the Small Business Administration (SBA).

The size of the organic industry has risen dramatically in recent

years from a low of $78 million in 1980, to $1 billion in 1990, to a

total retail sales level of $3.5 billion in 1996. Certified organic

cropland production has expanded from 473,000 acres to 667,000 acres in

the period 1992 to 1994, and is expected to reach 2 million acres by

the year 2000. Despite this rapid growth, it should be noted that the

organic industry represents a very small percentage of total

agricultural production and sales, and that organic certifiers, farmers

and handlers tend to own smaller operations rather than larger ones.

Currently, organic certification is voluntary and self-imposed.

According to the most complete data available to the AMS, there are 33

private and 11 State certifying agencies certifying approximately 4,000

farmers and 600 handlers in the United States. Over half of the private

and State agencies certify both farm and handling operations, while the

others certify only farms. Over three-fourths of State and private

agencies each certify fewer than 150 farms and 20 handlers. Based on a

review conducted by AMS of 16 certifiers, who provided information on

the organic sales of products produced on certified farms, most of the

farms certified have less than $25,000 in gross sales.

A national organic program would benefit farmers by opening access

to international markets. U.S. exports of organic products totaled $203

million in 1994 or about 9 percent of the organic output. Export

markets may become more substantial and offer price premiums for

organic products with increased world-wide consumption of organically

produced food. For example, the organic market share in the European

Union (EU) has been projected to reach 2.5 percent of total food

consumption expenditures by 1998. Austria expects its organic market

share to equal one third of all food sales by the year 2000. In 1994,

France and Germany combined had total retail sales of organic foods

equal to that of the United States in the same year (approximately $2

billion). Japan's retail sales for that year were estimated to be $688

million. Other EU countries report growth rates equal to or greater

than the current growth rate in the United States of about 20 percent

per year.

The reason for regulatory action is fully explained in the

Regulatory Impact Assessment which is attached as an appendix to this

proposed regulation. In short, the organic market may be precluded from

reaching its full potential until there is a definition of the term

organic, which would be achieved by implementation of this proposed

regulation that provides regulations for production, handling,

labeling, certification and accreditation of U.S. certifiers. Domestic

and international trade in organic products may also be hampered by the

need to negotiate reciprocity agreements because of the differing

standards of

[[Page 65857]]

production and handling that currently exist; meat and poultry,

including processed products containing meat and poultry as

ingredients, cannot be labeled organic; and few enforcement mechanisms

exist to protect consumers against fraudulent organic labeling.

The statutory authority for this proposed rule is the OFPA, which

in section 2104(a) (7 U.S.C. 6503(a)) requires the Secretary of

Agriculture to develop a national organic program. In general, the

Secretary must establish an organic certification program for farmers

and handlers of agricultural products that have been produced using

organic methods as provided for in the OFPA. In addition, section 2115

of the OFPA (7 U.S.C. 6514) requires the Secretary to establish and

implement a program to accredit a governing State official and any

private person who meets the requirements of the OFPA and the

regulations in part 205 as a certifying agent for the purpose of

certifying a farm or handling operation as being in compliance with the

standards set forth in this proposed regulation.

The purpose of the RFA is to fit regulatory actions to the scale of

business subject to the actions in order that small businesses would

not be unduly or disproportionately burdened. To accomplish this

purpose, it first is necessary to define a small business. According to

the Standard Industrial Codes (SIC) (13 CFR Part 121) which are

developed by an inter-agency group, published by the Office and

Management and Budget (OMB), and used by the SBA to identify small

businesses, nearly all of the entities affected by this proposed

regulation would be considered small businesses. According to the SIC,

a small business in the agricultural services sector, such as

certifiers, includes firms with revenues of less than $3.5 million (SIC

Division A Major Group 07). In crop production, the SIC definition of a

small business includes all farms with annual gross sales under

$500,000 (SIC 0111-0191). (Most of the farms currently certified have

less than $25,000 in gross sales of organic production. However, many

farms combine organic and conventional production on the same

operation, some with total sales that may exceed $500,000). In handling

operations, according to the SIC, a small business is defined as having

fewer than 500 employees (SIC Division D Major Group 20). (The

workforce data needed to determine whether any organic handling

operations exceed 500 employees is not available, but anecdotal

information leads us to believe that no organic handling operations

employ more than 499 persons).

We consulted with the SBA Office of Advocacy regarding the use of

size standards different from those in 13 CFR 121. For the purpose of

identifying those entities who would be most affected by this proposed

regulation, alternative definitions were established for the purpose of

this analysis. The alternative definition of a small certifier which we

established for this analysis is one with total revenue from

certification of less than $25,000. The alternative definition of a

small farm which we established is one with a maximum of $5,000 in

gross sales of agricultural products, as is set forth in section

2106(d) of the OFPA (7 U.S.C. 6505(d)). Additionally, for this

analysis, we established the alternative definition of a small handling

operations to be one whose sales are $50,000 or less.

Development of regulations for the National Organic Program began

with the premise that the industry should be burdened as little as

possible by the OFPA regulation. To accomplish the goal of regulation

with minimal burden, we initially determined that most of the

information needed for organic farmers and handlers to become

certified, and for certifiers to become accredited, already exists for

those entities currently operating. The challenge was to create a

regulation which complied with the OFPA mandates and which embodied the

customary and usual business practices already being carried out by the

industry. No new forms have been proposed and few additional documents

would be required in this proposed regulation. Certifiers may need to

create some of the documents proposed for the application process;

farmers may have to keep records for longer periods of time; and

handlers may need to refine recordkeeping to ensure a clear audit

trail. However, they would be allowed the flexibility to use the

easiest and least expensive means available to provide information, as

long as the required information is adequate to ensure compliance with

the regulations.

Small and large farmers, handlers, and certifiers would be affected

by additional fees resulting from implementation of the National

Organic Program. Certifiers may be burdened with the accreditation

requirements for business related activities, such as the requirement

for a financial audit. However, because no particular form is required,

current business records may be sufficient to provide the necessary

information. The requirements to keep personnel records, explain

administrative procedures, and evaluate personnel may be burdensome to

small certification businesses. Yet, we have received the comment from

at least one small business that requirements such as these can

increase efficiency and make a small business more cost effective.

Section 2112(d) of the OFPA (7 U.S.C. 6511(d)) requires farmers and

handlers to maintain records for five years, and section 2116 (c)(1) of

the OFPA (7 U.S.C. 6515(c)(1)) requires certifiers to maintain records

for ten years. Our research of the industry indicates that farmers and

handlers already maintain records for five years and certifiers do not

discard historical documents. This regulation, therefore, should not

significantly increase the record retention burden beyond current

industry practice. However, under the requirements of the Paperwork

Reduction Act of 1995 (PRA) (44 U.S.C. 3506 and 3507), a burden is

created when a law or regulation requires the storage of information.

The burden to the industry is calculated on the time required to file a

document. Under the PRA we are required to estimate and account for

this burden.

No other burdens are expected to fall upon the organic industry as

a result of overlapping Federal rules. This proposed regulation would

not duplicate, overlap or conflict with any existing Federal rules. In

preparing this proposed regulation, AMS consulted other Federal

agencies such as the FDA, EPA, ATF, and the USDA's Food Safety and

Inspection Service (FSIS) to ensure that this proposed regulation would

complement existing regulations.

Whether using the SIC definitions for small businesses or the

alternative definitions created for this analysis, our proposed

regulation would have a significant impact on a substantial number of

small businesses. However, we have considered several options with the

intention of mitigating negative economic impacts. The following

options were considered by AMS prior to and during the development of

the proposed regulation.

Regulatory Options

Option 1: The Organic Market in the Absence of Regulation

We have explored the alternative of no government regulation of the

organic industry. However, current problems in the organic industry

would continue to affect small entities as well as large ones. In fact,

it is likely that the effect of no regulation would negatively impact

small businesses to a greater degree than larger ones. For example,

without regulation, smaller certifiers

[[Page 65858]]

entering the industry with growth expectations based on implementation

of the OFPA through Federal regulation would be negatively affected to

a greater degree than larger certifiers who can spread fixed costs over

a larger number of clients. Larger businesses do not depend as heavily

on industry growth to maintain their business operations.

Organic farmers who have integrated livestock into their

agricultural operation are negatively impacted in two ways without

regulation of the organic industry. First, they do not receive the

price premium for organic meat and poultry because at the present time

FSIS does not allow for the use of the term organic on meat and poultry

labels. This would impact small farmers to a greater extent because

they have fewer animals from which to profit from a price premium.

Second, to feed their livestock, farmers either must pay a higher price

for organically produced livestock feed or raise the feed on their own

land which otherwise could be used to produce organic cash crops.

Smaller farmers are disproportionately impacted because the ratio of

the number of livestock per acre of land is limited by the number of

acres they must use for organic crop production in order to be a

profitable business. Larger farmers face the same decision of whether

to purchase organic feed or raise their own, but they have more acres

over which to spread the cost of either choice.

Without Federal regulation, small certifiers and farmers wishing to

export agricultural products are negatively impacted to a greater

degree than larger organizations by a lack of resources and influence

over foreign market systems. Also, completing the paperwork required

for exporting products is disproportionately costly to small entities

because of their limited resources. The burden of completing this

paperwork can be eased if the certifier has attained private, third-

party accreditation. We are aware that certifiers currently may pay in

excess of $15,000 for accreditation by a private organization. Smaller

certifiers cannot afford these fees, and therefore, potential clients

wishing to export organic products choose to be certified by the

larger, privately-accredited organizations.

Finally, we are required by the OFPA to regulate the industry

through the National Organic Program. In fact, we have received

requests from many small businesses, certifiers, farmers, and handlers,

to move forward with implementation of a national program as quickly as

possible. Therefore, we believe that regulating the organic industry

would be the most appropriate action to help small businesses.

Option 2: Exemption of Small Certifiers From Accreditation

We considered the option to exempt small certifiers from

accreditation requirements, just as small farmers and handlers are

exempt from certification. However, the OFPA does not provide for such

an exemption and this, therefore, would require a legislative

amendment. Additionally, we do not believe that exempting small

certifiers would be in the best interest of the industry or the small

certifiers.

The exemption of small farmers carries with it limitations which

may discourage some small farmers from claiming exemption, preferring

instead to become certified. In this proposed regulation, small farmers

who are not certified and who use the term organic to identify their

products must comply with the USDA standards, yet they may not display

the USDA seal or a certifying agent's logo on the labels or the

labeling of their products. Furthermore, organic agricultural products

produced on small farms that claim exemption from certification

requirements cannot be labeled as organic ingredients in products

processed by a certified operation. As a result, consumers and

processors may not wish to pay a price premium for organic products

from a non-certified operation.

The exemption of small certifiers from accreditation would carry

with it limitations resulting from the absence of Federal oversight.

Interstate and international trade would be hampered because it would

likely be limited to products certified by accredited certifiers.

Distinguishing exempt certifiers from accredited ones might require

that product labels of accredited certifiers' clients include the USDA

logo and lead to consumer confusion over labels in the marketplace.

Protecting consumers from fraudulent certification claims on labels

would be difficult at the Federal level since AMS and other enforcement

agencies, such as the FDA, ATF, and FSIS, would have to distinguish

accredited certifiers from those who are exempt. Costly spot checks or

site visits would be required by AMS to verify that products sold or

labeled as organic are produced under systems that are consistent with

the national program. To accomplish this, a mechanism would have to be

established to charge exempt certifiers for spot checks or site visits

and these charges might be more costly than becoming accredited.

One of the purposes of the OFPA is to assure consumers that

organically produced products meet a consistent standard. Without the

assurance provided by Federal oversight of certifiers through USDA

accreditation, there is no way to ensure that one national standard of

production and handling for organic agricultural products would be

employed. The result could be the continuation of costly reciprocity

agreements among small, exempt certifiers and large, USDA accredited

certifiers. This could prove to be more costly to small entities than

accreditation. For all of these reasons, we have determined that option

2 is not a viable alternative.

Option 3: The Proposed Regulation

The regulation we propose is a synthesis of existing organic

standards and certification programs. We have done extensive outreach

which is explained in the SUPPLEMENTARY INFORMATION section entitled

``Public Input''. After gathering the necessary information, we

developed this proposed regulation to ensure industry integrity and

help the organic industry grow. In this section, we will discuss how

this proposed Federal regulation of the organic industry would:

eliminate costly administrative tasks now necessary under current

industry practice and thus mitigate the financial burden of USDA

accreditation; level the playing field, enabling small entities to

better compete in the industry; and benefit all farmers and handlers

through industry growth. Finally, this proposed regulation includes

three factors that would decrease its overall burden by providing

flexibility in compliance and fees.

Certification organizations currently develop and interpret their

own standards of production and handling. The consensus of our outreach

to the industry is that one national standard with interpretation,

decision making, and enforcement authority at the Federal level would

eliminate the need for certifiers to develop and amend standards.

Federal regulation also would provide a consistent process for

certifying operations that produce and handle products bearing an

organic label. Smaller certifiers would benefit to a greater degree

than larger certifiers because the resources saved from creating and

interpreting their own standards could be directed toward improving

their business operations and offsetting any additional burden imposed

by accreditation.

One national standard would eliminate the need to negotiate costly

reciprocity agreements and thus save

[[Page 65859]]

certifiers' resources used to negotiate the agreements, while also

expanding markets for organic farmers and handlers certified by smaller

organizations which currently do not have, or have a limited number of,

such agreements. Eliminating the need for accreditation by private

organizations prior to export would relieve certifiers of current

financial and paperwork burdens while leveling the playing field for

large and small organic entities wishing to export organic agricultural

products.

An expanded market caused by the introduction of organic meat and

poultry, added consumer confidence backed by consistent standards of

production and handling, and additional export volumes of organic

agricultural products would benefit all of the organic industry.

Another benefit of this proposed regulation to smaller certifiers

would be an extended network of information exchange. Presently,

information dissemination occurs on a one-to-one basis and through

participation in industry groups, meetings, workshops and international

trade fairs. Participation in these activities, which often are

dominated by issues of the larger certifiers, is costly and frequently

prohibitive to smaller entities. This proposed regulation would

facilitate providing certifiers with information about the program,

including standards, practices and general requirements. Small

certifiers would have access to the same information at the same time

as large certifiers, which could be passed on to their clients,

typically small farmers and handlers.

In our previously discussed implementation option, we consider

allowing a 6-month period of time after publication of the final rule

for certifying agents to gain initial accreditation, followed by a 12-

month period of time for farm, wild crop harvesting, and handling

operations to become certified under the relevant provision of the

final regulation. Thus, we intend that the provisions of the NOP would

be implemented approximately 18 months after publication of the final

rule. On that date, which will be stated in the final rule, all organic

operations required to be certified in order to sell or label their

products as organic would have to be certified. Operations that are

certified prior to 18-months after publication of the final regulation

would be permitted to use the USDA organic seal upon certification by a

USDA accredited certification organization.

We would like comments, particularly from small farm or handling

operations, as to whether the 12-month period of time we anticipate

allowing for farm and handling operations to become certified is a

reasonable period of time for such operations to become certified. We

are particularly interested in learning whether there are any economic

or other factors that would create difficulties in obtaining

certification within the 12-month time period we expect to provide for

obtaining certification.

Small certifiers have expressed concern that they may not have the

expertise necessary to become accredited by USDA or to carry out the

responsibilities associated with accreditation. However, we believe

that this proposed regulation is consistent with, and builds upon,

current industry practice. It was designed to allow existing

certifiers, farmers and handlers to continue to operate within the

organic industry.

In developing our proposal, we considered requiring that

accreditation be renewed annually by large certifiers and bi-annually

by small certifiers. However, annual or bi-annual preparation of

accreditation application materials and the review of applications

would be burdensome to accredited certifiers and the NOP staff,

respectively. Therefore, in this regulation we have proposed that

rather than extending the length of accreditation for small certifiers,

we would require that all certifiers submit annually only information

about their operation that had changed from the previous year. This

requirement would eliminate the burden of certifiers annually refiling

all of the information submitted in the initial accreditation. Renewal

of accreditation would occur every fifth year.

Finally, this proposed regulation has three elements of flexibility

that are advantageous to small entities: performance based production

and handling standards and certifier requirements; production and

handling standards that contain a range of allowable practices; and

certifier site-evaluation fees that would reflect actual costs incurred

in connection with the site-evaluation.

The standards in this proposed regulation are performance standards

based on the results of a management system, rather than prescriptive

or design standards that prescribe specific technology or a precise

procedure for compliance. Performance standards allow for flexibility

in compliance, which is especially important to organic farmers,

handlers and certifiers with limited resources. Performance standards

promote innovation and the development of new technologies which would

help the industry as a whole be more efficient. Finally, they provide a

less costly means of compliance than design standards. Small entities,

in particular, benefit because compliance with performance standards

allows for the adaptation of existing systems without costly capital

investment.

The proposed rule allows for flexibility by providing a range of

farming and handling practices that can be used when necessary to

maintain the organic integrity of the operation. The use of a practice

or substance that is allowable only when necessary must be described in

the organic plan, as set forth in section 205.205 of subpart D of this

proposed regulation, as a record for consideration by the certifier

during a certification review. The benefit in providing a range of

practices is that a farmer or handler would not lose their investment

in an organic operation because of certain conditions, such as adverse

weather or commercial unavailability. This is especially important to

small farmers and handlers who depend on the organic price premium to a

greater extent than larger firms.

Section 2107(a)(10) of the OFPA (7 U.S.C. 6506(a)(10)) authorizes

the collection of reasonable fees from farmers, handlers, and

certifying agents who participate in the national organic program. When

developing this proposed rule, two alternative fee models were

considered. The fee for direct services model proposed in sections

205.421 through 205.424 of this proposed regulation combines a fixed

fee for all farmers, handlers and certifiers with a variable fee for

certain direct services provided by AMS in the accreditation of

certifiers. The second model considered, but not used in this proposal,

was the fee per certification model which would have based

accreditation fees on the numbers of farmers and handlers certified.

The fee for direct services model proposes to distribute program

costs for services to certified farmers and handlers through fixed fees

of $50 and $500, respectively. The difference between farmer and

handler fees is designed to account for the greater overhead and staff

time devoted to handler and processed product issues as compared to

farmer and raw product issues. A more extensive explanation of farmer

and handler fees is provided in the SUPPLEMENTARY INFORMATION section

entitled ``Fees''. Additionally in this model, certifiers would be

required to pay a fee of $640 when applying for accreditation and

submitting annual reports to cover staff time needed to

[[Page 65860]]

process the application or review the report, and an annual

administrative fee of $2,000 for program costs that cannot be allocated

to a specific certifier. The balance of accreditation costs would be

billed to certifiers on a time rate for direct services. A certifier

would have to collect sufficient funds from the farmers and handlers it

certifies to cover these program fees. Due to the fixed components of

the fees in this model, large farmers and handlers, as well as large

certifiers, would have the ability to spread their costs over a larger

base and, consequently, lower their fixed costs per unit.

Under the fee for direct services model, labor hours, travel, and

per diem costs for the site inspections required for accreditation

would be included in the variable fee for direct services. AMS

estimates the average cost to conduct an accreditation site visit to be

$3,500 per visit. The travel cost component of this figure would vary

based on the certifier's distance from Washington, D.C., because site

visits would be conducted by the National Organic Program staff working

away from program headquarters. An alternative method of distributing

travel costs would be to estimate an average annual cost per trip,

given the expected number of trips and the geographic distribution of

certifiers, and charge that amount for all site visits regardless of

location.

The advantage of the fee for direct services model is that it

incorporates a measure of size in the fee structure, i.e., the time

spent on each accreditation by National Organic Program staff. The

variable portion of the fee would distribute program costs among

certifiers according to the resources actually consumed in providing

the accreditation service. The disadvantage of this model is that it

introduces a source of variation in fees for which the derivation is

not wholly transparent or predictable. With several National Organic

Program staff conducting accreditation evaluations, a complaint about

the efficiency of an individual accreditation would be difficult to

resolve on the basis of objective measures.

Under the fee per certification model that we did not use in this

proposal, in which certifiers would pay a fee to the USDA for each

certification performed, the smallest one half of certifiers, who

certify about 10 percent of organic operations, would pay about 10

percent of the estimated costs associated with accreditation. The

largest 10 percent of certifiers, who certify about 45 percent of

organic operations, would pay about 45 percent of accreditation costs.

The remaining 40 percent of certifiers in the middle would pay 45

percent of the costs. The fee per certification would be fixed,

regardless of the size of the operation being certified. This feature

has the potential to create a barrier to market access for the smaller

operations. Certifiers who charge farmers and handlers for

certification based on size and scope of the operation would maximize

their profits by certifying only the larger farmers and handlers from

whom they would realize a higher return. If certifiers were to

discriminate in this manner in favor of larger operations, smaller

farmers and handlers would find the certification services available to

them to be relatively limited and possibly more expensive than under

the fee for direct services model that includes a variable fee for site

visits. A fixed fee per certification also would not take into account,

in the distribution of costs, the large difference in size between

processors and primary producers. Processors are generally much larger

than primary producers in terms of both total output and total revenue.

Even with the flexibility proposed in the regulation and the

expanded market opportunities brought about by implementation of the

National Organic Program, some small organic certifiers, farmers and

handlers may choose not to continue because of the proposed fees. We

invite comments concerning the expected benefits and costs to small

entities as presented in this analysis.

Paperwork Reduction Act of 1995

This proposed rule contains recordkeeping and submission

requirements that are subject to public comment and to review by the

Office of Management and Budget under the Paperwork Reduction Act of

1995 (44 U.S.C. 3506 and 3507). Therefore, in accordance with 5 CFR

Part 1320, we are providing a description of the reporting and

recordkeeping requirements and an estimate of the annual burden on the

organic industry. The proposed requirements would not become effective

prior to OMB approval.

Title: National Organic Program.

OMB Number: New collection.

Expiration Date of Approval: Three years from date of approval.

Type of Request: New.

Abstract: The information collection requirements in this proposed

regulation are essential to carry out the mandate of the Organic Foods

Production Act of 1990 (OFPA or Act). The OFPA requires the Secretary

of Agriculture to establish and implement a program to accredit a

governing State official, or any private person, who meets the

requirements of the Act and the proposed regulations, as a certifying

agent for the purpose of certifying a farm, wild crop harvesting, or

handling operation as being in compliance with the standards set forth

in the Act and this proposed regulation. After implementation of the

National Organic Program, any agricultural product labeled as organic

or made with certain organic ingredients would have to originate from

an operation that is certified by an accredited USDA certifier.

The OFPA requires certified farms, wild crop harvesting operations

and handling operations to maintain records for 5 years and certifying

agents to maintain records for 10 years. The OFPA exempts from

certification farm operations with gross agricultural sales of less

than $5,000, and the proposed regulation also exempts handling

operations with gross agricultural sales of less than $5,000. We

propose that each exempt operation would be required to maintain

records for one year that verify that such sales are less than $5,000.

We also propose that operations that handle only multi-ingredient

agricultural products that only represent the organic nature of

ingredients in the ingredients statement would not have to be

certified. These operations would be required to maintain records for

one year that verify the source of organic products received and the

operations to whom final organic products are sold. The OFPA also

exempts from certification any retail operation, or portion of a retail

operation, that only handles organically produced agricultural

products, but does not process them. The exemptions and exclusions from

certification requirements proposed in this regulation are discussed in

the supplementary information provided for section 205.202 of subpart

D.

Other information collection requirements proposed in this

regulation include: petitioning the NOSB to review a substance for

inclusion on the National List; developing labels; preparing inspector

and peer review panel reports; documenting methods to prevent

commingling of organic with non-organic products; notifying the proper

authority in the case of non-compliance with the regulations or the

possible violation of food safety laws; and submitting State organic

certification programs to the Secretary for approval.

The USDA conducted extensive research while developing this

proposed regulation so as to minimize disruption to the customary and

usual business practices of certifiers, farms, wild crop harvesting

operations and handling

[[Page 65861]]

operations. The research included consultation with administrators of

existing certification agencies; a review of certifiers' publications,

recordkeeping forms, and business characteristics; discussions at

meetings with State and private certifiers about their concerns

regarding accreditation; communications with the organic industry trade

association; and a review of the National Organic Standards Board

recommendations that were presented to the Secretary after extensive

public input. This research helped us determine that certifiers conduct

their certification of farms, wild crop harvesting operations and

handling operations in a similar manner and have similar recordkeeping

systems and business operating practices. We also determined that most

of the information we would require to conduct accreditation could be

collected from certifiers' existing materials without creating new

forms, and that the information currently used by certifiers to certify

farmers, wild crop harvesters and handlers could be adapted to comply

with this proposed regulation.

We are required under the PRA to report the amount of time

necessary for participants to comply with the proposed regulation as if

there were no previously existing documents. The PRA requires that our

total reporting (creation and submission of documents) burden cover the

greatest amount of reporting burden that might occur for any single

creation or submission of a document during any one of the first three

years following program implementation, i.e: 1999, 2000, and 2001.

Therefore, our total estimated reporting burden reflects the greatest

possible burden for each reporting activity that might occur during

this three year period. We also are required by the PRA to measure the

recordkeeping burden. The recordkeeping burden is the amount of time

needed to store and maintain records. For the purpose of measuring the

recordkeeping burden for our proposed rule, we use the burden for the

year 2001, the reporting year for which we estimated that the largest

number of records might be stored and maintained.

The USDA estimated the number of program participants who would be

required to either create, submit, or store documents as a result of

the proposed rule. To determine the number of organic farmers and

handlers, we conducted an analysis of existing certified organic

farmers and handlers in the United States for 1994, (Dunn, Julie Anton.

1995. ``Organic Food and Fiber: An Analysis of 1994 Certified

Production in the United States.'' U.S. Department of Agriculture,

Agriculture) and examined an analysis of data collected for the

California Department of Food and Agriculture Organic Program

concerning registered organic farms and handling operations in that

state (Klonsky, Karen, and Laura Tourte. September 1995. ``Statistical

Review of California's Organic Agriculture, 1992-93''. Cooperative

Extension, Department of Agricultural Economics, University of

California, Davis). Our analysis indicated that an estimated 4,000

farms and 600 handling operations were certified by 33 private and 11

State certifiers. The data collected in the USDA analysis indicated

that the number of certified organic farmers increased at an average

rate of 12 percent in the period from 1991 to 1994, and the number of

certified organic handlers increased at an average rate of 11 percent

over the same 3 years. Based on this rate of growth, we estimate that

7,049 farmers and 1,011 handlers will seek certification in the year

1999 and that these numbers would increase to 8,843 farmers and 1,245

handlers in the year 2001. We also estimate, based on our inquiries to

existing certifiers, that in the year 1999: 50 percent of certified

organic farms will include livestock, 25 percent of certified organic

farms and 75 percent of certified organic handling operations will be

split operations, and 150 wild crop harvesting operations will seek

certification.

Data from the California Department of Food and Agriculture study

indicated that 50 percent of registered organic farmers in California

had incomes below $10,000 in 1994. For the purposes of this burden

analysis, we estimated for the year 2001 that 25 percent of all organic

farmers and handlers would have an income of less than $5,000 from the

sale of agricultural products and, therefore, would be exempt from

certification. Based on our estimated rate of growth for organic

farmers and handlers, we anticipate that there would be a total of

11,788 non-certified and certified organic farms and a total of 1,660

non-certified and certified organic handling operations in the year

2001. Of these farms and handling operations, we estimated that 25

percent (2,947 farms and 415 handling operations) could be exempt from

certification. As proposed in this regulation, each exempt operation

would be required to maintain records to verify that its gross sales of

agricultural products is below $5,000. We request data and public input

that would assist us to better determine the percentage of certified

organic farms with livestock and the percentage of certified operations

that may be split operations, the percentage of organic farms and

handling operations that may be exempt from certification because they

have sales less than $5,000, and the number of wild crop harvesters.

Our inquires to several existing certifiers indicated that of the

total number of operations seeking certification, approximately 5

percent of farms and handling operations are denied certification; most

of the farms and handling operations denied certification received

certification after they reapply. Additionally, approximately 25

percent of certified operations were identified by certifiers during an

annual review as having some deficiency; most of these operations

retained their certification status.

Other than farmers and handlers, we have made burden estimates for

other entities who will create, submit or maintain records as a result

of the proposed National Organic Program. For instance, we expect to

receive 5 petitions annually for substances to be reviewed by the NOSB

for inclusion on the National List. We estimated a low number of

petitions because prior to proposing the National List the NOSB

researched and determined which substances are currently in use in the

organic industry, and because the NOSB itself will be identifying new

substances for inclusion on the National List.

We also estimated the time spent to develop product labels for

products sold, labeled, or represented as organic or made with certain

organic ingredients, or which use the term organic to modify an

ingredient in the ingredients statement. The time spent deciding about

use of the USDA seal, a State emblem, or the seal of a private

certifier also is included in this burden. Our research indicated that

operations using product labels containing the term organic handle an

average of 19.5 product labels. Additional research indicated that

there are currently about 16,000 products with the term organic used on

the product label and that the number has been increasing by 250

products annually, based on marketing data from 1994, 1995 and 1996. We

estimate, therefore, that by the year 2001, 17,000 products will be

marketed with the label term organic.

Regarding operations that handle products that only represent the

organic nature of ingredients in an ingredients statement, or that

handle prepackaged organic products and do not remove them from the

packaging (such as a warehouse or terminal market), the proposed rule

contains certain recordkeeping requirements in addition to the

requirement to document the procedures to prevent the commingling

[[Page 65862]]

of organic with non-organic products and the exposure of organic

products to prohibited substances. These recordkeeping requirements are

that documentation is to be maintained for 1 year to verify the source

and quantity of organic products received and to verify the destination

and quantity of products shipped from the operation. At this time, we

do not have information as to the number of such operations, nor can we

identify a means of collecting this information. We request public

input to assist us in determining the number of such operations.

We estimated that the number of certifying agents would remain

constant during the years 1999, 2000, and 2001 because our research

indicates that the total number has remained unchanged since 1994.

Although we predicted in the Regulatory Flexibility Analysis that some

of the smallest entities may cease operation as a result of the NOP, we

know of new certifying agents that have begun certifying operations,

and others who intend to begin so after implementation of the NOP. We

also know of existing certifiers who have ceased their operations. We

further estimated that the number of organic inspectors would increase

by the year 2001. We based this estimate on information obtained from a

private organic inspector organization which indicated that each

inspector performed approximately 35 inspections in 1996. Using this

average of 35 inspections per inspector, we estimate that 293

inspectors would be required in the year 2001 to inspect the estimated

10,238 operations to be certified.

The proposed regulation has certain requirements for laboratory

testing of products that are produced on certified organic farms or

wild crop harvesting operations and handled through certified handling

operations. These tests would be required to be conducted of certified

operations not less frequently than every five years; therefore,

approximately 20 percent of the total number of certified operations

would have products tested each year. Based on our estimate that 10,238

operations would be certified in the year 2001, we estimate that 2,048

operations would have products tested in that year. Other residue

testing may be conducted randomly of products at any point of

production or distribution. Pre-harvest tissue testing is proposed to

be conducted of crops grown on soil suspected of harboring a

contaminant. We estimate that certifiers would be required to collect a

combined total of 32 samples as part of this random and pre-harvest

testing, and would report violations of food safety laws to the

appropriate health agencies in 10 instances. We also propose that

producers, handlers, and wild crop harvesters report to their certifier

any instance of an application of a prohibited substance. We estimate

that 25 such instances would be reported to a certifier.

We estimate that approximately 30 foreign programs would submit

their programs to USDA in the year 1999 for review in order to seek

equivalency with the NOP. These programs are important to handlers of

multi-ingredient organic products, especially for the spices and

flavoring agents that cannot be produced in the U.S. We also estimate

that 15 approved foreign programs would be reviewed again by the

Secretary for continued equivalency in the year 2001 and that 5

approved programs would submit substantive program amendments to the

Secretary also in the year 2001.

Estimated Annual Reporting Burden

----------------------------------------------------------------------------------------------------------------

Average

Burden element Respondents Number of hours per Total hours Total cost

responses response

----------------------------------------------------------------------------------------------------------------

Monitor for measurable Farmers/handlers, 2,560 4.00 10,238.00 $102,380

degradation of soil and water. harvesters.

Petition to add to the National Interested parties. 5 10.00 50.00 500

List.

Development of a label........... Farmers/handlers, 17,056 2.00 34,113.00 682,260

harvesters.

Application for certification.... Farmers/handlers, 8,210 1.00 8,210.00 82,100

harvesters.

Farm organic plan (crops) \1\.... Farmers............ 7,049 14.75 103,972.75 1,039,730

Farms with livestock \2\..... Farmers............ 3,525 3.00 10,575.00 105,750

Split farms \2\.............. Farmers............ 1,762 2.50 4,405.00 44,050

Wild crop organic plan........... Harvesters......... 150 9.50 1,425.00 14,250

Handler organic plan............. Handlers........... 1,011 13.00 13,143.00 131,430

Handler split operation \2\.. Handlers........... 759 5.00 3,795.00 37,950

Statement of compliance to USDA Farmers/handlers, 8,210 0.50 4,105.00 41,050

regulations. harvesters.

Inspector report................. Inspectors......... 10,240 4.00 40,960.00 409,640

Determination of certification Certifying agents, 8,254 1.24 10,209.10 102,090

status \3\. farmers/handlers,

harvesters.

Annual continuation of Farmers/handlers, 10,238 3.78 38,648.70 386,490

certification. harvesters.

Notification to certified Certifying agents.. 2,561 2.23 5,711.44 114,220

operation of non-compliance.

Certifying agent notification of Certifying agents.. 12,769 0.85 10,848.20 216,960

Administrator \4\.

Accreditation requirements (other Certifying agents.. 8,272 03.06 25,344.00 506,880

than recordkeeping) \5\.

Accreditation application........ Certifying agents.. 44 1.67 73.50 1,480

Evidence of ability to certify... Certifying agents.. 44 23.28 1,024.50 20,500

Statements of agreement.......... Certifying agents.. 44 0.69 30.25 600

Peer review panel \6\............ Panel members, 72 11.00 792.00 15,840

certifying agents.

Annual continuation of Certifying agents.. 44 10.36 456.00 9,120

accreditation.

Transfer of records to Secretary. Certifying agents.. 2 40.00 80.00 1,600

Suspended certifying agent Certifying agents.. 1 16.00 16.00 320

submits new application.

State program application........ State officials.... 11 42.73 470.00 9,400

Periodic sampling for compliance. Certifying agents.. 2,048 3.00 6,144.00 122,880

[[Page 65863]]

Additional sampling and residue Certifying agents.. 22 3.00 66.00 1,320

testing.

Report residue and pre-harvest Certifying agents.. 20 0.50 10.00 200

test results.

Report application of prohibited Certifying agents, 25 0.15 3.75 80

substances. farmers/handlers,

harvesters.

Equivalency of foreign programs.. Foreign program 30 128.33 3,850.00 77,000

officials.

---------------------------------------------------------

Total........................ ................... ........... ........... 338,771.00 4,278,034

----------------------------------------------------------------------------------------------------------------

\1\ We do not have information to estimate the number of livestock operations that do not produce crops;

therefore, it is not possible to estimate the burden hours for such an operation.

\2\ Estimated hours for farms with livestock and split operations are in addition to the hours needed to

complete a farm plan for crops or a handler plan.

\3\ Respondents in the determination of certification status include 44 certifying agents who determine to grant

or deny certification to 8,210 applicants. The time elements include the exchange of information necessary for

a certifying agent to decide whether to grant or deny certification, issuance of a certificate, and

notification of the Administrator when certification is denied and when applicants do not reapply.

\4\ Notification of certification status includes notification of the Administrator by the certifier of both the

operations that have been certified and those operations not in compliance. We estimate that about 25 percent

of all operations will not be in compliance, and would be granted a continuation of certification with

restrictions.

\5\ The burden elements accounted for in this entry are not mentioned in other sections of the proposed rule.

These include the time necessary to provide information to persons seeking certification and to establish a

State or certifying agent logo, seal or identification.

\6\ We estimate that 72 persons (50 peer review pool members and 22 certifying agents) would participate in the

peer review panel process.

Estimated Annual Reporting Burden

----------------------------------------------------------------------------------------------------------------

Average

Burden element Respondents Number of hours per Total hours Total cost

responses response

----------------------------------------------------------------------------------------------------------------

Exempt and excluded operations... Farmers/handlers, 3,362 1.00 3,362.0 $33,620

harvesters.

Production records............... Farmers/handlers, 10,238 3.41 34,905.5 349,055

harvesters.

Certification records............ Certifying agent... 44 3.00 132.0 2,640

---------------------------------------------------------

Total........................ ................... ........... ........... 38,399.5 385,315

----------------------------------------------------------------------------------------------------------------

Annual Reporting and Recordkeeping Burden:

Estimated number of respondents: 13,967.

Total annual hours: 377,171.

Total Cost: $ 4,663,349.

It is important to note that the burden being reported is an

estimate of the amount of time that would be required of program

participants. It is not a measurement of the burden that would be

required of existing certifying agents and currently certified farmers,

harvesters and handlers in addition to the reporting and recordkeeping

activities that they currently perform. In writing the proposed

regulation, we carefully reviewed existing industry practice and made

every effort to incorporate the documents and practices currently being

used within the industry as a means of minimizing reporting and

recordkeeping costs when the program begins full operation.

The USDA encourages farmers, handlers and certifiers to use any

electronic means available to them to create, submit and store records,

including: keeping data base records of crops or livestock produced on

operations that are certified; lists of farm and handling operations

and their location; creating certification or training documents;

maintaining business accounting records; and sending documents by fax

or over the Internet. Research of the industry indicates that most

certifiers use electronic data creation and storage, fax machines, and

the Internet. Some farm and handling operations use computers and word

processors for their recordkeeping. Based on this information, we

estimated that 25 percent of the collection of information would be

performed by automated, electronic, mechanical, or other technological

means. We request comments to help assess the number of organizations

using computers, word processors, and other electronic equipment to

create and store documents, as well as the extent to which the Internet

is used to exchange information.

Additionally, comments are invited on: (1) whether the proposed

collection of information is necessary for the proper performance of

the functions of the USDA, including whether the information would have

practical utility; (2) the accuracy of the USDA's estimate of the

burden of the proposed collection of information, including the

validity of the methodology and assumptions used; (3) ways to enhance

the quality, utility, and clarity of the information to be collected;

and (4) ways to minimize the burden of the collection of information on

those who are to respond, including the use of appropriate automated,

electronic, mechanical, or other technological collection techniques or

other forms of information technology. Comments should be sent to:

Office of Management and Budget, New Executive Office Building, 725

17th Street, N.W., Room 725, Washington, DC 20503, Attention: Lisa

Grove, Desk Officer. Comments also should be sent to: Don Hulcher,

Clearance Officer, USDA-OICO, Room 404W, Jamie Whitten Building, Ag

Stop 7602, P.O. Box 96456, Washington, DC 20090-6456. Additionally,

comments may be sent by fax to (202) 690-4632 or submitted via the

Internet through the National Organic Program's homepage at: http://

www.ams.usda.gov/nop.

[[Page 65864]]

Comments are best assured of having full effect if they are received

within 30 days after publication of the proposed rule in the Federal

Register.

National Organic Program Overview

Pursuant to the OFPA, this rule proposes regulations for the

production, handling and marketing of organically produced agricultural

products and for the management of the National Organic Program. The

major components of the national organic program are summarized below.

A reference to the placement of the regulatory text of the summarized

topic is entered at the end of each program component's summary.

Definitions: Various terms used in the proposal are defined to

ensure that regulatory requirements that must be met are clear. Subpart

A.

Production and handling requirements: The OFPA requires that

national standards be established for the organic production and

handling of agricultural products. Agricultural products are any

agricultural commodity, whether raw or processed, including any

commodity or product derived from livestock that is marketed in the

United States for human or livestock consumption. To establish

consistent national standards for organic production and handling of

agricultural products, this proposed rule provides for the

implementation of a system of organic farming and handling that is

consistent with the provisions of the OFPA. The standards proposed

would apply to the production of crops and livestock and the harvesting

of wild crops, and to fresh or processed agricultural products that

are, or that are intended to be, sold, labeled, or represented as

organically produced or as containing organic ingredients.

The proposed regulation provides for flexibility in the application

of the proposed national organic standards and takes into account

specific conditions that may occur at different production and handling

sites. Under the proposal, each organic farmer and handler would be

required to develop an organic plan for their operations. The plan

would be evaluated and approved by an accredited certifying agent if it

were determined to meet the requirements of the OFPA and the

regulations promulgated under the OFPA. The performance of each farmer

and handler in meeting the approved practices in their organic plans

would be monitored by their certifiers. Subpart B.

National List: This proposal includes a National List of allowed

synthetic substances that can be used, and provides for the development

of a list of non-synthetic substances that cannot be used, in the

production and handling of organically produced agricultural products.

The NOSB provided recommendations to the Secretary with regard to

synthetic substances it believed should be permitted to be used and the

non-synthetic substances it believed should be prohibited for use. The

Act establishes the criteria that must be considered before a synthetic

substance can be placed on the National List of substances approved for

use, and criteria that must be considered before a non-synthetic

substance can be placed on the National List of substances prohibited

for use. A procedure for petitioning the Secretary and the NOSB to have

changes made to the National List of substances approved or prohibited

for use is incorporated in the proposed regulations. Subpart B.

Labeling: This rule proposes regulations for the label, labeling,

and market information for organically produced agricultural products.

The proposal applies to agricultural products that contain various

percentages of organic ingredients. The proposal also provides for the

use of the USDA organic seal, States' organic seals, and a certifying

agent's name, seal or logo, under certain conditions. Subpart C.

Certification: The proposed rule provides the requirements and

procedures for farms, wild crop harvesting operations, and handling

operations applying for organic certification under the NOP. The

proposed rule would permit Indian tribes that as an entity operate a

farm, a wild crop harvesting operation, and/or a handling operation, as

well as individual tribal members who carry out such operations, to

apply for organic certification for these operations. The application

process for certification and the requirements that must be met to

obtain certification, including the submission of an organic plan, are

in the proposed regulations. The proposed regulations provide, in

accordance with the Act, that the determination of whether a farm, wild

crop harvesting, or handling operation should be certified as an

organic farm, wild crop harvesting, or handling operation, would be

made by certifying agents accredited by the Secretary. If a certifying

agent initially determines that certification should not be granted,

the proposed rule allows the applicant for certification to reapply

under certain conditions. Additionally, the proposed rule provides for

the denial of an application for certification and the termination of

certification. It also provides for notice of these actions to the

applicant or certified operation and an opportunity for the applicant

or certified operation to respond to the notice prior to the denial or

termination action. Subpart D.

Accreditation: This proposed rule establishes an accreditation

program for persons who want to be accredited as a certifying agent.

Persons who could become accredited if they meet the OFPA's

requirements for accreditation would include Indian tribes or

individual tribal members. Accredited certifying agents would be

authorized to certify operations that meet the requirements of the OFPA

and the regulations in part 205 as certified farms, certified wild crop

harvesting operations, and certified handling operations. State

governing officials and private persons may apply for and be accredited

by the Secretary as certifying agents. Qualifications needed to obtain

and to maintain accreditation are specified in the proposed rule.

Procedures for denying, terminating, and suspending accreditation also

are proposed. Subpart E.

State organic programs: This proposal permits States to establish

or continue to operate their own organic programs, provided that the

program reflects the requirements of the OFPA and its implementing

regulations, and is approved by the Secretary.

In order for a State program to be approved as meeting the general

requirements set forth in section 2107 of the OFPA (7 U.S.C. 6506), the

program must have regulatory provisions that meet the following

requirements: (1) provide that an agricultural product to be sold or

labeled as organically produced must be produced only on certified

organic farms and handled only through certified organic handling

operations in accordance with the OFPA's requirements and be produced

and handled in accordance with such program; (2) require that producers

and handlers desiring to participate under such program establish an

organic plan as provided for in section 2114 of the OFPA (7 U.S.C.

6513); (3) provide for procedures that allow producers and handlers to

appeal an adverse administrative determination under this Act; (4)

require each certified organic farm, certified organic wild crop

operation, and each certified organic handling operation to certify to

the governing State official, on an annual basis, that such farmer or

handler has not produced or handled any agricultural product sold or

labeled as organically produced except in accordance with this title;

(5) provide for annual on-site inspection by the certifying agent of

each farm, wild crop

[[Page 65865]]

harvesting, and handling operation that has been certified under the

OFPA requirements; (6) require periodic residue testing by certifying

agents of agricultural products that have been produced on certified

organic farms and handled through certified organic handling operations

to determine whether such products contain any pesticide or other

nonorganic residue or natural toxicants and to require certifying

agents, to the extent that such agents are aware of a violation of

applicable laws relating to food safety, to report such violation to

the appropriate health agencies; (7) provide for appropriate and

adequate enforcement procedures; (8) protect against conflicts-of-

interest; (9) provide for public access to certification documents and

laboratory analyses that pertain to certification; (10) provide for the

collection of reasonable fees from producers, certifying agents and

handlers who participate in the program; and (11) require such other

terms and conditions as may be determined by the Secretary to be

necessary.

Once a State program is approved, farm, wild crop harvesting, and

handling operations in that State that wish to sell, label, or

represent their product as organically produced would have to be

approved as a certified operation under the State program. The

determination as to whether or not a farm, wild crop harvesting, or

handling operation meets a State's certification requirements would be

made by an agent accredited by the USDA under the National Organic

Program. The accredited agent who would make this determination either

can be a private person who has been accredited by the USDA or a

governing State official who has been accredited by the USDA.

In order to be certified under the State program, an operation

would have to meet the State certification requirements. These

certification requirements, as discussed previously, must reflect the

requirements in the National Organic Program. Thus, certified

operations in States that have their own program would be producing

products that are represented as organically produced in accordance

with the requirements of the National Organic Program that have been

included in the State program, in accordance with section 2107 or the

OFPA (7 U.S.C. 6506). Therefore, the provisions set forth in our

proposal in part 205 would be applicable to operations that are located

in States that have their own programs since these provisions would be

included in programs that are approved by the Secretary.

States, however, could have requirements that are in addition to

those of the NOP if they are approved by the Secretary and meet the

statutory criteria for approval. This means that if a State has applied

for, and received, approval from the Secretary for requirements in its

program that are in addition to those in the NOP, farm, wild crop

harvesting, and handling operations that operate in that State would

have to comply with these additional requirements that have been

approved. However, a State would not be allowed to require farm, wild

crop harvesting, and handling operations in other States to comply with

any additional requirements that the Secretary has approved for use by

that State.

Fees: The proposed rule establishes a system of fees to be paid by

farmers, wild crop harvesters, handlers, and certifying agents based on

the services provided to them by the USDA. The fees collected from

applicants for accreditation and from accredited certifying agents

would be for reviewing applications and annual reports, performing

administrative services for the benefit of all accredited certifying

agents, and for conducting site evaluations to evaluate the certifying

agent's performance. The fees collected from farmers, wild crop

harvesters, and handlers would be assessed as a fixed fee for each

category. Farmers, wild crop harvesters, and handlers operating under a

State organic program would pay fees directly to USDA. Subpart F.

Compliance review and other testing: This proposal establishes a

system for sampling and testing organically produced and handled

products. It provides for pre-harvest tissue testing and residue

testing to aid in enforcement of the regulations. Subpart F.

Appeals: The OFPA provides for the Secretary to establish an

expedited administrative appeals procedure under which persons may

appeal an action of the Secretary or a certifying agent under this

title that adversely affects such person or is inconsistent with the

organic certification program established under this title. This

proposal provides a procedure for the appeal of these actions. Subpart

F.

Equivalency of imported organic products: This proposal, in

accordance with the OFPA, permits organic products produced and handled

in foreign countries to be imported into the United States, and

represented as organically produced, under certain conditions. These

products would have to be produced and handled under an organic

certification program that provide safeguards and guidelines that are

at least equivalent to the requirements of the OFPA and the National

Organic Program. Under this proposal, the Secretary would review and

approve, if equivalent, the foreign organic programs. Subpart F.

Subpart A--Definitions

A number of the definitions provided in this proposed rule are

terms defined in the Act, and for these definitions we have used the

language provided in the Act. Some definitions are discussed in other

parts of the supplementary information and other definitions provided

are self-explanatory. However, for certain definitions, we have

discussed below our reasons for establishing these definitions to help

ensure that appropriate and consistent procedures are followed in

complying with other requirements proposed here.

Active ingredient is a term found in section 2118(c)(1)(B)(i) of

the OFPA (7 U.S.C. 6517(c)(1)(B)(i)). This section describes categories

of substances that may include active synthetic ingredients that may be

considered to be included on the National List. Although the Act does

not specifically define the term active ingredient, EPA does define

this term in section 2(a) of the Federal Insecticide, Fungicide, and

Rodenticide Act (FIFRA) (7 U.S.C. 136(a)), as amended. The EPA defines

the term active ingredient to be pesticides, herbicides, and other

substances covered by the FIFRA. We have included the EPA definition of

active ingredient as one of our definitions for this term, i.e., the

definition that covers active ingredients in pesticide formulations.

The EPA definition, however, does not cover the full scope of all

active synthetic substances that the Act would authorize for inclusion

on the National List. Therefore, our other proposed definition for

active ingredients, ``active ingredients in any input other than

pesticide formulations'', covers these other substances. One type of

substance that is included in this definition of active ingredient is a

substance used in any aspect of organic production or handling that

becomes chemically functional within an agroecosystem. A chemically

functional substance is one that would be absorbed by plants or that

would affect soil chemistry when used as permitted under this proposal,

such as a micronutrient or a cation balancing agent. Substances or

materials that do not fit this description, such as plastic mulches,

sticky barriers or row covers, thereby would not be considered as

[[Page 65866]]

active ingredients under this definition. Our proposed definition also

covers substances required to be listed as ingredients or additives on

food labels, but it does not include incidental additives and

processing aids that are not required to be listed on food labels.

The agroecosystem is a term that encompasses all the elements of a

system of organic farming and handling, and as such is the primary

focus of the proposed organic crop and livestock production standards.

Section 2119(m)(5) of the OFPA (7 U.S.C. 6518(m)(5)) specifically

indicates that the effects of a substance on the agroecosystem is a

criterion that must be evaluated before a synthetic substance can be

included on the National List of substances allowed for use.

Biodegradable refers to a specific quality of a material or

substance that is used on or applied to the soil that makes the

material or substance susceptible to biological decomposition. Most

biodegradable materials are organic matter obtained from plant or

animal sources. A material such as plastic that is not biodegradable

will resist decomposition and persist in the soil, and may enter into

unknown chemical interactions with soil and water. While chemical

degradation of non-biodegradable materials into simpler compounds

eventually occurs, this process happens very slowly compared to

biological decomposition. The use of non-biodegradable materials as

production inputs is considered to be incompatible with a system of

organic farming or handling because they may leave residues of

synthetic substances in the soil.

Chapter is defined here with reference to our proposal for the

accreditation of certifying agents in subpart E. We are aware of two

existing certifying agents that each operate as a single certification

body through a system of chapters. We believe that this is an

acceptable practice. Such chapters would, however, be expected to

comply with the Act and the regulations in this part.

Commercially available is a term that was the subject of extensive

deliberation by the NOSB, and our proposed definition reflects their

recommendation. We believe that this definition is essential in order

for producers and handlers to make appropriate decisions about whether

it is necessary to use certain materials, such as the use of non-

organically produced planting stock or livestock feed. It also is

necessary to help certifying agents evaluate whether the use of such

materials is justified or should be discontinued.

Contaminant is a term used in section 2112(b) of the OFPA (7 U.S.C.

6511(b)) with reference to substances that persist in the environment,

that may be suspected to be present in soil, and which may necessitate

a preharvest tissue test of crops grown on that soil to determine the

level of the contaminant in an organically produced crop.

Cytotoxic mode of action is used in sections 205.9(f) and 205.21(a)

of subpart B to describe the activity of a type of synthetic substance

that is prohibited for use in organic production. Substances of this

type chemically interact with plant and animal cells and interfere with

normal cell functions. Our definition describes synthetic substances

that are cytotoxic and that, therefore, would be prohibited for use.

Degradation is defined to allow organic producers, handlers and

certifying agents to accurately identify when the use of a practice or

substance that is otherwise permitted under this proposal should be

ended or modified. This would occur when it results in measurable

degradation of soil or water quality. For example, if nitrate levels in

an adjacent well are found to increase over two or more crop years

following application of a highly soluble mined source of nitrogen to

soil, as set forth in proposed section 205.7 (c)(2) of subpart B, then

the practice would have to be terminated or modified to prevent further

adverse effects on water nitrate levels.

Detectable residue level (DRL) is proposed for the purposes of this

part as being a residue of a pesticide or other prohibited substance

that is five percent or greater than the established EPA tolerance

level for the product that was tested, provided that if there is no

tolerance level established but an action level has been established,

the DRL will be the action level established by the FDA for the product

tested. EPA tolerance levels, expressed in terms of parts of a

pesticide residue per million parts of the food (ppm), refer to the

amount of a pesticide residue that may be present in or on a raw

agricultural commodity, processed food or processed feed. These

tolerance levels are listed in 40 CFR Part 180 (raw agricultural

commodities), Part 185 (processed foods) and Part 186 (processed feed).

The FDA action levels are used to regulate the occurrence of very low

levels of pesticide residues that result from the persistence of a

pesticide in the environment and for which there is no tolerance level

established by EPA. The action levels for certain pesticides found as

residues in agricultural commodities, processed foods or processed

feeds are listed in the FDA publication entitled ``Action Levels for

Poisonous or Deleterious Substances in Human Food and Animal Feed.''

Certain pesticide residues may not be detectable by available residue

testing techniques at a level as low as five percent of the EPA

tolerance level; in these cases, we would consider the detectable

residue level to be the lowest level measurable by available

techniques.

The purpose of defining the DRL at the proposed levels is to

establish a practical level for determining when to conduct an

investigation, as required in section 2112(c)(2)(B) of the OFPA (7

U.S.C. 6511(c)(2)(B)), to determine when a residue is the result of an

intentional application or when it is justified by site-specific

unavoidable residual environment contamination due to the persistence

of the detected substance. The proposed DRL should help eliminate

unnecessary investigations and test procedures and is within the range

of tolerance levels developed by existing State and private organic

programs. As discussed with reference to unavoidable residual

environmental contamination, the Secretary would establish on a case by

case basis the residue levels which would indicate that a prohibited

substance had been intentionally applied.

Fertilizers are addressed in section 2109(b)(1) of the OFPA (7

U.S.C. 6508(b)(1)), which prohibits the use in organic production of

fertilizers that contain synthetic ingredients or any commercially

blended fertilizers that contain prohibited substances under the Act or

a State program. Although the Act does not define the term fertilizers,

we have proposed a definition in order to clarify the kinds of

synthetic soil amendment substances that may be considered for

inclusion on the National List. Our proposed definition of fertilizers

is consistent with those used by various State agencies that regulate

the labeling of fertilizers, and refers to materials that supply the

major plant nutrients nitrogen, phosphorus and potassium. Synthetic

mineral substances, such as micronutrients and cation balancing agents,

which do not supply quantities of the three major plant nutrients,

would not be considered fertilizers under this definition and could,

therefore, be considered for inclusion on the National List because

they are not prohibited under section 2109(b)(1) of the OFPA (7 U.S.C.

6508(b)(1)).

Incidental additive is defined so that handlers clearly know that

the substances included in this category may be used in handling

organic

[[Page 65867]]

products, even though the incidental additive itself may not be

included on the National List.

Inert ingredient refers to any substance or group of structurally

similar substances if designated by the EPA, other than an active

ingredient that is intentionally included in a pesticide or formulated

product. Inert ingredients used in pesticides are specifically

regulated by EPA and have been classified by EPA with respect to their

relative toxicity. This EPA classification of inert ingredients is

referred to in Section 2118(c)(1)(B)(ii) of the OFPA (7 U.S.C.

6517(c)(1)(B)(ii)) and has been used in this proposal to indicate the

types of inert ingredients that may be used in any pesticide product

allowed for use on a certified farm or handling operation.

However, the EPA definition does not cover the full scope of inert

ingredients that may be used in formulated products allowed for use in

organic farming. Our proposed definition of this term also includes

inert ingredients intentionally included in any product used in organic

crop production, such as fertilizers or foliar sprays.

Non-agricultural ingredient is a term we use in various sections of

this proposal to delineate the type and category of substances allowed

for use as ingredients in or on organically produced agricultural

products if the substance is included on the National List in section

205.26 of subpart B. As discussed in the supplementary information

section in reference to the National List, we have used this term in

order to accurately describe those substances that would satisfy the

provisions of section 2118(c)(1) of the OFPA (7 U.S.C. 6517(c)(1))

related to handling.

Non-synthetic is a term used throughout our proposal to describe

those substances that are not synthetic. As discussed in the

supplementary information for the National List, we determined that

this term is more appropriate than the word natural, which is not

defined in the Act and which has other regulatory and marketing

meanings.

Packaging is defined here as any material used to wrap, cover, or

contain an agricultural product, and also includes wax applied directly

to an edible surface of an agricultural product. This definition is

proposed in response to the public input that expressed concerns that

waxes that contain synthetic fungicides or preservatives may be used on

organic products, such as fresh produce or cheese. We believe that this

definition is needed to implement the prohibition against the use of

packaging materials containing such prohibited substances, as set forth

in section 2111(a)(5) of the OFPA (7 U.S.C. 6510(a)(5)), to any

material that contacts an edible surface of an organic product.

Production aid is any substance, material, device or structure, but

not an organism, that is used to produce an agricultural product. A

production aid may or may not be synthetic, and may or may not function

as an active ingredient. Examples of production aids are provided in

section 2118(c)(1)(B)(i) of the OFPA (7 U.S.C. 6517(c)(1)(B)(i)) and

include netting, tree wraps and seals, insect traps, sticky barriers,

row covers, and equipment cleansers. Any production aid that is

determined to be active and synthetic must appear on the National List

in either sections 205.22 or 205.24 of subpart B before it may be used

in organic farming.

Putrefaction is defined in order to clarify the reasons why plant

and animal materials that are prone to putrefaction are less preferable

for use in proper manuring practice than those materials that are not

prone to putrefaction, as proposed in section 205.7 of subpart B.

Soil quality is a term that serves as a central performance

standard for the use of any method or substance in an organic farming

system, in that such use may not result in measurable degradation of

soil or water quality, as proposed in section 205.3(b)(1). In order to

determine whether a given operation is in compliance with the

regulations, farmers and certifiers must have a clear understanding of

what soil quality is and how it may be measured. Our proposed

definition of this term encompasses physical, chemical and biological

soil quality indicators that could readily be measured or observed at a

given location. Examples of soil quality indicators commonly measured

in organic farming systems include erosion, aggregation, compaction,

drainage, organic content, nutrient content, pH, cation balances,

presence of contaminants, leaf tissue analysis, presence of indicator

weed species, presence of pathogens, earthworm populations, and legume

nodulation.

Subtherapeutic is a term used in section 2110(d)(1)(A) of the OFPA

(7 U.S.C. 6509(d)(1)(A)) to refer to a dosage level of antibiotics that

is prohibited for administration to organically managed livestock. Our

proposed definition of this term indicates one of the circumstances in

which use of an antibiotic is prohibited.

System of organic farming and handling is a term used throughout

our proposal to refer to the general set of principles and objectives

of the Act. This term also serves as the foundation of the organic

production and handling provisions proposed here, and is discussed more

fully in the supplementary information that introduces Subpart B.

Unavoidable residual environmental contamination (UREC) is a term

used in section 2112(c)(2)(B) of the OFPA (7 U.S.C. 6511(c)(2)(B))

which we define as the residue level of a prohibited substance that

could be expected to exist in the soil at, or in a product originating

from, a specific production site to which the prohibited substance had

not been applied for a minimum of three years. If a residue test of an

organically produced product originating from a specific certified site

reveals a detectable residue level of a prohibited substance, then the

UREC level for the specific certified site would be determined by the

Secretary in consultation with the applicable governing State official,

and the appropriate environmental regulatory agency. A product found to

contain a detectable residue level exceeding the UREC level for the

specific site may not be sold or labeled as organic.

Subpart B--Organic Crop and Livestock Production and Handling

Requirements

Introduction

USDA's proposed requirements for organic farming and handling,

encompassed in subpart B, sections 205.3, 205.5 through 205.9, and

205.11 through 205.28, set forth the requirements for organic crop

production, wild crop harvesting, organic livestock production, organic

handling, and for products and substances allowed and prohibited in

organic farming and handling. These requirements are proposed to

implement the purposes of the Act as set forth in section 2102 of the

OFPA (7 U.S.C. 6501) to establish national standards governing the

marketing of organically produced agricultural products; to assure

consumers that organically produced products meet a consistent

standard; and to facilitate interstate commerce in fresh and processed

food that is organically produced. Section 2106 of the OFPA (7 U.S.C.

6505) requires that any agricultural product that is sold or labeled as

organically produced be produced and handled in accordance with the

standards established under the Act. Section 2118 of the OFPA (7 U.S.C.

6517) requires that a National List of substances approved and

prohibited for use in organic farming

[[Page 65868]]

and handling established by the Secretary be included in the standards.

Active synthetic substances must appear on the National List as

approved substances in order to be used in organic production, and a

non-synthetic (natural) substance may not be used if it appears on the

National List of substances prohibited for use.

We would like to point out that the word substance is used in a

variety of ways in this docket. When the word substance refers to a

material that meets the OFPA's definition of a synthetic substance, it

is described as a ``synthetic substance''. When the word substance

refers to a non-synthetic material (i.e., natural material), which is

one that does not come within the OFPA's definition of a synthetic

substance, it is described as a ``non-synthetic substance.'' When the

word substance refers to a material prohibited for use in the organic

program, whether it be synthetic or non-synthetic (i.e., natural), it

is described as a ``prohibited substance.'' An example of such a

prohibited material is a synthetic substance that does not appear on

the National List of synthetic substances permitted for use in organic

farming and handling. When the word substance is used without any

modifiers, it is used to describe all materials (substances),

regardless of whether such substances are synthetic or non-synthetic,

or prohibited or allowed for use in organic farming and handling.

We have crafted this subpart to be consistent with the requirements

of the Act, including its principles for organic farming and handling

systems. Although the Act does not specifically define what a system of

organic farming and handling is, it does refer in sections 2103(4) and

(5) of the OFPA (7 U.S.C. 6502(4) and (5)) to a system of organic

farming and a system of organic handling, respectively, as described in

the Act. In order to establish consistent national standards for

organic production and handling, we have determined that it is

necessary to define what a system of organic farming and handling is,

and to describe those practices that are consistent with such a system.

Another purpose of this definition will be to provide an explicit point

of reference for the organic industry to make determinations as to

whether various practices and substances are consistent with organic

farming and handling. We further expect the proposed definition of a

system of organic farming and handling to serve as a reference point

for program matters it is determined need further development.

We have defined a system of organic farming and handling to be: a

system that is designed and managed to produce agricultural products by

the use of methods and substances that maintain the integrity of

organic agricultural products until they reach the consumer. This is

accomplished by using, where possible, cultural, biological and

mechanical methods, as opposed to using substances, to fulfill any

specific function within the system so as to: maintain long-term soil

fertility; increase soil biological activity; ensure effective pest

management; recycle wastes to return nutrients to the land; provide

attentive care for farm animals; and handle the agricultural products

without the use of extraneous synthetic additives or processing in

accordance with the Act and the regulations in this part.

Our proposed definition has been derived from the underlying

premises of what constitutes organic farming and handling systems, as

reflected in various provisions of the Act. This definition also is

consistent with the definitions and principles established by the

existing public and private organic programs that we have reviewed and

the definitions and principles of organic agriculture and production

systems adopted by the National Organic Standards Board. The principles

reflected in our definition of a system of organic farming and handling

are incorporated in the regulations we are proposing.

The concept of maintaining the integrity of organic agricultural

products is established by one of the purposes of the Act, stated in

section 2102(2) of the OFPA (7 U.S.C. 6501(2)), to assure consumers

that organically produced products meet a consistent standard. The Act

generally delineates methods and substances that may or may not be used

in organic farming and handling in furtherance of this purpose.

Additionally, in section 2104 of the OFPA (7 U.S.C. 6503) it

specifically provides for an organic certification program for

producers and handlers of organic agricultural products. Such a program

helps to ensure the integrity of organic products.

There is a preference for the use of cultural, biological and

mechanical methods wherever possible, as opposed to using substances,

in organic farming and handling. Examples of methods that do not

involve the use of any substances are the planting of green manure

crops instead of applying fertilizer substances, and the use of crop

rotations and disease resistant plant varieties instead of applying

disease-suppressing substances. Section 2105(1) of the OFPA (7 U.S.C.

6504(1)) provides that an organically produced agricultural product

must be produced and handled without the use of synthetic chemicals,

except as otherwise provided for in the Act. Further, the Act provides

in section 2118 (7 U.S.C. 6517) a detailed scheme and criteria for

determining whether a particular active synthetic substance may be

exempted from the general prohibition on the use of synthetic

chemicals, and further provides in that section for the prohibition of

the use of certain substances that are not synthetic. Also, the Act

specifically directs in section 2119(m)(6) of the OFPA (7 U.S.C.

6518(m)(6)) that the NOSB consider the use of practices or other

available materials as alternatives to a synthetic substance being

included on the National List. Furthermore, the use of certain

substances in organic crop and livestock production and organic

handling is specifically prohibited in several provisions of the Act,

such as portions of sections 2109, 2110, and 2111 of the OFPA (7 U.S.C.

6508, 6509 and 6510). Therefore, we are proposing in our definition of

a system of organic farming and handling that, where possible,

cultural, biological and mechanical methods, as opposed to using

substances, are preferred. These provisions support the concept that

both non-synthetic substances and methods that do not involve the use

of any substances, such as cultural, biological, and mechanical

methods, are preferred alternatives to the use of synthetic chemicals.

The tenets of maintaining long-term soil fertility and increasing

soil biological activity are established in section 2114(b)(1) of the

OFPA (7 U.S.C. 6513(b)(1)), which requires that an organic plan contain

provisions designed to foster soil fertility, primarily through the

management of the organic content of the soil. The Act further

addresses soil biological activity in section 2119(m)(5) of the OFPA (7

U.S.C. 6518(m)(5)) when it requires that the physiological effects of a

synthetic substance on soil organisms be taken into consideration

before the substance is allowed for use in organic production.

The need for effective pest management methods in an organic

farming system is established in section 2109(c) of the OFPA (7 U.S.C.

6508(c)) which prohibits the use of certain substances and materials

for the control of pests, weeds, and diseases. This section, considered

together with the Act's prohibition of the use of most synthetic

chemicals in organic production systems, necessitates that crop pest

management methods be implemented that avoid the need to use

[[Page 65869]]

synthetic substances and materials. In addition, the inclusion of crop

rotation practices in an organic plan, as set forth in section

2114(b)(1) of the OFPA (7 U.S.C. 6513(b)(1)), is critical to

implementing effective pest management strategies and soil fertility

management in an organic farming system.

Recycling wastes to return nutrients to the land is a principle

expressed in the language of section 2114(b)(1) of the OFPA (7 U.S.C.

6513(b)(1)) which requires the fostering of soil fertility and which

provides for proper manuring to be used to manage soil organic content,

and in section 2114(b)(2) of the OFPA (7 U.S.C. 6513(b)(2)) which

delineates more specific requirements for the application of manure to

crops. Although the use of livestock manure is one means of complying

with this requirement, our proposed definition of proper manuring also

includes the use of other plant or animal wastes to improve soil

organic content and provide crop nutrients.

Attentive care for farm animals is implicit in the provisions of

sections 2110(c) and (d) of the OFPA (7 U.S.C. 6509(c) and (d)), which

specify what may or may not be fed to organically managed livestock,

prohibit certain health care practices, and require the NOSB to

recommend additional standards for the care of organic livestock. The

alternative to using the methods and practices prohibited under this

section of the Act is expressed by the concept of attentive care which

is essential when relying on management methods, rather than substances

such as medications, to maintain livestock health.

This proposed rule also incorporates the principle that organic

agricultural products are to be handled without the use of extraneous

synthetic additives and processing. Examples of extraneous additives

are synthetic preservatives, coloring agents and flavors. These are not

allowed because the Act, in section 6510(a)(1), prohibits the addition

of any synthetic ingredient during the processing or postharvest

handling of an agricultural product. Extraneous processing generally

involves the use of additional substances during and after the

processing. Extraneous processing would entail, for example,

unnecessarily subjecting a product to temperatures that degrade its

inherent antioxidant content, thereby requiring supplementation with an

antioxidant to maintain the product's stability.

Our proposed program encompasses all agricultural products, as

defined in section 2103 of the OFPA (7 U.S.C. 6502), and all aspects of

their production and handling, ranging from soil fertility management

to the packaging and labeling of the final product. Our requirements

address the systems used to produce an agricultural product rather than

the physical qualities of the product itself. No distinctions should be

made between organically and non-organically produced products in terms

of quality, appearance, or safety.

We believe that an effective regulatory scheme, which has to be

applicable to diverse types of operations and geographic regions must

be as flexible as possible and take into account site-specific

conditions. We accordingly have developed this proposal to provide,

within the parameters of the Act, provisions that take into account

site specific conditions without impairing the organic integrity of the

product produced. In creating this proposal, we examined various

examples of, and ideas for, such provisions, including standards

developed by existing organic programs, guidelines of international

organic interest groups and standards setting organizations,

recommendations of the NOSB, and suggestions provided in public input

received in the course of NOSB meetings and as response to NOSB draft

documents.

Existing organic certification programs, both State and private,

have grappled with the need to provide flexibility in their allowed

standards and procedures. One method that existing organic programs

have used is to distinguish in their standards between practices that

they consider to be acceptable for use without restrictions, those that

they consider to be acceptable for use only in certain conditions

(i.e., restricted practices), and those that they do not consider to be

acceptable for use under any circumstance. An example of restricted use

is illustrated by the case of botanical pesticides, which most organic

practitioners consider to be a last resort for pest control, and which

are considered acceptable for use only under certain circumstances.

Many existing organic certification programs have thus included such

substances within the area of restricted practices that must be closely

evaluated and justified by site-specific needs.

We have approached this need for flexibility by incorporating two

types of regulatory provisions into our proposed standards. The first

type of regulatory provision establishes, where appropriate, an order

of preference for selecting practices or materials. For example, we

propose in section 205.7(b) of subpart B an order of preferred

selection of five types of materials that would be acceptable for use

in proper manuring. We also propose in section 205.9 of subpart B an

order of preferred selection for the use of practices and substances to

prevent and control crop pests, weeds, and diseases. We would like to

solicit public comment as to whether or not the establishment of orders

of preference would impose an unnecessary burden on organic producers.

The second type of regulatory provision we propose would permit the

use of certain practices or substances only if necessary. The producer

or handler would base their determination of the need to use a

particular method or substance on site specific circumstances. The

basis for a producer or handler determining that a certain practice or

substance is necessary would be described in the organic plan, or

update to the organic plan, and would be reviewed and evaluated by the

certifying agent. An example of a practice that we are proposing be

used only if necessary is the use of non-organically produced

feedstuffs as a portion of an animal's feed ration, as proposed in

section 205.13(a) of subpart B.

A number of the regulations are written as performance standards.

Performance standards are generally written in terms of the results

expected, rather than the specific actions that must be taken to

achieve the desired result. An example of a performance standard is the

requirement proposed in section 205.3(b) of subpart B that the use or

application of any practice or substance must not result in measurable

degradation of soil or water quality. This proposed provision requires

that practices used in an organic operation be implemented in a manner

that maintains soil and water quality, but does not specify the

practices that have to be used.

Subpart B--Regulatory Overview

Subpart B of part 205 consists of USDA's proposed organic

production and handling requirements, and a proposed list of (1)

synthetic substances allowed and non-synthetic (natural) substances

prohibited for use in organic crop and livestock production and (2)

non-agricultural substances and non-organically produced agricultural

products allowed in or on processed organic products. The proposed

requirements for organic production and handling, and the provisions

for the proposed National List and use of substances, have been

integrated as a unified whole consistent with our

[[Page 65870]]

proposed definition of a system of organic farming and handling.

Section 205.3 (applicability) of subpart B delineates proposed

general requirements and conditions for organic production and

handling. Section 205.3 of subpart B includes the general requirement

that the use of any method or substance not result in measurable

degradation of soil or water quality. This section is followed by the

sections that set forth the requirements for organic crop production

(sections 205.5 through 205.9), wild crop harvesting (section 205.11),

organic livestock management (sections 205.12 through 205.15), and

organic handling (sections 205.16 through 205.19). Following the

sections on production and handling, sections 205.20 through 205.28

contain the proposed National List. The proposed National List

regulations consist of sections that describe the active synthetic

substances that are allowed for use in organic crop and livestock

production, the non-synthetic (natural) substances that are prohibited

for use in organic crop or livestock production, and the non-

agricultural and non-organically produced ingredients allowed in or on

processed organic products. (The OFPA does not require non-synthetic

(natural) substances allowed for use in organic crop and livestock

production, or non-organically produced products prohibited for use in

or on processed organic products, to be included in the National List).

Sections 205.20 and 205.21 summarize all of the categories and types of

substances allowed and prohibited for use in organic farming and

handling, as provided under the Act and the proposed regulations in

Subpart B.

Applicability--Section 205.3

In paragraph (a) of this section, we propose to establish the

requirement that any agricultural product that is sold, labeled or

represented as organic be produced in compliance with the relevant

proposed crop, wild crop, livestock and handling requirements,

including those of the National List. Crops and livestock would have to

be produced or harvested on a certified organic farming operation and

handled by a certified organic handling operation under a system of

organic farming and handling.

We propose in paragraph (b) of this section that any use or

application of a method or substance under these proposed requirements

must be used in accordance with all applicable requirements of part 205

and must not result in measurable degradation of soil or water quality.

This provision is proposed to clarify that all methods and substances

used in a certified operation shall be consistent with a system of

organic farming and handling, the purposes of the Act, and any other

requirements in the regulations in part 205. This provision also is

consistent with the recognition in the Act of the relation between

organic practices and soil and water quality.

In most instances we are not proposing to require that any specific

indicators of soil or water quality be monitored for compliance with

this provision. Rather, we expect that appropriate and reliable

indicators of soil or water quality would be chosen according to site-

specific considerations, such as the nature of the crops or livestock

being produced, the location and scale of the operation, and the kinds

of practices being used. By not requiring monitoring of specific

indicators, except in certain cases, we thus intend to leave the

decision as to whether to monitor the effects of a method or substance,

as well as the choice of indicators to be monitored, to the producer or

handler in consultation with the certifying agent. We would expect any

such monitoring activities to be described in the applicable organic

plan, and therefore subject to approval by the certifying agent, who

might require changes.

For example, if a certifying agent had some concerns about the

impact on soil quality of any practice, such as the planting of a

sloping field prone to erosion with corn or sorghum, the certifying

agent might require the producer to monitor erosion in that field to

ensure that soil quality was not being degraded. This could occur

following a review of an organic plan or any required annual inspection

of a certified operation. This provision also would address the

requirement set forth in section 2114(b)(1) of the OFPA (7 U.S.C.

6513(b)(1)) that soil fertility be addressed in an organic farm plan

for crop production. Additionally, a certifier who was concerned about

the compliance of a cattle feeding operation with the manure management

requirements proposed in section 205.15(c) might require that the

producer monitor nitrate levels in a nearby well to show that cattle

holding areas were not discharging manure-laden runoff into

groundwater. A wild crop harvester similarly might be required by a

certifier to estimate the population of the harvested plant species

that remain in a given area after each harvest, to ensure that the

harvesting was being done in compliance with section 2114(f) of the

OFPA (7 U.S.C. 6513(f)), which requires that harvesting does not

deplete the plant species being harvested (as proposed in section

205.11(b)).

Other indicators of soil or water quality that might be appropriate

to monitor, depending on the situation, would include: residues in soil

or water of substances prohibited for use in organic farming; soil

biological activity as indicated by earthworm populations; soil organic

matter and nutrient content; or soil compaction. It should be noted

that much of this monitoring activity is widely practiced in the course

of managing a farm or handling operation, and in many cases would

coincide with measurements, assessments or observations already being

undertaken routinely by a producer.

Although not required by statute, the NOSB recommended that

irrigation and water management be addressed within an organic farm

plan. At this time, however, we are not proposing regulations

specifically for the quality of irrigation water.

Section 205.3(b)(2) further would require that, if the same

function within an organic farming or handling operation may be

fulfilled by either a commercially available non-synthetic substance or

an allowed synthetic substance equally suitable for the intended use,

then the producer or handler must choose the non-synthetic substance in

preference to the synthetic substance if there is no discernable

difference between the two in terms of impacts on soil or water

quality. We recognize that such choices may seldom have to be made in

any operation. However, we are proposing this provision to further

reinforce the preference for the use of non-synthetic substances, as

opposed to synthetic substances, that is implicit in the Act, as

previously discussed. Any allowed synthetic substance will have been

evaluated by the NOSB according to section 2119(m)(6) of the OFPA (7

U.S.C. 6518(m)(6)), regarding alternative practices and available

materials, and our proposed requirement makes clear the choice

producers and handlers must make in a situation where an equally

suitable non-synthetic alternative is available.

Organic Crop Production Requirements

Land Requirements--Section 205.5

This proposed section addresses overall land management practices

that we have determined are needed to ensure that the area on which

organic crops are produced meets the requirements of the Act and the

proposed regulations in subpart B. We have proposed in paragraph (a) of

this

[[Page 65871]]

section, in accordance with section 2105 of the OFPA (7 U.S.C. 6504),

that land not have had any prohibited substances applied to it for at

least three years prior to harvest of an organically produced crop.

We are proposing further that any land on which organic crops are

produced have clearly defined and identifiable boundaries, as provided

under section 2107(b)(1)(A) of the OFPA (7 U.S.C. 6506(b)(1)(A)). We

believe that this requirement should apply to all land on which crops

are grown under organic management for two reasons. First, organically

managed fields must be clearly identifiable so that an inspector may

verify that the observed conditions on a farm operation are consistent

with the information provided by the producer in the application for

certification. Secondly, organically managed fields need to be clearly

identifiable to anyone who may be using prohibited substances on

adjoining lands in order to help prevent unintentional application of

prohibited substances to organically managed areas.

Paragraph (b) of this section would apply to any organically

managed land area that adjoins land that is not organically managed,

and would require that a producer implement, or propose a plan to

implement, some means to prevent the possibility of unintended

application of prohibited substances to land and contact of a

prohibited substance with the land from which organically produced

crops are to be harvested. This could be done through establishment of

physical barriers, diversion of runoff, buffer zones, or other means,

in accordance with section 2107(b)(1)(A) of the OFPA (7 U.S.C.

6506(b)(1)(A)). Existing State and private organic standards have

customarily required producers to establish and maintain adequate

buffer zones between adjoining organic and non-organic field units and

usually specify the minimum size of a buffer area. The information we

have reviewed indicates that such specific minimum size requirements

should not be included in our proposal because they would not be

applicable to every situation and could impose unnecessary burdens on

some organic producers.

Crop Rotation--Section 205.6

Crop rotations, or other means of ensuring soil fertility and

effective pest management, are the cornerstone of successful organic

crop production. They are essential considerations in establishing and

maintaining an organic farm system because they help to prevent pest,

weed and disease problems; disrupt crop pest, weed, and disease cycles;

provide habitat for beneficial organisms; stimulate positive biological

and chemical interactions in the agroecosystem; and maintain soil and

water quality in a manner that diminishes the need for the use of

synthetic substances.

Section 2114(b)(1) of the OFPA (7 U.S.C. 6513 (b)(1)) requires a

crop production farm (organic) plan to foster soil fe

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