U.S. Organic Proposed Regulation Published

Background

Although production and marketing of "organic" agricultural products began at least four decades ago, those involved in the organic movement have varied in practices and philosophies. Over time, as production grew in response to rising demand, producers and processors of organic products recognized the importance of reaching a consensus about what the term "organic" means.

In the late 1980's the organic industry turned to Congress for help in developing national organic standards. Support for the legislation came from all industry segments because each had experienced problems it believed could be addressed through uniform standards. A bill to create a national organic program was introduced in 1989, and later passed as part of the 1990 Farm Bill. The legislation is known as the Organic Foods Production Act (OFPA) of 1990.

The OFPA directed the Secretary of Agriculture (Secretary) to establish a National Organic Program (NOP). Lead responsibility for developing and implementing the program was assigned to USDA's Agricultural Marketing Service (AMS). The OFPA has three purposes:

(1) to establish national standards governing the marketing of certain agricultural products as organically produced; (2) to assure consumers that organically produced foods meet a consistent standard; and (3) to facilitate interstate commerce in fresh and processed food that is organically produced.

The comprehensive regulation, published in the Federal Register on December 16, 1997, contains detailed requirements and guidelines for the production and handling of organic agricultural products, both crops and livestock. A National List of banned and approved substances; labeling; certification of farm operations and handlers; USDA accreditation of State and private certifiers; and other administrative functions, including determination of the equivalency of imported organic foods, also are covered in the regulation. The public comment period ends on March 16, 1998. (See page 24 for details about how to obtain a copy of the regulation and submit comments.)

Industry and Consumers Helped Shape Regulations

OFPA mandated establishment of a National Organic Standards Board (NOSB) to advise the Secretary on a host of issues relating to the NOP. To ensure representation of a broad range of interests, the OFPA specified that the 14-member board include four organic producers, two organic handlers/processors, one organic retailer, three environmentalists, three consumer advocates, and one scientist. A fifteenth member, an accredited certifier, will join the NOSB once the NOP is fully operational. NOSB members are appointed by the Secretary for 5-year terms.

Based on position papers, public and industry input, and after an extensive review and comment process, the NOSB made formal recommendations to the Secretary, many of which are reflected in the proposed regulation. AMS also reviewed existing State and private certification programs and international organic standards, and worked closely with other Federal agencies such as EPA, FDA, HHS and SBA, as they developed the proposed regulation.

What "Organic" Means Now

According to industry estimates, sales of organic food in the United States reached $3.5 billion in 1996, the seventh consecutive year in which the growth rate exceeded 20 percent. Although still small compared to the conventional food market, organic products are increasingly going mainstream. Recently, full-size natural foods supermarkets have sprung up across the country, conceivably able to offer an organic version of nearly every conventional food.

However, at this time, the term "organic" is not applied consistently, as 12 states and more than 30 private entities operate organic certification programs. Although the requirements of most U.S. organic certifiers are similar, there are sometimes fundamental differences. Further, not all producers who identify themselves as organic are certified, and at this time, they don't necessarily have to be certified to make that claim.

Right now, about 30 states have labeling laws governing use of the term "organic," but exactly what those laws cover varies considerably. Some states regulate only what is produced in their own state while others cover all organically grown products marketed within their borders. Some states require that all products sold as organically produced be certified, whereas others specify that only those products produced in the state be certified. Some states limit the range of categories of products that can display an organic label.

Currently, producers in all states are prohibited from labeling meat and poultry as organic, whereas dairy products and eggs can be labeled and sold as such now.

What "Organic" Will Mean Under NOP

The proposed regulation applies to all "agricultural products," a term defined as "any agricultural commodity or product, whether raw or processed, including any commodity or product derived from livestock that is marketed in the United States for human or livestock consumption." Thus the term "organic" can apply to any food, including meat and poultry, and fiber. It also covers wild crops, and pasture and rangeland grazed by organic livestock.

The proposed regulation defines organic farming and handling as "A system 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 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..."

Thus, the term "organic" describes a food or fiber that has been produced and handled under the process detailed in the proposed regulation. Because one cannot tell by visual inspection if a product is organic, certification by an accredited third party is central to the concept of organics, providing assurance that organic integrity has been maintained from farm to retail outlet. "Organic" on the label does not imply or guarantee superiority of quality, nutritional value, taste, purity, or safety.

Organics In the International Market

Organic production is growing worldwide. Attracted by higher prices, many developing countries are exploring organics as a way to boost farmer income and access new markets. Many western European governments provide subsidies and other incentives to encourage their producers to make the transition from conventional to organic agriculture, and some actively encourage consumers to buy organic.

Today, organic products have a higher profile in international trade than ever before, and the organic sector is expected to remain among the fastest-growing areas of agriculture. Although small compared to conventional agriculture, the international organics sector has attracted attention recently because of its premium prices, rapid growth rate and potential to expand beyond a niche market in some areas of the world.

Currently, our biggest markets for organically produced commodities and products are the European Union (EU) countries, Canada and Japan. Major exports to the EU and Canada include dried fruit and nuts, wheat, flour, beans, lentils, rice, breakfast cereals and processed and convenience foods. The main exports items to Japan consist of fresh and dried fruit, fresh vegetables, and nuts.

Although detailed production and trade statistics are not available, industry sources estimated that in 1994, the value of U.S. organic exports topped $200 million, and anecdotal evidence indicates annual growth rates since then have been in the double digits. According to one source, the EU organic food market was valued at $1.7 billion in 1990 and may reach $14 billion by the year 2000. In fact, by 1995, with sales up 25 percent per year, the organic food market in France and Germany alone--the two largest countries in the EU--reached $2 billion. In 1996 the size of the organic food market in Japan was estimated at $500 million.

NOP Will Affect the U.S. Organic Sector

Once the NOP is fully implemented, the term "organic," as applied to U.S.-produced agricultural products, will mean the same thing to everyone. Full implementation of the NOP is expected to serve as a catalyst for further expansion of the U.S. organic sector and stimulate additional growth in international trade.

According to analysis done by the USDA, "consumers will benefit from greater confidence in the organic label, a wider selection of organic products, and the potential for lower prices as markets expand and become more efficient. Producers will benefit from increased assurance in the quality of certification, protection from fraudulently labeled products, access to international markets, the ability to market organic meat and poultry as organic, and the economies of scale and production efficiencies that may accompany market expansion." (For further details, see ERS's Food Review, Vol. 20, Issue 2, November 1997).

Equivalency of Imported Foods

From an import standpoint, the proposed regulation requires that products imported into the United States may be labeled as organic only if they have been produced, handled, and certified by a foreign organic program that the USDA has determined is equivalent to the NOP.

This issue is especially important to U.S. producers and processors who source products or ingredients, mainly from Latin America, which either are unavailable year-round or not grown in the United States. At least some of these commodities are converted into high-value, processed products and exported to our overseas customers. Thus, an efficient procedure to assess organic standards of other nations for equivalency to the U.S. standards will be in the best interest of both the domestic and export markets.

Controversial Issues

As the regulation developed, several controversial issues emerged regarding their compatibility with the concept of organics, and which must be resolved before a final rule is published. Those issues include use of genetically engineered organisms (GEOs) and irradiation, municipal sludge (biosolids) and raw manure on cropland, antibiotics for livestock, synthetic ingredients in processed foods, and allowable pesticide residue levels.

The proposed rule generated extensive media coverage upon release. All three major TV networks carried news stories on December 15, 1997, the day the Secretary announced the NOP. In the days immediately following release of the proposed regulation, major newspapers across the country ran articles and/or editorials and the major wire services carried news stories. Coverage focused on GEOs, irradiation and municipal sludge, as well as other perceived shortcomings of the regulation expressed by members of the organic industry, consumer groups and other interested parties.

The OFPA was silent on GEOs and irradiation, and the proposed regulation takes no position but instead specifically requests comments about the appropriateness of these technologies in the production and handling of organic foods. The OFPA addressed the other issues listed to some extent, and the proposed rule seeks comments to help iron out the details. Although all of these issues have been or are now being resolved for conventional agriculture, the public comment period will serve as a forum for discussions of whether they have a place in the U.S. organic farming and handling system.

Implications for U.S. Exports

As more foreign governments develop or revise their own organic laws and regulations, the issue of equivalency with the standards of major U.S. export markets will become increasingly important to our competitiveness. For instance, U.S. exports of organically produced commodities and products now are admitted into the EU on a case-by-case (lot-by-lot) basis which involves time, paperwork and frustration for U.S. producers and exporters, enough to keep some of them out of that market. If, after a formal review, the final NOP is deemed equivalent to the EU's organic standards, U.S. exports to the EU will be expedited and should increase.

However, it is uncertain how some of our major trading partners, particularly the EU, will react if the final regulation allows some of the controversial technologies and practices previously discussed to be used in the U.S. organic production and handling system. The ongoing controversy over GEOs in conventional agricultural products destined for the EU market is one example of the sensitivity of this issue. At stake is the U.S. share of this growing high-value market.

Conclusion

The long-awaited proposed organic regulation published on December 16, 1997, will generate intense discussion, both here and abroad, about what the term 'organic' will mean in the United States. If predictions hold, organic production will increase to meet rising demand in both the domestic and international markets when the NOP is fully implemented. To the extent the final regulation reflects equivalency in the laws, regulations and standards of our major trading partners, the United States will be in an excellent position to participate fully in the international market for organically produced commodities and processed products. Resolving these issues once the public comment period closes will present an important and crucial challenge to USDA.

(For further information, contact Janise Zygmont (analysis) at 202-720-1176 or Kelly Strzelecki (marketing) at 202-720-1341.)

Last modified: Tuesday, May 08, 2001