SOE Proposed Rule Series - Post #2: Exemptions & Unannounced Inspections
The purpose of this blog post is to briefly summarize two parts of the Strengthening Organic Enforcement (SOE) proposed rule, provide a preliminary analysis of the provisions, and identify areas that require further clarification. This is the second in a series of blog posts that the National Organic Coalition will publish in the coming weeks to provide information about the SOE proposed rule.
This blog post will focus on these two areas of the proposed rule:
1. Exemptions from Organic Certification – pages 20-35 of the official version of the proposed rule
2. Unannounced Inspections – pages 51-56 of the official version of the proposed rule
The first blog post in this series provides an overview of the proposed rule and summarizes the 13 provisions included in the rule. The proposed rule is now published in the Federal Register and USDA has created a SOE proposed rule webpage with details about the proposed rule and how to comment. Comments are due October 5, 2020.
The SOE proposed rule will update and modernize the organic regulations to strengthen oversight and enforcement and reduce fraud in the organic marketplace. NOC has strongly advocated for these changes and has played a pivotal role since 2016, along with OFARM and other organic advocates, in highlighting the existence of organic import fraud. The proposed rule implements the provisions from the 2018 Farm Bill that NOC pushed for, as well as multiple recommendations from the National Organic Standards Board (NOSB).
NOTE: NOC has not yet adopted formal positions on this complex proposed rule. What follows is our preliminary analysis. We continue to solicit input from our Members on these topics as we develop our written comments to the USDA. We also welcome input from other organic stakeholders and hope you will contact us if you have questions or would like to share your analysis with us.
1. Exemptions from certification
Summary of Provisions
On pages 20-35 of the official version of the proposed rule, USDA describes how the proposed changes to the regulations would reduce the types of uncertified entities in the organic supply chain that can operate without an organic certificate and oversight from the USDA National Organic Program (NOP). USDA provides a new definition for “handle”:
Handle. To sell, process, or package agricultural products, including but not limited to trading, facilitating sale or trade, brokering, repackaging, labeling, combining, containerizing, storing, receiving, or loading.
Operations that “handle” organic products must become certified. This revised definition means that importers, brokers, grain elevators, ports, and storage facilities that process or alter (pack or repack) products, and traders of organic products that previously abstained from organic certification are now required to become certified. Furthermore, in USDA’s explanation of the changes (pg. 27), USDA states that:
“Certified organic products that are handled by an uncertified, non-exempt operation at any point in the supply chain will lose their certified organic status and may no longer be sold, labeled, or represented as organic. In turn, certified organic operations that receive products from uncertified, non-exempt handlers and subsequently label the products as organic, use as feed for organic livestock, or use as ingredients for organic products are in violation of USDA organic regulations, and may be subject to proposed suspension or revocation of certification and possible civil penalties.”
The rule retains existing exemptions for operations with $5,000 or less in annual income from organic sales, retail operations (with a slightly modified definition), as well as transporters (i.e. trucks) and storage facilities that do not that do not “process or alter” organic products. Exempt operations, however, still need to comply with provisions in the regulations that prevent contact of organic products with prohibited substances (§ 205.272), as well as specific labeling and recordkeeping requirements. The rule seeks to specify more clearly the parts of the organic regulations with which exempt operations must comply.
Preliminary Analysis
NOC strongly supports requiring certification of operations that handle organic products under this new definition. We believe narrowing these exemptions from certification is necessary to improve traceability in the organic supply chain and safeguard organic integrity. We agree with the USDA’s statement in the proposed rule (pg. 25) that:
“The evolution of the organic industry has made clear that the current terms handle, handler, and handling operation, as defined at § 205.2 of the organic regulations, no longer adequately represent the full scope of organic supply chains. The allowance of uncertified handlers creates gaps in the organic supply chain, breaking chains of custody and complicating the verification of product origin.”
Based on our preliminary analysis, we believe the existing exemptions from certification for transporters and storage facilities are justified, but we have questions about how operations and certification agencies will use affidavits or other tools to ensure that exempt operations prevent contact with prohibited substances, or comingling with non-organic products. NOC believes the NOP and certification agencies should consider implementing a uniform affidavit process to facilitate compliance.
Under this proposed change to the definition of handle, NOC believes that companies who have private labels (but do not otherwise handle organic products) will not be required to undergo organic certification. We are concerned that leaving private labels out of the definition of handle exempts an important part of the organic supply chain from oversight. We believe the organic community should give serious consideration to the appropriateness of this exemption.
NOC recognizes that certification agencies must make many changes to strengthen enforcement under these proposed changes. For example, it will be up to certifiers to ensure that:
“Certified organic products that are handled by an uncertified, non-exempt operation at any point in the supply chain will lose their certified organic status and may no longer be sold, labeled, or represented as organic.”
While we understand the role that the certification agencies will play, we feel it is important to note that ultimately, the NOP’s accreditation, investigation, and enforcement activities must be robust enough to both support certification agencies in their efforts, as well as hold them accountable.
Requested Clarifications
NOC requests that the USDA be explicit about the circumstances under which trucks, rail cars, and ships must be certified. Are transport companies of various types required to become certified? If yes, under what circumstances? We believe the USDA should specify their intent for the proposed change to the regulation for the exemption at § 205.101 (e):
An operation that only stores, receives, and/or loads agricultural products, but does not process or alter such agricultural products.
2. Unannounced Inspections
Summary of Provisions
On pages 51-56 of the official version of the proposed rule, USDA specifies that certifying agents must conduct unannounced inspections for at least 5% of the operations they certify annually. USDA also spells out in the regulations that certification agencies must conduct mass balance and trace back audits during onsite inspections by adding the following language to the organic regulations:
Verification of information. The on-site inspection of an operation must verify:
· That sufficient quantities of organic product and ingredients are produced or purchased to account for organic product sold or transported; and
· That organic products and ingredients are traceable by the operation from the time of production or purchase to sale or transport; and that certifying agents can verify traceability back to the source per §205.501(a)(21).
Finally, additions to the regulations clarify that certification agencies must not operate in areas where they are not able to complete unannounced inspections:
Certifying agents must be able to conduct unannounced inspections of any operation it certifies and must not accept applications or continue certification with operations located in areas where they are unable to conduct unannounced inspections.
Preliminary Analysis
NOC strongly supports codifying the guidance that certifiers conduct unannounced inspections for a minimum of 5% of the operations they certify annually. NOP previously issued this “best practice” in a 2012 Instruction to certifiers (NOP Instruction 2609), but this instruction is not enforceable since the organic regulations currently allow for, but do not require, unannounced inspections.
We also strongly support the requirements for mass balance and trace back audits, as well as provisions that prevent certifiers from operating in regions where they lack capacity to conduct unannounced inspections.
NOC notes that it is the responsibility of the USDA National Organic Program, through their accreditation process, to ensure that certifiers are performing unannounced inspections during critical times (i.e. during the grazing season for a dairy operation that may not be complying with the pasture rule), rather than at times that may be convenient to the certification agency but less relevant for enforcement. Similarly, during accreditation visits, the NOP must evaluate the certification agency’s overall approach to unannounced inspections (i.e. the criteria being used to identify operations for unannounced inspections, the agency’s long-range plans, whether or not unannounced inspections are conducted broadly across all operations, products, and location, the use of data, non-compliance issues, complaints, and other risk-based factors to determine which operations to inspect, etc).
Requested Clarifications
NOC requests that the USDA clarify whether inspections limited in scope (i.e. inspections that are focused on a portion of the operation or one area of noncompliance) satisfy the requirements for unannounced inspections or if a full inspection is needed to fulfill the requirements. While some partial or limited scope inspections may be appropriate, NOC is concerned about an exclusive reliance on inspections that look at only one aspect of an operation as a means of fulfilling this requirement.
NOC also suggests that the USDA should consider what parameters to place around the performance of risk-based versus random inspections. We recognize that both random and risk-based (or unannounced inspections in response to complaints) play different and equally valid roles. While certification agencies need enough flexibility to conduct unannounced inspections in a meaningful way, we believe it is necessary for certifiers to make use of both random, as well as risk-based approaches, in conducting unannounced inspections.
NOC recognizes that NOP Instruction 2609, which most certification agencies already follow, provides a much greater degree of specificity regarding unannounced inspections than the proposed additions to the organic regulations. We are assessing if additional elements of this instruction need to be codified in the regulations to facilitate enforcement of these provisions and provide the necessary clarity to certifiers.