[Federal Register Volume 65, Number 246 (Thursday, December 21, 2000)]
[Rules and Regulations]
[Pages 80548-80684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32257]



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Part IV





Department of Agriculture





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Agricultural Marketing Service



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7 CFR Part 205



National Organic Program; Final Rule

  Federal Register / Vol. 65, No. 246 / Thursday, December 21, 2000 / 
Rules and Regulations  

[[Page 80548]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 205

[Docket Number: TMD-00-02-FR]
RIN 0581-AA40


National Organic Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final Rule with request for comments.

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SUMMARY: This final rule establishes the National Organic Program (NOP 
or program) under the direction of the Agricultural Marketing Service 
(AMS), an arm of the United States Department of Agriculture (USDA). 
This national program will facilitate domestic and international 
marketing of fresh and processed food that is organically produced and 
assure consumers that such products meet consistent, uniform standards. 
This program establishes national standards for the production and 
handling of organically produced products, including a National List of 
substances approved for and prohibited from use in organic production 
and handling. This final rule establishes a national-level 
accreditation program to be administered by AMS for State officials and 
private persons who want to be accredited as certifying agents. Under 
the program, certifying agents will certify production and handling 
operations in compliance with the requirements of this regulation and 
initiate compliance actions to enforce program requirements. The final 
rule includes requirements for labeling products as organic and 
containing organic ingredients. This final rule also provides for 
importation of organic agricultural products from foreign programs 
determined to have equivalent organic program requirements. This 
program is authorized under the Organic Foods Production Act of 1990, 
as amended.

EFFECTIVE DATE: This rule becomes effective February 20, 2001.
    Comments: Comments on specified aspects of the final regulations 
must be submitted on or before March 21, 2001.

ADDRESSES: Interested persons are invited to submit written comments on 
specified aspects of the final regulation to: Keith Jones, Program 
Manager, National Organic Program, USDA-AMS-TMP-NOP, Room 2945-So., Ag 
Stop 0275, P.O. Box 96456, Washington, DC 20090-6456. Comments may also 
be filed via the Internet through the National Organic Program's 
homepage at: www.ams.usda.gov/nop. Written comments on specified 
aspects of the final regulations should be identified with the docket 
number TMD-00-02-FR. To facilitate the timely scanning and posting of 
comments to the NOP homepage, multiple-page comments submitted by 
regular mail should not be stapled or clipped.
    It is our intention to have all comments to this final rule, 
whether mailed or submitted via the Internet, available for viewing on 
the NOP homepage in a timely manner. Comments submitted in response to 
this final rule will be available for viewing at USDA-AMS, 
Transportation and Marketing Programs, Room 2945-South Building, 14th 
and Independence Avenue, SW., Washington, DC, from 9 a.m. to 12 noon 
and from 1 p.m. to 4 p.m., Monday through Friday (except for official 
Federal holidays). Persons wanting to visit the USDA South Building to 
view comments received in response to this final rule are requested to 
make an appointment in advance by calling (202) 720-3252.

FOR FURTHER INFORMATION CONTACT: Richard Mathews, Senior Agricultural 
Marketing Specialist, USDA-AMS-TMP-NOP, Room 2510-So., P.O. Box 96456, 
Washington, DC 20090-6456; Telephone: (202) 205-7806; Fax: (202) 205-
7808.

SUPPLEMENTARY INFORMATION:

Prior Documents in This Proceeding

    This final rule is issued pursuant to the Organic Food Production 
Act of 1990 (Act or OFPA), as amended (7 U.S.C. 6501 et seq.). This 
final rule replaces the proposed rule published in the Federal Register 
March 13, 2000. The public submitted 40,774 comments on the proposed 
rule. Comments to the proposed rule were considered in the preparation 
of this final rule.
    The following notices related to the National Organic Standards 
Board (NOSB) and the development of this proposed regulation have been 
published in the Federal Register. Six notices of nominations for 
membership on the NOSB were published between April 1991 and June 2000 
(56 FR 15323, 59 FR 43807, 60 FR 40153, 61 FR 33897, 64 FR 33240, 65 FR 
35317). 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). Twenty notices of meetings of the NOSB were 
published between March 1992 and November 2000 (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 43520, 63 FR 7389, 
63 FR 64451, 64 FR 3675, 64 FR 28154, 64 FR 54858, 65 FR 11758, 65 FR 
33802, 65 FR 64657). One notice of public hearings on organic livestock 
and livestock products was published on December 30, 1993 (58 FR 
69315). Two notices specifying a procedure for submitting names of 
substances for inclusion on or removal from the National List of 
Approved and Prohibited Substances were published on March 27, 1995 (60 
FR 15744), and July 13, 2000 (65 FR 43259). A rule proposing the NOP 
was published on December 16, 1997 (62 FR 65850). An extension of the 
time period for submitting comments to the proposed rule was published 
on February 9, 1998 (63 FR 6498). One request for comments on Issue 
Papers was published on October 28, 1998 (63 FR 57624). A notice of a 
program to assess organic certifying agencies was published on June 9, 
1999 (64 FR 30861). A rule proposing the NOP was published on March 13, 
2000 (65 FR 13512). A notice of public meeting and request for comments 
on organic production and handling of aquatic animals to be labeled as 
organic was published on March 23, 2000 (65 FR 15579). One advance 
notice of proposed rulemaking and request for comments on reasonable 
security for private certifying agents was published on August 9, 2000 
(65 FR 48642).
    This preamble includes a discussion of the final rule and 
supplementary information, including the Regulatory Impact Assessment, 
Unfunded Mandates Reform Act Statement, Regulatory Flexibility Act 
Analysis, Federalism Impact Statement, and Civil Justice Impact 
Statement. The Civil Rights Impact Analysis is not included as an 
attachment but may be obtained by writing to the address provided above 
or via the Internet through the National Organic Program's homepage at: 
http://www.ams.usda.gov/nop.

Approval of Paperwork Reduction Act Requirements for This Final 
Rule

    The reporting requirements and recordkeeping burden imposed by this 
rule were published in the March 13, 2000, Federal Register for public 
comment. The Agency addressed these comments in the final rule to 
ensure that the least amount of the burden is placed on the public. The 
information collection and recordkeeping requirements have been 
reviewed and approved by the Office of Management and Budget under OMB 
Number 0581-0191, National Organic Program.

[[Page 80549]]

National Organic Program Overview

Subpart A--Definitions

Description of Regulations

    This subpart defines various terms used in this part. These 
definitions are intended to enhance conformance with the regulatory 
requirements through a clear understanding of the meaning of key terms.
    We have amended terms and definitions carried over from the 
proposed rule where necessary to make their wording consistent with the 
language used in this final rule. We have revised the definitions of 
the following words for greater clarity: person, practice standard, 
inert ingredient, processing, tolerance. We have removed the 
definitions for the following terms because the terms are not used in 
this final rule or have been determined to be unnecessary: accredited 
laboratory, estimated national mean, system of organic production and 
handling. We received comments on some of these definitions that have 
been deleted. We have not addressed those comments here because the 
relevant definitions have been deleted.

Definitions--Changes Based on Comments

    This subpart differs from the proposed rule in several respects as 
follows:
    (1) Many commenters requested changes to the definition of 
``excluded methods.'' Comments included requests to use the more common 
term, ``genetically modified organisms (GMO)''; to include the products 
of excluded methods/GMO's in the definition; to more closely follow the 
NOSB definition by adding gene deletion, doubling, introduction of a 
foreign gene, and changing gene position; to include that excluded 
methods are prohibited by the Act and by the regulations in this part; 
to change the wording of the reference to ``recombinant DNA''; and to 
add that the definition of excluded methods only covers ``intentional 
use.''
    We have accepted some of the comments and have modified the 
definition accordingly. Specifically, we have included reference to the 
``methods''--gene deletion, gene doubling, changing positions of genes, 
and introducing foreign genes--that were included in the original NOSB 
definition. This will make the definition even more closely parallel 
the NOSB recommendation. We also refer to recombinant DNA technology, 
which is technically more accurate than the proposed rules reference to 
recombinant DNA as a ``method.''
    We have not accepted the comments that requested adding the 
products of excluded methods to the definition. The emphasis and basis 
of these standards is on process, not product. We have specifically 
structured the provisions relating to excluded methods to refer to the 
use of methods. Including the products of excluded methods in the 
definition would not be consistent with this approach to organic 
standards as a process-based system. For the same reason, we have 
retained the term, ``excluded methods,'' to reinforce that process-
based approach.
    We have also rejected comments requesting that we include the 
prohibition on excluded methods in the definition and, likewise, those 
requesting that we refer to ``intentional use'' of excluded methods. 
The final rule maintains and clarifies the prohibition on the use of 
excluded methods in organic production systems. The prohibition is most 
properly addressed in the appropriate provisions of the regulations, 
particularly in Section 205.105, and not in the definition. Similarly, 
although we recognize that a distinction between intentional and 
unintentional use of excluded methods may be meaningful, particularly 
as it pertains to issues of drift, this is an issue that is best 
handled in the sections of the regulation governing use of excluded 
methods, not in the definition. The definition for ``excluded methods'' 
now reads:
    A variety of methods used to genetically modify organisms or 
influence their growth and development by means that are not possible 
under natural conditions or processes and are not considered compatible 
with organic production. Such methods include cell fusion, 
microencapsulation and macroencapsulation, and recombinant DNA 
technology (including gene deletion, gene doubling, introducing a 
foreign gene, and changing the position of genes when achieved by 
recombinant DNA technology). Such methods do not include the use of 
traditional breeding, conjugation, fermentation, hybridization, in 
vitro fertilization, or tissue culture.''
    (2) Many commenters objected to the definition of ``compost'' in 
the proposed rule because it required that compost must be produced in 
a facility that was in compliance with the Natural Resource 
Conservation Service's (NRCS) practice standard for a composting 
facility. We agree with these commenters and removed the requirement to 
comply with the NRCS practice standard. However, the final rule 
incorporates new requirements for the production of compost that are 
included in the definition. The final rule requires that compost must 
be produced through a process that combines plant and animal materials 
with an initial C:N ratio of between 25:1 and 40:1. Furthermore, 
producers using an in-vessel or static aerated pile system must 
maintain the composting materials at a temperature of between 131 deg.F 
and 170 deg.F for 3 days. Producers using a windrow system must 
maintain the composting materials at a temperature between 131 deg.F 
and 170 deg.F for 15 days, during which time, the materials must be 
turned a minimum of five times. We developed the requirements in the 
final rule for producing an allowed composted material by integrating 
standards used by the Environmental Protection Agency (EPA) and USDA's 
Natural Resources Conservation Service (NRCS). The requirements for the 
carbon-to-nitrogen (C:N) ratio for composting materials is the same as 
that found in the NRCS practice standard for a composting facility. The 
time and temperature requirements for in-vessel, static aerated pile, 
and window composting systems are consistent with those which EPA 
regulates under 40 CFR 503 for the production of Class A sewage sludge. 
Additionally, AMS reviewed these compost production requirements with 
USDA's Agricultural Research Service (ARS). This subject is discussed 
further under subpart C, Crop Production, Changes Based on Comment.
    (3) Some commenters stated that allowing nonagricultural or 
synthetic substances as feed supplements contradicted the definition 
for ``feed supplement'' in the proposed rule. These commenters stated 
that the definition stipulated that a feed supplement must, itself, be 
a feed material and that the proposed definition for ``feed'' did not 
include nonagricultural or synthetic substances. These commenters 
stated that the definition of ``feed supplement'' needed to be amended 
to accommodate nonagricultural or synthetic substances, or such 
substances should not be allowed. We agree with these commenters and 
amended the definition for ``feed supplement'' to read ``a combination 
of feed nutrients added to livestock feed to improve the nutritional 
balance or performance of the total ration.'' One commenter recommended 
modifying the definition of ``feed additive'' to ``a substance added to 
feed in micro quantities to fulfill a specific nutritional need; i.e., 
essential nutrients in the form of amino acids, vitamins,

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and minerals.'' We agree that this modification provides a more precise 
description of ``feed additive'' and have included the change. The 
changes to the definitions for ``feed supplement'' and ``feed 
additive'' are further discussed under item (4) of Livestock 
Production--Changes Based on Comments.
    (4) One commenter stated that the definition for ``forage'' 
inaccurately described it as ``vegetable matter,'' and suggested that 
``vegetative matter'' was a more suitable description. We agree with 
the suggestion and have incorporated the change.
    (5) Some commenters stated that the definition for ``mulch'' 
implied that all mulch materials must either be organic or included on 
the National List. These commenters maintained that, if this was the 
intent of the proposed rule, the provision was too restrictive. They 
recommended revising the definition to clarify that natural but 
nonorganic plant and animal materials, if managed to prevent 
contamination from prohibited substances, could be used as mulch 
without being added to the National List. This was the intent in the 
proposed rule, and we have modified the definition to make this 
provision clearer.
    (6) Many commenters stated that the final rule should include a 
definition of ``organic production'' that required that certified 
operations must preserve or protect biodiversity. These commenters 
stated that the preservation of biodiversity is a requirement in many 
existing organic certification standards, including the Codex 
guidelines. They also stated that the NOSB had included the requirement 
to preserve biodiversity in its definition of organic. We agree with 
the intent of these comments but prefer the term, ``conserve,'' to 
``preserve'' because it reflects a more dynamic, interactive 
relationship between the operation and biodiversity over time. We 
included a definition for organic production as ``a production system 
that is managed in accordance with the Act and regulations in this part 
to respond to site-specific conditions by integrating cultural, 
biological, and mechanical practices that foster cycling of resources, 
promote ecological balance, and conserve biodiversity.'' We deleted the 
definition for ``organic system of production and handling'' in the 
final rule.
    (7) Several commenters, including the NOSB, were concerned that the 
definition for ``planting stock'' as ``any plant or plant tissue, 
including rhizomes, shoots, leaf or stem cuttings, roots, or tubers, 
used in plant production or propagation'' was sufficiently broad to be 
applied to annual seedlings. We agree that it is important to establish 
that annual seedlings are not covered by the definition of ``planting 
stock'' and amended the definition to exclude them. The definition for 
planting stock in the final rule states ``any plant or plant tissue 
other than annual seedlings but including rhizomes, shoots, leaf or 
stem cuttings, roots, or tubers, used in plant production or 
propagation.'' The final rule retains the definition for ``annual 
seedling'' from the proposed rule.
    (8) Several commenters recommended that the definition of 
``processing'' should be amended to include ``distilling'' as an 
allowed practice. We agree with this comment and added distilling as an 
allowed processing practice.
    (9) Several commenters recommended that the final rule include a 
definition for ``processing aid'' that is consistent with the 
definition proposed by the NOSB and used by the Food and Drug 
Administration (FDA). We agree with these commenters and have included 
a definition for processing aid that is the same as the definition used 
by FDA and found in 21 CFR Part 101.100(a)(3)(ii).
    (10) Many commenters questioned whether the term, ``State organic 
certification program,'' in the proposed rule included organic programs 
from States that did not offer certification services. These commenters 
stated that the final rule should include provisions for all State 
organic programs regardless of whether they functioned as certifying 
agents. We agree with these commenters and have amended the final rule 
by incorporating the term, ``State organic program,'' as ``a State 
program that meets the requirements of section 6506 of the Act, is 
approved by the Secretary, and is designed to ensure that a product 
that is sold or labeled as organically produced under the Act is 
produced and handled using organic methods.'' The term, ``State organic 
program,'' encompasses such programs whether they offer certification 
services or not.
    (11) One commenter stated that the definition for ``wild crop'' 
only referred to a plant or part of a plant that was harvested from 
``an area of land.'' This commenter was concerned that the definition 
would preclude the certification of operations that produce wild 
aquatic crops, such as seaweed, and stated that the OFPA does allow for 
certifying such operations. We agree with this commenter and changed 
the definition to refer to a plant or part of a plant harvested from a 
``site.''
    (12) Many commenters stated that the soil fertility and crop 
nutrient management practice standard lacked a definition for 
``manure.'' These commenters maintained that the different provisions 
contained in the practice standard for ``manure'' and ``compost'' would 
be difficult to enforce without clear definitions to differentiate 
between the two materials. We agree with these comments and added a 
definition for manure as ``feces, urine, other excrement, and bedding 
produced by livestock that has not been composted.''
    (13) Some commenters stated that the National List in the final 
rule should include an annotation for narrow range oils to limit their 
use to a specific subset of such materials recommended by the NOSB. We 
agree with this comment but, rather than add an annotation, we have 
included the specifications recommended by the NOSB in a new definition 
for narrow range oils. Narrow range oils are defined as ``petroleum 
derivatives, predominately of paraffinic and napthenic fractions with a 
50-percent boiling point (10 mm Hg) between 415 deg.F and 440 deg.F.
    (14) Many commenters maintained that the final rule needed a 
definition of the term, ``pasture,'' to describe the relationship 
between ruminants and the land they graze. These commenters stated that 
a meaningful definition of ``pasture'' must incorporate the nutritional 
component that it provides livestock, as well as the necessity to 
manage the land in a manner that protects the natural resources of the 
operation. We agree with these commenters and have added a definition 
of ``pasture'' as ``land used for livestock grazing that is managed to 
provide feed value and maintain or improve soil, water, and vegetative 
sources.''
    (15) Many commenters stated that a definition for ``split 
operation'' was necessary to prevent commingling between organic and 
nonorganic commodities on operations that produced or handled both 
forms of a commodity. We agree with these comments and have included a 
definition for ``split operation'' as ``an operation that produces or 
handles both organic and nonorganic agricultural products.''

Definitions--Changes Requested But Not Made

    This subpart retains from the proposed rule terms and their 
definitions on which we received comments as follows:
    (1) Many commenters objected to the definition of ``sewage sludge'' 
because it excluded ash generated in a sewage sludge incinerator and 
grit and

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screenings generated during preliminary treatment of domestic sewage in 
treatment works. We have not changed the definition for ``sewage 
sludge'' because it provides the most comprehensive and enforceable 
description of the types of materials that commenters wanted to 
prohibit. The definition for ``sewage sludge'' in the proposed rule 
arose in response to significant public comment on the first proposed 
rule for national organic standards (62 Federal Register, No. 241) that 
recommended prohibiting biosolids in organic production. When 
incorporating those comments into the proposed rule, we did not use the 
term, ``biosolids,'' because it does not have a standardized definition 
under Federal regulations. The term, ``biosolids,'' is commonly used to 
refer to ``sewage sludge,'' which is the regulatory term established in 
40 CFR part 503. We incorporated the precise definition from 40 CFR 
part 503, even though it does not include ash, grit, or screenings, 
because it provided the clearest description of the types of materials 
identified in public comment.
    While commenters are correct that ash, grit, or screenings from the 
production of sewage sludge are not prohibited by this definition, 
these materials are prohibited elsewhere in the regulation. The soil 
fertility and crop nutrient management practice standard in section 
205.203 establishes the universe of allowed materials and practices. 
These allowed materials and practices are crop rotations, cover crops, 
plant and animal materials (including their ash), nonagricultural, 
natural materials, and, under appropriate conditions, mined substances 
of low and high solubility and synthetic materials included on the 
National List. Ash, grit, or screenings from the production of sewage 
sludge cannot be included in any of these categories and, therefore, 
cannot be used in organic production. We retained the definition of 
``sewage sludge'' because it most clearly conveys the wide array of 
commercially available soil amendments that might be considered for 
organic production but that the final rule expressly prohibits. We have 
not added specific exclusions for sewage sludge, ash, grit, or 
screenings because these materials are prohibited through other 
provisions in the practice standard.
    (2) The proposed rule prohibited the handler of an organic handling 
operation from using ionizing radiation for any purpose. The vast 
majority of commenters agreed with this prohibition and further 
recommended that the term, ``ionizing radiation,'' should be defined to 
identify the specific applications that are prohibited. Most commenters 
supported a definition based on the FDA requirements in 21 CFR part 
179.26 for the treatment or processing of food using ionizing 
radiation. While agreeing with the prohibition on ionizing radiation, 
these commenters favored allowing certain forms of irradiation such as 
the use of X-rays to inspect for debris such as stones that were 
inadvertently commingled with organically handled food. Other 
commenters recommended a prohibition on all forms of irradiation, which 
would include X-rays for inspection purposes, ultraviolet light, and 
microwaves in addition to ionizing radiation. Finally, a number of 
commenters stated that ionizing radiation is a safe and effective 
process for handling food and, therefore, should not be prohibited in 
organic handling.
    We have not added a definition for ``ionizing radiation'' to the 
final rule because we have incorporated specific references to the 
applications that are prohibited in the regulatory text. The final rule 
prohibits the handler of an organic handling operation from using 
ionizing radiation as specified under 21 CFR part 179.26. These are the 
FDA-approved uses of ionizing radiation that commenters most frequently 
recommended that we prohibit in organic handling operations. They 
include the use of cobalt-60, cesium-137, and other sources of 
radiation for the purpose of controlling microbial contaminants, 
pathogens, and pests in food or to inhibit the growth and maturation of 
fresh foods. At its June 2000 meeting, the NOSB recommended prohibiting 
ionizing radiation for the purpose of controlling microbial 
contaminants, pathogens, parasites, and pests in food, preserving a 
food, or inhibiting physiological processes such as sprouting or 
ripening. The final rule does not prohibit the handler of an organic 
handling operation from using the FDA-approved applications of X-rays 
for inspecting food. The prohibition on ionizing radiation in the final 
rule is based solely on consumer preference as reflected in the 
overwhelming public comment stating that organically handled foods 
should not be treated in that manner.
    (3) Some commenters recommend that the final rule incorporate 
definitions for the terms, ``food additives,'' ``extraction methods,'' 
``incidental additive,'' and ``substantially transform.'' However, 
these terms are not used in the final rule and do not require a 
definition.

Definitions--Clarifications

    Following our review of the definitions provisions in the proposed 
rule, we decided to further clarify the following provision in the 
final rule:
    We were concerned that ``State entity,'' the meaning of which 
encompasses both domestic and foreign political subdivisions, may be 
confused with ``State,'' the meaning of which is limited to the States 
of the United States, its territories, the District of Columbia, and 
Puerto Rico. To avoid any possible confusion as to which provisions in 
this final rule apply to States and which apply to the broader 
political subdivisions, we have replaced the term, ``State entity,'' 
with the term, ``governmental entity,'' while retaining the same 
definition language in the proposed rule.

Subpart B--Applicability

    This subpart provides an overview of what has to be certified under 
the National Organic Program (NOP); describes exemptions and exclusions 
from certification; addresses use of the term, ``organic'; addresses 
recordkeeping by certified production and handling operations; and 
addresses allowed and prohibited substances, methods, and ingredients 
in organic production and handling.

Description of Regulations

    Except for exempt and excluded operations, each production or 
handling operation or specified portion of a production or handling 
operation that produces or handles crops, livestock, livestock 
products, or other agricultural products that are intended to be sold, 
labeled, or represented as ``100 percent organic,'' ``organic,'' or 
``made with organic (specified ingredients or food group(s))'' must be 
certified. Certified operations must meet all applicable requirements 
of these regulations.
    This final rule becomes effective 60 days after its publication in 
the Federal Register and will be fully implemented 18 months after its 
effective date. Eighteen months after the effective date, all 
agricultural products that are sold, labeled, or represented as ``100 
percent organic,'' ``organic,'' or ``made with * * *'' must be produced 
and handled in compliance with these regulations. Products entering the 
stream of commerce prior to the effective date will not have to be 
relabeled. The U.S. Department of Agriculture (USDA) seal may not be 
affixed to any ``100 percent organic'' or ``organic'' product until 18 
months after the final rule's effective date.
    We anticipate that certifying agents and production and handling 
operations

[[Page 80552]]

will move as quickly as possible after the effective date of the final 
rule to begin operating under the national organic standards. 
Certifying agents must begin certifying organic production and handling 
operations to the national standards upon receipt of their 
accreditation from the Administrator. Any production or handling 
operation or specified portion of a production or handling operation 
that has been already certified by a certifying agent on the date that 
the certifying agent receives its accreditation under this part shall 
be deemed to be certified under the Act until the operation's next 
anniversary date of certification. We have taken this approach because 
we believe that such certifying agents will, upon the effective date of 
the final rule, demonstrate their eligibility for accreditation by 
applying the national standards to the certification and renewal of 
certification of their clients. We also believe this approach will 
provide relief to certified operations which might otherwise have to be 
certified twice within a 12--month period (prior to their certifying 
agent's accreditation and again following their certifying agent's 
accreditation). This relief will only be available to those certified 
operations certified by a certifying agent that receives its 
accreditation within 18 months from the effective date of the final 
rule.
    Certifying agents can apply for accreditation anytime after the 
effective date of the rule. Applications will be processed on a first-
come, first-served basis. Those certifying agents who apply for 
accreditation within the first 6 months after the effective date of the 
final rule and are determined by the Administrator to meet the 
requirements for accreditation will be notified of their status 
approximately 12 months after the final rule's effective date. This 
approach is being taken because of the market advantage that could be 
realized by accredited certifying agents if USDA did not announce the 
accreditations simultaneously.

Exempt and Excluded Operations

    This regulation establishes several categories of exempt or 
excluded operations. An exempt or excluded operation does not need to 
be certified. However, operations that qualify as exempt or excluded 
operations can voluntarily choose to be certified. A production or 
handling operation that is exempt or excluded from obtaining 
certification still must meet other regulatory requirements contained 
in this rule as explained below.

Exempt Operations

    (1) A production or handling operation that has $5,000 or less in 
gross annual income from organic sales is exempt from certification. 
This exemption is primarily designed for those producers who market 
their product directly to consumers. It will also permit such producers 
to market their products direct to retail food establishments for 
resale to consumers. The exemption is not restricted to U.S. producers. 
However, as a practical matter, we do not envision any significant use 
of the exemption by foreign producers because: (1) the products from 
such operations cannot be used as ingredients identified as organic in 
processed products produced by another handling operation, and (2) it 
is unlikely that such operations will be selling their products 
directly to consumers in the United States.
    An exempt producer or handler must comply with the labeling 
requirements of section 205.310 and the organic production and handling 
requirements applicable to its type of operation. For example, a 
producer of organic vegetables that performs no handling functions 
would have to comply with the labeling requirements of section 205.310 
and the applicable production requirements in sections 205.202 through 
205.207. The labeling and production and handling requirements protect 
the integrity of organically produced products.
    (2) A retail food establishment or portion of a retail food 
establishment that handles organically produced agricultural products 
but does not process them is exempt from all of the requirements in 
these regulations.
    (3) A handling operation or portion of a handling operation that 
handles only agricultural products containing less than 70 percent 
organic ingredients by total weight of the finished product (excluding 
water and salt) is exempt from the requirements in these regulations, 
except the recordkeeping provisions of section 205.101(c); the 
provisions for prevention of contact of organic products with 
prohibited substances in section 205.272; and the labeling regulations 
in sections 205.305 and 205.310. The recordkeeping provisions maintain 
an audit trail for organic products. The prevention of contact with 
prohibited substances and the labeling requirements protect the 
integrity of organically produced products.
    (4) A handling operation or portion of a handling operation that 
uses the word, ``organic,'' only on the information panel is exempt 
from the requirements in these regulations, except the recordkeeping 
provisions of section 205.101(c); the provisions for prevention of 
contact of organic products with prohibited substances as provided in 
section 205.272; and the labeling regulations in sections 205.305 and 
205.310. The recordkeeping provisions maintain an audit trail for 
organic products. The prevention of contact with prohibited substances 
and labeling requirements protect the integrity of organically produced 
products.
    As noted above, exempt handling operations producing 
multiingredient products must maintain records as required by section 
205.101(c). This would include records sufficient to: (1) Prove that 
ingredients identified as organic were organically produced and handled 
and (2) verify quantities produced from such ingredients. Such records 
must be maintained for no less than 3 years, and the operation must 
allow representatives of the Secretary and the applicable State 
program's governing State official access to the records during normal 
business hours for inspection and copying to determine compliance with 
the applicable regulations.

Excluded Operations

    (1) A handling operation or portion of a handling operation that 
sells organic agricultural products labeled as ``100 percent organic,'' 
``organic,'' or ``made with * * *'' that are packaged or otherwise 
enclosed in a container prior to being received or acquired by the 
operation, remain in the same package or container, and are not 
otherwise processed while in the control of the handling operation is 
excluded from the requirements in these regulations, except for the 
provisions for prevention of commingling and contact of organic 
products with prohibited substances in section 205.272. The 
requirements for the prevention of commingling and contact with 
prohibited substances protect the integrity of organically produced 
products.
    This exclusion will avoid creating an unnecessary barrier for 
handlers who distribute nonorganic products and who want to offer a 
selection of organic products.
    (2) A retail food establishment or portion of a retail food 
establishment that processes on the premises of the retail food 
establishment raw and ready-to-eat food from certified agricultural 
products labeled as ``100 percent organic,'' ``organic,'' or ``made 
with * * *'' is excluded from the requirements in these regulations, 
except for the provisions for prevention

[[Page 80553]]

of contact of organic products with prohibited substances as provided 
in section 205.272 and the labeling regulations in section 205.310. The 
prevention of commingling and contact with prohibited substances and 
labeling requirements protect the integrity of organically produced 
products.
    Excluded retail food establishments include restaurants; 
delicatessens; bakeries; grocery stores; or any retail outlet with an 
in-store restaurant, delicatessen, bakery, salad bar, or other eat-in 
or carry-out service of processed or prepared raw and ready-to-eat 
food.
    There is clearly a great deal of public concern regarding the 
handling of organic products by retail food establishments. We have not 
required certification of retail food establishments at this time 
because of a lack of consensus as to whether retail food establishments 
should be certified, a lack of consensus on retailer certification 
standards, and a concern about the capacity of existing certifying 
agents to certify the sheer volume of such businesses. Retail food 
establishments, not exempt under the Act, could at some future date be 
subject to regulation under the NOP. Any such regulation would be 
preceded by rulemaking with an opportunity for public comment.
    No retailer, regardless of this exclusion and the exceptions found 
in the definitions for ``handler'' or ``handling operation,'' may sell, 
label, or provide market information on a product unless such product 
has been produced and handled in accordance with the Act and these 
regulations. Any retailer who knowingly sells or labels a product as 
organic, except in accordance with the Act and these regulations, will 
be subject to a civil penalty of not more than $10,000 per violation 
under this program.

Recordkeeping Requirements for Certified Operations

    A certified operation must maintain records concerning the 
production and handling of agricultural products that are sold, 
labeled, or represented as ``100 percent organic,'' ``organic,'' or 
``made with * * *'' sufficient to demonstrate compliance with the Act 
and regulations. Such records must be adapted to the particular 
business that the certified operation is conducting, fully disclose all 
activities and transactions of the certified operation in sufficient 
detail to be readily understood and audited, be maintained for not less 
than 5 years beyond their creation, and be sufficient to demonstrate 
compliance with the Act and regulations. Certified operations must make 
the records required by this regulation available for inspection by 
authorized representatives of the Secretary, the applicable State 
organic program's (SOP) governing State official, and the certifying 
agent. Access to such records must be provided during normal business 
hours.

Examples of Records

    Each exempt, excluded, and certified operation should maintain the 
records which demonstrate compliance with the Act and the regulations 
applicable to it and which it believes establish an audit trail 
sufficient to prove to the Secretary, the applicable SOP's governing 
State official, and the certifying agent that the exempt, excluded, or 
certified operation is and has been in compliance with the Act and 
regulations.
    Examples of records include: application and supporting documents 
for certification; organic system plan and supporting documents; 
purchased inputs, including seeds, transplants, livestock, and 
substances (fertilizers, pesticides, and veterinary biologics 
consistent with the livestock provisions of subpart C), cash purchase 
receipts, receiving manifests (bills of lading), receiving tickets, and 
purchase invoices; field records (planting, inputs, cultivation, and 
harvest); storage records (bin register, cooler log); livestock 
records, including feed (cash purchase receipts, receiving manifests 
(bills of lading), receiving tickets, purchase invoices, copies of 
grower certificates), breeding records (calendar, chart, notebook, 
veterinary documents), purchased animals documentation (cash purchase 
receipts, receiving manifests (bills of lading), receiving tickets, 
purchase invoices, copies of grower certificates), herd health records 
(calendar, notebook, card file, veterinary records), and input records 
(cash purchase receipts, written records, labels); producer invoice; 
producer contract; receiving manifests (bills of lading); transaction 
certificate; producer certificate; handler certificate; weigh tickets, 
receipts, and tags; receiving tickets; cash purchase receipts; raw 
product inventory reports and records; finished product inventory 
reports and records; daily inventories by lot; records as to 
reconditioning, shrinkage, and dumping; production reports and records; 
shipping reports; shipping manifests (bills of lading); paid freight 
and other bills; car manifests; broker's contracts; broker's 
statements; warehouse receipts; inspection certificates; residue 
testing reports; soil and water testing reports; cash receipt journals; 
general ledgers and supporting documents; sales journals; accounts 
payable journals; accounts receivable journals; cash disbursement 
journals; purchase invoices; purchase journals; receiving tickets; 
producer and handler contracts; cash sales receipts; cash purchase 
journals; sales invoices, statements, journals, tickets, and receipts; 
account sales invoices; ledgers; financial statements; bank statements; 
records of deposit; canceled checks; check stubs; cash receipts; tax 
returns; accountant's or other work papers; agreements; contracts; 
purchase orders; confirmations and memorandums of sales; computer data; 
computer printouts; and compilations of data from the foregoing.

Allowed and Prohibited Substances

    A certified operation must only use allowed substances, methods, 
and ingredients for the production and handling of agricultural 
products that are sold, labeled, or represented as ``100 percent 
organic,'' ``organic,'' or made with * * *'' for these products to be 
in compliance with the Act and the NOP regulations. Use of ionizing 
radiation, sewage sludge, and excluded methods are prohibited in the 
production and handling of organic agricultural products.

Applicability--Changes Based on Comments

    This subpart differs from the proposal in several respects as 
follows:
    (1) Violations of the Act or Regulations. We have amended section 
205.100 by adding a new paragraph (c), which addresses violations of 
the Act and these regulations. A number of commenters advocated for 
provisions within the final rule describing what legal proceedings USDA 
would conduct against operations or persons that violate the NOP. We 
agree that this rule should include provisions addressing violations of 
the Act and these regulations. Accordingly, we have added at section 
205.100 the misuse of label provisions and false statement provisions 
of section 2120 (7 U.S.C. 6519) of the Act. Specifically, section 
205.100(c) provides that persons not in compliance with the labeling 
requirements of the Act or these regulations are subject to a civil 
penalty of not more than $10,000 per violation and that persons making 
false statements under the Act to the Secretary, a governing State 
official, or an accredited certifying agent shall be subject to the 
provisions of section 1001 of Title 18, United States Code. The 
provisions of the Act and these regulations apply to all operations or 
persons that sell, label, or represent their agricultural product as 
organic.

[[Page 80554]]

    (2) Prohibition on Use of Excluded Methods. We have moved section 
205.600 from subpart G, Administrative, to subpart B, Applicability, 
and replaced paragraph (d), which referred the reader to section 
205.301, with new paragraphs (d) through (g). As amended, this section, 
redesignated as section 205.105, includes all of the provisions covered 
under old section 205.600.
    The vast majority of commenters strongly supported the prohibition 
on the use of excluded methods in organic production and handling but 
raised concerns that they could not point to one provision that 
prohibited use of excluded methods in all aspects of organic production 
and handling. To close what they perceived to be ``loopholes'' in the 
prohibition, commenters made several suggestions for inclusion of new 
provisions prohibiting use of excluded methods in particular aspects of 
organic production and handling that they believed were not covered in 
the proposed rule. Other commenters pointed to inconsistencies in the 
way the prohibition on use of excluded methods was described in 
different sections, raising concerns that these apparent 
inconsistencies may create confusion for organic operations, 
certifiers, and consumers.
    Although we intended that use of excluded methods would be 
prohibited in all aspects of organic production and handling, the 
structure of the proposed rule may not have made that clear. We also 
share the concerns that, in attempting to identify all aspects of 
organic production and handling where excluded methods might be used, 
we may inadvertently have left out some provisions, creating confusion 
for organic operations, certifying agents, and consumers and creating 
doubt as to the scope of the prohibition on use of excluded methods. 
Similarly, to the extent that the prohibition on excluded methods may 
have been described differently in various sections of the proposed 
rule, we also share the concern that these inconsistencies could create 
confusion.
    As a result of these concerns, we have created a new provision in 
section 205.105 that prohibits the use of excluded methods (and 
ionizing radiation and sewage sludge) generally. This provision should 
alleviate perceptions that some areas of organic production may not 
have been covered by the prohibitions in the proposed rule. It also 
allows us to eliminate from the regulation most of the individual 
references to the prohibition on use of these methods, thereby 
eliminating any potential confusion where these provisions may have 
appeared inconsistent. These changes do not lift the prohibition on use 
of these methods in those sections. In fact, the purpose of this new 
provision is to make clear that use of these methods is prohibited in 
the production and handling of organic products.
    (3) Animal Vaccines. The proposed rule specifically asked for 
public comment on the potential impact of the prohibition on use of 
excluded methods as it relates to animal vaccines. A number of 
commenters raised concerns that there may be some critical vaccines 
that are only available in forms produced using excluded methods. 
Several commenters requested that we prohibit use of animal vaccines 
produced using excluded methods but that we provide for a temporary 
exemption until such time as vaccines produced without using excluded 
methods are approved for use on the National List. Other commenters 
requested that we prohibit use of vaccines produced using excluded 
methods without exception.
    We have concluded that the potential impact of prohibiting vaccines 
produced using excluded methods on animal production systems is still 
unknown. We do not know of any critical animal vaccine that is only 
available in a form produced using excluded methods, but it is unclear 
whether producers and certifying agents are tracking the possible use 
of such vaccines. There also appears to be no international consensus 
on the use in organic production systems of animal vaccines produced 
using excluded methods, although there is precedent for such an 
exemption. European Union regulations, for example, allow for use of 
animal vaccines produced using excluded methods.
    Based on comments received and because the potential impact of the 
prohibition on use of excluded methods is still uncertain, we have 
created the possibility at section 205.105(e) for the NOSB to exercise 
one very narrow exception to allow use of animal vaccines produced 
using excluded methods but only if they are explicitly approved on the 
National List. We believe the issue of animal vaccines requires further 
deliberation and that it is most appropriate to consider it through the 
National List process, which mandates review by the NOSB and Technical 
Advisory Panels. Consideration of animal vaccines produced using 
excluded methods is appropriate for the National List review process 
because animal vaccines, we believe, are most appropriately considered 
synthetic materials. That is why the provision is structured so that 
vaccines produced using excluded methods could only be used in organic 
production if they are affirmatively included on the National List. We 
do not believe that a broad-based exemption of the type suggested in 
some comments, even if only temporary, is appropriate.
    The Act allows use of animal vaccines in organic livestock 
production. Given the general prohibition on the use of excluded 
methods, however, we believe that animal vaccines produced using 
excluded methods should not be allowed without an explicit 
consideration of such materials by the NOSB and without an affirmative 
determination from the NOSB that they meet the criteria for inclusion 
on the National List. It is for that reason that we have not granted 
this request of commenters but, rather, provided an opportunity for 
review of this narrow range of materials produced using excluded 
methods through the National List process.
    It is important to make clear, however, that this provision does 
not open all potential applications of excluded methods to a case-by-
case review in the context of the National List, nor are we proposing 
that any particular vaccines be reviewed for inclusion on the National 
List at this time. The prohibition on use of excluded methods applies 
across the board to all phases of organic production and handling. We 
are simply responding to comments suggesting that a narrow exception 
for animal vaccines may be appropriate and providing for the 
possibility that such an exception could be invoked upon thorough 
review and recommendation by the NOSB.

Applicability--Changes Requested But Not Made

    This subpart retains from the proposed rule regulations on which we 
received comments as follows:
    (1) Exemption of Handling Operations Producing Multiingredient 
Products. Some commenters asserted that only certified handling 
operations should be allowed to identify ingredients in multiingredient 
products as organic. These commenters believe that consumers will be 
misled if noncertified handling operations are allowed to identify 
ingredients as organic even if the organic claim is limited to the 
information panel. We do not agree with these assertions and have 
retained the proposed rule provisions that do not require handler 
certification when a product only identifies ingredients as organic 
within the information panel. Although handling operations only making 
organic claims on the

[[Page 80555]]

information panel are exempt from certification, these operations are 
required to use organic product from certified operations. They are 
also required to prevent contact of organic products with prohibited 
substances as set forth in section 205.272, adhere to the labeling 
provisions of sections 205.305 and 205.310, and maintain records in 
accordance with section 205.101(c). We believe consumers will 
understand the distinction between products that have the organic 
nature of the product stated on the principal display panel and those 
that merely identify an ingredient as organic on the information panel.
    (2) Retailer Exclusion from Certification. Many commenters objected 
to the provisions of section 205.101(b)(2) which exclude retail food 
establishments from certification. These commenters assert that only 
final retailers that do not process agricultural products should be 
excluded from certification. There is clearly a great deal of public 
concern regarding the handling of organic products by retail food 
establishments. We have not required certification of retail food 
establishments at this time because of a lack of consensus as to 
whether retail food establishments should be certified, a lack of 
condenses on retailer certification standards, and a concern about the 
capacity of existing certifying agents to certify the sheer volume of 
such businesses. In addition, most existing certification programs do 
not include retail food establishments, and we do not believe there is 
sufficient consensus to institute such a significant expansion in the 
scope of certification at this time. However, since a few States have 
established procedures for certifying retail food establishments, we 
will assess their experience and continue to seek consensus on this 
issue of establishing retailer provisions under the NOP. Any such 
change would be preceded by rulemaking with an opportunity for public 
comment. The exclusion of nonexempt retail food establishments from 
this final rule does not prevent a State from developing an organic 
retail food establishment program as a component of its SOP. However, 
as with any component of an SOP, the Secretary will review such 
components on a case-by-case basis.
    (3) Producer Exemption Level. Several commenters advocated for an 
increase in the producer exemption level above the $5,000 limit. 
Comments supporting the exemption suggested increasing the statutory 
limit for qualifying for the exemption to as high as $75,000. Other 
commenters stated that all producers should be certified and opposed 
the exemption even though it is required by the Act. These commenters 
were concerned about maintaining the integrity of the organic product 
and about the lack of verification of the exempt operations.
    We have not increased or removed the $5,000 producer exemption 
because the exemption is mandated by section 2106(d) (7 U.S.C. 6505(d)) 
of the Act. Our purpose is to limit the financial burdens of 
certification on such operations but not to exempt them from the 
standards for organic production and handling. Accordingly, exempt 
production and handling operations must comply with the applicable 
organic production and handling requirements of subpart C and the 
labeling requirements of section 205.310.
    Some of the commenters wanting a change in the producer exemption 
level suggested that the NOP add provisions for restricting these 
producers to marketing at farmers markets or roadside stands. We 
disagree with these comments. While we believe that most producers 
qualifying for the exemption are indeed likely to be small producers 
who market their products directly to consumers, we do not believe it 
is in the best interest of these producers to restrict their market 
opportunity to a specific sales method.
    A few comments suggested that we establish a sliding-scale 
certification fee based upon either the size of the operation or sales 
of agricultural product instead of the exemption. The NOP does not 
establish fees for certification. Certifying agents may establish a 
sliding-scale system as long as their fees are reasonable and applied 
in a consistent and nondiscriminatory manner.
    Finally, some commenters expressed concern that exempt operations 
were forbidden from certification. This interpretation is not correct. 
Any production or handling operation, including an exempt operation, 
which makes application for certification as an organic operation and 
meets the requirements for organic certification may be certified.
    (4) Handler exemption. Many commenters disagreed with the proposed 
rule provision providing for an exemption of $5,000 to handlers. These 
commenters asked the NOP to remove the phrase, ``or handlers,'' from 
the exemption provision. The commenters argue that the handler 
exemption is not authorized by the Act. We disagree with the 
commenters, and we have retained the handler exemption in the final 
rule. The Act states that the exemption is available to ``persons'' 
selling not more than $5,000 annually in value of agricultural 
products. The Act's definition of ``persons'' includes handlers. Thus, 
handlers grossing $5,000 or less qualify for the exemption.
    (5) Categories of Income to Qualify for an Exemption. Some 
commenters want the $5,000 producer/handler exemption to include all 
sales of agricultural products, not just sales of organic agricultural 
products. These commenters perceive this provision to be a loophole for 
large, split operations. We disagree with these commenters, and we have 
retained the $5,000 producer/handler exemption based upon total sales 
of organic agricultural products. We do not believe there is a 
significant number of split operations which only gross $5,000 in 
annual sales of organic products and, therefore, qualify for this 
exemption. In setting the exemption levels, the Department sought to 
maximize the benefits to small producers afforded by the Act while 
setting a threshold level that minimizes the potential of product 
mislabeling.
    (6) Limiting Handler Exclusions. Many commenters argued that 
brokers, distributors, warehousers, and transporters should not be 
excluded from certification. We do not agree with these commenters. 
Brokers, distributors, warehousers and transporters do not alter the 
product and, in many cases, do not take title to the product. 
Certifying these handlers would be an unnecessary burden on the 
industry. Traditionally, distributors and trucking companies have been 
excluded from State and private certification requirements.
    (7) Recordkeeping Requirements for Excluded Operations. Several 
commenters argued that excluded operations should be required to comply 
with the same recordkeeping requirements as exempt operations. Some 
commenters expressed concern over the inability to verify compliance 
for either exempt or excluded operations and asked that exempt or 
excluded operations be subject to additional recordkeeping 
requirements. We disagree with these commenters and have retained the 
provisions from the proposed rule on recordkeeping for excluded 
operations. Given the nature of these excluded operations, for example, 
operations that only sell prepackaged organic products, we believe that 
extensive recordkeeping requirements would be an unwarranted regulatory 
burden.
    (8) Recordkeeping Burden on Small Certified Operations. Some 
commenters questioned whether small certified operations have the 
ability to implement a recordkeeping system which complies with the 
provisions of section 205.103.

[[Page 80556]]

These commenters argue that recordkeeping requirements must be tailored 
to the scale of the operation. We do not believe that the recordkeeping 
requirements as described in section 205.103 conflict with the 
suggestions of the commenters. The recordkeeping requirements provide 
that the records must be adapted to the particular business that the 
certified operation is conducting and be sufficient to demonstrate 
compliance with the Act and regulations. It is USDA's intent that each 
production and handling operation decide for itself what recordkeeping 
scheme is appropriate, given the complexity and scope of the individual 
business. These provisions provide considerable latitude for each 
production and handling operation to decide what records are necessary 
to demonstrate its compliance with the Act and the NOP regulations.
    (9) Public Access to Records. Several commenters asked that the 
public have full access to any certifying agent record on organic 
production and/or handling operations. Other commenters expressed 
concerns about certifying agents divulging confidential business 
information and asked that records containing confidential business 
information not be taken from the business' physical location.
    We have not changed this provision. The recordkeeping requirements 
are designed to seek a balance between the public's right to know and a 
business's right to retain confidential business information. 
Certifying agents must have access to certain records during their 
review of the operation to determine the operation's compliance with 
the NOP. However, certifying agents are required to protect an 
operation's confidential business information. Requiring full public 
access could compromise a business' competitive position and place an 
unfair burden on the organic industry.
    (10) Fair Labor Practices on Organic Farms. Many commenters asked 
the NOP to develop fair labor practice standards as a part of the final 
rule. We have not adopted these comments. Other statutes cover labor 
and worker safety standards. The Act does not provide the authority to 
include them in these regulations. However, these regulations do not 
prohibit certifying agents from developing a voluntary certification 
program, separate from organic certification, that address fair labor 
and worker safety standards.
    (11) ``Transitional Organic'' Label. Several commenters requested 
that the NOP adopt regulations on the conversion of operations to 
organic production and create a ``transitional organic'' label. We have 
not included provisions within the final rule that provide for 
``transitional organic'' labeling. Although many commenters requested 
that we provide for transition labeling, there does not appear to be 
sufficient consensus to establish such a standard at this time. Given 
this lack of consensus, it is unclear what marketplace value such a 
label might have, and we are concerned that allowing such a label at 
this point might lead to greater consumer confusion rather than 
providing clarity.

Applicability--Clarifications

    Clarification is given on the following issues raised by commenters 
as follows:
    (1) ``Genetic'' drift. Many commenters raised issues regarding 
drift of the products of excluded methods onto organic farms. These 
commenters were concerned that pollen drifting from near-by farms would 
contaminate crops on organic operations and that, as a result, organic 
farmers could lose the premium for their organic products through no 
fault of their own. Many commenters argued that we should use this rule 
to somehow shift the burden to the technology providers who market the 
products of excluded methods or the nonorganic farming operations that 
use their products. Some, for example, suggested that this regulation 
should require that the nonorganic operations using genetically 
engineered varieties plant buffer strips or take other steps to avoid 
drift onto organic farms. Others suggested that the regulation could 
provide for citizens' right to sue in cases of drift.
    While we understand the concerns that commenters have raised, the 
kind of remedies they suggested are outside the scope of the Act and 
this regulation. The Act only provides for the regulation of organic 
operations. We cannot use this regulation to impose restrictions, such 
as requiring buffer strips or other measures, on operations that are 
not covered by the Act. Similarly, while citizens may have the ability 
to bring suit under other laws, the Act itself does not provide for the 
right to bring suit as a Federal cause of action, and we could not 
grant it through this regulation.
    Drift has been a difficult issue for organic producers from the 
beginning. Organic operations have always had to worry about the 
potential for drift from neighboring operations, particularly drift of 
synthetic chemical pesticides. As the number of organic farms 
increases, so does the potential for conflict between organic and 
nonorganic operations.
    It has always been the responsibility of organic operations to 
manage potential contact of organic products with other substances not 
approved for use in organic production systems, whether from the 
nonorganic portion of a split operation or from neighboring farms. The 
organic system plan must outline steps that an organic operation will 
take to avoid this kind of unintentional contact.
    When we are considering drift issues, it is particularly important 
to remember that organic standards are process based. Certifying agents 
attest to the ability of organic operations to follow a set of 
production standards and practices that meet the requirements of the 
Act and the regulations. This regulation prohibits the use of excluded 
methods in organic operations. The presence of a detectable residue of 
a product of excluded methods alone does not necessarily constitute a 
violation of this regulation. As long as an organic operation has not 
used excluded methods and takes reasonable steps to avoid contact with 
the products of excluded methods as detailed in their approved organic 
system plan, the unintentional presence of the products of excluded 
methods should not affect the status of an organic product or 
operation.
    Issues of pollen drift are also not confined to the world of 
organic agriculture. For example, plant breeders and seed companies 
must ensure genetic identity of plant varieties by minimizing any 
cross-pollination that might result from pollen drift. Under research 
conditions, small-scale field tests of genetically engineered plants 
incorporate various degrees of biological containment to limit the 
possibility of gene flow to other sexually compatible plants. Federal 
regulatory agencies might impose specific planting requirements to 
limit pollen drift in certain situations. Farmers planting 
nonbiotechnology-derived varieties may face similar kinds of questions 
if cross-pollination by biotechnology-derived varieties alters the 
marketability of their crop. These discussions within the broader 
agricultural community may lead to new approaches to addressing these 
issues. They are, however, outside the scope of this regulation by 
definition.
    (2) Additional NOP Standards for Specific Production Categories. 
Many commenters asked that the NOP include in the final rule 
certification standards for apiculture, greenhouses, mushrooms, aquatic 
species, culinary herbs, pet food, and minor animal species (e.g., 
rabbits) food. The NOP intends to provide standards for categories 
where the Act provides the authority to promulgate standards.

[[Page 80557]]

During the 18-month implementation period, the NOP intends to publish 
for comment certification standards for apiculture, mushrooms, 
greenhouses and aquatic animals. These standards will build upon the 
existing final rule and will address only the unique requirements 
necessary to certify these specialized operations.
    Some of the other questions raised by commenters are already 
addressed in the final rule. For example, feed for minor species is 
covered by livestock feed provisions within subpart C and the livestock 
feed labeling provisions within subpart D. The production and 
utilization of culinary herbs, including herbal teas, is covered by the 
provisions of the final rule. We do not envision needing to do 
additional rulemaking on these two categories.
    Other requests by commenters have not been addressed. We have not 
addressed the labeling of pet food within this final rule because of 
the extensive consultation that will be required between USDA, the 
NOSB, and the pet food industry before any standards on this category 
could be considered.
    (3) Standards for Cosmetics, Body Care Products, and Dietary 
Supplements. A few commenters asked that the NOP include in the final 
rule certification standards for cosmetics, body care products, and 
dietary supplements. Producers and handlers of agricultural products 
used as ingredients in cosmetics, body care products, and dietary 
supplements could be certified under these regulations. Producers and 
handlers of these ingredients might find an increased market value for 
their products because of the additional assurance afforded by 
certification. The ultimate labeling of cosmetics, body care products, 
and dietary supplements, however, is outside the scope of these 
regulations.
    (4) Private Label Products. Many commenters asked about the 
certification status of so-called ``private label products.'' Private 
label products are items for which a retailer contracts with a 
processor to produce the product to the retailer's specifications and 
to be sold under the retailer's name. Commenters believe the proposed 
rule was unclear on the certification requirements for these products. 
Any product labeled as ``100 organic,'' ``organic,'' or ``made with * * 
*'' must be certified regardless of the business arrangements under 
which the product was produced. When a retail operation contracts for 
the production, packaging, or labeling of organic product, it is the 
certified production or handling operation that is responsible for 
complying with the applicable organic production or handling 
regulations.
    (5) State Oversight of Exempt and Excluded Operations. Many 
commenters asked for clarification on the State's enforcement 
responsibility for exempt and excluded operations. The NOP is 
ultimately responsible for the oversight and enforcement of the 
program, including oversight of exempt and excluded operations and 
cases of fraudulent or misleading labeling. We expect, however, that 
States would want to monitor for false claims or misleading labeling 
under these regulations and would forward any complaints to the NOP. 
States that have an approved SOP which includes regulation of 
operations excluded under the NOP would be required to enforce those 
provisions.
    (6) Nonedible Fibers Products in the NOP. Some commenters asked the 
NOP to clarify the certification status of fibers such as cotton and 
flax. The final rule allows for certification of organically produced 
fibers such as cotton and flax. However, the processing of these fibers 
is not covered by the final rule. Therefore, goods that utilize organic 
fibers in their manufacture may only be labeled as a ``made with * * 
*'' product; e.g., a cotton shirt labeled ``made with organic cotton.''
    (7) Recordkeeping for Operations That Produce Organic and 
Nonorganic Product. Several commenters recommended that ``split 
operations,'' which are operations producing organic and nonorganic 
agricultural products, be required to maintain separate records. These 
commenters believe that the proposed rule did not provide adequate 
provision for the maintenance of separate recordkeeping. The provisions 
within section 205.103(b)(1) and (b)(2) do indicate that operations 
which produce both organic and nonorganic agricultural products must 
maintain a recordkeeping system that differentiates the organic portion 
of the operations from the records related to other portions of 
operations.
    (8) NOP Program Manual. A few commenters, particularly States, 
noted that the proposed rule made several references to program manuals 
as a mechanism for further clarifying certain portions of the rule. 
These commenters asked whether certifying agents should consider 
information contained in these manuals as enforceable regulations. NOP 
program manuals cannot be and are not intended to be the equivalent of 
regulations. Rather, the NOP envisions development of a program manual 
to serve as guidance for certifying agents regarding implementation- 
and certification-related issues. Material contained within the program 
manual will be designed to address the organic agriculture principles 
of each final rule section, as appropriate, and to offer information 
that certifying agents should consider in making certification 
decisions that will be reliably uniform throughout the country. The use 
of program manuals as guidance to assist in developing uniform 
certification decisions is a standard industry practice, and the NOP 
has compiled examples of program manuals from both large and small 
certifiers. Because the NOP intends to use the examples it has acquired 
as the basis for any NOP guidance manual, we believe that most 
certifying agents will find such NOP manual, when developed, familiar 
and useful. Additionally, we will use the NOSB public meeting process 
to seek guidance from industry and the public on what information would 
be useful in a program manual and to provide input on the program 
manual as it is developed. Of course, if in developing program 
guidance, it appears that modifications or changes in the NOP final 
rule are required, such modifications would be made through notice and 
comment rulemaking.
    (9) Use of Products from Exempt Operations as Organic Ingredients. 
A few commenters responded to the question in the proposed rule in 
which we asked whether handlers should be allowed to identify 
organically produced products produced by exempt production operations 
as organic ingredients. The proposed rule provided that all ingredients 
identified as organic in a multiingredient product must have been 
produced by a production or handling operation certified by an 
accredited certifying agent.
    The commenters supported this position. These commenters believe 
that the potential for mislabeling outweighed any financial benefit 
that might accrue to exempt producers through expanded market 
opportunities. We concur, and, therefore, have retained the prohibition 
on using products produced by an exempt production or handling 
operation as organic ingredients.
    (10) Exemption of Handling Operations Producing Multiingredient 
Products. We have amended section 205.101(a)(3) by changing ``50 
percent'' to ``70 percent'' to make it consistent with the amendments 
to the labeling provisions. We have also edited section 205.101(a)(4) 
for clarification purposes. Additionally, we amended sections 
205.101(a)(3) and 205.101(a)(4) by citing the labeling requirements of 
section 205.305. These amendments have been made to clarify that 
handling operations exempted under these sections are

[[Page 80558]]

subject to the labeling requirements of section 205.305.
    (11) Production and Handling in Compliance with Federal Statutes. 
We have amended section 205.102 by removing paragraph (c). This 
paragraph provided that any agricultural product that is sold, labeled, 
or represented as ``100 percent organic,'' ``organic,'' or ``made with 
organic (specified ingredients)'' must be produced and handled in 
compliance with applicable Federal statutes and their implementing 
regulations. We have taken this action because the provision is an 
identical restatement of section 2120(f) (7 U.S.C. 6519(f)) of the Act. 
The Act makes clear that all production and handling operations are to 
comply with all applicable Federal statutes and their implementing 
regulations. Therefore, it is unnecessary to repeat the requirement in 
these regulations.
    (12) Foreign Applicants. We have removed section 205.104, which 
provided that the regulations in this part, as applicable, apply 
equally to domestic and foreign applicants for accreditation, 
accredited certifying agents, domestic and foreign applicants for 
certification as organic production or handling operations, and 
certified organic production and handling operations unless otherwise 
specified. These regulations, as written, apply equally to all 
applicants for accreditation, accredited certifying agents, applicants 
for organic certification, and certified organic operations. 
Accordingly, we have determined that section 205.104 is not necessary.

Subpart C--Organic Crop, Wild Crop, Livestock, and Handling 
Requirements Description of Regulations

General Requirements

    This subpart sets forth the requirements with which production and 
handling operations must comply in order to sell, label, or represent 
agricultural products as ``100 percent organic,'' ``organic,'' or 
``made with organic (specified ingredients or food group(s)).'' The 
producer or handler of an organic production or handling operation must 
comply with all applicable provisions of subpart C. Any production 
practice implemented in accordance with this subpart must maintain or 
improve the natural resources, including soil and water quality, of the 
operation. Production and handling operations which sell, label, or 
represent agricultural products as organic in any manner and which are 
exempt or excluded from certification must comply with the requirements 
of this subpart, except for the development of an organic system plan.

Production and Handling (General)

    The Organic Food Production Act of 1990 (OFPA or Act) requires that 
all crop, wild crop, livestock, and handling operations requiring 
certification submit an organic system plan to their certifying agent 
and, where applicable, the State organic program (SOP). The organic 
system plan is a detailed description of how an operation will achieve, 
document, and sustain compliance with all applicable provisions in the 
OFPA and these regulations. The certifying agent must concur that the 
proposed organic system plan fulfills the requirements of subpart C, 
and any subsequent modification of the organic plan by the producer or 
handler must receive the approval of the certifying agent.
    The organic system plan is the forum through which the producer or 
handler and certifying agent collaborate to define, on a site-specific 
basis, how to achieve and document compliance with the requirements of 
certification. The organic system plan commits the producer or handler 
to a sequence of practices and procedures resulting in an operation 
that complies with every applicable provision in the regulations. 
Accreditation qualifies the certifying agent to attest to whether an 
organic system plan comports with the organic standard. The organic 
system plan must be negotiated, enacted, and amended through an 
informed dialogue between certifying agent and producer or handler, and 
it must be responsive to the unique characteristics of each operation.
    An organic system plan contains six components. First, the organic 
system plan must describe the practices and procedures used, including 
the frequency with which they will be used, in the certified operation. 
Second, it must list and characterize each substance used as a 
production or handling input, including the documentation of commercial 
availability, as applicable. Third, it must identify the monitoring 
techniques which will be used to verify that the organic plan is being 
implemented in a manner which complies with all applicable 
requirements. Fourth, it must explain the recordkeeping system used to 
preserve the identity of organic products from the point of 
certification through delivery to the customer who assumes legal title 
to the goods. Fifth, the organic system plan must describe the 
management practices and physical barriers established to prevent 
commingling of organic and nonorganic products on a split operation and 
to prevent contact of organic production and handling operations and 
products with prohibited substances. Finally, the organic system plan 
must contain the additional information deemed necessary by the 
certifying agent to evaluate site-specific conditions relevant to 
compliance with these or applicable State program regulations. 
Producers or handlers may submit a plan developed to comply with other 
Federal, State, or local regulatory programs if it fulfills the 
requirements of an organic system plan.
    The first element of the organic system plan requires a narrative 
or other descriptive format that identifies the practices and 
procedures to be performed and maintained, including the frequency with 
which they will be performed. Practices are tangible production and 
handling techniques, such as the method for applying manure, the 
mechanical and biological methods used to prepare and combine 
ingredients and package finished products, and the measures taken to 
exclude pests from a facility. Procedures are the protocols established 
for selecting appropriate practices and materials for use in the 
organic system plan, such as a procedure for locating commercially 
available, organically produced seed. Procedures reflect the decision-
making process used to implement the organic system plan.
    By requiring information on the frequency with which production and 
handling practices and procedures will be performed, the final rule 
requires an organic system plan, to include an implementation schedule, 
including information on the timing and sequence of all relevant 
production and handling activities. The plan will include, for example, 
information about planned crop rotation sequences, the timing of any 
applications of organic materials, and the timing and location of soil 
tests. Livestock management practices might describe development of a 
rotational grazing plan or addition of mineral supplements to the feed 
supply. A handling operation might identify steps involved in locating 
and contracting with farmers who could produce organic ingredients that 
were in short supply.
    The second element that must be included in an organic system plan 
is information on the application of substances to land, facilities, or 
agricultural products. This requirement encompasses both natural and 
synthetic materials allowed for use in production and handling 
operations. For natural materials which may be used in organic 
operations under specific restrictions,

[[Page 80559]]

the organic plan must detail how the application of the materials will 
comply with those restrictions. For example, farmers who apply manure 
to their fields must document in their organic system plans how they 
will prevent that application from contributing to water contamination. 
A producer and handler who bases the selection of seed and planting 
stock material under section 205.204 or an agricultural ingredient 
under section 205.301 on the commercial availability of that substance 
must provide documentation in the organic system plan.
    The third element of the organic system plan is a description of 
the methods used to evaluate its effectiveness. Producers and handlers 
are responsible for identifying measurable indicators that can be used 
to evaluate how well they are achieving the objectives of the 
operation. For example, production objectives could be measured through 
regular tallies of bushels or pounds of product sold from the farm or 
in numbers of cases sold from a handling operation. Indicators that can 
identify changes in quality or effectiveness of management practices 
could be relatively simple, such as the information contained in a 
standard soil test. The specific indicators used to evaluate a given 
organic system plan will be determined by the producer or handler in 
consultation with the certifying agent. Thus, if the organic system 
plan calls for improvements in soil organic matter content in a 
particular field, it would include provisions for analyzing soil 
organic matter levels at periodic intervals. If herd health improvement 
is an objective, factors such as somatic cell count or observations 
about changes in reproductive patterns might be used as indicators.
    The fourth element of the organic system plan is a description of 
the recordkeeping system used to verify and document an audit trail, as 
appropriate to the operation. For each crop or wild-crop harvested, the 
audit trail must trace the product from the field, farm parcel, or area 
where it is harvested through the transfer of legal title. A livestock 
operation must trace each animal from its entrance into through removal 
from the organic operation. A handling operation must trace each 
product that is handled and sold, labeled, or represented as organic 
from the receipt of its constituent ingredients to the sale of the 
processed product.
    The fifth element which must be included in an organic system plan 
pertains to split production or handling operations. This provision 
requires an operation that produces both organic and nonorganic 
products to describe the management practices and physical barriers 
established to prevent commingling of organic and nonorganic products. 
This requirement addresses contact of organic products, including 
livestock, organic field units, storage areas, and packaging to be used 
for organic products, with prohibited substances.
    The specific requirements to be included in an organic system plan 
are not listed here. The accreditation process provides an assurance 
that certifying agents are competent to determine the specific 
documentation they require to review and evaluate an operation's 
organic system plan. Section 205.200(a)(6) allows a certifying agent to 
request additional information needed to determine that an organic 
system plan meets the requirements of this subpart. The site-specific 
nature of organic production and handling necessitates that certifying 
agents have the authority to determine whether specific information is 
needed to carry out their function.

Crop Production

    Any field or farm parcel used to produce an organic crop must have 
been managed in accordance with the requirements in sections 205.203 
through 205.206 and have had no prohibited substances applied to it for 
at least 3 years prior to harvest of the crop. Such fields and farm 
parcels must also have distinct, defined boundaries and buffer zones to 
prevent contact with the land or crop by prohibited substances applied 
to adjoining land.
    A producer of an organic crop must manage soil fertility, including 
tillage and cultivation practices, in a manner that maintains or 
improves the physical, chemical, and biological condition of the soil 
and minimizes soil erosion. The producer must manage crop nutrients and 
soil fertility through rotations, cover crops, and the application of 
plant and animal materials. The producer must manage plant and animal 
materials to maintain or improve soil organic matter content in a 
manner that does not contribute to contamination of crops, soil, or 
water by plant nutrients, pathogenic organisms, heavy metals, or 
residues of prohibited substances. Plant and animal materials include 
raw animal manure, composted plant and animal materials, and 
uncomposted plant materials. Raw animal manure must either be 
composted, applied to land used for a crop not intended for human 
consumption, or incorporated into the soil at least 90 days before 
harvesting an edible product that does not come into contact with the 
soil or soil particles and at least 120 days before harvesting an 
edible product that does come into contact with the soil or soil 
particles. Composted plant or animal materials must be produced through 
a process that establishes an initial carbon-to-nitrogen (C:N) ratio of 
between 25:1 and 40:1 and achieves a temperature between 131 deg.F and 
170 deg.F. Composting operations that utilize an in-vessel or static 
aerated pile system must maintain a temperature within that range for a 
minimum of 3 days. Composting operations that utilize a windrow 
composting system must maintain a temperature within that range for a 
minimum of 15 days, during which time the materials must be turned five 
times.
    In addition to these practices and materials, a producer may apply 
a crop nutrient or soil amendment included on the National List of 
synthetic substances allowed in crop production. The producer may apply 
a mined substance of low solubility. A mined substance of high 
solubility may only be applied if the substance is used in compliance 
with the annotation on the National List of nonsynthetic materials 
prohibited in crop production. Ashes of untreated plant or animal 
materials which have not been combined with a prohibited substance and 
which are not included on the National List of nonsynthetic substances 
prohibited for use in organic crop production may be used to produce an 
organic crop. A plant or animal material that has been chemically 
altered by a manufacturing process may be used only if it is included 
on the National List of synthetic substances allowed for use in organic 
production. The producer may not use any fertilizer or composted plant 
and animal material that contains a synthetic substance not allowed for 
crop production on the National List or use sewage sludge. Burning crop 
residues as a means of disposal is prohibited, except that burning may 
be used to suppress the spread of disease or to stimulate seed 
germination.
    The producer must use organically grown seeds, annual seedlings, 
and planting stock. The producer may use untreated nonorganic seeds and 
planting stock when equivalent organic varieties are not commercially 
available, except that organic seed must be used for the production of 
edible sprouts. Seed and planting stock treated with substances that 
appear on the National List may be used when an organically produced or 
untreated variety is not commercially available. Nonorganically 
produced annual seedlings may be used when a temporary variance has 
been established due to damage caused by

[[Page 80560]]

unavoidable business interruption, such as fire, flood, or frost. 
Planting stock used to produce a perennial crop may be sold as 
organically produced planting stock after it has been maintained under 
a system of organic management for at least 1 year. Seeds, annual 
seedlings, and planting stock treated with prohibited substances may be 
used to produce an organic crop when the application of the substance 
is a requirement of Federal or State phytosanitary regulations.
    The producer is required to implement a crop rotation, including 
but not limited to sod, cover crops, green manure crops, and catch 
crops. The crop rotation must maintain or improve soil organic matter 
content, provide for effective pest management in perennial crops, 
manage deficient or excess plant nutrients, and control erosion to the 
extent that these functions are applicable to the operation.
    The producer must use preventive practices to manage crop pests, 
weeds, and diseases, including but not limited to crop rotation, soil 
and crop nutrient management, sanitation measures, and cultural 
practices that enhance crop health. Such cultural practices include the 
selection of plant species and varieties with regard to suitability to 
site-specific conditions and resistance to prevalent pests, weeds, and 
diseases. Mechanical and biological methods that do not entail 
application of synthetic substances may be used as needed to control 
pest, weed, and disease problems that may occur. Pest control practices 
include augmentation or introduction of pest predators or parasites; 
development of habitat for natural enemies; and nonsynthetic controls 
such as lures, traps, and repellents. Weed management practices include 
mulching with fully biodegradable materials; mowing; livestock grazing; 
hand weeding and mechanical cultivation; flame, heat, or electrical 
techniques; and plastic or other synthetic mulches, provided that they 
are removed from the field at the end of the growing or harvest season. 
Disease problems may be controlled through management practices which 
suppress the spread of disease organisms and the application of 
nonsynthetic biological, botanical, or mineral inputs. When these 
practices are insufficient to prevent or control crop pests, weeds, and 
diseases, a biological or botanical substance or a synthetic substance 
that is allowed on the National List may be used provided that the 
conditions for using the substance are documented in the organic system 
plan. The producer must not use lumber treated with arsenate or other 
prohibited materials for new installations or replacement purposes that 
comes into contact with soil or livestock.
    A wild crop that is to be sold, labeled, or represented as ``100 
percent organic,'' ``organic,'' or ``made with organic (specified 
ingredients or food group(s))'' must be harvested from a designated 
area that has had no prohibited substances applied to it for a period 
of 3 years immediately preceding the harvest of the wild crop. The wild 
crop must also be harvested in a manner that ensures such harvesting or 
gathering will not be destructive to the environment and will sustain 
the growth and production of the wild crop.

Livestock Production

    Any livestock product to be sold, labeled, or represented as 
organic must be maintained under continuous organic management from the 
last third of gestation or hatching with three exceptions. Poultry or 
edible poultry products must be from animals that have been under 
continuous organic management beginning no later than the second day of 
life. Milk or milk products must be from animals that have been under 
continuous organic management beginning no later than 1 year prior to 
the production of such products, except for the conversion of an 
entire, distinct herd to organic production. For the first 9 months of 
the year of conversion, the producer may provide the herd with a 
minimum of 80-percent feed that is either organic or produced from land 
included in the organic system plan and managed in compliance with 
organic crop requirements. During the final 3 months of the year of 
conversion, the producer must provide the herd feed in compliance with 
section 205.237. Once the herd has been converted to organic 
production, all dairy animals shall be under organic management from 
the last third of gestation. Livestock used as breeder stock may be 
brought from a nonorganic operation into an organic operation at any 
time, provided that, if such livestock are gestating and the offspring 
are to be organically raised from birth, the breeder stock must be 
brought into the organic operation prior to the last third of 
gestation.
    Should an animal be brought into an organic operation pursuant to 
this section and subsequently moved to a nonorganic operation, neither 
the animal nor any products derived from it may be sold, labeled, or 
represented as organic. Breeder or dairy stock that has not been under 
continuous organic management from the last third of gestation may not 
be sold, labeled, or represented as organic slaughter stock. The 
producer of an organic livestock operation must maintain records 
sufficient to preserve the identity of all organically managed 
livestock and all edible and nonedible organic livestock products 
produced on his or her operation.
    Except for nonsynthetic substances and synthetic substances 
included on the National List that may be used as feed supplements and 
additives, the total feed ration for livestock managed in an organic 
operation must be composed of agricultural products, including pasture 
and forage, that are organically produced. Any portion of the feed 
ration that is handled must comply with organic handling requirements. 
The producer must not use animal drugs, including hormones, to promote 
growth in an animal or provide feed supplements or additives in amounts 
above those needed for adequate growth and health maintenance for the 
species at its specific stage of life. The producer must not feed 
animals under organic management plastic pellets for roughage or 
formulas containing urea or manure. The feeding of mammalian and 
poultry slaughter by-products to mammals or poultry is prohibited. The 
producer must not supply animal feed, feed additives, or feed 
supplements in violation of the Federal Food, Drug, and Cosmetic Act.
    The producer of an organic livestock operation must establish and 
maintain preventive animal health care practices. The producer must 
select species and types of livestock with regard to suitability for 
site-specific conditions and resistance to prevalent diseases and 
parasites. The producer must provide a feed ration including vitamins, 
minerals, protein, and/or amino acids, fatty acids, energy sources, 
and, for ruminants, fiber. The producer must establish appropriate 
housing, pasture conditions, and sanitation practices to minimize the 
occurrence and spread of diseases and parasites. Animals in an organic 
livestock operation must be maintained under conditions which provide 
for exercise, freedom of movement, and reduction of stress appropriate 
to the species. Additionally, all physical alterations performed on 
animals in an organic livestock operation must be conducted to promote 
the animals' welfare and in a manner that minimizes stress and pain.
    The producer of an organic livestock operation must administer 
vaccines and other veterinary biologics as needed to protect the well-
being of animals in his or her care. When preventive practices

[[Page 80561]]

and veterinary biologics are inadequate to prevent sickness, the 
producer may administer medications included on the National List of 
synthetic substances allowed for use in livestock operations. The 
producer may not administer synthetic parasiticides to breeder stock 
during the last third of gestation or during lactation if the progeny 
is to be sold, labeled, or represented as organically produced. After 
administering synthetic parasiticides to dairy stock, the producer must 
observe a 90-day withdrawal period before selling the milk or milk 
products produced from the treated animal as organically produced. 
Every use of a synthetic medication or parasiticide must be 
incorporated into the livestock operation's organic system plan subject 
to approval by the certifying agent.
    The producer of an organic livestock operation must not treat an 
animal in that operation with antibiotics, any synthetic substance not 
included on the National List of synthetic substances allowed for use 
in livestock production, or any substance that contains a nonsynthetic 
substance included on the National List of nonsynthetic substances 
prohibited for use in organic livestock production. The producer must 
not administer any animal drug, other than vaccinations, in the absence 
of illness. The use of hormones for growth promotion is prohibited in 
organic livestock production, as is the use of synthetic parasiticides 
on a routine basis. The producer must not administer synthetic 
parasiticides to slaughter stock or administer any animal drug in 
violation of the Federal Food, Drug, and Cosmetic Act. The producer 
must not withhold medical treatment from a sick animal to maintain its 
organic status. All appropriate medications and treatments must be used 
to restore an animal to health when methods acceptable to organic 
production standards fail. Livestock that are treated with prohibited 
materials must be clearly identified and shall not be sold, labeled, or 
represented as organic.
    A livestock producer must document in his or her organic system 
plan the preventative measures he or she has in place to deter illness, 
the allowed practices he or she will employ if illness occurs, and his 
or her protocol for determining when a sick animal must receive a 
prohibited animal drug. These standards will not allow an organic 
system plan that envisions an acceptable level of chronic illness or 
proposes to deal with disease by sending infected animals to slaughter. 
The organic system plan must reflect a proactive approach to health 
management, drawing upon allowable practices and materials. Animals 
with conditions that do not respond to this approach must be treated 
appropriately and diverted to nonorganic markets.
    The producer of an organic livestock operation must establish and 
maintain livestock living conditions for the animals under his or her 
care which accommodate the health and natural behavior of the 
livestock. The producer must provide access to the outdoors, shade, 
shelter, exercise areas, fresh air, and direct sunlight suitable to the 
species, its stage of production, the climate, and the environment. 
This requirement includes access to pasture for ruminant animals. The 
producer must also provide appropriate clean, dry bedding, and, if the 
bedding is typically consumed by the species, it must comply with 
applicable organic feed requirements. The producer must provide shelter 
designed to allow for the natural maintenance, comfort level, and 
opportunity to exercise appropriate to the species. The shelter must 
also provide the temperature level, ventilation, and air circulation 
suitable to the species and reduce the potential for livestock injury. 
The producer may provide temporary confinement of an animal because of 
inclement weather; the animal's stage of production; conditions under 
which the health, safety, or well-being of the animal could be 
jeopardized; or risk to soil or water quality. The producer of an 
organic livestock operation is required to manage manure in a manner 
that does not contribute to contamination of crops, soil, or water by 
plant nutrients, heavy metals, or pathogenic organisms and optimizes 
nutrient recycling.

Handling

    Mechanical or biological methods can be used to process an 
agricultural product intended to be sold, labeled, or represented as 
``100 percent organic,'' ``organic,'' or ``made with organic 
ingredients'' for the purpose of retarding spoilage or otherwise 
preparing the agricultural product for market. Processed 
multiingredient products labeled ``100 percent organic,'' may only use 
wholly organic ingredients, pursuant to paragraph (a) of section 
205.301. Nonagricultural substances that are allowed for use on the 
National List and nonorganically produced agricultural products may be 
used in or on ``organic'' and ``made with * * *'' products pursuant to 
paragraphs (b) and (c) of section 205.301, respectively. Documentation 
of commercial availability of each substance to be used as a nonorganic 
ingredient in products labeled ``organic'' must be listed in the 
organic handling system plan in accordance with section 205.201.
    Handlers are prohibited from using: (1) Ionizing radiation for the 
treatment or processing of foods; (2) ingredients produced using 
excluded methods; or (3) volatile synthetic solvents in or on a 
processed product or any ingredient which is sold, labeled, or 
represented as organic. The prohibition on ionizing radiation for the 
treatment or processing of foods is discussed under Applicability, 
section 205.105. This rule does not prohibit an organic handling 
operation from using Food and Drug Administration (FDA)-approved X-rays 
for inspecting packaged foods for foreign objects that may be 
inadvertently commingled in the packaged product.
    The two paragraphs on excluded methods and ionizing radiation in 
section 205.270(c) of the proposed rule are replaced with new paragraph 
(c)(1) which cross-references those practices under paragraphs (e) and 
(f) of section 205.105. New section 205.105 clearly specifies that 
ionizing radiation and excluded methods are two practices that handlers 
must not use in producing organic agricultural products and 
ingredients. The prohibition on the use of volatile synthetic solvents, 
also included under paragraph (c) of section 205.270 does not apply to 
nonorganic ingredients in ``made with * * *'' products.
    The practice standard for facility pest management under section 
205.271 requires the producer or handler operating a facility to use 
management practices to control and prevent pest infestations. 
Prevention practices in paragraph (a) include removing pest habitats, 
food sources, and breeding areas; preventing access to handling 
facilities; and controlling environmental factors, such as temperature, 
light, humidity, atmosphere, and air circulation, to prevent pest 
reproduction. Permitted pest control methods in paragraph (b) include 
mechanical or physical controls, such as traps, light, or sound. Lures 
and repellents using nonsynthetic substances may be used as pest 
controls. Lures and repellents with synthetic substances that are 
allowed on the National List also may be used. Prevention and control 
practices in paragraphs (a) and (b) may be used concurrently.
    If the practices in paragraphs (a) and (b) are not effective, 
amended paragraph (c) provides that handlers may then use a 
nonsynthetic or synthetic substance consistent with National List. If 
the measures and substances provided under paragraphs (a), (b), and (c) 
are not

[[Page 80562]]

effective, synthetic substances not on the National List may be used to 
control pest infestations. Under new paragraph (d), the handler and the 
operation's certifying agent, prior to using such a substance, must 
agree on the substance to be used to control the pest, measures to be 
taken to prevent contact with organically produced product, and 
ingredients that may be in the handling facility.
    This rule recognizes that certain local, State, and Federal laws or 
regulations may require intervention with prohibited substances before 
or at the same time substances allowed in paragraphs (b) and (c) are 
used. To the extent that this occurs, this rule permits the handler to 
follow such laws and regulations to market a product as organically 
handled, provided that the product does not come into contact with the 
pest control substance used.
    The extent of pest infestation cannot be foreseen when an organic 
plan is submitted by the certified operation and approved by the 
certifying agent. A handler who uses any nonsynthetic or synthetic 
substance to control facility pests must update its organic handling 
system plan to address all measures taken or intended to be taken to 
prevent contact between the substance and any organically produced 
ingredient or finished product.
    Section 205.272 provides additional practice standards that must be 
followed by an organic handling operation to prevent the commingling of 
organic and nonorganic products and to protect organic products from 
contact with prohibited substances. An organic handling operation must 
not use packaging materials and storage containers or bins that contain 
a synthetic fungicide, preservative, or fumigant in handling an organic 
product. The operation also must not use or reuse any storage bin or 
container that was previously in contact with any prohibited substance 
unless the reusable bin or container has been thoroughly cleaned and 
poses no risk of prohibited materials contacting the organic product.

Temporary Variances

    This subpart establishes conditions under which certified organic 
operations may receive temporary variances from the production and 
handling provisions of this subpart. The Administrator may establish 
temporary variances due to: (1) Natural disasters declared by the 
Secretary; (2) unavoidable business interruption caused by natural 
catastrophes such as drought, wind, fire, flood, excessive moisture, 
hail, tornado, or earthquake; or (3) to conduct research on organic 
production and handling techniques or inputs. An SOP's governing State 
official or a certifying agent may recommend that the Administrator 
establish a temporary variance for various reasons including an 
unavoidable business interruption. The Administrator will determine how 
long a temporary variance will be in effect at the time it is 
established, subject to such extension as the Administrator deems 
necessary. Temporary variances may not be issued to allow use of any 
practice, material, or procedure which is prohibited under section 
205.105.
    The proposed rule inadvertently omitted the SOP's governing State 
official as having authority to recommend a temporary variance to the 
Administrator. We have added that authority in paragraph (b) of section 
205.290.
    Upon notification by the Administrator that a temporary variance 
has been established, the certifying agent must inform each production 
and handling operation it certifies that may be affected by the 
temporary variance. For example, if a drought causes a severe shortage 
of organically produced hay, a dairy operation may be permitted to 
substitute some nonorganic hay for a portion of the herd's diet to 
prevent liquidation of the herd. The producer must keep records showing 
the source and amount of the nonorganic hay used and the timeframe 
needed to restore the total feed ration to organic sources. The 
certifying agent may require that the next organic plan include 
contingency measures to avoid the need to resort to nonorganic feed in 
case of a future shortage.

General--Changes Based on Comments

    This subpart differs from the proposal in several respects as 
follows:
    (1) Maintain or Improve Provision for Production Operations Only. A 
number of commenters questioned whether the requirement in the proposed 
rule that an operation must ``maintain or improve the natural resources 
of the operation, including soil and water quality'' applied to 
handling as well as production operations. They stated that handling 
operations are not integrated into natural systems the way that 
production systems are. As a result, these commenters were uncertain 
how handlers could fulfill the ``maintain or improve'' requirement.
    The ``maintain or improve'' requirement addresses the impact of a 
production operation on the natural resource base that sustains it and, 
as such, does not apply to handling operations. We have modified the 
final rule in section 205.200 by limiting the ``maintain or improve'' 
requirement to production practices.
    (2) Management Practices and Physical Barriers to Prevent 
Commingling. Many commenters, including numerous certifying agents, 
stated that the proposed provisions for an organic system plan were not 
adequate for the task of certifying an operation that produces both 
organic and nonorganic products. The commenters requested that the 
final rule incorporate the provisions established in the OFPA for 
certifying these split operations. These provisions include separate 
recordkeeping for the organic and nonorganic operations and the 
implementation of protective practices to prevent the commingling of 
product and the unintentional contact of organic product with 
prohibited substances. We have amended the provisions for an organic 
system plan in section 205.201(a)(5) to require greater accountability 
regarding the segregation of organic and nonorganic products in a split 
operation. The changes we made incorporate language from the OFPA 
(``physical facilities, management practices'') to provide clear 
criteria for producers, handlers and certifying agents to agree upon an 
organic system plan that protects the integrity of organic product.
    (3) Commercial Availability. The proposed rule required that a raw 
or processed agricultural product sold, labeled, or represented as 
organic must contain not less than 95 percent organically produced raw 
or processed agricultural product. Additionally, section 205.606 of the 
proposed rule allowed any nonorganically produced agricultural product 
to be used in the 5 percent nonorganic component of an agricultural 
product sold, labeled, or represented as organic. Many commenters 
objected to these provisions and recommended that nonorganically 
produced agricultural products should only be allowed in an organic 
product when the organically produced form was not commercially 
available. Commenters stated that allowing nonorganically produced 
agricultural products within the 5 percent would significantly weaken 
demand for many organically produced commodities, especially herbs and 
spices. These commenters stated that herbs and spices often constitute 
less than 5 percent of the ingredients in a raw or processed 
agricultural product and that handlers producing an organic product 
would instinctively seek out the less expensive nonorganic variety. 
They also indicated that the 5 percent component is an important market 
for many products

[[Page 80563]]

produced from organically produced livestock, such as milk derivatives 
and meat by-products, that are not typically marketed directly to 
consumers. Commenters stated that the preponderance of current 
certification programs use the commercial availability criterion when 
determining whether a nonorganically produced agricultural product may 
be used within the 5 percent component. Commenters cited the National 
Organic Standards Board's (NOSB) recommendation that organic 
agricultural products be used in this 5 percent component unless they 
are commercially unavailable and requested that the final rule 
incorporate the criteria for determining commercial availability that 
accompanied that NOSB recommendation.
    We agree with commenters that a preference for organically produced 
agricultural commodities, when commercially available, can benefit 
organic producers, handlers, and consumers in a variety of ways. We 
believe that the commercial availability requirement may allow 
consumers to have confidence that processed products labeled as 
``organic'' contain the highest feasible percentage of organic 
ingredients. Some producers may benefit from any market incentive to 
supply organically produced minor ingredients that handlers need for 
their processed products. We recognize that the provision does impose 
an additional requirement on handlers who must ascertain whether the 
agricultural ingredients they use are commercially available in organic 
form. The NOSB recommended that the final rule contain a commercial 
availability provision based upon the guidelines developed by the 
American Organic Standards project of the Organic Trade Association. 
For these reasons, we have amended the final rule to require that an 
agricultural commodity used as an ingredient in a raw or processed 
product labeled as organic must be organic when the ingredient is 
commercially available in an organic form.
    While recognizing the potential benefits of applying the commercial 
availability standard to all agricultural ingredients in a processed 
product, we are concerned that enforcing this provision could impose an 
excessive burden on handlers. Although many commenters stated that some 
existing certifying agents apply a commercial availability standard, we 
do not have complete information on the criteria used by these 
certifying agents, and we are unsure whether a consensus exists on 
criteria for commercial availability within the organic community. 
Additionally, we are concerned that, unless the standard is clearly 
articulated and consistently interpreted and enforced, it will not be 
effective. Disagreement among certifying agents regarding when and 
under what circumstances an ingredient is commercially available would 
undermine our intent to create an equitable and enforceable standard.
    AMS is soliciting additional comment and information on a number of 
issues concerning the development of standards for the commercial 
availability of organically produced agricultural commodities used in 
processed products labeled as ``organic.'' On the basis of these 
comments and information and additional recommendations that the NOSB 
may develop, AMS will develop a commercial availability standard for 
use in implementing the final rule. AMS intends to develop the 
commercial availability standard and incorporate it within the final 
rule prior to the commencement of certification activities by 
accredited certifying agents. This approach will provide organic 
handlers and certifying agents the standard necessary to incorporate 
the consideration of commercial availability of ingredients in an 
organic system plan at the time that the USDA organic standard comes 
into use. Specifically, AMS requests comments and information 
addressing the following questions:
    What factors, such as quantity, quality, consistency of supply, and 
expense of different sources of an ingredient, should be factored into 
the consideration of commercial availability? What relative importance 
should each of these factors possess, and are there circumstances under 
which the relative importance can change?
    What activities and documentation are sufficient to demonstrate 
that a handler has taken appropriate and adequate measures to ascertain 
whether an ingredient is commercially available?
    How can AMS ensure the greatest possible degree of consistency in 
the application of the commercial availability standard among multiple 
certifying agents?
    Could potentially adverse effects of a commercial availability 
standard, such as uncertainty over the cost and availability of 
essential ingredients, impact or impede the development of markets for 
organically processed products?
    What economic and administrative burdens are imposed by the 
commercial availability standards found in existing organic 
certification programs?
    How would producers benefit from market incentives to increase use 
of organic ingredients that result from a commercial availability 
standard?
    Would lack of a commercial availability standard provide a 
disincentive for handlers of products labeled ``organic'' to seek out 
additional organic minor ingredients? What impacts could this have on 
producers of minor ingredients?
    AMS welcomes any new or unpublished research results or information 
that exists concerning a commercial availability standard. AMS 
specifically invites comment from establishments which currently 
operate using commercial availability or a comparable provision in the 
conduct of their business. AMS will receive comment on this issue until 
90 days after publication of the final rule.
    (4) Conservation of Biodiversity. Many commenters recommended 
amending the definition of organic production to include the 
requirement that an organic production system must promote or enhance 
biological diversity (biodiversity). Commenters stated that the 
definitions for organic production developed by the NOSB and the Codex 
Commission include this requirement. We agree with these commenters and 
have amended the definition of organic production to require that a 
producer must conserve biodiversity on his or her operation. The use of 
``conserve'' establishes that the producer must initiate practices to 
support biodiversity and avoid, to the extent practicable, any 
activities that would diminish it. Compliance with the requirement to 
conserve biodiversity requires that a producer incorporate practices in 
his or her organic system plan that are beneficial to biodiversity on 
his or her operation.

General--Changes Requested But Not Made

    This subpart retains from the proposed rule regulations on which we 
received comments as follows:
    Organic Plan Excessively Restrictive. One organic inspector was 
concerned that the requirements of the organic system plan were too 
prescriptive and would create an excessive paper work burden for 
producers and handlers. The commenter stated that the excessive 
specificity of certain requirements (composition and source of every 
substance used), combined with the ambiguity of others (soil and tissue 
testing required but with no mention of the frequency), would confuse 
the working relationship between a producer or handler and his or her 
certifying agent. The commenter was

[[Page 80564]]

concerned that strict adherence to the specifications in the organic 
system plan would compromise the ability of producers and handlers to 
run their businesses. While agreeing that flexibility in the 
development of the organic system plan was valuable, the commenter 
stated that producers and handlers, not the certifying agent, must 
retain the primary managerial role for their operation. Other 
commenters maintained that the organic system plan requirements were 
too ambiguous and would inhibit certifying agents' efforts to review 
necessary information. For example, a trade association commented that 
the absence of specific recordkeeping requirements for livestock feed 
materials, medications, and health care activities would impair 
compliance monitoring.
    The provisions for an organic system plan were one of the most 
significantly revised components of the proposed rule, and, with minor 
changes related to split operations, we have retained them in the final 
rule. These provisions provide ample discretion for producers, 
handlers, and certifying agents to perform their duties while 
recognizing that mutual consent is a prerequisite for them to meet 
their responsibilities. The organic system plan enables producers and 
handlers to propose and certifying agents to approve site and 
operation-specific practices that fulfill all applicable program 
requirements. Producers and handlers retain the authority to manage 
their operations as they deem necessary, but any actions they undertake 
that modify their organic system plan must be approved by the 
certifying agent. With regard to recordkeeping, certifying agents are 
authorized to require the additional information, such as the livestock 
records mentioned in the comment, that they deem necessary to evaluate 
compliance with the regulations.
    One certifying agent stated that the requirement to maintain or 
improve the natural resources of the operation was worthy in principle 
but unreasonable to achieve. This commenter stated that the long-term 
consequences of an organic system plan could not be foreseen and 
recommended requiring that producers ``must endeavor'' to maintain or 
improve the operation's natural resources. We have not changed this 
requirement because the vast majority of commenters supported an 
organic system plan that mandated the ``maintain or improve'' 
principle. A good working relationship between the producer and his or 
her certifying agent, including the annual inspection and accompanying 
revisions to the organic system plan, can rectify the unforeseen and 
unfavorable conditions that arise.

Crop Production--Changes Based on Comments

    This subpart differs from the proposal in several respects as 
follows:
    (1) Crop nutrient management. The fundamental requirement of the 
soil fertility and crop nutrient management practice standard, that 
tillage, cultivation, and nutrient management practices maintain or 
improve the physical, chemical, and biological condition of the soil 
and minimize erosion, remains unaltered. The proposed rule required 
that a producer budget crop nutrients by properly utilizing manure or 
other animal and plant materials, mined substances of low or high 
solubility, and allowed synthetic amendments. Many commenters disagreed 
with using the term, ``budget,'' which they considered too limiting to 
characterize nutrient management in organic systems. These commenters 
recommended that the practice standard instead emphasize the diverse 
practices used in organic systems to cycle nutrients over extended 
periods of time.
    We agree with these commenters and have amended the final rule to 
require that producers manage crop nutrients and soil fertility through 
the use of crop rotations and cover crops in addition to plant and 
animal materials. Additionally, we clarified that producers may manage 
crop nutrients and soil fertility by applying mined substances if they 
are used in compliance with the conditions established in the National 
List. Finally, we removed the word, ``waste,'' from our description of 
animal and plant materials in the proposed rule to emphasize the 
importance of these resources in organic soil fertility management.
    (2) Compost Practice Standard. The proposed rule required that a 
composted material used on an organic operation must be produced at a 
facility in compliance with the Natural Resource Conservation Service 
(NRCS) practice standard. While many commenters agreed with the need 
for greater oversight of the feedstocks and procedures used to produce 
compost, most stated that the NRCS practice standard would not be 
suitable for this purpose. Commenters stated that the requirements in 
the NRCS practice standard were not designed for organic operations and 
would prohibit many established, effective composting systems currently 
used by organic producers. For example, adoption of the NRCS practice 
standard would prevent producers from using nonfarm wastes as compost 
feedstocks. Materials such as food processing by-products and leaves 
from curbside collection programs have long been used with beneficial 
results.
    Commenters also stated that the minimum acceptable requirements for 
the design, construction, and operation of a composting facility 
contained in the practice standard were appropriate for a voluntary 
cost share program but were excessive as a compliance requirement for 
organic certification. Commenters questioned whether producers could 
justify the investment of time and resources needed to comply with the 
multiple design and operation criteria specified in the NRCS practice 
standard.
    We agree with commenters who stated that, given the diversity of 
composting systems covered by a national organic standard, requiring 
full compliance with the NRCS practice standard would be overly 
prescriptive. We maintain, however, that implementation of the OFPA 
requires a rigorous, quantitative standard for the production of 
compost. The OFPA contains significant restrictions on applying raw 
manure that are reflected in the soil fertility and crop nutrient 
management practice standard. These restrictions pertain to raw manure 
and do not apply once fresh animal materials are transformed into a 
composted material. An organic producer using a composted material 
containing manure must comply with the nutrient cycling and soil and 
water conservation provisions in his or her organic system plan but is 
not constrained by the restrictions that apply to raw manure. 
Therefore, producers intending to apply soil amendments will require 
clear and verifiable criteria to differentiate raw manure from 
composted material. We developed the requirements in the final rule for 
producing an allowed composted material by integrating standards used 
by the Environmental Protection Agency (EPA) and USDA's Natural 
Resources Conservation Service (NRCS). The requirements for the carbon-
to-nitrogen (C:N) ratio for composting materials are the same as that 
found in the NRCS practice standard for a composting facility. The time 
and temperature requirements for in-vessel, static aerated pile, and 
windrow composting systems are consistent with that EPA regulates under 
40 CFR Part 503 for the production of Class A sewage sludge. 
Additionally, AMS reviewed these compost production requirements with 
USDA's Agricultural Research Service (ARS).

[[Page 80565]]

    The conditions in the final rule for producing an allowed composted 
material begin with the selection of appropriate feedstocks. The 
producer's first responsibility is to identify the source of the 
feedstocks used in the composting system. This requirement ensures that 
only allowed plant and animal materials are included in the composting 
process, that they are not contaminated with prohibited materials, and 
that they are incorporated in quantities suitable to the design of the 
composting system. Certifying agents will exercise considerable 
discretion for evaluating the appropriateness of potential feedstock 
materials and may require testing for prohibited substances before 
allowing their use. For example, a certifying agent could require a 
producer to monitor off-farm inputs such as leaves collected through a 
municipal curbside program or organic wastes from a food processing 
facility. Monitoring may be necessary to protect against contamination 
from residues of prohibited substances, such as motor oil or heavy 
metals, or gross inert materials such as glass shards that can enter 
the organic waste stream.
    The final rule further requires that the producer adhere to 
quantitative criteria when combining and managing the plant and animal 
materials that are being composted. When combining feedstocks to 
initiate the process, producers must establish a C:N ratio of between 
25:1 and 40:1. This range allows for very diverse combinations of 
feedstock materials while ensuring that, when properly managed, the 
composting process will yield high quality material. While some 
commenters maintained that specifying any C:N ratio in the final rule 
would be too restrictive, it would be far more problematic not to 
establish a range. The 25:1 to 40:1 range ensures that producers will 
establish appropriate conditions under which the additional 
requirements in this practice standard, most notably the time and 
temperature criteria, can be achieved with minimal producer oversight. 
Composting operations using a C:N ratio lower than 25:1 require 
increasingly intensive management as the ratio drops due to the risk of 
putrefaction. Operations in excess of the 40:1 range may achieve the 
minimum temperature but are likely to drop off quickly and result in a 
finished material that is inadequately mature and deficient in 
nitrogen. The producer is not required to perform a physical analysis 
of each feedstock component if he or she can demonstrate that an 
estimated value is reliable. For example, estimates of the carbon and 
nitrogen content in specific manures and plant materials are generally 
recognized. Other feedstocks of consistent quality may be tested once 
and assumed to approximate that value.
    The producer must develop in his or her organic system plan the 
management strategies and monitoring techniques to be used in his or 
her composting system. To produce an allowed composted material, the 
producer must use an in-vessel, static aerated pile, or windrow 
composting system. Producers using an in-vessel or static aerated pile 
system must document that the composting process achieved a temperature 
between 131 deg.F and 170 deg.F and maintained that level for a minimum 
of 3 days. Producers using a windrow composting system must document 
that the composting process achieved a temperature between 131 deg.F 
and 170 deg.F and maintained that level for a minimum of 15 days. 
Compost produced using a windrow system must be turned five times 
during the process. These time and temperature requirements are 
designed to minimize the risk from human pathogens contained in the 
feedstocks, degrade plant pathogens and weed seeds, and ensure that the 
plant nutrients are sufficiently stabilized for land application.
    The final rule does not contain provisions for the use of materials 
commonly referred to as ``compost teas.'' A compost tea is produced by 
combining composted plant and animal materials with water and a 
concentrated nutrient source such as molasses. The moisture and 
nutrient source contribute to a bloom in the microbial population in 
the compost, which is then applied in liquid form as a crop pest or 
disease control agent. The microbial composition of compost teas are 
difficult to ascertain and control and we are concerned that applying 
compost teas could impose a risk to human health. Regulation of compost 
teas was not addressed in the proposed rule. The National Organic 
Program (NOP) will request additional input from the NOSB and the 
agricultural research community before deciding whether these materials 
should be prohibited in organic production or whether restrictions on 
their use are appropriate.
    In addition to managing crop nutrients with raw manure and 
composted plant and animal materials, a producer may use uncomposted 
plant materials. These are materials derived exclusively from plant 
sources that a producer manages in a manner that makes them suitable 
for application in a cropping system. For example, plant materials that 
are degraded and stabilized through a vermicomposting process may be 
used as a soil fertility and crop nutrient amendment.
    (3) Mined Substances of High Solubility. The proposed rule treated 
mined substances of high solubility as a single category of soil 
amendment and allowed their use where warranted by soil and crop tissue 
testing. Many commenters objected to the general allowance for this 
category of substances and were particularly disappointed that the NOSB 
annotations on two such materials, sodium (Chilean) nitrate and 
potassium chloride, were not included. Commenters cited the potential 
detrimental effects of these highly soluble and saline substances on 
soil quality and stated that several international organic 
certification programs severely prescribe or prohibit their use. One 
certifying agent recommended that natural substances of high solubility 
and salinity be handled comparably to similar synthetic materials such 
as liquid fish products and humic acids that appear on the National 
List, complete with their original NOSB annotations.
    At its June 2000 meeting, the NOSB recommended that the NOP delete 
general references to mined substances of high solubility from the 
final rule, and incorporate the NOSB's specific annotations for 
materials of this nature. We have adopted this recommendation by 
retaining a place for mined substances of high solubility in the soil 
fertility and crop nutrient management practice standard but 
restricting their use to the conditions established for the material as 
specified on the National List of prohibited natural substances. Under 
this approach, mined substances of high solubility are prohibited 
unless used in accordance with the annotation recommended by the NOSB 
and added by the Secretary to the National List. We deleted the 
provision from the proposed rule that use of the substance be 
``justified by soil or crop tissue analysis.'' The final rule contains 
two materials--sodium nitrate and potassium chloride--that may be used 
in organic crop production with the annotations developed by the NOSB.
    While ``mined substances of high solubility'' is not a discrete, 
recognized category such as crop nutrients, the proposed rule mentioned 
sodium nitrate, potassium chloride, potassium nitrate (niter), 
langbeinite (sulfate of potash magnesia), and potassium sulfate in this 
context. Based on the recommendation of the NOSB, the final rule would 
prohibit use of these materials, unless the NOSB developed 
recommendations on conditions for their use and the Secretary added 
them

[[Page 80566]]

to the National List. The NOP would welcome further guidance from the 
NOSB on these materials.
    (4) Burning crop residues. The proposed rule prohibited burning as 
a means of crop disposal, except for burning prunings from perennial 
crops to suppress the spread of disease. Many commenters supported the 
principle behind the prohibition but maintained that the proposed 
language was too restrictive and would preclude certain beneficial 
agronomic practices. Several producers stated that the proposed rule 
would prevent them from collecting and burning residues from diseased 
annual crops, which they felt was an effective and beneficial practice. 
Other producers cited their use of prescriptive burning as a management 
practice for certain native or wild crops. As evidenced by the 
allowance for burning to suppress disease with perennial crops, the 
proposed rule was not designed to preclude the selective use of fire in 
organic production. We agree with the commenters that a more flexible 
allowance for the practice is warranted, and we have amended the 
provision to allow burning of annual and perennial crop residues for 
the suppression of disease and to stimulate seed germination. Producers 
must establish their need and procedures for burning in their organic 
system plan, and the practice cannot be used solely to remove crop 
debris from fields.
    (5) Requirement for Organic Seed in Sprout Production. The proposed 
rule allowed nonorganically produced seeds for all purposes, including 
sprout production, when the certifying agent concurred with the 
producer that organically produced seeds were not commercially 
available. While commenters predominately supported this approach with 
seed used for planting, they were virtually unanimous in stating that 
it is never appropriate to allow nonorganically produced and handled 
seeds in organic sprout production. Commenters cited the NOSB's June 
1994 recommendation that seed used for the production of edible sprouts 
shall be organically produced and stated that existing certification 
standards do not provide an exemption based on commercial availability. 
We agree with these commenters and have modified the final rule to 
require that organic seed must be used for the production of edible 
sprouts.
    (6) Mitigating the Effects of a Biological, Botanical, or Synthetic 
Substance. The proposed rule required that producers who used a 
biological or botanical substance or an allowed synthetic substance to 
control crop pests, weeds, or disease evaluate and mitigate the effects 
of repetitive use of the same or similar substances. While agreeing 
that pest resistance and shifts in pest populations were important 
considerations, commenters stated that managing these issues was beyond 
the ability of individual operations. Commenters recommended that the 
NOP develop principles and practices for managing pest resistance and 
shifts in pest types that would apply to all production operations. We 
agree with these comments and have deleted the requirement to evaluate 
and mitigate the effects of using the same or similar crop pest, weed, 
or disease control substances. The final rule requires that producers 
document the use of such substances in their organic systems plans, 
subject to the approval of their certifying agent.
    (7) Prohibition on Use of Treated Lumber. The proposed rule did not 
specifically address the use of lumber that had been treated with a 
prohibited substance, such as arsenic, in organic production. Citing 
the explicit prohibition on these substances in existing organic 
standards, many commenters felt that treated lumber should be excluded 
in the final rule. Commenters also cited the NOSB's recommendation to 
prohibit the use of lumber treated with a prohibited substance for new 
construction and replacement purposes effective upon publication of the 
final rule. We have included a modified version of the NOSB's 
recommendation within the crop pest, weed, and disease management 
practice standard. This provision prohibits the use of lumber treated 
with arsenate or other prohibited materials for new installations or 
replacement purposes in contact with an organic production site. We 
included this modification to clarify that the prohibition applies to 
lumber used in direct contact with organically produced and handled 
crops and livestock and does not include uses, such as lumber for fence 
posts or building materials, that are isolated from production. The 
prohibition applies to lumber used in crop production, such as the 
frames of a planting bed, and for raising livestock, such as the boards 
used to build a farrowing house.
    (8) Greater Rigor in the Wild Harvest Production Organic System 
Plan. A number of commenters stated that the wild-crop harvesting 
practice standard was insufficiently descriptive and that the proposed 
rule failed to apply the same oversight to wild harvest operations as 
it did to those producing crops and livestock. Some commenters 
maintained that the proposed rule did not require a wild harvest 
producer to operate under an approved organic system plan. These 
commenters proposed specific items, including maps of the production 
area that should be required in a wild harvest operation's organic 
system plan. One commenter recommended that the definition for ``wild 
crop'' be modified to allow the harvest of plants from aquatic 
environments.
    We amended the practice standard for wild-crop harvesting to 
express the compliance requirements more clearly. Wild-crop producers 
must comply with the same organic system plan requirements and 
conditions, as applicable to their operation, as their counterparts who 
produce crops and livestock. Wild harvest operations are production 
systems, and they must satisfy the general requirement that all 
practices included in their organic system plan must maintain or 
improve the natural resources of the operation, including soil and 
water quality. We modified the practice standard to emphasize that wild 
harvest production is linked to a designated site and expect that a 
certifying agent would incorporate mapping and boundary conditions into 
the organic system plan requirements. Finally, we changed the 
definition of ``wild crop'' to specify that harvest takes place from a 
``site'' instead of ``from land,'' thereby allowing for aquatic plant 
certification.

Crop Production--Changes Requested But Not Made

    This subpart retains from the proposed rule regulations on which we 
received comments as follows:
    (1) Application of Raw Manure. The soil fertility and crop nutrient 
management practice standard in the proposed rule permitted the 
application of raw manure to crops not intended for human consumption 
and established restrictions for applying it to crops used for human 
food. For human food crops, the proposed rule required a 120-day 
interval between application and harvest of crops whose edible portion 
had direct contact with the soil or soil particles, and a 90-day 
interval for crops that did not. These provisions reflected the 
recommendations developed by the NOSB at its June 1999 meeting. The 
practice standard also required that raw manure must be applied in a 
manner that did not contribute to the contamination of crops, soil, or 
water by plant nutrients, pathogenic organisms, heavy metals, or 
residues of prohibited substances.
    The majority of commenters supported the provisions for applying 
raw manure. Some commenters stated

[[Page 80567]]

that the provisions effectively balanced the benefits of applying raw 
manure to the soil with the environmental and human health risks 
associated with its use. These commenters stated that the lengthy 
intervals between application and harvest would not impose an 
unreasonable or unfeasible burden on organic producers. The NOSB 
strongly supported the provisions in the proposed rule, emphasizing 
that raw manure contributed significant benefits to soil nutrient, 
structure, and biological activity that other soil fertility practices 
and materials do not provide. Other commenters stated that the 
provisions were consistent with the requirements in existing organic 
standards and added that the restrictions were justifiable because they 
reflected responsible management practices.
    For differing reasons, a number of commenters disagreed with the 
proposed provisions. Some commenters cited the human health risks 
associated with pathogenic organisms found in raw manure and stated 
that the proposed intervals between application and harvest were not 
adequately protective. These commenters recommended that the NOP 
conduct more extensive risk assessment procedures before determining 
what, if any, intervals between application and harvest would 
adequately protect human health. Some of these commenters identified 
the risk assessment methodology and pathogen treatment procedures 
governing the production and use of sewage sludge as the most suitable 
precedent for guiding the additional work required in this area. 
Conversely, a number of commenters stated that the provisions in the 
proposed rule were excessive because they exceeded the minimum 60-day 
interval between application and harvest established in the OFPA. Many 
of these commenters recommended eliminating the distinction between 
crops that come into contact with soil or soil particles and those that 
don't and applying a uniform 60-day interval between harvest and 
application for any crop to which raw manure had been applied. Some 
commenters stated that the 120-day interval severely limited the 
flexibility of producers who operated in regions such as the Northeast 
where the growing season lasted only slightly longer. Other commenters 
maintained that the practice standard did not address specific 
practices, such as applying raw manure to frozen fields, that they 
maintained should be expressly prohibited.
    The responsibility to use raw manure in a manner that is protective 
of human health applies to all producers, whether organic or not, who 
apply such materials. We acknowledge the commenters who noted that the 
OFPA cites food safety concerns relative to manure use and, therefore, 
that food safety considerations should be reflected in the practice 
standard for applying raw manure in the final rule. Some of the 
commenters favored more extensive risk assessment procedures or 
lengthening the interval between application and harvest. We have not, 
however, changed the provisions for applying raw manure.
    Although public health officials and others have identified the use 
of raw manure as a potential food safety concern, at the present time, 
there is no science-based, agreed-upon standard for regulating the use 
of raw manure in crop production. The standard in this rule is not a 
public health standard. The determination of food safety demands a 
complex risk assessment methodology, involving extensive research, peer 
review, and field testing for validation of results. The only 
comparable undertaking in Federal rulemaking has been EPA's development 
of treatment and application standards for sewage sludge, an 
undertaking that required years of dedicated effort. The NOP does not 
have a comparable capacity with which to undertake a comprehensive risk 
assessment of the safety of applying raw manure to human food crops. To 
delegate the authority to determine what constitutes safe application 
of raw manure to certifying agents would be even more problematic. A 
certifying agent cannot be responsible for establishing a Federal food 
safety standard. Therefore, the standard in this rule is a reflection 
of AMS' view and of the public comments that this standard is 
reasonable and consistent with current organic industry practices and 
NOSB recommendations for organic food crop production. Should 
additional research or Federal regulation regarding food safety 
requirements for applying raw manure emerge, AMS will ensure that 
organic production practice standards are revised to reflect the most 
up-to-date food safety standard.
    Neither the identification of food safety as a consideration in the 
OFPA nor the inclusion of this practice standard in the final rule 
should be construed to suggest that organically produced agricultural 
products are any safer than nonorganically produced ones. USDA has 
consistently stated that certification is a process claim, not a 
product claim, and, as such, cannot be used to differentiate organic 
from nonorganic commodities with regard to food safety. National 
organic standards for manure use cannot be used to establish a food 
safety standard for certified commodities in the absence of as uniform 
Federal regulation to ensure the safety of all human food crops to 
which raw manure has been applied. The OFPA was designed to certify a 
process for informational marketing purposes.
    Neither have we changed the practice standard in response to 
comments that the requirement in the final rule should not exceed the 
60-day interval contained in the OFPA. The OFPA clearly establishes 
that the interval must be no less than 60 days and does not preclude a 
longer standard. The NOSB has strongly supported the proposed 90-and 
120-day intervals, and the vast majority of commenters indicated that 
these provisions would be feasible for virtually all organic cropping 
systems. The requirement in the practice standard that raw manure must 
be applied in a manner that does not contribute to the contamination of 
crops, soil, or water by plant nutrients, pathogenic organisms, heavy 
metals, or residues of prohibited substances provides certifying agents 
the discretion to prohibit specific practices that would not be in 
compliance. With this discretion, a certifying agent could prohibit 
practices, such as applying manure to frozen ground or too close to 
water resources, that many commenters stated were not appropriate for 
organic production.
    (2) No Prohibition on Manure from Nonorganic Operations. The 
proposed rule identified animal and plant waste materials as important 
components in soil fertility and crop nutrient management without 
providing criteria for distinguishing allowed and prohibited sources. A 
large number of commenters objected to this provision and stated that 
manure from nonorganic sources may contain residues from prohibited 
substances, including animal medications. These commenters maintained 
that some of these residues, such as antibiotics, may remain active for 
extended intervals, and others, such as heavy metals, could accumulate 
on the organic operation. Commenters stated that if either or both 
conditions prevailed, the integrity of the organic operation would be 
jeopardized. Many producers and certifying agents emphasized that the 
proposed rule conflicted with the Codex guidelines that prohibit the 
use of manure from factory farms. These commenters were concerned that 
failure to restrict the use of manure from nonorganic operations would 
put their products at a competitive disadvantage, particularly in 
European markets. When raising this issue, most commenters requested 
that the final rule either prohibit the use of

[[Page 80568]]

manure from factory farms or state that certifying agents could 
regulate the practice by requiring residue testing and restrictions on 
application.
    We have not changed the provisions for using manure from nonorganic 
operations in the final rule. In many discussions on the subject 
throughout the years, the NOSB has never recommended that manure from 
nonorganic farms be prohibited. Existing organic certification 
standards routinely permit the use of manure from nonorganic operations 
with appropriate oversight, and the final rule incorporates a similar 
approach. Under the final rule, a certifying agent can require residue 
testing when there is reasonable concern that manure, either raw or as 
a component of compost, contains sufficient quantities of prohibited 
materials to violate the organic integrity of the operation. Providing 
certifying agents the discretion to require screening for prohibited 
materials will minimize the risk of introducing contaminants while 
maintaining the ecologically important practice of recycling organic 
material from nonorganic operations. Additionally, the final rule 
requires that producers apply manure and compost in a manner that 
maintains or improves the soil and water quality of their operation. 
This provision provides an additional safeguard that certifying agents 
may use to ensure that the application of any form of manure protects 
the natural resources of the operation.
    (3) Rotating a Field in and out of Organic Production. Some 
commenters stated that a producer should not be allowed to rotate 
fields on their operation in and out of organic production. These 
commenters were concerned that producers could apply prohibited 
substances that persisted for many years, such as soil fumigants, and 
begin harvesting organically produced crops after 3 years. They stated 
that, without a prohibition on the rotation of fields in this manner, 
organic producers could effectively use a prohibited substance on their 
operation.
    We have not amended the final rule to prohibit the rotation of a 
field on an operation in and out of organic production. The statutory 
prohibition on the application of a prohibited substance is 3 years, 
and this requirement is contained in section 205.202(b). This 
prohibition restricts the application of a prohibited substance, not 
its residual activity. If AMS receives evidence that the rotation of 
fields in this manner threatens to compromise organic production, the 
NOP and NOSB will collaborate on developing standards to remedy it.
    (4) Use of Seed Treatments on the National List. The seed and 
planting stock practice standard in the proposed rule generated a very 
diverse array of responses that, while largely favorable, highlighted a 
potentially disruptive impact on organic producers. The practice 
standard favored organic seed and planting stock over nonorganically 
produced but untreated varieties and nonorganically produced, untreated 
seed and planting stock over nonorganically produced seeds and planting 
stock treated with an allowed synthetic substance. Producers could use 
the less preferable seed or planting stock variety if they demonstrated 
to their certifying agent that an equivalent variety in the preferred 
form was not commercially available. Most commenters endorsed the 
principle of requiring organic seed and planting stock and agreed that 
the proposed provisions were a workable approach to enforcement. They 
stated that the provisions created an incentive for seed and planting 
stock providers to develop supplies for organic markets, yet enabled 
producers who made a good faith effort but failed to locate seed or 
planting stock in the preferred form the ability to continue producing 
organically. Most commenters indicated that this approach would support 
the existing market for organic seed and planting stock while fostering 
its continued development.
    A number of commenters, however, stated that the seed and planting 
stock practice standard was unreasonable and unworkable and would 
adversely affect organic producers. These effects would include 
significantly reduced planting options due to the nonavailability of 
seed in any allowed form and higher seed costs, which represent a 
significant percentage of the total production cost for some 
commodities. These commenters maintained that the three categories of 
seed and planting stock allowed in the order of preference could not 
reliably provide producers with many commercial varieties currently 
being planted. They pointed out that there were no synthetic seed 
treatments on the National List in the proposed rule, thereby 
eliminating the use of treated seed in organic production. Commenters 
stated that producers often rely upon seed and planting stock varieties 
that are uniquely well adapted for their growing conditions or 
marketing requirements and that these particular varieties would very 
often not be available in untreated form. These commenters concluded 
that the proposed practice standard would compel many producers to 
abandon many tried and true varieties of seed and planting stock and 
perhaps phase out organic production entirely. One commenter maintained 
that the proposed rule's stated intention of using the practice 
standard to stimulate production of organic seed and planting stock was 
not within the purpose of the OFPA.
    We have not changed the seed and planting stock practice standard 
in response to these commenters because the prohibition on using 
synthetic materials not on the National List is a requirement of the 
OFPA. The final rule cannot allow producers to use synthetic seed 
treatments that have not been reviewed, favorably recommended by the 
NOSB, and added to the National List by the Secretary. The practice 
standard creates incentives for producers to seek out seed and planting 
stock inputs that are the most compatible with organic production, yet 
includes allowances when preferred forms are not commercially 
available. While no seed treatments are included on the National List 
in the final rule, individuals may petition the NOSB for review of such 
substances. Additionally, the practice standard creates an incentive 
for seed and planting stock producers and suppliers to develop natural 
treatments suitable for organic systems that would not need to appear 
on the National List. The objectives of spurring production of 
organically grown seed and promoting research in natural seed 
treatments are compatible with the OFPA's purpose of facilitating 
commerce in organically produced and processed food. We designed the 
practice standard to pursue these objectives while preventing the 
disruption that an ironclad requirement for organically produced seed 
and planting stock may have caused.
    (5) Practice Standard for Maple Syrup. Many commenters stated that 
the proposed rule lacked production and handling standards for 
operations that produce maple syrup. Commenters stated that maple syrup 
production is a significant enterprise for many organic producers and 
that the absence of a practice standard in the final rule would 
adversely affect existing markets for organic products. Many commenters 
recommended that the final rule incorporate the maple syrup practice 
standard from an existing certification program or the American Organic 
Standards.
    We have not included a practice standard for the production and 
handling of maple syrup because the final rule contains sufficient 
provisions for the certification of these types of operations. After 
reviewing existing

[[Page 80569]]

practice standards for maple syrup, we determined that the standards in 
the final rule for crop production, handling operations, and allowed 
and prohibited materials on the National List provided comparable 
guidance.

Crop Production--Clarifications

    Clarification is given on the following issues raised by 
commenters:
    (1) Applicability of Crop Rotation Requirement to all Operations. 
One State program commented that the crop rotation practice standard in 
the proposed rule was unreasonable for producers who operated in 
regions where limited rainfall and irrigation resources or unique soil 
conditions made cover cropping impractical. This commenter stated that 
certain dryland cropping systems, such as aloe vera production, 
function as ``semi-perennial'' systems that do not include rotations, 
yet fulfill the objectives of the crop rotation practice standard. A 
certifying agent expressed a similar concern by suggesting that the 
crop rotation practice standard be changed by adding ``may include, but 
is not limited to'' prior to the list of allowed management practices. 
This commenter felt that the ``may include'' clause afforded individual 
growers greater discretion by acknowledging that not every allowed 
management practice would be applicable to all operations.
    We have retained the language from the proposed rule because it 
already provides the flexibility to develop site-specific crop rotation 
practices requested by these commenters. The regulation as originally 
written includes the `` but not limited to'' clause that allows 
producers to include alternative management practices in their organic 
system plan. Additionally, the regulation states that the producer must 
implement a crop rotation that provides the required functions ``that 
are applicable to the operation.'' This further establishes that the 
crop rotation component of an organic system plan must be considered 
within the context of site-specific environmental conditions including 
climate, hydrology, soil conditions, and the crops being produced. The 
final rule requires implementation of a crop rotation, but the producer 
and certifying agent will determine the specific crops and the 
frequency and sequencing of their use in that rotation. Crop rotations 
must fulfill the requirements of this practice standard--to maintain or 
improve soil organic matter content, provide for pest management, 
manage deficient or excess plant nutrients, and control erosion--and 
are not obligated to use any specific management practice. We 
structured this and other practice standards, as well as the 
requirements of the organic system plan, to enable producers and 
certifying agents to develop organic system plans adapted to natural 
variation in environmental conditions and production systems.
    (2) Excluding Annual Seedlings from Planting Stock. The proposed 
rule allowed a producer to use nonorganically produced seeds and 
planting stock if organically produced equivalent varieties were not 
commercially available. Several commenters, including the NOSB, were 
concerned that the definition of planting stock as ``any plant or plant 
tissue, including rhizomes, shoots, leaf or stem cuttings, roots, or 
tubers, used in plant production or propagation'' was sufficiently 
broad to be applied to annual seedlings. While many commenters, 
including the NOSB, supported the commercial availability exemption in 
the case of seeds and planting stock, they objected to extending it to 
annual seedlings. The proposed rule did not intend to include annual 
seedling within the definition of planting stock and included a 
separate definition of ``annual seedling'' as ``a plant grown from seed 
that will complete its life cycle or produce a harvestable crop yield 
within the same crop your or season in which it is planted.'' The 
proposed rule addressed annual seedlings as a distinct category within 
the seed and planting stock practice standard. There was no allowance 
for using nonorganically produced annual seedlings based on commercial 
availability, and such seedlings can only be used when a temporary 
variance has been issued due to a catastrophic business interruption. 
The growth of markets for organically produced annual seedlings, unlike 
those for seeds and planting stock, obviates the need for the 
commercial availability provision. We have retained this approach in 
the final rule.

Livestock Production--Changes Based on Comments

    This subpart differs from the proposal in several respects as 
follows:
    (1) Whole Herd Conversion. The proposed rule required that 
livestock receive 1 year of continuous organic management prior to the 
milk or milk products they produce being labeled as organic. Based on 
the feed provisions in that proposal, producers would be required to 
provide a 100-percent organic feed ration (exclusive of National List 
substances allowed as feed supplements and additives) for that entire 
year. Many producers, consumers, State certification programs, and 
certifying agents commented that the full year organic feed requirement 
created an insurmountable barrier for small and medium-size dairy 
operations wishing to convert to organic production. They maintained 
that the added expense of a full year, 100-percent organic feed 
requirement was economically prohibitive. These commenters stated that 
``new entry'' or ``whole herd'' conversion provisions in existing 
certification standards have been instrumental in enabling established 
nonorganic dairies to make the transition to organic production. 
Commenters stated that these provisions typically allow producers to 
provide livestock 80-percent organic or self-raised feed for the first 
9 months of a herd's transition, before requiring 100-percent organic 
feed for the final 3 months. Some commenters stated that many current 
organic dairies had capitalized on this whole herd conversion provision 
and that the consistent growth in demand for organic milk and milk 
products reflected consumer acceptance of the principle.
    At its June 2000 meeting, the NOSB reiterated its prior endorsement 
of the conversion principle for operations that jointly convert dairy 
herds and the land on which they are raised. The NOSB recommended 
allowing a producer managing an entire, distinct herd to provide 80-
percent organic or self-raised feed during the first 9 months of the 
final year of conversion, and 100-percent organic feed for the final 3 
months. The recommendation further required that dairy animals brought 
onto an organic dairy must be organically raised form the last third of 
gestation, except that feed produced on land managed under an organic 
system plan could be fed to young stock up to 12 months prior to milk 
production.
    While the preponderance of comments supported the whole herd 
conversion provision, a significant number of individuals, certifying 
agents, and State certification programs opposed it. Some commenters 
felt that requiring less than 1 full year of 100-percent organic feed 
would not satisfy consumer expectations for an organically managed 
dairy. Other commenters stated that the whole herd conversion merely 
favored one segment of organic producers over another. They maintained 
that the full year, 100-percent organic feed requirement would 
stimulate markets for organically produced hay and grain, thereby 
rewarding good row crop rotation. One certifying agent was concerned 
that the conversion provision would create a permanent exemption and 
that split

[[Page 80570]]

operation dairies could use it repeatedly to bring nonorganic animals 
into the organic operation.
    The final rule contains a provision for whole herd conversion that 
closely resembles those found in the NOSB recommendation and the 
existing certification standards. The final rule requires that an 
entire, distinct dairy herd must be under organic management for 1 year 
prior to the production of organic milk. During the first 9 months of 
that year, the producer must provide a feed ration containing a minimum 
of 80-percent organic feed or feed that is raised from land included in 
the organic system plan and managed in compliance with organic crop 
requirements. The balance of the feed ration may be nonorganically 
produced, but it must not include prohibited substances including 
antibiotics or hormones. The producer must provide the herd 100-percent 
organic feed for the final 3 months before the production of organic 
milk. The producer must comply with the provisions in the livestock 
health and living conditions practice standard during the entire year 
of conversion. After the dairy operation has been certified, animals 
brought on to the operation must be organically raised from the last 
third of gestation. We did not incorporate the NOSB's recommendation to 
provide young stock with nonorganic feed up to 12 months prior to the 
production of certified milk. By creating an ongoing allowance for 
using nonorganic feed on a certified operation, this provision would 
have undermined the principle that a whole herd conversion is a 
distinct, one-time event.
    We anticipate that the provisions added to the final rule will 
address the concerns of commenters who objected to the conversion 
principle. Consumers have embraced milk and milk products from dairies 
certified under private whole herd conversion provisions essentially 
identical to that in the final rule. While the conversion provision may 
temporarily reduce demand for organic feed materials, it encourages 
producers to develop their own supplies of organic feed. The conversion 
provision also rewards producers for raising their own replacement 
animals while still allowing for the introduction of animals from off 
the farm that were organically raised from the last third of gestation. 
This should protect existing markets for organically raised heifers 
while not discriminating against closed herd operations. Finally, the 
conversion provision cannot be used routinely to bring nonorganically 
raised animals into an organic operation. It is a one-time opportunity 
for producers working with a certifying agent to implement a conversion 
strategy for an established, discrete dairy herd in conjunction with 
the land resources that sustain it.
    (2) Organic Management for Livestock from the Last Third of 
Gestation. The proposed rule required that organically managed breeder 
and dairy stock sold, labeled, or represented as organic slaughter 
stock must be under continuous organic management from birth. Many 
commenters stated that this requirement was an inappropriate relaxation 
of most existing organic standards, which require organic management 
for all slaughter stock from the last third of gestation. These 
commenters cited the NOSB's 1994 recommendation that all slaughter 
stock must be the progeny of breeder stock under organic management 
from the last third of gestation or longer. Commenters also recommended 
extending the organic management provision to cover the last third of 
gestation to make it consistent with the requirements in section 
205.236(a)(4) for the organically raised offspring of breeder stock. We 
agree with the argument presented by commenters and have changed the 
final rule to require that breeder or dairy stock be organically raised 
from the last third of gestation to be sold as organic slaughter stock.
    (3) Conversion Period for Nonedible Livestock Products. The 
proposed rule required that livestock must be under continuous organic 
management for a period not less than 1 year before the nonedible 
products produced from them could be sold as organic. Several 
commenters questioned the basis for creating different origin of 
livestock requirements based on whether the operation intended to 
produce edible or nonedible products. These commenters stated that the 
OFPA does not sanction such a distinction, nor is it contained in 
existing certification standards. They questioned why the proposed rule 
created such a provision in the absence of a favorable NOSB 
recommendation. We agree that the creation of a separate origin of 
livestock requirement for animals intended to provide nonedible 
products could be confusing. We have changed this provision in the 
final rule to require that nonedible products be produced from 
livestock that have been organically managed from the last third of 
gestation.
    (4) Provisions for Feed Supplements and Feed Additives. The 
proposed rule provided that nonagricultural products and synthetic 
substances included on the National List could be used as feed 
additives and supplements. Many commenters stated that allowing 
nonagricultural products and synthetic substances as feed supplements 
contradicted the definition for ``feed supplement'' found in the 
proposed rule. That definition stipulated that a feed supplement must, 
itself, be a feed material, and the definition for ``feed'' in the 
proposed rule precluded using nonagricultural products and synthetic 
substances. These commenters requested that either the definition of 
``feed supplement'' be changed to make it consistent with the allowance 
for nonagricultural products and synthetic substances or else that the 
term be dropped from the final rule. The Food and Drug Administration 
(FDA) recommended modifying the definitions for ``feed additive'' and 
``feed supplement'' and further specifying the components required in a 
feed ration under the livestock health care practice standard.
    We amended the definition in the final rule to state that a feed 
supplement is ``a combination of feed nutrients added to livestock feed 
to improve the nutritional balance or performance of the total 
ration.'' We retained the second component of the proposed definition, 
which described how a feed supplement could be offered to livestock. We 
amended the definition of ``feed additive'' to ``a substance added to 
feed in micro quantities to fulfill a specific nutritional need; i.e., 
essential nutrients in the form of amino acids, vitamins, and 
minerals.'' The definitions for ``feed supplement'' and ``feed 
additive'' in the proposed rule were originally recommended by the 
NOSB. While our intent in the proposed rule was to codify as fully as 
possible the recommendations of the NOSB, we agree with commenters that 
the proposed definitions were incompatible with the overall provisions 
for livestock feed. The definitions in the final rule are consistent 
with the NOSB's objective to create clear distinctions between feed, 
feed supplements, and feed additives while clarifying the role for each 
within an organic livestock ration. We also incorporated FDA's 
recommendation to include protein and/or amino acids, fatty acids, 
energy sources, and fiber for ruminants as required elements of a feed 
ration in the livestock health care practice standard. These additions 
make the livestock health care practice standard more consistent with 
the National Research Council's Committee on Animal Nutrition's 
Nutrient Requirement series, which we cited in the proposed rule as the 
basis for feed requirements.
    Many commenters addressed provisions in the proposed rule to allow 
or prohibit specific materials and categories of materials used in 
livestock

[[Page 80571]]

feed. Among these, some commenters questioned whether enzymes were 
defined as a feed additive and, therefore, allowed. One certifying 
agent requested guidance on the status of supplementing livestock feed 
with amino acids. At its October 1999 meeting, the NOSB discussed the 
Technical Advisory Panel (TAP) reviews on the use of enzymes and amino 
acids in livestock feed. The NOSB determined that natural sources of 
enzymes exist and that their use should be allowed in organic 
production. Their discussion of natural sources of enzymes concluded 
that enzymes derived from edible, nontoxic plants and nonpathogenic 
bacteria or fungi that had not been genetically engineered should be 
allowed as a nonorganic feed additive. The NOSB did not take a position 
on amino acids during this meeting but indicated that it would revisit 
the subject in the near future. Based on these recommendations, the 
final rule allows the use of natural enzymes but not amino acids as 
nonorganic feed additives. The NOSB's recommendation that natural 
sources of enzymes existed and were compatible with organic livestock 
production supports allowing them without adding them to the National 
List. Some commenters discussed the animal welfare and environmental 
benefits associated with providing amino acids in livestock feed and 
supported allowing them. However, without a recommendation from the 
NOSB that amino acids are natural or should be added to the National 
List as a synthetic, the final rule does not allow their use.
    Commenters questioned whether nonsynthetic but nonagricultural 
substances, such as ground oyster shells and diatomaceous earth, would 
be allowed in agricultural feed. In 1994, the NOSB recommended that 
natural feed additives can be from any source, provided that the 
additive is not classified as a prohibited natural on the National 
List. We agree with this recommendation and have amended the final rule 
to allow such materials as feed additives and supplements. The only 
additional constraint on these materials is that every feed, feed 
additive, and feed supplement be used in compliance with the Federal 
Food, Drug, and Cosmetic Act, as stated in section 205.237(b)(6).
    The NOSB recommended that ruminants maintained under temporary 
confinement must have access to dry, unchopped hay. Although this 
position was an NOSB recommendation and not part of the proposed rule, 
several commenters responded to it. Most of these commenters stated 
that the language was too restrictive and could preclude the use of 
many suitable forage products. One dairy producer stated that the 
requirement would not be practical for operations that mix hay with 
other feed components. We agree that the NOSB's proposed language is 
too prescriptive and have not included it in the final rule.
    (5) Provisions for Confinement. The proposed rule established the 
health, nutritional, and behavioral needs of the particular species and 
breed of animal as the primary considerations for determining livestock 
living conditions. The proposed rule also identified essential 
components of the practice standard, including access to shade, 
shelter, exercise areas, fresh air, and direct sunlight, while stating 
that species-specific guidelines would be developed in conjunction with 
future NOSB recommendations and public comment. Finally, the proposed 
rule outlined the conditions pertaining to animal welfare and 
environmental protection under which producers could temporarily 
confine livestock.
    While supportive of the underlying principles of this practice 
standard, the vast majority of commenters stated that the actual 
provisions suffered from a lack of clarity and specificity. Many 
commenters were concerned that the proposed rule did not adequately 
ensure access to the outdoors for all animals. While supportive of the 
access to pasture requirement for ruminant production, commenters 
stated that the final rule needed a clear definition of pasture to make 
the provision meaningful. Conversely, some commenters supported the 
less prescriptive approach adopted in the proposed rule. The NOSB added 
considerably to its earlier recommendations on livestock living 
conditions during its June 2000 meeting.
    Many commenters stated that the criteria identified as required 
elements in the provisions for livestock living conditions did not 
specifically include access to the outdoors. One commenter stated that 
the requirement that animals receive direct sunlight could be 
interpreted to simply require windows in livestock confinement 
facilities. Commenters were virtually unanimous that, except for the 
limited exceptions for temporary confinement, all animals of all 
species must be afforded access to the outdoors. Commenters also 
maintained that the outdoor area must accommodate natural livestock 
behavior, such as dust wallows for poultry and, in the case of 
ruminants, provide substantial nutrition. Many commenters specifically 
opposed dry lots as an allowable outdoor environment. The NOSB 
recommended that the final rule state that all livestock shall have 
access to the outdoors. As a result of these comments, we have revised 
the final rule to establish that access to the outdoors is a required 
element for all organically raised livestock.
    We further amended the final rule to include a definition of 
``pasture.'' The definition of ``pasture'' we included emphasizes that 
livestock producers must manage their land to provide nutritional 
benefit to grazing animals while maintaining or improving the soil, 
water, and vegetative resources of the operation. The producer must 
establish and maintain forage species-appropriate for the nutritional 
requirements of the species using the pasture.
    Numerous commenters requested clarification on species-specific 
living conditions, such as the use of cages for poultry and confinement 
systems for veal production. The use of continuous confinement systems 
including cages for poultry and veal production is incompatible with 
the requirement that organically raised livestock receive access to the 
outdoors and the ability to engage in physical activity appropriate to 
their needs. There will be times when producers must temporarily 
confine livestock under their care, but these instances must be 
supported by the exemptions to the outdoor access requirement included 
in the final rule. Other commenters requested additional guidance on 
whether confinement for the purpose of finishing slaughter stock would 
be allowed, and, if so, how long that confinement could last. 
Commenters who supported an allowance for finishing most often 
recommended that, in the case of cattle, confinement should not exceed 
90 days. The final rule does not include a specific length of time that 
cattle or other species may be confined prior to slaughter. We will 
seek additional input from the NOSB and public comment before 
developing such standards.
    Several commenters questioned whether a Federal, State, or local 
regulation that required confinement would supersede the requirement 
for outdoor access. These commenters were aware of county ordinances 
that prohibited free ranging livestock production to protect water 
quality. Organic operations must comply with all Federal, State, and 
local regulations. At the same time, to sell, label, or represent an 
agricultural commodity as ``100 percent organic,'' ``organic,'' or 
``made with * * *'' the producer or handler must comply with all the 
applicable requirements set forth in this

[[Page 80572]]

regulation. Federal, State, or local regulations that prohibit a 
required practice or require a prohibited one will essentially preclude 
organic certification of the affected commodity within that 
jurisdiction.
    (6) Prohibition on Parasiticides During Lactation. The proposed 
rule provided that breeder stock could receive synthetic parasiticides 
included on the National List, provided that the treatment occurred 
prior to the last third of gestation for progeny that were to be 
organically managed. Many commenters supported this principle but were 
concerned that the wording would allow producers to administer 
parasiticides to lactating breeder stock while the offspring were still 
nursing. These commenters felt that such an allowance violated the 
intent of the provision because offspring could be exposed to systemic 
parasiticides or their residues through their mother's milk. The NOSB 
recommended a prohibition on using allowed synthetic parasiticides 
during lactation for progeny that are organically managed. We agree 
with these commenters and have modified the final rule to prohibit the 
treatment of organically managed breeder stock with allowed synthetic 
parasiticides during the last third of gestation or lactation.

Livestock Production--Changes Requested But Not Made

    This subpart retains from the proposed rule regulations on which we 
received comments as follows:
    (1) Prohibition on Factory Farms. Many commenters requested that 
the final rule prohibit the certification of ``factory farms.'' These 
commenters stated that factory farms are dependent upon practices and 
materials that are inconsistent with or expressly prohibited in the 
OFPA. The final rule does not contain such a prohibition because 
commenters did not provide a clear, enforceable definition of ``factory 
farm'' for use in the final rule. All organic operations, regardless of 
their size or other characteristics, must develop and adhere to an 
approved organic system plan that complies with these regulations in 
order to be certified.
    (2) Nonorganic Feed Protocol. The proposed rule required that, 
except for nonagricultural products and synthetic substances included 
on the National List, a producer must provide livestock with a total 
feed ration composed of agricultural feed products, including pasture 
and forage, that is organically produced and, if applicable, handled. 
It also included provisions for temporary variances that, under very 
limited circumstances and with the approval of the certifying agent and 
the Administrator, would provide an exemption from specific production 
and handling standards. The preamble of the proposed rule described an 
emergency resulting in the unavailability of organic agricultural feed 
products as an example of a situation in which a temporary variance 
could be issued. Many commenters recommended that the final rule 
require a producer who received a temporary variance for a feed 
emergency to follow the order of preference for noncertified organic 
feed developed by the NOSB. This order of preference requires a 
producer to procure agricultural feed products from sources that are as 
close to complying with the standards for organic certification as 
possible. Commenters stated that adherence to the order of preference 
would most closely conform with the expectation of consumers that 
organically raised livestock received organic feed and would create an 
incentive for livestock feed producers to pursue certification.
    We have not included the NOSB's feed emergency order of preference 
in the final rule because it would be too prescriptive and difficult to 
enforce during an emergency. Receiving a temporary variance 
categorically exempts a producer from the provision for which it was 
issued, although that producer may not substitute any practice, 
material, or procedure that is otherwise prohibited, although that 
producer may not substitute any practice, material, or procedure that 
is otherwise prohibited under section 205.105. Additionally, certified 
organic feed is far more available in terms of quantity and 
affordability than when the NOSB developed its order of preference in 
1994. We anticipate that producers whose original supply of organic 
agricultural feed products is interrupted will be able to fill the 
shortfall through the marketplace.
    (3) Prohibition on Physical Alterations. The proposed rule required 
that producers perform physical alterations as needed to promote animal 
welfare and in a manner that minimizes pain and stress. This provision 
was one component of the health care practice standard that required 
producers to establish and maintain preventive livestock health care 
practices. We stated in the preamble that there was insufficient 
consensus from previous public comment to designate specific physical 
alterations as allowed or prohibited and envisioned working with 
producers, certifying agents, and consumers to achieve that goal. We 
requested comment on techniques to measure animal stress that could be 
used to evaluate whether specific physical alterations were consistent 
with the conditions established in the proposed rule.
    We received significant numbers of comments both opposing and 
supporting the provision in the proposed rule for performing physical 
alterations. Many commenters opposed any allowance for physical 
alterations and argued that such practices are cruel and debilitating 
to animals. These commenters maintained that modifications in breed 
selection, stocking densities, and the configuration of living 
conditions could achieve results similar to physical alterations 
without harming the animal. They stated that by adapting their 
production systems to promote the physical and psychological welfare of 
animals, producers could obviate the need for physical alterations. In 
particular, commenters cited physical alterations to the beaks and feet 
of poultry as unnecessary due to the availability of alternative 
production systems. Many commenters expressed concern that the 
allowance for physical alterations would facilitate the certification 
of large confinement operations. Commenters also stated that performing 
physical alterations was inconsistent with Codex guidelines and 
objected to the allowance before full public deliberation on the 
subject through the NOSB process.
    A large number of commenters stated that, if reasonable guidelines 
could be established, the allowance for physical alterations would be a 
beneficial, and even necessary, condition for organic livestock 
production. These commenters maintained that producers engage in 
physical alterations for the overall welfare of the flock or herd and 
that the pain and stress of performing them must be weighed against the 
pain and stress of not doing so. For example, these commenters cited 
the traumatic effect of cannibalism on poultry flocks that had not 
undergone beak trimming or the injuries caused by animals whose horns 
had not been removed. Many of these commenters stated that producers 
could reduce but not eliminate the need for physical alterations 
through alternative production practices such as breed selection and 
stocking densities. The NOSB supported the provision as written in the 
proposed rule, stating that it met the animal welfare requirements 
while allowing practices necessary for good animal husbandry. We have 
retained the proposed provision for physical alterations without taking 
any further position on whether specific practices are allowed or 
prohibited. We did not receive substantial new

[[Page 80573]]

guidance on techniques to measure stress in animals due to physical 
alterations and have made no revisions in that regard. The final rule 
establishes that, when appropriately performed and within the context 
of an overall management system, specific physical alterations are 
allowed. It also mandates that, as an element of a preventative health 
care program, physical alterations must benefit the ultimate physical 
and psychological welfare of the affected animal.
    (4) Withdrawal for Synthetic Parasiticides in Lactating Livestock. 
The proposed rule required a 90-day withdrawal period before milk and 
milk products produced from livestock treated with an allowed synthetic 
parasiticide could be labeled as organic. Referencing the statement in 
the preamble to the proposed rule that the 90-day withdrawal period was 
attributable to ``consumer expectations of organically raised 
animals,'' a dairy producer commented that the provision ignored animal 
welfare and farm economic sustainability considerations. The commenter 
considered the 90-day withdrawal period capricious and problematic 
since, for bovine dairy operations, it would compel producers to either 
shorten an animal's natural drying off period, or lose 30 days of 
organic milk production. The commenter stated that the optimal extended 
withdrawal period for this situation would be 60 days since this is the 
approximate duration of a dairy cow's natural dry period. Under this 
approach, livestock requiring treatment could receive an allowed 
synthetic parasiticide at the time of drying off, thus allowing the 
withdrawal period to coincide with the natural 60-day period when the 
livestock were not lactating. Livestock could complete the withdrawal 
period prior to the birth of their offspring in approximately 60 days, 
at which time the mother's milk could again be sold as organic. The 
commenter maintained that the 60-day period would satisfy consumer 
expectation for an extended withdrawal period after treatment with an 
allowed synthetic parasiticide without imposing an unnecessary 
constraint on the producer.
    We have retained the 90-day withdrawal period in the final rule. 
The provisions in the final rule for treating livestock with an allowed 
synthetic parasiticide reflect the 90-day withdrawal period recommended 
by the NOSB at its October 1999 meeting. The NOSB has the authority to 
reconsider this issue and propose an alternative annotation for the 
Secretary's consideration.
    (5) Delineation of Space Requirements for Animal Confinement. The 
proposed rule did not establish space requirements for livestock living 
conditions but stated that a producer must accommodate the health and 
natural behavior of animals under his or her care. Some commenters 
stated their preference for space requirements because they are more 
uniform and enforceable. These commenters stated that some existing 
certification standards include space requirements in standards for 
livestock living conditions and that Codex guidelines support this 
approach. While not disagreeing that space requirements could be an 
effective certification tool for organic livestock production systems, 
we have not incorporated any such provisions in the final rule. We 
anticipate that additional NOSB recommendations and public comment will 
be necessary for the development of space requirements. At its June 
2000 meeting, the NOSB agreed that it would be premature to include 
space requirements in the final rule.
    (6) Access to pasture versus pasture-based. Commenters stated that 
the proposed rule's requirement that ruminants receive ``access to 
pasture'' did not sufficiently characterize the relationship that 
should exist between ruminants and the land they graze. Many of these 
commenters recommended that the final rule require that ruminant 
production be ``pasture-based.'' Many commenters stated that the final 
rule needed a more explicit description of the relationship between 
livestock and grazing land. The NOSB shared this perspective and 
recommended that the final rule require that ruminant production 
systems be ``pasture-based.'' In contrast, an organic dairy producer 
maintained that a uniform, prescriptive definition of pasture would not 
be appropriate in a final rule. This commenter stated that the 
diversity of growing seasons, environmental variables, and forage and 
grass species could not be captured in a single definition and that 
certifying agents should define pasture on a case-by-case basis. This 
commenter also disagreed with the ``pasture-based'' requirement, 
stating that pasture should be only one of several components of 
balanced livestock nutrition. Singling out pasture as the foundation 
for ruminant management would distort this balance and deprive other 
producers of the revenue and rotation benefits they generate by growing 
livestock feed.
    We retained the ``access to pasture'' requirement because the term, 
``pasture-based,'' has not been sufficiently defined to use for 
implementing the final rule. The final rule does include a definition 
for pasture, and retention of the ``access to pasture'' provision 
provides producers and certifying agents with a verifiable and 
enforceable standard. The NOP will work with the NOSB to develop 
additional guidance for managing ruminant production operations.
    (7) Stage of Production. The proposed rule contained provisions for 
temporary confinement, during which time livestock would not receive 
access to the outdoors. Many commenters were concerned that the stage-
of-production justification for temporary confinement could be used to 
deny animals access to the outdoors during naturally occurring life 
stages, including lactation. Commenters overwhelmingly opposed such an 
allowance and stated that the stage of production exemption should be 
narrowly applied. One commenter stated that a dairy operation, for 
example, might have seven or eight distinct age groups of animals, with 
each group requiring distinct living conditions. Under these 
circumstances, the commenter maintained that a producer should be 
allowed to temporarily house one of these age groups indoors to 
maximize use of the whole farm and the available pasture. At its June 
2000 meeting, the NOSB stated that the allowance for temporary 
confinement should be restricted to short-term events such as birthing 
of newborn or finish feeding for slaughter stock and should 
specifically exclude lactating dairy animals.
    We have not changed the provision in the final rule for the stage-
of-production allowance in response to these comments. The NOSB has 
supported the principle of a stage-of-production allowance but has not 
provided sufficient guidance for determining, on a species-specific 
basis, what conditions would warrant such an allowance. Without a 
clearer foundation for evaluating practices, we have not identified any 
specific examples of practices that would or would not warrant a stage-
of-production allowance. We will continue to explore with the NOSB 
specific conditions under which certain species could be temporarily 
confined to enhance their well-being.
    In the final rule, temporary confinement refers to the period 
during which livestock are denied access to the outdoors. The length of 
temporary confinement will vary according to the conditions on which it 
is based, such as the duration of inclement weather. The conditions for 
implementing temporary confinement for livestock do not minimize the 
producer's ability to

[[Page 80574]]

restrain livestock in the performance of necessary production 
practices. For example, it is allowable for a producer to restrain 
livestock during the actual milking process or under similar 
circumstances, such as the administration of medication, when the 
safety and welfare of the livestock and producer are involved.

Handling--Changes Based on Comments

    The following changes are made based on comments received.
    (1) Commercial Availability. A large number of commenters, 
including organic handlers and certifying agents, stated that 
``commercial availability'' must be included as a requirement for the 5 
percent of nonorganic ingredients that are used in products labeled 
``organic.''
    We agree and have added a commercial availability requirement as 
part of a handler's organic system plan under section 205.201 of this 
subpart. Up to 5 percent (less water and salt) of a product labeled 
``organic,'' may be nonorganic agricultural ingredients. However, 
handlers must document that organic forms of the nonorganic ingredients 
are not commercially available before using the nonorganic ingredients.
    (2) Prohibited Practices. Commenters were unclear about the extent 
of the prohibition on use of excluded methods and ionizing radiation. 
To make that prohibition clear, we have moved the handling prohibitions 
in proposed rule sections 205.270 (c) to 205.105, Applicability, 
subpart B. Paragraphs (c)(1) and (c)(2) which listed excluded methods 
and ionizing radiation in the proposed rule are combined into paragraph 
(c)(1) that cross-references new section 205.105.
    (3) Use of Predator Pests and Parasites. Paragraph (b)(1) of 
section 205.271 proposed that predator pests and parasites may be used 
to control pests in handling facilities. Under FDA's Good Manufacturing 
Practice, 21 CFR part section 110.35(c), it states that ``No pests 
shall be allowed in any area of a food plant.'' Some commenters 
believed use of predator pests in handling facilities is prohibited by 
the FDA regulation. Other commenters stated that predator pests could 
be used in certain handling facilities under the FDA regulation. One 
commenter claimed that the FDA regulation in 21 CFR part 110.19 allows 
exemptions for certain establishments that only harvest, store, or 
distribute raw agricultural product. Another commenter suggested that 
use of predator pests should be allowed when FDA does not prohibit 
their use.
    We do not intend to be inconsistent with the FDA requirement and, 
thus, have removed proposed paragraph (b)(1) of section 205.271. Use of 
predator pests in various organic handling and storage areas is subject 
to FDA's Good Manufacturing Practice. Paragraphs (b)(2) and (b)(3) are 
redesignated.
    (4) Use of Synthetic Pheromone Lures. Proposed paragraph (b)(3) 
provided for use of nonsynthetic lures and repellant. A few handlers 
and certifying agents commented that nearly all pheromone lures use 
synthetic substances. Because pheromone lures do not come into contact 
with products in a handling facility, commenters argued that such lures 
should be allowed, provided that the synthetic substance used is on the 
National List.
    We agree and have added ``synthetic substances'' to redesignated 
paragraph (b)(2) for use in lures and repellents. The synthetic 
substances used must be consistent with the National List.
    (5) Restrict Initial Use of Synthetics to National List Substances. 
Paragraph (c) in the proposed rule provided for use of any synthetic 
substance to prevent or control pests. Several handlers and certifying 
agents stated that use of nonsynthetic and synthetic substances should 
initially be limited first to substances which are allowed on the 
National List. This would mean that substances not allowed for use on 
the National List could not be used initially to control or prevent 
pest infestations.
    We agree with these comments. Use of allowed substance before use 
of other substances is a fundamental principle of organic agriculture. 
Therefore, if preferred practices under paragraphs (a) and (b) are not 
successful in preventing or controlling pest infestations, handlers may 
then use, under amended paragraph (c), only nonsynthetic or synthetic 
substances which are allowed for use on the National List.
    We have removed the proviso that applications of a pest control 
substance must be consistent with the product's label instructions. 
This requirement is readily understood and does not need to be 
explicitly stated in the regulations.
    Because paragraph (c) now provides for use only of allowed National 
List substances, a new paragraph (d) is added to allow for use of other 
synthetic substances, including synthetic substances not on the 
National List, to prevent or control pest infestations. These 
substances may be used only if the practices in paragraphs (a), (b), 
and (c) are ineffective. Before the substance is used, the handler and 
the operation's certifying agent must agree on the synthetic substance 
to be used and the measures to be taken to prevent contact of the 
substance with organic products and ingredients in the facility. We 
expect that this communication can be accomplished with telephone calls 
or by electronic means.
    This regulation does not preempt Federal, State, or local health 
and sanitation requirements. We recognize that inspectors who monitor 
compliance with those regulations may require immediate intervention 
and use of synthetic substances, not on the National List, before or at 
the same time as the methods specified in paragraphs (b) and (c). 
Therefore, to make this clear, we have added a new paragraph (f). To 
ensure that the use of the substances does not destroy a product's 
organic integrity, we are requiring that the handler take appropriate 
measures to prevent contact of the product with the pest control 
substance used.
    (6) Preventing Contact with Prohibited Substances. Commenters 
recommended that, if prohibited substances are applied by fogging or 
fumigation, the organic product and packaging material must be required 
to be completely removed from the facility and reentry of the product 
or packaging be delayed for a period three times longer than that 
specified on the pesticide label. Commenters believed removal and 
reentry should be mandatory, regardless of the organic product or 
container.
    We understand the commenters' concerns. However, their 
recommendations are not appropriate for all pest infestations. We 
believe that measures needed to be taken to prevent contact with a 
synthetic substance must be determined on a case-by-case basis by the 
handler and certifying agent. As stated earlier, new paragraph (d) of 
section 205.271 requires a handler and certifying agent to agree on 
control and prevention measures prior to application of a synthetic 
substance. We believe that such an agreement will help safeguard a 
product's organic integrity. Use of a synthetic substance in fogging or 
fumigation should be based on, among other things, location of the pest 
relative to the organic products in the facility; the extent of the 
pest infestation; the substance and application method to be used; the 
state of the organically produced product or ingredient (raw, 
unpackaged bulk, canned, or otherwise sealed); and health and 
sanitation requirements of local, State, and Federal authorities.
    Paragraph (e) is changed to clarify that an operation's organic 
handling plan must be updated to document all measures taken to prevent 
contact between synthetic pest control

[[Page 80575]]

substances and organically produced products and ingredients.
    (7) Repetitive Use of Pest Control Measures. One commenter 
suggested a change in the paragraph (e) requirement that handlers' 
organic plans must include ``an evaluation of the effects of repetitive 
use'' of pest prevention and control materials. The commenter believed 
that the requirement was excessive and beyond what should be expected 
of handlers. The commenter indicated that handlers' organic plans 
should address the ``techniques that will be used to minimize'' the 
negative effects of repetitive use of pest control materials.
    We agree that ``an evaluation of the effects of repetitive use'' is 
more than what is reasonable to expect of handlers in their organic 
plans. We do not agree, however, that an organic plan should be 
required to address the ``techniques'' used to minimize the effects of 
repetitive use of pest control materials. However, we believe that 
handlers should update their organic handling plans to account for the 
use of pest control or prevention substances, particularly if the 
substances are prohibited substances. The update should include a 
description of the application methods used and the measures taken to 
prevent contact between the substance used and the organic product. We 
have added these requirements in redesignated paragraph (e). Proposed 
paragraph (e) of section 205.271 is removed.

Handling--Changes Requested But Not Made

    (1) Exceptions to Handling Processes. A commenter stated that many 
herbal products are extracted from organically produced herbs but that 
the extraction of those products ``can employ significantly different 
methods than those used in the manufacture of more traditional foods.'' 
To be labeled as ``organic'' ingredients, substances such as herbs, 
spices, flavorings, colorings, and other similar substances, must be 
derived from a certified organic source and be extracted without the 
use of prohibited substances.
    (2) Allowed Synthetics Used in Packaging Materials and Storage 
Containers. A State department of agriculture commented that section 
205.272(b)(1) prohibits use of synthetic fungicides, preservatives, or 
fumigants in packaging materials and storage containers or bins. The 
comment stated that it is inconsistent to permit use of allowed 
substances as ingredients in processed products but prohibit their use 
as a preservative or fumigant in the packaging materials and storage 
containers and bins. The commenter suggested that paragraph (b)(1) be 
amended to permit use of National List-allowed substances in section 
205.605, particularly carbon dioxide and ozone, in packaging materials 
and storage containers or bins.
    We understand the commenter's concern. However, section 6510(a)(5) 
of the Act specifically prohibits use of any packaging materials, 
storage containers, or bins that contain synthetic fungicides, 
preservatives, or fumigants.
    (3) Additional Measures to Prevent Product Contamination. A few 
commenters suggested changing paragraph (e) of section 205.271 to 
require that handlers' organic handling plans specify measures that 
would be taken to prevent contact between a pest control substance and 
``packaging materials.'' This would be in addition to measures 
preventing contamination of ``any ingredient or finished product'' in 
the handling facility.
    We understand the commenters' objective. However, for the reasons 
stated earlier in regard to commenters' request that mandatory removal 
of product during pest control treatment be required, we believe that 
such a requirement should not be mandatory for all packaging materials. 
Measures to prevent contamination of packaging material should be left 
to the handler and certifying agent to specify in the handling plan.

Handling--Clarifications

    Clarification is given on the following issues raised by 
commenters.
    (1) Use of Nonorganic Ingredients in Processed Products. We have 
corrected paragraph (c) of section 205.270 to clarify what must not be 
used in or on organically produced ingredients and nonorganically 
produced ingredients used in processed organic products. The 
prohibition on use of ionizing radiation, excluded methods, and 
volatile synthetic solvents applies to all organically produced 
ingredients. The 5 percent of nonorganic ingredients in products 
labeled ``organic,'' also are subject to the three prohibited 
practices. The nonorganic ingredients in products labeled ``made with 
organic ingredients'' must not be produced using ionizing radiation or 
excluded methods but may be produced using volatile synthetic solvents. 
The nonorganic ingredients in products containing less than 70 percent 
organically produced ingredients may be produced and processed using 
ionizing radiation, excluded methods, and synthetic solvents.
    (2) Water Quality Used in Processing. A handler questioned whether 
public drinking water containing approved levels of chlorine, pursuant 
to the Safe Drinking Water Act, is acceptable for use in processing 
products labeled ``100 percent organic.'' Water meeting the Safe 
Drinking Water Act may be used in processing any organically produced 
products.

Temporary Variances--Changes Based on Comments

    Additional Causes for Issuing Temporary Variance. A few State 
department of agriculture commenters suggested that ``drought'' should 
be added to the regulatory text as a natural disaster warranting a 
temporary variance from regulations.
    We agree and have added drought to the regulatory text in paragraph 
(a)(2) of section 205.290. We have also added ``hail'' as a natural 
disaster warranting a temporary variance. Both drought and hail were 
mentioned in the preamble of the proposed rule but were unintentionally 
left out of the regulatory text.

Temporary Variances--Changes Requested But Not Made

    Allowance of Temporary Variances. A few commenters suggested that 
SOP's governing State officials should be able to authorize temporary 
variances due to local natural disasters which may occur in a State. We 
do not agree that with these comments. For consistency of application, 
we believe that only the Administrator should have the authority to 
grant a temporary variance. Citing local conditions, an SOP's governing 
State official and certifying agents may recommend a temporary variance 
to the Administrator. We are committed to providing quick responses to 
such recommendations.

Subpart D--Labels, Labeling, and Market Information

    The Act provides that a person may sell or label an agricultural 
product as organically produced only if the product has been produced 
and handled in accordance with provisions of the Act and these 
regulations. This subpart sets forth labeling requirements for organic 
agricultural products and products with organic ingredients based on 
their percentage of organic composition. For each labeling category, 
this subpart establishes what organic terms and references can and 
cannot be displayed on a product package's principal display panel 
(pdp), information panel, ingredient statement, and on other package 
panels. Labeling requirements also are established for organically 
produced livestock feed, for containers used in shipping and storing 
organic

[[Page 80576]]

product, and for denoting organic bulk products in market information 
which is displayed or disseminated at the point of retail sale. 
Restrictions on labeling organic product produced by exempt operations 
are established. Finally, this subpart provides for a USDA seal and 
regulations for display of the USDA seal and the seals, logos, or other 
identifying marks of certifying agents.
    The intent of these sections is to ensure that organically produced 
agricultural products and ingredients are consistently labeled to aid 
consumers in selection of organic products and to prevent labeling 
abuses. These provisions cover the labeling of a product as organic and 
are not intended to supersede other labeling requirements specified in 
other Federal labeling regulations. The Food and Drug Administration 
(FDA) regulates the placement of information on food product packages 
in 21 CFR parts 1 and 101. USDA's Food Safety and Inspection Service's 
(FSIS) Federal Meat Inspection Act, Poultry Products Inspection Act, 
and Egg Products Inspection Act have implementing regulations in 9 CFR 
part 317 which must be followed in the labeling of meat, poultry, and 
egg products. The Federal Trade Commission (FTC) regulations under the 
Fair Packaging and Labeling Act (FLPA) in 16 CFR part 500 and the 
Alcohol Tobacco and Firearms (ATF) regulations under the Federal 
Alcohol Administration Act (FAA) in 27 CFR parts 4, 5, and 7, also must 
be followed, as applicable to the nature of the product. The labeling 
requirements specified in this subpart must be implemented in a manner 
so that they do not conflict with the labeling requirements of these 
and other Federal labeling requirements.
    While this regulation does not require labeling of an organic 
product as organic, we assume that producers and handlers choose to 
label their organic products and display the USDA seal to the extent 
allowed in these regulations. They do this to improve the marketability 
of their organic product.
    Under the National Organic Program (NOP), the assembly, packaging, 
and labeling of multiingredient organic products are considered 
handling activities. The certification of handling operations is 
covered in subpart C of this regulation. No claims, statements, or 
marks using the term, ``organic,'' or display of certification seals, 
other than as provided in this regulation, may be used. Based on 
comments received, several important labeling changes from the proposed 
rule are made in this final rule. (1) The term, ``organic,'' cannot be 
used in an agricultural product name if it modifies an ingredient that 
is not organically produced (e.g., ``organic chocolate ice cream'' when 
the chocolate flavoring is not organically produced). (2) The 5 percent 
or less of nonorganic ingredients in products labeled ``organic'' must 
be determined not ``commercially available'' in organic form. (3) 
Display of a product's organic percentage is changed from required to 
optional for ``organic'' and ``made with * * *'' products. (4) The 
minimum organic content for ``made with * * *'' products is increased 
from 50 percent to 70 percent. (5) In addition to listing individual 
ingredients, the ``made with * * *'' label may identify a food group on 
the label (``made with organic fruit''). (6) A new section is added to 
provide labeling of livestock feed that is organically produced. (7) 
Finally, a revised design for the USDA seal is established. In addition 
to these changes, we have made a few changes in the regulatory text for 
clarity and consistency purposes. These do not change the intent of the 
regulation.
    Once a handler makes a decision to market a product as organic or 
containing organic ingredients, the handler is required to follow the 
provisions in this subpart regarding use, display, and location of 
organic claims and certification seals. Handlers who produce and label 
organic ingredients and/or assemble multiingredient products composed 
of 70 percent or more organic ingredients must be certified as an 
organic handling operation. Handlers of products of less than 70 
percent organic ingredients do not have to be certified unless the 
handler actually produces one or more of the organic ingredients used 
in the product. Repackers who purchase certified organic product from 
other entities for repackaging and labeling must be certified as an 
organic operation. Entities which simply relabel an organic product 
package are subject to recordkeeping requirements which show proof that 
the product purchased prior to relabeling was, indeed, organically 
produced and handled. Distributors which receive and transport labeled 
product to market are not subject to certification or any labeling 
requirements of this regulation.
    Many commenters appealed for ``transition'' or ``conversion'' 
labeling. This issue is discussed under Applicability in subpart B. 
Transition labeling is not provided for in the Act or the proposed rule 
and is not provided for in this regulation.

Description of Regulations

General Requirements

    The general labeling principle employed in this regulation is that 
labeling or identification of the organic nature of a product increases 
as the organic content of the product increases. In other words, the 
higher the organic content of a product, the more prominently its 
organic nature can be displayed. This is consistent with provisions of 
the Act which establish the three percentage categories for organic 
content and basic labeling requirements in those categories.
    Section 205.300 specifies the general use of the term, ``organic,'' 
on product labels and market information. Paragraph (a) establishes 
that the term, ``organic,'' may be used only on labels and in market 
information as a modifier of agricultural products and ingredients that 
have been certified as produced and handled in accordance with these 
regulations. The term, ``organic,'' cannot be used on a product label 
or in market information for any purpose other than to modify or 
identify the product or ingredient in the product that is organically 
produced and handled. Food products and ingredients that are not 
organically produced and handled cannot be modified, described, or 
identified with the term, ``organic,'' on any package panel or in 
market information in any way that implies the product is organically 
produced.
    Section 6519(b) of the Act provides the Secretary with the 
authority to review use of the term, ``organic,'' in agricultural 
product names and the names of companies that produce agricultural 
products. While we believe that the term, ``organic,'' in a brand name 
context does not inherently imply an organic production or handling 
claim and, thus, does not inherently constitute a false or misleading 
statement, we intend to monitor the use of the term in the context of 
the entire label. We will consult with the FTC and FDA regarding 
product and company names that may misrepresent the nature of the 
product and take action on a case-by-case basis.

Categories of Organic Content

    Section 205.301 establishes the organic content requirements for 
different labeling provisions specified under this program. The type of 
labeling and market information that can be used and its placement on 
different panels of consumer packages and in market information is 
based on the percentage of organic ingredients in the product. The 
percentage must reflect the actual weight or fluid volume (excluding 
water

[[Page 80577]]

and salt) of the organic ingredients in the product. Four categories of 
organic content are established: 100 percent organic; 95 percent or 
more organic; 70 to 95 percent organic; and less than 70 percent 
organic.

100 Percent Organic

    For labeling and market information purposes, this regulation 
allows a ``100 percent organic'' label on: (1) agricultural products 
that are composed of a single ingredient such as raw, organically 
produced fruits and vegetables and (2) products composed of two or more 
organically produced ingredients, provided that the individual 
ingredients are, themselves, wholly organic and produced without any 
nonorganic ingredients or additives. Only processing aids which are, 
themselves, organically produced, may be used in the production of 
products labeled ``100 percent organic.'' With the exception of the 
description phrase ``100 percent'' on the pdp, the labeling 
requirements for ``100 percent organic'' products are the same as 
requirements for 95 percent organic products specified in section 
205.303.

Organic

    Products labeled or represented as ``organic'' must contain, by 
weight (excluding water and salt), at least 95 percent organically 
produced raw or processed agricultural product. The organic ingredients 
must be produced using production and handling practices pursuant to 
subpart C. Up to 5 percent of the ingredients may be nonagricultural 
substances (consistent with the National List) and, if not commercially 
available in organic form pursuant to section 205.201, nonorganic 
agricultural products and ingredients in minor amounts (hereinafter 
referred to as minor ingredients) (spices, flavors, colorings, oils, 
vitamins, minerals, accessory nutrients, incidental food additives). 
The nonorganic ingredients must not be produced using excluded methods, 
sewage sludge, or ionizing radiation.

Made with Organic Ingredients

    For labeling and market information purposes, the third category of 
agricultural products are multiingredient products containing by weight 
or fluid volume (excluding water and salt) between 70 and 95 percent 
organic agricultural ingredients. The organic ingredients must be 
produced in accordance with subpart C and subpart G. Such products may 
be labeled or represented as ``made with organic (specified ingredients 
or food group(s)).'' By ``specified,'' we mean the name of the 
agricultural product(s) or food group(s) forming the organic 
ingredient(s). Up to three organically produced ingredients or food 
groups may be named in the phrase.
    If one or more food groups are specified in the phrase, all 
ingredients in the product which belong to the food group(s) identified 
on the label must be organically produced. For the purposes of this 
labeling, the following food groups may be identified as organically 
produced on a food package label: beans, fish, fruits, grains, herbs, 
meats, nuts, oils, poultry, seeds, spices, sweeteners, and vegetables. 
In addition, processed milk products (butter, cheese, yogurt, milk, 
sour creams, etc.) also may be identified as a ``milk products'' food 
group. For instance, a vegetable soup made with 85 percent organically 
produced and handled potatoes, tomatoes, peppers, celery, and onions 
may be labeled ``soup made with organic potatoes, tomatoes, and 
peppers'' or, alternatively, ``soup made with organic vegetables.'' In 
the latter example, the soup may not contain nonorganic vegetables. For 
the purposes of this labeling provision, tomatoes are classified, 
accordingly to food use, as a vegetable.
    To qualify for this organic labeling, the nonorganic agricultural 
ingredients must be produced and handled without use of the first three 
prohibited practices specified in paragraph (f) of section 205.301, but 
may be produced or handled using practices prohibited in paragraphs 
(f)(4) through (f)(7).
    Because of the length of the labeling phrase ``made with organic 
(specified ingredients or food group(s)),'' such products are referred 
to in this preamble as ``made with * * * '' products. The labeling 
requirements for ``made with * * *'' products are specified in section 
205.304.

Product With Less Than 70 Percent Organic Ingredients

    The final labeling category covers multiingredient products with 
less than 70 percent organic ingredients (by weight or fluid volume, 
excluding water and salt). The organic ingredients must be produced in 
accordance with subparts C and G. The remaining nonorganic ingredients 
may be produced, handled, and assembled without regard to these 
regulations (using prohibited substances and prohibited production and 
handling practices). Organic labeling of these products is limited to 
the information panel only as provided in section 205.305.
    Products that fail to meet the requirements for one labeling 
category may be eligible for a lower labeling category. For example, if 
a product contains wholly organic ingredients but the product 
formulation requires a processing aid or less than 5 percent of a minor 
ingredient that does not exist in organic form, the product cannot be 
labeled ``100 percent organic'' and must be labeled as ``organic.'' If 
a multiingredient product is 95 percent or more organic but contains a 
prohibited substance in the remaining 5 percent, the product cannot be 
labeled as ``organic,'' because of the presence of the prohibited 
substance, but may be labeled as a ``made with * * *'' product. 
Further, a handler who produces a ``100 percent organic'' or 
``organic'' product but chooses not to be certified under this program 
may only display the organic percentage on the information panel and 
label the ingredients as ``organic'' on the ingredient statement. The 
handler must comply with recordkeeping requirements in subpart E.

Livestock Feed

    All agricultural ingredients used in raw and processed livestock 
feed that is labeled as ``100 percent organic'' and ``organic'' must be 
organically produced and handled in accordance with the requirements of 
these regulations. The difference between the two labels is that feed 
labeled as ``100 percent organic'' must be composed only of organically 
produced agricultural ingredients and may not contain nonorganic feed 
additives or supplements. The agricultural portion of livestock feed 
labeled as ``organic'' must contain only organically produced raw and 
processed agricultural ingredients and may contain feed additives and 
supplements in conformance with the requirements of section 205.237. 
Additionally, labeling of livestock feed containers must follow State 
livestock feed labeling laws.

Prohibited Practices

    The labeling of whole products or ingredients as organic is 
prohibited if those products or ingredients are produced using any of 
the following production or handling practices: (1) Ingredients or 
processing aids produced using excluded methods; (2) ingredients that 
have been produced using applications of sewage sludge; (3) ingredients 
that have been processed with ionizing radiation; (4) synthetic 
substances not on the National List; (5) sulfites, nitrates, or 
nitrites added to or used in processing of an organic product in 
addition to those substances occurring naturally in a commodity (except 
the use of sulfites in the

[[Page 80578]]

production of wine); (6) use of the phrase, ``organic when available,'' 
or similar statement on labels or in market information when referring 
to products composed of nonorganic ingredients used in place of 
specified organic ingredients; and (7) labeling as ``organic'' any 
product containing both organic and nonorganic forms of an ingredient 
specified as ``organic'' on the label.
    These seven prohibitions apply to the four labeling categories of 
products and are not individually repeated as prohibited practices in 
the following sections. Table 1, Prohibited Production and Handling 
Practices for Organic Labeling, shows how use of the seven prohibited 
practices affects the labeling of organically produced products and 
ingredients used in those products.

                                                         Table 1.--Prohibited Production and Handling Practices for Labeling Categories
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                         Use nonorganic
                                                                                      Use ionizing      Use substances not on      Contain added         ingredients and      Use both  organic
      Organic and use label         Use excluded methods    Use sewage sludge          radiation            National List       sulfites, nitrates,       label ``when      and nonorganic forms
                                                                                                                                      nitrites             available''       of same  ingredient
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
``100 percent organic'': Single/   NO...................  NO...................  NO...................  NO...................  NO...................  NO..................  NO
 multiingredients completely
 organic.
``Organic'':
    Organic ingredients (95% or    NO...................  NO...................  NO...................  NO...................  NO...................  NO..................  NO
     more).
    Nonorganic ingredients (5% or  NO...................  NO...................  NO...................  NO...................  NO...................  NO..................  NO
     less).
``Made with organic
 ingredients'':
    Organic ingredients (70-95%).  NO...................  NO...................  NO...................  NO...................  NO--except wine......  NO..................  NO
    Nonorganic ingredients (30%    NO...................  NO...................  NO...................  OK...................  OK...................  NA*.................  NA*
     or less).
Less-than 70% organic
 ingredients:
    Organic ingredients (30% or    NO...................  NO...................  NO...................  NO...................  NO--except wine......  NO..................  NO
     less).
    Nonorganic ingredients (70%    OK...................  OK...................  OK...................  OK...................  OK...................  NA*.................  NA*
     or more).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Not applicable, provided that the nonorganic ingredient is not labeled as ``organic'' on the ingredient statement and is not counted in the calculation of the product's organic percentage.

Calculating the Percentage of Organic Ingredients

    Section 205.302 specifies procedures for calculating the 
percentage, by weight or fluid volume, of organically produced 
ingredients in an agricultural product labeled or represented as 
``organic.'' The calculation is made by the handler at the time the 
finished product is assembled.
    The organic percentage of liquid products and liquid ingredients is 
determined based on the fluid volume of the product and ingredients 
(excluding water and salt). When a product is identified on the pdp or 
the information panel as being reconstituted with water from a 
concentrate, the organic content is calculated on the basis of a 
single-strength concentration.
    For products that contain organically produced dry and liquid 
ingredients, the percentage of total organic ingredients is based on 
the combined weight of the dry organic ingredient(s) and the weight of 
the liquid organic ingredient(s) (excluding water and salt). For 
example, a product may be made using organically produced vegetable 
oils or grain oils or contain organic liquid flavoring extracts in 
addition to other organic and nonorganic ingredients. In such cases, 
the weight of the liquid organic oils or flavoring extracts, less any 
added water and salt, would be added to other solid organic ingredients 
in the product, and their combined weight would be the basis for 
calculating the percentage of organic ingredients.
    At the discretion of the handler, the total percentage of all 
organic ingredients in a food product may be displayed on any package 
panel of the product with the phrase, ``contains X percent organic 
ingredients,'' or a similar phrase. If the total percentage is a 
fraction, it must be rounded down to the nearest whole number. The 
percentage of each organic ingredient is not required to be displayed 
in the ingredient statement.
    A certified operation that produces organic product may contract 
with another operation to repackage and/or relabel the product in 
consumer packages. In such cases, the repacker or relabeler may use 
information provided by the certified operation to determine the 
percentage of organic ingredients and properly label the organic 
product package consistent with the requirements of this subpart.

Labeling ``100 Percent Organic'' and ``Organic'' Products

    Section 205.303 includes optional, required, and prohibited 
practices for labeling agricultural products that are ``100 percent 
organic'' or ``organic.'' Products that are composed of wholly organic 
ingredients may be identified with the label statement, ``100 percent 
organic,'' on any package panel. Products composed of between 95 and 
100 percent organic ingredients may be identified with the label 
statement ``organic'' on any package panel, and the handler must 
identify each organic ingredient in the ingredient statement.
    The handler may display the following information on the pdp, the 
information panel, and any other part of the package and in market 
information representing the product: (1) The term, ``100 percent 
organic'' or ``organic,'' as applicable to the content of the product; 
and (2) for products labeled ``organic,'' the percentage of organic 
ingredients in the product. The size of the percentage statement must 
not exceed one-half the size of the largest type size on the panel

[[Page 80579]]

on which the statement is displayed. It also must appear in its 
entirety in the same type size, style, and color without highlighting; 
(3) the USDA seal; and (4) the seal, logo, or other identifying mark of 
the certifying agent (hereafter referred to as ``seal or logo'') which 
certified the handler of the finished product. The seals or logos of 
other certifying agents which certified organic raw materials or 
organic ingredients used in the product also may be displayed, at the 
discretion of the finished product handler. If multiple organic 
ingredients are identified on the ingredient statement, the handler of 
the finished product that combined the various organic ingredients must 
maintain documentation, pursuant to subpart B of this regulation.
    While certifying agent identifications can appear on the package 
with the USDA seal, they may not appear larger than the USDA seal on 
the package. There is no restriction on the size of the USDA seal as it 
may appear on any panel of a packaged product, provided that display of 
the Seal conforms with the labeling requirements of FDA and FSIS.
    If a product is labeled as ``100 percent organic'' the ingredients 
may be identified with the term, ``organic,'' but will not have to be 
so labeled because it is assumed from the 100 percent label that all 
ingredients are organic. For 95 percent-plus products, each organically 
produced ingredient listed in the ingredient statement must be 
identified with the term, ``organic,'' or an asterisk or other mark to 
indicate that the ingredient is organically produced. Water and salt 
cannot be identified as ``organic'' in the ingredient statement.
    The handler of these products also must display on the information 
panel the name of the certifying agent which certified the handling 
operation that produced the finished product. The handler may include 
the business address, Internet address, or telephone number of the 
certifying agent. This information must be placed below or otherwise 
near the manufacturer or distributor's name.

Labeling Products ``Made With Organic (specified ingredients or food 
group(s))''

    With regard to agricultural products ``made with * * *''--those 
products containing between 70 and 95 percent organic ingredients--this 
rule establishes, in section 205.304, the following optional, required, 
and prohibited labeling practices.
    Under optional practices, the ``made with * * *'' statement is used 
to identify the organically produced ingredients in the product. The 
statement may be placed on the pdp and other panels of the package. The 
same statement can also be used in market information representing the 
product. However, the following restrictions are placed on the 
statement: (1) The statement may list up to three ingredients or food 
group commodities that are in the product; (2) the individually 
specified ingredients and all ingredients in a labeled food group must 
be organically produced and must be identified as ``organic'' in the 
ingredient statement on the package's information panel; (3) the 
statement cannot appear in print that is larger than one half (50 
percent) of the size of the largest print or type appearing on the pdp; 
and (4) the statement and optional display of the product's organic 
percentage must appear in their entirety in the same type size, style, 
and color without highlighting.
    The following food groups can be specified in the ``made with'' 
labeling statement: fish, fruits, grains, herbs, meats, nuts, oils, 
poultry, seeds, spices, sweeteners, and vegetables. In addition, 
organically produced and processed butter, cheeses, yogurt, milk, sour 
cream, etc., may be identified as a ``milk products'' food group. For 
the purposes of this labeling, tomatoes are considered as vegetables, 
based on their use in a product. As noted immediately above, all of a 
product's ingredients that are in the specified food group(s) must be 
organically produced.
    Display of the ``made with * * *'' statement on other panels must 
be similarly consistent with the size of print used on those panels. 
These restrictions are in accordance with FDA labeling requirements and 
similar to the recommendations of the National Organic Standards Board 
(NOSB). This provision helps assure that the ``made with * * *'' 
statement is not displayed in such a manner as to misrepresent the 
actual organic composition of the product.
    The USDA seal may not be displayed on the pdp of products labeled 
``made with organic ingredients.'' However, at the handler's option and 
consistent with any contract agreement between the organic producer or 
handler and the certifying agent, the certifying agent's seal or logo 
may be displayed on the pdp and other package panels.
    Packages of ``made with * * *'' products may display on the pdp, 
information panel, or any package panel, the total percentage of 
organic ingredients in the product. Any organically produced 
ingredient, including any ingredient that is a member of a food group 
listed on the ``made with * * *'' statement, must be identified in the 
ingredient statement with the term, ``organic.'' Alternatively, an 
asterisk or other mark may be placed beside each organically produced 
ingredient in the ingredients statement with an explanation that the 
mark indicates the ingredient is organically produced.
    The name of the certifying agent which certified the handler of the 
finished product must be displayed below or otherwise near the 
manufacturer or distributor's name. The statement may include the 
phrase, ``Certified organic by * * *'' or ``Ingredients certified as 
organically produced by * * *'' to help distinguish the certifying 
agent from the manufacturer or distributor. The handler may include the 
business address, Internet address, or telephone number of the 
certifying agent which certified the handler of the finished product.
    If the percentage of organic ingredients in the product is 
displayed, the handler who affixes the label to the product package is 
responsible for determining the percentage. The handler may use 
information provided by the certified operation in determining the 
percentage. As part of the certifying agent's annual certification of 
the handler, the certifier must verify the calculation and labeling of 
packages.

Labeling Products With Less Than 70 Percent Organic Ingredients

    Section 205.305 covers the final labeling category of packaged 
multiingredient agricultural products containing less than 70 percent 
organic ingredients.
    Handlers of ``less than 70 percent'' multiingredient products, who 
choose to declare the organic nature of their product, may do so only 
in the ingredient statement by identifying the organically produced 
ingredients with the term, ``organic,'' or with an asterisk or other 
mark. If the handler identifies the ingredients that are organically 
produced, the handler also may declare the percentage of organic 
content in the product. The percentage may only be placed on the 
information panel so that it can be viewed in relation to the 
ingredient statement.
    Processed products composed of less than 70 percent organic content 
cannot display the USDA seal or any certifying agent's organic 
certification seal or logo anywhere on the product package or in market 
information.
    Handlers of such products are subject to this regulation in the 
following ways. Those handlers who only purchase organic and nonorganic 
ingredients and

[[Page 80580]]

assemble a finished product of less than 70 percent organic content do 
not have to be certified as organic handlers. However, they are 
responsible for appropriate handling and storage of the organic 
ingredients (section 205.101(a)(3)) and for maintaining records 
verifying the organic certification of the ingredients used in the 
product (section 205.101(c)). To the extent that the packaging process 
includes affixing the label to finished product package, those handlers 
are responsible for meeting the labeling requirements of this subpart. 
The nonorganic ingredients may be produced, handled, and assembled 
without regard to the requirements of this part.
    Table 2, Labeling Consumer Product Packages, provides a summary of 
the required and prohibited labeling practices for the four labeling 
categories.

                                   Table 2.--Labeling Consumer Product Packages
----------------------------------------------------------------------------------------------------------------
                                   Principal display                          Ingredient         Other package
        Labeling category                panel         Information panel       statement            panels
----------------------------------------------------------------------------------------------------------------
``100 percent Organic''           ``100 percent       ``100% organic''    If multiingredient  ``100 percent
 (Entirely organic; whole, raw     organic''           (optional).         product, identify   organic''
 or processed product).            (optional).        Certifying agent     each ingredient     (optional).
                                  USDA seal and        name (required);    as ``organic''     USDA seal and
                                   certifying agent    business/Internet   (optional).         certifying agent
                                   seal(s)             address, tele.                          seal(s)
                                   (optional).         No. (optional).                         (optional).
``Organic'' (95% or more organic  ``Organic'' (plus   ``X% organic''      Identify organic    ``X% organic''
 ingredients).                     product name)       (optional).         ingredients as      (optional).
                                   (optional).        Certifying agent     ``organic''        USDA seal and
                                  ``X% organic''       name (required);    (required if        certifying agent
                                   (optional) USDA     business/Internet   other organic       seal(s)
                                   seal and            address, tele.      labeling is         (optional).
                                   certifying agent    No. (optional).     shown).
                                   seal(s)
                                   (optional).
``Made with Organic               ``made with         ``X% organic        Identify organic    ``made with
 Ingredients'' (70 to 95%          organic             ingredients''       ingredients as      organic
 organic ingredients).             (ingredients or     (optional).         ``organic''         (ingredients or
                                   food group(s))''   Certifying agent     (required if        food group(s))''
                                   (optional).         name (required);    other organic       (optional) ``X%
                                  ``X% organic''       business/Internet   labeling is         organic''
                                   (optional).         address, tele.      shown).             (optional).
                                  Certifying agent     No. (optional).                        Certifying agent
                                   seal of final      Prohibited: USDA                         seal of final
                                   product handler     seal.                                   product handler
                                   (optional).                                                 (optional).
                                  Prohibited: USDA                                            Prohibited: USDA
                                   seal.                                                       seal.
Less-than 70% organic             Prohibited: Any     ``X% organic''      Identify organic    Prohibited: USDA
 ingredients.                      reference to        (optional).         ingredients as      seal & certifying
                                   organic content    Prohibited: USDA     ``organic''         agent seal.
                                   of product.         seal & certifying   (optional)
                                  Prohibited: USDA     agent seal.         (required if %
                                   seal & certifying                       organic is
                                   agent seal.                             displayed).
----------------------------------------------------------------------------------------------------------------

    Misrepresentation in Labeling of Organic Products. The labeling 
requirements of this final rule are intended to assure that the term, 
``organic,'' and other similar terms or phrases are not used on a 
product package or in marketing information in a way that misleads 
consumers as to the contents of the package. Thus, we intend to monitor 
the use of the term, ``organic,'' and other similar terms and phrases. 
If terms or phrases are used on product packages to represent 
``organic'' when the products are not produced to the requirements of 
this regulation, we will proceed to restrict their use.
    Handlers may not qualify or modify the term, ``organic,'' using 
adjectives such as, ``pure'' or ``healthy,'' e.g., ``pure organic 
beef'' or ``healthy organic celery.'' The term, ``organic,'' is used in 
labeling to indicate a certified system of agricultural production and 
handling. Terms such as ``pure,'' ``healthy,'' and other similar 
adjectives attribute hygienic, compositional, or nutritional 
characteristics to products. Use of such adjectives may misrepresent 
products produced under the organic system of agriculture as having 
special qualities as a result of being produced under the organic 
system. Furthermore, use of such adjectives would incorrectly imply 
that products labeled in this manner are different from other organic 
products that are not so labeled.
    Moreover, ``pure,'' ``healthy,'' and other similar terms are 
regulated by FDA and FSIS. These terms may be used only in accordance 
with the labeling requirements of FDA and FSIS. The prohibition on use 
of these terms to modify ``organic'' does not otherwise preclude their 
use in other labeling statements as long as such statements are in 
accordance with other applicable regulations. Representations made in 
market information for organic products are also subject to the 
requirements and restrictions of other Federal statutes and applicable 
regulations, including the Federal Trade Commission Act, 15 U.S.C. 45 
et seq.

Labeling Organically Produced Livestock Feed Products

    New section 205.306 is added to provide for labeling of the two 
categories of livestock feed that are organically produced under this 
regulation. Feed labeled ``100 percent organic'' may contain only 
organically produced agricultural product. Such feed must not contain 
feed additives, supplements, or synthetic substances. Feed labeled 
``organic'' must contain only organically produced agricultural 
products and may contain feed additives and supplements in accordance 
with section 205.237, Livestock Feed, and section 205.603 of the 
National List. This rule does not limit the percentage of such 
additives and supplements in organic feed products, which may be 
required under various State laws.
    Livestock feed labeled ``100 percent organic'' and ``organic'' may, 
at the handler's option, display the USDA seal and the seal or logo of 
the certifying agent. The organic ingredients listed on the ingredient 
statement may be identified with the word, ``organic,'' or other 
reference mark. The name of the certifying agent must be displayed on 
the information panel. The business address, Internet address, and 
other contact information for the certifying agent may be displayed. 
These are the only labeling options to indicate that livestock feed 
that is organically produced.

[[Page 80581]]

Labeling of Products Shipped in International Markets

    Domestically produced organic products intended for export may be 
labeled to meet the requirements of the country of destination or any 
labeling requirements specified by a particular foreign buyer. For 
instance, a product label may require a statement that the product has 
been certified to, or meets, certain European Union (EU) organic 
standards. Such factual statements regarding the organic nature of the 
product are permitted. However, those packages must be exported and 
cannot be sold in the United States with such a statement on the label 
because the statement indicates certification to standards other than 
are required under this program. As a safeguard for this requirement, 
we require that shipping containers and bills of lading for such 
exported products display the statement, ``for export only,'' in bold 
letters. Handlers also are expected to maintain records, such as bills 
of lading and U.S. Customs Service documentation, showing export of the 
products. Only products which have been certified and labeled in 
accordance with the requirements of the NOP may be shipped to 
international markets without marking the shipping containers ``for 
export only.''
    Organically produced products imported into the United States must 
be labeled in accordance with the requirements of this subpart. 
Labeling and market representation of the product cannot imply that the 
product is also certified to other organic standards or requirements 
that differ from this national program.

Labeling Nonretail Containers

    Section 205.307 provides for labeling nonretail containers used to 
ship or store raw or processed organic agricultural products that are 
labeled ``100 percent organic,'' ``organic,'' and ``made with organic * 
* *'' Labeling nonretail containers as containing organically produced 
product should provide for easy identification of the product to help 
prevent commingling with nonorganic product or handling of the product 
which would destroy the organic nature of the product (fumigation, 
etc.). These labeling provisions are not intended for shipping or 
storage containers that also are used in displays at the point of 
retail sale. Retail containers must meet labeling provisions specified 
in section 205.307.
    Containers used only for shipping and storage of any organic 
product labeled as containing 70 percent or more organic content may, 
at the handler's discretion, display the following information: (1) The 
name and contact information of the certifying agent which certified 
the handler of the finished product; (2) the term, ``organic,'' 
modifying the product name; (3) any special handling instructions that 
must be followed to maintain the organic integrity of the product; and 
(4) the USDA seal and the appropriate certifying agent seal. This 
information is available to handlers if they believe display of the 
information helps ensure special handling or storage practices which 
are consistent with organic practices.
    Containers used for shipping and storage of organic product must 
display a production lot number if such a number is used in the 
processing and handling of the product. Much of this information may 
overlap information that the handler normally affixes to shipping and 
storage containers or information that is required under other Federal 
labeling regulations. There are no restrictions on size or display of 
the term, ``organic,'' or the certifying agent seal unless required by 
other Federal or State statutes.

Labeling Products at the Point of Retail Sale

    Section 205.308 applies to organically produced ``100 percent 
organic'' and ``organic'' products that are not packaged prior to sale 
and are presented in a manner which allows the consumer to select the 
quantity of the product purchased.
    The terms, ``100 percent organic'' and ``organic,'' as applicable, 
may be used to modify the name of the product in retail displays, 
labeling, and market information. The ingredient statement of a product 
labeled ``organic'' displayed at retail sale must identify the organic 
ingredients. If the product is prepared in a certified facility, the 
retail materials may also display the USDA seal and the seal or logo of 
the certifying agent. If shown, the certifying agent seal must not be 
larger than the USDA seal.
    Section 205.309 addresses ``made with * * *'' products that are not 
packaged prior to sale and are presented in a manner which allows the 
consumer to select the quantity of the product purchased. These 
products include, but are not limited to, multiingredient products 
containing between 70 and 95 percent organic ingredients. The ``made 
with * * *'' label may be used to modify the name of the product in 
retail displays, labeling, and market information. Up to three organic 
ingredients or food groups may be identified in the statement. If such 
statement is declared in market information at the point of retail 
sale, the ingredient statement and market information must identify the 
organic ingredients. Retail display and market information of bulk 
products cannot display the USDA seal but may, if the product is 
prepared in a certified facility, display the seal or logo of the 
certifying agent which certified the finished product. The certifying 
agent's seal or logo may be displayed at the option of the retail food 
establishment.
    Products containing less than 70 percent organic ingredients may 
not be identified as organic or containing organic ingredients at 
retail sale. The USDA seal and any certifying agent seal or logo may 
not be displayed for such products.

Labeling Products Produced in Exempt or Excluded Operations

    Section 205.310 provides limited organic labeling provisions for 
organic product produced or handled on exempt and excluded operations. 
Such operations would include retail food establishments, certain 
manufacturing facilities, and production and handling operations with 
annual organic sales of less the $5,000. These operations are discussed 
more thoroughly in subpart B, Applicability.
    Any such operation that is exempt or excluded from certification or 
which chooses not to be certified may not label its organically 
produced products in a way which indicates that the operation has been 
certified as organic. Exempt producers may market whole, raw organic 
product directly to consumers, for example, at a farmers market or 
roadside stand as ``organic apples'' or ``organic tomatoes.'' Exempt 
producers may market their products to retail food establishments for 
resale to consumers. However, no terms may be used which indicate that 
such products are ``certified'' as organic. Finally, exempt organic 
producers cannot sell their product to a handler for use as an 
ingredient or for processing into an ingredient that is labeled as 
organic on the information panel.
    These provisions are truth in labeling provisions because display 
of a certification seal indicates that the product has been certified. 
We believe this requirement helps differentiate between certified and 
uncertified products and helps maintain the integrity of certified 
products while providing organic labeling opportunities for exempt and 
excluded operations.

USDA Organic Seal

    This final rule establishes a USDA seal that can be placed on 
consumer packages, displayed at retail food

[[Page 80582]]

establishments, and used in market information to show that certified 
organic products have been produced and handled in accordance with 
these regulations. The USDA seal can only be used to identify raw and 
processed products that are certified as organically produced. It 
cannot be used for products labeled as ``made with organic 
ingredients'' (70 to 95 percent organic ingredients) or on products 
with less than 70 percent organic ingredients.
    The USDA seal is composed of an outer circle around two interior 
half circles with an overlay of the words ``USDA Organic.'' When used, 
the USDA seal must be the same form and design as shown in figure 1 of 
section 205.311 of this regulation. The USDA seal must be printed 
legibly and conspicuously. On consumer packages, retail displays, and 
labeling and market information, the USDA seal should be printed on a 
white background in earth tones with a brown outer circle and separate 
interior half circles of white (upper) and green (lower). The term, 
``USDA,'' must appear in green on the white half circle. The term, 
``organic,'' must appear in white on the green half circle. The handler 
may print the USDA seal in black and white, using black in the place of 
green and brown. Size permitting, the green (or black) lower half 
circle may have four light lines running from left to right and 
disappearing at the right horizon, to resemble a cultivated field. The 
choice between these two color schemes is left to the discretion of the 
producer, handler, or retail food establishment.

Labeling--Changes Based on Comments

    The following changes are made based on comments received.
    (1) Use of ``Organic'' in Product Names. The NOSB, State organic 
program (SOP) managers, certifying agents, and a large number of 
individual commenters strongly recommended that USDA prohibit use of 
the term, ``organic,'' to modify an ingredient in a product name if the 
ingredient, itself, is not produced organically. The examples offered 
were ``organic chocolate ice cream'' and ``organic cherry sweets'' in 
which the ice cream and candy are at least 95 percent organic but the 
chocolate and cherry flavoring is not organically produced.
    We agree with commenters that such product names can be misleading 
and would be a violation of section 205.300(a). In the examples, the 
word, ``organic,'' precedes the words, ``chocolate'' and ``cherry,'' 
and clearly implies that those ingredients are organically produced. 
The chocolate and cherry flavorings must be organically produced to be 
used in this way. If the product is at least 95 percent organically 
produced but the flavoring is nonorganic, the word sequence must be 
reversed or the word, ``flavored,'' must be added to the name; e.g., 
``chocolate organic ice cream'' or ``chocolate flavored organic ice 
cream.'' A sentence has been added to section 205.300(a) to specify 
that the term, ``organic,'' may not be used in a product name to 
identify an ingredient that is not organically produced.
    A similar comment was received asking how a single product with two 
separately wrapped components can be labeled if one of the components 
is organically produced and the other is not. The commenter's example 
was a carrot and dip snack pack in which the carrots are organically 
produced and the dip is a conventional product. Another example is 
ready-to-eat tossed green salad in which the salad greens are 
organically produced but the separately pouched salad dressing is a 
nonorganic component of the product.
    Such products also must be labeled in accordance with section 
205.300(a). It would be misleading to label the snack pack ``organic 
carrots and dip'' or ``organic green salad and ranch dressing,'' if the 
dip and ranch dressing are not produced with organic ingredients. The 
salad may be labeled ``organic green salad with ranch dressing.''
    Section 6519(b) of the Act provides the Secretary with the 
authority to take action against misuse of the term, ``organic.'' USDA 
will monitor use of the term, ``organic,'' in product names and will 
restrict use of the term in names that are determined to be 
deliberately misleading to consumers. Such determinations must be made 
on a case-by-cases basis.
    (2) Labeling Livestock Feed. In the definition of ``agricultural 
product,'' the Act includes product marketed for ``livestock 
consumption.'' This means that NOP regulations have applicability to 
livestock feed production. The Association of American Feed Control 
Officials (AAFCO) and a few States departments of agriculture commented 
that the proposed provisions conflict with widely followed standards 
for livestock feed labeling. AAFCO's ``Model Bill and Regulation'' 
standards are incorporated in many State feed laws. The commenters 
claimed that the requirement to identify organic ingredients in the 
ingredient statement conflicts with feed regulations which prohibit 
reference to an ingredient's ``quality or grade.'' They also claimed 
that the percentage of organic content requirement is a quantitative 
claim that must be verified by independent sources (e.g., sources other 
than the certifying agent). The commenters suggested that a provision 
be added to address labeling of commercial livestock feed.
    We have added new paragraph (e) of section 205.301 which provides 
for two kinds of feed that can be labeled as ``organic.'' The first is 
feed that contains only organically produced agricultural ingredients 
and contains no added nutrients or supplements. The second organic feed 
category also must contain only organically produced agricultural 
ingredients but may contain feed additives and supplements that are 
needed to meet the nutritional and health needs of the livestock for 
which the feed is intended. Feed labeled as ``organic'' must conform 
with the requirements of section 205.237, Livestock feed. That section 
provides that feed additives and supplements produced in conformity 
with section 205.603 of the National List may be used. The NOP requires 
that livestock under organic management must only be fed organically 
produced agricultural ingredients.
    We also have added new section 205.306 to address commenters' 
labeling concerns. The new section provides for optional display of a 
feed's organic percentage and optional identification of the feed 
ingredients that are organically produced. The labeling requirements 
are not intended to supersede the general feed labeling requirements 
established in the FFDCA and those found under various State laws. 
Handling processes, feed formulations and recordkeeping must be 
sufficient to meet the requirements of applicable State regulations.
    We believe the provisions in new paragraph (e) of section 205.301 
on feed content and new section 205.306 on labeling will allow 
livestock feed producers to produce and label organic livestock feed 
that is in accordance with these regulations and State requirements.
    (3) Organic Processing Aids. Several industry leaders and SOP 
managers questioned whether the proposed rule intended to exclude the 
use of certified organic processing aids in the creation of ``100 
percent organic'' products. Commenters pointed out that a handler 
should be able to use organically produced processing aids to create 
products that are labeled as ``100 percent organic.'' The processing 
aid can be a by-product of an organic agricultural product; e.g., a 
filter made of rice hulls from organically produced rice. AMS concurs. 
Accordingly, a change is made in paragraph (f)(4) of section 205.301 to 
provide for use of

[[Page 80583]]

organically produced processing aids in products labeled ``100 percent 
organic.''
    To help clarify this and correct an incomplete reference in the 
proposed rule preamble, we have changed the column heading of the 
fourth prohibited practice in the preamble table 1.
    (4) Content of ``100 Percent Organic Products.'' Certifying agents 
and several industry commenters called attention to the regulatory text 
of section 205.301(a) describing 100 percent organic products. They 
argued that the proposed rule would allow products with one or more 95 
percent-plus ``organic'' ingredients to be combined as components and 
have the resulting product be labeled as ``100 percent organic.''
    We did not intend to allow any ingredient that is less than 100 
percent organic to be used in a product labeled ``100 percent 
organic.'' To leave no doubt as to the nature of any product labeled 
``100 percent organic,'' we have changed the wording of paragraph (a) 
of section 205.301 to clarify that a multiingredient ``100 percent 
organic'' product must be comprised entirely of 100 percent organic 
ingredients.
    (5) Labeling of Organic Percentage. We received many comments 
requesting clearer display of a product's percentage of organic 
content. Most suggested that any product containing less than 100 
percent organic ingredients should be required to display the organic 
percentage on the pdp. They argued that display of the organic 
percentage on the front of the package would enable consumers to more 
easily determine organic content, compare competing products, and make 
better purchase decisions. The NOSB did not recommend display of 
organic percentage on the pdp for all products containing organic 
ingredients.
    We also received several comments from handlers concerned that the 
required display of a product's organic percentage can be a burden on 
handlers. They stated that, to save packaging and printing costs, 
handlers order bulk quantities of printed packages, labels, and other 
printed marketing materials. When printed in advance of a growing 
season and harvest, the handler may not be able to assemble a product 
that is exactly consistent with the preprinted labeling information, 
particularly the percentage of organic content. One commenter 
representing a commodity association opposed the required percentage 
labeling because the association believes consumers will not understand 
any organic claim if a percentage of less than 100 percent is 
displayed.
    We believe that display of the percentage of organic content is 
important product information that can be very helpful to consumers in 
their purchase decisions. We also believe that the opportunity to 
display the percentage content of organically produced ingredients can 
be a positive factor in encouraging handlers to use more organic 
ingredients in their multiingredient products. At the same time, we 
understand the financial commitment involved in preprinting bulk 
quantities of packages and labels well in advance of harvests, which 
determine availability of needed ingredients.
    This final rule implements changes in sections 205.303 and 205.304 
for products labeled ``organic'' and ``made with organic ingredients.'' 
The requirement to display the percentage of organic content on the 
information panel is removed. That requirement is replaced with 
optional labeling of the product's organic percentage on the pdp or any 
other package panels. This will allow those handlers to display the 
percentage of their product's organically produced contents on the pdp 
where it will be most immediately visible to consumers. Handlers who 
cannot, with certainty, display their product's organic percentage or 
who choose not to display the percentage, are not required to do so.
    This revised labeling provision also removes the requirement in 
section 205.305 that products with less than 70 percent organic content 
display the product's organic percentage on the information panel. 
Under this final rule, that percentage labeling is optional but is 
still restricted to the information panel. The percentage of a less 
than 70 percent organic product may not be displayed on the pdp and may 
not be displayed if the organic ingredients are not identified in the 
ingredient statement.
    (6) Designation of Organically Produced Ingredients. A certifying 
agent suggested that identification of organic ingredients in 
ingredient statements should be allowed to be made with an asterisk or 
similar mark, with the asterisk defined on the information panel. The 
commenter stated that the repetitive use of the word, ``organic,'' may 
cause space problems on some small packages and that use of a mark is a 
common industry practice. We agree with the comment and have changed 
sections 205.303(b)(1), 205.304(b)(1), and 205.305(a)(i) of the 
regulatory text accordingly. Thus, organic ingredients may be 
identified in the ingredient statement with either the term, 
``organic,'' or an asterisk or other mark, provided that the asterisk 
or other mark is defined on the information panel adjacent to the 
ingredient statement.
    (7) Minimum Organic Percentage for Labeling. In the proposed rule's 
preamble, we asked for public comment on whether the 50 percent minimum 
organic content for pdp labeling should be increased. The 50 percent 
minimum content was established in section 6505(c) of the Act. However, 
the Act also provides the Secretary with the authority to require such 
other terms and conditions as are necessary to implement the program. 
Thus, the minimum organic content level for pdp labeling could be 
changed if the change would further the purposes of the Act.
    Comments to the first (1997) proposal and to the revised proposed 
rule suggested that the minimum organic content for labeling purposes 
should be increased. All comments received, including comments from 
certifying agents, a leading organic association, the EU and other 
international commenters recommended that the minimum organic content 
to qualify for pdp labeling should be raised to 70 percent, which is 
the EU's minimum. All comments stated that the increase is necessary to 
make the NOP standards consistent with international organic standards. 
Commenters also pointed to advances in organic production and 
processing technologies and to increases in the availability of 
organically produced products and processed ingredients. These factors 
should make it easier for handlers to assemble food products with 
higher organic content.
    We concur with the comments. We view this as a tightening of 
labeling requirements in that pdp labeling now requires a higher 
percentage of organic ingredients and makes the U.S. standard 
consistent with international norms.
    In the proposed rule's preamble, we also asked for specific public 
comment on whether a minimum percentage of total product content should 
be required for any single organic ingredient that is included in the 
pdp statement ``made with organic (specified ingredients).'' No 
commenters responded to this question. Therefore, no required minimum 
percentage for a single organic ingredient in ``made with * * *'' 
products is established.
    (8) ``Made With Organic (Specified Food Groups).'' Several industry 
organizations suggested that, as an alternative to listing up to three 
organic ingredients in the ``made with * * *'' label, the rule should 
also allow for identification of food ``groups'' or ``classes'' of food 
in the ``made with'' label. Commenters suggested, for instance, that a 
soup (with 70 percent or

[[Page 80584]]

more organic ingredients, less water and salt) containing organically 
produced potatoes, carrots, and onions may be labeled as ``soup made 
with organic potatoes, carrots, and onions'' or, alternatively, ``soup 
made with organic vegetables.''
    We agree that this label option offers handlers of such 
multiingredient products with more flexibility in their labeling. All 
ingredients in the identified food group must be organically produced 
and must be identified in the ingredient statement as ``organic.'' In 
the above example, if soup also contains conventionally produced 
cauliflower, only ``soup made with organic potatoes, carrots, and 
onions'' can be displayed.
    We also believe that some parameters must be established as to what 
are considered as food groups or classes of food. For the purposes of 
this regulation, products from the following food groups may be labeled 
as ``organic'' in a ``made with * * *'' label: beans, fruits, grains, 
herbs, meats, nuts, oils, poultry, seeds, spices, and vegetables. In 
addition, organically produced and processed butter, cheeses, yogurt, 
milk, sour cream, etc. may be combined in a product and identified as 
``organic milk products.'' Organically produced and processed sugar 
cane, sugar beets, corn syrup, maple syrup, etc. may be used in a 
product and identified as ``organic sweeteners.''
    Finally, to be consistent with the ``made with * * *'' labeling for 
individual ingredients, up to three food groups can be identified in 
the ``made with * * *'' statement. Section 205.304 is changed 
accordingly.
    (9) Labeling Products from Exempt and Excluded Operations. A change 
is made in redesignated section 205.310 which provides for labeling of 
organic products produced by exempt and excluded operations. SOP 
managers and an organic handler pointed out that the preamble suggested 
restrictions on labeling that would prevent exempt and excluded 
operations from identifying their products as ``organic.'' After review 
of the proposed rule, we have revised redesignated section 205.310 to 
more clearly specify labeling opportunities for exempt operations. The 
regulatory text more clearly states that such operations may not label 
or represent their organic products as being ``certified'' as organic 
and that such exempt and excluded operations must comply with 
applicable production and handling provisions of subpart C. Labeling 
must be consistent with the four labeling categories based on the 
product's organic content.
    A State organic advisory board recommended that proposed section 
205.309 be revised to apply to exempt and excluded operations which 
choose to be certified under this program. We do not believe it is 
necessary to provide separate regulatory text for exempt and excluded 
operations that are certified. An exempt operation is not precluded 
from organic certification, if qualified.
    (10) Redesigned USDA Seal. Leading industry members, certifying 
agents, SOP managers, and many individual commenters opposed the 
proposed wording and design of the USDA seal. Comments generally stated 
the following points: (1) The proposed Seal wording indicates that USDA 
is the certifying agent rather than accredited certifiers; (2) 
international Organization for Standardization (ISO) Guide 61 prohibits 
government bodies from acting or appearing as certifying agents; and 
(3) The shield or badge design indicates a certification of product 
``quality'' and assurance of safety which is inconsistent with the 
NOP's claim to be a certification of ``process'' only. Commenters 
suggested several alternative seal statements, including: ``Certified 
Organic--USDA Accredited,'' ``Certified Organic--USDA Approved,'' 
``USDA Certified Organic Production,'' ``Meets USDA Organic Production 
Requirements.''
    Based on comments received, we are implementing a revised USDA seal 
which is shown in the regulatory text under section 301.311. It is a 
circular design with the words, ``USDA Organic.'' The color scheme is a 
white background, brown outer circle, white and green inner 
semicircles, and green and white words. A black and white color scheme 
also may be used if preferred by the handler.
    Some commenters suggested changing the shape of the USDA seal to a 
circle or triangle which, they state, is more in keeping with 
recognized recycling and sustainability logos. We did not choose a 
triangle design because processors have commented that triangle designs 
may cause tears in shrink wrap coverings at the points of the triangle.

Labeling--Changes Requested But Not Made

    (1) ``Organic'' in Company Names. Many commenters stated that the 
term, ``organic,'' must not be used as part of a company name if the 
company does not market organically produced foods. They are concerned 
that the term in a company name would incorrectly imply that the 
product, itself, is organically produced.
    While we understand commenter concerns, we do not know the extent 
of the problem. We do not believe those concerns require such a 
prohibition in the regulations at this time. These regulations may not 
be the best mechanism to address the issue. Section 6519(b) of the Act 
provides the Secretary with the authority to take action against misuse 
of the term, ``organic.'' USDA will monitor use of the term, 
``organic,'' in company names and will work with the FTC to take action 
against such misuse of the term. These determinations must be made on a 
case-by-case basis. The proposed rule did not specifically address this 
issue. We have added a sentence to paragraph (a) of section 205.300 to 
this effect.
    (2) The ``100 Percent Organic'' Label. A large number of commenters 
opposed the ``100 percent organic'' label for different reasons. A few 
claimed that the label is not authorized under the Act. Several 
commenters suggested that consumers will not understand the difference 
between multiingredient products labeled ``100 percent organic'' and 
``organic.'' Others raised the concern that the ``100 percent organic'' 
phrase to modify raw, fresh fruits and vegetables in produce sections 
and farmers markets may be confusing to consumers.
    Regarding the first comment, the term is not specifically provided 
for in the Act. However, the Secretary has the authority under section 
6506(a)(11) to require other terms and conditions as may be necessary 
to develop a national organic program. When a product is wholly 
organic, pursuant to the production and handling requirements of the 
NOP, we believe the handler should have the option to differentiate it 
from products which, by necessity, are less than 100 percent organic. 
We believe the label meets the purposes of the Act.
    Regarding consumer confusion, we believe consumers will understand 
the difference between the two kinds of organic products and will make 
their organic purchases accordingly.
    Regarding the labeling of raw, fresh product as ``100 percent 
organic,'' organically produced products can be labeled to a lower 
labeling category. Raw, fresh fruits and vegetables which qualify for a 
``100 percent organic'' label may be labeled simply as ``organic,'' if 
the producer or retail operator believes that label is best for 
marketing purposes.
    (3) Explain Why Product Is Not 100 Percent Organic. A large number 
of commenters also suggested any ``product that is less than 100 
percent organic should carry that information on the main display panel 
* * *'' By ``that information,'' we assume the commenters are referring 
to the reasons

[[Page 80585]]

why a product cannot be certified as ``100 percent organic.''
    AMS believes such a labeling requirement is impractical. Products 
may fail to qualify for a ``100 percent organic'' label for very 
technical, or little understood, reasons. Contemporary food processing 
often uses ingredients, processing technologies, and product 
formulations that are complicated, technical, and probably not of 
interest to the general organic consumer. Such information is not 
required on nonorganically produced products for the simple reason that 
it is not considered useful to consumers. Explanations of the different 
processing technologies used in food products would be cumbersome and 
would interfere with other product labeling.
    We believe the optional display of the organic percentage and 
required identification of organic ingredients on the information panel 
provides sufficient information for consumers to make purchase 
decisions. Other descriptive information regarding processing 
substances and procedures may, of course, be provided at the handler's 
option and placed in accordance with other Federal labeling 
requirements.
    (4) Check the Appropriate Organic Category. One commenter suggested 
that packages of organically produced product display a small box 
listing the four organic label categories and a check mark beside the 
category which fits the product.
    We understand the simplicity and comparative nature of such a 
standardized organic label that allows easy comparison of similar 
products. However, we believe that the optional display of the 
product's organic percentage and required identification of organic 
ingredients will be more helpful to consumers and makes the grid box 
redundant.
    (5) Nonorganic Ingredients in Organic Products. A large number of 
comments were received on the composition and use of nonorganic 
ingredients in products labeled ``made with * * *'' and on conventional 
products with less than 50 (now 70) percent organic ingredients. 
Several industry commenters suggested that nonorganic ingredients in 
``made with * * *'' products must be ``natural'' (nonsynthetic 
agricultural substances) and not be artificially produced. Commenters 
argued that all ingredients in ``made with * * *'' and less than 70 
percent products should be produced in accordance with the prohibited 
practices under sections 205.105 and 205.301(f). A significant number 
of commenters opposed identification of organic ingredients in what 
they called ``natural food'' products.
    First, we do not agree that the nonorganic ingredients in ``made 
with * * *'' products must be restricted to only ``natural'' products. 
Such restrictions on the composition of nonorganic ingredients would 
significantly reduce handlers' options in producing those products and, 
thus, reduce consumers' options in purchasing products with organic 
ingredients.
    Regarding prohibited practices, this rule implements the strong 
industry and consumer demand that the prohibited practices found under 
section 205.105 (excluded methods, irradiation, and sewage sludge) not 
be used in nonorganic ingredients in ``made with * * *'' products. 
However, we do not believe that restrictions on use of the other 
prohibited practices, found in section 205.301(f), would further the 
purposes of the Act. Application of all prohibited practices on the 
nonorganic ingredients in the ``made with * * *'' and less-than 70 
percent organic products would essentially require that those products 
be organically produced. The Act allows for products that are not 
wholly organic. We believe the ``made with * * *'' label and the 
labeling restrictions on the less-than 70 percent organic products 
clearly states to consumers that only some of the ingredients in those 
products are organically produced.
    If accepted, these comments would unnecessarily restrict a 
handler's ability to truthfully represent and market a conventionally 
produced agricultural product with some organic ingredients. A handler 
should not be prohibited from making a truthful claim about some 
ingredients in a less than 70 percent organic product.
    (6) Alternative ``Made With * * *'' Labels. A few SOP managers 
commented that the phrase, ``made with * * *,'' is confusing. They 
stated that many processed foods contain at least 50 percent organic 
ingredients but do not make an organic claim on the pdp. They believe 
the label would be less confusing if it stated a minimum organic 
percentage rather than identifying the organic ingredients. They 
suggest the labeling category be changed to ``contains at least 50 
percent organic ingredients (or, as revised in this rule, ``contains at 
least 70 percent organic ingredients'').
    We disagree. Identification of up to three organically produced 
ingredients or food groups on the pdp gives consumers useful, specific 
information about the product's organic ingredients. This label, 
combined with the optional display of the percentage content on the pdp 
and required identification of organic ingredients, should provide 
enough information for consumers to make good decisions.
    A few commenters contended that the statement ``made with organic 
(specified ingredients)'' is unclear and ``open ended'' and that 
consumers may assume the entire product is organically produced. The 
``made with * * *'' labeling claim refers only to the organic 
ingredients and not to the whole product. We do not believe that 
consumers will be confused by the label.
    (7) Use of Other Terms as Synonymous for ``Organic''. A few 
commenters representing international organic standards suggested that 
use of the terms, ``biologic'' and ``ecologic,'' which are synonymous 
with ``organic'' in other countries, should be allowed under the NOP. 
Commenters claimed these terms are approved by Codex and their 
inclusion in this regulation would facilitate international trade and 
equivalency agreements.
    These terms were addressed in the proposed rule and are not 
accepted. Under the NOP, these terms may be used as eco-labels on a 
product package but may not be used in place of the term, ``organic.'' 
Although such terms may be considered synonymous with ``organic'' in 
other countries, they are not widely used or understood in this 
country. We believe their use as synonymous for ``organic'' would only 
lend to consumer confusion. Regarding the Codex labeling standard, we 
point out that Codex also provides that terms commonly used in a 
country may be used in place of ``biologic'' and ``ecologic.'' Thus, 
the use of ``organic'' in the United States is consistent with Codex 
standards.
    With regard to the commenters' claim that the alternate labels 
would facilitate international trade, this regulation allows 
alternative labeling of products which are being shipped to 
international markets. Thus, a certified organic operation in the 
United States may produce a product to meet contracted organic 
requirements of a foreign buyer, label the product as ``biologic'' or 
``ecologic'' on the pdp consistent with the market preferences of the 
receiving country, and ship the product to the foreign buyer.
    Other terms were suggested by commenters as alternatives to the 
term, ``organic,'' including ``grown by age-old, natural methods,'' 
``grown without chemical input,'' and ``residue Free.'' These phrases 
may be consumer friendly but clearly do not convey the

[[Page 80586]]

extensive and complex nature of contemporary organic agriculture. These 
phrases may be used as additional, eco-labels, provided they are 
truthful labeling statements. They are not permitted as replacements 
for the term, ``organic.''
    (8) Reconstituted Organic Concentrates. A certifying agent objected 
to paragraph (a)(2) of section 205.302, which allows labeling of an 
organically produced concentrate ingredient which is reconstituted with 
water during assembly of the processed product. The commenter claimed 
that this provision gives consumers the message that reconstituted 
juice is equivalent to fresh juice when, the commenter claims, it is 
not the same.
    AMS disagrees. This labeling is consistent with current industry 
practices. The Act does not prohibit such labeling of concentrates. We 
believe it is in the interest of the program to allow labeling of 
organically produced concentrates, provided that the process to produce 
the concentrate and the reconstitution process is consistent with 
organic principles and the National List.
    (9) Calculating Reconstituted Versus Dehydrated Weight. Several 
comments were received regarding specific problems encountered in the 
calculation of the percentage of organic content as provided under 
section 295.302. A handler claimed the reconstituted weight of an 
organically produced spice should be counted in the percentage 
calculation rather than the dehydrated weight of the spice used in the 
formulation. A similar comment was received from a food cooperative 
suggesting that, if an organically produced concentrate (in powdered 
form) is added to the same organically produced ingredient in its 
organic liquid form (not from concentrate), then the product's organic 
percentage should be calculated based on the concentrate's single-
strength reconstituted weight plus the weight of the natural organic 
liquid.
    AMS disagrees with these comments. This regulation provides for an 
ingredient's weight to be calculated, excluding added water and salt. 
If an organically produced spice is added to a product in its natural 
form, the weight of the spice is calculated. If the spice ingredient is 
in dehydrated, powdered form when added in the product formulation, the 
dehydrated weight of the spice must be the basis for its percentage of 
content calculation. If an organically produced dehydrated spice is 
reconstituted with water prior to product assembly, the spice must 
still be calculated at its dehydrated weight because percentage 
calculations are based on the ingredient weight, excluding water and 
salt. It would be misleading to calculate the weight of the concentrate 
ingredient in its reconstituted form.
    Likewise, if a powdered ingredient is added to the same organically 
produced ingredient in its natural, liquid form, the weight of the 
powdered ingredient must be used. Using the reconstituted weight of the 
powdered ingredient would increase the percentage of the ingredient 
above the actual weight of the ingredient in the product. We believe 
that if the comment were accepted, the handler would be able to use 
less natural organic liquid than the organic percentage and ingredient 
statement indicates.
    (10) Calculate Organic Percentage in Tenths of a Percent. A trade 
organization suggested that the organic percentage be rounded to tenths 
of one percent to accommodate products that may contain a minor 
ingredient or additive that comprises less than 1 percent of the 
product. The example provided was Vitamin D in milk. The comment 
suggested that it is misleading to consumers to suggest that 1 percent 
of a milk product is nonorganic when the Vitamin D additive may be 
comprise only a few tenths of one percent of the product.
    AMS disagrees. Rounding down the percentage to a whole number is 
sufficient for consumer information and does not misrepresent the 
product's organic content. A handler may add a qualifying statement 
regarding the minor ingredient's weight in relation to the whole 
product weight.
    (11) Verifying Calculations. A State department of agriculture 
comment suggested that the paragraph (c) of section 205.302 be revised 
slightly to provide that percentage calculations must be verified ``to 
the satisfaction'' of the certifying agent. The commenter believes that 
the suggested language allows the handler the flexibility to determine 
the number calculations that need to be checked in order to verify that 
the organic percentage calculation is correct.
    We do not believe the suggested change is necessary. We assume that 
any use of a certifying agent's seal on a product means that the 
certifying agent has checked and approves of the method of calculating 
the product's organic percentage. If the calculations are not to the 
certifying agent's satisfaction, the agent would not certify the 
handling process.
    While we appreciate the point made by the commenter, we do not 
believe the suggested change means what the commenter intends. 
Paragraph (c) of section 205.302 does not specify the number and 
methods of calculations that need to be carried out by a certifying 
agent because that will depend on the handling process being certified 
and the ingredients in the product. We leave that to the discretion of 
the certifying agent. Also, the basis for a product's organic 
percentage calculation should be clarified in the organic plan. It is 
assumed that the certifying agent will either be satisfied that the 
methodology for calculating organic percentage is correct or the 
methodology will be changed.
    (12) Labeling Nonretail Shipping Containers. A few State 
departments of agriculture commented that shipping and storage 
containers with organic products should be required to be labeled as 
containing organic product. Other commenters recommended that shipping 
containers be required to display the name of the grower and the 
certifying agent. They cite these requirements as current industry 
practice.
    This regulation does not require organic labeling on shipping and 
storage containers because those containers are not used in the 
marketplace. The only information required by the NOP is the production 
lot number of the product, if a lot number exists for the particular 
product. Product content and shipper information may be displayed, as 
required by other Federal or State regulations or at the discretion of 
the handler. Proper identification of the organic nature of a product 
with special instructions for shipment or storage could prevent 
exposure to prohibited substances that would lead to subsequent loss of 
the shipment as an organic product.
    (13) Disclaimers on Organic Products. Several commenters complained 
that consumers are misled by the organic labeling and the NOP. They 
claimed that when science-based technologies (genetic engineering, 
irradiation, chlorination, etc.) are not used on products, the food is 
less safe than conventionally produced foods. Some of the commenters 
suggested that a disclaimer regarding food safety and nutritional value 
be required on packages with organic labeling.
    AMS disagrees. The USDA seal indicates only that the product has 
been certified to a certain production and/or handling ``process'' or 
``system.'' The seal does not convey a message of food safety or more 
nutritional value. The NOP prohibitions on use of excluded methods, 
ionizing radiation, sewage sludge, and some substances and materials 
are not intended to imply that

[[Page 80587]]

conventionally produced products made by those methods or containing 
those prohibited substances are less safe or nutritious than 
organically produced products. We do not believe that organic food 
packages or labeling should carry disclaimers of what the USDA seal or 
a certifying agent's seal does not represent. Other Federal and State 
seals and marketing claims are placed on consumer products, including 
food products, without disclaimers regarding those seals and claims. A 
disclaimer displayed in relation to USDA seal or a certifying agent's 
seal would confuse consumers. Finally, disclaimer statements also would 
present space problems on small product packages.

Labeling--Clarifications

    Clarification is given on the following issues raised by 
commenters:
    (1) Certification Is to an Organic Process, Not Organic Product. 
Several commenters suggested that the final rule more clearly state 
that the NOP provides for certification of an organic process or system 
of agriculture and not certification of products, themselves, as 
``organic.'' They stated that the phrase ``* * * contain or be created 
using * * *'' in paragraphs (a), (b), and (c) of section 205.301 
implies certification of the product's content and not to the 
processed-based, organic system of agriculture.
    We agree and have revised the wording in those paragraphs to 
clarify that such products must be organically produced in accordance 
with organic production and handling requirement of this regulation.
    (2) Phasing Out Use of Old Labels and Packages. Citing FDA 
regulations, the NOSB, certifying agents, and some State agencies 
suggested a minimum 18-month period for handlers to use up their 
current supplies of packages and labels before complying with the new 
labeling requirements.
    This rule provides for an interim period of 18 months between 
publication of the final rule and the implementation date of the 
program. Publication of this final rule serves notice to certified 
producers and handlers that they should begin planning for phasing out 
use of labels that are not in accordance with these requirements.
    The implementation process is discussed in Applicability, subpart 
B. An organic operation will automatically be certified under this 
program when its certifying agent is accredited by AMS. At that time, 
the operation may begin following these labeling requirements but may 
not display the new USDA seal until the implementation date. AMS 
assumes that certifying agents and their client certified operations 
will maintain frequent contact as to the status of the agent's 
application for accreditation so that the certified operation may 
schedule the phasing out of old labels and purchase of new labels and 
packages. AMS expects to accredit all currently operating certifying 
agents by the implementation date of this regulation. Stick-on labels 
to comply with the new requirements are acceptable.
    Newly established organic operations certified for the first time 
must immediately begin using labels in accordance with this program.
    (3) Labeling of Products With Minor Ingredients. Several commenters 
questioned how the minor ingredients (spices, flavors, colorings, 
preservatives, oils, vitamins, minerals, accessory nutrients, 
processing aids, and incidental food additives) needed for formulation 
or processing of many multiingredient products will be treated under 
the ``100 percent organic'' and ``organic'' labeling categories. 
Because minor ingredients may not exist or are difficult to obtain in 
organic form, their use in a product can affect the labeling of the 
product, even though the percentage of the ingredient is extremely 
small compared to the rest of the product's ingredients.
    Minor ingredients and processing aids must be treated as any other 
ingredient or substance which is used as an ingredient in or in the 
processing of an organically produced product. To be added as an 
ingredient or used in the processing of a product labeled ``100 percent 
organic,'' a minor ingredient must be extracted from a certified 
organic source without the use of chemicals or solvents. To be added as 
an ingredient or used in the processing of a product labeled 
``organic,'' a minor ingredient must be from an organic agricultural 
source, if commercially available. If not commercially available, the 
ingredient must be an agricultural product or a substance consistent 
with the National List.
    (4) Reusing Containers. A commenter complained that small producers 
should not be subjected to costly packaging and labeling requirements 
when their products are sold directly to the public at farmers markets 
and roadside stands. The commenter requested that small producers be 
able to reuse retail boxes and labels. The commenter did not specify 
which labeling provisions presented burdensome costs on small entities.
    We agree that costs for exempt operations, indeed all organic 
operations, should be kept to a minimum. NOP does not prohibit reuse of 
containers provided their labeling does not misrepresent product and 
does not allow organic product to come into contact with prohibited 
substances from the container's previous contents.
    (5) Clarifying Prohibited Labeling Practices. Commenters identified 
a few inconsistencies between the preamble and regulatory text 
regarding the seven prohibited production and processing practices now 
specified in section 205.301(f). We have made the following changes to 
clarify the intent of the regulation.
    A commenter correctly pointed out that the regulatory text of 
paragraph (f) incorrectly refers only to ingredients that cannot be 
produced using the seven prohibited production and handling practices 
listed in the paragraph. That text is not consistent with the preamble, 
which correctly states that whole products, as well as ingredients, 
labeled as ``organic'' cannot be produced or processed using the seven 
prohibited practices. The term, ``whole products,'' is added to the 
introductory sentence of new section 205.301(f).
    A few commenters pointed out that all seven practices are 
prohibited in the production of nonorganic ingredients used in products 
labeled as ``organic.'' The second sentence of proposed paragraph (b) 
of section 205.301 (products labeled ``organic'') incorrectly listed 
only the first three prohibited practices. A phrase is added to the 
introductory sentence of new paragraph (f) to specify that the 5 
percent or less of nonorganic ingredients in products labeled as 
``organic'' may not be produced or handled using any of the seven 
prohibited practices.
    Finally, with the addition of the commercial availability 
requirement in section 205.201, a conforming change is needed in 
section 205.301(f)(6) regarding use of nonorganic ingredients when 
organically produced ingredients are available.
    (6) Consistency with State Labeling Requirements. One State organic 
association commented that the State's law requires identification of 
the certifying agent if the term, ``certified organic,'' appears on the 
label. The comment was not clear about where on the package the 
certifier must be identified; e.g., with the ``certified organic'' term 
on the pdp or anywhere on the package. The commenter did not 
specifically suggest changing the labeling provisions to include the 
certifying agent on the pdp.
    This regulation allows a handler the option of displaying the 
certifying agent's seal or logo on the pdp for products with 70 percent 
or more

[[Page 80588]]

organically produced ingredients. This regulation also requires 
identification of the certifying agent on the information panel of all 
products containing 70 percent or more organically produced 
ingredients. The identification must include an address or contact 
information and be placed adjacent to identification of the 
manufacturer, required by FDA. We believe these provisions are 
sufficient to meet the State's labeling requirements. The NOP will be 
available to consult with States regarding alternative labeling 
required to be used in the State.
    (7) Clarifying Labeling of Products in Other Than Packaged Form. We 
have modified sections 205.308 and 205.309 to clarify that products in 
other than packaged form at the point of retail sale that are prepared 
by an exempt or excluded operation may be labeled as ``100 percent 
organic,'' ``organic,'' or ``made with * * *'' as appropriate. 
Consistent with the general restrictions on the labeling of products 
from such operations, which are found in section 205.310, such products 
may not display the USDA seal or any certifying agent's seal or other 
identifying mark or otherwise be represented as a certified organic 
product.

Subpart E--Certification

    This subpart sets forth the requirements for a national program to 
certify production and handling operations as certified organic 
production or handling operations. This certification process will be 
carried out by accredited certifying agents.

Description of Regulations

General Requirements

    Production and handling operations seeking to receive or maintain 
organic certification must comply with the Act and applicable organic 
production and handling regulations. Such operations must establish, 
implement, and annually update an organic production or handling system 
plan that is submitted to an accredited certifying agent. They must 
permit on-site inspections by the certifying agent with complete access 
to the production or handling operation, including noncertified 
production and handling areas, structures, and offices.
    As discussed in subpart B, certified operations must maintain 
records concerning the production and handling of agricultural products 
that are sold, labeled, or represented as ``100 percent organic,'' 
``organic,'' or ``made with organic (specified ingredients or food 
group(s))'' sufficient to demonstrate compliance with the Act and 
regulations. Records applicable to the organic operation must be 
maintained for not less than 5 years beyond their creation. Authorized 
representatives of the Secretary, the applicable State organic 
program's (SOP) governing State official, and the certifying agent must 
be allowed access to the operation's records during normal business 
hours. Access to the operation's records will be for the purpose of 
reviewing and copying the records to determine compliance with the Act 
and regulations.
    Certified operations are required to immediately notify the 
certifying agent concerning any application, including drift, of a 
prohibited substance to any field, production unit, site, facility, 
livestock, or product that is part of the organic operation. They must 
also immediately notify the certifying agent concerning any change in a 
certified operation or any portion of a certified operation that may 
affect its compliance with the Act and regulations.

Certification Process

    To obtain certification, a producer or handler must submit an 
application for certification to an accredited certifying agent. The 
application must contain descriptive information about the applicant's 
business, an organic production and handling system plan, information 
concerning any previous business applications for certification, and 
any other information necessary to determine compliance with the Act.
    Applicants for certification and certified operations must submit 
the applicable fees charged by the certifying agent. An applicant may 
withdraw its application at anytime. An applicant who withdraws its 
application will be liable for the costs of services provided up to the 
time of withdrawal of the application.
    The certifying agent will decide whether to accept the applicant's 
application for certification. A certifying agent must accept all 
production and handling applications that fall within its area(s) of 
accreditation and certify all qualified applicants to the extent of its 
administrative capacity to do so. In other words, a certifying agent 
may decline to accept an application for certification when the 
certifying agent is not accredited for the area to be certified or when 
the certifying agent lacks the resources to perform the certification. 
However, the certifying agent may not decline to accept an application 
on the basis of race, color, national origin, gender, religion, age, 
disability, political beliefs, sexual orientation, or marital or family 
status.
    Upon acceptance of an application for certification, a certifying 
agent will review the application to ensure completeness and to 
determine whether the applicant appears to comply or may be able to 
comply with the applicable production or handling regulations. As part 
of its review, the certifying agent will verify that an applicant has 
submitted documentation to support the correction of any noncompliances 
identified in a previously received notification of noncompliance or 
denial of certification. We anticipate that at a future date the 
certifying agent will also review any available U.S. Department of 
Agriculture (USDA) data on production and handling operations for 
information concerning the applicant.
    We anticipate using data collected from certifying agents to 
establish and maintain a password-protected Internet database only 
available to accredited certifying agents and USDA. This database would 
include data on production and handling operations issued a 
notification of noncompliance, noncompliance correction, denial of 
certification, certification, proposed suspension or revocation of 
certification, and suspension or revocation of certification. 
Certifying agents would use this Internet database during their review 
of an application for certification. This data will not be available to 
the general public because much of the data would involve ongoing 
compliance issues inappropriate for release prior to a final 
determination.
    After a complete review of the application, which shall be 
conducted within a reasonable time, the certifying agent will 
communicate its findings to the applicant. If the review of the 
application reveals that the applicant may be in compliance with the 
applicable production or handling regulations, the certifying agent 
will schedule an on-site inspection of the applicant's operation to 
determine whether the applicant qualifies for certification. The 
initial on-site inspection must be conducted within a reasonable time 
following a determination that the applicant appears to comply or may 
be able to comply with the requirements for certification. The initial 
inspection may be delayed for up to 6 months to comply with the 
requirement that the inspection be conducted when the land, facilities, 
and activities that demonstrate compliance or capacity to comply can be 
observed.
    The certifying agent will conduct an initial on-site inspection of 
each production unit, facility, and site that produces or handles 
organic products and that is included in the applicant's

[[Page 80589]]

operation. As a benchmark, certifying agents should follow auditing 
guidelines prescribed by the International Organization for 
Standardization Guide 10011-1, ``Guidelines for auditing quality 
systems--Part 1: Auditing'' (ISO Guide 10011-1).\1\ The certifying 
agent will use the on-site inspection in determining whether to approve 
the request for certification and to verify the operation's compliance 
or capability to comply with the Act and regulations. Certifying agents 
will conduct on-site inspections when an authorized representative of 
the operation who is knowledgeable about the operation is present. An 
on-site inspection must also be conducted when land, facilities, and 
activities that demonstrate the operation's compliance with or 
capability to comply with the applicable production or handling 
regulations can be observed.
---------------------------------------------------------------------------

    \1\ ISO Guide 10011-1 is available for viewing at USDA-AMS, 
Transportation and Marketing Programs, Room 2945-South Building, 
14th and Independence Ave., SW, Washington, DC, from 9:00 a.m. to 
4:00 p.m., Monday through Friday (except official Federal holidays). 
A copy may be obtained from the American National Standards 
Institute, 11 West 42d Street, New York, NY 10036; Website: 
www.ansi.org; E-mail: [email protected]; Telephone: 212-642-4900; 
Facsimile: 212-398-0023.
---------------------------------------------------------------------------

    The on-site inspection must verify that the information provided to 
the certifying agent accurately reflects the practices used or to be 
used by the applicant or certified operation and that prohibited 
substances have not been and are not being applied to the operation. 
Certifying agents may use the collection and testing of soil; water; 
waste; plant tissue; and plant, animal, and processed products samples 
as tools in accomplishing this verification.
    The inspector will conduct an exit interview with an authorized 
representative of the operation who is knowledgeable about the 
inspected operation to confirm the accuracy and completeness of 
inspection observations and information gathered during the on-site 
inspection. The main purpose of this exit interview is to present the 
inspection observations to those in charge of the firm in such a manner 
so as to ensure they clearly understand the results of the inspection. 
The firm is not required to volunteer any information during the exit 
interview but would be required to respond to questions or requests for 
additional information. The inspector will raise and discuss during the 
exit interview any known issues of concern, taking into account their 
perceived significance. As a general rule, the inspector will not make 
recommendations for improvements to the operation during the exit 
interview. However, the certifying agent will have the discretion to 
decide the extent to which an inspector may discuss any compliance 
issue. At the time of the inspection, the inspector shall provide the 
operation's authorized representative with a receipt for any samples 
taken by the inspector. There shall be no charge to the inspector for 
the samples taken.
    The certifying agent shall, within a reasonable time, provide the 
inspected operation with a copy of the on-site inspection report, as 
approved by the certifying agent, for any on-site inspection performed 
and provide the operation with a copy of the test results for any 
samples taken by an inspector.

Notification of Approval

    A certifying agent will review the on-site inspection report, the 
results of any analyses for substances, and any additional information 
provided by the applicant within a reasonable time after completion of 
the initial on-site inspection. The certifying agent will grant 
certification upon making two determinations: (1) that the applicant's 
operation, including its organic system plan and all procedures and 
activities, is in compliance with the Act and regulations and (2) that 
the applicant is able to conduct operations in accordance with its 
organic systems plan.
    Upon determining the applicant's compliance and ability to comply, 
the agent will grant certification and issue a ``certificate of organic 
operation.'' The certification may include requirements for the 
correction of minor noncompliances within a specified time period as a 
condition of continued certification. A certificate of organic 
operation will specify the name and address of the certified operation; 
the effective date of certification; the categories of organic 
operation, including crops, wild crops, livestock, or processed 
products produced by the certified operation; and the name, address, 
and telephone number of the certifying agent. Once certified, a 
production or handling operation's organic certification continues in 
effect until surrendered by the organic operation or suspended or 
revoked by the certifying agent, the SOP's governing State official, or 
the Administrator.

Denial of Certification

    Should the certifying agent determine that the applicant is not 
able to comply or is not in compliance with the Act, the certifying 
agent will issue a written notification of noncompliance to the 
applicant. The notification of noncompliance will describe each 
noncompliance, the facts on which the notification is based, and the 
date by which rebuttal or correction of each noncompliance must be 
made. Applicants who receive a notification of noncompliance may 
correct the noncompliances and submit, by the date specified, a 
description of correction and supporting documentation to the 
certifying agent. As an alternative, the applicant may submit a new 
application to another certifying agent, along with the notification of 
noncompliance and a description of correction of the noncompliances and 
supporting documentation. Applicants may also submit, by the date 
specified, written information to the issuing certifying agent to rebut 
the noncompliance described in the notification of noncompliance. When 
a noncompliance cannot be corrected, a notification of noncompliance 
and a ``notification of denial of certification'' may be combined in 
one notification.
    The certifying agent will evaluate the applicant's corrective 
actions taken and supporting documentation submitted or the written 
rebuttal. If necessary, the certifying agent will conduct a followup 
on-site inspection of the applicant's operation. When the corrective 
action or rebuttal is sufficient for the applicant to qualify for 
certification, the certifying agent will approve certification. When 
the corrective action or rebuttal is not sufficient for the applicant 
to qualify for certification, the certifying agent will issue the 
applicant a written notice of denial of certification. The certifying 
agent will also issue a written notice of denial of certification when 
an applicant fails to respond to the notification of noncompliance. The 
notice of denial of certification will state the reasons for denial and 
the applicant's right to reapply for certification, request mediation, 
or file an appeal.
    An applicant who has received a notification of noncompliance or 
notice of denial of certification may apply for certification again at 
any time with any certifying agent. When the applicant submits a new 
application to a different certifying agent, the application must 
include, when available, a copy of the notification of noncompliance or 
notice of denial of certification. The application must also include a 
description of the actions taken, with supporting documentation, to 
correct the noncompliances noted in the notification of noncompliance. 
When a certifying agent receives such an application, the certifying 
agent will treat the application as a new

[[Page 80590]]

application and begin a new application process.
    A certifying agent has limited authority to deny certification 
without first issuing a notification of noncompliance. This authority 
may be exercised when the certifying agent has reason to believe that 
an applicant for certification has willfully made a false statement or 
otherwise purposefully misrepresented its operation or its compliance 
with the requirements for certification.

Continuation of Certification

    Each year, the certified operation must update its organic 
production or handling system plan and submit the updated information 
to the certifying agent and pay the certification fees to continue 
certification. The updated organic system plan must include a summary 
statement, supported by documentation, detailing deviations from, 
changes to, modifications to, or other amendments to the previous 
year's organic system plan. The updated organic system plan must also 
include additions to or deletions from the previous year's organic 
system plan, intended to be undertaken in the coming year. The 
certified operation must update the descriptive information about its 
business and other information as deemed necessary by the certifying 
agent to determine compliance with the Act and regulations. The 
certified operation must also provide an update on the correction of 
minor noncompliances previously identified by the certifying agent as 
requiring correction for continued certification.
    Following receipt of the certified operation's updated information, 
the certifying agent will, within a reasonable time, arrange and 
conduct an on-site inspection of the certified operation. When it is 
impossible for the certifying agent to conduct the annual on-site 
inspection following receipt of the certified operation's annual update 
of information, the certifying agent may allow continuation of 
certification and issue an updated certificate of organic operation on 
the basis of the information submitted and the most recent on-site 
inspection conducted during the previous 12 months. However, the annual 
on-site inspection must be conducted within the first 6 months 
following the certified operation's scheduled date of annual update. As 
a benchmark, certifying agents should follow auditing guidelines 
prescribed by ISO Guide 10011-1. Upon completion of the inspection and 
a review of updated information, the certifying agent will determine 
whether the operation continues to comply with the Act and regulations. 
If the certifying agent determines that the operation is in compliance, 
certification will continue. If any of the information specified on the 
certificate of organic operation has changed, the certifying agent will 
issue an updated certificate of organic operation. If the certifying 
agent finds that the operation is not complying with the Act and 
regulations, a written notification of noncompliance will be issued as 
described in section 205.662.
    In addition to annual inspections, a certifying agent may conduct 
additional on-site inspections of certified operations that produce or 
handle organic products to determine compliance with the Act and 
regulations. The Administrator or SOP's governing State official may 
also require that additional inspections be performed by the certifying 
agent to determine compliance with the Act and regulations. Additional 
inspections may be announced or unannounced and would be conducted, as 
necessary, to obtain information needed to determine compliance with 
identified requirements.
    Such on-site inspections would likely be precipitated by reasons to 
believe that the certified operation was operating in violation of one 
or more requirements of the Act or these regulations. The policies and 
procedures regarding additional inspections, including how the costs of 
such inspections are handled, would be the responsibility of each 
certifying agent. Misuse of such authority would be subject to review 
by USDA during its evaluation of a certifying agent for reaccreditation 
and at other times in response to complaints. Certified production and 
handling operations can file complaints with USDA at any time should 
they believe a certifying agent abuses its authority to perform 
additional inspections.

Certification After Suspension or Revocation of Certifying Agent's 
Accreditation

    When the Administrator revokes or suspends a certifying agent's 
accreditation, affected certified operations will need to make 
application for certification with another accredited certifying agent. 
The certification of the production or handling operation remains in 
effect during this transfer of the certification. The certified 
production or handling operation may seek certification by any 
qualified certifying agent accredited by the Administrator. To minimize 
the burden of obtaining the new certification, the Administrator will 
oversee transfer of the original certifying agent's file on the 
certified operation to the operation's new certifying agent.
    Upon initiation of suspension or revocation of a certifying agent's 
accreditation or upon suspension or revocation of a certifying agent's 
accreditation, the Administrator may initiate proceedings to suspend or 
revoke the certification of operations certified by the certifying 
agent. The Administrator's decision to suspend or revoke a producer's 
or handler's certification in light of the loss of its certifying 
agent's accreditation would be made on a case-by-case basis. Actions 
such as fraud, bribery, or collusion by the certifying agent, which 
cause the Administrator to believe that the certifying agent's clients 
do not meet the standards of the Act or these regulations, might 
require the immediate initiation of procedures to suspend or revoke 
certification from some or all of its client base. Removal of 
accreditation, regardless of the reason, in no way affects the appeals 
rights of the certifying agent's clients. Further, a certified 
operation's certification will remain in effect pending the final 
resolution of any proceeding to suspend or revoke its certification.
    A private-entity certifying agent must furnish reasonable security 
for the purpose of protecting the rights of operations certified by 
such certifying agent. This security is to ensure the performance of 
the certifying agent's contractual obligations. As noted elsewhere in 
this rule, the specific amount and type of security that must be 
furnished by a private certifying agent will be the subject of future 
rulemaking by USDA. We anticipate that the amount of the security will 
be tied to the number of clients served by the certifying agent and the 
anticipated costs of certification that may be incurred by its clients 
in the event that the certifying agent's accreditation is suspended or 
revoked. We anticipate that the security may be in the form of cash, 
surety bonds, or other financial instrument (such as a letter of 
credit) administered in a manner comparable to cash or surety bonds 
held under the Perishable Agricultural Commodities Act.

Certification--Changes Based on Comments

    This subpart differs from the proposal in several respects as 
follows:
    (1) Access to Production and Handling Operation. We have amended 
section 205.400(c) by changing ``noncertified areas and structures'' to 
``noncertified production and handling

[[Page 80591]]

areas, structures, and offices.'' A commenter requested that section 
205.400(c) be amended to allow for access to farm-related structures 
only. The commenter believes that the requirements of section 
205.400(c) could be interpreted as giving inspectors access to 
residential property. We agree with the commenter that residential 
privacy should be maintained. However, if a certified operation 
conducts business from or stores records at a residential property, the 
certified operation will be considered to be maintaining an office at 
the residential property. The records in such office shall be made 
accessible for review and copying. Accordingly, we have amended section 
205.400(c) to further clarify which areas and structures are to be made 
accessible during an on-site inspection.
    (2) Application for Certification. We have amended the first 
paragraph of section 205.401 by replacing the word, ``request,'' each 
time it occurred with the word, ``application.'' A commenter 
recommended that we amend the first paragraph of section 205.401 by 
replacing the word, ``request,'' with ``application.'' We have accepted 
the commenter's recommendation because the amendment makes the language 
in the first paragraph consistent with the title and the requirements 
of the section.
    (3) Verification of Correction of Noncompliances. To make section 
205.402(a)(3) consistent with section 205.401(c) we have amended the 
language in section 205.402(a)(3) to require that the certifying agent 
verify that an applicant who previously applied to another certifying 
agent and received a notification of denial of certification has 
submitted documentation to support the correction of any noncompliances 
identified in the notification of denial of certification. A commenter 
recommended that section 205.402(a)(3) be amended by inserting ``or 
denial of certification'' after the phrase, ``notification of 
noncompliance.'' We have accepted the commenter's recommended amendment 
because it is consistent with the requirements of section 205.401(c). 
Section 205.401(c) requires an applicant for certification to include 
the name(s) of any organic certifying agent(s) to which application has 
previously been made, the year(s) of application, and the outcome of 
the application(s) submission. The applicant is also required to 
include, when available, a copy of any notification of noncompliance or 
denial of certification issued to the applicant for certification. The 
words, ``when available,'' have been added to this requirement in this 
final rule to satisfy concerns regarding the status of applicants who 
cannot find or no longer have a copy of any notification of 
noncompliance or denial of certification previously received. We see no 
down side to relaxing this requirement since the applicant must still 
comply with each of the other provisions in section 205.401(c), 
including the requirement that the applicant include a description of 
the actions taken to correct the noncompliances noted in any 
notification of noncompliance or denial of certification, including 
evidence of such correction. Further, the certifying agent will be 
using USDA's database of certification actions during its review of an 
application for certification.
    (4) Timely Communication to the Applicant. We have amended section 
205.402(b), by requiring at paragraph (b)(1) that the certifying agent, 
within a reasonable time, review the application materials received and 
communicate its findings to the applicant. A commenter requested that 
we amend section 205.402(b) which required a certifying agent to 
communicate to the applicant its findings on the review of application 
materials submitted by the applicant. Specifically, the commenter 
requested that section 205.402(b) be amended by adding to the end 
thereof, ``in a timely manner so as to prevent the avoidable tillage of 
native habitat that had been identified in the application as lands for 
organic production.''
    We concur that certification decisions should be timely. There are 
many reasons (e.g., financial and contractual) for why certification 
must be timely. It would be impractical, however, to attempt to address 
all of the reasons for timely certification in these regulations. We 
have, therefore, amended section 205.402(b) as noted above. This 
amendment is consistent with the requirement in section 205.402(a) that 
the certifying agent, upon acceptance of an application for 
certification, review the application for completeness, determine by a 
review of the application materials whether the applicant appears to 
comply or may be able to comply with the requirements for 
certification, and schedule an on-site inspection. The ``upon 
acceptance'' requirement necessitates that the certifying agent review 
the application for certification and provide feedback to the applicant 
in a timely manner.
    (5) On-site Inspections. We have amended section 205.403(a)(1) by 
specifying that the initial and annual on-site inspections of each 
production unit, facility, and site in an operation applies to those 
units, facilities, and sites that produce or handle organic products. A 
commenter recommended that section 205.403(a)(1) be amended to specify 
that on-site inspections of each production unit, facility, and site 
will include just those that produce or handle organic products. The 
commenter stated that this change was necessary because some retail 
corporations choose to certify all store locations regardless of 
whether the location sells organic products. The commenter went on to 
say that, if a location does not stock any organic products, the 
certifying agent should have the discretion to modify the inspection 
requirement.
    We have excluded all retail food establishments from certification. 
The exclusion is found in section 205.101(b)(2). Accordingly, the 
commenter's recommendation is not applicable to retail food 
establishments. We have, however, made the recommended amendment to 
section 205.403(a)(1) because of its potential applicability to other 
operations which may apply for certification.
    (6) Scheduling Initial On-site Inspection. We have amended section 
205.403(b) to provide that the initial inspection may be delayed for up 
to 6 months to comply with the requirement that the inspection be 
conducted when the land, facilities, and activities that demonstrate 
compliance or capacity to comply with the organic production and 
handling requirements can be observed. We received a comment stating 
that if an application is received in January for a crop that will be 
planted in May, it would be necessary to delay the inspection until 
late May or June to observe the crop in the field. The commenter went 
on to say that the alternative would be to conduct the initial 
inspection before the crop is planted, in order to meet the ``within a 
reasonable time'' requirement, and then conduct a reinspection during 
the growing season. The commenter recommended amending section 
205.403(b) to allow the certifying agent to delay the initial on-site 
inspection until the land, facilities, and activities that demonstrate 
compliance or capacity to comply can be observed.
    We have accepted the recommendation because there may be situations 
where a later on-site inspection will prove mutually beneficial to the 
certifying agent and the operation to be inspected. However, certifying 
agents are reminded that the operation may be certified following a 
demonstration that the operation is able to comply with the organic 
production and handling requirements found in subpart C of these 
regulations. Accordingly, certifying agents should

[[Page 80592]]

not unnecessarily delay the certification of an organic production or 
handling operation by insisting that the inspection only be performed 
when the operation can demonstrate its actual compliance with the 
organic production and handling requirements. Applicants who believe 
that the certifying agent is abusing its authority to delay the on-site 
inspection may file a complaint with the Administrator.
    We have also amended the second sentence in section 205.403(b) by 
inserting the word, ``all,'' and removing both references to 
``applicant'' to clarify that the provision applies to all on-site 
inspections.
    (7) Exit Interview. We have amended section 205.403(d) by requiring 
that the inspector conduct an exit interview with ``an authorized 
representative of the operation who is knowledgeable about the 
inspected operation'' rather than ``an authorized representative of the 
inspected operation'' as required in the proposed rule. This amendment 
is consistent with the requirement in section 205.403(b) that an on-
site inspection be conducted when an authorized representative of the 
operation who is knowledgeable about the operation is present.
    A commenter requested that we define ``authorized representative.'' 
Another commenter recommended changing the term, ``authorized 
representative,'' to ``responsible executive.'' Our amendment of 
section 205.403(d) responds to both of these comments by clarifying the 
qualifications of an authorized representative.
    A third commenter stated that an exit interview is not a practical 
requirement and that an initial interview is often preferred. The 
commenter stressed that verification that the inspector has correctly 
understood what is presented is ongoing. This commenter also expressed 
the belief that there may be times when it may not be appropriate for 
the inspector to address issues of concern and that such issues may be 
best left to the certifying agent. The commenter recommended that the 
requirement for an exit interview be deleted or presented as an option. 
Another commenter suggested that issues of concern are often identified 
and discussed with the operation's representative during the course of 
the inspection. This commenter believes that it is unnecessarily 
confrontational to require an exit interview during which these issues 
of concern are repeated. This commenter recommended replacing the 
required exit interview with a communications provision that would 
require the inspector to discuss the need for any additional 
information as well as any issues of concern. The recommended provision 
would also authorize the certifying agent to provide the applicant with 
a summary of the inspector's areas of concern.
    While we agree that the language in section 205.403(d) needed 
clarification, we do not agree that the exit interview is impractical 
or unnecessarily confrontational. The exit interview is intended to 
give the inspector an opportunity to confirm the accuracy and 
completeness of inspection observations and information gathered during 
the on-site inspection, to request any additional information necessary 
to establish eligibility for certification, and to raise and discuss 
any known issues of concern. Issues of concern that may involve 
compliance issues will be handled as authorized by the certifying 
agent. The exit interview is also intended to give the inspected 
operation's authorized representative general information concerning 
the inspector's observations. Such exit interviews are required under 
ISO Guide 10011-1. Accordingly, requiring exit interviews is consistent 
with ISO standards and our expectation, as stated earlier in this 
preamble, that certifying agents benchmark their on-site inspection 
procedures to ISO Guide 10011-1.
    (8) On-site Inspection Documentation. We have amended section 
205.402(b) by adding the requirements that the certifying agent: (1) 
provide the applicant with a copy of the on-site inspection report, as 
approved by the certifying agent, for any on-site inspection performed 
and (2) provide the applicant with a copy of the test results for any 
samples taken by an inspector. We have also amended section 205.403 by 
adding a new paragraph (e) that requires the inspector, at the time of 
the inspection, to provide the operation's authorized representative 
with a receipt for any samples taken by the inspector. This new 
paragraph also addresses the requirement that the certifying agent 
provide the operation inspected with a copy of the inspection report 
and any test results. Having the certifying agent issue the on-site 
inspection report to the operation inspected is consistent with ISO 
Guide 65, section 11(b).
    Several commenters recommended that section 205.403 be amended to 
require that the inspector issue a copy of the on-site inspection 
report to the operation at the exit interview. They also recommended 
that the inspector be required to provide the operation with a receipt 
for samples collected for testing. The commenters, further, recommended 
that the certifying agent be required to provide the operation with a 
written report on the results of the testing performed on the samples 
taken. A commenter also recommended that the operation be paid for any 
samples taken. One of the commenters recommended that section 205.403 
be amended by adding protocol for an exit interview.
    We concur that the applicant for certification and certified 
operations should be provided with a copy of the on-site inspection 
report, a receipt for samples taken, and a copy of the test results for 
samples taken. Accordingly, we have amended sections 205.402(b) and 
205.403 as noted above.
    The protocol for an exit interview will be set forth in the 
certifying agent's procedures to be used to evaluate certification 
applicants, make certification decisions, and issue certification 
certificates. The NOP is available to respond to questions and to 
assist certifying agents in the development of these procedures which 
are required under section 205.504(b)(1). Accordingly, AMS is not 
amending the section to include a protocol for exit interviews. AMS is 
also not including a requirement that the certifying agent pay the 
applicant for samples taken, since such charges would just be charged 
back to the applicant as a cost for processing the applicant's 
application for certification.
    (9) Granting Certification. We have amended the last sentence of 
section 205.404(a) by removing the word, ``restrictions,'' and 
replacing it with ``requirements for the correction of minor 
noncompliances within a specified time period.'' A commenter suggested 
that the last sentence of section 205.404(a) be amended to read: ``The 
approval may include restrictions or requirements as a condition of 
continued certification, which includes a time line for fulfilling the 
requirement.'' Another commenter requested that we define 
``restrictions.'' This commenter also recommended amending section 
205.404(a) to clarify the meaning of ``restrictions'' and to require 
corrective action by the operator within a specific time period. We 
agree with the commenters that the last sentence of section 205.404(a) 
was in need of further clarification. We also agree that it is 
appropriate for the regulations to require that the requirements for 
correction include a specified time period within which the corrections 
must be made. Accordingly, we amended section 205.404(a) as noted 
above. The certifying agent will make the determination of whether a 
violation

[[Page 80593]]

of the Act and regulations is minor. Minor noncompliances are those 
infractions that, by themselves, do not preclude the certification or 
continued certification of an otherwise qualified organic producer or 
handler. The certifying agent would be free to modify the time period 
for correction should it believe it to be appropriate.
    We have also made editorial changes to section 205.404(a) 
consistent with suggestions we received on section 205.506. In the 
title to section 205.404 we have replaced ``Approval of'' with 
``Granting.'' In section 205.404(a) we have replaced ``approve'' with 
``grant'' and ``approval'' with ``certification.'' This change makes 
the language in section 205.404 consistent with ISO Guide 65, section 
4.6, which addresses the granting of certification.
    (10) Payment of Fees. We have amended the introductory statement 
within section 205.406(a) by adding the requirement that, to continue 
certification, a certified operation annually pay the certifying 
agent's certification fees. A commenter recommended amending section 
205.404(c) by adding a sentence providing that a certified operation's 
failure to pay the certifying agent's certification fees may be a cause 
for suspension or revocation of certification. We agree that the issue 
of payment of fees should be addressed but not in section 205.404(c), 
which deals with the duration of a certified operation's certification. 
We believe the issue of payment of certification fees is more 
appropriately addressed in section 205.406, which deals with 
continuation of certification. Accordingly, we have amended section 
205.406(a) to require payment of the certifying agent's fees as a 
condition of continued certification. This addition would allow a 
certifying agent to initiate suspension or revocation proceedings 
against any operation that fails to pay the required fees. The 
certifying agent is not required to initiate suspension or revocation 
proceedings for failure to pay the fees. In fact, the certifying agent 
is encouraged to use one or more of the legal debt collection 
alternatives available to it.
    (11) Denial of Certification. We have amended section 205.405 to 
include noncompliance and resolution provisions originally included by 
cross-reference to section 205.662(a). We have made this amendment in 
response to a comment that these regulations do not provide an 
opportunity for a hearing upon denial of certification. We disagree 
with the commenter's assessment but have amended section 205.405(a) to 
eliminate confusion that may result from the cross-reference to section 
205.662(a). We have determined that section 205.662(a) may cause 
confusion for certification applicants because the section does not 
specifically address applicants.
    As amended, section 205.405(a) required a written notification of 
noncompliance that describes each noncompliance, the facts on which the 
noncompliance is based, and the date by which the applicant must rebut 
or correct each noncompliance and submit supporting documentation of 
each such correction when correction is possible. Section 205.405(b) 
lists the options available to the applicant, including the options of 
correcting the noncompliance or submitting written information to rebut 
the noncompliance. Successful correction or rebuttal will result in an 
approval of certification. When the corrective action or rebuttal is 
not sufficient for the applicant to qualify for certification, the 
certifying agent will issue a written notice of denial of 
certification. This notice will state the reason(s) for denial and the 
applicant's right to request mediation in accordance with section 
205.663 or to file an appeal in accordance with section 205.681.
    (12) Rebuttal of a Noncompliance. We have amended section 
205.405(b)(3) to clarify that rebuttal of a noncompliance shall be 
submitted to the certifying agent that issued the notification of 
noncompliance. We made this amendment in response to a commenter's 
question about who has authority to evaluate a written rebuttal.
    (13) Correction of Minor Noncompliances. We have amended section 
205.406(a) by adding a new paragraph (3) which requires the certified 
operation to include with its annual reporting an update on the 
correction of minor noncompliances previously identified by the 
certifying agent as requiring correction for continued certification. A 
commenter recommended adding at 205.406(a) a requirement that the 
certified operation address any restrictions that have been applied to 
its certification under 205.404(a). We agree with the commenter that 
the annual reporting by the certified operation should include an 
update addressing the certified operation's compliance with the 
certifying agent's requirements for the correction of minor 
noncompliances. Accordingly, we amended section 205.406(a) as noted 
above and redesignated paragraph (3) as paragraph (4). The certifying 
agent will make the determination of whether a violation of the Act and 
regulations is minor. Minor noncompliances are those infractions that, 
by themselves, do not preclude the certification or continued 
certification of an otherwise qualified organic producer or handler.
    (14) Scheduling Annual On-site Inspections. We have amended section 
205.406(b) to provide that, when it is impossible for the certifying 
agent to conduct the annual on-site inspection following receipt of the 
certified operation's annual update of information, the certifying 
agent may allow continuation of certification and issue an updated 
certificate of organic operation on the basis of the information 
submitted and the most recent on-site inspection conducted during the 
previous 12 months. The annual on-site inspection, required by section 
205.403, must, however, be conducted within the first 6 months 
following the certified operation's scheduled date of annual update.
    A commenter expressed the belief that the requirement for an on-
site inspection after receipt of the certified operation's annual 
update of information would have required that all annual on-site 
inspections be performed at the same time of the year. The commenter 
went on to express the belief that, to avoid inspecting certified 
operations twice a year, certifying agents would have to schedule the 
annual update to occur during the growing season in order to comply 
with the requirement for timing inspections when normal production 
activities can be observed. The commenter stated that certifying agents 
should be given more flexibility for scheduling inspections and 
conducting their certification programs according to management 
procedures best suited to their agency. The commenter recommended 
amending section 205.406(b) by adding to the end thereof: ``or base the 
decision regarding eligibility for renewal on an on-site inspection 
conducted during the previous 12 months.''
    We agree with the commenter that certifying agents should be given 
more flexibility for scheduling on-site inspections so as to best meet 
the management needs of the certifying agent. Accordingly, we have 
amended section 205.406(b) to allow continuation of certification and 
issuance of an updated certificate of organic operation on the basis of 
the information submitted and the most recent on-site inspection 
conducted during the previous 12 months. This option will be available 
to the certifying agent when renewal is scheduled for a time when it is 
impossible to conduct the annual on-site inspection following receipt 
of the annual update and at a time when land, facilities, and 
activities that demonstrate the operation's compliance or capability

[[Page 80594]]

to comply can be observed. This change does not affect the requirement 
in section 205.403(a)(1) that the certifying agent conduct an annual 
on-site inspection of each certified operation. Further, the annual on-
site inspection must be conducted within the first 6 months following 
the certified operation's scheduled date of annual update.

Certification--Changes Requested But Not Made

    This subpart retains from the proposed rule regulations on which we 
received comments as follows:
    (1) Number of On-site Inspections. A commenter recommended that 
section 205.403(a)(1) be amended by adding a requirement that 
production operations be under active organic management for the last 
year of the 3-year land conversion period and that two on-site 
inspections be performed prior to organic certification.
    Section 205.403(a)(1) provides that the certifying agent must 
conduct an initial on-site inspection of each production unit, 
facility, and site that produces or handles organic products and that 
is included in an operation for which certification is requested. The 
requirement does not preclude a certifying agent from conducting 
additional on-site inspections, if necessary, to establish the 
applicant's eligibility for certification. The Act requires a 3-year 
period immediately preceding harvest, during which the production 
operation must be free from the application of prohibited substances. 
The Act does not, however, require that land be under active organic 
management during this period, and we do not believe such a requirement 
in these regulations is necessary. Such a requirement, for example, 
would necessitate some process for verifying that an operation is under 
active organic management, which would, in effect, require a 
certification-type decision a year before certification is granted and 
the operation can begin to label products as certified organic. 
Accordingly, we disagree with the commenter's recommendation that an 
operation be under active organic management for the last year of the 
3-year land conversion and that two on-site inspections be required.
    (2) Unannounced Inspections. A commenter recommended that section 
205.403(a)(2)(iii) be amended to require additional unannounced 
inspections either by defining the circumstances under which the 
inspections should be undertaken or by setting a minimum percentage of 
unannounced inspections. The commenter claimed that 5 percent is a 
common percentage adopted by certifying agents around the world.
    Section 205.403 requires an initial on-site inspection, annual on-
site inspection, and additional on-site inspections to determine 
compliance with the Act and regulations, to verify that information 
provided reflects actual practices, and to verify, through testing if 
necessary, that prohibited substances are not used by the operation. 
Because of the widely disparate nature of certified operations, we 
believe the certifying agent is in the best position to determine the 
need for additional on-site inspections. Accordingly, we have rejected 
the commenter's request that the regulations require additional 
unannounced visits either by defining the circumstances under which 
these should be undertaken or by setting a minimum percentage.
    (3) Timeliness of Certifying Agent Review Information. A commenter 
requested that section 205.404(a) be amended to specify a timeframe of 
60 days rather than ``Within a reasonable time'' as the time by which 
the certifying agent must review the on-site inspection report, the 
results of any analyses for substances, and any additional information 
requested from or supplied by the applicant.
    Section 205.404(a) requires the certifying agent, within a 
reasonable time after completion of the initial on-site inspection, to 
review the on-site inspection report, the results of any analyses for 
substances conducted, and any additional information requested from or 
supplied by the applicant. Section 205.504(b)(1) requires the 
certifying agent to submit a copy of the procedures to be used to 
evaluate certification applicants, make certification decisions, and 
issue certification certificates. Such procedures and the certifying 
agent's performance in making timely certification decisions will be 
subject to review during accreditation and reaccreditation of the 
certifying agent. Certifying agents are expected to make timely 
decisions regarding whether to certify an applicant and whether a 
certified operation is in compliance with the Act and regulations. 
Applicants with complaints regarding timeliness of service could 
forward their complaints to the Administrator. Accordingly, timely 
service will be in the best interest of certifying agents since such 
complaints could have an impact on their reaccreditation or continued 
accreditation. Further, our original position is consistent with those 
commenters requesting flexibility in determining what constitutes 
reasonable time. Accordingly, we have not amended section 205.404(a) as 
requested.
    (4) Categories of Organic Operation. We received a variety of 
comments regarding the requirement that the certifying agent issue a 
certificate of organic operation which specifies the categories of 
organic operation, including crops, wild crops, livestock, or processed 
products produced by the certified operation. One commenter recommended 
that section 205.404(b)(3) be amended, with regard to processing, to 
only require a processing category to be specified on the certificate, 
such as food processing or feed processing. The commenter stated that 
it should not be necessary to list every product on the certificate. 
Specifically, the commenter recommended amending section 205.404(b)(3) 
by inserting the words, ``general categories of,'' immediately in front 
of the word, ``processed.'' Another commenter recommended amending 
section 205.404(b)(3) to require the identity of specific crops and the 
specific processing operations certified. Still another commenter 
requested that section 205.404(b) be amended by adding a new paragraph 
requiring that the certificate include the number of livestock of each 
species produced on the certified operation. This same commenter also 
recommended the addition of a new paragraph requiring that the 
certificate identify the specific location of each certified organic 
field and handling operation. We also received support for section 
205.404(b)(3) as written. This commenter does not support the addition 
of information regarding the number of livestock or the location of 
fields.
    We disagree with the suggestion that the certificate list every 
crop, wild crop, livestock, or processed product produced by the 
certified operation. We believe that listing categories of organic 
operation is sufficient. This does not, however, prevent the certifying 
agent, in cooperation with the certified operation, from listing 
specific crops, livestock, or processed products on the certificate. 
Such information could always be listed on the certificate when 
requested by the certified operation. We also disagree with the 
commenter who requested that certifying agents display the number of 
livestock of each species produced by the certified operation and the 
specific location of each certified organic field and handling 
operation. We do not believe it is necessary to list the quantity of 
product to be produced or handled at a certified operation, nor do we 
believe it is necessary to list the location of a certified operation's 
fields or facilities. Such information may,

[[Page 80595]]

however, be listed on the certificate upon the written request of the 
certified operation. By requiring the name, address, and telephone 
number of the certifying agent, the certificate would provide 
interested persons with a contact for obtaining releasable information 
concerning the certified operation. Further, the certifying agent is 
the first line of compliance under this program and, as such, is the 
person to whom all questions and concerns should be addressed about 
certified operations.
    (5) Annual Renewal of Certification. Numerous commenters requested 
that section 205.404(b)(2) be amended to provide for the placement of 
an expiration date on the certificate of organic operation. The 
commenters want yearly expiration of certification and yearly 
expiration of the certificate of organic operation. Commenters also 
requested that section 205.404(c) be amended to provide that once 
certified, a production or handling operation's organic certification 
continues in effect until the expiration date on the certificate, until 
surrendered by the organic operation, or until suspended or revoked by 
the certifying agent, the SOP's governing State official, or the 
Administrator. Some commenters recommended the addition of a new 
paragraph 205.406(e) that would provide for automatic suspension of a 
certification if the certified operation did not provide the 
information required in paragraph 205.406(a) by the expiration date to 
be placed on the certificate of organic operation.
    We disagree with the commenters who have requested annual renewal 
of certification and that the certified operation's certification and 
its certificate of organic operation expire annually. We prefer 
continuous certification due to the very real possibility that the 
renewal process might not always be completed before expiration of the 
certification period. Expiration of the certification period would 
result in termination of the operation's certification. Even a short 
period of interruption in an operation's organic status could have 
severe economic ramifications. Further, we believe that a regular 
schedule of expiration of certification is unnecessary inasmuch as all 
certified operations are required to annually update their organic 
system plan and submit any changes to their certifying agent. More 
importantly, unlike accreditation, where the Act provides for 
expiration and renewal, the Act does not provide for an expiration or 
renewal of certification. Therefore, it is also our position that once 
granted certification the production or handling operation retains that 
certification until voluntarily surrendered or removed, following due 
process, for violation of the Act or these regulations.
    (6) Denial of Certification. A commenter recommended that section 
205.405(e) be amended to place a time restriction on reapplication for 
certification after denial of certification. The commenter suggested a 
3-year period. We disagree with this recommendation because the reasons 
for denial include a wide range of noncompliances. The ability to 
correct noncompliances will vary as will the time needed to correct the 
noncompliances.
    (7) Production and Handling Operation Certification Following 
Suspension or Revocation of Certifying Agent Accreditation. A few 
commenters requested amendment of section 205.406 through the addition 
of a new paragraph (f). Specifically, the commenters requested 
provisions that would provide for USDA notification of certified 
operations regarding the suspension or revocation of their certifying 
agent's accreditation. Some of these commenters requested that the 
provisions also allow the affected certified operation to use current 
market labels for a maximum period of 12 months, provided the certified 
operation made application for certification with another USDA-
accredited certifying agent within 3 months of being notified of their 
certifying agent's suspension or revocation of accreditation. Another 
commenter requested that the new paragraph provide that the affected 
certified operation will continue to operate as if certified by the 
USDA and will be allowed to use current market labels for a maximum 
period of 12 months. The commenter stated that this amendment would 
provide the certified operation with the time needed to obtain 
recertification by an accredited certifying agent and to prepare new 
labels.
    We disagree with the recommendations. USDA does not perform organic 
certification activities under any circumstance, including upon 
surrender, suspension, or revocation of an accredited certifying 
agent's accreditation. Operations certified by a certifying agent that 
surrenders or loses its USDA accreditation will be notified by USDA and 
given an opportunity to immediately begin seeking certification by the 
USDA-accredited certifying agent of their choice. Certified operations 
shall not affix the seal or other representation of a certifying agent 
to any product that they produce after the certifying agent has 
surrendered or had its accreditation revoked. The certified operation 
may use the USDA organic seal. In the case of suspension of the 
certifying agent, the reasons for the suspension and the terms of the 
suspension will determine whether the certifying agent's certified 
operations will have to seek recertification or stop affixing the 
certifying agent's seal or other representation to their products. USDA 
will announce the suspension or revocation of a certifying agent's 
accreditation, and the announcement will address the status of 
operations certified by the certifying agent.

Certification--Clarifications

    Clarification is given on the following issues raised by commenters 
as follows:
    (1) Recordkeeping. A commenter stated that most computerized 
recordkeeping systems used at retail and wholesale are set up to save 
the data for a maximum of 2 years; adding 3 additional years to that 
requirement would be extremely costly as systems modifications and 
additional hardware and support would be required to meet the mandate. 
The commenter suggested that since food product is generally sold and 
consumed within a matter of months (if not weeks), shortening this 
requirement to 2 years should meet the goal for tracking of any product 
through the distribution system. This commenter was referring to the 
requirement in section 205.400(d) that records be maintained for not 
less than 5 years beyond their creation.
    Section 205.103 requires that a certified operation maintain 
records; that the records be adapted to the particular business that 
the certified operation is conducting, fully disclose all activities 
and transactions of the certified operation in sufficient detail as to 
be readily understood and audited, be maintained for not less than 5 
years beyond their creation, and be sufficient to demonstrate 
compliance with the Act and the regulations in this part; and that the 
certified operation must make such records available for inspection and 
copying during normal business hours by authorized representatives of 
the Secretary, the applicable SOP's governing State official, and the 
certifying agent. The requirements do not state in what form (i.e., 
paper, electronic, film) that the records must be maintained. 
Therefore, in answer to the commenter's concern, database records more 
than 2 years old could be stored in any form, including on an 
electronic storage device, which would permit retrieval upon request.
    (2) Application Fees. A commenter recommended that section 205.401 
be

[[Page 80596]]

amended by adding a new paragraph (e) which would require an applicant 
for certification to include, along with the other required application 
information, the application fees required by the certifying agent.
    The requested language is unnecessary because section 205.400(e) 
requires submission of the applicable fees charged by the certifying 
agent as a general requirement for certification.
    (3) Applicant Identification. In reference to section 205.401(c) a 
commenter stated that an applicant that is a corporation could easily 
change the name of the corporation in order to avoid having to report 
applications submitted and denied under the previous name. The 
commenter went on to state that there must be a database available to 
certifying agents that includes names and location addresses of 
operations that have received a notification of noncompliance, denial 
of certification, or a suspension or revocation of certification.
    Section 205.401(b) requires the applicant to include in its 
application the name of the person completing the application; the 
applicant's business name, address, and telephone number; and, when the 
applicant is a corporation, the name, address, and telephone number of 
the person authorized to act on the applicant's behalf.
    As we stated in the preamble to the proposed rule, we anticipate 
using the data collected under section 205.501(a)(15) to establish and 
maintain two Internet databases. The first Internet database would be 
accessible to the general public and would include the names and other 
appropriate data on certified organic production and handling 
operations. The second Internet database would be password protected 
and only available to accredited certifying agents and USDA. This 
second database would include data on production and handling 
operations issued a notification of noncompliance, noncompliance 
correction, denial of certification, certification, proposed suspension 
or revocation of certification, and suspension or revocation of 
certification. Certifying agents would use the second Internet database 
during their review of an application for certification.
    (4) Withdrawal of Application. Several commenters expressed the 
belief that allowing an applicant to voluntarily withdraw its 
application will be used as a tool to avoid denial of certification. 
They expressed concern that voluntary withdrawal before denial of 
certification will allow the applicant to make application with a 
different certifying agent with a clean record. These commenters were 
responding to the provision in section 205.402(e) which allows an 
applicant for certification to withdraw its application at any time.
    We continue to believe that operations should not be unnecessarily 
stigmatized because they applied for certification before the operation 
was ready to meet all requirements for certification. While some 
operations may use voluntary withdrawal as a means to avoid the 
issuance of a notification of noncompliance or a notice of denial of 
certification, this should not adversely affect the National Organic 
Program (NOP) because all certifying agents are responsible for using 
qualified personnel in the certification process and for ensuring an 
applicant's eligibility for certification. Further, all applicants for 
certification are required under section 205.401(c) to include in their 
application the name(s) of any organic certifying agent(s) to which 
application has previously been made, the year(s) of application, and 
the outcome of the application(s) submission.
    (5) On-site Inspections. Section 205.403(a)(2)(ii) provides that 
the Administrator or SOP's governing State official may require that 
additional inspections be performed by the certifying agent for the 
purpose of determining compliance with the Act and the regulations in 
this part. In commenting on this provision, a commenter asked, ``Who is 
running this program: State or Federal officials?''
    This is a national organic program administered by the Agricultural 
Marketing Service of the United States Department of Agriculture. 
States may administer their own organic program. However, all SOP's are 
subject to USDA approval. The National Organic Standards and a State's 
organic standards under a USDA-approved SOP are the National Organic 
Standards for that State. The State, under USDA's approval of the SOP, 
has enforcement responsibilities for the Federal and State components 
of the organic program within the State.
    (6) Verification of Information. A commenter stated that section 
205.403(c) is insufficiently comprehensive. The commenter stated that 
organic inspection is assessment of a process evaluated against 
comprehensive standards and, as such, it requires specific rules to 
provide confidence in the quality of the inspection. The commenter 
recommended amending section 205.403(c) by including requirements on 
minimum verification methods.
    Section 205.403(c) identifies what must be verified during the on-
site inspection. The details on how the verification will be 
accomplished will be set forth in the certifying agent's procedures to 
be used to evaluate certification applicants, make certification 
decisions, and issue certification certificates and the certifying 
agent's procedures for reviewing and investigating certified operation 
compliance with the Act and regulations. The NOP is available to 
respond to questions and to assist certifying agents in complying with 
the on-site inspection requirements, including those for the 
verification of information.
    (7) Notifying Customers of Change in Certification Status. A 
commenter stated that the regulations do not indicate when a certified 
organic producer must stop using the organic seal or whether they must 
notify customers of their denial of certification. The commenter 
recommended amending section 205.405 to include a provision for 
notifying customers of a certified operation's change in certification 
status.
    Any producer or handler who plans to sell, label, or represent its 
product as ``100 percent organic,'' ``organic,'' or ``made with * * *'' 
must be certified unless exempted under the small operation exemption 
under section 205.101(a)(1) or not regulated under the NOP (i.e., a 
producer of dog food). Only certified operations may represent 
themselves as certified. Operations denied certification may not 
represent their products as ``100 percent organic,'' ``organic,'' or 
``made with * * *'' Operations that have had their certification 
suspended or revoked will be subject to the terms and conditions of 
their suspension or revocation relative to the labeling of product 
produced prior to the suspension or revocation. No product produced by 
an operation after suspension or revocation of certification may be 
sold, labeled, or represented as ``100 percent organic,'' ``organic,'' 
or ``made with * * *''
    Buyers of organic product can request to see the producer's or 
handler's certificate of organic operation. Operations that have lost 
their organic status will be unable to obtain an updated certificate. 
Buyers with questions regarding an operation's organic status may also 
contact the certifying agent identified on a certificate of organic 
operation. Further, as previously noted, we anticipate using the data 
collected under section 205.501(a)(15) to establish and maintain an 
Internet database accessible to the general public that will include 
the

[[Page 80597]]

names and other appropriate data on certified organic production and 
handling operations.
    (8) Continuation of Certification. A few commenters recommended 
amending section 205.406 to include a safety net for producers who are 
certified by a certifying agent that does not become accredited by 
USDA. They stated that the rule must clearly state that a certified 
organic producer will have the full 18-month implementation period 
starting from the effective date of the final rule to get recertified 
if their certifying agent is not accredited. One of the commenters 
stated that because the NOP anticipates that the accreditation process 
will require 12 months, producers will, in effect, have 6 months to be 
certified by a new certifying agent should the producer's certifying 
agent not be accredited.
    Certification under the NOP will become mandatory 18 months after 
the effective date of the final rule. Applications for accreditation 
will be processed on a first-come, first-served basis. Accreditations 
will be announced approximately 12 months after the effective date of 
the final rule for those qualified certifying agents who apply within 
the first 6 months following the effective date and for any other 
applicants that AMS determines eligible. Certifying agents will begin 
the process of certifying organic production and handling operations to 
the national standards upon receipt of their USDA accreditation. All 
production and handling operations certified by an accredited 
certifying agent will be considered certified to the national standards 
until the certified operation's anniversary date of certification. This 
phase-in period will only be available to those certified operations 
certified by a certifying agent that receives its accreditation within 
18 months from the effective date of the final rule. We anticipate that 
certifying agents and production and handling operations will move as 
quickly as possible to begin operating under the national organic 
standards. Operations certified by a certifying agent, which fails to 
apply for or fails to meet the requirements for USDA accreditation 
under the NOP, must seek and receive certification by a USDA-accredited 
certifying agent before they can sell, label, or represent their 
products as organic, effective 18 months after the effective date of 
the final rule.

Subpart F--Accreditation of Certifying Agents

    This subpart sets forth the requirements for a national program to 
accredit State and private entities as certifying agents to certify 
domestic or foreign organic production or handling operations. This 
subpart also provides that USDA will accept a foreign certifying 
agent's accreditation to certify organic production or handling 
operations if: (1) USDA determines, upon the request of a foreign 
government, that the standards under which the foreign government 
authority accredited the foreign certifying agent meet the requirements 
of this part; or (2) the foreign governmental authority that accredited 
the certifying agent acted under an equivalency agreement negotiated 
between the United States Government and the foreign government.
    This National Organic Program (NOP) accreditation process will 
facilitate national and international acceptance of U.S. organically 
produced agricultural commodities. The accreditation requirements in 
these regulations will, upon announcement of the first group of 
accredited certifying agents, replace the voluntary fee-for-service 
organic assessment program, established by AMS under the Agricultural 
Marketing Act of 1946. That assessment program verifies that State and 
private organic certifying agents comply with the requirements 
prescribed under the International Organization for Standardization/
International Electrotechnical Commission Guide 65, ``General 
Requirements for Bodies Operating Product Certification Systems'' (ISO 
Guide 65).\2\ ISO Guide 65 provides the general requirements that a 
certifying agent would need to meet to be recognized as competent and 
reliable. That assessment program was originally established to enable 
organic certifying agents in the absence of a U.S. national organic 
program to comply with European Union (EU) requirements beginning on 
June 30, 1999. That assessment program verifies that State and private 
organic certifying agents are operating third-party certification 
systems in a consistent and reliable manner, thereby facilitating 
uninterrupted exports of U.S. organic agricultural commodities to the 
EU. ISO Guide 65 was used as a benchmark in developing the 
accreditation program described in this final rule. Certifying agents 
accredited under the NOP that maintain compliance with the Act and 
these regulations will meet or exceed the requirements of ISO Guide 65; 
therefore, the organic assessment program is no longer needed.
---------------------------------------------------------------------------

    \2\ ISO/IEC Guide 65 is available for viewing at USDA-AMS, 
Transportation and Marketing Programs, Room 2945-South Building, 
14th and Independence Ave., SW., Washington, DC, from 9:00 a.m. to 
4:00 p.m., Monday through Friday (except official Federal holidays). 
A copy may be obtained from the American National Standards 
Institute, 11 West 42d Street, New York, NY 10036; Website: 
www.ansi.org; E-mail: [email protected]; Telephone: 212-642-4900; 
Facsimile: 212-398-0023.
---------------------------------------------------------------------------

    Participation in the NOP does not preclude the accredited 
certifying agent from conducting other business operations, including 
the certification of agricultural products, practices, and procedures 
to standards that do not make an organic claim. An accredited 
certifying agent may not, however, engage in any business operations or 
activities which would involve the agent in a violation of or in a 
conflict of interest under the NOP.

Description of Regulations

    The Administrator will accredit qualified domestic and foreign 
applicants in the areas of crops, livestock, wild crops, or handling or 
any combination thereof to certify domestic or foreign production or 
handling operations as certified organic operations. Qualified 
applicants will be accredited for 5 years.

Application Process

    Certifying agents will apply to the Administrator for accreditation 
to certify production or handling operations operating under the NOP. 
The certifying agent's application must include basic business 
information, must identify each area of operation for which 
accreditation is requested and the estimated number of each type of 
operation to be certified annually, and must include a list of each 
State or foreign country where it currently certifies production or 
handling operations and where it intends to certify such operations. 
Certifying agents must also submit personnel, administrative, conflict 
of interest, current certification, and other documents and information 
to demonstrate their expertise in organic production or handling 
techniques, their ability to comply with and implement the organic 
certification program, and their ability to comply with the 
requirements for accreditation. Certifying agents planning to certify 
production or handling operations within a State with an approved State 
organic program (SOP) must demonstrate their ability to comply with the 
requirements of the SOP.
    The administrative information submitted by the applicant must 
include copies of its procedures for certifying operations, for 
ensuring compliance of its certified operations with the Act and 
regulations, for complying with recordkeeping requirements, and for 
making information available to the

[[Page 80598]]

public about certified operations. The procedures for certifying 
operations encompass the processes used by the certifying agent to 
evaluate applicants, make certification decisions, issue certification 
certificates, and maintain the confidentiality of any business 
information submitted by the certified operation. The procedures for 
ensuring compliance of the certified operations will include the 
methods used to review and investigate certified operations, for 
sampling and residue testing, and to report violations.
    The personnel information submitted with the application must 
demonstrate that the applicant uses a sufficient number of adequately 
trained personnel to comply with and implement the organic 
certification program. The certifying agent will also have to provide 
evidence that its responsibly connected persons, employees, and 
contractors with inspection, analysis, and decision-making 
responsibilities have sufficient expertise in organic production or 
handling techniques to successfully perform the duties assigned. They 
must also show that all persons who review applications for 
certification perform on-site inspections, review certification 
documents, evaluate qualifications for certification, make 
recommendations concerning certification, or make certification 
decisions and that all parties responsibly connected to the certifying 
agent have revealed existing or potential conflicts of interest.
    Applicants who currently certify production or handling operations 
must also submit a list of the production and handling operations 
currently certified by them. For each area in which the applicant 
requests accreditation, the applicant should furnish copies of 
inspection reports and certification evaluation documents for at least 
three operations. If the applicant underwent any other accrediting 
process in the year previous to the application, the applicant should 
also submit the results of the process.
    Certifying agents are prohibited from giving advice or providing 
consultancy services to certification applicants or certified 
operations for overcoming identified barriers to certification. This 
requirement does not apply to voluntary education programs available to 
the general public and sponsored by the certifying agent.
    The Administrator will provide oversight of the fees to ensure that 
the schedule of fees filed with the Administrator is applied uniformly 
and in a nondiscriminatory manner. The Administrator may inform a 
certifying agent that its fees appear to be unreasonable and require 
that the certifying agent justify the fees. The Administrator will 
investigate the level of fees charged by an accredited certifying agent 
upon receipt of a valid complaint or under compelling circumstances 
warranting such an investigation.

Statement of Agreement

    Upon receipt of the certifying agent's application for 
accreditation, the Administrator will send a statement of agreement to 
the person responsible for the certifying agent's day-to-day operations 
for signature. The statement of agreement affirms that, if granted 
accreditation as a certifying agent under this subpart, the applicant 
will carry out the provisions of the Act and the regulations in this 
part. Accreditation will not be approved until this statement is signed 
and returned to the Administrator.
    The statement of agreement will include the applicant's agreement 
to accept the certification decisions made by another certifying agent 
accredited or accepted by USDA pursuant to section 205.500 and the 
applicant's agreement to refrain from making false or misleading claims 
about its accreditation status, the USDA accreditation program, or the 
nature or qualities of products labeled as organically produced. 
Further, the statement will include the applicant's agreement to pay 
and submit the fees charged by AMS and to comply with, implement, and 
carry out any other terms and conditions determined by the 
Administrator to be necessary. Applicants are also required to affirm 
through this statement of agreement that they will: (1) conduct an 
annual performance evaluation of all persons who review applications 
for certification, perform on-site inspections, review certification 
documents, evaluate qualifications for certification, make 
recommendations concerning certification, or make certification 
decisions and implement measures to correct any deficiencies in 
certification services; and (2) have an annual program review conducted 
of their certification activities by their staff, an outside auditor, 
or a consultant who has expertise to conduct such reviews and implement 
measures to correct any noncompliances with the Act and the regulations 
in this part that are identified in the evaluation.
    A private entity certifying agent must additionally agree to hold 
the Secretary harmless for any failure on the agent's part to carry out 
the provisions of the Act and regulations. A private entity certifying 
agent's statement will also include an agreement to furnish reasonable 
security for the purpose of protecting the rights of operations 
certified by such certifying agent. Such security will be in an amount 
and according to such terms as the Administrator may by regulation 
prescribe. A private entity certifying agent must agree to transfer all 
records or copies of records concerning its certification activities to 
the Administrator if it dissolves or loses its accreditation. This 
requirement for the transfer of records does not apply to a merger, 
sale, or other transfer of ownership of a certifying agent. A private 
entity certifying agent must also agree to make such records available 
to any applicable SOP's governing State official.

Granting Accreditation

    Upon receiving all the required information, including the 
statement of agreement, and the required fee, the Administrator will 
determine if the applicant meets the requirements for accreditation. 
The Administrator's determination will be based on a review of the 
information submitted and, if necessary, a review of the information 
obtained from a site evaluation. The Administrator will notify the 
applicant of the granting of accreditation in writing. The notice of 
accreditation will state the area(s) for which accreditation is given, 
the effective date of the accreditation, any terms or conditions for 
the correction of minor noncompliances, and, for a private-entity 
certifying agent, the amount and type of security that must be 
established.
    Certifying agents who apply for accreditation and do not meet the 
requirements for accreditation will be provided with a notification of 
noncompliance which will describe each noncompliance, the facts on 
which the notification is based, and the date by which the applicant 
must rebut or correct each noncompliance and submit supporting 
documentation of each such correction when correction is possible. If 
the applicant is successful in its rebuttal or provides acceptable 
evidence demonstrating correction of the noncompliances, the NOP 
Program Manager will send the applicant a written notification of 
noncompliance resolution and proceed with further processing of the 
application. If the applicant fails to correct the noncompliances, 
fails to report the corrections by the date specified in the 
notification of noncompliance, fails to file a rebuttal by the date 
specified in the notification of noncompliance, or is unsuccessful in 
its rebuttal, the Program

[[Page 80599]]

Manager will issue a written notification of accreditation denial to 
the applicant. An applicant who has received written notification of 
accreditation denial may apply for accreditation again at any time or 
file an appeal of the denial of accreditation with the Administrator by 
the date specified in the notification of accreditation denial.
    Once accredited, a certifying agent may establish a seal, logo, or 
other identifying mark to be used by certified production and handling 
operations. However, the certifying agent may not require use of its 
seal, logo, or other identifying mark on any product sold, labeled, or 
represented as organically produced as a condition of certification. 
The certifying agent also may not require compliance with any 
production or handling practices other than those provided for in the 
Act and regulations as a condition for use of its identifying mark. 
However, certifying agents certifying production or handling operations 
within a State with more restrictive requirements, approved by the 
Administrator, shall require compliance with such requirements as a 
condition of use of their identifying mark by such operations.

Site Evaluations

    One or more representatives of the Administrator will perform site 
evaluations for each certifying agent in order to examine the 
certifying agent's operations and to evaluate compliance with the Act 
and regulations. Site evaluations will include an on-site review of the 
certifying agent's certification procedures, decisions, facilities, 
administrative and management systems, and production or handling 
operations certified by the certifying agent. A site evaluation of an 
accreditation applicant will be conducted before or within a reasonable 
time after issuance of the applicant's notification of accreditation. 
Certifying agents will be billed for each site evaluation conducted in 
association with an initial accreditation, amendments to an 
accreditation, and renewals of accreditation. Certifying agents will 
not be billed by USDA for USDA-initiated site evaluations conducted to 
determine compliance with the Act and regulations.
    As noted above, a certifying agent may be accredited prior to a 
site evaluation. If the Program Manager finds, following the site 
evaluation, that an accredited certifying agent is not in compliance 
with the Act or regulations, the Program Manager will issue the 
certifying agent a written notification of noncompliance. If the 
certifying agent fails to correct the noncompliances, report the 
corrections by the date specified in the notification of noncompliance, 
or file a rebuttal by the date specified in the notification of 
noncompliance, the Administrator will begin proceedings to suspend or 
revoke the accreditation. A certifying agent that has had its 
accreditation suspended may at any time, unless otherwise stated in the 
notification of suspension, submit a request to the Secretary for 
reinstatement of its accreditation. The request must be accompanied by 
evidence demonstrating correction of each noncompliance and corrective 
actions taken to comply with and remain in compliance with the Act and 
regulations. A certifying agent whose accreditation is revoked will be 
ineligible for accreditation for a period of not less than 3 years 
following the date of such determination.

Peer Review Panels

    The Administrator shall establish a peer review panel pursuant to 
the Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2 et seq.). 
The peer review panel shall be composed of not fewer than three members 
who shall annually evaluate the NOP's adherence to the accreditation 
procedures in subpart F of these regulations and ISO/IEC Guide 61,\3\ 
General requirements for assessment and accreditation of certification/
registration bodies, and the NOP's accreditation decisions. This will 
be accomplished through the review of: (1) accreditation procedures, 
(2) document review and site evaluation reports, and (3) accreditation 
decision documents or documentation. The peer review panel shall report 
its finding, in writing, to the NOP Program Manager.
---------------------------------------------------------------------------

    \3\ ISO/IEC Guide 61 is available for viewing at USDA-AMS, 
Transportation and Marketing Programs, Room 2945-South Building, 
14th and Independence Ave., SW., Washington, DC, from 9:00 a.m. to 
4:00 p.m., Monday through Friday (except official Federal holidays). 
A copy may be obtained from the American National Standards 
Institute, 11 West 42d Street, New York, NY 10036; Website: 
www.ansi.org; E-mail: [email protected]; Telephone: 212-642-4900; 
Facsimile: 212-398-0023.
---------------------------------------------------------------------------

Continuing Accreditation

    An accredited certifying agent must submit annually to the 
Administrator, on or before the anniversary date of the issuance of the 
notification of accreditation, the following reports and fees: (1) A 
complete and accurate update of its business information, including its 
fees, and information evidencing its expertise in organic production or 
handling and its ability to comply with these regulations; (2) 
information supporting any changes requested in the areas of 
accreditation; (3) a description of measures implemented in the 
previous year and any measures to be implemented in the coming year to 
satisfy any terms and conditions specified in the most recent 
notification of accreditation or notice of renewal of accreditation; 
(4) the results of the most recent performance evaluations and annual 
program review and a description of adjustments to the certifying 
agent's operation and procedures implemented or to be implemented in 
response to the performance evaluations and program review; and (5) the 
required AMS fees.
    Certifying agents will keep the Administrator informed of their 
certification activities by providing the Administrator with a copy of: 
(1) Any notice of denial of certification, notification of 
noncompliance, notification of noncompliance correction, notification 
of proposed suspension or revocation, and notification of suspension or 
revocation issued simultaneously with its issuance and (2) a list, on 
January 2 of each year, including the name, address, and telephone 
number of each operation granted certification during the preceding 
year.
    One or more site evaluations will occur during the 5-year period of 
accreditation to determine whether an accredited certifying agent is 
complying with the Act and regulations. USDA will establish an 
accredited certifying agent compliance monitoring program, which will 
involve no less than one randomly selected site evaluation of each 
certifying agent during its 5-year period of accreditation. Larger and 
more diverse operations, operations with clients marketing their 
products internationally, and operations with a history of problems 
should expect more frequent site evaluations by USDA. Operations with 
clients marketing their products internationally will be annually site 
evaluated to meet the ISO-Guide 61 requirement for periodic 
surveillance of accredited certifying agents. USDA may also conduct 
site evaluations during investigations of alleged or suspected 
violations of the Act or regulations and in followup to such 
investigations. Such investigations will generally be the result of 
complaints filed with the Administrator alleging violations by the 
certifying agent. Compliance site evaluations may be announced or 
unannounced at the discretion of the Administrator. Certifying agents 
will not be billed by USDA for USDA-initiated site evaluations 
conducted to determine compliance with the Act and regulations.

[[Page 80600]]

    An accredited certifying agent must provide sufficient information 
to persons seeking certification to enable them to comply with the 
applicable requirements of the Act and these regulations. The 
certifying agent must maintain strict confidentiality with respect to 
its clients and not disclose to third parties (with the exception of 
the Secretary or the applicable SOP's governing State official or their 
authorized representatives) any business-related information concerning 
any client obtained while implementing these regulations except as 
authorized by regulation. A certifying agent must make the following 
information available to the public: (1) Certification certificates 
issued during the current and 3 preceding calender years; (2) a list of 
producers and handlers whose operations it has certified, including for 
each the name of the operation, type(s) of operation, products 
produced, and the effective date of the certification, during the 
current and 3 preceding calender years; and (3) the results of 
laboratory analyses for residues of pesticides and other prohibited 
substances conducted during the current and 3 preceding calender years. 
A certifying agent may make other business information available to the 
public if permitted in writing by the producer or handler. This 
information will be made available to the public at the public's 
expense.
    An accredited certifying agent must maintain records according to 
the following schedule: (1) Records obtained from applicants for 
certification and certified operations must be maintained for not less 
than 5 years beyond their receipt; (2) records created by the 
certifying agent regarding applicants for certification and certified 
operations must be maintained for not less than 10 years beyond their 
creation; and (3) records created or received by the certifying agent 
pursuant to the accreditation requirements, excluding any records 
covered by the 10-year requirement, must be maintained for not less 
than 5 years beyond their creation or receipt. Examples of records 
obtained from applicants for certification and certified operations 
include organic production system plans, organic handling system plans, 
application documents, and any documents submitted to the certifying 
agent by the applicant/certified operation. Examples of records created 
by the certifying agent regarding applicants for certification and 
certified operations include certification certificates, notices of 
denial of certification, notification of noncompliance, notification of 
noncompliance correction, notification of proposed suspension or 
revocation, notification of suspension or revocation, correspondence 
with applicants and certified operations, on-site inspection reports, 
documents concerning residue testing, and internal working papers and 
memorandums concerning applicants and certified operations. Examples of 
records created or received by the certifying agent pursuant to the 
accreditation requirements include operations manuals; policies and 
procedures documents (personnel, administrative); training records; 
annual performance evaluations and supporting documents; conflict of 
interest disclosure reports and supporting documents; annual program 
review working papers, memorandums, letters, and reports; fee 
schedules; annual reports of operations granted certification; 
application materials submitted to the NOP; correspondence received 
from and sent to USDA; and annual reports to the Administrator.
    The certifying agent must make all records available for inspection 
and copying during normal business hours by authorized representatives 
of the Secretary and the applicable SOP's governing State official. In 
the event that the certifying agent dissolves or loses its 
accreditation, it must transfer to the Administrator and make available 
to any applicable SOP's governing State official all records or copies 
of records concerning its certification activities. This requirement 
for the transfer of records does not apply to a merger, sale, or other 
transfer of ownership of a certifying agent.
    Certifying agents are also required to prevent conflicts of 
interest and to require the completion of an annual conflict of 
interest disclosure report by all persons who review applications for 
certification, perform on-site inspections, review certification 
documents, evaluate qualifications for certification, make 
recommendations concerning certification, or make certification 
decisions and all parties responsibly connected to the certifying 
agent. Coverage of the conflict of interest provisions extends to 
immediate family members of persons required to complete an annual 
conflict of interest disclosure report. A certifying agent may not 
certify a production or handling operation if the certifying agent or a 
responsibly connected party of such certifying agent has or has held a 
commercial interest in the production or handling operation, including 
an immediate family interest or the provision of consulting services, 
within the 12-month period prior to the application for certification. 
A certifying agent may certify a production or handling operation if 
any employee, inspector, contractor, or other personnel of the 
certifying agent has or has held a commercial interest, including an 
immediate family interest or the provision of consulting services, 
within the 12-month period prior to the application for certification. 
However, such persons must be excluded from work, discussions, and 
decisions in all stages of the certification process and the monitoring 
of the entity in which they have or have held a commercial interest. 
The acceptance of payment, gifts, or favors of any kind, other than 
prescribed fees, from any business inspected is prohibited. However, a 
certifying agent that is a not-for-profit organization with an Internal 
Revenue Code tax exemption or, in the case of a foreign certifying 
agent, a comparable recognition of not-for-profit status from its 
government, may accept voluntary labor from certified operations. 
Certifying agents are also prohibited from giving advice or providing 
consultancy services to certification applicants or certified 
operations for overcoming identified barriers to certification. To 
further ensure against conflict of interest, the certifying agent must 
ensure that the decision to certify an operation is made by a person 
different from the person who conducted the on-site inspection.
    The certifying agent must reconsider a certified operation's 
application for certification when the certifying agent determines, 
within 12 months of certifying the operation, that a person 
participating in the certification process and covered under section 
205.501(c)(11)(ii) has or had a conflict of interest involving the 
applicant. If necessary, the certifying agent must perform a new on-
site inspection. All costs associated with a reconsideration of an 
application, including onsite inspection costs, shall be borne by the 
certifying agent. When it is determined that, at the time of 
certification, a conflict of interest existed between the applicant and 
a person covered under section 205.501(c)(11)(i), the certifying agent 
must refer the certified operation to a different accredited certifying 
agent for recertification. The certifying agent must also reimburse the 
operation for the cost of the recertification.
    No accredited certifying agent may exclude from participation in or 
deny the benefits of the NOP to any person due to discrimination 
because of race, color, national origin, gender, religion, age, 
disability, political beliefs, sexual orientation, or marital or family 
status. Accredited certifying agents must accept all production and 
handling

[[Page 80601]]

applications that fall within their areas of accreditation and certify 
all qualified applicants, to the extent of their administrative 
capacity to do so, without regard to size or membership in any 
association or group.

Renewal of Accreditation

    To avoid a lapse in accreditation, certifying agents must apply for 
renewal of accreditation at least 6 months prior to the fifth 
anniversary of issuance of the notification of accreditation and each 
subsequent renewal of accreditation. The Administrator will send the 
certifying agent a notice of pending expiration of accreditation 
approximately 1 year prior to the scheduled date of expiration. The 
accreditation of certifying agents who make timely application for 
renewal of accreditation will not expire during the renewal process. 
The accreditation of certifying agents who fail to make timely 
application for renewal of accreditation will expire as scheduled 
unless renewed prior to the scheduled expiration date. Certifying 
agents with an expired accreditation must not perform certification 
activities under the Act and these regulations.
    Following receipt of the certifying agent's annual report and fees 
and the results of a site evaluation, the Administrator will determine 
whether the certifying agent remains in compliance with the Act and 
regulations and should have its accreditation renewed. Upon a 
determination that the certifying agent is in compliance with the Act 
and regulations, the Administrator will issue a notice of renewal of 
accreditation. The notice of renewal will specify any terms and 
conditions that must be addressed by the certifying agent and the time 
within which those terms and conditions must be satisfied. Renewal of 
accreditation will be for 5 years. Upon a determination that the 
certifying agent is not in compliance with the Act and regulations, the 
Administrator will initiate proceedings to suspend or revoke the 
certifying agent's accreditation. Any certifying agent subject to a 
proceeding to suspend or revoke its accreditation may continue to 
perform certification activities pending resolution of the proceedings 
to suspend or revoke the accreditation.

Amending Accreditation

    An accredited certifying agent may request amendment to its 
accreditation at any time. The application for amendment must be sent 
to the Administrator and must contain information applicable to the 
requested change in accreditation, a complete and accurate update of 
the certifying agent's application information and evidence of 
expertise and ability, and the applicable fees.

Accreditation--Changes Based on Comments

    This subpart differs from the proposal in several respects as 
follows:
    (1) Advice and Consultancy Services. We have amended section 
205.501(a)(11)(iv) to clarify that certifying agents are to prevent 
conflicts of interest by not giving advice or providing consultancy 
services to applicants for certification and certified operations for 
overcoming identified barriers to certification. This amendment has 
been made in response to a commenter who stated that the provisions of 
section 205.501(a)(11)(iv), as proposed, seemed to preclude the 
providing of advice and educational workshops and training programs. It 
was not our intent to prevent certifying agents from sponsoring in-
house publications, conferences, workshops, informational meetings, and 
field days for which participation is voluntary and open to the general 
public. The provisions as originally proposed and as amended are 
intended to prohibit certifying agents from telling applicants and 
certified operations how to overcome barriers to certification 
identified by the certifying agent. It would be a conflict of interest 
for a certifying agent to tell an operation how to comply inasmuch as 
the certifying agents impartiality and objectivity will be lost should 
the advice or consultancy prove ineffective in resolving the 
noncompliance. The provisions of section 205.501(a)(11)(iv) are 
consistent with ISO Guide 61.
    To further clarify this issue, we have also amended section 
205.501(a)(16) by adding ``for certification activities'' after the 
word, ``charges.''
    (2) Conflicts of Interest--Persons Covered. We have amended section 
205.501(a)(11)(v) to limit the completion of annual conflict of 
interest disclosure reports to all persons who review applications for 
certification, perform on-site inspections, review certification 
documents, evaluate qualifications for certification, make 
recommendations concerning certification, or make certification 
decisions and all parties responsibly connected to the certifying 
agent. A commenter recommended amending section 205.501(a)(11)(v) to 
have it apply to all persons with direct oversight of or participation 
in the certification program rather than all persons identified in 
section 205.504(a)(2). Section 205.504(a)(2) includes all personnel to 
be used in the certification operation, including administrative staff, 
certification inspectors, members of any certification review and 
evaluation committees, contractors, and all parties responsibly 
connected to the certifying agent. We have decided that completion of 
annual conflict of interest disclosure reports by persons not involved 
in the certification process or responsibly connected to the certifying 
agent is unnecessary. As amended, section 205.501(a)(11)(v) includes 
all persons with the opportunity to influence the outcome of a decision 
on whether to certify a specific production or handling operation. 
Completed conflict of interest disclosure reports will be used by 
certifying agents to identify persons with interests in applicants for 
certification and certified operations that may affect the impartiality 
of such persons.
    (3) Reporting Certifications Granted. We have amended section 
205.501(a)(15)(ii) (formerly section 205.501(a)(14)(ii)) by replacing 
``a quarterly calendar basis'' with ``January 2 of each year.'' A 
commenter stated that the requirement that certifying agents report 
certifications that they have granted on a quarterly basis to the 
Administrator is burdensome. The commenter requested that section 
205.501(a)(14)(ii) be amended to require a midyear or end-year 
reporting. Section 205.501(a)(15)(ii) now requires the certifying agent 
to submit a list, on January 2 of each year, including the name, 
address, and telephone number of each operation granted certification 
during the preceding year. Certifying agents can fulfill this 
requirement by providing an up-to-date copy of the list of producers 
and handlers required to be made available to the public by section 
205.504(b)(5)(ii).
    (4) Notification of Inspector. We have added a new section 
205.501(a)(18) requiring the certifying agent to provide the inspector, 
prior to each on-site inspection, with previous on-site inspection 
reports and to notify the inspector of the certifying agent's decision 
relative to granting or denying certification to the applicant site 
inspected by the inspector. Such notification must identify any 
requirements for the correction of minor noncompliances. We have made 
this addition because we agree with the commenter that such information 
should be provided to the inspector and because the requirements are 
consistent with ISO Guide 61.
    (5) Acceptance of Applications. We have added a new section 
205.501(a)(19) requiring the certifying agent to accept all production 
or handling applications

[[Page 80602]]

for certification that fall within the certifying agent's areas of 
accreditation and to certify all qualified applicants, to the extent of 
their administrative capacity to do so, without regard to size or 
membership in any association or group. We have made this addition 
because we agree with the many commenters who requested that certifying 
agents be required to certify all qualified applicants. We recognize, 
however, that there may be times when the certifying agent's workload 
or the size of its client base might make it necessary for the 
certifying agent to decline acceptance of an application for 
certification within its area of accreditation. This is why we have 
included the proviso, ``to the extent of their administrative capacity 
to do so.'' We have included ``without regard to size or membership in 
any association or group'' to address commenter concerns about 
discrimination in the providing of certification services. This 
addition is consistent with ISO Guide 61.
    (6) Ability to Comply with SOP. We have added a new section 
205.501(a)(20) requiring the certifying agent to demonstrate its 
ability to comply with an SOP, to certify organic production or 
handling operations within the State. This change, as pointed out by a 
State commenter, is necessary to clarify that a certifying agent must 
be able to comply with an SOP to certify production or handling 
operations within that State.
    (7) Performance Evaluation. We have amended section 205.501(a)(6) 
by replacing ``appraisal'' with ``evaluation'' and expanding the 
coverage from inspectors to persons who review applications for 
certification, perform on-site inspections, review certification 
documents, evaluate qualifications for certification, make 
recommendations concerning certification, or make certification 
decisions. Corresponding amendments have also been made to section 
205.510(a)(4). Further, we have amended section 205.501(a)(6) to 
clarify that the deficiencies to be corrected are deficiencies in 
certification services. We changed ``appraisal'' to ``evaluation'' at 
the request of a State commenter who pointed out that State inspectors 
generally perform other duties in addition to the inspection of organic 
production or handling operations. We concur that this change will help 
differentiate between the State's employee performance appraisal for 
all duties as a State employee and the evaluation of certification 
services provided under the NOP. Expanding the coverage from inspectors 
to all persons involved in the certification process makes the 
regulation consistent with ISO Guide 61. Sections 205.505(a)(3) and 
205.510(a)(4) have been amended to make their language consistent with 
the changes to section 205.501(a)(6).
    (8) Annual Program Evaluation. We have amended section 
205.501(a)(7) by replacing ``evaluation'' with ``review'' and by 
replacing ``evaluations'' with ``reviews.'' A commenter suggested 
amending section 205.501(a)(7) by replacing the requirement of an 
annual program evaluation with an annual review of program activities. 
We agree that ``review'' is a more appropriate term than ``evaluate'' 
since to review is to examine, report, and correct while evaluate is 
more in the nature of assessing value. We have not, however, accepted 
that portion of the commenter's suggestion which would have removed the 
reference to the review being conducted by the certifying agent's 
staff, an outside auditor, or a consultant who has the expertise to 
conduct such reviews. We have not accepted this suggestion because the 
comment would have limited the review to being conducted by the 
certifying agent with no requirement that the certifying agent be 
qualified to conduct the review. Another commenter wanted to change the 
requirement to an annual assessment of the quality of the inspection 
system. We have not accepted this suggestion because it can be 
interpreted as narrowing the scope of the review from the full 
certification program to just the inspection component of the 
certification program. This commenter would also have limited the 
review to being conducted by the certifying agent with no requirement 
that the certifying agent be qualified to conduct the review. We 
believe that narrowing the scope of the review would be inconsistent 
with ISO Guide 65. It is also inconsistent with our intent that the 
entire certification program be reviewed annually. We also received a 
comment stating that it is a violation of ISO Guide 65 to have staff 
perform an internal review. We disagree with this commenter. ISO Guide 
65 provides that the certification body shall conduct periodic internal 
audits covering all procedures in a planned and systematic manner. 
Sections 205.505(a)(4) and 205.510(a)(4) have been amended to make 
their language consistent with the changes to section 205.501(a)(7).
    (9) Certification Decision. We have added a new section 
205.501(a)(11)(vi) that requires the certifying agent to ensure that 
the decision to certify an operation is made by a person different from 
the person who carried out the on-site inspection. Commenters requested 
that this provision be added to the requirement that certifying agents 
prevent conflicts of interest. We concur with the request because it 
clearly separates the act of inspecting an organic operation from the 
act of granting certification. This addition is also consistent with 
ISO Guide 65, section 4.2(f), which requires that the certification 
body ensure that each decision on certification is taken by a person 
different from those who carried out the evaluation.
    (10) Determination of Conflict of Interest. We have added a new 
section 205.501(a)(12) addressing situations where a conflict of 
interest present at the time of certification is identified after 
certification. Several commenters requested the addition of a provision 
that, if a conflict of interest is identified within 12 months of 
certification, the certifying agent must reconsider the application and 
may reinspect the operation if necessary. We agree with the commenters 
that the issue of conflicts of interest present at the time of 
certification but identified after certification need to be addressed 
in the regulations. Accordingly, we have provided that an entity 
accredited as a certifying agent must reconsider a certified 
operation's application for certification and, if necessary, perform a 
new on-site inspection when it is determined, within 12 months of 
certifying the operation, that any person participating in the 
certification process and covered under section 205.501(a)(11)(ii) has 
or had a conflict of interest involving the applicant. Because the 
certifying agent is responsible for preventing conflicts of interest, 
all costs associated with a reconsideration of application, including 
onsite inspection costs, must be borne by the certifying agent. 
Further, a certifying agent must refer a certified operation to a 
different accredited certifying agent for recertification when it is 
determined that any person covered under section 205.501(a)(11)(i) at 
the time of certification of the applicant had a conflict of interest 
involving the applicant. Because the certifying agent is responsible 
for preventing conflicts of interest, the certifying agent must 
reimburse the operation for the cost of the recertification. Sections 
205.501(a)(12) through 205.501(a)(17) have been redesignated as 
sections 205.501(a)(13) through 205.501(a)(18), respectively.
    (11) Financial Security. We published an advanced notice of 
proposed rulemaking and request for comments regarding financial 
security in the

[[Page 80603]]

August 9, 2000, issue of the Federal Register. We issued a news release 
announcing the Federal Register publication on August 9, 2000. Numerous 
commenters expressed concern about reasonable security relative to its 
amount and impact on small certifying agents. A few commenters 
requested a definition for reasonable security. Others stated that the 
formula for determining the amount of security should be published in 
the Federal Register. The March 13, 2000, NOP proposed rule stated that 
the amount and terms of reasonable financial security would be the 
subject of additional rulemaking. The August 9, 2000, advanced notice 
of proposed rulemaking solicited comments on all aspects of reasonable 
security and protection of the rights of program participants. We 
requested comments from any interested parties, including producers and 
handlers of organic agricultural products, certifying agents, importers 
and exporters, the international community, and any other person or 
group. Six questions were provided to facilitate public comment on the 
advanced notice of proposed rulemaking. Comments addressing other 
relevant issues were also invited. The questions posed in the advanced 
notice of proposed rulemaking were:
    (a) From what risks or events might a customer of a private 
certifying agent require reasonable security?
    (b) What are the financial instrument(s) that could provide the 
reasonable security to protect customers from these events?
    (c) What dollar amounts of security would give reasonable 
protection to a customer of a private certifying agent?
    (d) What are the financial costs to private certifiers, especially 
small certifiers, of providing reasonable security?
    (e) Do the risks or events provided in response to question #1 
necessarily require financial compensation?
    (f) Are there situations in which reasonable security is not 
needed?
    Following analysis of the comments received, we will publish a 
proposed rule on reasonable security in the Federal Register. The 
public will again be invited to submit comments. The proposed rule will 
include the proposed regulation, an explanation of the decision-making 
process, an analysis of the costs and benefits, the effects on small 
businesses, and an estimate of the paperwork burden imposed by the 
regulation.
    (12) Use of Identifying Mark. We have amended section 205.501(b)(2) 
to clarify that all certifying agents (private and State) certifying 
production or handling operations within a State with more restrictive 
requirements, approved by the Secretary, shall require compliance with 
such requirements as a condition of use of their identifying mark by 
such operations. Numerous commenters stated that they wanted USDA to 
permit higher production standards by private certifying agents. See 
also item 17 under Accreditation--Changes Requested But Not Made. This 
amendment is intended to further clarify our position that no 
certifying agent (State or private) may establish or require compliance 
with its own organic standards. It is an SOP, not a State certifying 
agent, that receives approval from the Secretary for more restrictive 
requirements. See also item 7 under Accreditation--Clarifications.
    (13) Transfer of Records. To address the issues of a merger, sale, 
or other transfer of ownership, we have added the following to the end 
of section 205.501(c)(3); ``Provided, That, such transfer shall not 
apply to a merger, sale, or other transfer of ownership of a certifying 
agent.'' Commenters suggested amending section 205.501(c)(3) to provide 
for the transfer of records accumulated from the time of accreditation 
to the Administrator or his or her designee, another accredited 
certifying agent, or an SOP's governing State official in a State where 
such official exists. It was also stated that this section needs to 
take into account a certifying agent's decision to merge or transfer 
accounts to another certifying agent in the case of loss of 
accreditation. Under the NOP, should a certifying agent dissolve or 
lose its accreditation, its certified operations will be free to seek 
certification with the accredited certifying agent of their choice. 
Accordingly, it would be inappropriate to automatically transfer an 
operation's records to another certifying agent as requested by the 
commenters. However, in analyzing the comments, we realized that a 
provision was needed for a merger, sale, or other transfer of ownership 
of a certifying agent; thus, the amendment to section 205.501(c)(3). 
Section 205.505(b)(3) has been amended to make its language consistent 
with the changes to section 205.501(c)(3).
    (14) Fees for Information. We have amended section 205.504(b)(5) by 
inserting ``including any fees to be assessed'' after the word, 
``used.'' This change is made in response to the question of whether 
fees may be charged for making information available to the public. It 
is our intent that certifying agents may charge reasonable fees for 
document search time, duplication, and, when applicable, review costs. 
We anticipate that review costs will most likely be incurred when the 
information requested is located within documents which may contain 
confidential business information.
    (15) Information Available to the Public. We have amended section 
205.504(b)(5)(ii) by adding products produced to the information to be 
released to the public. This addition responds in an alternate way to 
commenters who wanted the information included on certificates of 
organic operation. That request was denied; see item 4, Changes 
Requested But Not Made, under subpart E, Certification. This addition 
is consistent with ISO Guide 61.
    (16) Equivalency of Certification Decisions and Statement of 
Agreement. We have amended sections 205.501(a)(12) (redesignated as 
205.501(a)(13)) and 205.505(a)(1) by deleting the words, ``USDA 
accredited'' and ``as equivalent to its own,'' and adding to the end 
thereof: ``accredited or accepted by USDA pursuant to section 
205.500.'' We have made this amendment to clarify that the provision 
applies to certification decisions by domestic certifying agents as 
well as foreign certifying agents accredited or accepted by USDA 
pursuant to section 205.500.
    There were many comments in support of section 205.501(a)(12) as 
written. However some did not agree that certifying agents should have 
to recognize another agent's decision as equivalent to their own. These 
commenters want to maintain the right and ability not to use their seal 
on a product that does not meet their standards. The most strongly 
voiced comment stated: ``delete section 205.501(a)(12) and section 
205.505(a)(1). The requirements constitute a ``taking'' in violation of 
the Fifth Amendment and are unnecessary to accomplish the goal of 
establishing a consistent standard and facilitating trade.''
    We do not concur with the commenters who want to change sections 
205.501(a)(12) and 205.505(a)(1). We also do not agree with the comment 
that sections 205.501(a)(12) and 205.505(a)(1) constitute a taking in 
violation of the Fifth Amendment and are unnecessary to accomplish the 
goal of establishing a consistent standard and facilitating trade. We 
believe that, to accomplish the goal of establishing a consistent 
standard and to facilitate trade, it is vital that an accredited 
certifying agent accept the certification decisions made by another 
certifying agent accredited or accepted by USDA pursuant to section 
205.500. All domestic organic production and handling operations, 
unless exempted or excluded under

[[Page 80604]]

section 205.101, must be certified to these national standards and, 
when applicable, any State standards approved by the Secretary. All 
domestic certified operations must be certified by a certifying agent 
accredited by the Administrator. No USDA-accredited certifying agent, 
domestic or foreign, may establish or require compliance with its own 
organic standards. Certifying agents are not required to have an 
identifying mark for use under the NOP. However, if a certifying agent 
is going to use an identifying mark under the NOP, the use of such mark 
must be voluntary and available to all of the certifying agent's 
clients certified under the NOP. Accordingly, we have not changed the 
requirement that a certifying agent accept the certification decisions 
made by another USDA-accredited certifying agent. We have, however, as 
noted above, amended both sections to require that USDA-accredited 
certifying agents accept the certification decisions made by another 
certifying agent accredited or accepted by USDA pursuant to section 
205.500.
    (17) Granting Accreditation. We have made editorial changes to 
section 205.506 consistent with the suggestion that we replace 
``approval of accreditation'' with ``granting of accreditation.'' In 
the title to section 205.506, we have replaced ``Approval of'' with 
``Granting.'' In section 205.506(a), we have replaced ``approved'' with 
``granted,'' and in section 205.506(b), we have replaced ``approval'' 
with ``the granting.'' We have made these change because, under the 
NOP, we grant accreditation rather than approve accreditation.
    (18) Correction of Minor Noncompliances. We have added a new 
section 205.506(b)(3) providing that the notification granting 
accreditation will state any terms and conditions for the correction of 
minor noncompliances. Commenters requested the addition of language to 
section 205.506(b) which would clarify that the Administrator may 
accredit with required corrective actions for minor noncompliances. In 
the proposed rule, we addressed accreditation subject to the correction 
of minor noncompliances at section 205.510(a)(3). We agree with 
commenters that, for the purposes of clarity, this issue should also be 
addressed in section 205.506 on the granting of accreditation. 
Accordingly, we have added new section 205.506(b)(3) as noted above. We 
have also retained the provisions of section 205.510(a)(3), which 
requires certifying agents to annually report on actions taken to 
satisfy any terms and conditions addressed in the most recent 
notification of accreditation or notice of renewal of accreditation. 
Section 205.506(b)(3) has been redesignated as section 205.506(b)(4).
    (19) Denial of Accreditation. We have amended section 205.507 to 
include noncompliance and resolution provisions originally included by 
cross-reference to section 205.665(a). This cross-reference created 
confusion for commenters, regarding section 205.665's applicability to 
applicants for accreditation because the section does not specifically 
address applicants. Rather than specifically identifying applicants 
within section 205.665, we believe the issue is best clarified by 
addressing noncompliance and resolution within section 205.507. As 
amended, section 205.507 now states in paragraph (a) that the written 
notification of noncompliance must describe each noncompliance, the 
facts on which the notification is based, and the date by which the 
applicant must rebut or correct each noncompliance and submit 
supporting documentation of each such correction when correction is 
possible. This rewrite of paragraph (a) also enabled us to eliminate 
paragraph (b) since its provisions are addressed in amended paragraph 
(a). The section also provides, at new paragraph (b), that when each 
noncompliance has been resolved, the Program Manager will send the 
applicant a written notification of noncompliance resolution and 
proceed with further processing of the application. We have also 
clarified the applicant's appeal rights by adding ``or appeal the 
denial of accreditation in accordance with section 205.681 by the date 
specified in the notification of accreditation denial'' to the end of 
paragraph (c).
    (20) Reinstatement of Accreditation. We have amended section 
205.507(d) by removing the requirement that a certifying agent that has 
had its accreditation suspended reapply for accreditation in accordance 
with section 205.502. In its place, we provide that the certifying 
agent may request reinstatement of its accreditation. Such request may 
be submitted at any time unless otherwise stated in the notification of 
suspension. Amended section 205.507(d) also provides that the 
certifying agent's request must be accompanied by evidence 
demonstrating correction of each noncompliance and corrective actions 
taken to comply with and remain in compliance with the Act and the 
regulations in this part. We have made this change because unlike 
revocation, suspension does not terminate a certifying agent's 
accreditation. Accordingly, requiring a new application for 
accreditation is unnecessary and burdensome on the certifying agent. 
This change is consistent with changes to sections 205.662(f) and 
205.665(g)(1), which were made based on comments received on section 
205.662(f).
    (21) Ineligible for accreditation. We have amended section 
205.507(d) by deleting ``private entity'' from the third sentence. The 
amended sentence provides that ``A certifying agent whose accreditation 
is revoked will be ineligible for accreditation for a period of not 
less than 3 years following the date of such determination.'' Several 
commenters recommended deletion of ``private entity'' so that private 
certifying agents would be regulated on an equivalent basis with State 
certifying agents. It is our intent to regulate private and State 
certifying agents on an equivalent basis. Accordingly, we made the 
recommended change.
    (22) Peer Review. We have amended section 205.509. As amended, the 
section requires that the Administrator establish a peer review panel 
pursuant to FACA (5 U.S.C. App. 2 et seq.). The peer review panel will 
be composed of not less than 3 members who will annually evaluate the 
NOP's adherence to the accreditation procedures in subpart F of these 
regulations and ISO/IEC Guide 61, General requirements for assessment 
and accreditation of certification/registration bodies, and the NOP's 
accreditation decisions. This will be accomplished through the review 
of accreditation procedures, document review and site evaluation 
reports, and accreditation decision documents and documentation. The 
peer review panel will report its finding, in writing, to the NOP's 
Program Manager. We developed this approach to peer review as a means 
of addressing the suggestions of the commenters and the need for 
administration of an effective and timely accreditation program.
    Many commenters wanted the opening language in the first sentence 
of section 205.509 changed from ``The Administrator may'' to the ``The 
Administrator shall'' establish a peer review panel to assist in 
evaluating applicants for accreditation, amendment to an accreditation, 
and renewal of accreditation as certifying agents. One of the most 
frequent comments, including a comment by the NOSB, was that peer 
reviewers should be compensated for their time and expenses. Many 
commenters believe also that the peer review process should be 
collaborative. Some commenters who wanted this change recognized that a 
collaborative process where confidential information was shared could 
run into problems

[[Page 80605]]

because FACA (P.L. 92-463, 5 U.S.C. App.) meetings are open to the 
public. They advised creating a FACA panel but restricting public 
access during discussion of confidential business information based on 
5 U.S.C. Section 522b(c)(4) of the Government in the Sunshine Act.
    As requested, amended section 205.509 requires the formation of a 
peer review panel. Also as requested, peer reviewers, who will serve as 
a FACA committee, will be reimbursed for their travel and per diem 
expenses. The reviewers will also work collaboratively. We have not, 
however, provided for collaborative review of each applicant for 
accreditation by the peer review panel because of the administrative 
burden that an outside collaborative review process would place on the 
NOP. Currently, there are 36 private and 13 State certifying agencies. 
It is, therefore, likely that USDA will receive approximately 50 
applications for accreditation the first year of the program. Given the 
need to make accreditation decisions in a timely, organized fashion, it 
would be infeasible to convene a panel of peers for each applicant for 
accreditation prior to rendering a decision on accreditation. However, 
as noted above, we have provided that a peer review panel will annually 
evaluate the NOP's adherence to the accreditation procedures in subpart 
F of these regulations and ISO/IEC Guide 61, General requirements for 
assessment and accreditation of certification/registration bodies, and 
validate the NOP's accreditation decisions.
    We have also amended current section 205.510(c)(3) by removing the 
reference to reports submitted by a peer review panel to make that 
section consistent with the rewrite of section 205.509.
    (23) Expiration of accreditation. We have added a new section 
205.510(c)(1) which provides that the Administrator shall send the 
accredited certifying agent a notice of pending expiration of 
accreditation approximately 1 year prior to the scheduled date of 
expiration. A commenter suggested USDA notification of certifying 
agents at least 1 year prior to the scheduled expiration of 
accreditation. We have made the suggested change because we believe 
notification about 1 year prior to expiration will facilitate the 
timely receipt of applications for renewal. We have redesignated 
sections 205.510(c)(1) and 205.510(c)(2) as 205.510(c)(2) and 
205.510(c)(3), respectively.
    (24) Amendments to Accreditation. We have added a new section 
205.510(f) to provide that an amendment to an accreditation may be 
requested at any time. The application for amendment must be sent to 
the Administrator and must contain information applicable to the 
requested change in accreditation. The application for amendment must 
also contain a complete and accurate update of the information 
submitted in accordance with section 205.503, Applicant information; 
and section 205.504, Evidence of expertise and ability. The applicant 
must also submit the applicable fees required in section 205.640. We 
have added this new section because we agree with the commenter who 
expressed concern that the regulations were not clear regarding 
amendments to accreditation. This addition is consistent with section 
205.510(a)(2) which allows certifying agents to request amendment of 
their accreditation as part of their annual report to the 
Administrator.

Accreditation--Changes Requested But Not Made

    This subpart retains from the proposed rule, regulations on which 
we received comments as follows:
    (1) Accreditation by USDA. A commenter stated that ISO/IEC Guide 61 
specifies, but the proposed rule did not specify, the requirements for 
USDA to assess and accredit certifying agents. The commenter questioned 
USDA's acceptance internationally as a competent accreditation body. A 
few commenters requested that USDA provide certifying agents with 
assurance of international trade acceptance of the USDA's accreditation 
program prior to implementation of the final rule. We do not believe 
that it is necessary to include in these regulations detailed 
procedures by which USDA will operate its accreditation program. USDA 
has developed its accreditation and certification programs with the 
intent that they meet or exceed international guidelines. Every country 
will make its own decision regarding acceptance of this accreditation 
program. Accordingly, while we do not anticipate problems with 
acceptance of our accreditation program, we cannot provide assurance 
against problems as requested by the commenters.
    (2) Equivalency at the European Community (EC) Level. A commenter 
requested confirmation that an equivalency agreement would be 
negotiated at the EC level since the EC legislation provides for the 
basic rules while accreditation of certifying agents is a task for each 
member state. Another commenter pointed out that because Switzerland 
has the same regulations as the EC, equivalency would have to be done 
in close coordination with the EC. The commenter went on to say that 
according to Swiss and European practice, not only the organic product, 
but also the bodies involved will be mutually accepted. This commenter 
also stated that, due to Swiss import provisions, brokers must be 
subject to a certain control. Equivalency will be negotiated between 
the United States and the foreign government authority seeking the 
equivalency agreement.
    (3) Period of Accreditation. It was suggested that accreditation 
should be for a 4-year period with full reevaluation occurring once 
every 4 years and annual surveillance visits in the intervening years. 
We do not concur with changing the period of accreditation from 5 years 
to 4 years as suggested. The 5-year period that we have provided that 
accreditation is consistent with the Act, which provides that 
accreditation shall be for a period of not to exceed 5 years. The 
commenter claims that the international norm is for full reevaluations 
to take place once every 4 years with annual surveillance visits in the 
intervening years. ISO Guide 61, section 3.5.1, provides that the 
accreditation body shall have an established documented program, 
consistent with the accreditation granted, for carrying out periodic 
surveillance and reassessment at sufficiently close intervals to verify 
that its accredited body continues to comply with the accreditation 
requirements. We believe that accreditation for 5 years is a reasonable 
period of time. Further, we believe that a 5-year period of 
accreditation is consistent with ISO Guide 61 inasmuch as we require an 
annual evaluation of the certification program; annual review of 
persons associated with the certification process, including 
inspectors; annual reporting with a complete and accurate update of 
information required for accreditation; and one or more site 
evaluations during the period of accreditation in addition to the 
initial site evaluation for the period of accreditation. Accordingly, 
we have not made the recommended change.
    (4) Accreditation by Private-Sector Accreditation Bodies. Numerous 
commenters wanted language added to section 205.500(c) that would allow 
private sector accreditation bodies to accredit foreign certifying 
agents. For example, several commenters suggested adding a provision 
reading as follows: ``The foreign certifying agent is accredited by a 
private accreditation body recognized by the USDA as defined by an 
equivalency agreement negotiated between the USDA and the accreditation 
body.'' Commenters also wanted us to amend section 205.502(a)

[[Page 80606]]

to recognize accreditation by private accreditation programs.
    USDA is the accrediting body for all accreditations under the NOP. 
USDA will not recognize nongovernmental accrediting bodies. USDA will 
recognize foreign certifying agents accredited by a foreign government 
authority when USDA determines that the foreign government's standards 
meet the requirements of the NOP or when an equivalency agreement has 
been negotiated between the United States and a foreign government.
    (5) Requirements for Accreditation. Some commenters requested more 
specificity in the requirements for accreditation. For example, one 
recommended that section 205.501(a)(1) should include the requirement 
that inspectors demonstrate completion of a specified training program 
or internship or ongoing education and/or licensing. Another commenter 
wanted baseline criteria for denying an application due to expertise. 
Still others wanted a definition for (1) ``experience and training 
pertaining to organic/sustainable agricultural methods and their 
implementation on farm or in processing facilities,'' (2) ``trained 
certifying agent personnel,'' and (3) ``reasonable time.'' Finally, one 
wanted recordkeeping and evaluative parameters. AMS does not believe 
that it is necessary to present the requirements for accreditation to 
the extent of detail requested by the commenters. The intent is to 
provide flexibility to the certifying agents such that they can tailor 
their policies and procedures to the nature and scope of their 
operation. The NOP is available to respond to questions and to assist 
certifying agents in complying with the requirements for accreditation.
    (6) Volunteer Board Members. Some commenters suggested amending 
section 205.501(a)(5) to include a reference to committees and to 
expand ``sufficient expertise'' to ``sufficient balance of interests 
and expertise.'' The commenters proposed the amendment to create a 
firewall between those persons involved in decision making and the 
volunteer board members. However, the purpose of section 205.501(a)(5) 
is to ensure that the persons used by the certifying agent to assume 
inspection, analysis, and decision-making responsibilities have 
sufficient expertise in organic production or handling techniques to 
successfully perform the duties assigned. Therefore, we have not made 
the suggested changes. Conflict of interest guidelines are found at 
section 205.501(a)(11).
    (7) Confidentiality. A commenter stated that Texas law prevents the 
Texas Department of Agriculture from guaranteeing confidentiality to 
its clients. Accordingly, the commenter requested that section 
205.501(a)(10) be amended by adding to the end thereof: ``or as 
required by State statutes.'' We have not made the suggested change 
because the Act requires that the certifying agent maintain strict 
confidentiality with respect to its clients under the NOP and not 
disclose any business-related information concerning such client 
obtained while implementing the Act. To be accredited under the NOP, 
certifying agents must fully comply with the requirements of the Act 
and these regulations. Further, no SOP will be approved which does not 
comply with the NOP.
    (8) Certifying Agent Fees. Several commenters requested that the 
regulations prohibit royalty formulas (i.e., fees from every certified 
sale) for certifying agent fees. It is not our intent to regulate how a 
certifying agent sets its fees beyond their being reasonable and 
nondiscriminatory.
    (9) Conflicts of Interest. We received numerous comments stating 
that section 205.501(a)(11)(i) was too restrictive and unnecessary due 
to the provisions of section 205.501(a)(11)(ii) to prevent conflicts of 
interest. Some argued that these conflict of interest provisions are 
beyond ISO requirements and place an undue burden on membership based 
certifying agents and the entities they serve. They requested a 
conflict of interest policy enabling membership-based certification 
organizations to continue operating. A commenter suggested that section 
205.501(a)(11) be amended to require that a certifying agent's board 
members sign an affidavit listing potential conflicts of interest, 
identify issues where an organization decision might help them 
personally, and exclude themselves from decision-making that would 
assist them personally. This commenter proposed the amendment for the 
purpose of creating a firewall between those persons involved in 
certification decision-making and the volunteer board members.
    We do not believe that the conflict of interest provisions are too 
restrictive. These provisions are very similar to conflict of interest 
provisions under other USDA programs involving public-private 
partnerships (e.g., grain inspection). The certifying agent and its 
responsibly connected parties, including volunteer board members, hold 
positions of influence over the certifying agent's employees and 
persons with whom the certifying agent contracts for such services as 
inspection, sampling, and residue testing. Therefore, we continue to 
believe that avoiding such conflicts of interest is necessary to 
maintain the integrity of the organic certification process.
    (10) Conflicts of Interest and Prohibition on Certification. A 
commenter requested that we include an ``or'' between sections 
205.501(a)(11)(i) and 205.501(a)(11)(ii). We have not made the 
recommended change because both sections must be complied with; they 
are not mutually exclusive. Section 205.501(a)(11)(i) prohibits the 
certification of an applicant when the certifying agent or a 
responsibly connected party of such certifying agent has or has held a 
commercial interest in the applicant for certification, including an 
immediate family interest or the provision of consulting services, 
within the 12-month period prior to the application for certification. 
When the certifying agent and its responsibly connected persons are 
free of any conflict of interest involving the applicant for 
certification, the applicant may be certified if qualified. However, 
section 205.501(a)(11)(ii) requires the certifying agent to exclude any 
person (employees and contractors who do not meet the definition of 
responsibly connected), including contractors, with conflicts of 
interest from work, discussions, and decisions in all stages of the 
certification process and the monitoring of certified production or 
handling operations for all entities in which such person has or has 
held a commercial interest, including an immediate family interest or 
the provision of consulting services, within the 12-month period prior 
to the application for certification.
    (11) Gifts and Contributions. Commenters recommended that section 
205.501(a)(11)(iii) be amended to allow not-for-profit organizations to 
accept gifts and contributions from certified operations for those 
programs not directly related to the certifying agent's organic 
certification activities. They also wanted it clarified that not-for-
profit organizations can accept voluntary labor from certified 
operations for those programs not directly related to the certifying 
agent's organic certification activities. We have not made the 
requested changes. First, the acceptance of gifts and contributions 
would constitute a conflict of interest and would be contrary to ISO 
Guide 61. Certifying agents must have the financial stability and 
resources to perform their certification duties without relying on 
gifts and contributions from those they serve.

[[Page 80607]]

Second, we have not added the requested provision on voluntary labor 
because section 205.501(a)(11)(iii) already addresses the acceptance of 
voluntary labor by not-for-profit organizations from certified 
operations.
    (12) Conflicts of Interest--Determination Period. Commenters wanted 
to increase the conflict determination period from 12 months to 24 
months. Some also wanted the period to extend for 2 years after, with 
the exception of those who have left the employ of the certifying agent 
or are no longer under contract with the certifying agent.
    We disagree with the recommendations calling for a longer 
precertification conflict of interest prohibition period. We continue 
to believe that 12 months is a sufficient period to ensure that any 
previous commercial interest would not create a conflict of interest 
situation for two reasons. First, this time period is consistent with 
similar provisions governing conflicts of interest for government 
employees. Second, section 205.501(a)(11)(v) requires the completion of 
an annual conflict of interest disclosure report by all personnel 
designated to be used in the certification operation, including 
administrative staff, certification inspectors, members of any 
certification review and program evaluation committees, contractors, 
and all parties responsibly connected to the certification operation. 
This requirement will assist certifying agents in complying with the 
requirements to prevent conflicts of interest. We also continue to 
believe that a longer prohibition period would have the effect of 
severely curtailing most certifying agents' ability to comply with the 
Act's requirement that they employ persons with sufficient expertise to 
implement the applicable certification program. Accordingly, we have 
not made the recommended change.
    The change recommended by the commenters who requested that the 
conflict of interest determination period extend for 2 years after 
certification is unnecessary. Certifying agents and their responsibly 
connected parties, employees, inspectors, contractors, and other 
personnel are prohibited from engaging in activities or associations at 
any time during their affiliation with the certifying agent which would 
result in a conflict of interest. While associated with the certifying 
agent, all employees, inspectors, contractors, and other personnel are 
expected to disclose to the certifying agent any offer of employment 
they have received and not immediately refused. They are also expected 
to disclose any employment they are seeking and any arrangement they 
have concerning future employment with an applicant for certification 
or a certified operation. The certifying agent would then have to 
exclude that person from work, discussions, and decisions in all stages 
of the certification or monitoring of the operation making the 
employment offer. If a certifying agent or a responsibly connected 
party of the certifying agent has received and not immediately refused 
an offer of employment, is seeking employment, or has an arrangement 
concerning future employment with an applicant for certification, the 
certifying agent may not accept or process the application. Further, 
certifying agents and responsibly connected parties may not seek 
employment or have an arrangement concerning future employment with an 
operation certified by the certifying agent while associated with that 
certifying agent. Certifying agents and responsibly connected parties 
must sever their association with the certifying agent when such person 
does not immediately refuse an offer of employment from a certified 
operation. Accordingly, we have decided not to include a 
postcertification prohibition period in this final rule.
    (13) False and Misleading Claims. A commenter asked who will 
determine what is a misleading claim about the nature or qualities of 
products labeled as organically produced. This same commenter 
recommended amending section 205.501(a)(13) by removing the prohibition 
against making false or misleading claims about the nature or qualities 
of products labeled as organically produced.
    We disagree with this recommendation. Claims regarding 
accreditation status, the USDA accreditation program for certifying 
agents, and the nature and quality of products labeled as organically 
produced all fall under the authority of the Act. Accordingly, USDA 
will determine what is a misleading claim. We believe that the 
requirements are needed to prevent the dissemination of inaccurate or 
misleading information to consumers about organically produced 
products. We further believe that the change suggested by the commenter 
would undermine the goal of a uniform NOP by allowing certifying agents 
to make claims that would state or imply that organic products produced 
by operations that they certify are superior to those of operations 
certified by other certifying agents. These requirements would not 
prohibit certifying agents from sharing factual information with 
consumers, farmers, processors, and other interested parties regarding 
verifiable attributes of organic food and organic production systems. 
Accordingly, we have not made the recommended change to what is now 
section 205.501(a)(14).
    (14) Certifying Agent Compliance With Terms and Conditions Deemed 
Necessary. A commenter recommended that we remove section 
205.501(a)(17). This section requires that certifying agents comply 
with and implement other terms and conditions deemed necessary by the 
Secretary. This requirement is consistent with section 6515(d)(2) of 
the Act, which requires a certifying agent to enter into an agreement 
with the Secretary under which such agent shall agree to such other 
terms and conditions as the Secretary determines appropriate. 
Accordingly, we have not accepted the commenter's recommendation. This 
requirement is located at current section 205.501(a)(21).
    (15) Limitations on the Use of Certifying Agent's Marks. Numerous 
commenters stated that they wanted USDA to permit higher production 
standards by private certifying agents. A common argument for allowing 
higher standards was that practitioners must be allowed to ``raise the 
bar'' through superior ecological on-farm practices or pursuit of other 
social and ecological goals. Some commenters recommended that the 
language in section 205.501(b)(2) be replaced with provisions that 
would allow certifying agents to issue licensing agreements with 
contract specifications that clearly establish conditions for use of 
the certifying agent's identifying mark.
    We believe the positions advocated by the commenters are 
inconsistent with section 6501(2) of the Act, which provides that a 
stated purpose of the Act is to assure consumers that organically 
produced products meet a consistent national standard. We believe that, 
to accomplish the goal of establishing a consistent standard and to 
facilitate trade, it is vital that an accredited certifying agent 
accept the certification decisions made by another certifying agent 
accredited or accepted by USDA pursuant to section 205.500. All organic 
production and handling operations, unless exempted or excluded under 
section 205.101 or not regulated under the NOP (i.e., a producer of dog 
food), must be certified to these national standards and, when 
applicable, any State standards approved by the Secretary. All 
certified operations must be certified by a certifying agent accredited 
by the Administrator. No accredited certifying agent may establish or 
require compliance with its

[[Page 80608]]

own organic standards. Accredited certifying agents may establish other 
standards outside of the NOP. They may not, however, refer to them as 
organic standards nor require that applicants for certification under 
the NOP or operations certified under the NOP comply with such 
standards as a requirement for certification under the NOP. Use of the 
certifying agent's identifying mark must be voluntary and available to 
all of its clients certified under the NOP. However, a certifying agent 
may withdraw a certified operation's authority to use its identifying 
mark during a compliance process. The certifying agent, however, 
accepts full liability for any such action.
    The national standards implemented by this final rule can be 
amended as needed to establish more restrictive national standards. 
Anyone may request that a provision of these regulations be amended by 
submitting a request to the NOP Program Manager or the Chairperson of 
the NOSB. Requests for amendments submitted to the NOP Program Manager 
will be forwarded to the NOSB for its consideration. The NOSB will 
consider the requested amendments and make its recommendations to the 
Administrator. When appropriate, the NOP will conduct rulemaking on the 
recommended amendment. Such rulemaking will include an opportunity for 
public comment.
    (16) Evidence of Expertise and Ability. A commenter stated that 
section 205.504, which addresses the documentation necessary to 
establish evidence of expertise and abilities, requires too much 
paperwork. We believe the amount of paperwork is appropriate for the 
task at hand, verifying a certifying agent's expertise in and 
eligibility for accreditation to certify organic production and 
handling operations to the NOP. We further believe that the level of 
paperwork is necessary to meet international guidelines for determining 
whether an applicant is qualified for accreditation as a certifying 
agent.
    (17) Procedures for Making Information Available to the Public. 
Comments on section 205.504(b)(5) were mixed. Some commenters felt that 
the proposal fell short of the OFPA requirement to ``Provide for public 
access to certification documents and lab analysis.'' Others thought 
that too much confidential information would be released.
    The Act requires public access, at section 2107(a)(9), to 
certification documents and laboratory analyses pertaining to 
certification. Accordingly, we disagree with those commenters who 
requested that such documents not be released to the public. We also 
disagree with the commenters who contend that the requirement for 
public disclosure falls short of what is required by the Act. Section 
205.504(b)(5) meets the requirements of the Act by requiring the 
release of those documents cited in section 2107(a)(9) of the Act. The 
section also authorizes the release of other business information as 
authorized in writing by the producer or handler.
    (18) Accreditation Prior to Site Evaluation. Numerous commenters 
recommended that we require site visits prior to accreditation. Some 
commenters cited ISO Guide 61, section 2.3.1, in their arguments for 
site visits prior to accreditation. ISO Guide 61, section 2.3.1., 
provides that the decision on whether to accredit a body shall be made 
on the basis of the information gathered during the accreditation 
process and any other relevant information. Section 3.3.2 of ISO Guide 
61 provides that the accreditation body shall witness fully the on-site 
activities of one or more assessments or audits conducted by an 
applicant body before an initial accreditation is granted.
    We do not concur with the commenters. These regulations provide for 
assessment of the applicant's qualifications and capabilities through a 
rigorous review of the application and supporting documentation. 
Following this review, an initial site evaluation shall be conducted 
before or within a reasonable period of time after issuance of the 
applicant's ``notification of accreditation.'' In cases where the 
document review raises concerns regarding the applicant's 
qualifications and capabilities and the Administrator deems it 
necessary, a preapproval site evaluation will be conducted. We have 
further provided that a site evaluation shall be conducted after 
application for renewal of accreditation but prior to renewal of 
accreditation.
    Our purpose in allowing for initial accreditation prior to a site 
evaluation is to facilitate implementation of the NOP and to provide a 
means for newly established certifying agents to obtain a client base 
to demonstrate that they can meet the requirements of the NOP 
regulations. We believe this is consistent with the intent of ISO Guide 
61, section 2.3.1. and fits within its ``and any other relevant 
information'' provision. Accordingly, we restate our position that 
accreditation approval without a site evaluation is appropriate, 
necessary in the case of established certifying agents that may need to 
make adjustments in their operations to comply with the NOP 
regulations, and necessary in the case of newly established certifying 
agents who will have to obtain a client base to demonstrate beyond the 
paperwork that they can meet the requirements of the NOP regulations.
    (19) Ineligibility After Revocation of Accreditation. Section 
205.507(d) provides that a certifying agent whose accreditation is 
revoked will be ineligible for accreditation for a period of not less 
than 3 years following the date of such determination. A commenter 
stated that the 3-year period of ineligibility is overly long and 
effectively puts the certifying agent out of business. The commenter 
suggested that a 6- to 12-month period might be reasonable. We have not 
accepted the suggested 6- to 12-month ineligibility period because the 
Act requires a period of ineligibility of not less than 3 years 
following revocation of accreditation.
    (20) Qualifications of the Site Evaluator. A commenter recommended 
amending section 205.508(a) to indicate the required qualifications of 
the site evaluator. We have not accepted the recommendation. We do not 
believe that it is necessary to specify the required qualifications of 
site evaluators in these regulations. All USDA employees who will 
perform site evaluations under the NOP are quality systems auditors 
trained in accordance with internationally recognized protocols.
    (21) Complaint Process. A commenter recommended that section 
205.510 include a complaint process for complaints by certified 
operations regarding the performance of a certifying agent or 
inspector. The commenter also recommended that section 205.510 include 
a complaint process for the public should they feel that a certifying 
agent is not in compliance.
    We do not believe that it is necessary to include a complaint 
process in the regulations. All interested parties are free to file a 
complaint with an accredited certifying agent, SOP's governing State 
official, or the Administrator at any time. We will provide guidance to 
accredited certifying agents and SOP's governing State officials 
regarding the type of information to gather when receiving a complaint. 
SOP's governing State officials will include in their request for 
approval of their SOP information on their collection of complaint 
information. Certifying agents will include details regarding the 
collection of complaint information and the investigation of complaints 
involving certified operations in their procedures for reviewing and 
investigating certified operation compliance (section

[[Page 80609]]

205.504(b)(2)). This will include maintaining records of complaints and 
remedial actions relative to certification as well as documentation of 
followup actions. Further, certifying agents will include details 
regarding the collection of complaint information and the investigation 
of complaints involving inspectors and other personnel employed by or 
contracted by the certifying agents in their policies and procedures 
for training, evaluating, and supervising personnel (section 
205.504(a)(1)).
    (22) Recordkeeping by Certifying Agents. A commenter stated that 
the 10-year recordkeeping requirement of section 205.510(b)(2) for 
records created by the certifying agent regarding applicants for 
certification and certified operations is excessive. The commenter 
recommended a 5-year retention period. We have not accepted the 
recommended 5-year records retention period for records created by the 
certifying agent regarding applicants for certification and certified 
operations because the Act requires the retention of such records for 
10 years.
    (23) Reaccreditation. A commenter recommended that section 
205.510(c)(1) be amended to require reaccreditation every 3 years. We 
have provided that accreditation will be for a period of 5 years. This 
is consistent with the Act which provides that accreditation shall be 
for a period of not to exceed 5 years. The commenter believes that a 5-
year period is not consistent with ISO Guide 61, section 3.5.1, which 
provides that the accreditation body shall have an established 
documented program, consistent with the accreditation granted, for 
carrying out periodic surveillance and reassessment at sufficiently 
close intervals to verify that its accredited body continues to comply 
with the accreditation requirements. We believe that accreditation for 
5 years is a reasonable period of time. Further, we believe that a 5-
year period of accreditation is consistent with ISO Guide 61 inasmuch 
as we require an annual evaluation of the certification program; annual 
review of persons associated with the certification process, including 
inspectors; annual reporting with a complete and accurate update of 
information required for accreditation; and one or more site 
evaluations during the period of accreditation in addition to the 
initial site evaluation for the period of accreditation. Accordingly, 
we have not made the recommended change. This requirement is located at 
current section 205.510(c)(2).
    (24) Notice of Renewal of Accreditation. A commenter recommended 
that section 205.510(d) be amended to include a timeframe within which 
the Administrator must notify an applicant of its renewal of 
accreditation. We believe that a mandated timeframe for notifying the 
applicant of renewal of accreditation is inappropriate. We plan to 
process all applications for renewal of accreditation in the order in 
which they are received, to confirm the receipt of each application, 
and to establish a dialog with the applicant upon confirmation of 
receipt of an application for renewal of accreditation. The length of 
the renewal process will depend in large part on the nature of the 
operation seeking renewal of accreditation. To minimize the chances 
that an accreditation will expire during the renewal process, we have: 
(1) provided that the Administrator shall send the accredited 
certifying agent a notice of pending expiration of accreditation 
approximately 1 year before the date of expiration of the certifying 
agent's accreditation, (2) required that an application for renewal of 
accreditation must be received at least 6 months prior to expiration of 
the certifying agent's accreditation, and (3) provided that the 
accreditation of a certifying agent who makes timely application for 
renewal of accreditation will not expire during the renewal process. 
Accordingly, we have not made the recommended amendment.

Accreditation--Clarifications

    Clarification is given on the following issues raised by commenters 
as follows:
    (1) Accreditation of Foreign Certifying Agents. A commenter 
suggested that section 205.500 be amended to provide that if there is a 
government system operating in a foreign country then the government is 
the appropriate pathway for that country to apply for accreditation.
    USDA will accept an application for accreditation to perform 
certification activities under the NOP from any private entity or 
governmental entity certifying agent and accredit such applicant upon 
proof of qualification for accreditation. USDA will provide for USDA 
accreditation of certifying agents and acceptance of a foreign 
government's accreditation of certifying agent within the same country. 
This maximizes opportunity for certifying agents without the potential 
for confusion and overlap in documentation. Further, we believe these 
requirements facilitate world trade.
    (2) State Approval of Product From Foreign Countries. A commenter 
stated that any product making claims of organic agricultural 
ingredients to be sold in California shall fall under the jurisdiction 
of the California Organic Program for enforcement, inspection, and 
certification direction. The commenter further stated that, should any 
foreign certifying agents be accepted, they too shall be subject to the 
sovereign rights of the State of California to protect and enforce the 
laws of the State of California and to protect agricultural claims in 
this State.
    Any organic program administered by a State will have to be 
approved by the Secretary. Approval of an SOP will be contingent upon 
the State's agreeing to accept the certification decisions made by 
certifying agents accredited or accepted by USDA pursuant to section 
205.500.
    (3) Equivalency. A commenter stated that USDA should declare in 
section 205.500 that there are no alternative methods of production 
that meet the Congressional purpose ``to assure consumers that 
organically produced products meet a consistent standard.'' The 
commenter went on to state that, if USDA proceeds with equivalency then 
the regulations should be amended to provide for: (1) No importing 
until final determination, (2) no final determination until Federal 
Register publication and public comment, (3) audit of foreign agency 
and production sites, and (4) revocation of accreditation for 
violations. The commenter also recommended that foreign certifying 
agents be reviewed with the same frequency as State certifying agents.
    We disagree that there are no alternative methods of production 
that assure consumers that organically produced products meet a 
consistent standard. Accordingly, we will negotiate equivalency 
agreements with foreign governments. A final equivalency agreement will 
be required before affected product may be imported into the United 
States and sold, labeled, or represented as organic. Equivalency 
agreements will be announced to the public through a notice in the 
Federal Register and a news release. Site evaluations are a 
possibility. Foreign certifying agents that receive USDA accreditation, 
rather than recognition through their government, will have to fully 
comply with the NOP and will be treated the same as domestic accredited 
certifying agents.
    (4) Evaluation of Equivalency. Commenters asked how equivalency 
would be evaluated and recommended basing equivalency, not on a check 
of formalities, but on the finding of substantive equivalence and 
equivalent effectiveness of certifying systems.
    The negotiation of an equivalency agreement will involve meetings 
between representatives of the foreign

[[Page 80610]]

government seeking equivalency and representatives of USDA's 
Agricultural Marketing Service and Foreign Agricultural Service. 
Support will be provided by the Office of the U.S. Trade 
Representative. The process will also include the review of documents 
and possibly one or more site evaluations. Equivalency agreements will 
be announced to the public through a notice in the Federal Register and 
a news release.
    (5) Treatment of Certifying Agents Operating in More Than One 
Country. A few commenters requested that we amend section 205.500(c) by 
adding a provision to clarify the issue of how the international 
activities of foreign or domestic certifying agents will be treated 
when they operate in more than one country.
    We believe that the requested provision is unnecessary. Certifying 
agents, domestic and foreign, accredited under the NOP will be expected 
to comply fully with the requirements of the NOP regardless of where 
they operate. The only exception would be when they operate in a 
country in which the Secretary has negotiated an equivalency agreement.
    (6) Accreditation of Foreign Certifying Agents. A commenter 
requested that we amend section 205.500(c) to exempt foreign applicants 
from having to be accredited certifying agents in USDA's program if the 
exporting country's national organic program meets international 
standards; e.g, Codex guidelines.
    We have provided for USDA accreditation of qualified foreign 
certifying agents upon application. We have also provided that USDA 
will accept a foreign certifying agent's accreditation to certify 
organic production or handling operations if it determines, upon the 
request of a foreign government, that the standards under which the 
foreign government authority accredited the foreign certifying agent 
meet the requirements of this part. We have further provided that USDA 
will accept a foreign certifying agent's accreditation to certify 
organic production or handling operations if the foreign government 
authority that accredited the foreign certifying agent acted under an 
equivalency agreement negotiated between the United States and the 
foreign government. These recognitions of foreign government programs, 
however, do not extend to international standards such as Codex 
guidelines. In either case, we are recognizing the ability of a foreign 
government's program to meet U.S. standards, not some other 
international standard.
    (7) States with an Organic Statute. A commenter stated that a State 
with an organic statute or regulations that does not certify organic 
producers or organic handlers should not have to be accredited.
    The NOP requires the Secretary's approval of SOP's whether or not 
the State has a State certifying agent. A State may have an SOP but not 
have a State certifying agent. In this case the SOP must be approved by 
the Secretary. A State may have a State certifying agent but no SOP. In 
this case, the State certifying agent must apply for and receive 
accreditation to certify organic production or handling operations. 
Finally, a State may have an SOP and a State certifying agent. In this 
case, the SOP must be approved by the Secretary, and the State 
certifying agent must apply for and receive accreditation to certify 
organic production or handling operations.
    (8) Nondiscriminatory Services. A commenter wanted the addition of 
a provision in section 205.501(a) requiring certifying agents to 
provide nondiscriminatory services. We have not included the suggested 
addition in this final rule because the provision already exists in 
section 205.501(d).
    (9) Release of Information. A few commenters requested that we 
amend section 205.501(a)(10) to include a general exclusion allowing 
the release of any information with the client's permission. We have 
not included the suggested addition in this final rule because section 
205.504(b)(5)(iv) already addresses the allowed release of other 
business information as permitted in writing by the producer or 
handler.
    (10) Use of the Term, ``Certified Organic.'' In commenting on 
section 205.501(b)(1), a commenter stated that if the term, ``certified 
organic,'' is included on a label, it must state by whom, according to 
Maine State law. We do not believe that the requirements of section 
205.501(b)(1) would preclude a certified operation from complying with 
a State law requiring identification of the certifying agent on a 
product sold, labeled, or represented as ``certified organic.'' 
Further, these regulations do not require a certified operation to use 
the word, ``certified,'' on its label.
    (11) Holding the Secretary Harmless. In commenting on the 
requirements of section 205.501(c)(1), a commenter stated that 
certifying agents are responsible for representing USDA but seem to 
have no recourse. Another commenter asked, what happens if a certifying 
agent is found in violation of the Act but the violation was due to 
information or direction that came from USDA?
    Under the NOP, accredited certifying agents are required to comply 
with and carry out the requirements of the Act and these regulations. 
If they fail to do so, they are responsible for their actions or 
failures to act. This would not be true if the action or failure to act 
was at the direction of the Secretary.
    (12) Self-evaluation of Ability to Comply. A commenter requested 
that section 205.504 be amended to provide clarity on the baseline 
requirements that would allow a certifying agent to conduct a self-
evaluation to determine its ability to comply. The commenter stated 
that there should be some type of baseline acceptance of expertise and 
ability. The commenter wants details regarding the ``training'' or 
``experience'' requirements necessary to qualify for accreditation. 
This commenter also stated that criteria for inspector and reviewer 
training should be added and enlarged.
    We do not believe that it is necessary to present the requirements 
for accreditation to the extent of detail requested by the commenter. 
The intent is to provide flexibility to the certifying agents such that 
they can tailor their policies and procedures to the nature and scope 
of their operation. The NOP is available to respond to questions and to 
assist certifying agents in complying with the requirements for 
accreditation.
    (13) Evidence of Expertise and Ability. Commenters stated that 
important elements of ISO Guide 65 are missing from section 205.504. 
They cite the maintenance of a complaints register and a register of 
precedents and provisions for subcontracting and a documents control 
policy or a document register.
    Certifying agents grant certification, deny certification, and take 
enforcement action against a certified operation's certification. 
Certifying agents are required to maintain records applicable to all 
such actions and to report such actions to the Administrator. 
Certifying agents may contract with qualified individuals for the 
performance of services such as inspection, sampling, and residue 
testing. Certifying agents are required to submit personnel information 
(employed and contracted) and administrative policies and procedures to 
the Administrator. All such documents must be updated annually. The 
regulations also require the maintenance of records according to 
specified retention periods. All of these factors will be considered in 
granting or denying accreditation. We believe these requirements meet 
or exceed the ISO Guide 65 guidelines.
    (14) Personnel Evidence of Expertise. A commenter inquired about 
the

[[Page 80611]]

frequency at which the personnel information, required by section 
205.504(a) and used to establish evidence of expertise and ability, is 
to be updated. Section 205.510 requires that the certifying agent 
annually submit a complete and accurate update of the information 
required in section 205.504.
    (15) Responsibly Connected. A commenter stated that the term, 
``responsibly connected,'' as used in section 205.504(a)(2) is a broad 
sweep. The commenter believes the term would include everyone they do 
business with.
    Section 205.504(a)(2) requires the certifying agent to provide the 
name and position description of all personnel to be used in the 
certification operation. The section assists the certifying agent in 
meeting the requirement by identifying categories of persons covered by 
the requirement including persons responsibly connected to the 
certifying agent. Responsibly connected does not include everyone that 
the certifying agent does business with. Responsibly connected is 
defined in the Definitions subpart of this final rule as ``any person 
who is a partner, officer, director, holder, manager, or owner of 10 
percent or more of the voting stock of an applicant or a recipient of 
certification or accreditation.'' This definition has not changed.
    (16) Independent Third-Party Inspectors. A commenter recommended 
amending section 205.504(a)(3)(I) to provide for the use of independent 
third-party inspectors. We believe that this recommended amendment is 
unnecessary since nothing in these regulations precludes a certifying 
agent from contracting with independent third parties for inspection 
services.
    (17) Response to Accreditation Applicant. A commenter requested 
that section 205.506(a)(3) be amended to provide a timeframe within 
which the Administrator has to respond to the accreditation 
application. While section 205.506(a)(3) identifies the information to 
be reviewed by the Administrator prior to the granting of 
accreditation, we assume the commenter is seeking a specific time limit 
by which the Administrator will acknowledge receipt of an application 
for accreditation. In the alternative, the commenter may have been 
seeking a specific time limit by which the Administrator must grant or 
deny accreditation. We believe that a regulation-mandated timeframe for 
notifying the applicant of receipt of an application or for granting or 
denying accreditation is unnecessary. We plan to process all 
applications in the order in which they are received, to confirm the 
receipt of each application upon receipt, and to establish a dialog 
with the applicant upon confirmation of receipt of an application for 
accreditation. We will work with each applicant to complete the 
accreditation process as expeditiously as possible. A firm timeframe, 
however, cannot be set for granting or denying accreditation due to the 
anticipated uniqueness of each applicant and its application for 
accreditation.
    (18) Duration of Accreditation and Certification. A commenter 
asked, ``How can certification be essentially in perpetuity and 
accreditation have a time restraint?'' The commenter's question does 
not indicate a preference for certification or accreditation longevity. 
The commenter correctly points out that certification and 
accreditation, both of which must be updated annually, are granted for 
different time periods. The Act limits the period of accreditation to 5 
years but does not establish a limit to the period of certification. We 
believe the requirement that the certified operation submit an annual 
update of its organic plan negates the need for a certification 
expiration date.
    (19) Denial of Accreditation. In commenting on section 205.507, a 
commenter stated that the regulations need to address what happens to a 
certifying agent's clients when the certifying agent fails to qualify 
for accreditation on its first attempt.
    Section 205.507(c) provides that an applicant who has received 
written notification of accreditation denial may apply for 
accreditation again at any time in accordance with section 205.502. 
Upon implementation of the certification requirements of the NOP, 
production and handling operations planning to sell, label, or 
represent their products as organic must be certified by a USDA-
accredited certifying agent before selling, labeling, or representing 
their products as organic. If a producer's or handler's choice of 
certifying agents does not receive USDA accreditation, the producer or 
handler must seek and receive certification under the NOP from a USDA-
accredited certifying agent before selling, labeling, or representing 
their products as organic. Producers and handlers not so certified may 
not sell, label, or represent their products as organic. Any producer 
or handler who violates this requirement will be subject to prosecution 
under section 2120 of the Act.
    (20) Loss of Accreditation After Initial Site Visit. Commenting on 
section 205.508(b), a commenter stated the belief that accreditation 
before a site visit may cause problems if the certifying agent does not 
meet the requirements and, subsequently, loses its accreditation. We 
believe the problems will be no greater than will occur at any other 
time when it becomes necessary to revoke a certifying agent's 
accreditation, including when it becomes necessary to initiate 
proceedings to suspend or revoke the certification of one or more of 
the certifying agent's certified operations. However, just because 
revocation of a certifying agent's accreditation may be justified, it 
may not be necessary to suspend or revoke the certification of one or 
more of its clients. An operation certified by a certifying agent that 
has lost its accreditation must make application with a new certifying 
agent if it is going to continue to sell, label, or represent its 
products as organic.
    (21) Prohibition on Certification After Expiration of 
Accreditation. A commenter stated that, ``USDA should allow certifying 
agents to apply the same provisions to expiration of certification of a 
certified operation.'' The provision referenced by the commenter is the 
section 205.510(c)(1) (current section 205.510(c)(2)) requirement that 
certifying agents with an expired accreditation must not perform 
certification activities under the Act and these regulations. We have 
not accepted the commenter's request that the same prohibition be 
applied to production and handling operations with an expired 
certification because certification does not expire.
    (22) Expiration of Accreditation. Many commenters requested that we 
amend section 205.510(c)(1) to require annual reports and 
``minivisits.'' The commenters cited ISO Guide 61, section 3.5.1. We do 
not believe that annual ``minivisits'' are necessary to meet the 
requirements of ISO Guide 61 or to assure compliance with the NOP. One 
or more site evaluations will be conducted during the period of 
accreditation. The certifying agent's annual report will be used as a 
determining factor in whether to conduct a site evaluation. A request 
for amendment to a certifying agent's area of accreditation will also 
result in a site evaluation. This requirement is located at current 
section 205.510(c)(2).
    (23) Update and Review of Inspector Lists. In commenting on section 
205.510(c)(1) (current section 205.510(c)(2)) several commenters stated 
that updating and review of inspector lists must occur more frequently 
than every 5 years. They cited ISO Guide 61, section 3.5.1.
    Section 205.510(a)(1) requires that the certifying agent annually 
update the information required in section 205.504. This includes the 
inspector information required by paragraphs 205.504(a)(2) and 
205.504(a)(3)(i).

[[Page 80612]]

Subpart G--Administrative

The National List of Allowed and Prohibited Substances

Description of Regulations

General Requirements

    This subpart contains criteria for determining which substances and 
ingredients are allowed or prohibited in products to be sold, labeled, 
or represented as ``organic'' or ``made with organic (specified 
ingredients or food group(s)).'' It establishes the National List of 
Allowed and Prohibited Substances (National List) and identifies 
specific substances which may or may not be used in organic production 
and handling operations. Sections 6504, 6510, 6517, and 6518 of the 
Organic Foods Production Act (OFPA) of 1990 provide the Secretary with 
the authority to develop the National List. The contents of the 
National List are based upon a Proposed National List, with 
annotations, as recommended to the Secretary by the National Organic 
Standards Board (NOSB). The NOSB is established by the OFPA to advise 
the Secretary on all aspects of the National Organic Program (NOP). The 
OFPA prohibits synthetic substances in the production and handling of 
organically produced agricultural products unless such synthetic 
substances are placed on the National List.
    Substances appearing on the National List are designated using the 
following classifications:
    1. Synthetic substances allowed for use in organic crop production
    2. Nonsynthetic substances prohibited for use in organic crop 
production
    3. Synthetic substances allowed for use in organic livestock 
production
    4. Nonsynthetic substances prohibited for use in organic livestock 
production
    5. Nonagricultural (nonorganic) substances allowed as ingredients 
in or on processed products labeled as ``organic'' or ``made with 
organic (specified ingredients or food group(s))
    6. Nonorganically produced agricultural products allowed as 
ingredients in or on processed products labeled as organic'' or ``made 
with organic (specified ingredients or food group(s))
    This subpart also outlines procedures through which an individual 
may petition the Secretary to evaluate substances for developing 
proposed National List amendments and deletions.
    The NOSB is responsible for making the recommendation of whether a 
substance is suitable for use in organic production and handling. The 
OFPA allows the NOSB to develop substance recommendations and 
annotations and forward to the Secretary a Proposed National List and 
any subsequent proposed amendments. We have made every effort to ensure 
the National List in this final rule corresponds to the recommendations 
on allowed and prohibited substances made by the NOSB. In developing 
their recommendations, the NOSB evaluates synthetic substances for the 
National List utilizing the criteria stipulated by the Act. 
Additionally, criteria for evaluating synthetic processing ingredients 
have been implemented by the NOSB. These criteria are an interpretation 
and application of the general evaluation criteria for synthetic 
substances contained in the OFPA that the NOSB will apply to processing 
aids and adjuvants. The NOSB adopted these criteria as internal 
guidelines for evaluating processing aids and adjuvants. The adopted 
criteria do not supersede the criteria contained in the OFPA or replace 
the Food and Drug Administration's (FDA) regulations related to food 
additives and generally recognized as safe (GRAS) substances. The NOSB 
has also provided recommendations for the use of synthetic inert 
ingredients in formulated pesticide products used as production inputs 
in organic crop or livestock operations. The Environmental Protection 
Agency (EPA) regulates and maintains the EPA Lists of Inert ingredients 
used for pesticide. In this final rule, EPA Inerts List 1 and 2 are 
prohibited, EPA List 3 is also prohibited unless specifically 
recommended as allowed by the NOSB, and EPA List 4 Inerts are allowed 
unless specifically prohibited.
    In this final rule, only EPA List 4 Inerts are allowed as 
ingredients in formulated pesticide products used in organic crop and 
livestock production. The allowance for EPA List 4 Inerts only applies 
to pesticide formulations. Synthetic ingredients in any formulated 
products used as organic production inputs, including pesticides, 
fertilizers, animal drugs, and feeds, must be included on the National 
List. As sanctioned by OFPA, synthetic substances can be used in 
organic production and handling as long as they appear on the National 
List. The organic industry should clearly understand that NOSB 
evaluation of the wide variety of inert ingredients and other nonactive 
substances will require considerable coordination between the NOP, the 
NOSB, and industry. Materials review can be anticipated as one of the 
NOSB's primary activities during NOP implementation. Considering the 
critical nature of this task, the organic industry should make a 
collaborative effort to prioritize for NOSB review those substances 
that are essential to organic production and handling. The development 
and maintenance of the National List has been and will be designed to 
allow the use of a minimal number of synthetic substances that are 
acceptable to the organic industry and meet the OFPA criteria.
    We expect the maintenance of the National List to be a dynamic 
process. We anticipate that decisions on substance petitions for the 
inclusion on or deletion from the National List will be made on an 
annual basis. Any person seeking a change in the National List should 
request a copy of the petition procedures that were published in the 
Federal Register (65 Fed Reg 43259--43261) on July 13, 2000, from the 
NOP. The National List petition process contact information is: Program 
Manager, National Organic Program, USDA/AMS/TMP/NOP, Room 2945-S, Ag 
Stop 0268, P.O. Box 96456, Washington, DC 20090-6456 or visit the NOP 
website: www.ams.usda.gov/nop. Substances petitioned for inclusion on 
the National List will be reviewed by the NOSB, which will forward a 
recommendation to the Secretary. Any amendments to the National List 
will require rulemaking and must be published for comment in the 
Federal Register.
    Nothing in this subpart alters the authority of other Federal 
agencies to regulate substances appearing on the National List. FDA 
issues regulations for the safe use of substances in food production 
and processing. USDA's Food Safety and Inspection Service (FSIS) has 
the authority to determine efficacy and suitability regarding the 
production and processing of meat, poultry, and egg products. FDA and 
FSIS restrictions on use or combinations of food additives or GRAS 
substances take precedence over the approved and prohibited uses 
specified in this final rule. In other words, any combinations of 
substances in food processing not already addressed in FDA and FSIS 
regulations must be approved by FDA and FSIS prior to use. FDA and FSIS 
regulations can be amended from time to time under their rulemaking 
procedures, and conditions of safe use of food additives and GRAS 
substances can be revised by the amendment. It is important that 
certified organic producers and handlers of both crop and livestock 
products consult with FDA regulations in 21 CFR parts 170 through 199 
and FSIS regulations in this regard. All feeds, feed ingredients, and 
additives for feeds used in the

[[Page 80613]]

production of livestock in an organic operation must comply with the 
Federal Food, Drug, and Cosmetic Act (FFDCA). Animal feed labeling 
requirements are published in 21 CFR Part 501, and new animal drug 
requirements and a listing of approved animal drugs are published in 21 
CFR parts 510-558. Food (feed) additive requirements, a list of 
approved food (feed) additives generally recognized as safe substances, 
substances affirmed as GRAS, and substances prohibited from use in 
animal food or feed are published in 21 CFR parts 570-571, 21 CFR part 
573, 21 CFR part 582, 21 CFR part 584, and 21 CFR part 589, 
respectively. Furthermore, the Food and Drug Administration has worked 
closely with the Association of American Feed Control Officials (AAFCO) 
and recognizes the list of additives and feedstuffs published in the 
AAFCO Official Publication, which is updated annually.
    Under the Federal Insecticide, Fungicide, and Rodenticide Act 
(FIFRA), EPA regulates the use of all pesticide products, including 
those that may be approved for use in the NOP. In registering a 
pesticide under FIFRA, EPA approves the uses of each pesticide product. 
It is a violation of FIFRA to use a registered product in a manner 
inconsistent with its labeling. The fact that a substance is on the 
National List does not authorize use or a pesticide product for that 
use if the pesticide product label does not include that use. If the 
National List and the pesticide labeling conflict, the pesticide 
labeling takes precedence and may prohibit a practice allowed on the 
National List.

National List--Changes Based On Comments

    This subpart differs from the proposal in several respects as 
follows:
    (1) Comprehensive Prohibition on Excluded Methods. Many commenters 
supported a comprehensive prohibition on the use of excluded methods in 
organic production and handling. These commenters stated that the 
proposed language on excluded methods could have allowed some uses 
since the general prohibition described in section 205.301 of the 
proposed rule could be interpreted as applying only to multiingredient 
products. In order to provide a comprehensive prohibition on the use of 
excluded methods, we incorporated a new provision within section 
205.105. A more comprehensive discussion of this issue is found in 
subpart B, Applicability.
    (2) Substance Evaluation Criteria for the National List. Commenters 
stated that the final rule should include in the regulation text the 
evaluation criteria utilized by the NOSB for the development of 
substance recommendations. We agree, and we have inserted the substance 
evaluation criteria developed by the NOSB for processing ingredients 
and cited the criteria within the Act (7 U.S.C. 6518(m)) for crops and 
livestock production as new provisions for section 205.600, which is 
now entitled ``Evaluation criteria for allowed and prohibited 
substances, methods, and ingredients.''
    (3) Substances Approved for Inclusion on the National List. 
Commenters stated that the National List did not contain all of the 
substances recommended by the NOSB for inclusion on the National List 
of Allowed and Prohibited Substances. We agree and have added the 
following substances consistent with the most recent NOSB 
recommendations:

Crop Production

Lime sulfur as a plant disease control substance
Elemental sulfur as a plant or soil amendment
Copper as a plant or soil micronutrient
Streptomycin sulfate as plant disease control substances with the 
annotation `` for fire blight control in apples and pears only''
Terramycin (oxytetracycline calcium complex) as a plant disease control 
substance with the annotation ``for fire blight control only''
Magnesium sulfate as a plant or soil amendment with the annotation 
``allowed with a documented soil deficiency''
Ethylene as a plant growth regulator, with the annotation ``for 
regulation of pineapple flowering''

    We have added sodium nitrate and potassium chloride to the National 
List as nonsynthetic substances prohibited for use in crop production 
unless used in accordance with the substance annotations. Sodium 
nitrate is prohibited unless use is restricted to no more than 20 
percent of the crop's total nitrogen requirement. Potassium chloride is 
prohibited unless derived from a mined source and applied in a manner 
that minimizes chloride accumulation in the soil. These additions are 
discussed further in item 3 under Changes Based on Comments, subpart C.

Livestock Production

Oxytocin with the annotation ``for use in postparturition therapeutic 
applications''
EPA List 4 inert ingredients as synthetic inert ingredients for use 
with nonsynthetic substances or synthetic substances allowed in organic 
livestock production.

    Several commenters recommended that the final rule should specify 
which nonsynthetic substances are prohibited for use in livestock 
production. These commenters stated that the proposed rule prohibited 
six such substances for use in crop production and maintained that an 
analogous list for livestock operations would be beneficial. Of the six 
nonsynthetic substances in the proposed rule prohibited for use in crop 
production, four were based on NOSB recommendations (strychnine, 
tobacco dust, sodium fluoaluminate (mined), and ash from burning 
manure) and two were based on statutory provisions in the OFPA (arsenic 
and lead salts). After reviewing these substances and the NOSB 
recommendations, we determined that the prohibition for one, 
strychnine, also applies to livestock production. Individuals may 
petition the NOSB to have additional nonsynthetic substances prohibited 
for use in organic crop and livestock production.

Organic Handling (Processing)

Tribasic calcium phosphate
Nonsynthetic colors
Flavors, with the annotation ``nonsynthetic sources only and must not 
be produced using synthetic solvents and carrier systems or any 
artificial preservatives''
Nonsynthetic waxes, carnauba wax, wood resin
Cornstarch (native), gums, kelp, lecithin and pectin were moved from 
section 205.605 to section 205.606

    (4) Substance Removed from the National List. Commenters stated 
that certain substances on the National List in the proposed rule had 
not been recommended by the NOSB. We agree with the comment that the 
NOSB did not recommend that magnesium should be allowed as a plant or 
soil micronutrient and have removed it from the National List.
    (5) Changes in Substance Annotations on the National List. 
Commenters stated that certain annotations in the proposed rule did not 
capture the precise recommendations of the NOSB. We agree and have 
amended the annotations within the National List as follows:
    The annotation for hydrated lime as a plant disease control 
substance now states, ``must be used in a manner that minimizes 
accumulation of copper in the soil.''
    The annotation for horticultural oils as an insecticide substance 
and as a plant disease control substance now

[[Page 80614]]

states, ``Narrow range oils as dormant, suffocating, and summer oils.''
    The annotation for hydrated lime in livestock production now 
states, ``not permitted for soil application or to cauterize physical 
alterations or deodorize animal wastes.''
    The annotation for the allowed synthetic parasiticide Ivermectin 
has been modified to state that the substance may not be used during 
the lactation period of breeding stock.
    The annotation for trace minerals and vitamins allowed as feed 
additives has been modified and now states, ``used for enrichment or 
fortification when FDA approved.''
    The annotation for magnesium sulfate in organic handling now 
states, ``nonsynthetic sources only.''
    The annotation for EPA List 4 Inerts allowed in crop and livestock 
production has been modified to state, `` * * * for use with 
nonsynthetic substances or synthetic substances listed in this section 
* * *''
    (6) Sulfur Dioxide for Organic Wines. Many commenters recommended 
that this final rule should allow for the use of sulfur dioxide in wine 
labeled ``made with organic grapes.'' They argued that sulfur dioxide 
is necessary in organic wine production and that prohibiting its use 
would have a negative impact on organic grape production and wineries 
that produce wine labeled ``made with organic grapes.'' The prohibition 
on the use of sulfur dioxide in the proposed rule was based upon the 
requirement in the Act that prohibited the addition of sulfites to 
organically produced foods. However, a change in the Act now allows the 
use of sulfites in wine labeled as ``made with organic grapes.'' 
Therefore, we have added sulfur dioxide to the National List with the 
annotation, ``for use only in wine labeled ``made with organic 
grapes,'' Provided, That, total sulfite concentration does not exceed 
100 ppm.'' The label for the wine must indicate the presence of 
sulfites. This addition to the National List is also in agreement with 
the NOSB recommendation for allowing the use of sulfur dioxide in 
producing wine to be labeled as ``made with organic grapes.''

National List--Changes Requested But Not Made

    This subpart retains from the proposed rule regulations on which we 
received comments as follows:
    (1) Restructuring the National List. Commenters requested a 
restructuring of the National List to improve its clarity and ease of 
use. Some of the commenters asked for minor changes involving the 
wording of section titles. Other commenters were opposed to the 
categories used in the National List because the categories are not in 
compliance with the Act. In its June 2000 meeting, the NOSB asked the 
NOP to review a proposal from a research institute proposing that 
processing materials for the National List be categorized according to 
industry standards. This proposal recommended including new sections 
for substances used in ``made with * * *'' and substances used in the 
5-percent nonorganic portion of ``organic'' multiingredient products. 
We agree that the present structure of the National List may not have 
optimum clarity and ease of use. However, extensive restructuring of 
the National List without additional NOSB consideration and public 
discussion would be a significant variation from the policy that 
established the National List for this final rule. The NOP will work 
with the NOSB and the public to refine the National list consistent 
with industry norms and public expectations.
    (2) Use of EPA List 4 Inerts. The proposed rule allowed EPA List 4 
Inerts to be used as synthetic inert ingredients with allowed synthetic 
active ingredients in crop production. Some commenters stated that 
certain substances among the EPA List 4 inerts should not be allowed in 
organic production. Some commenters went further and recommended that 
the allowance for synthetic inert ingredients should be limited to the 
subset of materials that the EPA designates as List 4A. We do not agree 
with these commenters and have retained the allowance for all inerts 
included on EPA List 4. List 4 inerts are classified by EPA as those of 
``minimal concern'and, after continuing consultation with EPA, we 
believe there is no justification for a further restriction to List 4A. 
If commenters believe that a particular List 4 inert should not be 
allowed in formulated products used in organic production, they can 
petition the NOSB to have that substance prohibited.
    (3) Removing Vaccines from the National List. Some commenters 
asserted that vaccines should not be included on the National List 
because the NOSB had never favorably recommended their use in livestock 
production. However, the OFPA authorizes the use of vaccines, and in 
1995, the NOSB recommended allowing their use. The NOSB stated that use 
of vaccines may be necessary to ensure the health of the animal and to 
remain in compliance with Federal, State, or regional regulations. We 
agree with the NOSB's recommendation and have retained vaccines as an 
allowed substance in livestock medication.
    (4) Adding Amino Acids to the National List. Some commenters 
recommended that amino acids should be added to the National List as 
allowed synthetic substances for livestock production. We have not 
added amino acids to the National List because the NOSB has not 
recommended that they should be allowed. This subject is discussed 
further in item 4, Livestock--Changes Based on Comments, subpart C.
    (5) Creating a Category for Prohibited Nonsynthetic Seed 
Treatments. A commenter stated that the National List of nonsynthetic 
substances prohibited for use in crop production should include 
provisions for seed treated with a nonsynthetic substance. This 
commenter stated that the final rule should acknowledge that a 
nonsynthetic seed treatment could be prohibited on the National List. 
We do not believe it is necessary to include a separate category for 
seed treatments under the prohibited nonsynthetic section of the 
National List. An individual may petition the NOSB to have a particular 
nonsynthetic seed treatments placed on the prohibited list without 
creating a new category for seed treatments.
    (6) Creating a Category for Treated Seed and Toxins Derived from 
Bacteria. Commenters stated that the National List of synthetic 
substances allowed in crop production should include categories for 
treated seed and toxins derived from bacteria. These commenters stated 
that these categories are sanctioned by the OFPA, and failure to 
consider them would place a significant burden on organic producers. We 
believe it is unnecessary to include these categories on the National 
List. Specific substances from these categories could be incorporated 
in existing categories that reflect their function, such as plant 
disease control or insecticide. An individual may submit petitions to 
the NOSB to have specific substances from these categories considered 
for inclusion on the National List.
    (7) Remove Categories for Feed Supplements. A commenter stated that 
it was inappropriate for the National List of synthetic substances 
allowed in livestock production to contain categories for feed 
supplements and feed additives because they are not authorized in the 
OFPA. We disagree with this commenter because the identification of 
categories on the National List does not mean that all substances 
within that category are allowed. The categories help to clarify which 
types of materials may be included on the National List. The substances 
included under the categories of feed supplements and feed

[[Page 80615]]

additives were recommended by the NOSB and added to the National List 
with the Secretary's approval.
    (8) Neurotoxic Substances on the National List. Many commenters 
requested that the NOP remove particular substances from section 
205.605 of the National List. They stated these substances were sources 
of neurotoxic compounds that negatively effect human health. The 
substances cited were yeast (autolysate and brewers), carrageenan, and 
enzymes. Moreover, these commenters argued against including on the 
National List some amino acids or their derivatives which the 
commenters claim have neurotoxic side effects. These commenters 
requested that amino acids should be prohibited from the National List 
due to the possibility that neurotoxic substances could be utilized for 
either organic agricultural production or handling.
    We do not agree with the requests of the commenters and we have not 
made the requested changes. There are no amino acids currently on the 
National List; therefore, synthetic sources of amino acids are 
prohibited. Unless recommended for use by the NOSB, synthetic amino 
acids will not be included on the National List. The NOP has 
established a petition process for substances to be evaluated for 
inclusion on or removal from the National List of Allowed and 
Prohibited Substances in organic production and handling. Anyone 
seeking to have a particular substance removed from the National List 
may file a substance petition to amend the National List.
    (9) EPA List 4 Inerts for Organic Processing. A few commenters 
recommended that substances in EPA List 4 inerts that are allowed for 
use in crop production also be allowed for use as processing materials. 
We do not agree, and we have not included EPA List 4 Inerts on the 
National List for organic handling. Inerts listed on EPA List 4 have 
been evaluated and approved for use in pesticide formulations, not for 
use as processing materials. Inerts that are included on EPA List 4 
would have to be further evaluated to determine whether such materials 
meet the criteria for inclusion on the National List.
    (10) Modifying Annotations of Organic Processing Substances. One 
commenter requested that the Department modify the annotation for 
phosphoric acid to include its use as a processing aid. We have not 
made the suggested change. Any change in the annotation of a substance 
can only occur through an NOSB recommendation. Individuals or groups 
can use the petition process to submit substance petitions to the NOSB 
for the evaluation to be included on or removed from the National List.
    (11) Nutritional Supplementation of Organic Foods. Some commenters 
asserted that 21 CFR 104.20 is not an adequate stand-alone reference 
for nutritional supplementation of organic foods. As a result, these 
commenters recommended that the final rule include as additional cites 
21 CFR 101.9(c)(8) for FDA-regulated foods and 9 CFR 317.30(c), 
318.409(c)(8) for foods regulated by FSIS to support 21 CFR 104.20. We 
did not implement the suggested changes of the commenters. Section 
205.605(b)(20) in the proposed rule allowed the use of synthetic 
nutrient vitamins and minerals to be used in accordance with 21 CFR 
104.20, Nutritional Quality Guidelines For Foods, as ingredients in 
processed products to be sold as ``organic'' or ``made with * * *.'' 
The commenters recommended cites, 21 CFR 101.9(c)(8) for FDA-regulated 
foods and 9 CFR 317.30(c); section 318.409(c)(8) did not provide 
provisions for nutritional supplementation of foods. Instead, these 
suggested cites were particularly aimed toward: (1) The declaration of 
nutrition information on the label and in labeling of a food; (2) 
labeling, marking devices, and containers; (3) entry into official 
establishments; and (4) reinspection and preparation of products. The 
NOP, in consultation with FDA, considers 21 CFR 104.20 to be the most 
appropriate reference regarding nutritional supplementation for organic 
foods.
    (12) National List Petition Process as Part of the Final Rule.
    Commenters have requested that the National List Petition Process, 
approved by the NOSB at its June 2000 meeting (and published in the 
Federal Register on July 13, 2000), be included in the final rule. We 
do not agree with the commenters, and we have retained the National 
List Petition Process regulation language from the proposed rule. We 
have separated the specific petition process from the regulation to 
provide for maximum flexibility to change and clarify the petition 
process to accommodate new considerations developed during the NOP 
implementation. If this process were part of this final rule, updates 
to the petition process would require notice and comment rulemaking. 
Any changes in the National List that may be a result of the petition 
process, however, would require notice and comment rulemaking.
    (13) Nonapproved Substance Amendments to the National List. 
Commenters also requested to have many substances that are not on the 
National List and that have not been recommended by the NOSB for use in 
organic production and handling be added to the National List. We do 
not agree. Amendments to the National List must be petitioned for NOSB 
consideration, must have an NOSB recommendation, and must be published 
for public comment in the Federal Register.

National List--Clarifications

    Clarification is given on the following issues raised by commenters 
as follows:
    (1) Inerts Use in Botanical or Microbial Pesticides. Commenters 
expressed concern that the prohibition on the use of EPA List 3 inerts 
would prevent organic producers from using certain botanical or 
microbial formulated products that are currently allowed under some 
certification programs. These commenters requested that the NOP and the 
NOSB expedite the evaluation of List 3 inerts used in nonsynthetic 
formulated products to prevent the loss of certain formulated products. 
The prohibition of List 3 inerts was based on the recommendation of the 
NOSB to add only those substances from List 4 to the National List. The 
NOSB also recommended that individual inert substances included on List 
3 could be petitioned for addition to the National List. The NOP has 
requested that the NOSB identify for expedited review those List 3 
inerts that are most important in formulated products used in organic 
production. Individuals may petition to have these inerts considered 
for inclusion on the National List. Additionally, the NOP will work 
with the EPA and the registrants of formulated products to expedite 
review of List 3 inerts currently included in formulated products used 
in organic production. Unless List 3 inerts are moved to List 4 or 
individually added to the National List, they are prohibited for use in 
organic production.
    (2) Prohibiting Ash, Grit, and Screenings Derived from Sewage 
Sludge. Many commenters recommended that the ash, grit, and screenings 
derived from the production of sewage sludge should be added to the 
National List as nonsynthetic materials prohibited for use in crop 
production. While the use of sewage sludge, including ash, grit, and 
screenings, is prohibited in organic production, we did not add them to 
the National List as prohibited nonsynthetic substances. This subject 
is discussed further under subpart A, Definitions--Changes Requested 
But Not Made.
    (3) Allowed Uses for Pheromones. Some commenters were concerned 
that

[[Page 80616]]

the annotation for using pheromones as ``insect attractants'' was too 
limiting and would not include uses such as mating disruption, 
trapping, and monitoring. The annotation for pheromones does not 
preclude any use for a pheromone that is otherwise allowed by Federal, 
State, or local regulation.
    (4) Nonagricultural Products as Livestock Feed Ingredients. Some 
commenters questioned whether nonsynthetic, nonagricultural substances 
such as fishmeal and crushed oyster shell needed to be added to the 
National List to be used in livestock feed. Nonsynthetic substances do 
not have to appear on the National List and may be used in organic 
livestock feed, provided that they are used in compliance with the 
FFDCA. This subject is discussed further under item 4, Livestock--
Changes Based on Comments, subpart C.
    (5) Chlorine Disinfectant Limit Annotation for Organic Production 
and Handling. Some commenters requested clarification on the annotation 
for using chlorine materials as an allowed synthetic substance in crop 
and handling operations. The annotation in the proposed rule, which has 
been retained in the final rule, stated that ``residual chlorine levels 
in the water shall not exceed the maximum residual disinfectant limit 
under the Safe Water Drinking Act.'' With this annotation, the residual 
chlorine levels at the point where the waste water stream leaves the 
production or handling operation must meet limits under the Safe 
Drinking Water Act.
    (6) Tobacco Use in Organic Production. One commenter questioned 
whether forms of tobacco other than tobacco dust, such as water 
extracts or smoke, were prohibited nonsynthetic substances. The 
technical advisory panel (TAP) review on which the NOSB based its 
recommendation to prohibit tobacco dust identified nicotine sulfate as 
the active ingredient. Therefore, any substance containing nicotine 
sulfate as an active ingredient is prohibited in crop production.
    (7) Nonsynthetic Agricultural Processing Aids on the National List. 
A commenter requested clarification from the NOP on whether processing 
aids (e.g., defoaming agents), which are nonsynthetic and nonorganic 
agricultural substances (e.g., soybean oil), must appear on the 
National List when used in processing. In the regulation, a 
nonsynthetic and nonorganic agricultural product, such as soybean oil, 
used as a processing aid does not have to appear on the National List. 
Such products are included in the provision in section 205.606 that 
nonorganically produced agricultural products may be used in accordance 
with any applicable restrictions when the substance is not commercially 
available in organic form.
    (8) Transparency of the National List Petition Process. Some 
commenters stated the petition process for amending the National List 
appears to have limited public access and should be more transparent. 
These commenters advocate that any amendments to the National List 
should be subject to notice and comment. They also requested clarity on 
how petitions are prioritized and reviewed and the timeframes for 
review. Additionally, these commenters asked the NOP to expedite the 
review of materials for the National List. On July 13, 2000, AMS 
published in the Federal Register (Vol. 65, 43259-43261) guidelines for 
submitting petitions for the evaluations of substances for the addition 
to or removal from the National List. In this notice, the NOP stated 
that most petition information is available for public inspection with 
the exception of information considered to be ``confidential business 
information.'' The notice also specified that any changes to the 
National List must be published in the Federal Register for public 
comment. The published petition notice has also provided an indication 
to the industry about the urgency of the need for substance review and 
that the industry should provide pertinent information to the NOSB to 
expedite the review of materials not on the National List.

State Organic Programs

    The Act provides that each State may implement an organic program 
for agricultural products that have been produced and handled within 
the State, using organic methods that meet the requirements of the Act 
and these regulations. The Act further provides that a State organic 
program (SOP) may contain more restrictive requirements for organic 
products produced and handled within the State than are contained in 
the National Organic Program (NOP). All SOP's and subsequent amendments 
thereto must be approved by the Secretary.
    A State may have an SOP but not have a State certifying agent. A 
State may have a State certifying agent but no SOP. Finally, a State 
may have an SOP and a State certifying agent. In all cases, the SOP's 
must be approved by the Secretary. In all cases, the State certifying 
agent must apply for and receive accreditation to certify organic 
production or handling operations pursuant to subpart F.
    In States with an approved SOP, the SOP's governing State official 
is responsible for administering a compliance program for enforcement 
of the NOP and any more restrictive requirements contained in the SOP. 
The SOP governing State officials may review and investigate complaints 
of noncompliance involving organic production or handling operations 
operating within their State and, when appropriate, initiate suspension 
or revocation of certification. The SOP governing State officials may 
also review and investigate complaints of noncompliance involving 
accredited certifying agents operating within their State. They must 
report the findings of any review and investigation of a certifying 
agent to the NOP Program Manager along with any recommendations for 
appropriate action. States that do not have an SOP will not be 
responsible for compliance under the NOP, except that an accredited 
State certifying agent operating within such State will have compliance 
responsibilities under the NOP as a condition of its accreditation.
    The sections covering SOP's, beginning with section 205.620, 
establish: (1) The requirements for an SOP and amending such a program 
and (2) the process for approval of an SOP and amendments to the SOP's. 
Review and approval of an SOP will occur not less than once during each 
5-year period. Review related to compliance matters may occur at any 
time.

Description of Regulations

State Organic Program Requirements

    A State may establish an SOP for production and handling operations 
within the State that produces and handles organic agricultural 
products. The SOP and supporting documentation must demonstrate that 
the SOP meets the requirements for organic programs specified in the 
Act.
    An SOP may contain more restrictive requirements governing the 
production and handling of organic products within the State. Such 
requirements must be based on environmental conditions or specific 
production or handling practices particular to the State or region of 
the United States, which necessitates the more restrictive requirement. 
More restrictive requirements must be justified and shown to be 
consistent with and to further the purposes of the Act and the 
regulations in this part. Requirements necessitated by an environmental 
condition that is limited to a specific geographic area of the State 
should only be required of organic production and

[[Page 80617]]

handling operations operating within the applicable geographic area. If 
approved by the Secretary, the more restrictive requirements will 
become the NOP regulations for organic producers and handlers in the 
State or applicable geographical area of the State. All USDA-accredited 
certifying agents planning to operate within a State with an SOP will 
be required to demonstrate their ability to comply with the SOP's more 
restrictive requirements.
    No provision of an SOP shall discriminate against organic 
agricultural products produced by production or handling operations 
certified by certifying agents accredited or accepted by USDA pursuant 
to section 205.500. Specifically, an SOP may not discriminate against 
agricultural commodities organically produced in other States in 
accordance with the Act and the regulations in this part. Further, an 
SOP may not discriminate against agricultural commodities organically 
produced by production or handling operations certified by foreign 
certifying agents operating under: (1) Standards determined by USDA to 
meet the requirements of this part or (2) an equivalency agreement 
negotiated between the United States and a foreign government.
    To receive approval of its SOP, a State must assume enforcement 
obligations in the State for the requirements of this part and any more 
restrictive requirements included in the SOP and approved by the 
Secretary. Specifically, the State must ensure compliance with the Act, 
the regulations in this part, and the provisions of the SOP by 
certified production and handling operations operating within the 
State. The SOP must include compliance and appeals procedures 
equivalent to those provided for under the NOP.
    An SOP and any amendments thereto must be approved by the Secretary 
prior to implementation by the State.

State Organic Program Approval Process

    An SOP and subsequent amendments thereto must be submitted to the 
Secretary by the SOP's governing State official for approval prior to 
implementation. A request for approval of an SOP must contain 
supporting materials that include statutory authorities, program 
descriptions, documentation of environmental or ecological conditions 
or specific production and handling practices particular to the State 
which necessitate more restrictive requirements than the requirements 
of this part, and other information as may be required by the 
Secretary. A request for amendment of an approved SOP must contain 
supporting materials that include an explanation and documentation of 
the environmental or ecological conditions or specific production 
practices particular to the State or region, which necessitate the 
proposed amendment. Supporting material also must explain how the 
proposed amendment furthers and is consistent with the purposes of the 
Act and the regulations in this part.
    Each request for approval of an SOP or amendment to an SOP and its 
supporting materials and documentation will be reviewed for compliance 
with the Act and these regulations. Within 6 months of receiving the 
request for approval, the Secretary will notify the SOP's governing 
State official of approval or disapproval. A disapproval will include 
the reasons for disapproval. A State receiving a notice of disapproval 
of its SOP or amendment to its SOP may submit a revised SOP or 
amendment to its SOP at any time.

Review of State Organic Programs

    SOP's will be reviewed at least once every 5 years by the Secretary 
as required by section 6507(c)(1) of the Act. The Secretary will notify 
the SOP's governing State official of approval or disapproval of the 
program within 6 months after initiation of the review.

State Organic Programs--Changes Based on Comments

    This portion of subpart G differs from the proposal in several 
respects as follows:
    (1) Publication of SOP's and Consideration of Public Comments. Some 
commenters assert that the USDA should not publish SOP provisions for 
public comment in the Federal Register. These commenters argued that it 
is not appropriate for the NOP to have nonresidents commenting on a 
particular State program as nearly all States have a mechanism to 
ensure full public participation in their regulation promulgation. They 
believe the comment process set forth in the proposed rule is a 
redundant and unacceptable intrusion on State sovereignty.
    We will not publish for public comment the provisions of SOP's 
under review by the Secretary in the Federal Register. We have removed 
the provision from this final rule, described in section 205.621(b), 
requiring the Secretary to publish in the Federal Register for public 
comment a summary of the SOP and a summary of any amendment to such a 
program. Alternatively, we will announce which SOP's are being reviewed 
through the NOP website. The NOP will issue public information notices 
that will announce each approved SOP and any approved amendments to an 
existing State program. The notices will identify the characteristics 
of the approved State program that warranted the more restrictive 
organic production or handling requirements. We also will include a 
summary of the new program on the NOP website.
    (2) NOP Oversight of SOP's. Several commenters stated that, in the 
proposed rule, the provisions did not provide a comprehensive 
description of organic programs operated by States that would be under 
NOP authority. Some commenters implied that the proposed rule would 
only include States with organic certification programs, while other 
commenters inquired whether the sections 205.620 to 205.622 included 
other SOP activities beyond certification.
    To address the commenters' concerns, we have modified the section 
heading by adding the term, ``organic,'' and removing the term, 
``certification,'' from the description and definition of SOP's. We 
have taken this action to clarify that, while certification is one 
component of the requirements, it does not define the extent of 
evaluation of State programs that will be conducted by the NOP. SOP's 
can choose not to conduct certification activities under their existing 
organic program. State programs whose provisions fall within the scope 
of the eleven general provisions described in the Act (7 U.S.C. 6506) 
will require Departmental review.
    States may conduct other kinds of organic programs that will not 
need review and approval by the NOP. Examples of these other programs 
may include: organic promotion and research projects, marketing; 
transition assistance or cost share programs, registration of State 
organic production and handling operations, registration of certifying 
agents operating within the State, or a consumer referral program. The 
NOP will not regulate such State activities. Such programs may not 
advertise, promote, or otherwise infer that the State's organic 
products are more organic or better than organic product produced in 
other States. Such programs and projects would be beyond the scope of 
this national program and will not be subject to the Secretary's 
review.

State Organic Programs--Changes Requested But Not Made

    (1) Limitations on SOP More Restrictive Requirements. Commenters 
expressed concern that limiting a State's

[[Page 80618]]

ability to craft a regulation designated as a more restrictive 
requirement to environmental conditions or specific production and 
handling practices would hinder the ongoing development of SOP's. They 
were concerned that any State legislation modifying the SOP would need 
to be preapproved by the Secretary.
    We have retained the provision limiting the scope of more 
restrictive requirements States can include in their organic program as 
described in section 205.620(c). We believe the language contained in 
the provision is broad enough to facilitate the development of SOP's 
without hindering development or State program implementation and 
enforcement. Section 6507(b)(1) of the Act provides that States may 
establish more restrictive organic certification requirements; 
paragraph (b)(2) establishes parameters for those requirements. More 
restrictive SOP requirements must: further the purposes of the Act, be 
consistent with the Act, not discriminate against other State's 
agricultural commodities, and be approved by the Secretary before 
becoming effective. We expect that a State's more restrictive 
requirements are likely to cover specific organic production or 
handling practices to address a State's specific environmental 
conditions. The Secretary will approve State's requests for more 
restrictive State requirements that are consistent with the purposes of 
the Act. However, we believe requests from States for more restrictive 
requirements will be rare. Although SOP's can impose additional 
requirements, we believe States will be reluctant to put their program 
participants at a competitive disadvantage when compared to producers 
and handlers in other States absent compelling environmental conditions 
or a compelling need for special production and handling practices. 
While preapproval of State legislation modifying an existing SOP is not 
required, the NOP envisions a close consultation with States with 
existing programs to ensure consistency with the final rule.
    (2) SOP Enforcement Obligations. Some commenters expressed concern 
about States having adequate resources available to implement 
enforcement activities that they are obligated to conduct under the 
NOP. A few of these commenters argue that the enforcement obligation 
will result in their State programs being discontinued. A few 
commenters cited a lack of federal funding to support State enforcement 
obligations and suggested the NOP provide funding for enforcement 
activities.
    The proposed rule indicated that States with organic programs must 
assume enforcement obligations for this regulation within their State. 
We have retained this enforcement obligation in section 205.620(d). 
Many States currently have organic programs with the kind of 
comprehensive enforcement and compliance mechanisms necessary for 
implementing any State regulatory program. Assuming those enforcement 
activities are consistent with the NOP, this final rule adds no 
additional regulatory burden to the SOP's. The costs associated with 
the enforcement activities of an approved SOP should be similar to the 
enforcement costs associated with the existing State program. 
Additional clarification of SOP enforcement obligations is in the 
Accreditation, Appeals, and Compliance preamble discussions.
    (3) SOP Evaluation Notification Period. A few commenters indicated 
that the SOP review and decision notification period described in 
section 205.621(b) of the proposed rule could hinder a State's ability 
to develop or implement an SOP. These commenters cited potential cases 
in which particular States have requirements for regulatory 
promulgation that must occur within 6 months under a State legislative 
session that is held once every 2 years. These commenters suggested the 
NOP should reduce the notification time to 1 to 3 months.
    We disagree with the commenters. In the proposed rule in section 
205.621(b), the Secretary is required to notify the SOP's governing 
State official within 6 months of receipt of submission of documents 
and information regarding the approval of the SOP. We have retained 
this time period. We will review SOP applications as quickly as 
possible and will endeavor to make decisions in less than 6 months 
whenever possible. However, some SOP's may be very complex and require 
more review time. The NOP envisions working closely with the States and 
State officials to ensure a smooth transition to the requirements of 
this final rule.

State Organic Programs--Clarifications

    (1) Discrimination Against Organic Products. Several commenters 
requested the addition of a provision prohibiting an SOP from 
discriminating against agricultural commodities organically produced in 
other States. Discrimination by a State against organically produced 
agricultural products produced in another State is prevented in two 
ways. First, any organic program administered by a State must meet the 
requirements for organic programs specified in the Act and be approved 
by the Secretary. Finally, a USDA-accredited certifying agent must 
accept the certification decisions made by another USDA-accredited 
certifying agent as its own.
    (2) Potential Duplication Between the Accreditation and SOP Review 
Process. Some commenters asked about possible duplication between the 
process for reviewing SOP's and the process of accreditation review. 
These commenters have asked the NOP to eliminate any duplication that 
may exist between the two review processes. The NOP will be conducting 
a review process for SOP's and a separate review process for 
accrediting State and private certifying agents. The two reviews are 
different. The SOP review is the evaluation of SOP compliance with the 
Act and the NOP regulations. If approved, the SOP becomes the NOP 
standards for the particular State with which all certifying agents 
operating in that State must comply. Approved SOP's must be in 
compliance with the Act and the NOP regulations. They cannot have 
weaker standards than the NOP. States can have more restrictive 
requirements than the NOP if approved by the Secretary.
    The accreditation review is an evaluation of the ability of 
certifying agents to carry out their responsibilities under the NOP. 
This review is a measure of the competency of certifying agents to 
evaluate compliance to national organic standards. Certifying agents 
will not be unilaterally establishing regulations or standards related 
to the certification of organic products. They will only provide an 
assessment of compliance.
    Thus, SOP reviews and accreditation reviews are separate 
evaluations of different procedures. We acknowledge some of the 
information for the two evaluations may be similar; e.g., compliance 
procedures. The reviews do not duplicate the same requirements. 
However, the NOP envisions working with States to ensure documentation 
is not duplicated.
    (3) Scope of Enforcement by States. A number of State commenters 
have requested clarification on the proposed rule provision specifying 
that approved SOP's must assume enforcement obligations in their State 
for the requirements of the NOP and any additional requirements 
approved by the Secretary. These commenters have indicated that they 
remain uncertain as to what is expected by the term, ``enforcement 
obligation.''
    Approved SOP's will have to administer and provide enforcement of 
the requirements of the Act and the

[[Page 80619]]

regulations of the NOP. The administrative procedures used by the State 
in administering the approved SOP should have the same force and effect 
as the procedures use by AMS in administering this program. This final 
rule specifies that the requirements for environmental conditions or 
for special production and handling practices are necessary for 
establishing more restrictive requirements. These factors establish our 
position that a State must agree to incurring increased enforcement 
responsibilities and obligations to be approved as an SOP under the 
NOP. For instance, a State with an approved organic program will 
oversee compliance and appeals procedures for certified organic 
operations in the State. Those procedures must provide due process 
opportunities such as rebuttal, mediation, and correction procedures. 
Once approved by the Secretary, the State governing official of the SOP 
must administer the SOP in a manner that is consistent and equitable 
for the certified parties involved in compliance actions.
    (4) SOP's That Do not Certify and NOP Oversight. A few commenters 
requested that the NOP develop new provisions to include State programs 
that have organic regulations but do not conduct certification 
activities. These commenters argue that any SOP that has a regulatory 
impact on organic producers, regardless of whether or not the program 
includes certification, be approved by the Secretary.
    This regulation, in section 205.620(b), provides for NOP oversight 
of SOP's that do not conduct certification activities.
    (5) State's Use of Private Certifying Agents. Some commenters have 
requested that the NOP provide clarification of the proposed rule 
sections 205.620 through 205.622 on how these sections will affect 
States that delegate certification activities to private certifying 
agents. These commenters asked how the NOP intends to oversee this type 
of State activity.
    The NOP intends to give considerable latitude to States in choosing 
the most appropriate system or procedures to structure their programs. 
This may include a State establishing its own certifying agent or 
relying on private certifying agents. However, States will not be 
accrediting certifying agents operating in their State. Accreditation 
of all certifying agents operating in the United States is the 
responsibility of USDA. Establishment of a single national 
accreditation program is an essential part of the NOP. As stated 
elsewhere in this final rule, any accreditation responsibilities of a 
State's current organic program will cease with implementation of this 
program. Pursuant to the Compliance provisions of this subpart, the 
governing State official charged with compliance oversight under the 
SOP may investigate and notify the NOP of possible compliance 
violations on the part of certifying agents operating in the State. 
However, the State may not pursue compliance actions or remove 
accreditation of any certifying agent accredited by the Secretary. That 
authority is the sole responsibility of the Secretary. If more 
restrictive State requirements are approved by the Secretary, we will 
review certifying agent qualifications in the State, as provided by 
section 205.501(a)(20), and determine whether they are able to certify 
to the approved, more restrictive requirements. Our accreditation 
responsibilities include oversight of both State and private certifying 
agents, including any foreign certifying agents that may operate in a 
State.

Subpart G--Fees

    This portion of subpart G sets forth the regulations on fees and 
other charges to be assessed for accreditation and certification 
services under the National Organic Program (NOP). These regulations 
address the kinds of fees and charges to be assessed by the U.S. 
Department of Agriculture (USDA) for the accreditation of certifying 
agents, the level of such fees and charges, and the payment of such 
fees and charges. These regulations also address general requirements 
to be met by certifying agents in assessing fees and other charges for 
the certification of producers and handlers as certified organic 
operations. Finally, these regulations address the Secretary's 
oversight of a certifying agent's fees and charges for certification 
services.

Description of Regulation

Fees and Other Charges for Accreditation

    Fees and other charges will be assessed and collected from 
applicants for initial accreditation and accredited certifying agents 
submitting annual reports or seeking renewal of accreditation. Such 
fees will be equal as nearly as may be to the cost of the accreditation 
services rendered under these regulations. Fees-for-service will be 
based on the time required to render the service provided calculated to 
the nearest 15-minute period. Activities to be billed on the basis of 
time used include the review of applications and accompanying documents 
and information, evaluator travel, the conduct of on-site evaluations, 
review of annual reports and updated documents and information, and the 
preparation of reports and any other documents in connection with the 
performance of service. The hourly rate will be the same as that 
charged by the Agricultural Marketing Service (AMS), through its 
Quality System Certification Program, to certification bodies 
requesting conformity assessment to the International Organization for 
Standardization ``General Requirements for Bodies Operating Product 
Certification Systems'' (ISO Guide 65).
    Applicants for initial accreditation and accredited certifying 
agents submitting annual reports or seeking renewal of accreditation 
during the first 18 months following the effective date of subpart F 
will receive service without incurring an hourly charge for such 
service.
    Applicants for initial accreditation and renewal of accreditation 
must pay at the time of application, effective 18 months following the 
effective date of subpart F, a nonrefundable fee of $500.00. This fee 
will be applied to the applicant's fees-for-service account.
    When service is requested at a place so distant from the 
evaluator's headquarters that a total of one-half hour or more is 
required for the evaluator(s) to travel to such a place and back to the 
headquarters or from a place of prior assignment on circuitous routing 
requiring a total of one-half hour or more to travel to the next place 
of assignment on the circuitous routing, the charge for such service 
will include all applicable travel charges. Travel charges may include 
a mileage charge administratively determined by USDA, travel tolls, or, 
when the travel is made by public transportation (including hired 
vehicles), a fee equal to the actual cost thereof. If the service is 
provided on a circuitous routing, the travel charges will be prorated 
among all the applicants and certifying agents furnished the service 
involved. Travel charges will become effective for all applicants for 
initial accreditation and accredited certifying agents on the effective 
date of subpart F. The applicant or certifying agent will not be 
charged a new mileage rate without notification before the service is 
rendered.
    When service is requested at a place away from the evaluator's 
headquarters, the fee for such service shall include a per diem charge 
if the employee(s) performing the service is paid per diem in 
accordance with existing travel regulations. Per diem charges to 
applicants and certifying agents will cover the same period of time for 
which

[[Page 80620]]

the evaluator(s) receives per diem reimbursement. The per diem rate 
will be administratively determined by USDA. Per diem charges shall 
become effective for all applicants for initial accreditation and 
accredited certifying agents on the effective date of subpart F. The 
applicant or certifying agent will not be charged a new per diem rate 
without notification before the service is rendered.
    When costs, other than fees-for-service, travel charges, and per 
diem charges, are associated with providing the services, the applicant 
or certifying agent will be charged for these costs. Such costs include 
but are not limited to equipment rental, photocopying, delivery, 
facsimile, telephone, or translation charges incurred in association 
with accreditation services. The amount of the costs charged will be 
determined administratively by USDA. Such costs will become effective 
for all applicants for initial accreditation and accredited certifying 
agents on the effective date of subpart F.

Payment of Fees and Other Charges

    Applicants for initial accreditation and renewal of accreditation 
must remit the nonrefundable fee along with their application. 
Remittance must be made payable to the Agricultural Marketing Service, 
USDA, and mailed to: Program Manager, USDA-AMS-TMP-NOP, Room 2945-South 
Building, P.O. Box 96456, Washington, DC 20090-6456 or such other 
address as required by the Program Manager. All other payments for fees 
and other charges must be received by the due date shown on the bill 
for collection, made payable to the Agricultural Marketing Service, 
USDA, and mailed to the address provided on the bill for collection. 
The Administrator will assess interest, penalties, and administrative 
costs on debts not paid by the due date shown on a bill for collection 
and collect delinquent debts or refer such debts to the Department of 
Justice for litigation.

Fees and Other Charges for Certification

    Fees charged by a certifying agent must be reasonable, and a 
certifying agent may charge applicants for certification and certified 
production and handling operations only those fees and charges that it 
has filed with the Administrator. The certifying agent must provide 
each applicant with an estimate of the total cost of certification and 
an estimate of the annual cost of updating the certification. The 
certifying agent may require applicants for certification to pay at the 
time of application a nonrefundable fee that must be applied to the 
applicant's fees-for-service account. A certifying agent may set the 
nonrefundable portion of certification fees; however, the nonrefundable 
portion of certification fees must be explained in the fee schedule 
submitted to the Administrator. The fee schedule must explain what fee 
amounts are nonrefundable and at what stage during the certification 
process the respective fees become nonrefundable. The certifying agent 
must provide all persons inquiring about the application process with a 
copy of its fee schedule.

Fees--Changes Based on Comments

    This subpart differs from the proposal in the following respects:
    Nonrefundable Portion of Certification Fees. Commenters were not 
satisfied with the provision in section 205.642 that stated, ``The 
certifying agent may require applicants for certification to pay at the 
time of application a nonrefundable fee of no more than $250.00, which 
shall be applied to the applicant's fee for service account.'' Some 
commenters believed we were requiring the certifying agents to bill 
fees for inspection services separately. One State agency expressed a 
concern that we were placing a limit on the initial fee the certifying 
agent could collect. As a result, the State agency commented that by 
not being allowed to collect the full certification fee at the time of 
application, the certifying agent, in effect, would be extending credit 
to the applicant. Commenters reported that some State agencies are 
prevented by statute from extending credit and are required to collect 
all fees at the time of application. Several commenters stated that the 
amount of $250.00 was too low and would not cover the costs the 
certifying agents could incur during the certification process. One 
organization noted that we should consider prorating the amount of the 
fee to be refunded when an applicant for certification withdraws before 
the completion of the certification process. The organization 
recommended that the amount of the prorated fee should be based on how 
far along in the certification process the applicant had progressed 
before withdrawal. Another commenter believed it was inappropriate for 
USDA to set any fees for private certification programs and that the 
fees should be market driven.
    It was not our intent to limit the initial amount that certifying 
agents could collect from the applicant for certification. Our intent 
was to limit the portion of the fee that would be nonrefundable in 
order to reduce the potential liability for the small producer/handler 
who may need to withdraw prematurely from the certification process. 
However, we acknowledge that this provision could be misinterpreted. We 
also realize that certifying agents may incur initial costs during the 
preliminary stage of the certification process that may be more or less 
than the $250.00 application rate proposed. As a result, we have 
removed the provision that stated certifying agents could collect a 
nonrefundable fee of not more than $250.00 at the time of application 
from applicants for certification.
    Certifying agents may set the nonrefundable portion of their 
certification fees. However, the nonrefundable portion of their 
certification fees must be explained in the fee schedule submitted to 
the Administrator. The fee schedule must explain what fee amounts are 
nonrefundable and at what stage during the certification process the 
respective fees become nonrefundable. Certifying agents will also 
provide all persons inquiring about the application process with a copy 
of its fee schedule.

Fees--Changes Requested But Not Made

    This subpart retains from the proposed rule regulations on which we 
received comments as follows:
    (1) Farm Subsidy/Transition Program. Many commenters asked that 
USDA subsidize or develop a cost-share program for small farmers/
producers who are certified or who are in transition to organic 
farming. Some commenters wanted these costs to be fully subsidized; a 
few commenters suggested that USDA pay for any extra site visit costs; 
and many others wanted USDA to pay premium prices to farmers for their 
products during the period of transition to organic production. In 
addition, many commenters argued that USDA should fully fund 
certification costs. Finally, many commenters suggested that the USDA 
should provide additional financial support to the organic industry 
because the industry is relatively young and composed of a large number 
of small, low-resource businesses.
    We have considered the commenters requests but have not made the 
suggested changes. The NOP under AMS is primarily a user-fee-based 
Federal program. Section 2107(a)(10) of the Organic Food Production Act 
of 1990 (OFPA) requires that the NOP provide for the collection of 
reasonable fees from producers, certifying agents, and handlers who 
participate in activities to certify, produce, or handle agricultural 
products as organically produced. Therefore, under the

[[Page 80621]]

statutory authority of OFPA, it is outside of the scope of the NOP to 
provide for the subsidization of producers, handlers, and certifying 
agents as desired by some commenters. We have, however, established 
provisions in this part that we believe will minimize the economic 
impact of the NOP on producers, handlers, and certifying agents.
    (2) Small Farmer Exemption Versus Lower Certification Fees. Many 
commenters suggested that certification fees be lowered or based on a 
sliding scale rather than instituting an exemption from certification 
for small farmers and handlers.
    We have not accepted the commenters' suggestion. We cannot remove 
the small farmer exemption because section 2106(d) of the Act requires 
that small farmers be provided an exemption from organic certification 
if they sell no more than $5,000 annually in value of agricultural 
products. Also, certification fees cannot be lowered by USDA because 
NOP under AMS is primarily a user-fee-based Federal agency. It is not 
our goal or objective to make a profit on our accreditation activities. 
However, our fees associated with the accreditation process are 
targeted toward recovering costs incurred during the accreditation 
process. Commenters expressed a concern that the accreditation fees 
charged by USDA would have an impact on the certification fees 
prescribed by certifying agents to operations seeking organic 
certification. We understand the commenters' concern that accreditation 
fees charged to certifying agents will most likely be calculated into 
the fees that certifiers charge their clients. However, we believe that 
our provision to waive the hourly service charges for accreditation 
during the first 18 months of implementation of the NOP should help 
reduce accreditation costs of the certifying agent and should, 
therefore, result lower certification fee charged by certifying agents. 
As provided by the Act and the regulations in this part, fees charged 
by certifying agents must be reasonable. Also, certifying agents must 
submit their fee schedule to the Administrator and may only charge 
those fees and charges filed with the Administrator. In addition, 
certifiers are required to provide their approved fee schedules to 
applicants for certification. Therefore, applicants for certification 
will be able to base their selection of a certifying agent on price if 
they choose. Moreover, there are no provisions in the regulations that 
preclude certifying agents from pricing their services on a sliding 
scale, as long as their fees are consistent and nondiscriminatory and 
are approved during the accreditation process.
    (3) Accreditation Fees. Many industry commenters suggested that we 
reevaluate our accreditation fee structure. They believe the hourly 
accreditation rate proposed is unacceptable. Commenters were concerned 
that high accreditation costs would lead to high certification costs, 
which would have a greater impact on small operations. Some industry 
commenters also noted that we should be required to provide a fee 
schedule such as the certifiers are required to do. They stated that 
unless USDA provided a fee schedule that included travel costs, they 
would not be able to accurately budget for these costs. A few 
commenters wanted USDA to forgo charging travel costs or not charge 
travel time at the full rate. Several commenters also stated that the 
hourly rate stated in the proposal is much higher than what the people 
who actually perform the accreditations will earn. However, a large 
majority of the commenters favored the 18-month period in which AMS 
will not charge the hourly accreditation rate to applicants.
    As stated in the proposal, the hourly rate will be the same as that 
of AMS' Quality Systems Certification Program. Due to the fact that 
AMS' Quality Systems Certification Program publishes one rate that is 
readily available to the public, it is our belief that it is 
unnecessary for the NOP to set up a separate fee schedule. The NOP will 
notify accredited certifying agents and applicants for accreditation of 
any proposed rate changes and final actions on such rates by AMS. We 
will also periodically report the status of fees to the National 
Organic Standards Board.
    Those applicants and certifying agents who need accreditation cost 
estimates, including travel, for budgetary or other reasons may notify 
the NOP. The NOP staff will provide the applicant with a cost estimate, 
based on information provided by the applicant. As stated in an earlier 
response ((2)--Changes Requested But Not Made), the objective of the 
fee that is charged to accredit certifying agents is not to gain a 
profit for accreditation activities but to recover costs incurred 
during the accreditation process. As such, these costs include but are 
not limited to salaries, benefits, clerical help, equipment, supplies, 
etc.

Compliance

    This portion of subpart G sets forth the enforcement procedures for 
the National Organic Program (NOP). These procedures describe the 
compliance responsibilities of the NOP Program Manager, State organic 
programs' (SOP) governing State officials, and State and private 
certifying agents. These provisions also address the rights of 
certified production and handling operations and accredited certifying 
agents operating under the NOP. The granting and denial of 
certification and accreditation are addressed under subparts E and F.

Description of Regulations

    The Secretary is required under the Act to review the operations of 
SOP's, accredited certifying agents, and certified production or 
handling operations for compliance with the Act and these regulations. 
The Program Manager of the NOP may carry out compliance proceedings and 
provide oversight of compliance proceedings on behalf of the Secretary 
and the Administrator. The Program Manager will initiate proceedings to 
suspend or revoke a certified operation's certification if a certifying 
agent or SOP's governing State official fails to take appropriate 
enforcement action. The Program Manager may also initiate proceedings 
to suspend or revoke a certified operation's certification if the 
operation is found to have been erroneously certified by a certifying 
agent whose accreditation has been suspended or revoked. We anticipate, 
however, that most investigations, reviews, and analyses of 
certification noncompliance and initiation of suspension or revocation 
will be conducted by the certified operation's certifying agent. With 
regard to certifying agents, the Program Manager will, when 
appropriate, initiate proceedings to suspend or revoke the 
accreditation of a certifying agent for noncompliance with the Act and 
these regulations.
    In States with an approved SOP, the SOP's governing State official 
is responsible for administering a compliance program for enforcement 
of the NOP/SOP. SOP's governing State officials may review and 
investigate complaints of noncompliance involving organic production or 
handling operations operating within their State and, when appropriate, 
initiate suspension or revocation of certification. SOP's governing 
State officials may also review and investigate complaints of 
noncompliance involving accredited certifying agents operating within 
their State. They must report the findings of any review and 
investigation of a certifying agent to the Program Manager along with 
any recommendations for appropriate action.
    The compliance provisions of the NOP are consistent with the

[[Page 80622]]

requirements of the Administrative Procedure Act (APA) (5 U.S.C. 553-
559) in that this program provides for due process including an 
opportunity for hearing, appeal procedures, written notifications of 
noncompliance, and opportunities to demonstrate or achieve compliance 
before any suspension or revocation of organic certification or 
accreditation is invoked. A compliance action regarding certification 
carried out under an approved SOP's compliance procedures will have the 
same force and effect as a certification compliance action carried out 
under these NOP compliance procedures. The notification process for 
denying certification and accreditation is laid out in subparts E and 
F, respectively.
    Each notification of noncompliance, rejection of mediation, 
noncompliance resolution, proposed suspension or revocation, and 
suspension or revocation issued under these regulations must be sent to 
the recipient's place of business via a delivery service which provides 
return receipts. Certified operations and certifying agents must 
respond to all compliance notifications via a delivery service which 
provides return receipts.

Noncompliance Procedure for Certified Operations

    The Act provides for the enforcement of certification requirements. 
Statutory oversight of production and handling operations by certifying 
agents includes review of organic plans, on-site inspections, residue 
and tissue testing, authority to conduct investigations and initiate 
suspension or revocation actions, and responsibility to report 
violations.

Notification of Noncompliance

    A written notification of noncompliance will be sent to the 
certified operation when an inspection, review, or investigation 
reveals any noncompliance with the Act or these regulations. A 
noncompliance notification may encompass the entire operation or a 
portion of the operation. For instance, a violation at one farm may not 
warrant loss of certification at other farms of the certified operation 
not affected by the violation. The notification of noncompliance will 
provide: (1) A description of each condition, action, or item of 
noncompliance; (2) the facts upon which the notification is based; and 
(3) the date by which the certified operation must rebut the 
notification or correct the noncompliance and submit supporting 
documentation of the correction. A certified operation may continue to 
sell its product as organic upon receiving a notification of 
noncompliance and throughout the compliance proceeding and any appeal 
procedure which might follow the compliance proceeding unless otherwise 
notified by a State or Federal government agency.
    If a certified operation believes the notification of noncompliance 
is incorrect or not well-founded, the certified operation may submit a 
rebuttal to the certifying agent or SOP's governing State official, as 
applicable, providing supporting data to refute the facts stated in the 
notification. The opportunity for rebuttal is provided to allow 
certifying agents and certified operations to informally resolve 
noncompliance issues. The rebuttal process should be helpful in 
resolving differences which may be the result of misinterpretation of 
requirements, misunderstandings, or incomplete information. 
Alternatively, the certified operation may correct the identified 
noncompliances and submit proof of such corrections. When the certified 
operation demonstrates that each noncompliance has been corrected or 
otherwise resolved, the certifying agent or SOP's governing State 
official, as applicable, will send the certified operation a written 
notification of noncompliance resolution.

Proposed Suspension or Revocation of Certification

    If the noncompliance is not resolved or is not in the process of 
being resolved by the date specified in the notification of 
noncompliance, the certifying agent or SOP's governing State official 
will send the certified operation a written notification of proposed 
suspension or revocation of certification for the entire operation or a 
portion of the operation affected by the noncompliance. The 
notification will state: (1) The reasons for the proposed suspension or 
revocation; (2) the proposed effective date of the suspension or 
revocation; (3) the impact of the suspension or revocation on the 
certified operation's future eligibility for certification; and (4) 
that the certified operation has a right to request mediation or to 
file an appeal. The impact of a proposed suspension or revocation may 
include the suspension or revocation period or whether the suspension 
or revocation applies to the entire operation or to a portion or 
portions of the operation.
    If a certifying agent or SOP's governing State official determines 
that correction of a noncompliance is not possible, the notification of 
noncompliance and the proposed suspension or revocation of 
certification may be combined in one notification of proposed 
suspension or revocation. The certified operation will have an 
opportunity to appeal the proposed suspension or revocation.
    If a certifying agent or SOP's governing State official has reason 
to believe that a certified operation has willfully violated the Act or 
regulations, a notification of proposed suspension or revocation will 
be sent to the certified operation. The proposed suspension or 
revocation will be for the entire operation or a portion of the 
operation. This notification, because it involves a willful violation, 
will be sent without first issuing a notification of noncompliance.

Mediation

    A production or handling operation may request mediation of any 
dispute regarding denial of certification or proposed suspension or 
revocation of certification. Mediation is not required prior to filing 
an appeal but is offered as an option which may resolve the dispute 
more quickly than the next step, which is filing an appeal. When 
mediation is requested, it must be requested in writing to the 
applicable certifying agent. The certifying agent will have the option 
of accepting or rejecting the request for mediation. If the certifying 
agent rejects the request for mediation, the certifying agent must 
provide written notification to the applicant for certification or 
certified operation. The written notification must advise the applicant 
for certification or certified operation of the right to request an 
appeal in accordance with section 205.681. Any such appeal must be 
requested within 30 days of the date of the written notification of 
rejection of the request for mediation. If mediation is accepted by the 
certifying agent, such mediation must be conducted by a qualified 
mediator mutually agreed upon by the parties to the mediation. If an 
SOP is in effect, the mediation procedures established in the SOP, as 
approved by the Secretary, must be followed. The parties to the 
mediation will have no more than 30 days to reach an agreement 
following a mediation session. If mediation is unsuccessful, the 
production or handling operation will have 30 days from termination of 
mediation to appeal the denial of certification or proposed suspension 
or revocation in accordance with the appeal procedures in section 
205.681.
    Any agreement reached during or as a result of the mediation 
process must be in compliance with the Act and these regulations. The 
Secretary reserves the right to review any mediated agreement for 
conformity to the Act and these regulations and to reject any agreement

[[Page 80623]]

or provision not in conformance with the Act or these regulations

Suspension or Revocation

    The certifying agent or SOP's governing State official will suspend 
or revoke the certified operation's certification when the operation 
fails to resolve the issue through rebuttal or mediation, fails to 
complete needed corrections, or does not file an appeal. The operation 
will be notified of the suspension or revocation by written 
notification. The certifying agent or SOP's governing State official 
must not send a notification of suspension or revocation to a certified 
operation that has requested mediation or filed an appeal while final 
resolution of either is pending.
    The decision to suspend or revoke certification will be based on 
the seriousness of the noncompliance. Such decisions must be made on a 
case-by-case basis. Section 6519 of the Act establishes that willful 
violations include making a false statement, knowingly affixing a false 
label, or otherwise violating the purposes of the Act.
    In addition to suspension or revocation, a certified operation that 
knowingly sells or labels a product as organic, except in accordance 
with the Act, will be subject to a civil penalty of not more than 
$10,000 per violation. Further, a certified operation that makes a 
false statement under the Act to the Secretary, an SOP's governing 
State official, or a certifying agent will be subject to the provisions 
of section 1001 of title 18, United States Code.
    A certified operation whose certification has been suspended under 
this section may at any time, unless otherwise stated in the 
notification of suspension, submit a request to the Secretary for 
reinstatement of its certification. The request must be accompanied by 
evidence demonstrating correction of each noncompliance and corrective 
actions taken to comply with and remain in compliance with the Act and 
the NOP.
    A certified operation or a person responsibly connected with an 
operation that has had its certification revoked will be ineligible to 
receive certification for an operation in which such operation or 
person has an interest for 5 years following the date of revocation. 
Accordingly, an operation will be ineligible for organic certification 
if one of its responsibly connected parties, was a responsibly 
connected party of an operation that had its certification revoked. The 
Secretary may, when in the best interest of the certification program, 
reduce or eliminate the period of ineligibility.

Noncompliance Procedure for Certifying Agents

    The Program Manager, on behalf of the Secretary, may initiate a 
compliance action against an accredited certifying agent who violates 
the Act or these regulations. Compliance proceedings may be initiated 
as a result of annual reviews for continuation of accreditation, site 
evaluations, or investigations initiated in response to complaints of 
noncompliant activities. Compliance proceedings also may be initiated 
on recommendation of an SOP's governing State official.
    A written notification of noncompliance will be sent by the Program 
Manager to an accredited certifying agent when an inspection, review, 
or investigation of such person reveals any noncompliance with the Act 
or these regulations. A notification of noncompliance will provide a 
description of each noncompliance found and the facts upon which the 
notification is based. Additionally, the notification will provide the 
date by which the certifying agent must rebut or correct each 
noncompliance described and submit supporting documentation of each 
correction.
    When documentation received by the Program Manager demonstrates 
that each noncompliance has been resolved, the Program Manager will 
send the certifying agent a written notification of noncompliance 
resolution.
    If a noncompliance is not resolved by rebuttal or correction, the 
Program Manager will issue a notification of proposed suspension or 
revocation of accreditation. The notification will state whether the 
suspension or revocation will be for the certifying agent's entire 
accreditation, that portion of the accreditation applicable to a 
particular field office, or a specific area of accreditation. For 
instance, if a certifying agent with field offices in different 
geographic areas is cited for a compliance violation at one field 
office, the Program Manager could determine that only that portion of 
the accreditation applicable to the noncompliant field office should be 
suspended or revoked.
    If the Program Manager determines that the noncompliance cannot be 
immediately or easily corrected, the Program Manager may combine the 
notification of noncompliance and the proposed suspension or revocation 
in one notification.
    The notification of proposed suspension or revocation of 
accreditation will state the reasons and effective date for the 
proposed suspension or revocation. Such notification will also state 
the impact of a suspension or revocation on future eligibility for 
accreditation and the certifying agent's right to file an appeal.
    If the Program Manager has reason to believe that a certifying 
agent has willfully violated the Act or regulations, the Program 
Manager will issue a notification of proposed suspension or revocation 
of accreditation. The proposed suspension or revocation may be for the 
certifying agent's entire accreditation, that portion of the 
accreditation applicable to a particular field office, or a specified 
area of accreditation. This notification, because it involves a willful 
violation, will be sent without first issuing a notification of 
noncompliance.
    The certifying agent may file an appeal of the Program Manager's 
determination pursuant to section 205.681. If the certifying agent 
fails to file an appeal of the proposed suspension or revocation, the 
Program Manager will suspend or revoke the certifying agent's 
accreditation. The certifying agent will be notified of the suspension 
or revocation by written notification.
    A certifying agent whose accreditation is suspended or revoked must 
cease all certification activities in each area of accreditation and in 
each State for which its accreditation is suspended or revoked. Any 
certifying agent whose accreditation has been suspended or revoked must 
transfer to the Secretary all records concerning its certification 
activities that were suspended or revoked. The certifying agent must 
also make such records available to any applicable SOP's governing 
State official. The records will be used to determine whether 
operations certified by the certifying agent may retain their organic 
certification.
    A certifying agent whose accreditation is suspended by the 
Secretary may at any time, unless otherwise stated in the notification 
of suspension, submit a request to the Secretary for reinstatement of 
its accreditation. Such request must be accompanied by evidence 
demonstrating correction of each noncompliance and actions taken to 
comply with and remain in compliance with the Act and regulations. A 
certifying agent whose accreditation is revoked by the Secretary will 
be ineligible to be accredited as a certifying agent under the Act and 
regulations for a period of not less than 3 years following the date of 
revocation.

[[Page 80624]]

State Organic Programs' Compliance Procedures

    An SOP's governing State official may initiate noncompliance 
proceedings against certified organic operations operating in the 
State. Such proceedings may be initiated for failure of a certified 
operation to meet the production or handling requirements of this part 
or the State's more restrictive requirements, as approved by the 
Secretary.
    The SOP's governing State official must promptly notify the Program 
Manager of commencement of noncompliance proceedings initiated against 
certified operations and forward to the Program Manager a copy of each 
notice issued. A noncompliance proceeding, brought by an SOP's 
governing State official against a certified operation may be appealed 
in accordance with the appeal procedures of the SOP. There will be no 
subsequent rights of appeal to the Secretary. Final decisions of a 
State may be appealed to the United States District Court for the 
district in which such certified operation is located.
    An SOP's governing State official may review and investigate 
complaints of noncompliance with the Act or regulations concerning 
accreditation of certifying agents operating in the State. When such 
review or investigation reveals any noncompliance, the SOP's governing 
State official must send a written report of noncompliance to the 
Program Manager. The SOP's governing State official's report must 
provide a description of each noncompliance and the facts upon which 
the noncompliance is based.

Compliance--Changes Based On Comments

    This portion of subpart G differs from the proposal in several 
respects as follows:
    (1) Written Notifications. We have added a new paragraph (d) to 
section 205.660. The preamble to the proposed rule stated that all 
written notifications sent by certifying agents and SOP's governing 
State officials, as well as rebuttals, requests for mediation, and 
notices of correction of noncompliances sent by certified operations, 
will be sent to the addressee's place of business by a delivery service 
which provides dated return receipts. The assurance of completed 
communications and timely compliance procedures was given as the reason 
for delivery by a service which provides dated return receipts. The 
addition of paragraph (d) at section 205.660 is one of the actions that 
we have taken in response to requests from commenters that we further 
clarify the compliance process. Paragraph (d) requires that each 
notification of noncompliance, rejection of mediation, noncompliance 
resolution, proposed suspension or revocation, and suspension or 
revocation issued in accordance with sections 205.662, 205.663, and 
205.665 and each response to such notification must be sent to the 
recipient's place of business via a delivery service which provides 
return receipts. This action will facilitate the effective 
administration of the compliance process by assuring a verifiable time 
line on the issuance and receipt of compliance documents and the 
response given to each such document.
    (2) Determination of Willful. The preamble statement that ``only 
the Program Manager or governing State official may make the final 
determination that a violation is willful'' was incorrect and 
inconsistent with the regulatory language in section 205.662(d). 
Section 205.662(d) provides that, ``if a certifying agent or State 
organic program's governing State official has reason to believe that a 
certified operation has willfully violated the Act or regulations in 
this part, the certifying agent or State organic program's governing 
State official shall send the certified operation a notification of 
proposed suspension or revocation of certification of the entire 
operation or a portion of the operation, as applicable to the 
noncompliance.'' Accordingly, as recommended by a commenter, the 
incorrect statement has been deleted from the preamble to this final 
rule.
    (3) Proposed Suspension or Revocation. We have amended sections 
205.662(c) and 205.665(c) by removing the redundant phrase ``or is not 
adequate to demonstrate that each noncompliance has been corrected'' 
from the first sentence of each section.
    (4) Suspension or Revocation. We have amended section 205.662(e)(2) 
by adding ``while final resolution of either is pending'' to the end 
thereof. The language of section 205.662(e)(2) now reads: ``A 
certifying agent or State organic program's governing State official 
must not send a notification of suspension or revocation to a certified 
operation that has requested mediation pursuant to section 205.663 or 
filed an appeal pursuant to section 205.681 while final resolution of 
either is pending.'' We have made this change because we agree with 
those commenters who expressed the belief that section 205.662(e)(2) 
needed to be amended to clarify the duration of the stay on the 
issuance of a notification of suspension or revocation when mediation 
is requested or an appeal is filed. Several commenters stated that 
section 205.662(e)(2) needed to be amended to clarify that requesting 
mediation or filing an appeal does not indefinitely stop the suspension 
or revocation process.
    (5) Eligibility After Suspension or Revocation of Certification. We 
have amended section 205.662(f) such that it now parallels section 
205.665(g) which addresses suspension and revocation of certifying 
agents. We have also changed the title of section 205.662(f) from 
``Ineligibility'' to ``Eligibility'' to parallel section 205.665(g). A 
few commenters referred to the provisions in section 205.665(g), which 
addresses eligibility after suspension or revocation of accreditation, 
and requested clarification of the difference between suspension and 
revocation of certification. Upon reviewing section 205.662(f), we 
decided that amendment was needed to clarify the difference between 
suspension and revocation of certification relative to eligibility for 
certification. Accordingly, we added a new paragraph (1) which provides 
that a certified operation whose certification has been suspended under 
this section may at any time, unless otherwise stated in the 
notification of suspension, submit a request to the Secretary for 
reinstatement of its certification. The paragraph also provides that 
the request must be accompanied by evidence demonstrating correction of 
each noncompliance and corrective actions taken to comply with and 
remain in compliance with the Act and the regulations in this part. We 
also amended what is now paragraph (2) of section 205.662(f) to clarify 
that the period of ineligibility following revocation of certification 
is 5 years unless reduced or eliminated by the Secretary.
    Further, we have amended section 205.665(g)(1) to clarify that a 
certifying agent that has had its accreditation suspended may request 
reinstatement of its accreditation rather than submit a new request for 
accreditation. The amendment also clarifies that the reinstatement may 
be requested at any time unless otherwise stated in the notification of 
suspension. This amendment makes section 205.665(g)(1) similar to new 
paragraph (1) of section 205.662(f). This amendment is also consistent 
with commenter desires that the noncompliance procedures for certified 
operations and accredited certifying agents be similar.
    (6) Penalties for Violations of the Act. We have amended section 
205.662 by adding a new paragraph (g) which incorporates therein the 
provisions of

[[Page 80625]]

paragraphs (a) and (b) of section 2120, 7 U.S.C. 6519, Violations of 
Title, of the Act. Specifically, paragraph (g) provides that, in 
addition to suspension or revocation, any certified operation that 
knowingly sells or labels a product as organic, except in accordance 
with the Act, shall be subject to a civil penalty of not more than 
$10,000 per violation. This paragraph also provides that any certified 
operation that makes a false statement under the Act to the Secretary, 
an SOP's governing State official, or a certifying agent shall be 
subject to the provisions of section 1001 of title 18, United States 
Code. Commenters requested regulatory language citing section 2120, 7 
USC 6519, Violations of Title, of the Act. Commenters also requested a 
clearer description of enforcement. Specifically, they want provisions 
describing how USDA will deal with operations that make false claims or 
do not meet the NOP requirements. Further, numerous commenters 
expressed concern that there are no penalties in the regulations other 
than suspension and revocation. The European Community stated that it 
did not find, in the proposal, requirements for penalties to be applied 
by certifying agents when irregularities or infringements are found. 
The European Community went on to say that the European Union requires 
such penalties.
    The Act provides for suspension and revocation of certification and 
the civil and criminal penalties addressed in 7 U.S.C. 6519. Certified 
operations are also required through the compliance program set forth 
in these regulations, to correct all noncompliances with the Act or 
regulations as a condition of retaining their certification. 
Furthermore, to get a suspended certification reinstated, an operation 
must submit a request to the Secretary. The request must be accompanied 
by evidence demonstrating correction of each noncompliance and 
corrective actions taken to comply with and remain in compliance with 
the Act and the regulations in this part. An operation or a person 
responsibly connected with an operation whose certification has been 
revoked will be ineligible to receive certification for a period of not 
more than 5 years.
    We believe adding paragraph (g) will help clarify that there are 
penalties which may be imposed on certified operations that violate the 
Act and these regulations in addition to suspension or revocation.
    The provisions of the Act and these regulations apply to all 
persons who sell, label, or represent their agricultural product as 
organic. Accordingly, persons who falsely sell, label, or represent 
their product as organic, are subject to the provisions of paragraphs 
(a) and (b) of section 2120, 7 USC 6519, of the Act. To clarify this, 
we have added a new paragraph (c) to section 205.100 of the 
Applicability subpart.
    Certifying agents, SOP's governing State officials, and USDA will 
receive complaints alleging violations of the Act or these regulations. 
Certifying agents will review all complaints that they receive to 
determine if the complaint involves one of their clients. If the 
complaint involves a client of the certifying agent, the agent will 
handle the complaint in accordance with its procedures for reviewing 
and investigating certified operation compliance. If the complaint 
involves a person who is not a client of the certifying agent, the 
certifying agent will refer the complaint to the SOP's governing State 
official, when applicable, or, in the absence of an applicable SOP's 
governing State official, the Administrator. SOP's governing State 
officials will review all complaints that they receive in accordance 
with their procedures for reviewing and investigating alleged 
violations of the NOP and SOP. The SOP's governing State official's 
review of the complaint could result in referral of the complaint to a 
certifying agent when the complaint involves a client of the certifying 
agent, dismissal, or investigation by the SOP's governing State 
official. SOP's governing State officials will, as appropriate, 
investigate allegations of violations of the Act by noncertified 
operations operating within their State. USDA will review all 
complaints that it receives in accordance with its procedures for 
reviewing and investigating alleged violations of the NOP. USDA will 
refer complaints alleging violations of the NOP/SOP to the applicable 
SOP's governing State official, who may, in turn, refer the complaint 
to the applicable certifying agent. In States without an approved SOP, 
USDA will refer complaints to the applicable certifying agent. USDA 
will, as appropriate, investigate allegations of violations of the Act 
by noncertified operations operating in States where there is no 
approved SOP.
    (7) Mediation. We have amended section 205.663 by providing that a 
dispute with respect to proposed suspension or revocation of 
certification may, rather than shall, be mediated. We have also 
provided that mediation must be requested in writing to the applicable 
certifying agent. The certifying agent will have the option of 
accepting or rejecting the request for mediation. If the certifying 
agent rejects the request for mediation, the certifying agent must 
provide written notification to the applicant for certification or 
certified operation. The written notification must advise the applicant 
for certification or certified operation of the right to request an 
appeal within 30 days of the date of the written notification of 
rejection of the request for mediation. If mediation is accepted by the 
certifying agent, such mediation must be conducted by a qualified 
mediator mutually agreed upon by the parties to the mediation.
    Several commenters wanted section 205.663 amended to provide that 
disputes ``may,'' rather than ``shall,'' be mediated. The commenters 
advocated allowing the certifying agent to determine when mediation is 
a productive option. Several State commenters wanted to amend the 
second sentence to read as follows: ``If a State organic program is in 
effect, the mediation procedures established in the State organic 
program, as approved by the Secretary, will be followed for cases 
involving the State organic program and its applicants or certified 
parties.'' Another commenter wanted to retain the requirement that 
disputes ``shall'' be mediated but wanted disputes mediated in 
accordance with 7 CFR part 11 and section 205.681 of these regulations.
    We concur that certifying agents should be authorized to reject a 
request for mediation, especially when they believe that the 
noncompliance issue is not conducive to mediation. Accordingly, we 
amended section 205.663 as noted above. We disagree, however, with the 
State commenters who want to amend the second sentence. We believe that 
the recommended change would exclude the clients of private-sector 
certifying agents operating within the State. USDA approval of an SOP 
will require that all certified operations operating within the State 
have the same opportunities for mediation, regardless of whether they 
are certified by a private or State certifying agent. If an approved 
SOP provides for mediation, such mediation must be available to all 
certified operations operating within the State. We also disagree with 
the commenter who requested that disputes be mediated in accordance 
with 7 CFR part 11 and section 205.681 of these regulations. First, we 
believe that States with an approved SOP must be allowed to establish 
their own mediation program and procedures. Second, the Act and its 
implementing regulations are subject to the APA for adjudication. The 
provisions of the APA generally applicable to agency adjudication are 
not applicable to proceedings under 7

[[Page 80626]]

CFR part 11, National Appeals Division Rules of Procedure. Even if 7 
CFR part 11 were applicable, it does not address mediation procedures. 
Mediation is merely addressed in 7 CFR Part 11 as an available dispute 
resolution method along with its impact on the filing of an appeal.
    (8) Noncompliance Procedure for Certifying Agents. We have amended 
section 205.665(a)(3) to clarify that, like certified operations, 
certifying agents must submit supporting documentation of each 
correction of a noncompliance identified in a notification of 
noncompliance. This amendment to section 205.665(a)(3) was made in 
response to commenter concerns that the noncompliance procedures for 
certified operations and certifying agents be similar. It had been our 
intent that certifying agents would have to document their correction 
of noncompliances and that the noncompliance procedures for certified 
operations and certifying agents would be similar.

Compliance--Changes Requested But Not Made

    This subpart retains from the proposed rule, regulations on which 
we received comments as follows:
    (1) Funding for Enforcement. Several commenters stated that USDA 
should provide funding to the States for the cost of performing 
enforcement activities. Others asked who should fund investigations and 
enforcement actions if certifying agents (State and private) are 
enforcing compliance with a Federal law. Numerous commenters requested 
information on how enforcement will be funded. The National Organic 
Standards Board (NOSB) recommended that the NOP examine existing models 
for capturing enforcement fees such as the State of California's 
registration program for all growers, handlers, and processors who use 
the word, ``organic,'' in marketing their products.
    We disagree with the commenters who stated that USDA should fund 
enforcement activities (State and private). Costs for compliance under 
the NOP will be borne by USDA, States with approved SOP's, and 
accredited certifying agents. Each of the entities will bear the cost 
of their own enforcement activities under the NOP. AMS anticipates that 
States will consider the cost of enforcing their SOP's prior to seeking 
USDA approval of such programs. We also anticipate that certifying 
agents will factor the cost of compliance into their certification fee 
schedules.
    We agree that there may be alternatives, such as the State of 
California's registration program, available to raise funds for 
enforcing the NOP. We will help identify existing models and potential 
options that may be available in the future at the Federal, State, or 
certifying agent level. In the interim, we believe that SOP's should 
explore funding options at their level and that certifying agents 
should factor the cost of enforcement into their certification fees 
structure.
    (2) Stop Sale. A number of commenters requested that the 
regulations include the ability to stop sales or recall misbranded or 
fraudulently produced products. The Act does not authorize the NOP to 
stop sales or recall misbranded or fraudulently produced product. 
Accordingly, USDA cannot authorize stop sales or the recall of product. 
We also believe that the certified operation's right to due process 
precludes a stop sale or recall prior to full adjudication of the 
alleged noncompliance. However, the Food and Drug Administration (FDA) 
and the USDA's Food Safety Inspection Service (FSIS) have stop sale 
authority that may be used in certain organic noncompliance cases. 
Further, States may, at their discretion, be able to provide for stop 
sale or recall of misbranded or fraudulently produced products produced 
within their State. While the Act does not provide for stop sale or 
recall, it does provide at 7 U.S.C. 6519 that any person who: (1) 
knowingly sells or labels a product as organic, except in accordance 
with the Act, shall be subject to a civil penalty of not more than 
$10,000 and (2) makes a false statement under the Act to the Secretary, 
an SOP's governing State official, or a certifying agent shall be 
subject to the provisions of section 1001 of title 18, United States 
Code.
    (3) Notification of Proposed Suspension or Revocation. A commenter 
recommended replacing ``notification of proposed suspension or 
revocation'' in section 205.662(d) with ``notification of suspension or 
revocation.'' Certification cannot be suspended or revoked without due 
process. Accordingly, the issuance of a written notification of 
proposed suspension or revocation is necessary to provide the certified 
operation with information regarding the alleged noncompliance(s) and 
its right to answer the allegations. For this reason we have not 
accepted the commenter's recommendation.
    (4) Mediation for Certifying Agents. Several commenters recommended 
amending section 205.665(c)(4) to provide for mediation between a 
certifying agent and the Program Manager when a proposed suspension or 
revocation is disputed by the certifying agent. We have not accepted 
the recommendation. USDA uses 7 CFR part 1, Rules of Practice Governing 
Formal Adjudicatory Proceedings Instituted by the Secretary Under 
Various Statutes, for adjudicatory proceedings involving the denial, 
suspension, and revocation of accreditation.
    (5) Revocation of Accreditation. A commenter stated that revocation 
of accreditation for 3 years is excessive. The commenter stated that a 
period of 6 to 12 months might be reasonable. We have not amended 
section 205.665(g)(2) because the Act requires that the period of 
revocation for certifying agents, who violate the Act and these 
regulations, be for not less than 3 years. Suspension is available to 
the Secretary to address less egregious noncompliances. A certifying 
agent whose accreditation is suspended may at any time, unless 
otherwise stated in the notification of suspension, submit a request to 
the Secretary for reinstatement of its accreditation. The request must 
be accompanied by evidence demonstrating correction of each 
noncompliance and corrective actions taken to comply with and remain in 
compliance with the Act and these regulations.
    (6) Appeals Under SOP's. Several commenters recommended amending 
205.668(b) by adding at the end thereof: ``unless the State program's 
appeals procedures include judicial review through the State District 
Court.'' Another commenter wanted 205.668(b) amended by removing ``of 
the State organic certification program. There shall be no subsequent 
rights of appeal to the Secretary. Final decisions of a State may be 
appealed to the United States District Court for the district in which 
such certified operation is located,'' and inserting in its place ``at 
7 CFR part 11 and 205.681 of this chapter.'' We have not accepted the 
recommendations because the Act at 7 U.S.C. 6520 provides that a final 
decision of the Secretary may be appealed to the United States District 
Court for the district in which the person is located. We consider an 
approved SOP to be the NOP for that State. As such, we consider the 
SOP's governing State official of such approved SOP to be the 
equivalent of a representative of the Secretary for the purposes of the 
appeals procedures under the NOP. Accordingly, the final decision of 
the SOP's governing State official of an approved SOP is considered the 
final decision of the Secretary and, as such, is appealable to

[[Page 80627]]

the United States District Court for the district in which the person 
is located, not a State's District Court.
    We also disagree with the commenter who wanted all appeals to be 
made to the National Appeals Division under the provisions at 7 CFR 
part 11 and section 205.681 of these regulations. First, we believe 
that States with an approved SOP must be allowed to establish their own 
appeal procedures. Such procedures would have to comply with the Act, 
be equivalent to the procedures of USDA, and be approved by the 
Secretary. Second, as noted elsewhere in this preamble, the Act and its 
implementing regulations are subject to the APA for adjudication. The 
provisions of the APA generally applicable to agency adjudication are 
not applicable to proceedings under 7 CFR part 11.

Compliance--Clarifications

    Clarification is given on the following issues raised by 
commenters:
    (1) Complaints, Investigations, Stop Sales, and Penalties. Many 
commenters wanted USDA to spell out the responsibilities and 
authorities of States, State and private certifying agents, Federal 
agencies, and citizens to make complaints, investigate violations, halt 
the sale of products, and impose penalties. Anyone may file a 
complaint, with USDA, an SOP's governing State official, or certifying 
agent, alleging violation of the Act or these regulations. Certifying 
agents, SOP's governing State officials, and USDA will receive, review, 
and investigate complaints alleging violations of the Act or these 
regulations as described in item 6 above under Changes Based on 
Comments. Citizens have no authority under the NOP to investigate 
complaints alleging violation of the Act or these regulations.
    As noted elsewhere in this preamble, the Act does not authorize 
USDA to stop the sale of product. Accordingly, USDA cannot authorize 
stop sales by accredited certifying agents. We also believe that the 
certified operation's right to due process precludes a stop sale prior 
to full adjudication of the alleged noncompliance. However, FDA and 
FSIS have stop sale authority that may be used in the event of food 
safety concerns. Further, States may, at their discretion, be able to 
provide for stop sale of product produced within their State. Citizens 
have no authority under the NOP to stop the sale of a product.
    The Act and these regulations provide for suspension or revocation 
of certification by certifying agents, SOP's governing State officials, 
and the Secretary. Only USDA may suspend or revoke a certifying agent's 
accreditation. All proposals to suspend or revoke a certification or 
accreditation are subject to appeal as provided in section 205.681. The 
Act provides at 7 U.S.C. 6519 that any person who: (1) knowingly sells 
or labels a product as organic, except in accordance with the Act, 
shall be subject to a civil penalty of not more than $10,000; and (2) 
makes a false statement under the Act to the Secretary, an SOP's 
governing State official, or a certifying agent shall be subject to the 
provisions of section 1001 of title 18, United States Code. Only USDA 
may bring an action under 7 U.S.C. 6519.
    (2) Certifying Agent's Identifying Mark. The NOSB reaffirmed its 
recommendation which would allow private certifying agents to prevent 
the use of their service mark (seal) upon written notification that: 
(1) certification by the private certifying agent has been terminated, 
and (2) the certifying agent has 30 days to appeal the certifying 
agent's decision to the Secretary of Agriculture. We will neither 
prohibit nor approve a certifying agent's actions to withdraw a 
certified operation's authority to use the certifying agent's 
identifying mark for alleged violations of the Act or regulations. We 
stand fast in our position that all certified operations are to be 
given due process prior to the suspension or revocation of their 
certification. The reader is also reminded that the certifying agent 
cannot terminate, suspend, or revoke a certification if the certified 
operation files an appeal with an SOP's governing State official, when 
applicable, or the Administrator as provided for in the notification of 
proposed suspension or revocation. The certifying agent accepts full 
liability for any action brought as a result of the withdrawal of a 
certified operation's authority to use the certifying agent's 
identifying mark.
    (3) Loss of Certification. A commenter posed several questions 
regarding the loss of certification. The commenter's questions and our 
responses are as follows.
    How will consumers and affected regulatory agencies know if a 
grower or handler loses its certification? We will provide public 
notification of suspensions and revocations of certified operations 
through means such as the NOP website.
    What will the effect of a lost certification be? Suspension or 
revocation of a producer's or handler's certification will require that 
the producer or handler immediately cease its sale, labeling, and 
representation of agricultural products as organically produced or 
handled as provided in the suspension or revocation order. A production 
or handling operation or a person responsibly connected with an 
operation whose certification has been suspended may at any time, 
unless otherwise stated in the notification of suspension, submit a new 
request for certification in accordance with section 205.401. The 
request must be accompanied by evidence demonstrating correction of 
each noncompliance and corrective actions taken to comply with and 
remain in compliance with the Act and the regulations in this part. An 
operation or a person responsibly connected with an operation whose 
certification has been revoked will be ineligible to receive 
certification for a period of not more than 5 years following the date 
of such revocation, as determined by the Secretary. Any producer or 
handler who sells, labels, or represents its product as organic 
contrary to the provisions of the suspension or revocation order would 
be subject to prosecution under 7 U.S.C. 6519 of the Act.
    Will the certifying agent give a future effective date for loss of 
certification, or could the loss of certification be immediate or even 
retroactive? Suspension or revocation will become effective as 
specified in the suspension or revocation order once it becomes final 
and effective. The operation, upon suspension or revocation, will be 
prohibited from selling, labeling, and representing its product as 
organic per the provisions of the suspension or revocation order.
    If organic products already on the market were grown or handled by 
someone whose certification is revoked or suspended, would USDA require 
that the products be recalled and relabeled? USDA will not, unless the 
noncompliance involves a food safety issue under FSIS, require the 
recall or relabeling of product in the channels of commerce prior to 
the issuance of a suspension or revocation order. First, at the time 
the product was produced, it may have been produced in compliance with 
the Act and these regulations. Second, USDA does not have the 
authority, under the Act, to issue a stop sale order for product sold, 
labeled, or represented as organic and placed in the channels of 
commerce prior to suspension or revocation of a certified operation's 
certification. The Act, however, provides at 7 U.S.C. 6519(a) for the 
prosecution of any person who knowingly sells or labels a product as 
organic, except in accordance with the Act. Such persons shall be 
subject to a civil penalty of not more than $10,000 per violation.
    (4) Investigations. A commenter suggested that we amend section

[[Page 80628]]

205.661(a) to require that all complaints must be investigated in 
accordance with the certifying agent's complaints policy. The commenter 
also stated that the Administrator should know which complaints were 
not investigated. We disagree that all complaints must be investigated 
since, upon review of the alleged noncompliance, some complaints may 
lack grounds for investigation. For example, a concerned citizen could 
allege that an organic producer was seen applying a pesticide to a 
specific field. Upon review of the allegation, the certifying agent 
could determine that the producer in question was a split operation and 
that the field in question was part of the conventional side of the 
production operation. Accordingly, there would be no need for an 
investigation. However, the certifying agent will be expected to: (1) 
take each allegation seriously, (2) review each complaint received, (3) 
make a determination as to whether there may be a basis for conducting 
an investigation, (4) investigate all allegations when it is believed 
that there may be a basis for conducting the investigation, and (5) 
maintain a detailed log of all complaints received and their 
disposition. The actions taken by the certifying agent must be in 
conformance with the certifying agent's procedures for reviewing and 
investigating certified operation compliance.
    (5) Deadline for the Correction of a Noncompliance. Several 
commenters requested that 205.662(a)(3) be amended by adding: ``The 
deadline for correction of the noncompliance may be extended at the 
discretion of the certifier if substantial progress has been made to 
correct the noncompliance.'' We believe that the requested amendment is 
unnecessary. Section 205.662(a)(3) requires that the notification of 
noncompliance include a date by which the certified operation must 
rebut or correct each noncompliance and submit supporting documentation 
of each correction when correction is possible. There is no prohibition 
preventing the certifying agent from extending the deadline specified 
when the certifying agent believes that the certified operation has 
made a good faith effort at correcting each noncompliance.
    (6) Compliance with SOP. Several States requested that section 
205.665 be amended to clarify how States may handle a private 
certifying agent found to be in noncompliance with SOP's approved by 
the Secretary. A majority of these commenters also asked if NOP intends 
to suspend or revoke the accreditation of certifying agents on a State-
by-State basis. Section 205.668(c) authorizes an SOP's governing State 
official to review and investigate complaints of noncompliance with the 
Act or regulations concerning accreditation of certifying agents 
operating in the State. When such review or investigation reveals any 
noncompliance, the SOP's governing State official shall send a written 
report of noncompliance to the NOP Program Manager. The report shall 
provide a description of each noncompliance and the facts upon which 
the noncompliance is based. The NOP Program Manager will then employ 
the noncompliance procedures for certifying agents as found in section 
205.665. This may include additional investigative work by AMS. Only 
USDA may suspend or revoke a certifying agent's accreditation.
    SOP's must meet the general requirements for organic programs 
specified in the Act and be at least equivalent to these regulations. 
Accordingly, noncompliances worthy of suspension or revocation would in 
all probability be worthy of national suspension or revocation of 
accreditation for one or more areas of accreditation. Therefore, USDA 
does not anticipate suspending or revoking accreditations, or areas of 
accreditation, on a State-by-State basis. It is possible, however, that 
the Secretary may decide to only suspend or revoke a certifying agent's 
accreditation or an area of accreditation to certify producers or 
handlers within a given State. Such a decision would in all probability 
be tied to a State's more restrictive requirements.

Inspection and Testing, Reporting, and Exclusion from Sale

    This portion of subpart G sets forth the inspection and testing 
requirements for agricultural products that have been produced on 
organic production operations or handled through organic handling 
operations.
    Residue testing plays an important role in organic certification by 
providing a means for monitoring compliance with the National Organic 
Program (NOP) and by discouraging the mislabeling of agricultural 
products. This testing program provides State organic programs' (SOP) 
governing State officials and certifying agents with a tool for 
ensuring compliance with three areas for testing: (1) preharvest 
residue testing, (2) postharvest residue testing, and (3) testing for 
unavoidable residual environmental contamination levels.

Description of Regulations

General Requirements

    Under the residue testing requirements of the NOP, all agricultural 
products sold, labeled, or represented as organically produced must be 
available for inspection by the Administrator, SOP's governing State 
official, or certifying agent. Organic farms and handling operations 
must be made available for inspection under subpart E, Certification. 
In addition, products from the aforementioned organic operations may be 
required by the SOP's governing State official or certifying agent to 
undergo preharvest or postharvest testing when there is reason to 
believe that agricultural inputs used in organic agriculture production 
or agricultural products to be sold or labeled as organically produced 
have come into contact with prohibited substances or have been produced 
using excluded methods. The cost of such testing will be borne by the 
applicable certifying agent and is considered a cost of doing business. 
Accordingly, certifying agents should make provisions for the cost of 
preharvest or postharvest residue testing when structuring 
certification fees.

Preharvest and Postharvest Residue Testing

    The main objectives of the residue testing program are to: (1) 
ensure that certified organic production and handling operations are in 
compliance with the requirements set forth in this final rule and (2) 
serve as a means for monitoring drift and unavoidable residue 
contamination of agricultural products to be sold or labeled as 
organically produced. Any detectable residues of a prohibited substance 
or a product produced using excluded methods found in or on samples 
during analysis will serve as a warning indicator to the certifying 
agent.
    The Administrator, SOP's governing State official, or certifying 
agent may require preharvest or postharvest testing of any agricultural 
input used in organic agricultural production or any agricultural 
product to be sold or labeled as ``100 percent organic,'' ``organic,'' 
or ``made with organic (specified ingredients or food group(s)).'' It 
is based on the Administrator's, SOP's governing State official's, or 
certifying agent's belief that an agricultural product or agricultural 
input has come into contact with one or more prohibited substances or 
has been produced using excluded methods. Certifying agents do not have 
to conduct residue tests if they do not have reason to believe that 
there is a need for testing.

[[Page 80629]]

Certifying agents must ensure, however, that certified organic 
operations are operating in accordance with the Act and the regulations 
set forth in this part.
    The ``reason to believe'' could be triggered by various situations, 
for example: (1) The applicable authority receiving a formal, written 
complaint regarding the practices of a certified organic operation; (2) 
an open container of a prohibited substance found on the premises of a 
certified organic operation; (3) the proximity of a certified organic 
operation to a potential source of drift; (4) suspected soil 
contamination by historically persistent substances; or (5) the product 
from a certified organic operation being unaffected when neighboring 
fields or crops are infested with pests. These situations do not 
represent all of the possible occurrences that would trigger an 
investigation. Preharvest or postharvest residue testing will occur on 
a case-by-case basis.
    In each case, an inspector representing the Administrator, SOP's 
governing State official, or certifying agent or will conduct sampling. 
According to subpart F, Accreditation, private or State entities 
accredited as certifying agents under the NOP must ensure that its 
responsibly connected persons, employees, and contractors with 
inspection, analysis, and decision-making responsibilities have 
sufficient expertise to successfully perform the duties assigned. 
Therefore, all inspectors employed by certifying agents to conduct 
sampling must have sufficient expertise in methods of chain-of-custody 
sampling. Moreover, testing for chemical residues must be performed in 
an accredited laboratory. When conducting chemical analyses, the 
laboratory must incorporate the analytical methods described in the 
most current edition of the Official Methods of Analysis of the AOAC 
International or other current applicable validated methodology for 
determining the presence of contaminants in agricultural products. 
Results of all analyses and tests performed under section 205.670 must 
be promptly provided to the Administrator, except, that, where an SOP 
exists, all test results and analyses should be provided to the SOP's 
governing State official by the applicable certifying party that 
requested testing. Residue test results and analyses must also be, 
according to section 205.403(e)(2), provided to the owner of the 
certified organic operation whose product was tested. All other 
parities desiring to obtain such information must request it from the 
applicable certifying agent.
    OFPA requires certifying agents, to the extent of their awareness, 
to report violations of applicable laws relating to food safety to 
appropriate health agencies such as EPA and FDA. When residue testing 
indicates that an agricultural product contains pesticide residues or 
environmental contaminants that exceed either the EPA tolerance level 
or FDA action level, as applicable, the certifying agent must promptly 
report data revealing such information to the Federal agency whose 
regulatory tolerance or action level has been exceeded.

Residue Testing and Monitoring Tools

    When testing indicates that an agricultural product to be sold or 
labeled as organically produced contains residues of prohibited 
substances, certifying agents will compare the level of detected 
residues with 5 percent of the Environmental Protection Agency (EPA) 
tolerance for the specific residue detected on the agricultural product 
intended to be sold as organically produced. This compliance measure, 5 
percent of EPA tolerance for the detected prohibited residue, will 
serve as a standard for the Administrator, SOP's governing State 
officials, and certifying agents to assist in monitoring for illegal 
use violations.
    In addition, we intend to establish levels of unavoidable residual 
environmental contamination (UREC) for crop-and site-specific 
agricultural commodities to be sold, labeled, or represented as ``100 
percent organic,'' ``organic,'' or ``made with . . .'' These levels 
will represent limits at which USDA may take compliance action to 
suspend the use of a contaminated area for organic agricultural 
production. Currently, USDA is seeking scientifically sound principles 
and measures by which it can establish UREC levels to most effectively 
address issues of unavoidable residual environmental contamination with 
respect to this rule. However, in the interim, UREC will be defined as 
the Food and Drug Administration's (FDA) action levels for poisonous or 
deleterious substances in human food or animal feed. UREC levels will 
be initially set for persistent prohibited substances (aldrin, 
dieldrin, chlordane, DDE, etc.) in the environment. They may become 
more inclusive of prohibited residues as additional information becomes 
available. Unavoidable residual environmental contamination levels will 
be based on the unavoidability of the chemical substances and do not 
represent permissible levels of contamination where it is avoidable.
    Analyses and test results will be available for public access 
unless the residue testing is part of an ongoing compliance 
investigation. Information relative to an ongoing compliance 
investigation will be confidential and restricted to the public.

Detection of Prohibited Substances or Products Derived from Excluded 
Methods

    In the case of residue testing and the detection of prohibited 
substances in or on agricultural products to be sold, labeled, or 
represented as ``100 percent organic,'' ``organic,'' or ``made with . . 
.'' products with detectable residues of prohibited substances that 
exceed 5 percent of the EPA tolerance for the specific residue or UREC 
cannot be sold or labeled as organically produced. When such an 
agricultural crop is in violation of these requirements, the 
certification of that crop will be suspended for the period that the 
crop is in production. Certifying agents must follow the requirements 
specified in sections 205.662 and 205.663 of subpart G, Compliance.
    The ``5 percent of EPA tolerance'' standard is considered a level 
above which an agricultural product cannot be sold as organic, 
regardless of how the product may have come into contact with a 
potential prohibited substance. This standard has been established to: 
(1) satisfy consumer expectations that organic agricultural products 
will contain minimal chemical residues and (2) respond to the organic 
industry's request to implement a standard comparable to current 
industry practices. However, the ``5 percent of EPA tolerance'' 
standard cannot be used to automatically qualify agricultural products 
as organically produced, even if the level of chemical residues 
detected on an agricultural product is below 5 percent of the EPA 
tolerance for the respective prohibited substance. This final rule is a 
comprehensive set of standards and regulations that determines whether 
a product can or cannot be considered to carry the specified organic 
labeling terms in subpart D, Labeling. Therefore, in addition to this 
section of subpart G, Administrative, all other requirements of this 
part must be met by certified organic operations to have an 
agricultural product considered ``organically produced.''
    When residue testing detects the presence of any prohibited 
substance, whether above or below 5 percent of the EPA tolerance for 
the specific pesticide or UREC, the SOP's governing State official or 
certifying agent may conduct an investigation of the certified organic

[[Page 80630]]

operation to determine the cause of the prohibited substance or product 
in or on the agricultural product to be sold or labeled as organically 
produced. The same shall occur if testing detects a product produced 
using excluded methods. If the investigation reveals that the presence 
of the prohibited substance or product produced using excluded methods 
in or on an agricultural product intended to be sold as organically 
produced is the result of an intentional application of a prohibited 
substance or use of excluded methods, the certified organic operation 
shall be subject to suspension or revocation of its organic 
certification. In addition, any person who knowingly sells, labels, or 
represents an agricultural product as organically produced in violation 
of the Act or these regulations shall be subject to a civil penalty of 
not more than $10,000 per violation.

Emergency Pest or Disease Treatment Programs

    When a prohibited substance is applied to an organic production or 
handling operation due to a Federal or State emergency pest or disease 
treatment program and the organic handling or production operation 
otherwise meets the requirements of this final rule, the certification 
status of the operation shall not be affected as a result of the 
application of the prohibited substance, except that: (1) Any harvested 
crop or plant part to be harvested that has contact with a prohibited 
substance applied as the result of a Federal or State emergency pest or 
disease treatment program cannot be sold, labeled, or represented as 
``100 percent organic,'' ``organic,'' or ``made with . . .'' and (2) 
any livestock that are treated with a prohibited substance applied as 
the result of a Federal or State emergency pest or disease treatment 
program or product derived from such treated livestock cannot be sold, 
labeled, or represented as ``100 percent organic,'' ``organic,'' or 
``made with . . .''
    However, milk or milk products may be labeled or sold as 
organically produced beginning 12 months following the last date that 
the dairy animal was treated with the prohibited substance. 
Additionally, the offspring of gestating mammalian breeder stock 
treated with a prohibited substance may be considered organic if the 
breeder stock was not in the last third of gestation on the date that 
the breeder stock was treated with the prohibited substance.

Residue Testing--Changes Based on Comments

    This portion of subpart G differs from our proposal in several 
respects as follows:
    (1) Reporting Requirements. Commenters were not satisfied with the 
language in section 205.670(d)(1) that required results of all analyses 
and tests performed under section 205.670 to be provided to the 
Administrator promptly upon receipt. They asked that the paragraph be 
amended to include that: (1) Results of all analyses and tests 
performed under section 205.670 be provided by the Administrator to the 
appropriate SOP's governing State official; and (2) test results be 
made immediately available to the owner of the material sampled. They 
stated that since State organic certification programs are responsible 
for enforcement within their State, results of residue tests conducted 
by certifying agents must be provided to the SOP's governing State 
official for routine monitoring and for investigating possible 
violations of the Act.
    We agree with the commenters and have responded to their concerns 
accordingly. To ensure that SOP's receive results of all tests and 
analyses conducted under the inspection and testing requirements of 
subpart G, section 205.670(d) has been amended to include that the 
results of all analyses and residue tests must be provided to the 
Administrator promptly upon receipt; Except: That where an SOP exists, 
all test results and analyses should be provided to the SOP's governing 
State official.
    In regard to the commenters' request that certified organic 
operations be provided with a copy of test results from samples taken 
by an inspector, an additional paragraph, section 205.403(e)(2), has 
been added to subpart E, Certification, that assures that such 
information is provided to the owners of certified organic operations 
by the certifying agents.
    (2) Integrity Of Organic Samples. We have modified language in 
section 205.670(c) to clarify our intent regarding the maintenance of 
sample integrity. The proposed rule stated that ``sample integrity must 
be maintained in transit, and residue testing must be performed in an 
accredited laboratory.'' During the final rulemaking process, we did 
not believe that our intent was clear on this subject. Our intent is to 
ensure that sample integrity is maintained throughout the entire chain 
of custody during the residue testing process. Proposed language only 
suggests that sample integrity be maintained in transit. Therefore, we 
have changed the second sentence in section 205.670(c) to state that 
``sample integrity must be maintained throughout the chain of custody, 
and residue testing must be performed in an accredited laboratory.''
    (3) Reporting Residue and Other Food Safety Violations to 
Appropriate Health Agencies. In the proposed rule, section 205.671(b) 
under Exclusion from Organic Sale states, ``If test results indicate a 
specific agricultural product contains pesticide residues or 
environmental contaminants that exceed the FDA's or the EPA's 
regulatory tolerances, the data must be reported promptly to the 
appropriate public health agencies.'' During the final rulemaking 
process, a group of commenters suggested that we move section 
205.671(b) into section 205.670 as paragraph (e). They recommended that 
we move section 205.671(b) because it does not specifically address the 
sale of organically produced products, as indicated by the section 
heading. They recommended that section 205.671(b) be placed under 
section 205.670 as paragraph (e) because it dealt with the reporting of 
residues that exceed Federal regulatory tolerances. The commenters 
further stated that, while section 205.671(b) creates a duty to report, 
it is not specific as to who must report.
    We have accepted the suggestions of the commenters and have 
responded accordingly. We have removed section 205.671(b) and relocated 
it under section 205.670 as paragraph (e). We have also modified the 
regulatory text of paragraph (e) to include language that instructs 
certifying agents to report, when residue testing indicates that an 
agricultural product contains pesticide residues or environmental 
contaminants that exceed either the EPA tolerance level or FDA action 
level, as applicable, data reveling such information to the Federal 
agency whose regulatory tolerance or action level has been exceeded.
    (4) Exclusion from Organic Sale. We have reviewed section 
205.671(a), removed the requirement to implement the Pesticide Data 
Program (pdp) estimated national mean as a compliance tool in 
monitoring for the presence of unacceptable levels of prohibited 
substances in agricultural products intended to be sold as organic, and 
added the ``5 percent of EPA tolerance'' standard.
    Commenters voiced the opinion that the estimated national mean 
would be a difficult standard in organic agricultural production for 
several reasons. Some stated that the estimated national mean was a new 
concept that would confuse

[[Page 80631]]

producers and handlers because they would not know the exact definition 
of ``estimated national mean'' and how it would be determined. Others 
stated that the PDP was too limited in scope to employ an estimated 
national mean for all commodity/pesticide combinations. Commenters 
reasoned that PDP data were limited in terms of the agricultural 
commodities that are sampled and tested.
    Another group of commenters stated that PDP data would be unfair to 
use in the NOP's residue testing plan. They argued PDP data should not 
be used to set maximum residue levels for organic agricultural products 
because PDP samples its products as close to the point of consumption 
as possible. As a result, commenters believe that PDP data may not be 
totally reflective of residue levels of agricultural products at the 
farmgate level. Since most residue testing in organic agricultural 
production takes place at the farmgate, these commenters argued that it 
would be an inappropriate standard for organic agricultural production.
    As a result, a large number of commenters suggested that we 
reconsider using the estimated national mean as a standard for the 
maximum allowable residues on organically produced products. Instead, 
commenters recommended that the NOP incorporate the National Organic 
Standards Board's (NOSB) recommendation and current industry practice 
of using 5 percent of the EPA tolerance as a maximum level of pesticide 
residue on organic agricultural products. Commenters argued that using 
5 percent of the EPA tolerance provides a sense of confidence to the 
consumers of organic agricultural products.
    In many respects, we agree with the commenters. We have revisited 
using PDP data to establish an estimated national mean for commodity/
pesticide combinations and for setting a maximum level of pesticide 
residue that could exclude agricultural products from being sold, 
labeled, or represented as organic. As a result, we have concluded that 
such an approach may be somewhat underdeveloped to incorporate into the 
NOP. We have reached this conclusion based on many of the same 
arguments presented by commenters (i.e., limited scope of agricultural 
products tested under PDP, product sampling based upon market 
availability, testing near the point of consumption, etc.). Also, we 
estimated that there would be a considerable time lag between the 
implementation of the NOP and defining a comprehensive list of 
estimated national means for all commodity/pesticide combinations. 
Thus, we have decided not to use the estimated national mean as a tool 
for monitoring organic agricultural products for the presence of 
prohibited substances and as a standard to exclude agricultural 
products from being sold, labeled, or represented as organically 
produced.
    Instead, we have decided to follow the recommendation of the 
commenters by replacing the estimated national mean for specific 
commodity/pesticide pairs with 5 percent of the EPA tolerance for the 
specific pesticide. Therefore, when residue testing detects prohibited 
substances at levels that are greater than 5 percent of the EPA 
tolerance for the specific pesticide detected on the particular product 
samples, the agricultural product must not be sold or labeled as 
organically produced.
    We fully understand that the EPA tolerance is defined as the 
maximum legal level of a pesticide residue in or on a raw or processed 
agricultural commodity. We also acknowledge that the EPA tolerance is a 
health-based standard. We are not trying to employ the 5 percent 
standard in a manner similar to that of EPA. As mentioned in our 
proposal, the national organic standards, including provisions 
governing prohibited substances, are based on the method of production, 
not the content of the product. The primary purpose of the residue 
testing approach described in this final rule, then, is to provide an 
additional tool for SOP's governing State officials and certifying 
agents to use in monitoring and ensuring compliance with the NOP.
    (5) Unavoidable Residual Environmental Contamination. We have 
defined, as an interim measure, UREC as the FDA action levels for 
poisonous or deleterious substances in human food or animal feed.
    Section 205.671 proposed the use of UREC to serve as a residue 
testing tool for compliance. Commenters believed UREC levels, as 
prescribed in section 205.671 of the proposed rule, would be 
problematic as a standard because they were undefined. Commenters 
argued that it would be impractical and very expensive to establish 
UREC levels for every organic crop and region in the United States. 
They suggested that UREC levels be managed as a practice standard or 
program manual issue. They also expressed the concern that inconsistent 
application of UREC levels could create difficulties for certifying 
agents and certified operations.
    We agree that UREC levels should be defined. We are seeking 
scientifically sound principles and measures by which we can establish 
UREC levels to most effectively address issues of unavoidable residual 
contamination with respect to this rule. However, in the interim, the 
ability to implement an undefined standard would be difficult for 
certifying agents. Therefore, we have included language in the preamble 
that temporarily defines UREC as the FDA action levels for poisonous or 
deleterious substances in human food or animal feed. When residue 
testing detects the presence of a prohibited substance on an 
agricultural product greater than such levels mentioned, the 
agricultural product cannot be sold as organic. We have decided to use 
FDA action levels for UREC because they encompass many of the toxic, 
persistent chemicals and heavy metals that are present in the 
environment and may be found on food and animal feed. As mentioned 
earlier, the FDA action levels are being employed in this part as 
temporary measures for compliance. We will continue to seek 
scientifically sound principles and measures by which to establish UREC 
levels that more appropriately satisfy the purposes of this part.

Residue Testing--Changes Requested But Not Made

    This subpart retains from the proposed rule regulations on which we 
received comments as follows:
    (1) Residue Testing Responsibility. Commenters petitioned that we 
remove the requirement in section 205.670(b) that states residue tests 
must be conducted by the applicable SOP's governing State official or 
the certifying agent at the official's or certifying agent's own 
expense. The commenters expressed the opinion that we were practicing 
``micromanagement.'' They also said that there was no need for the 
proposal to be so detailed with respect to who pays for residue 
testing. Based on the commenters' responses, residue analyses are 
reportedly paid by producers, buyers, brokers, certifiers, and 
government residue testing programs.
    We have not adopted the suggestion of the commenters. In the 
proposal, we stated that conducting residue tests was considered a cost 
of doing business for certifying agents. Our position has not changed. 
Certifying agents can factor residue testing costs into certification 
fees. It is not our intention to ``micromanage'' the way that 
certifying agents conduct business. Section 2107(a)(6) of the Act 
requires that certifying agents conduct residue testing of agricultural 
products that have been produced on certified organic farms and handled 
through certified organic handling operations. OFPA also

[[Page 80632]]

requires, under section 2112(a) through (c), that certifying agents 
enforce its provisions by implementing a system of residue testing to 
test products sold or labeled as organically produced. In addition, 
subpart E, Certification, authorizes certifying agents to conduct on-
site inspections, which may include residue testing, of certified 
organic operations to verify that the operation is complying with the 
provisions in the Act and the regulations in this part. Certifying 
agents are responsible for monitoring organic operations for the 
presence of prohibited substances; we view residue testing as a cost of 
doing business. Therefore, we believe that certifying agents should 
factor monitoring costs associated with implementing the provisions in 
the Act and Rule into their certification fees.
    (2) Reporting to Federal Regulatory Agencies. Commenters disagree 
with section 205.671(b) of the proposed rule which states that if test 
results indicate a specific agricultural product contains pesticide 
residues or environmental contaminants that exceed the FDA action level 
or EPA tolerance, the data must be reported promptly to appropriate 
public health agencies. Commenters believe that since results of all 
analyses and tests must be provided to the Administrator, USDA should 
be responsible for communicating such test results to other Federal 
agencies such as FDA or EPA if regulatory tolerances or action levels 
are exceeded. They also suggested that section 205.671(b) be removed 
from the national regulations. Commenters expressed the view that such 
a requirement is not related to organic certification.
    We do not agree with the commenters. It is not our intent to create 
additional responsibility for the certifying agent. Section 205.671(b), 
redesignated as section 205.670(e), is a statutory requirement. Section 
2107(a)(6) of the Organic Food Production Act of 1990 requires 
certifying agents, to the extent of their awareness, to report 
violations of applicable laws relating to food safety to appropriate 
health agencies such as EPA and FDA. Therefore, due to section 2107 of 
the Act, section 205.670(e) has been included in the national 
regulations.
    (3) ``Threshold'' for Genetic Contamination. Many commenters 
suggested that we establish a ``threshold'' for the unintended or 
adventitious presence of products of excluded methods in organic 
products. Some commenters argued that a threshold is necessary because, 
without the mandatory labeling of biotechnology-derived products, 
organic operations and certifying agents could not be assured that 
products of excluded methods were not being used. Others argued that, 
without an established threshold, the regulations would constitute a 
``zero tolerance'' for products of excluded methods, which would be 
impossible to achieve.
    We do not believe there is sufficient consensus upon which to 
establish such a standard at this time. Much of the basic, baseline 
information about the prevalence of genetically engineered products in 
the conventional agricultural marketplace that would be necessary to 
set such a threshold--e.g., the effects of pollen drift where it may be 
a factor, the extent of mixing at various points throughout the 
marketing chain, the adventitious presence of genetically engineered 
seed in nonengineered seed lots--is still largely unknown. Our 
understanding of how the use of biotechnology in conventional 
agricultural production might affect organic crop production is even 
less well developed.
    Also, as was pointed out in some comments, the testing methodology 
for the presence of products of excluded methods has not yet been fully 
validated. Testing methods for some biotechnology traits in some 
commodities are becoming commercially available. Without recognized 
methods of testing for and quantifying of all traits in a wide range of 
food products, however, it would be very difficult to establish a 
reliable numerical tolerance.
    There are publicly and privately funded research projects underway 
that may provide useful baseline information. Efforts of Federal 
agencies to clarify the marketing and labeling of biotechnology- and 
nonbiotechnology-derived crops may also help address these concerns. 
FDA, for example, is developing guidance for food producers who 
voluntarily chose to label biotechnology- and nonbiotechnology-derived 
foods. USDA is also preparing a Federal Register Notice to seek public 
comment on the appropriate role, if any, that it can play in 
facilitating the marketing of agricultural products through the 
development of ``quality assurance'' type programs that help to 
preserve the identity of agricultural commodities. USDA, in cooperation 
with the technology providers, is also working to validate testing 
procedures and laboratories for some commodities.
    All of these efforts may help to provide information on this issue. 
Practices for preserving product identity, including segregating 
genetically engineered and nongenetically engineered products, are 
evolving in some conventional markets. As we discussed in the preamble 
to the proposed rule, we anticipate that these evolving industry best 
practices and standards will become the standards for implementing the 
provisions in this regulation relating to the use of excluded methods. 
As was also discussed in the proposed rule, these regulations do not 
establish a ``zero tolerance'' standard. As with other substances not 
approve for use in organic production systems, a positive detection of 
a product of excluded methods would trigger an investigation by the 
certifying agent to determine if a violation of organic production or 
handling standards occurred. The presence of a detectable residue alone 
does not necessarily indicate use of a product of excluded methods that 
would constitute a violation of the standards.
    (4) Certification Status After Emergency Pest or Disease Treatment. 
We have not modified language in section 205.672 that would affect the 
certification status of a certified organic operation if the operation 
had been subjected to a Federal or State emergency pest or disease 
treatment program.
    Section 205.672 states that when a prohibited substance is applied 
to a certified operation due to a Federal or State emergency pest or 
disease treatment program and the certified operation otherwise meets 
the requirements of this part, the certification status of the 
operation shall not be affected as a result of the application of the 
prohibited substance: Provided, That, the certified operation adheres 
to certain requirements prescribed by the NOP. One group of commenters 
informed us that they did not support maintaining the organic status of 
an operation that has been directly treated with prohibited substances, 
regardless of the reason for treatment. They believe that Federal and 
State emergency pest or disease treatment programs should provide 
alternatives for organic operations whenever feasible. If no 
alternative measure is feasible, the organic operation should choose 
between voluntary surrender of their organic status on targeted parts 
of the operation or destruction of the crop to eliminate pest habitat. 
The commenters also suggested that compensation should be provided to 
organic producers whose crops must be destroyed to eliminate habitat. 
They feel that allowing the application of prohibited materials to 
certified organic land without affecting the certification status 
violates the trust consumers place in organic certification.

[[Page 80633]]

    We disagree with the position of the commenters. Historically, 
residues from emergency pest or disease treatment programs have been 
treated as drift cases by certifiers. In these cases, the specific crop 
may not be sold as organic, but the organic status of future crop years 
are not affected. We intend to handle such cases in a similar manner. 
We understand that commenters would like us to remove the certification 
of an organic operation that has been treated with a prohibited 
substance, but organic certification is a production claim, not a 
content claim. We, along with the commenters, are concerned with 
consumers trusting organic certification. At the same time, we are 
concerned with the welfare of certified organic operations. We have 
tried to include language in section 205.672 that would address both 
issues. We believe that, if a certified organic grower has been a good 
steward of his/her land and has managed the production of his/her 
product(s) in accordance with all regulations in the Act and other 
requirements in this part, the certification status of the operation 
should not be affected. The application of a prohibited substance as 
part of a Federal or State emergency pest or disease treatment program 
is outside the control of the certified operation. We also believe that 
maintaining consumer trust is important. Thus, section 205.672 states 
that any harvested crop or plant part to be harvested that has been 
treated with a prohibited substance as part of a Federal or State 
emergency pest or disease treatment program cannot be sold as 
organically produced. Therefore, the certified organic operation can 
retain its certification status, and the consumer can be assured that a 
product from a certified organic operation that has been in contact 
with a prohibited substance as the result of a Federal or State pest or 
disease treatment program will not enter the organic marketplace. 
Accordingly, we have not made the change to section 205.672 as proposed 
by the commenters.
    (5) Emergency Pest or Disease Treatment Programs. Commenters 
suggested that the Department add a new paragraph to section 205.672 
that states ``the certifying agent must monitor production operations 
that have been subjected to a Federal or State emergency pest or 
disease treatment program, and may require testing of following crops, 
or an extended transition period for affected production sites, if 
residue test results indicate the presence of a prohibited substance.'' 
Commenters said the language in the proposed rule did not clearly 
establish that a transition period could be needed after contamination 
of a certified organic operation by a government-mandated spray 
program. They felt that there may be a need for a case-by-case 
determination by the certifying agent as to when it would be best for a 
certified organic operation to begin selling its products as 
organically produced after it has been subject to a government mandated 
spray program.
    We understand that commenters would like USDA to mandate certifying 
agents to monitor operations that have been subject to Federal or State 
emergency pest or disease treatment programs; however, we do not see a 
need to prescribe such a provision. Based on the responsibilities of 
being a USDA-accredited certifier, it is our belief that certifying 
agents would monitor a certified organic operation that has been 
subjected to a Federal or State emergency pest or disease treatment 
program to make sure that product being produced for organic sale is 
actually being produced in accordance with the Act and the regulations 
in this part. Certifying agents have been granted the authority to 
conduct additional on-site inspections of certified organic operations 
to determine compliance with the Act and national standards under 
subpart E, section 205.403. Commenters requested that we include 
language that would allow certifying agents to recommend an extended 
transition period for affected production sites if residue tests 
indicate the presence of a prohibited substance. Again, we understand 
the commenters' concern, but we are not aware of comprehensive soil 
residue data that could guide certifying agents in determining 
appropriate withdrawal intervals for operations that have been 
subjected to emergency pest or disease treatment programs.

Residue Testing--Clarifications

    Clarification is given on the following issues raised by commenters 
as follows:
    (1) Sampling and Testing. Commenters stated that the purpose of 
residue testing under the Act is to assure that organically produced 
agricultural products that are sold as organic do not contain pesticide 
residues or residues of other prohibited substances that exceed levels 
as specified by the NOP. Based on language in section 205.670(b) of the 
proposed rule, commenters expressed the opinion that the Agricultural 
Marketing Service (AMS) was, not only requiring residue testing of 
organic agricultural products, but also of ``any'' agricultural input 
used or agricultural product intended to be sold as ``100 percent 
organic,'' ``organic,'' or ``made with * * *'' when there is reason to 
believe that the agricultural input or product has come into contact 
with a prohibited substance. Commenters believe that organic certifying 
agents may be required to test many nonorganic agricultural inputs 
(such as seeds, compost, straw, sawdust, and plastic) and nonorganic 
agricultural products and ingredients used in products labeled as 
``made with * * *''. They also argued that such testing would be 
unnecessary, burdensome, and expensive because such materials are more 
likely to have come into contact with a prohibited substance. 
Therefore, commenters suggested that we amend section 205.670(b) by 
deleting ``agricultural inputs'' and replacing ``agricultural product'' 
with ``organically produced agricultural product.'' They also 
recommended that we replace the second occurrence of ``product'' with 
``organic product.'' Thus section 205.670(b) would suggest that only 
organic agricultural products could be required to be tested by the 
certifying agent.
    We understand the concerns of the commenters but believe that the 
commenters have misinterpreted the intent of section 205.670(b). It is 
not our intent to mandate residue testing of all inputs and ingredients 
used in the production of organic agricultural products. Neither is it 
our intent for certifying agents to abuse residue testing 
responsibility by conducting residue tests of certified organic 
operations without reason to believe that the agricultural input or 
product intended to be sold as organic has come into contact with 
prohibited substances. Our intent is to make it clear that certifying 
agents have the authority to test any agricultural input used or 
agricultural product intended to be sold as organically produced when 
there is reason to believe that the agricultural input or product has 
come into contact with a prohibited substance. Section 205.670(b) 
allows for testing of inputs and agricultural products, but it does not 
require that all inputs of a product intended to be sold as organically 
produced must be tested. However, certifying agents must be able to 
ensure that certified organic operations are operating in accordance 
with the Act and the regulations set forth in this part. To assure that 
certifying agents have established fair and effective procedures for 
enforcing residue testing requirements, section 205.504(b)(6) provides 
that they must submit to USDA a copy of the procedures to be used for

[[Page 80634]]

sampling and residue testing pursuant to section 205.670.
    (2) Chain Of Custody Training. A commenter suggested that section 
205.670(c) address chain of custody training for inspectors that will 
be performing preharvest or postharvest tissue test sample collection 
on behalf of the Administrator, SOP's governing State official, or 
certifying agent. The commenter proposed that all inspectors should be 
trained to handle chain of custody samples in order to maintain the 
integrity of the samples.
    We agree that inspectors should be appropriately trained to handle 
chain-of-custody samples in order to maintain the integrity of the 
samples taken from a certified organic operation. However, we do not 
believe that the language in section 205.670(c) must be modified to 
address such an issue. As a USDA-accredited body, a private or State 
entity operating as a certifying agent must ensure that its responsibly 
connected persons, employees, and contractors with inspection, 
analysis, and decision-making responsibilities have sufficient 
expertise in organic production or handling techniques to successfully 
perform the duties assigned. The certifying agent must also submit a 
description of the training that has been provided or intends to be 
provided to personnel to ensure that they comply with and implement the 
requirements of the Act and the regulations in this part. In addition, 
certifying agents must submit a copy of the procedure to be used for 
sampling and residue testing for approval by the Administrator. Through 
the accreditation process, therefore, we will be able to assess the 
expertise of the individuals employed by the certifying agent and 
provide guidance in areas where additional training is needed to comply 
with the requirements of the Act and the regulations in this part.
    (3) Exclusion from Organic Sale. Commenters expressed that section 
205.671(a) could be easily misinterpreted. They said that section 
205.671(a) did not make clear that residue testing may not be used to 
qualify crops to be sold as organic if a direct application of 
prohibited materials occurred. Commenters suggested that section 
205.671(a) include: ``Any crop or product to which prohibited materials 
have been directly applied shall not be sold, labeled, or represented 
as organically produced.''
    We do not believe this additional language is necessary. Residue 
testing cannot be used to qualify any agricultural crop or product to 
which a prohibited material has been purposefully/directly applied. The 
presence of any prohibited substance on an agricultural product to be 
sold as organic warrants an investigation as to why the detected 
prohibited substance is present on the agricultural product. It does 
not matter if the product has come into contact with a prohibited 
substance through means of drift or intentional application. If the 
outcome of the investigation reveals that the presence of the detected 
prohibited substance is the result of an intentional application, the 
certified operation will be subject to suspension or revocation of its 
organic certification and/or a civil penalty of not more than $10,000 
if he/she knowingly sells the product as organic. The use of prohibited 
substances is not allowed in the Act or this final rule. Residue 
testing is not a means of qualifying a crop or product as organic if a 
prohibited substance has been intentionally/directly applied. It is a 
tool for monitoring compliance with the regulations set forth in the 
Act and in this part.
    (4) Emergency Pest or Disease Treatment Programs. Commenters 
requested that we make a clear distinction between crops or 
agricultural products that have had prohibited substances directly 
applied to them and those that have come into contact with prohibited 
substances through chemical drift. They have proposed that we amend 
section 205.672(a) to address this issue. Section 205.672(a) of the 
proposal states that any harvested crop or plant part to be harvested 
that has had contact with a prohibited substance applied as the result 
of a Federal or State emergency pest or disease treatment program 
cannot be sold as organically produced. Commenters did not find this 
language acceptable because it did not distinguish between the two 
types of ways that products can come into contact with prohibited 
substances (drift and direct/intentional application) and how each 
situation would be addressed with respect to the national organic 
standards. Commenters believed that section 205.672(a) was fairly 
ambiguous and open for misinterpretation. Commenters requested that we 
amend language in section 205.672(a) to include that ``Any harvested 
crop or plant part to be harvested that has contact with a prohibited 
substance directly applied to the crop as the result of a Federal or 
State emergency pest or disease treatment program cannot be sold, 
labeled, or represented as organically produced.''
    We do not accept the commenters' request and believe that the 
commenters have misinterpreted section 205.672 of the proposed rule. 
Section 205.672 specifically addresses certified organic operations 
that have had prohibited substances applied to them due to a Federal or 
State pest or disease treatment program. Section 205.672 does not 
include those organic operations that may have been drifted upon by 
prohibited substances that have been applied to a neighboring farm as a 
result of a Federal or State emergency pest or disease treatment 
program. Any potential drift from a mandatory pest and disease 
treatment program will be treated in the same manner as drift from any 
other source.

Adverse Action Appeal Process

    This portion of subpart G sets forth the procedures for appealing 
adverse actions under the National Organic Program (NOP). These 
procedures will be used by: (1) Producers and handlers appealing denial 
of certification and proposed suspension or revocation of certification 
decisions; and (2) certifying agents appealing denial of accreditation 
and proposed suspension or revocation of accreditation decisions. The 
Act and the Administrative Procedure Act (APA) (5 U.S.C. 553-559) 
provides affected persons with the right to appeal any adverse actions 
taken against their application for certification or accreditation or 
their certification or accreditation.
    The Administrator will handle certification appeals from operations 
in States that do not have an approved State organic program (SOP). The 
Administrator will also handle appeals of accreditation decisions of 
the NOP Program Manager. The Administrator will issue decisions to 
sustain or deny appeals. If an appeal is denied, the Administrator will 
initiate a formal adjudicatory proceeding to deny, suspend, or revoke 
certification or accreditation. Such proceedings will be conducted 
pursuant to USDA's Rules of Practice Governing Formal Adjudicatory 
Proceedings Instituted by the Secretary Under Various Statutes, 7 CFR 
1.130 through 1.151. Under these rules of practice, if the 
Administrative Law Judge denies the appeal, the appellant may appeal 
the Administrative Law Judge's decision to the Judicial Officer. If the 
Judicial Officer denies the appeal, the appellant may appeal the 
Judicial Officer's decision to the United States District Court for the 
district in which the appellant is located.
    In States with approved SOP's, the SOP will oversee certification 
compliance proceedings and handle appeals from certified operations in 
the State. An SOP's appeal procedures and rules of procedure must be 
approved by the Secretary and must be equivalent to

[[Page 80635]]

those of the NOP and USDA. The final decision on an appeal under the 
SOP may be appealed by the appellant to United States District Court 
for the district in which the appellant is located.

Description of Regulations

    These appeal procedures provide that: (1) Persons, subject to the 
Act, who believe they are adversely affected by a noncompliance 
decision of the NOP's Program Manager may appeal such decision to the 
Administrator; (2) persons, subject to the Act, who believe they are 
adversely affected by a noncompliance decision of an SOP may appeal 
such decision to the SOP's governing State official who will initiate 
handling of the appeal in accordance with the appeal procedures 
approved by the Secretary; and (3) persons, subject to the Act, who 
believe they are adversely affected by a noncompliance decision of a 
certifying agent may appeal such decision to the Administrator unless 
the person is subject to an approved SOP, in which case the appeal must 
be made to the SOP.
    All written communications between parties involved in appeal 
proceedings must be sent to the recipient's place of business by a 
delivery service which provides dated return receipts. All appeals 
filed under these procedures will be reviewed, heard, and decided by 
persons not involved with the decision being appealed.

Certification Appeals

    Applicants for certification may appeal a certifying agent's notice 
of denial of certification. Certified operations may appeal a 
notification of proposed suspension or revocation of their 
certification issued by their certifying agent. Such appeals will be 
made to the Administrator unless the person is subject to an approved 
SOP, in which case the appeal must be made to the SOP.
    If the Administrator or SOP sustains an appeal, the applicant or 
certified operation will be granted certification or continued 
certification, as applicable to the operation's status. The act of 
sustaining the appeal will not be considered an adverse action and may 
not be appealed by the certifying agent which issued the notice of 
denial of certification or notification of proposed suspension or 
revocation of certification.
    If the Administrator or SOP denies an appeal, a formal 
administrative proceeding will be initiated to deny, suspend, or revoke 
the certification. Such proceeding will be conducted in accordance with 
USDA's Uniform Rules of Practice or the SOP's rules of procedure.

Accreditation Appeals

    Applicants for accreditation may appeal the Program Manager's 
notification of accreditation denial. Accredited certifying agents may 
appeal a notification of proposed suspension or revocation of their 
accreditation issued by the Program Manager. Such appeals will be made 
to the Administrator. If the Administrator sustains an appeal, the 
applicant or certifying agent will be granted accreditation or 
continued accreditation, as applicable to the operation's status. If 
the Administrator denies an appeal, a formal administrative proceeding 
will be initiated to deny, suspend, or revoke the accreditation. Such 
proceeding will be conducted in accordance with USDA's Uniform Rules of 
Practice.

Filing Period

    An appeal of a noncompliance decision must be filed within the time 
period provided in the letter of notification or within 30 days from 
the date of receipt of the notification, whichever occurs later. The 
appeal will be considered ``filed'' on the date received by the 
Administrator or, when applicable, the SOP. Unless appealed in a timely 
manner, a notification to deny, suspend, or revoke a certification or 
accreditation will become final. The applicant, certified operation, or 
certifying agent that does not file an appeal in the time period 
provided waives the right to further appeal of the compliance 
proceeding.

Where and What to File

    Appeals to the Administrator must be filed in writing and sent to: 
Administrator, USDA-AMS, Room 3071-S, P.O. Box 96456, Washington, DC 
20090-6456. Appeals to the SOP must be filed in writing to the address 
and person identified in the letter of notification. All appeals must 
include a copy of the adverse decision to be reviewed and a statement 
of the appellant's reasons for believing that the decision was not 
proper or made in accordance with applicable program regulations, 
policies, or procedures.

Appeals--Changes Based On Comments

    This portion of subpart G differs from the proposal in several 
respects as follows:
    (1) To Whom an Appeal Is Made. We have amended section 205.680 to 
clarify to whom an appeal is made when the noncompliance decision is 
made by the NOP's Program Manager, an SOP, or a certifying agent. 
Several commenters requested that we amend section 205.680 to make it 
consistent with the provision providing that appeals to the 
Administrator are not allowed in the case of an SOP decision, because 
such appeals have to be made to the SOP's governing State official.
    We agree that section 205.680 did not convey sufficient explanation 
of to whom an appeal is made. Accordingly, we have amended the language 
in section 205.680 to clarify through paragraphs (a), (b), and (c) 
that: (1) Persons, subject to the Act, who believe they are adversely 
affected by a noncompliance decision of the NOP's Program Manager may 
appeal such decision to the Administrator; (2) persons, subject to the 
Act, who believe they are adversely affected by a noncompliance 
decision of an SOP may appeal such decision to the SOP's governing 
State official who will initiate handling of the appeal pursuant to 
appeal procedures approved by the Secretary; and (3) persons, subject 
to the Act, who believe they are adversely affected by a noncompliance 
decision of a certifying agent may appeal such decision to the 
Administrator unless the person is subject to an approved SOP, in which 
case the appeal must be made to the SOP.
    (2) Written Communications. We have added a new paragraph (d) to 
section 205.680, which provides that all written communications between 
parties involved in appeal proceedings must be sent to the recipient's 
place of business by a delivery service which provides dated return 
receipts. We have taken this action to further clarify the appeals 
process. This addition to section 205.680 implements the same 
requirements for appeal documents as our addition of new paragraph (d) 
to section 205.660 stipulates for compliance documents.
    (3) Who Shall Handle Appeals. We have added a new paragraph (e) to 
section 205.680, which provides that all appeals must be reviewed, 
heard, and decided by persons not involved with the decision being 
appealed. This provision was added to section 205.680 to allay the 
fears of commenters that the person making the decision would be the 
person deciding the appeal. A couple of commenters recommended that an 
appeal be heard by persons other than those who made the decision being 
appealed. Specifically, they want the appeal conducted by independent 
hearing officers who are not responsible for implementation or 
administration of the NOP. They also want the final decision-making 
authority in the administrative review process placed in the hands of 
the Secretary.

[[Page 80636]]

    Under the NOP, once the compliance procedures are completed at the 
certifying agent level, the certified operation may appeal the decision 
of the certifying agent to the Administrator or to the SOP when the 
certified operation is located within a State with an approved SOP. The 
Administrator or the SOP will review the case and render an opinion on 
the appeal. When the appeal is sustained, the certified operation and 
certifying agent are notified and the case ends. However, if the appeal 
is denied the certified operation and certifying agent are notified and 
the certified operation is given an opportunity to appeal the decision 
of the Administrator or SOP.
    Appeals of decisions made by the Administrator will be heard by an 
Administrative Law Judge. If the Administrative Law Judge rules against 
the certified operation, the Administrative Law Judge's decision may be 
appealed by the certified operation to the Judicial Officer. The 
Judicial Officer is the USDA official delegated authority by the 
Secretary as the final deciding officer in adjudication proceedings. If 
the Judicial Officer rules against the certified operation, the 
Judicial Officer's decision may be appealed by the certified operation 
to the United States District Court for the district in which the 
certified operation is located. For additional information see USDA's 
Uniform Rules of Practice found at 7 CFR part 1, subpart H.
    Appeals of decisions made by an SOP will follow procedures 
comparable to those just described for an appeal of a decision made by 
the Administrator. As with a final decision of USDA, a final decision 
of the State that goes against the certified operation may be appealed 
to the United States District Court for the district in which the 
certified operation is located.
    (4) Filing Period. We have amended the first sentence of section 
205.681(c) by replacing ``at least'' with ``within'' and by adding the 
words, ``whichever occurs later,'' to the end thereof. This amendment 
has been made to clarify our intent that persons affected by a 
noncompliance proceeding decision receive not less than 30 days in 
which to file their appeal of the decision.
    (5) Where To File an Appeal. We have amended section 205.681(d) to 
clarify where appeals are to be filed. First, we have amended what is 
now paragraph (1) by removing the requirement that the appellant send a 
copy of the appeal to the certifying agent. This action shifts the 
responsibility of notifying the certifying agent of the appeal from the 
appellant to USDA or, when applicable, the SOP. Second, we have added 
language at paragraph (2) which clarifies that appeals to the SOP must 
be filed in writing to the address and person identified in the letter 
of notification. Finally, we have amended what is now paragraph (3) of 
section 205.681 by replacing ``position'' with ``reasons for 
believing'' to clarify the intended scope and purpose of the 
appellant's appeal statement. Clarification of section 205.681(d) was 
prompted by a commenter who stated that it is discriminatory to require 
clients of private certifying agents to appeal to USDA in Washington, 
when State program clients can appeal locally.
    There are various levels of appeal within the NOP. Clients of 
certifying agents (State and private) are provided with an opportunity 
to rebut the noncompliance findings of the certifying agent. Once the 
certified operation has exhausted its options at the certifying agent 
level, the certified operation may appeal the decision of the 
certifying agent to the Administrator or to the SOP when the certified 
operation is located within a State with an approved SOP.
    The Administrator will review the case and render an opinion on the 
appeal. This level of appeal will not require the certified operation's 
representative to travel to the Administrator. An appeal of a decision 
made by the Administrator will be heard by an Administrative Law Judge 
as near as possible to the certified operation's representative's place 
of business or residence. An appeal of a decision made by the 
Administrative Law Judge will be heard by the Judicial Officer. Again 
the certified operation's representative will not be required to travel 
outside of the representative's place of business or residence. If the 
certified operation appeals the decision of the Judicial Officer, the 
appeal would be heard by the United States District Court for the 
district in which the certified operation is located.
    Appeals of decisions made by an SOP will follow procedures 
comparable to those just described for an appeal of a decision made by 
the Administrator. As with a final decision of USDA, a final decision 
of the State that goes against the certified operation may be appealed 
to the United States District Court for the district in which the 
certified operation is located.
    (6) Appeal Reports. We will submit an annual report on appeals to 
the National Organic Standards Board (NOSB), which will include 
nonconfidential compliance information. A commenter requested that we 
report quarterly to the NOSB on appeals (number, outcome, kinds, and 
problems). We agree that it would be appropriate for the NOP to submit 
an appeals report to the NOSB. We will compile appeal data such as the 
number, outcome, kinds, and problems encountered. We will maintain this 
information under the compliance program to be developed within the 
NOP. We do not believe that it is necessary to put this type of detail 
or activity into the regulations. Further, we do not believe, at this 
time, that reporting more frequently than annually will be needed. The 
NOP, however, will work closely with the NOSB to provide it with the 
information it may need to recommend program amendments designed to 
address compliance and appeal issues.
    (7) Availability of Appeal Information. We will develop and 
distribute appeal information. A commenter requested that section 
205.680 be amended to require the distribution of an appeal information 
brochure to any applicant for accreditation or certification. We agree 
that the development and distribution of such information is a good 
idea. We do not believe, however, that it is necessary or appropriate 
to put this type of detail or activity into the regulations. We plan to 
provide program information, including appeals and related issues, on 
the NOP website.

Appeals--Changes Requested But Not Made

    This portion of subpart G retains from the proposed rule, 
regulations on which we received comments as follows:
    (1) National Appeals Division. Several commenters recommend 
amending sections 205.680 and 205.681 to provide for appeals to the 
National Appeals Division under the provisions at 7 CFR part 11. We 
disagree with the request that the NOP use the National Appeals 
Division Rules of Procedure. The Act and its implementing regulations 
are subject to the APA for rulemaking and adjudication. The provisions 
of the APA generally applicable to agency adjudication are not 
applicable to proceedings under 7 CFR part 11, National Appeals 
Division Rules of Procedure. USDA uses 7 CFR part 1, Rules of Practice 
Governing Formal Adjudicatory Proceedings Instituted by the Secretary 
Under Various Statutes, for adjudicatory proceedings involving the 
denial, suspension, and revocation of certification and accreditation.

Appeals--Clarifications

    Clarification is given on the following issues raised by 
commenters:
    (1) Appeals. A commenter stated that appeals of certification 
decisions should always be taken first to the certifying

[[Page 80637]]

agent to provide an opportunity to rectify any possible error. Another 
commenter requested an appeals process that includes private certifying 
agents.
    Section 205.662(a) requires a written notification of noncompliance 
with opportunity to rebut or correct. When the noncompliance has been 
resolved due to rebuttal or correction, a written notification of 
noncompliance resolution is issued in accordance with section 
205.662(b). When rebuttal is unsuccessful or correction of the 
noncompliance is not completed within the prescribed time period, a 
written notification of proposed suspension or revocation will be 
issued in accordance with section 205.662(c). This notification will 
advise the certified operation of its right to request mediation or 
file an appeal with the Administrator or, when applicable, an SOP. We 
believe this process of providing a notification of noncompliance with 
opportunity to rebut or correct, followed by a notification of proposed 
suspension or revocation, provides ample opportunity for the certified 
operation to work with its certifying agent to resolve issues of 
noncompliance.
    (2) Timely Notification. A few commenters requested that we amend 
section 205.680 to include mandatory procedures for timely written 
notice of an adverse decision, the reasons for the decision, the 
person's appeal rights, and the procedures for filing an appeal. We 
recognize that all compliance activities need to be carried out as 
quickly and expeditiously as possible within the confines of due 
process. We believe that the commenters' concerns are addressed through 
various sections of these regulations. Section 205.402(a) requires 
review of an application upon acceptance of the application. Section 
205.405, on denial of certification, requires a notification of 
noncompliance, followed, as applicable, by a notice of denial of 
certification. In accordance with section 205.405(d), the notice of 
denial of certification will state the reasons for denial and the 
applicant's right to request mediation or appeal the decision. Section 
205.507 on denial of accreditation requires a notification of 
noncompliance, followed, as applicable, by a denial of accreditation. 
The notification of accreditation denial will state the reasons for 
denial and the applicant's right to appeal the decision. Compliance 
sections 205.662 for certified operations and 205.665 for certifying 
agents require a notification of noncompliance with an opportunity to 
correct or rebut the noncompliance(s). Sections 205.662 and 205.665, 
when applicable, require the issuance of a notification of proposed 
suspension or revocation. Such notice must describe the noncompliance 
and the entity's right to an appeal. Section 205.681 provides the 
procedures for filling an appeal.

Miscellaneous

    Section 205.690 provisions the Office of Management and Budget 
control number assigned to the information collection requirements of 
these regulations. Sections 205.691 through 205.699 are reserved.

List of Subjects in 7 CFR Part 205

    Administrative practice and procedure, Agriculture, Animals, 
Archives and records, Imports, Labeling, Organically produced products, 
Plants, Reporting and recordkeeping requirements, Seals and insignia, 
Soil conservation.


    For the reasons set forth in the preamble, Title 7, Chapter I of 
the Code of Federal Regulations is amended as follows:

PARTS 205-209 [REMOVED]

    1. Parts 205 through 209, which are currently reserved in 
subchapter K (Federal Seed Act), are removed.
    2. A new subchapter M consisting of parts 205 through 209 is added 
to read as follows:

SUBCHAPTER M--ORGANIC FOODS PRODUCTION ACT PROVISIONS

PART 205--NATIONAL ORGANIC PROGRAM

Subpart A--Definitions
Sec.
205.1   Meaning of words.
205.2   Terms defined.
Subpart B--Applicability
205.100   What has to be certified.
205.101   Exemptions and exclusions from certification.
205.102   Use of the term, ``organic.''
205.103   Recordkeeping by certified operations.
205.104   [Reserved]
205.105   Allowed and prohibited substances, methods, and 
ingredients in organic production and handling.
205.106-205.199   [Reserved]
Subpart C--Organic Production and Handling Requirements
205.200   General.
205.201   Organic production and handling system plan.
205.202   Land requirements.
205.203   Soil fertility and crop nutrient management practice 
standard.
205.204   Seeds and planting stock practice standard.
205.205   Crop rotation practice standard.
205.206   Crop pest, weed, and disease management practice standard.
205.207   Wild-crop harvesting practice standard.
205.208-205.235   [Reserved]
205.236   Origin of livestock.
205.237   Livestock feed.
205.238   Livestock health care practice standard.
205.239   Livestock living conditions.
205.240-205.269   [Reserved]
205.270   Organic handling requirements.
205.271   Facility pest management practice standard.
205.272   Commingling and contact with prohibited substance 
prevention practice standard.
205.273-205.289   [Reserved]
205.290   Temporary variances.
205.291-205.299   [Reserved]
Subpart D--Labels, Labeling, and Market Information
205.300   Use of the term, ``organic.''
205.301   Product composition.
205.302   Calculating the percentage of organically produced 
ingredients.
205.303   Packaged products labeled ``100 percent organic'' or 
``organic.''
205.304   Packaged products labeled ``made with organic (specified 
ingredients or food group(s)).''
205.305   Multiingredient packaged products with less that 70 
percent organically produced ingredients.
205.306   Labeling of livestock feed.
205.307   Labeling of nonretail containers used for only shipping or 
storage of raw or processed agricultural products labeled as ``100 
percent organic,'' ``organic,'' or ``made with organic (specified 
ingredients or food group(s)).''
205.308   Agricultural products in other than packaged form at the 
point of retail sale that are sold, labeled, or represented as ``100 
percent organic'' or ``organic.''
205.309   Agricultural products in other than packaged form at the 
point of retail sale that are sold, labeled, or represented as 
``made with organic (specified ingredients or food group(s)).''
205.310   Agricultural products produced on an exempt or excluded 
operation.
205.311   USDA Seal.
205.312-205.399   [Reserved]
Subpart E--Certification
205.400   General requirements for certification.
205.401   Application for certification.
205.402   Review of application.
205.403   On-site inspections.
205.404   Granting certification.
205.405   Denial of certification.
205.406   Continuation of certification.
205.407-205.499   [Reserved]
Subpart F--Accreditation of Certifying Agents
205.500   Areas and duration of accreditation.
205.501   General requirements for accreditation.
205.502   Applying for accreditation.
205.503   Applicant information.
205.504   Evidence of expertise and ability.
205.505   Statement of agreement.

[[Page 80638]]

205.506   Granting accreditation.
205.507   Denial of accreditation.
205.508   Site evaluations.
205.509   Peer review panel.
205.510   Annual report, recordkeeping, and renewal of 
accreditation.
205.511-205.599   [Reserved]
Subpart G--Administrative

The National List of Allowed and Prohibited Substances

205.600   Evaluation criteria for allowed and prohibited substances, 
methods, and ingredients.
205.601   Synthetic substances allowed for use in organic crop 
production.
205.602   Nonsynthetic substances prohibited for use in organic crop 
production.
205.603   Synthetic substances allowed for use in organic livestock 
production.
205.604   Nonsynthetic substances prohibited for use in organic 
livestock production.
205.605   Nonagricultural (nonorganic) substances allowed as 
ingredients in or on processed products labeled as ``organic,'' or 
``made with organic (specified ingredients or food group(s)).''
205.606   Nonorganically produced agricultural products allowed as 
ingredients in or on processed products labeled as ``organic'' or 
``made with organic (specified ingredients or food group(s)).''
205.607   Amending the National List.
205.608-205.619   [ Reserved]

State Organic Programs

205.620   Requirements of State organic programs.
205.621   Submission and determination of proposed State organic 
programs and amendments to approved State organic programs.
205.622   Review of approved State organic programs.
205.623-205.639   [Reserved]

Fees

205.640   Fees and other charges for accreditation.
205.641   Payment of fees and other charges.
205.642   Fees and other charges for certification.
205.643-205.649   [Reserved]

Compliance

205.660   General.
205.661   Investigation of certified operations.
205.662   Noncompliance procedure for certified operations.
205.663   Mediation.
205.664   [Reserved]
205.665   Noncompliance procedure for certifying agents.
205.666-205.667   [Reserved]
205.668   Noncompliance procedures under State Organic Programs.
205.699   [Reserved]

Inspection and Testing, Reporting, and Exclusion from Sale

205.670   Inspection and testing of agricultural product to be sold 
or labeled ``organic.''
205.671   Exclusion from organic sale.
205.672   Emergency pest or disease treatment.
205.673-205.679   [Reserved]

Adverse Action Appeal Process

205.680   General.
205.681   Appeals.
205.682-205.689   [Reserved]

Miscellaneous

205.690   OMB control number.
205.691-205.699   [Reserved]

    Authority: 7 U.S.C. 6501-6522.

Subpart A--Definitions


Sec. 205.1  Meaning of words.

    For the purpose of the regulations in this subpart, words in the 
singular form shall be deemed to impart the plural and vice versa, as 
the case may demand.


Sec. 205.2  Terms defined.

    Accreditation. A determination made by the Secretary that 
authorizes a private, foreign, or State entity to conduct certification 
activities as a certifying agent under this part.
    Act. The Organic Foods Production Act of 1990, as amended (7 U.S.C. 
6501 et seq.).
    Action level. The limit at or above which the Food and Drug 
Administration will take legal action against a product to remove it 
from the market. Action levels are based on unavoidability of the 
poisonous or deleterious substances and do not represent permissible 
levels of contamination where it is avoidable.
    Administrator. The Administrator for the Agricultural Marketing 
Service, United States Departure of Agriculture, or the representative 
to whom authority has been delegated to act in the stead of the 
Administrator.
    Agricultural inputs. All substances or materials used in the 
production or handling of organic agricultural products.
    Agricultural product. 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.
    Agricultural Marketing Service (AMS). The Agricultural Marketing 
Service of the United States Department of Agriculture.
    Allowed synthetic. A substance that is included on the National 
List of synthetic substances allowed for use in organic production or 
handling.
    Animal drug. Any drug as defined in section 201 of the Federal 
Food, Drug, and Cosmetic Act, as amended (21 U.S.C. 321), that is 
intended for use in livestock, including any drug intended for use in 
livestock feed but not including such livestock feed.
    Annual seedling. A plant grown from seed that will complete its 
life cycle or produce a harvestable yield within the same crop year or 
season in which it was planted.
    Area of operation. The types of operations: crops, livestock, wild-
crop harvesting or handling, or any combination thereof that a 
certifying agent may be accredited to certify under this part.
    Audit trail. Documentation that is sufficient to determine the 
source, transfer of ownership, and transportation of any agricultural 
product labeled as ``100 percent organic,'' the organic ingredients of 
any agricultural product labeled as ``organic'' or ``made with organic 
(specified ingredients)'' or the organic ingredients of any 
agricultural product containing less than 70 percent organic 
ingredients identified as organic in an ingredients statement.
    Biodegradable. Subject to biological decomposition into simpler 
biochemical or chemical components.
    Biologics. All viruses, serums, toxins, and analogous products of 
natural or synthetic origin, such as diagnostics, antitoxins, vaccines, 
live microorganisms, killed microorganisms, and the antigenic or 
immunizing components of microorganisms intended for use in the 
diagnosis, treatment, or prevention of diseases of animals.
    Breeder stock. Female livestock whose offspring may be incorporated 
into an organic operation at the time of their birth.
    Buffer zone. An area located between a certified production 
operation or portion of a production operation and an adjacent land 
area that is not maintained under organic management. A buffer zone 
must be sufficient in size or other features (e.g., windbreaks or a 
diversion ditch) to prevent the possibility of unintended contact by 
prohibited substances applied to adjacent land areas with an area that 
is part of a certified operation.
    Bulk. The presentation to consumers at retail sale of an 
agricultural product in unpackaged, loose form, enabling the consumer 
to determine the individual pieces, amount, or volume of the product 
purchased.
    Certification or certified. A determination made by a certifying 
agent that a production or handling operation is in compliance with the 
Act and the regulations in this part, which is documented by a 
certificate of organic operation.

[[Page 80639]]

    Certified operation. A crop or livestock production, wild-crop 
harvesting or handling operation, or portion of such operation that is 
certified by an accredited certifying agent as utilizing a system of 
organic production or handling as described by the Act and the 
regulations in this part.
    Certifying agent. Any entity accredited by the Secretary as a 
certifying agent for the purpose of certifying a production or handling 
operation as a certified production or handling operation.
    Certifying agent's operation. All sites, facilities, personnel, and 
records used by a certifying agent to conduct certification activities 
under the Act and the regulations in this part.
    Claims. Oral, written, implied, or symbolic representations, 
statements, or advertising or other forms of communication presented to 
the public or buyers of agricultural products that relate to the 
organic certification process or the term, ``100 percent organic,'' 
``organic,'' or ``made with organic (specified ingredients or food 
group(s)),'' or, in the case of agricultural products containing less 
than 70 percent organic ingredients, the term, ``organic,'' on the 
ingredients panel.
    Commercially available. The ability to obtain a production input in 
an appropriate form, quality, or quantity to fulfill an essential 
function in a system of organic production or handling, as determined 
by the certifying agent in the course of reviewing the organic plan.
    Commingling. Physical contact between unpackaged organically 
produced and nonorganically produced agricultural products during 
production, processing, transportation, storage or handling, other than 
during the manufacture of a multiingredient product containing both 
types of ingredients.
    Compost. The product of a managed process through which 
microorganisms break down plant and animal materials into more 
available forms suitable for application to the soil. Compost must be 
produced through a process that combines plant and animal materials 
with an initial C:N ratio of between 25:1 and 40:1. Producers using an 
in-vessel or static aerated pile system must maintain the composting 
materials at a temperature between 131 deg. F and 170 deg. F for 3 
days. Producers using a windrow system must maintain the composting 
materials at a temperature between 131 deg. F and 170 deg. F for 15 
days, during which time, the materials must be turned a minimum of five 
times.
    Control. Any method that reduces or limits damage by populations of 
pests, weeds, or diseases to levels that do not significantly reduce 
productivity.
    Crop. A plant or part of a plant intended to be marketed as an 
agricultural product or fed to livestock.
    Crop residues. The plant parts remaining in a field after the 
harvest of a crop, which include stalks, stems, leaves, roots, and 
weeds.
    Crop rotation. The practice of alternating the annual crops grown 
on a specific field in a planned pattern or sequence in successive crop 
years so that crops of the same species or family are not grown 
repeatedly without interruption on the same field. Perennial cropping 
systems employ means such as alley cropping, intercropping, and 
hedgerows to introduce biological diversity in lieu of crop rotation.
    Crop year. That normal growing season for a crop as determined by 
the Secretary.
    Cultivation. Digging up or cutting the soil to prepare a seed bed; 
control weeds; aerate the soil; or work organic matter, crop residues, 
or fertilizers into the soil.
    Cultural methods. Methods used to enhance crop health and prevent 
weed, pest, or disease problems without the use of substances; examples 
include the selection of appropriate varieties and planting sites; 
proper timing and density of plantings; irrigation; and extending a 
growing season by manipulating the microclimate with green houses, cold 
frames, or wind breaks.
    Detectable residue. The amount or presence of chemical residue or 
sample component that can be reliably observed or found in the sample 
matrix by current approved analytical methodology.
    Disease vectors. Plants or animals that harbor or transmit disease 
organisms or pathogens which may attack crops or livestock.
    Drift. The physical movement of prohibited substances from the 
intended target site onto an organic operation or portion thereof.
    Emergency pest or disease treatment program. A mandatory program 
authorized by a Federal, State, or local agency for the purpose of 
controlling or eradicating a pest or disease.
    Employee. Any person providing paid or volunteer services for a 
certifying agent.
    Excluded methods. A variety of methods used to genetically modify 
organisms or influence their growth and development by means that are 
not possible under natural conditions or processes and are not 
considered compatible with organic production. Such methods include 
cell fusion, microencapsulation and macroencapsulation, and recombinant 
DNA technology (including gene deletion, gene doubling, introducing a 
foreign gene, and changing the positions of genes when achieved by 
recombinant DNA technology). Such methods do not include the use of 
traditional breeding, conjugation, fermentation, hybridization, in 
vitro fertilization, or tissue culture.
    Feed. Edible materials which are consumed by livestock for their 
nutritional value. Feed may be concentrates (grains) or roughages (hay, 
silage, fodder). The term, ``feed,'' encompasses all agricultural 
commodities, including pasture ingested by livestock for nutritional 
purposes.
    Feed additive. A substance added to feed in micro quantities to 
fulfill a specific nutritional need; i.e., essential nutrients in the 
form of amino acids, vitamins, and minerals.
    Feed supplement. A combination of feed nutrients added to livestock 
feed to improve the nutrient balance or performance of the total ration 
and intended to be:
    (1) Diluted with other feeds when fed to livestock;
    (2) Offered free choice with other parts of the ration if 
separately available; or
    (3) Further diluted and mixed to produce a complete feed.
    Fertilizer. A single or blended substance containing one or more 
recognized plant nutrient(s) which is used primarily for its plant 
nutrient content and which is designed for use or claimed to have value 
in promoting plant growth.
    Field. An area of land identified as a discrete unit within a 
production operation.
    Forage. Vegetative material in a fresh, dried, or ensiled state 
(pasture, hay, or silage), which is fed to livestock.
    Governmental entity. Any domestic government, tribal government, or 
foreign governmental subdivision providing certification services.
    Handle. To sell, process, or package agricultural products, except 
such term shall not include the sale, transportation, or delivery of 
crops or livestock by the producer thereof to a handler.
    Handler. Any person engaged in the business of handling 
agricultural products, including producers who handle crops or 
livestock of their own production, except such term shall not include 
final retailers of agricultural products that do not process 
agricultural products.

[[Page 80640]]

    Handling operation. Any operation or portion of an operation 
(except final retailers of agricultural products that do not process 
agricultural products) that receives or otherwise acquires agricultural 
products and processes, packages, or stores such products.
    Immediate family. The spouse, minor children, or blood relatives 
who reside in the immediate household of a certifying agent or an 
employee, inspector, contractor, or other personnel of the certifying 
agent. For the purpose of this part, the interest of a spouse, minor 
child, or blood relative who is a resident of the immediate household 
of a certifying agent or an employee, inspector, contractor, or other 
personnel of the certifying agent shall be considered to be an interest 
of the certifying agent or an employee, inspector, contractor, or other 
personnel of the certifying agent.
    Inert ingredient. Any substance (or group of substances with 
similar chemical structures if designated by the Environmental 
Protection Agency) other than an active ingredient which is 
intentionally included in any pesticide product (40 CFR 152.3(m)).
    Information panel. That part of the label of a packaged product 
that is immediately contiguous to and to the right of the principal 
display panel as observed by an individual facing the principal display 
panel, unless another section of the label is designated as the 
information panel because of package size or other package attributes 
(e.g., irregular shape with one usable surface).
    Ingredient. Any substance used in the preparation of an 
agricultural product that is still present in the final commercial 
product as consumed.
    Ingredients statement. The list of ingredients contained in a 
product shown in their common and usual names in the descending order 
of predominance.
    Inspection. The act of examining and evaluating the production or 
handling operation of an applicant for certification or certified 
operation to determine compliance with the Act and the regulations in 
this part.
    Inspector. Any person retained or used by a certifying agent to 
conduct inspections of certification applicants or certified production 
or handling operations.
    Label. A display of written, printed, or graphic material on the 
immediate container of an agricultural product or any such material 
affixed to any agricultural product or affixed to a bulk container 
containing an agricultural product, except for package liners or a 
display of written, printed, or graphic material which contains only 
information about the weight of the product.
    Labeling. All written, printed, or graphic material accompanying an 
agricultural product at any time or written, printed, or graphic 
material about the agricultural product displayed at retail stores 
about the product.
    Livestock. Any cattle, sheep, goat, swine, poultry, or equine 
animals used for food or in the production of food, fiber, feed, or 
other agricultural-based consumer products; wild or domesticated game; 
or other nonplant life, except such term shall not include aquatic 
animals or bees for the production of food, fiber, feed, or other 
agricultural-based consumer products.
    Lot. Any number of containers which contain an agricultural product 
of the same kind located in the same conveyance, warehouse, or packing 
house and which are available for inspection at the same time.
    Manure. Feces, urine, other excrement, and bedding produced by 
livestock that has not been composted.
    Market information. Any written, printed, audiovisual, or graphic 
information, including advertising, pamphlets, flyers, catalogues, 
posters, and signs, distributed, broadcast, or made available outside 
of retail outlets that are used to assist in the sale or promotion of a 
product.
    Mulch. Any nonsynthetic material, such as wood chips, leaves, or 
straw, or any synthetic material included on the National List for such 
use, such as newspaper or plastic that serves to suppress weed growth, 
moderate soil temperature, or conserve soil moisture.
    Narrow range oils. Petroleum derivatives, predominately of 
paraffinic and napthenic fractions with 50 percent boiling point (10 mm 
Hg) between 415 deg. F and 440 deg. F.
    National List. A list of allowed and prohibited substances as 
provided for in the Act.
    National Organic Program (NOP). The program authorized by the Act 
for the purpose of implementing its provisions.
    National Organic Standards Board (NOSB). A board established by the 
Secretary under 7 U.S.C. 6518 to assist in the development of standards 
for substances to be used in organic production and to advise the 
Secretary on any other aspects of the implementation of the National 
Organic Program.
    Natural resources of the operation. The physical, hydrological, and 
biological features of a production operation, including soil, water, 
wetlands, woodlands, and wildlife.
    Nonagricultural substance. A substance that is not a product of 
agriculture, such as a mineral or a bacterial culture, that is used as 
an ingredient in an agricultural product. For the purposes of this 
part, a nonagricultural ingredient also includes any substance, such as 
gums, citric acid, or pectin, that is extracted from, isolated from, or 
a fraction of an agricultural product so that the identity of the 
agricultural product is unrecognizable in the extract, isolate, or 
fraction.
    Nonsynthetic (natural). A substance that is derived from mineral, 
plant, or animal matter and does not undergo a synthetic process as 
defined in section 6502(21) of the Act (7 U.S.C. 6502(21)). For the 
purposes of this part, nonsynthetic is used as a synonym for natural as 
the term is used in the Act.
    Nonretail container. Any container used for shipping or storage of 
an agricultural product that is not used in the retail display or sale 
of the product.
    Nontoxic. Not known to cause any adverse physiological effects in 
animals, plants, humans, or the environment.
    Organic. A labeling term that refers to an agricultural product 
produced in accordance with the Act and the regulations in this part.
    Organic matter. The remains, residues, or waste products of any 
organism.
    Organic production. A production system that is managed in 
accordance with the Act and regulations in this part to respond to 
site-specific conditions by integrating cultural, biological, and 
mechanical practices that foster cycling of resources, promote 
ecological balance, and conserve biodiversity.
    Organic system plan. A plan of management of an organic production 
or handling operation that has been agreed to by the producer or 
handler and the certifying agent and that includes written plans 
concerning all aspects of agricultural production or handling described 
in the Act and the regulations in subpart C of this part.
    Pasture. Land used for livestock grazing that is managed to provide 
feed value and maintain or improve soil, water, and vegetative 
resources.
    Peer review panel. A panel of individuals who have expertise in 
organic production and handling methods and certification procedures 
and who are appointed by the Administrator to assist in evaluating 
applicants for accreditation as certifying agents.
    Person. An individual, partnership, corporation, association, 
cooperative, or other entity.
    Pesticide. Any substance which alone, in chemical combination, or 
in any formulation with one or more substances is defined as a 
pesticide in

[[Page 80641]]

section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide Act 
(7 U.S.C. 136(u) et seq).
    Petition. A request to amend the National List that is submitted by 
any person in accordance with this part.
    Planting stock. Any plant or plant tissue other than annual 
seedlings but including rhizomes, shoots, leaf or stem cuttings, roots, 
or tubers, used in plant production or propagation.
    Practice standard. The guidelines and requirements through which a 
production or handling operation implements a required component of its 
production or handling organic system plan. A practice standard 
includes a series of allowed and prohibited actions, materials, and 
conditions to establish a minimum level performance for planning, 
conducting, and maintaining a function, such as livestock health care 
or facility pest management, essential to an organic operation.
    Principal display panel. That part of a label that is most likely 
to be displayed, presented, shown, or examined under customary 
conditions of display for sale.
    Private entity. Any domestic or foreign nongovernmental for-profit 
or not-for-profit organization providing certification services.
    Processing. Cooking, baking, curing, heating, drying, mixing, 
grinding, churning, separating, extracting, slaughtering, cutting, 
fermenting, distilling, eviscerating, preserving, dehydrating, 
freezing, chilling, or otherwise manufacturing and includes the 
packaging, canning, jarring, or otherwise enclosing food in a 
container.
    Processing aid. (1) Substance that is added to a food during the 
processing of such food but is removed in some manner from the food 
before it is packaged in its finished form;
    (2) a substance that is added to a food during processing, is 
converted into constituents normally present in the food, and does not 
significantly increase the amount of the constituents naturally found 
in the food; and
    (3) a substance that is added to a food for its technical or 
functional effect in the processing but is present in the finished food 
at insignificant levels and does not have any technical or functional 
effect in that food.
    Producer. A person who engages in the business of growing or 
producing food, fiber, feed, and other agricultural-based consumer 
products.
    Production lot number/identifier. Identification of a product based 
on the production sequence of the product showing the date, time, and 
place of production used for quality control purposes.
    Prohibited substance. A substance the use of which in any aspect of 
organic production or handling is prohibited or not provided for in the 
Act or the regulations of this part.
    Records. Any information in written, visual, or electronic form 
that documents the activities undertaken by a producer, handler, or 
certifying agent to comply with the Act and regulations in this part.
    Residue testing. An official or validated analytical procedure that 
detects, identifies, and measures the presence of chemical substances, 
their metabolites, or degradations products in or on raw or processed 
agricultural products.
    Responsibly connected. Any person who is a partner, officer, 
director, holder, manager, or owner of 10 percent or more of the voting 
stock of an applicant or a recipient of certification or accreditation.
    Retail food establishment. A restaurant; delicatessen; bakery; 
grocery store; or any retail outlet with an in-store restaurant, 
delicatessen, bakery, salad bar, or other eat-in or carry-out service 
of processed or prepared raw and ready-to-eat-food.
    Routine use of parasiticide. The regular, planned, or periodic use 
of parasiticides.
    Secretary. The Secretary of Agriculture or a representative to whom 
authority has been delegated to act in the Secretary's stead.
    Sewage sludge. A solid, semisolid, or liquid residue generated 
during the treatment of domestic sewage in a treatment works. Sewage 
sludge includes but is not limited to: domestic septage; scum or solids 
removed in primary, secondary, or advanced wastewater treatment 
processes; and a material derived from sewage sludge. Sewage sludge 
does not include ash generated during the firing of sewage sludge in a 
sewage sludge incinerator or grit and screenings generated during 
preliminary treatment of domestic sewage in a treatment works.
    Slaughter stock. Any animal that is intended to be slaughtered for 
consumption by humans or other animals.
    Soil and water quality. Observable indicators of the physical, 
chemical, or biological condition of soil and water, including the 
presence of environmental contaminants.
    Split operation. An operation that produces or handles both organic 
and nonorganic agricultural products.
    State. Any of the several States of the United States of America, 
its territories, the District of Columbia, and the Commonwealth of 
Puerto Rico.
    State certifying agent. A certifying agent accredited by the 
Secretary under the National Organic Program and operated by the State 
for the purposes of certifying organic production and handling 
operations in the State.
    State organic program (SOP). A State program that meets the 
requirements of section 6506 of the Act, is approved by the Secretary, 
and is designed to ensure that a product that is sold or labeled as 
organically produced under the Act is produced and handled using 
organic methods.
    State organic program's governing State official. The chief 
executive official of a State or, in the case of a State that provides 
for the statewide election of an official to be responsible solely for 
the administration of the agricultural operations of the State, such 
official who administers a State organic certification program.
    Synthetic. A substance that is formulated or manufactured by a 
chemical process or by a process that chemically changes a substance 
extracted from naturally occurring plant, animal, or mineral sources, 
except that such term shall not apply to substances created by 
naturally occurring biological processes.
    Tolerance. The maximum legal level of a pesticide chemical residue 
in or on a raw or processed agricultural commodity or processed food.
    Transplant. A seedling which has been removed from its original 
place of production, transported, and replanted.
    Unavoidable residual environmental contamination (UREC). Background 
levels of naturally occurring or synthetic chemicals that are present 
in the soil or present in organically produced agricultural products 
that are below established tolerances.
    Wild crop. Any plant or portion of a plant that is collected or 
harvested from a site that is not maintained under cultivation or other 
agricultural management.

Subpart B--Applicability


Sec. 205.100  What has to be certified.

    (a) Except for operations exempt or excluded in Sec. 205.101, each 
production or handling operation or specified portion of a production 
or handling operation that produces or handles crops, livestock, 
livestock products, or other agricultural products that are intended to 
be sold, labeled, or represented as ``100 percent organic,'' 
``organic,'' or ``made with organic (specified ingredients or food 
group(s))'' must be certified according to the provisions of subpart E 
of this part and

[[Page 80642]]

must meet all other applicable requirements of this part.
    (b) Any production or handling operation or specified portion of a 
production or handling operation that has been already certified by a 
certifying agent on the date that the certifying agent receives its 
accreditation under this part shall be deemed to be certified under the 
Act until the operation's next anniversary date of certification. Such 
recognition shall only be available to those operations certified by a 
certifying agent that receives its accreditation within 18 months from 
February 20, 2001.
    (c) Any operation that:
    (1) Knowingly sells or labels a product as organic, except in 
accordance with the Act, shall be subject to a civil penalty of not 
more than $10,000 per violation.
    (2) Makes a false statement under the Act to the Secretary, a 
governing State official, or an accredited certifying agent shall be 
subject to the provisions of section 1001 of title 18, United States 
Code.


Sec. 205.101  Exemptions and exclusions from certification.

    (a) Exemptions. (1) A production or handling operation that sells 
agricultural products as ``organic'' but whose gross agricultural 
income from organic sales totals $5,000 or less annually is exempt from 
certification under subpart E of this part and from submitting an 
organic system plan for acceptance or approval under Sec. 205.201 but 
must comply with the applicable organic production and handling 
requirements of subpart C of this part and the labeling requirements of 
Sec. 205.310. The products from such operations shall not be used as 
ingredients identified as organic in processed products produced by 
another handling operation.
    (2) A handling operation that is a retail food establishment or 
portion of a retail food establishment that handles organically 
produced agricultural products but does not process them is exempt from 
the requirements in this part.
    (3) A handling operation or portion of a handling operation that 
only handles agricultural products that contain less than 70 percent 
organic ingredients by total weight of the finished product (excluding 
water and salt) is exempt from the requirements in this part, except:
    (i) The provisions for prevention of contact of organic products 
with prohibited substances set forth in Sec. 205.272 with respect to 
any organically produced ingredients used in an agricultural product;
    (ii) The labeling provisions of Secs. 205.305 and 205.310; and
    (iii) The recordkeeping provisions in paragraph (c) of this 
section.
    (4) A handling operation or portion of a handling operation that 
only identifies organic ingredients on the information panel is exempt 
from the requirements in this part, except:
    (i) The provisions for prevention of contact of organic products 
with prohibited substances set forth in Sec. 205.272 with respect to 
any organically produced ingredients used in an agricultural product;
    (ii) The labeling provisions of Secs. 205.305 and 205.310; and
    (iii) The recordkeeping provisions in paragraph (c) of this 
section.
    (b) Exclusions. (1) A handling operation or portion of a handling 
operation is excluded from the requirements of this part, except for 
the requirements for the prevention of commingling and contact with 
prohibited substances as set forth in Sec. 205.272 with respect to any 
organically produced products, if such operation or portion of the 
operation only sells organic agricultural products labeled as ``100 
percent organic,'' ``organic,'' or ``made with organic (specified 
ingredients or food group(s))'' that:
    (i) Are packaged or otherwise enclosed in a container prior to 
being received or acquired by the operation; and
    (ii) Remain in the same package or container and are not otherwise 
processed while in the control of the handling operation.
    (2) A handling operation that is a retail food establishment or 
portion of a retail food establishment that processes, on the premises 
of the retail food establishment, raw and ready-to-eat food from 
agricultural products that were previously labeled as ``100 percent 
organic,'' ``organic,'' or ``made with organic (specified ingredients 
or food group(s))'' is excluded from the requirements in this part, 
except:
    (i) The requirements for the prevention of contact with prohibited 
substances as set forth in Sec. 205.272; and
    (ii) The labeling provisions of Sec. 205.310.
    (c) Records to be maintained by exempt operations. (1) Any handling 
operation exempt from certification pursuant to paragraph (a)(3) or 
(a)(4) of this section must maintain records sufficient to:
    (i) Prove that ingredients identified as organic were organically 
produced and handled; and
    (ii) Verify quantities produced from such ingredients.
    (2) Records must be maintained for no less than 3 years beyond 
their creation and the operations must allow representatives of the 
Secretary and the applicable State organic programs' governing State 
official access to these records for inspection and copying during 
normal business hours to determine compliance with the applicable 
regulations set forth in this part.


Sec. 205.102  Use of the term, ``organic.''

    Any agricultural product that is sold, labeled, or represented as 
``100 percent organic,'' ``organic,'' or ``made with organic (specified 
ingredients or food group(s))'' must be:
    (a) Produced in accordance with the requirements specified in 
Sec. 205.101 or Secs. 205.202 through 205.207 or Secs. 205.236 through 
205.239 and all other applicable requirements of part 205; and
    (b) Handled in accordance with the requirements specified in 
Sec. 205.101 or Secs. 205.270 through 205.272 and all other applicable 
requirements of this part 205.


Sec. 205.103  Recordkeeping by certified operations.

    (a) A certified operation must maintain records concerning the 
production, harvesting, and handling of agricultural products that are 
or that are intended to be sold, labeled, or represented as ``100 
percent organic,'' ``organic,'' or ``made with organic (specified 
ingredients or food group(s)).''
    (b) Such records must:
    (1) Be adapted to the particular business that the certified 
operation is conducting;
    (2) Fully disclose all activities and transactions of the certified 
operation in sufficient detail as to be readily understood and audited;
    (3) Be maintained for not less than 5 years beyond their creation; 
and
    (4) Be sufficient to demonstrate compliance with the Act and the 
regulations in this part.
    (c) The certified operation must make such records available for 
inspection and copying during normal business hours by authorized 
representatives of the Secretary, the applicable State program's 
governing State official, and the certifying agent.


Sec. 205.104  [Reserved]


Sec. 205.105  Allowed and prohibited substances, methods, and 
ingredients in organic production and handling.

    To be sold or labeled as ``100 percent organic,'' ``organic,'' or 
``made with

[[Page 80643]]

organic (specified ingredients or food group(s)),'' the product must be 
produced and handled without the use of:
    (a) Synthetic substances and ingredients, except as provided in 
Sec. 205.601 or Sec. 205.603;
    (b) Nonsynthetic substances prohibited in Sec. 205.602 or 
Sec. 205.604;
    (c) Nonagricultural substances used in or on processed products, 
except as otherwise provided in Sec. 205.605;
    (d) Nonorganic agricultural substances used in or on processed 
products, except as otherwise provided in Sec. 205.606;
    (e) Excluded methods, except for vaccines: Provided, That, the 
vaccines are approved in accordance with Sec. 205.600(a);
    (f) Ionizing radiation, as described in Food and Drug 
Administration regulation, 21 CFR 179.26; and
    (g) Sewage sludge.


Secs. 205.106-205.199  [Reserved]

Subpart C--Organic Production and Handling Requirements


Sec. 205.200  General.

    The producer or handler of a production or handling operation 
intending to sell, label, or represent agricultural products as ``100 
percent organic,'' ``organic,'' or ``made with organic (specified 
ingredients or food group(s))'' must comply with the applicable 
provisions of this subpart. Production practices implemented in 
accordance with this subpart must maintain or improve the natural 
resources of the operation, including soil and water quality.


Sec. 205.201  Organic production and handling system plan.

    (a) The producer or handler of a production or handling operation, 
except as exempt or excluded under Sec. 205.101, intending to sell, 
label, or represent agricultural products as ``100 percent organic,'' 
``organic,'' or ``made with organic (specified ingredients or food 
group(s))'' must develop an organic production or handling system plan 
that is agreed to by the producer or handler and an accredited 
certifying agent. An organic system plan must meet the requirements set 
forth in this section for organic production or handling. An organic 
production or handling system plan must include:
    (1) A description of practices and procedures to be performed and 
maintained, including the frequency with which they will be performed;
    (2) A list of each substance to be used as a production or handling 
input, indicating its composition, source, location(s) where it will be 
used, and documentation of commercial availability, as applicable;
    (3) A description of the monitoring practices and procedures to be 
performed and maintained, including the frequency with which they will 
be performed, to verify that the plan is effectively implemented;
    (4) A description of the recordkeeping system implemented to comply 
with the requirements established in Sec. 205.103;
    (5) A description of the management practices and physical barriers 
established to prevent commingling of organic and nonorganic products 
on a split operation and to prevent contact of organic production and 
handling operations and products with prohibited substances; and
    (6) Additional information deemed necessary by the certifying agent 
to evaluate compliance with the regulations.
    (b) A producer may substitute a plan prepared to meet the 
requirements of another Federal, State, or local government regulatory 
program for the organic system plan: Provided, That, the submitted plan 
meets all the requirements of this subpart.


Sec. 205.202  Land requirements.

    Any field or farm parcel from which harvested crops are intended to 
be sold, labeled, or represented as ``organic,'' must:
    (a) Have been managed in accordance with the provisions of 
Secs. 205.203 through 205.206;
    (b) Have had no prohibited substances, as listed in Sec. 205.105, 
applied to it for a period of 3 years immediately preceding harvest of 
the crop; and
    (c) Have distinct, defined boundaries and buffer zones such as 
runoff diversions to prevent the unintended application of a prohibited 
substance to the crop or contact with a prohibited substance applied to 
adjoining land that is not under organic management.


Sec. 205.203  Soil fertility and crop nutrient management practice 
standard.

    (a) The producer must select and implement tillage and cultivation 
practices that maintain or improve the physical, chemical, and 
biological condition of soil and minimize soil erosion.
    (b) The producer must manage crop nutrients and soil fertility 
through rotations, cover crops, and the application of plant and animal 
materials.
    (c) The producer must manage plant and animal materials to maintain 
or improve soil organic matter content in a manner that does not 
contribute to contamination of crops, soil, or water by plant 
nutrients, pathogenic organisms, heavy metals, or residues of 
prohibited substances. Animal and plant materials include:
    (1) Raw animal manure, which must be composted unless it is:
    (i) Applied to land used for a crop not intended for human 
consumption;
    (ii) Incorporated into the soil not less than 120 days prior to the 
harvest of a product whose edible portion has direct contact with the 
soil surface or soil particles; or
    (iii) Incorporated into the soil not less than 90 days prior to the 
harvest of a product whose edible portion does not have direct contact 
with the soil surface or soil particles;
    (2) Composted plant and animal materials produced though a process 
that:
    (i) Established an initial C:N ratio of between 25:1 and 40:1; and
    (ii) Maintained a temperature of between 131 deg. F and 170 deg. F 
for 3 days using an in-vessel or static aerated pile system; or
    (iii) Maintained a temperature of between 131 deg. F and 170 deg. F 
for 15 days using a windrow composting system, during which period, the 
materials must be turned a minimum of five times.
    (3) Uncomposted plant materials.
    (d) A producer may manage crop nutrients and soil fertility to 
maintain or improve soil organic matter content in a manner that does 
not contribute to contamination of crops, soil, or water by plant 
nutrients, pathogenic organisms, heavy metals, or residues of 
prohibited substances by applying:
    (1) A crop nutrient or soil amendment included on the National List 
of synthetic substances allowed for use in organic crop production;
    (2) A mined substance of low solubility;
    (3) A mined substance of high solubility: Provided, That, the 
substance is used in compliance with the conditions established on the 
National List of nonsynthetic materials prohibited for crop production;
    (4) Ash obtained from the burning of a plant or animal material, 
except as prohibited in paragraph (e) of this section: Provided, That, 
the material burned has not been treated or combined with a prohibited 
substance or the ash is not included on the National List of 
nonsynthetic substances prohibited for use in organic crop production; 
and
    (5) A plant or animal material that has been chemically altered by 
a manufacturing process: Provided, That, the material is included on 
the National

[[Page 80644]]

List of synthetic substances allowed for use in organic crop production 
established in Sec. 205.601.
    (e) The producer must not use:
    (1) Any fertilizer or composted plant and animal material that 
contains a synthetic substance not included on the National List of 
synthetic substances allowed for use in organic crop production;
    (2) Sewage sludge (biosolids) as defined in 40 CFR part 503; and 
(3) Burning as a means of disposal for crop residues produced on the 
operation: Except, That, burning may be used to suppress the spread of 
disease or to stimulate seed germination.


Sec. 205.204  Seeds and planting stock practice standard.

    (a) The producer must use organically grown seeds, annual 
seedlings, and planting stock: Except, That,
    (1) Nonorganically produced, untreated seeds and planting stock may 
be used to produce an organic crop when an equivalent organically 
produced variety is not commercially available: Except, That, 
organically produced seed must be used for the production of edible 
sprouts;
    (2) Nonorganically produced seeds and planting stock that have been 
treated with a substance included on the National List of synthetic 
substances allowed for use in organic crop production may be used to 
produce an organic crop when an equivalent organically produced or 
untreated variety is not commercially available;
    (3) Nonorganically produced annual seedlings may be used to produce 
an organic crop when a temporary variance has been granted in 
accordance with Sec. 205.290(a)(2);
    (4) Nonorganically produced planting stock to be used to produce a 
perennial crop may be sold, labeled, or represented as organically 
produced only after the planting stock has been maintained under a 
system of organic management for a period of no less than 1 year; and
    (5) Seeds, annual seedlings, and planting stock treated with 
prohibited substances may be used to produce an organic crop when the 
application of the materials is a requirement of Federal or State 
phytosanitary regulations.
    (b) [Reserved]


Sec. 205.205  Crop rotation practice standard.

    The producer must implement a crop rotation including but not 
limited to sod, cover crops, green manure crops, and catch crops that 
provide the following functions that are applicable to the operation:
    (a) Maintain or improve soil organic matter content;
    (b) Provide for pest management in annual and perennial crops;
    (c) Manage deficient or excess plant nutrients; and
    (d) Provide erosion control.


Sec. 205.206  Crop pest, weed, and disease management practice 
standard.

    (a) The producer must use management practices to prevent crop 
pests, weeds, and diseases including but not limited to:
    (1) Crop rotation and soil and crop nutrient management practices, 
as provided for in Secs. 205.203 and 205.205;
    (2) Sanitation measures to remove disease vectors, weed seeds, and 
habitat for pest organisms; and
    (3) Cultural practices that enhance crop health, including 
selection of plant species and varieties with regard to suitability to 
site-specific conditions and resistance to prevalent pests, weeds, and 
diseases.
    (b) Pest problems may be controlled through mechanical or physical 
methods including but not limited to:
    (1) Augmentation or introduction of predators or parasites of the 
pest species;
    (2) Development of habitat for natural enemies of pests;
    (3) Nonsynthetic controls such as lures, traps, and repellents.
    (c) Weed problems may be controlled through:
    (1) Mulching with fully biodegradable materials;
    (2) Mowing;
    (3) Livestock grazing;
    (4) Hand weeding and mechanical cultivation;
    (5) Flame, heat, or electrical means; or
    (6) Plastic or other synthetic mulches: Provided, That, they are 
removed from the field at the end of the growing or harvest season.
    (d) Disease problems may be controlled through:
    (1) Management practices which suppress the spread of disease 
organisms; or
    (2) Application of nonsynthetic biological, botanical, or mineral 
inputs.
    (e) When the practices provided for in paragraphs (a) through (d) 
of this section are insufficient to prevent or control crop pests, 
weeds, and diseases, a biological or botanical substance or a substance 
included on the National List of synthetic substances allowed for use 
in organic crop production may be applied to prevent, suppress, or 
control pests, weeds, or diseases: Provided, That, the conditions for 
using the substance are documented in the organic system plan.
    (f) The producer must not use lumber treated with arsenate or other 
prohibited materials for new installations or replacement purposes in 
contact with soil or livestock.


Sec. 205.207  Wild-crop harvesting practice standard.

    (a) A wild crop that is intended to be sold, labeled, or 
represented as organic must be harvested from a designated area that 
has had no prohibited substance, as set forth in Sec. 205.105, applied 
to it for a period of 3 years immediately preceding the harvest of the 
wild crop.
    (b) A wild crop must be harvested in a manner that ensures that 
such harvesting or gathering will not be destructive to the environment 
and will sustain the growth and production of the wild crop.


Secs. 205.208--205.235  [Reserved]


Sec. 205.236  Origin of livestock.

    (a) Livestock products that are to be sold, labeled, or represented 
as organic must be from livestock under continuous organic management 
from the last third of gestation or hatching: Except, That:
    (1) Poultry. Poultry or edible poultry products must be from 
poultry that has been under continuous organic management beginning no 
later than the second day of life;
    (2) Dairy animals. Milk or milk products must be from animals that 
have been under continuous organic management beginning no later than 1 
year prior to the production of the milk or milk products that are to 
be sold, labeled, or represented as organic: Except, That, when an 
entire, distinct herd is converted to organic production, the producer 
may:
    (i) For the first 9 months of the year, provide a minimum of 80-
percent feed that is either organic or raised from land included in the 
organic system plan and managed in compliance with organic crop 
requirements; and
    (ii) Provide feed in compliance with Sec. 205.237 for the final 3 
months.
    (iii) Once an entire, distinct herd has been converted to organic 
production, all dairy animals shall be under organic management from 
the last third of gestation.
    (3) Breeder stock. Livestock used as breeder stock may be brought 
from a nonorganic operation onto an organic operation at any time: 
Provided, That, if such livestock are gestating and the offspring are 
to be raised as organic livestock, the breeder stock must be brought 
onto the facility no later than the last third of gestation.
    (b) The following are prohibited:
    (1) Livestock or edible livestock products that are removed from an

[[Page 80645]]

organic operation and subsequently managed on a nonorganic operation 
may be not sold, labeled, or represented as organically produced.
    (2) Breeder or dairy stock that has not been under continuous 
organic management since the last third of gestation may not be sold, 
labeled, or represented as organic slaughter stock.
    (c) The producer of an organic livestock operation must maintain 
records sufficient to preserve the identity of all organically managed 
animals and edible and nonedible animal products produced on the 
operation.


Sec. 205.237  Livestock feed.

    (a) The producer of an organic livestock operation must provide 
livestock with a total feed ration composed of agricultural products, 
including pasture and forage, that are organically produced and, if 
applicable, organically handled: Except, That, nonsynthetic substances 
and synthetic substances allowed under Sec. 205.603 may be used as feed 
additives and supplements.
    (b) The producer of an organic operation must not:
    (1) Use animal drugs, including hormones, to promote growth;
    (2) Provide feed supplements or additives in amounts above those 
needed for adequate nutrition and health maintenance for the species at 
its specific stage of life;
    (3) Feed plastic pellets for roughage;
    (4) Feed formulas containing urea or manure;
    (5) Feed mammalian or poultry slaughter by-products to mammals or 
poultry; or
    (6) Use feed, feed additives, and feed supplements in violation of 
the Federal Food, Drug, and Cosmetic Act.


Sec. 205.238  Livestock health care practice standard.

    (a) The producer must establish and maintain preventive livestock 
health care practices, including:
    (1) Selection of species and types of livestock with regard to 
suitability for site-specific conditions and resistance to prevalent 
diseases and parasites;
    (2) Provision of a feed ration sufficient to meet nutritional 
requirements, including vitamins, minerals, protein and/or amino acids, 
fatty acids, energy sources, and fiber (ruminants);
    (3) Establishment of appropriate housing, pasture conditions, and 
sanitation practices to minimize the occurrence and spread of diseases 
and parasites;
    (4) Provision of conditions which allow for exercise, freedom of 
movement, and reduction of stress appropriate to the species;
    (5) Performance of physical alterations as needed to promote the 
animal's welfare and in a manner that minimizes pain and stress; and
    (6) Administration of vaccines and other veterinary biologics.
    (b) When preventive practices and veterinary biologics are 
inadequate to prevent sickness, a producer may administer synthetic 
medications: Provided, That, such medications are allowed under 
Sec. 205.603. Parasiticides allowed under Sec. 205.603 may be used on:
    (1) Breeder stock, when used prior to the last third of gestation 
but not during lactation for progeny that are to be sold, labeled, or 
represented as organically produced; and
    (2) Dairy stock, when used a minimum of 90 days prior to the 
production of milk or milk products that are to be sold, labeled, or 
represented as organic.
    (c) The producer of an organic livestock operation must not:
    (1) Sell, label, or represent as organic any animal or edible 
product derived from any animal treated with antibiotics, any substance 
that contains a synthetic substance not allowed under Sec. 205.603, or 
any substance that contains a nonsynthetic substance prohibited in 
Sec. 205.604.
    (2) Administer any animal drug, other than vaccinations, in the 
absence of illness;
    (3) Administer hormones for growth promotion;
    (4) Administer synthetic parasiticides on a routine basis;
    (5) Administer synthetic parasiticides to slaughter stock;
    (6) Administer animal drugs in violation of the Federal Food, Drug, 
and Cosmetic Act; or
    (7) Withhold medical treatment from a sick animal in an effort to 
preserve its organic status. All appropriate medications must be used 
to restore an animal to health when methods acceptable to organic 
production fail. Livestock treated with a prohibited substance must be 
clearly identified and shall not be sold, labeled, or represented as 
organically produced.


Sec. 205.239  Livestock living conditions.

    (a) The producer of an organic livestock operation must establish 
and maintain livestock living conditions which accommodate the health 
and natural behavior of animals, including:
    (1) Access to the outdoors, shade, shelter, exercise areas, fresh 
air, and direct sunlight suitable to the species, its stage of 
production, the climate, and the environment;
    (2) Access to pasture for ruminants;
    (3) Appropriate clean, dry bedding. If the bedding is typically 
consumed by the animal species, it must comply with the feed 
requirements of Sec. 205.237;
    (4) Shelter designed to allow for:
    (i) Natural maintenance, comfort behaviors, and opportunity to 
exercise;
    (ii) Temperature level, ventilation, and air circulation suitable 
to the species; and
    (iii) Reduction of potential for livestock injury;
    (b) The producer of an organic livestock operation may provide 
temporary confinement for an animal because of:
    (1) Inclement weather;
    (2) The animal's stage of production;
    (3) Conditions under which the health, safety, or well being of the 
animal could be jeopardized; or
    (4) Risk to soil or water quality.
    (c) The producer of an organic livestock operation must manage 
manure in a manner that does not contribute to contamination of crops, 
soil, or water by plant nutrients, heavy metals, or pathogenic 
organisms and optimizes recycling of nutrients.


Secs. 205.240--205.269  [Reserved]


Sec. 205.270  Organic handling requirements.

    (a) Mechanical or biological methods, including but not limited to 
cooking, baking, curing, heating, drying, mixing, grinding, churning, 
separating, distilling, extracting, slaughtering, cutting, fermenting, 
eviscerating, preserving, dehydrating, freezing, chilling, or otherwise 
manufacturing, and the packaging, canning, jarring, or otherwise 
enclosing food in a container may be used to process an organically 
produced agricultural product for the purpose of retarding spoilage or 
otherwise preparing the agricultural product for market.
    (b) Nonagricultural substances allowed under Sec. 205.605 and 
nonorganically produced agricultural products allowed under 
Sec. 205.606 may be used:
    (1) In or on a processed agricultural product intended to be sold, 
labeled, or represented as ``organic,'' pursuant to Sec. 205.301(b), if 
not commercially available in organic form.
    (2) In or on a processed agricultural product intended to be sold, 
labeled, or represented as ``made with organic (specified ingredients 
or food group(s)),'' pursuant to Sec. 205.301(c).
    (c) The handler of an organic handling operation must not use in or 
on agricultural products intended to be sold, labeled, or represented 
as ``100 percent organic,'' ``organic,'' or ``made

[[Page 80646]]

with organic (specified ingredients or food group(s)),'' or in or on 
any ingredients labeled as organic:
    (1) Practices prohibited under paragraphs (e) and (f) of 
Sec. 205.105.
    (2) A volatile synthetic solvent or other synthetic processing aid 
not allowed under Sec. 205.605: Except, That, nonorganic ingredients in 
products labeled ``made with organic (specified ingredients or food 
group(s))'' are not subject to this requirement.


Sec. 205.271  Facility pest management practice standard.

    (a) The producer or handler of an organic facility must use 
management practices to prevent pests, including but not limited to:
    (1) Removal of pest habitat, food sources, and breeding areas;
    (2) Prevention of access to handling facilities; and
    (3) Management of environmental factors, such as temperature, 
light, humidity, atmosphere, and air circulation, to prevent pest 
reproduction.
    (b) Pests may be controlled through:
    (1) Mechanical or physical controls including but not limited to 
traps, light, or sound; or
    (2) Lures and repellents using nonsynthetic or synthetic substances 
consistent with the National List.
    (c) If the practices provided for in paragraphs (a) and (b) of this 
section are not effective to prevent or control pests, a nonsynthetic 
or synthetic substance consistent with the National List may be 
applied.
    (d) If the practices provided for in paragraphs (a), (b), and (c) 
of this section are not effective to prevent or control facility pests, 
a synthetic substance not on the National List may be applied: 
Provided, That, the handler and certifying agent agree on the 
substance, method of application, and measures to be taken to prevent 
contact of the organically produced products or ingredients with the 
substance used.
    (e) The handler of an organic handling operation who applies a 
nonsynthetic or synthetic substance to prevent or control pests must 
update the operation's organic handling plan to reflect the use of such 
substances and methods of application. The updated organic plan must 
include a list of all measures taken to prevent contact of the 
organically produced products or ingredients with the substance used.
    (f) Notwithstanding the practices provided for in paragraphs (a), 
(b), (c), and (d) of this section, a handler may otherwise use 
substances to prevent or control pests as required by Federal, State, 
or local laws and regulations: Provided, That, measures are taken to 
prevent contact of the organically produced products or ingredients 
with the substance used.


Sec. 205.272  Commingling and contact with prohibited substance 
prevention practice standard.

    (a) The handler of an organic handling operation must implement 
measures necessary to prevent the commingling of organic and nonorganic 
products and protect organic products from contact with prohibited 
substances.
    (b) The following are prohibited for use in the handling of any 
organically produced agricultural product or ingredient labeled in 
accordance with subpart D of this part:
    (1) Packaging materials, and storage containers, or bins that 
contain a synthetic fungicide, preservative, or fumigant;
    (2) The use or reuse of any bag or container that has been in 
contact with any substance in such a manner as to compromise the 
organic integrity of any organically produced product or ingredient 
placed in those containers, unless such reusable bag or container has 
been thoroughly cleaned and poses no risk of contact of the organically 
produced product or ingredient with the substance used.


Secs. 205.273--205.289  [Reserved]


Sec. 205.290  Temporary variances.

    (a) Temporary variances from the requirements in Secs. 205.203 
through 205.207, 205.236 through 205.239, and 205.270 through 205.272 
may be established by the Administrator for the following reasons:
    (1) Natural disasters declared by the Secretary;
    (2) Damage caused by drought, wind, flood, excessive moisture, 
hail, tornado, earthquake, fire, or other business interruption; and
    (3) Practices used for the purpose of conducting research or trials 
of techniques, varieties, or ingredients used in organic production or 
handling.
    (b) A State organic program's governing State official or 
certifying agent may recommend in writing to the Administrator that a 
temporary variance from a standard set forth in subpart C of this part 
for organic production or handling operations be established: Provided, 
That, such variance is based on one or more of the reasons listed in 
paragraph (a) of this section.
    (c) The Administrator will provide written notification to 
certifying agents upon establishment of a temporary variance applicable 
to the certifying agent's certified production or handling operations 
and specify the period of time it shall remain in effect, subject to 
extension as the Administrator deems necessary.
    (d) A certifying agent, upon notification from the Administrator of 
the establishment of a temporary variance, must notify each production 
or handling operation it certifies to which the temporary variance 
applies.
    (e) Temporary variances will not be granted for any practice, 
material, or procedure prohibited under Sec. 205.105.


Secs. 205.291-205.299  [Reserved]

Subpart D--Labels, Labeling, and Market Information


Sec. 205.300  Use of the term, ``organic.''

    (a) The term, ``organic,'' may only be used on labels and in 
labeling of raw or processed agricultural products, including 
ingredients, that have been produced and handled in accordance with the 
regulations in this part. The term, ``organic,'' may not be used in a 
product name to modify a nonorganic ingredient in the product.
    (b) Products for export, produced and certified to foreign national 
organic standards or foreign contract buyer requirements, may be 
labeled in accordance with the organic labeling requirements of the 
receiving country or contract buyer: Provided, That, the shipping 
containers and shipping documents meet the labeling requirements 
specified in Sec. 205.307(c).
    (c) Products produced in a foreign country and exported for sale in 
the United States must be certified pursuant to subpart E of this part 
and labeled pursuant to this subpart D.
    (d) Livestock feeds produced in accordance with the requirements of 
this part must be labeled in accordance with the requirements of 
Sec. 205.306.


Sec. 205.301  Product composition.

    (a) Products sold, labeled, or represented as ``100 percent 
organic.'' A raw or processed agricultural product sold, labeled, or 
represented as ``100 percent organic'' must contain (by weight or fluid 
volume, excluding water and salt) 100 percent organically produced 
ingredients. If labeled as organically produced, such product must be 
labeled pursuant to Sec. 205.303.
    (b) Products sold, labeled, or represented as ``organic.'' A raw or 
processed agricultural product sold, labeled, or represented as 
``organic'' must contain (by weight or fluid volume, excluding water 
and salt) not less than 95 percent organically produced raw or 
processed agricultural products. Any remaining product ingredients must 
be organically produced, unless not commercially

[[Page 80647]]

available in organic form, or must be nonagricultural substances or 
nonorganically produced agricultural products produced consistent with 
the National List in subpart G of this part. If labeled as organically 
produced, such product must be labeled pursuant to Sec. 205.303.
    (c) Products sold, labeled, or represented as ``made with organic 
(specified ingredients or food group(s)).'' Multiingredient 
agricultural product sold, labeled, or represented as ``made with 
organic (specified ingredients or food group(s))'' must contain (by 
weight or fluid volume, excluding water and salt) at least 70 percent 
organically produced ingredients which are produced and handled 
pursuant to requirements in subpart C of this part. No ingredients may 
be produced using prohibited practices specified in paragraphs (f)(1), 
(2), and (3) of Sec. 205.301. Nonorganic ingredients may be produced 
without regard to paragraphs (f)(4), (5), (6), and (7) of Sec. 205.301. 
If labeled as containing organically produced ingredients or food 
groups, such product must be labeled pursuant to Sec. 205.304.
    (d) Products with less than 70 percent organically produced 
ingredients. The organic ingredients in multiingredient agricultural 
product containing less than 70 percent organically produced 
ingredients (by weight or fluid volume, excluding water and salt) must 
be produced and handled pursuant to requirements in subpart C of this 
part. The nonorganic ingredients may be produced and handled without 
regard to the requirements of this part. Multiingredient agricultural 
product containing less than 70 percent organically produced 
ingredients may represent the organic nature of the product only as 
provided in Sec. 205.305.
    (e) Livestock feed. (1) A raw or processed livestock feed product 
sold, labeled, or represented as ``100 percent organic'' must contain 
(by weight or fluid volume, excluding water and salt) not less than 100 
percent organically produced raw or processed agricultural product.
    (2) A raw or processed livestock feed product sold, labeled, or 
represented as ``organic'' must be produced in conformance with 
Sec. 205.237.
    (f) All products labeled as ``100 percent organic'' or ``organic'' 
and all ingredients identified as ``organic'' in the ingredient 
statement of any product must not:
    (1) Be produced using excluded methods, pursuant to Sec. 201.105(e) 
of this chapter;
    (2) Be produced using sewage sludge, pursuant to Sec. 201.105(f) of 
this chapter;
    (3) Be processed using ionizing radiation, pursuant to 
Sec. 201.105(g) of this chapter;
    (4) Be processed using processing aids not approved on the National 
List of Allowed and Prohibited Substances in subpart G of this part: 
Except, That, products labeled as ``100 percent organic,'' if 
processed, must be processed using organically produced processing 
aids;
    (5) Contain sulfites, nitrates, or nitrites added during the 
production or handling process, Except, that, wine containing added 
sulfites may be labeled ``made with organic grapes'';
    (6) Be produced using nonorganic ingredients when organic 
ingredients are available; or
    (7) Include organic and nonorganic forms of the same ingredient.


Sec. 205.302  Calculating the percentage of organically produced 
ingredients.

    (a) The percentage of all organically produced ingredients in an 
agricultural product sold, labeled, or represented as ``100 percent 
organic,'' ``organic,'' or ``made with organic (specified ingredients 
or food group(s)),'' or that include organic ingredients must be 
calculated by:
    (1) Dividing the total net weight (excluding water and salt) of 
combined organic ingredients at formulation by the total weight 
(excluding water and salt) of the finished product.
    (2) Dividing the fluid volume of all organic ingredients (excluding 
water and salt) by the fluid volume of the finished product (excluding 
water and salt) if the product and ingredients are liquid. If the 
liquid product is identified on the principal display panel or 
information panel as being reconstituted from concentrates, the 
calculation should be made on the basis of single-strength 
concentrations of the ingredients and finished product.
    (3) For products containing organically produced ingredients in 
both solid and liquid form, dividing the combined weight of the solid 
ingredients and the weight of the liquid ingredients (excluding water 
and salt) by the total weight (excluding water and salt) of the 
finished product.
    (b) The percentage of all organically produced ingredients in an 
agricultural product must be rounded down to the nearest whole number.
    (c) The percentage must be determined by the handler who affixes 
the label on the consumer package and verified by the certifying agent 
of the handler. The handler may use information provided by the 
certified operation in determining the percentage.


Sec. 205.303  Packaged products labeled ``100 percent organic'' or 
``organic.''

    (a) Agricultural products in packages described in Sec. 205.301(a) 
and (b) may display, on the principal display panel, information panel, 
and any other panel of the package and on any labeling or market 
information concerning the product, the following:
    (1) The term, ``100 percent organic'' or ``organic,'' as 
applicable, to modify the name of the product;
    (2) For products labeled ``organic,'' the percentage of organic 
ingredients in the product; (The size of the percentage statement must 
not exceed one-half the size of the largest type size on the panel on 
which the statement is displayed and must appear in its entirety in the 
same type size, style, and color without highlighting.)
    (3) The term, ``organic,'' to identify the organic ingredients in 
multiingredient products labeled ``100 percent organic'';
    (4) The USDA seal; and/or
    (5) The seal, logo, or other identifying mark of the certifying 
agent which certified the production or handling operation producing 
the finished product and any other certifying agent which certified 
production or handling operations producing raw organic product or 
organic ingredients used in the finished product: Provided, That, the 
handler producing the finished product maintain records, pursuant to 
this part, verifying organic certification of the operations producing 
such ingredients, and: Provided further, That, such seals or marks are 
not individually displayed more prominently than the USDA seal.
    (b) Agricultural products in packages described in Sec. 205.301(a) 
and (b) must:
    (1) For products labeled ``organic,'' identify each organic 
ingredient in the ingredient statement with the word, ``organic,'' or 
with an asterisk or other reference mark which is defined below the 
ingredient statement to indicate the ingredient is organically 
produced. Water or salt included as ingredients cannot be identified as 
organic.
    (2) On the information panel, below the information identifying the 
handler or distributor of the product and preceded by the statement, 
``Certified organic by * * *,'' or similar phrase, identify the name of 
the certifying agent that certified the handler of the finished product 
and may display the business address, Internet address, or telephone 
number of the certifying agent in such label.

[[Page 80648]]

Sec. 205.304  Packaged products labeled ``made with organic (specified 
ingredients or food group(s)).''

    (a) Agricultural products in packages described in Sec. 205.301(c) 
may display on the principal display panel, information panel, and any 
other panel and on any labeling or market information concerning the 
product:
    (1) The statement:
    (i) ``Made with organic (specified ingredients)'': Provided, That, 
the statement does not list more than three organically produced 
ingredients; or
    (ii) ``Made with organic (specified food groups)'': Provided, That, 
the statement does not list more than three of the following food 
groups: beans, fish, fruits, grains, herbs, meats, nuts, oils, poultry, 
seeds, spices, sweeteners, and vegetables or processed milk products; 
and, Provided further, That, all ingredients of each listed food group 
in the product must be organically produced; and
    (iii) Which appears in letters that do not exceed one-half the size 
of the largest type size on the panel and which appears in its entirety 
in the same type size, style, and color without highlighting.
    (2) The percentage of organic ingredients in the product. The size 
of the percentage statement must not exceed one-half the size of the 
largest type size on the panel on which the statement is displayed and 
must appear in its entirety in the same type size, style, and color 
without highlighting.
    (3) The seal, logo, or other identifying mark of the certifying 
agent that certified the handler of the finished product.
    (b) Agricultural products in packages described in Sec. 205.301(c) 
must:
    (1) In the ingredient statement, identify each organic ingredient 
with the word, ``organic,'' or with an asterisk or other reference mark 
which is defined below the ingredient statement to indicate the 
ingredient is organically produced. Water or salt included as 
ingredients cannot be identified as organic.
    (2) On the information panel, below the information identifying the 
handler or distributor of the product and preceded by the statement, 
``Certified organic by * * *,'' or similar phrase, identify the name of 
the certifying agent that certified the handler of the finished 
product: Except, That, the business address, Internet address, or 
telephone number of the certifying agent may be included in such label.
    (c) Agricultural products in packages described in Sec. 205.301(c) 
must not display the USDA seal.


Sec. 205.305  Multi-ingredient packaged products with less than 70 
percent organically produced ingredients.

    (a) An agricultural product with less than 70 percent organically 
produced ingredients may only identify the organic content of the 
product by:
    (1) Identifying each organically produced ingredient in the 
ingredient statement with the word, ``organic,'' or with an asterisk or 
other reference mark which is defined below the ingredient statement to 
indicate the ingredient is organically produced, and
    (2) If the organically produced ingredients are identified in the 
ingredient statement, displaying the product's percentage of organic 
contents on the information panel.
    (b) Agricultural products with less than 70 percent organically 
produced ingredients must not display:
    (1) The USDA seal; and
    (2) Any certifying agent seal, logo, or other identifying mark 
which represents organic certification of a product or product 
ingredients.


Sec. 205.306  Labeling of livestock feed.

    (a) Livestock feed products described in Sec. 205.301(e)(1) and 
(e)(2) may display on any package panel the following terms:
    (1) The statement, ``100 percent organic'' or ``organic,'' as 
applicable, to modify the name of the feed product;
    (2) The USDA seal;
    (3) The seal, logo, or other identifying mark of the certifying 
agent which certified the production or handling operation producing 
the raw or processed organic ingredients used in the finished product, 
Provided, That, such seals or marks are not displayed more prominently 
than the USDA seal;
    (4) The word, ``organic,'' or an asterisk or other reference mark 
which is defined on the package to identify ingredients that are 
organically produced. Water or salt included as ingredients cannot be 
identified as organic.
    (b) Livestock feed products described in Sec. 205.301(e)(1) and 
(e)(2) must:
    (1) On the information panel, below the information identifying the 
handler or distributor of the product and preceded by the statement, 
``Certified organic by * * *,'' or similar phrase, display the name of 
the certifying agent that certified the handler of the finished 
product. The business address, Internet address, or telephone number of 
the certifying agent may be included in such label.
    (2) Comply with other Federal agency or State feed labeling 
requirements as applicable.


Sec. 205.307  Labeling of nonretail containers used for only shipping 
or storage of raw or processed agricultural products labeled as ``100 
percent organic,'' ``organic,'' or ``made with organic (specified 
ingredients or food group(s)).''

    (a) Nonretail containers used only to ship or store raw or 
processed agricultural product labeled as containing organic 
ingredients may display the following terms or marks:
    (1) The name and contact information of the certifying agent which 
certified the handler which assembled the final product;
    (2) Identification of the product as organic;
    (3) Special handling instructions needed to maintain the organic 
integrity of the product;
    (4) The USDA seal;
    (5) The seal, logo, or other identifying mark of the certifying 
agent that certified the organic production or handling operation that 
produced or handled the finished product.
    (b) Nonretail containers used to ship or store raw or processed 
agricultural product labeled as containing organic ingredients must 
display the production lot number of the product if applicable.
    (c) Shipping containers of domestically produced product labeled as 
organic intended for export to international markets may be labeled in 
accordance with any shipping container labeling requirements of the 
foreign country of destination or the container labeling specifications 
of a foreign contract buyer: Provided, That, the shipping containers 
and shipping documents accompanying such organic products are clearly 
marked ``For Export Only'' and: Provided further, That, proof of such 
container marking and export must be maintained by the handler in 
accordance with recordkeeping requirements for exempt and excluded 
operations under Sec. 205.101.


Sec. 205.308  Agricultural products in other than packaged form at the 
point of retail sale that are sold, labeled, or represented as ``100 
percent organic'' or ``organic.''

    (a) Agricultural products in other than packaged form may use the 
term, ``100 percent organic'' or ``organic,'' as applicable, to modify 
the name of the product in retail display, labeling, and display 
containers: Provided, That, the term, ``organic,'' is used to identify 
the organic ingredients listed in the ingredient statement.
    (b) If the product is prepared in a certified facility, the retail 
display, labeling, and display containers may use:
    (1) The USDA seal; and
    (2) The seal, logo, or other identifying mark of the certifying 
agent that

[[Page 80649]]

certified the production or handling operation producing the finished 
product and any other certifying agent which certified operations 
producing raw organic product or organic ingredients used in the 
finished product: Provided, That, such seals or marks are not 
individually displayed more prominently than the USDA seal.


Sec. 205.309  Agricultural products in other than packaged form at the 
point of retail sale that are sold, labeled, or represented as ``made 
with organic (specified ingredients or food group(s)).''

    (a) Agricultural products in other than packaged form containing 
between 70 and 95 percent organically produced ingredients may use the 
phrase, ``made with organic (specified ingredients or food group(s)),'' 
to modify the name of the product in retail display, labeling, and 
display containers.
    (1) Such statement must not list more than three organic 
ingredients or food groups, and
    (2) In any such display of the product's ingredient statement, the 
organic ingredients are identified as ``organic.''
    (b) If prepared in a certified facility, such agricultural products 
labeled as ``made with organic (specified ingredients or food 
group(s))'' in retail displays, display containers, and market 
information may display the certifying agent's seal, logo, or other 
identifying mark.


Sec. 205.310  Agricultural products produced on an exempt or excluded 
operation.

    (a) An agricultural product organically produced or handled on an 
exempt or excluded operation must not:
    (1) Display the USDA seal or any certifying agent's seal or other 
identifying mark which represents the exempt or excluded operation as a 
certified organic operation, or
    (2) Be represented as a certified organic product or certified 
organic ingredient to any buyer.
    (b) An agricultural product organically produced or handled on an 
exempt or excluded operation may be identified as an organic product or 
organic ingredient in a multiingredient product produced by the exempt 
or excluded operation. Such product or ingredient must not be 
identified or represented as ``organic'' in a product processed by 
others.
    (c) Such product is subject to requirements specified in paragraph 
(a) of Sec. 205.300, and paragraphs (f)(1) through (f)(7) of 
Sec. 205.301.


Sec. 205.311  USDA Seal.

    (a) The USDA seal described in paragraphs (b) and (c) of this 
section may be used only for raw or processed agricultural products 
described in paragraphs (a), (b), (e)(1), and (e)(2) of Sec. 205.301.
    (b) The USDA seal must replicate the form and design of the example 
in figure 1 and must be printed legibly and conspicuously:
    (1) On a white background with a brown outer circle and with the 
term, ``USDA,'' in green overlaying a white upper semicircle and with 
the term, ``organic,'' in white overlaying the green lower half circle; 
or
    (2) On a white or transparent background with black outer circle 
and black ``USDA'' on a white or transparent upper half of the circle 
with a contrasting white or transparent ``organic'' on the black lower 
half circle.
    (3) The green or black lower half circle may have four light lines 
running from left to right and disappearing at the point on the right 
horizon to resemble a cultivated field.
[GRAPHIC] [TIFF OMITTED] TR21DE00.001

Secs. 205.312-205.399  [Reserved]

Subpart E--Certification


Sec. 205.400  General requirements for certification.

    A person seeking to receive or maintain organic certification under 
the regulations in this part must:
    (a) Comply with the Act and applicable organic production and 
handling regulations of this part;
    (b) Establish, implement, and update annually an organic production 
or handling system plan that is submitted to an accredited certifying 
agent as provided for in Sec. 205.200;
    (c) Permit on-site inspections with complete access to the 
production or handling operation, including noncertified production and 
handling areas, structures, and offices by the certifying agent as 
provided for in Sec. 205.403;
    (d) Maintain all records applicable to the organic operation for 
not less than 5 years beyond their creation and allow authorized 
representatives of the Secretary, the applicable State organic 
program's governing State official, and the certifying agent access to 
such records during normal business hours for review and copying to 
determine compliance with the Act and the regulations in this part, as 
provided for in Sec. 205.104;
    (e) Submit the applicable fees charged by the certifying agent; and
    (f) Immediately notify the certifying agent concerning any:
    (1) Application, including drift, of a prohibited substance to any 
field, production unit, site, facility, livestock, or product that is 
part of an operation; and
    (2) Change in a certified operation or any portion of a certified 
operation that may affect its compliance with the Act and the 
regulations in this part.


Sec. 205.401  Application for certification.

    A person seeking certification of a production or handling 
operation under this subpart must submit an application for 
certification to a certifying agent. The application must include the 
following information:
    (a) An organic production or handling system plan, as required in 
Sec. 205.200;
    (b) The name of the person completing the application; the 
applicant's business name, address, and telephone number; and, when the 
applicant is a corporation, the name, address, and telephone number of 
the person authorized to act on the applicant's behalf;
    (c) The name(s) of any organic certifying agent(s) to which 
application has previously been made; the year(s) of application; the 
outcome of the application(s) submission, including, when available, a 
copy of any notification of noncompliance or denial of certification 
issued to the applicant for certification; and a description of the 
actions taken by the applicant to correct the noncompliances noted in 
the notification of noncompliance, including evidence of such 
correction; and
    (d) Other information necessary to determine compliance with the 
Act and the regulations in this part.


Sec. 205.402  Review of application.

    (a) Upon acceptance of an application for certification, a 
certifying agent must:
    (1) Review the application to ensure completeness pursuant to 
Sec. 205.401;
    (2) Determine by a review of the application materials whether the 
applicant appears to comply or may be able to comply with the 
applicable requirements of subpart C of this part;
    (3) Verify that an applicant who previously applied to another 
certifying agent and received a notification of

[[Page 80650]]

noncompliance or denial of certification, pursuant to Sec. 205.405, has 
submitted documentation to support the correction of any noncompliances 
identified in the notification of noncompliance or denial of 
certification, as required in Sec. 205.405(e); and
    (4) Schedule an on-site inspection of the operation to determine 
whether the applicant qualifies for certification if the review of 
application materials reveals that the production or handling operation 
may be in compliance with the applicable requirements of subpart C of 
this part.
    (b) The certifying agent shall within a reasonable time:
    (1) Review the application materials received and communicate its 
findings to the applicant;
    (2) Provide the applicant with a copy of the on-site inspection 
report, as approved by the certifying agent, for any on-site inspection 
performed; and
    (3) Provide the applicant with a copy of the test results for any 
samples taken by an inspector.
    (c) The applicant may withdraw its application at any time. An 
applicant who withdraws its application shall be liable for the costs 
of services provided up to the time of withdrawal of its application. 
An applicant that voluntarily withdrew its application prior to the 
issuance of a notice of noncompliance will not be issued a notice of 
noncompliance. Similarly, an applicant that voluntarily withdrew its 
application prior to the issuance of a notice of certification denial 
will not be issued a notice of certification denial.


Sec. 205.403  On-site inspections.

    (a) On-site inspections. (1) A certifying agent must conduct an 
initial on-site inspection of each production unit, facility, and site 
that produces or handles organic products and that is included in an 
operation for which certification is requested. An on-site inspection 
shall be conducted annually thereafter for each certified operation 
that produces or handles organic products for the purpose of 
determining whether to approve the request for certification or whether 
the certification of the operation should continue.
    (2) (i) A certifying agent may conduct additional on-site 
inspections of applicants for certification and certified operations to 
determine compliance with the Act and the regulations in this part.
    (ii) The Administrator or State organic program's governing State 
official may require that additional inspections be performed by the 
certifying agent for the purpose of determining compliance with the Act 
and the regulations in this part.
    (iii) Additional inspections may be announced or unannounced at the 
discretion of the certifying agent or as required by the Administrator 
or State organic program's governing State official.
    (b) Scheduling. (1) The initial on-site inspection must be 
conducted within a reasonable time following a determination that the 
applicant appears to comply or may be able to comply with the 
requirements of subpart C of this part: Except, That, the initial 
inspection may be delayed for up to 6 months to comply with the 
requirement that the inspection be conducted when the land, facilities, 
and activities that demonstrate compliance or capacity to comply can be 
observed.
    (2) All on-site inspections must be conducted when an authorized 
representative of the operation who is knowledgeable about the 
operation is present and at a time when land, facilities, and 
activities that demonstrate the operation's compliance with or 
capability to comply with the applicable provisions of subpart C of 
this part can be observed, except that this requirement does not apply 
to unannounced on-site inspections.
    (c) Verification of information. The on-site inspection of an 
operation must verify:
    (1) The operation's compliance or capability to comply with the Act 
and the regulations in this part;
    (2) That the information, including the organic production or 
handling system plan, provided in accordance with Secs. 205.401, 
205.406, and 205.200, accurately reflects the practices used or to be 
used by the applicant for certification or by the certified operation;
    (3) That prohibited substances have not been and are not being 
applied to the operation through means which, at the discretion of the 
certifying agent, may include the collection and testing of soil; 
water; waste; seeds; plant tissue; and plant, animal, and processed 
products samples.
    (d) Exit interview. The inspector must conduct an exit interview 
with an authorized representative of the operation who is knowledgeable 
about the inspected operation to confirm the accuracy and completeness 
of inspection observations and information gathered during the on-site 
inspection. The inspector must also address the need for any additional 
information as well as any issues of concern.
    (e) Documents to the inspected operation. (1) At the time of the 
inspection, the inspector shall provide the operation's authorized 
representative with a receipt for any samples taken by the inspector. 
There shall be no charge to the inspector for the samples taken.
    (2) A copy of the on-site inspection report and any test results 
will be sent to the inspected operation by the certifying agent.


Sec. 205.404  Granting certification.

    (a) Within a reasonable time after completion of the initial on-
site inspection, a certifying agent must review the on-site inspection 
report, the results of any analyses for substances conducted, and any 
additional information requested from or supplied by the applicant. If 
the certifying agent determines that the organic system plan and all 
procedures and activities of the applicant's operation are in 
compliance with the requirements of this part and that the applicant is 
able to conduct operations in accordance with the plan, the agent shall 
grant certification. The certification may include requirements for the 
correction of minor noncompliances within a specified time period as a 
condition of continued certification.
    (b) The certifying agent must issue a certificate of organic 
operation which specifies the:
    (1) Name and address of the certified operation;
    (2) Effective date of certification;
    (3) Categories of organic operation, including crops, wild crops, 
livestock, or processed products produced by the certified operation; 
and
    (4) Name, address, and telephone number of the certifying agent.
    (c) Once certified, a production or handling operation's organic 
certification continues in effect until surrendered by the organic 
operation or suspended or revoked by the certifying agent, the State 
organic program's governing State official, or the Administrator.


Sec. 205.405  Denial of certification.

    (a) When the certifying agent has reason to believe, based on a 
review of the information specified in Sec. 205.402 or Sec. 205.404, 
that an applicant for certification is not able to comply or is not in 
compliance with the requirements of this part, the certifying agent 
must provide a written notification of noncompliance to the applicant. 
When correction of a noncompliance is not possible, a notification of 
noncompliance and a notification of denial of certification may be 
combined in one notification. The notification of noncompliance shall 
provide:

[[Page 80651]]

    (1) A description of each noncompliance;
    (2) The facts upon which the notification of noncompliance is 
based; and
    (3) The date by which the applicant must rebut or correct each 
noncompliance and submit supporting documentation of each such 
correction when correction is possible.
    (b) Upon receipt of such notification of noncompliance, the 
applicant may:
    (1) Correct noncompliances and submit a description of the 
corrective actions taken with supporting documentation to the 
certifying agent;
    (2) Correct noncompliances and submit a new application to another 
certifying agent: Provided, That, the applicant must include a complete 
application, the notification of noncompliance received from the first 
certifying agent, and a description of the corrective actions taken 
with supporting documentation; or
    (3) Submit written information to the issuing certifying agent to 
rebut the noncompliance described in the notification of noncompliance.
    (c) After issuance of a notification of noncompliance, the 
certifying agent must:
    (1) Evaluate the applicant's corrective actions taken and 
supporting documentation submitted or the written rebuttal, conduct an 
on-site inspection if necessary, and
    (i) When the corrective action or rebuttal is sufficient for the 
applicant to qualify for certification, issue the applicant an approval 
of certification pursuant to Sec. 205.404; or
    (ii) When the corrective action or rebuttal is not sufficient for 
the applicant to qualify for certification, issue the applicant a 
written notice of denial of certification.
    (2) Issue a written notice of denial of certification to an 
applicant who fails to respond to the notification of noncompliance.
    (3) Provide notice of approval or denial to the Administrator, 
pursuant to Sec. 205.501(a)(14).
    (d) A notice of denial of certification must state the reason(s) 
for denial and the applicant's right to:
    (1) Reapply for certification pursuant to Secs. 205.401 and 
205.405(e);
    (2) Request mediation pursuant to Sec. 205.663 or, if applicable, 
pursuant to a State organic program; or
    (3) File an appeal of the denial of certification pursuant to 
Sec. 205.681 or, if applicable, pursuant to a State organic program.
    (e) An applicant for certification who has received a written 
notification of noncompliance or a written notice of denial of 
certification may apply for certification again at any time with any 
certifying agent, in accordance with Secs. 205.401 and 205.405(e). When 
such applicant submits a new application to a certifying agent other 
than the agent who issued the notification of noncompliance or notice 
of denial of certification, the applicant for certification must 
include a copy of the notification of noncompliance or notice of denial 
of certification and a description of the actions taken, with 
supporting documentation, to correct the noncompliances noted in the 
notification of noncompliance.
    (f) A certifying agent who receives a new application for 
certification, which includes a notification of noncompliance or a 
notice of denial of certification, must treat the application as a new 
application and begin a new application process pursuant to 
Sec. 205.402.
    (g) Notwithstanding paragraph (a) of this section, if a certifying 
agent has reason to believe that an applicant for certification has 
willfully made a false statement or otherwise purposefully 
misrepresented the applicant's operation or its compliance with the 
certification requirements pursuant to this part, the certifying agent 
may deny certification pursuant to paragraph (c)(1)(ii) of this section 
without first issuing a notification of noncompliance.


Sec. 205.406  Continuation of certification.

    (a) To continue certification, a certified operation must annually 
pay the certification fees and submit the following information, as 
applicable, to the certifying agent:
    (1) An updated organic production or handling system plan which 
includes:
    (i) A summary statement, supported by documentation, detailing any 
deviations from, changes to, modifications to, or other amendments made 
to the previous year's organic system plan during the previous year; 
and
    (ii) Any additions or deletions to the previous year's organic 
system plan, intended to be undertaken in the coming year, detailed 
pursuant to Sec. 205.200;
    (2) Any additions to or deletions from the information required 
pursuant to Sec. 205.401(b);
    (3) An update on the correction of minor noncompliances previously 
identified by the certifying agent as requiring correction for 
continued certification; and
    (4) Other information as deemed necessary by the certifying agent 
to determine compliance with the Act and the regulations in this part.
    (b) Following the receipt of the information specified in paragraph 
(a) of this section, the certifying agent shall within a reasonable 
time arrange and conduct an on-site inspection of the certified 
operation pursuant to Sec. 205.403: Except, That, when it is impossible 
for the certifying agent to conduct the annual on-site inspection 
following receipt of the certified operation's annual update of 
information, the certifying agent may allow continuation of 
certification and issue an updated certificate of organic operation on 
the basis of the information submitted and the most recent on-site 
inspection conducted during the previous 12 months: Provided, That, the 
annual on-site inspection, required pursuant to Sec. 205.403, is 
conducted within the first 6 months following the certified operation's 
scheduled date of annual update.
    (c) If the certifying agent has reason to believe, based on the on-
site inspection and a review of the information specified in 
Sec. 205.404, that a certified operation is not complying with the 
requirements of the Act and the regulations in this part, the 
certifying agent shall provide a written notification of noncompliance 
to the operation in accordance with Sec. 205.662.
    (d) If the certifying agent determines that the certified operation 
is complying with the Act and the regulations in this part and that any 
of the information specified on the certificate of organic operation 
has changed, the certifying agent must issue an updated certificate of 
organic operation pursuant to Sec. 205.404(b).


Secs. 205.407-205.499  [Reserved]

Subpart F--Accreditation of Certifying Agents


Sec. 205.500  Areas and duration of accreditation.

    (a) The Administrator shall accredit a qualified domestic or 
foreign applicant in the areas of crops, livestock, wild crops, or 
handling or any combination thereof to certify a domestic or foreign 
production or handling operation as a certified operation.
    (b) Accreditation shall be for a period of 5 years from the date of 
approval of accreditation pursuant to Sec. 205.506.
    (c) In lieu of accreditation under paragraph (a) of this section, 
USDA will accept a foreign certifying agent's accreditation to certify 
organic production or handling operations if:
    (1) USDA determines, upon the request of a foreign government, that 
the standards under which the foreign government authority accredited 
the

[[Page 80652]]

foreign certifying agent meet the requirements of this part; or
    (2) The foreign government authority that accredited the foreign 
certifying agent acted under an equivalency agreement negotiated 
between the United States and the foreign government.


Sec. 205.501  General requirements for accreditation.

    (a) A private or governmental entity accredited as a certifying 
agent under this subpart must:
    (1) Have sufficient expertise in organic production or handling 
techniques to fully comply with and implement the terms and conditions 
of the organic certification program established under the Act and the 
regulations in this part;
    (2) Demonstrate the ability to fully comply with the requirements 
for accreditation set forth in this subpart;
    (3) Carry out the provisions of the Act and the regulations in this 
part, including the provisions of Secs. 205.402 through 205.406 and 
Sec. 205.670;
    (4) Use a sufficient number of adequately trained personnel, 
including inspectors and certification review personnel, to comply with 
and implement the organic certification program established under the 
Act and the regulations in subpart E of this part;
    (5) Ensure that its responsibly connected persons, employees, and 
contractors with inspection, analysis, and decision-making 
responsibilities have sufficient expertise in organic production or 
handling techniques to successfully perform the duties assigned.
    (6) Conduct an annual performance evaluation of all persons who 
review applications for certification, perform on-site inspections, 
review certification documents, evaluate qualifications for 
certification, make recommendations concerning certification, or make 
certification decisions and implement measures to correct any 
deficiencies in certification services;
    (7) Have an annual program review of its certification activities 
conducted by the certifying agent's staff, an outside auditor, or a 
consultant who has expertise to conduct such reviews and implement 
measures to correct any noncompliances with the Act and the regulations 
in this part that are identified in the evaluation;
    (8) Provide sufficient information to persons seeking certification 
to enable them to comply with the applicable requirements of the Act 
and the regulations in this part;
    (9) Maintain all records pursuant to Sec. 205.510(b) and make all 
such records available for inspection and copying during normal 
business hours by authorized representatives of the Secretary and the 
applicable State organic program's governing State official;
    (10) Maintain strict confidentiality with respect to its clients 
under the applicable organic certification program and not disclose to 
third parties (with the exception of the Secretary or the applicable 
State organic program's governing State official or their authorized 
representatives) any business-related information concerning any client 
obtained while implementing the regulations in this part, except as 
provided for in Sec. 205.504(b)(5);
    (11) Prevent conflicts of interest by:
    (i) Not certifying a production or handling operation if the 
certifying agent or a responsibly connected party of such certifying 
agent has or has held a commercial interest in the production or 
handling operation, including an immediate family interest or the 
provision of consulting services, within the 12-month period prior to 
the application for certification;
    (ii) Excluding any person, including contractors, with conflicts of 
interest from work, discussions, and decisions in all stages of the 
certification process and the monitoring of certified production or 
handling operations for all entities in which such person has or has 
held a commercial interest, including an immediate family interest or 
the provision of consulting services, within the 12-month period prior 
to the application for certification;
    (iii) Not permitting any employee, inspector, contractor, or other 
personnel to accept payment, gifts, or favors of any kind, other than 
prescribed fees, from any business inspected: Except, That, a 
certifying agent that is a not-for-profit organization with an Internal 
Revenue Code tax exemption or, in the case of a foreign certifying 
agent, a comparable recognition of not-for-profit status from its 
government, may accept voluntary labor from certified operations;
    (iv) Not giving advice or providing consultancy services, to 
certification applicants or certified operations, for overcoming 
identified barriers to certification;
    (v) Requiring all persons who review applications for 
certification, perform on-site inspections, review certification 
documents, evaluate qualifications for certification, make 
recommendations concerning certification, or make certification 
decisions and all parties responsibly connected to the certifying agent 
to complete an annual conflict of interest disclosure report; and
    (vi) Ensuring that the decision to certify an operation is made by 
a person different from those who conducted the review of documents and 
on-site inspection.
    (12)(i) Reconsider a certified operation's application for 
certification and, if necessary, perform a new on-site inspection when 
it is determined, within 12 months of certifying the operation, that 
any person participating in the certification process and covered under 
Sec. 205.501(a)(11)(ii) has or had a conflict of interest involving the 
applicant. All costs associated with a reconsideration of application, 
including onsite inspection costs, shall be borne by the certifying 
agent.
    (ii) Refer a certified operation to a different accredited 
certifying agent for recertification and reimburse the operation for 
the cost of the recertification when it is determined that any person 
covered under Sec. 205.501(a)(11)(i) at the time of certification of 
the applicant had a conflict of interest involving the applicant.
    (13) Accept the certification decisions made by another certifying 
agent accredited or accepted by USDA pursuant to Sec. 205.500;
    (14) Refrain from making false or misleading claims about its 
accreditation status, the USDA accreditation program for certifying 
agents, or the nature or qualities of products labeled as organically 
produced;
    (15) Submit to the Administrator a copy of:
    (i) Any notice of denial of certification issued pursuant to 
Sec. 205.405, notification of noncompliance, notification of 
noncompliance correction, notification of proposed suspension or 
revocation, and notification of suspension or revocation sent pursuant 
to Sec. 205.662 simultaneously with its issuance; and
    (ii) A list, on January 2 of each year, including the name, 
address, and telephone number of each operation granted certification 
during the preceding year;
    (16) Charge applicants for certification and certified production 
and handling operations only those fees and charges for certification 
activities that it has filed with the Administrator;
    (17) Pay and submit fees to AMS in accordance with Sec. 205.640;
    (18) Provide the inspector, prior to each on-site inspection, with 
previous on-site inspection reports and notify the inspector of its 
decision regarding certification of the production or handling 
operation site inspected by the inspector and of any requirements for

[[Page 80653]]

the correction of minor noncompliances;
    (19) Accept all production or handling applications that fall 
within its area(s) of accreditation and certify all qualified 
applicants, to the extent of its administrative capacity to do so 
without regard to size or membership in any association or group; and
    (20) Demonstrate its ability to comply with a State's organic 
program to certify organic production or handling operations within the 
State.
    (21) Comply with, implement, and carry out any other terms and 
conditions determined by the Administrator to be necessary.
    (b) A private or governmental entity accredited as a certifying 
agent under this subpart may establish a seal, logo, or other 
identifying mark to be used by production and handling operations 
certified by the certifying agent to indicate affiliation with the 
certifying agent: Provided, That, the certifying agent:
    (1) Does not require use of its seal, logo, or other identifying 
mark on any product sold, labeled, or represented as organically 
produced as a condition of certification and
    (2) Does not require compliance with any production or handling 
practices other than those provided for in the Act and the regulations 
in this part as a condition of use of its identifying mark: Provided, 
That, certifying agents certifying production or handling operations 
within a State with more restrictive requirements, approved by the 
Secretary, shall require compliance with such requirements as a 
condition of use of their identifying mark by such operations.
    (c) A private entity accredited as a certifying agent must:
    (1) Hold the Secretary harmless for any failure on the part of the 
certifying agent to carry out the provisions of the Act and the 
regulations in this part;
    (2) Furnish reasonable security, in an amount and according to such 
terms as the Administrator may by regulation prescribe, for the purpose 
of protecting the rights of production and handling operations 
certified by such certifying agent under the Act and the regulations in 
this part; and
    (3) Transfer to the Administrator and make available to any 
applicable State organic program's governing State official all records 
or copies of records concerning the person's certification activities 
in the event that the certifying agent dissolves or loses its 
accreditation; Provided, That, such transfer shall not apply to a 
merger, sale, or other transfer of ownership of a certifying agent.
    (d) No private or governmental entity accredited as a certifying 
agent under this subpart shall exclude from participation in or deny 
the benefits of the National Organic Program to any person due to 
discrimination because of race, color, national origin, gender, 
religion, age, disability, political beliefs, sexual orientation, or 
marital or family status.


Sec. 205.502  Applying for accreditation.

    (a) A private or governmental entity seeking accreditation as a 
certifying agent under this subpart must submit an application for 
accreditation which contains the applicable information and documents 
set forth in Secs. 205.503 through 205.505 and the fees required in 
Sec. 205.640 to: Program Manager, USDA-AMS-TMP-NOP, Room 2945--South 
Building, P.O. Box 96456, Washington, DC 20090-6456.
    (b) Following the receipt of the information and documents, the 
Administrator will determine, pursuant to Sec. 205.506, whether the 
applicant for accreditation should be accredited as a certifying agent.


Sec. 205.503  Applicant information.

    A private or governmental entity seeking accreditation as a 
certifying agent must submit the following information:
    (a) The business name, primary office location, mailing address, 
name of the person(s) responsible for the certifying agent's day-to-day 
operations, contact numbers (telephone, facsimile, and Internet 
address) of the applicant, and, for an applicant who is a private 
person, the entity's taxpayer identification number;
    (b) The name, office location, mailing address, and contact numbers 
(telephone, facsimile, and Internet address) for each of its 
organizational units, such as chapters or subsidiary offices, and the 
name of a contact person for each unit;
    (c) Each area of operation (crops, wild crops, livestock, or 
handling) for which accreditation is requested and the estimated number 
of each type of operation anticipated to be certified annually by the 
applicant along with a copy of the applicant's schedule of fees for all 
services to be provided under these regulations by the applicant;
    (d) The type of entity the applicant is (e.g., government 
agricultural office, for-profit business, not-for-profit membership 
association) and for:
    (1) A governmental entity, a copy of the official's authority to 
conduct certification activities under the Act and the regulations in 
this part,
    (2) A private entity, documentation showing the entity's status and 
organizational purpose, such as articles of incorporation and by-laws 
or ownership or membership provisions, and its date of establishment; 
and
    (e) A list of each State or foreign country in which the applicant 
currently certifies production and handling operations and a list of 
each State or foreign country in which the applicant intends to certify 
production or handling operations.


Sec. 205.504  Evidence of expertise and ability.

    A private or governmental entity seeking accreditation as a 
certifying agent must submit the following documents and information to 
demonstrate its expertise in organic production or handling techniques; 
its ability to fully comply with and implement the organic 
certification program established in Secs. 205.100 and 205.101, 
Secs. 205.201 through 205.203, Secs. 205.300 through 205.303, 
Secs. 205.400 through 205.406, and Secs. 205.661 and 205.662; and its 
ability to comply with the requirements for accreditation set forth in 
Sec. 205.501:
    (a) Personnel. (1) A copy of the applicant's policies and 
procedures for training, evaluating, and supervising personnel;
    (2) The name and position description of all personnel to be used 
in the certification operation, including administrative staff, 
certification inspectors, members of any certification review and 
evaluation committees, contractors, and all parties responsibly 
connected to the certifying agent;
    (3) A description of the qualifications, including experience, 
training, and education in agriculture, organic production, and organic 
handling, for:
    (i) Each inspector to be used by the applicant and
    (ii) Each person to be designated by the applicant to review or 
evaluate applications for certification; and
    (4) A description of any training that the applicant has provided 
or intends to provide to personnel to ensure that they comply with and 
implement the requirements of the Act and the regulations in this part.
    (b) Administrative policies and procedures. (1) A copy of the 
procedures to be used to evaluate certification applicants, make 
certification decisions, and issue certification certificates;
    (2) A copy of the procedures to be used for reviewing and 
investigating certified operation compliance with the Act and the 
regulations in this part and the reporting of violations of the Act

[[Page 80654]]

and the regulations in this part to the Administrator;
    (3) A copy of the procedures to be used for complying with the 
recordkeeping requirements set forth in Sec. 205.501(a)(9);
    (4) A copy of the procedures to be used for maintaining the 
confidentiality of any business-related information as set forth in 
Sec. 205.501(a)(10);
    (5) A copy of the procedures to be used, including any fees to be 
assessed, for making the following information available to any member 
of the public upon request:
    (i) Certification certificates issued during the current and 3 
preceding calender years;
    (ii) A list of producers and handlers whose operations it has 
certified, including for each the name of the operation, type(s) of 
operation, products produced, and the effective date of the 
certification, during the current and 3 preceding calender years;
    (iii) The results of laboratory analyses for residues of pesticides 
and other prohibited substances conducted during the current and 3 
preceding calender years; and
    (iv) Other business information as permitted in writing by the 
producer or handler; and
    (6) A copy of the procedures to be used for sampling and residue 
testing pursuant to Sec. 205.670.
    (c) Conflicts of interest. (1) A copy of procedures intended to be 
implemented to prevent the occurrence of conflicts of interest, as 
described in Sec. 205.501(a)(11).
    (2) For all persons who review applications for certification, 
perform on-site inspections, review certification documents, evaluate 
qualifications for certification, make recommendations concerning 
certification, or make certification decisions and all parties 
responsibly connected to the certifying agent, a conflict of interest 
disclosure report, identifying any food- or agriculture-related 
business interests, including business interests of immediate family 
members, that cause a conflict of interest.
    (d) Current certification activities. An applicant who currently 
certifies production or handling operations must submit: (1) A list of 
all production and handling operations currently certified by the 
applicant;
    (2) Copies of at least 3 different inspection reports and 
certification evaluation documents for production or handling 
operations certified by the applicant during the previous year for each 
area of operation for which accreditation is requested; and
    (3) The results of any accreditation process of the applicant's 
operation by an accrediting body during the previous year for the 
purpose of evaluating its certification activities.
    (e) Other information. Any other information the applicant believes 
may assist in the Administrator's evaluation of the applicant's 
expertise and ability.


Sec. 205.505  Statement of agreement.

    (a) A private or governmental entity seeking accreditation under 
this subpart must sign and return a statement of agreement prepared by 
the Administrator which affirms that, if granted accreditation as a 
certifying agent under this subpart, the applicant will carry out the 
provisions of the Act and the regulations in this part, including:
    (1) Accept the certification decisions made by another certifying 
agent accredited or accepted by USDA pursuant to Sec. 205.500;
    (2) Refrain from making false or misleading claims about its 
accreditation status, the USDA accreditation program for certifying 
agents, or the nature or qualities of products labeled as organically 
produced;
    (3) Conduct an annual performance evaluation of all persons who 
review applications for certification, perform on-site inspections, 
review certification documents, evaluate qualifications for 
certification, make recommendations concerning certification, or make 
certification decisions and implement measures to correct any 
deficiencies in certification services;
    (4) Have an annual internal program review conducted of its 
certification activities by certifying agent staff, an outside auditor, 
or a consultant who has the expertise to conduct such reviews and 
implement measures to correct any noncompliances with the Act and the 
regulations in this part;
    (5) Pay and submit fees to AMS in accordance with Sec. 205.640; and
    (6) Comply with, implement, and carry out any other terms and 
conditions determined by the Administrator to be necessary.
    (b) A private entity seeking accreditation as a certifying agent 
under this subpart must additionally agree to:
    (1) Hold the Secretary harmless for any failure on the part of the 
certifying agent to carry out the provisions of the Act and the 
regulations in this part;
    (2) Furnish reasonable security, in an amount and according to such 
terms as the Administrator may by regulation prescribe, for the purpose 
of protecting the rights of production and handling operations 
certified by such certifying agent under the Act and the regulations in 
this part; and
    (3) Transfer to the Administrator and make available to the 
applicable State organic program's governing State official all records 
or copies of records concerning the certifying agent's certification 
activities in the event that the certifying agent dissolves or loses 
its accreditation; Provided, That such transfer shall not apply to a 
merger, sale, or other transfer of ownership of a certifying agent.


Sec. 205.506  Granting accreditation.

    (a) Accreditation will be granted when:
    (1) The accreditation applicant has submitted the information 
required by Secs. 205.503 through 205.505;
    (2) The accreditation applicant pays the required fee in accordance 
with Sec. 205.640(c); and
    (3) The Administrator determines that the applicant for 
accreditation meets the requirements for accreditation as stated in 
Sec. 205.501, as determined by a review of the information submitted in 
accordance with Secs. 205.503 through 205.505 and, if necessary, a 
review of the information obtained from a site evaluation as provided 
for in Sec. 205.508.
    (b) On making a determination to approve an application for 
accreditation, the Administrator will notify the applicant of the 
granting of accreditation in writing, stating:
    (1) The area(s) for which accreditation is given;
    (2) The effective date of the accreditation;
    (3) Any terms and conditions for the correction of minor 
noncompliances; and
    (4) For a certifying agent who is a private entity, the amount and 
type of security that must be established to protect the rights of 
production and handling operations certified by such certifying agent.
    (c) The accreditation of a certifying agent shall continue in 
effect until such time as the certifying agent fails to renew 
accreditation as provided in Sec. 205.510(c), the certifying agent 
voluntarily ceases its certification activities, or accreditation is 
suspended or revoked pursuant to Sec. 205.665.


Sec. 205.507  Denial of accreditation.

    (a) If the Program Manager has reason to believe, based on a review 
of the information specified in Secs. 205.503 through 205.505 or after 
a site evaluation as specified in Sec. 205.508, that an applicant for 
accreditation is not able to comply or is not in compliance with the 
requirements of the Act and the regulations in this part, the Program

[[Page 80655]]

Manager shall provide a written notification of noncompliance to the 
applicant. Such notification shall provide:
    (1) A description of each noncompliance;
    (2) The facts upon which the notification of noncompliance is 
based; and
    (3) The date by which the applicant must rebut or correct each 
noncompliance and submit supporting documentation of each such 
correction when correction is possible.
    (b) When each noncompliance has been resolved, the Program Manager 
will send the applicant a written notification of noncompliance 
resolution and proceed with further processing of the application.
    (c) If an applicant fails to correct the noncompliances, fails to 
report the corrections by the date specified in the notification of 
noncompliance, fails to file a rebuttal of the notification of 
noncompliance by the date specified, or is unsuccessful in its 
rebuttal, the Program Manager will provide the applicant with written 
notification of accreditation denial. An applicant who has received 
written notification of accreditation denial may apply for 
accreditation again at any time in accordance with Sec. 205.502, or 
appeal the denial of accreditation in accordance with Sec. 205.681 by 
the date specified in the notification of accreditation denial.
    (d) If the certifying agent was accredited prior to the site 
evaluation and the certifying agent fails to correct the 
noncompliances, fails to report the corrections by the date specified 
in the notification of noncompliance, or fails to file a rebuttal of 
the notification of noncompliance by the date specified, the 
Administrator will begin proceedings to suspend or revoke the 
certifying agent's accreditation. A certifying agent who has had its 
accreditation suspended may at any time, unless otherwise stated in the 
notification of suspension, submit a request to the Secretary for 
reinstatement of its accreditation. The request must be accompanied by 
evidence demonstrating correction of each noncompliance and corrective 
actions taken to comply with and remain in compliance with the Act and 
the regulations in this part. A certifying agent whose accreditation is 
revoked will be ineligible for accreditation for a period of not less 
than 3 years following the date of such determination.


Sec. 205.508  Site evaluations.

    (a) Site evaluations of accredited certifying agents shall be 
conducted for the purpose of examining the certifying agent's 
operations and evaluating its compliance with the Act and the 
regulations of this part. Site evaluations shall include an on-site 
review of the certifying agent's certification procedures, decisions, 
facilities, administrative and management systems, and production or 
handling operations certified by the certifying agent. Site evaluations 
shall be conducted by a representative(s) of the Administrator.
    (b) An initial site evaluation of an accreditation applicant shall 
be conducted before or within a reasonable period of time after 
issuance of the applicant's ``notification of accreditation.'' A site 
evaluation shall be conducted after application for renewal of 
accreditation but prior to the issuance of a notice of renewal of 
accreditation. One or more site evaluations will be conducted during 
the period of accreditation to determine whether an accredited 
certifying agent is complying with the general requirements set forth 
in Sec. 205.501.


Sec. 205.509  Peer review panel.

    The Administrator shall establish a peer review panel pursuant to 
the Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2 et seq.). 
The peer review panel shall be composed of not less than 3 members who 
shall annually evaluate the National Organic Program's adherence to the 
accreditation procedures in this subpart F and ISO/IEC Guide 61, 
General requirements for assessment and accreditation of certification/
registration bodies, and the National Organic Program's accreditation 
decisions. This shall be accomplished through the review of 
accreditation procedures, document review and site evaluation reports, 
and accreditation decision documents or documentation. The peer review 
panel shall report its finding, in writing, to the National Organic 
Program's Program Manager.


Sec. 205.510  Annual report, recordkeeping, and renewal of 
accreditation.

    (a) Annual report and fees. An accredited certifying agent must 
submit annually to the Administrator, on or before the anniversary date 
of the issuance of the notification of accreditation, the following 
reports and fees:
    (1) A complete and accurate update of information submitted 
pursuant to Secs. 205.503 and 205.504;
    (2) Information supporting any changes being requested in the areas 
of accreditation described in Sec. 205.500;
    (3) A description of the measures implemented in the previous year 
and any measures to be implemented in the coming year to satisfy any 
terms and conditions determined by the Administrator to be necessary, 
as specified in the most recent notification of accreditation or notice 
of renewal of accreditation;
    (4) The results of the most recent performance evaluations and 
annual program review and a description of adjustments to the 
certifying agent's operation and procedures implemented or to be 
implemented in response to the performance evaluations and program 
review; and
    (5) The fees required in Sec. 205.640(a).
    (b) Recordkeeping. Certifying agents must maintain records 
according to the following schedule:
    (1) Records obtained from applicants for certification and 
certified operations must be maintained for not less than 5 years 
beyond their receipt;
    (2) Records created by the certifying agent regarding applicants 
for certification and certified operations must be maintained for not 
less than 10 years beyond their creation; and
    (3) Records created or received by the certifying agent pursuant to 
the accreditation requirements of this subpart F, excluding any records 
covered by Secs. 205.510(b)(2), must be maintained for not less than 5 
years beyond their creation or receipt.
    (c) Renewal of accreditation. (1) The Administrator shall send the 
accredited certifying agent a notice of pending expiration of 
accreditation approximately 1 year prior to the scheduled date of 
expiration.
    (2) An accredited certifying agent's application for accreditation 
renewal must be received at least 6 months prior to the fifth 
anniversary of issuance of the notification of accreditation and each 
subsequent renewal of accreditation. The accreditation of certifying 
agents who make timely application for renewal of accreditation will 
not expire during the renewal process. The accreditation of certifying 
agents who fail to make timely application for renewal of accreditation 
will expire as scheduled unless renewed prior to the scheduled 
expiration date. Certifying agents with an expired accreditation must 
not perform certification activities under the Act and the regulations 
of this part.
    (3) Following receipt of the information submitted by the 
certifying agent in accordance with paragraph (a) of this section and 
the results of a site evaluation, the Administrator will determine 
whether the certifying agent remains in compliance with the Act and

[[Page 80656]]

the regulations of this part and should have its accreditation renewed.
    (d) Notice of renewal of accreditation. Upon a determination that 
the certifying agent is in compliance with the Act and the regulations 
of this part, the Administrator will issue a notice of renewal of 
accreditation. The notice of renewal will specify any terms and 
conditions that must be addressed by the certifying agent and the time 
within which those terms and conditions must be satisfied.
    (e) Noncompliance. Upon a determination that the certifying agent 
is not in compliance with the Act and the regulations of this part, the 
Administrator will initiate proceedings to suspend or revoke the 
certifying agent's accreditation.
    (f) Amending accreditation. Amendment to scope of an accreditation 
may be requested at any time. The application for amendment shall be 
sent to the Administrator and shall contain information applicable to 
the requested change in accreditation, a complete and accurate update 
of the information submitted pursuant to Secs. 205.503 and 205.504, and 
the applicable fees required in Sec. 205.640.


Secs. 205.511-205.599  [Reserved]

Subpart G--Administrative

The National List of Allowed and Prohibited Substances


Sec. 205.600  Evaluation criteria for allowed and prohibited 
substances, methods, and ingredients.

    The following criteria will be utilized in the evaluation of 
substances or ingredients for the organic production and handling 
sections of the National List:
    (a) Synthetic and nonsynthetic substances considered for inclusion 
on or deletion from the National List of allowed and prohibited 
substances will be evaluated using the criteria specified in the Act (7 
U.S.C. 6517 and 6518).
    (b) In addition to the criteria set forth in the Act, any synthetic 
substance used as a processing aid or adjuvant will be evaluated 
against the following criteria:
    (1) The substance cannot be produced from a natural source and 
there are no organic substitutes;
    (2) The substance's manufacture, use, and disposal do not have 
adverse effects on the environment and are done in a manner compatible 
with organic handling;
    (3) The nutritional quality of the food is maintained when the 
substance is used, and the substance, itself, or its breakdown products 
do not have an adverse effect on human health as defined by applicable 
Federal regulations;
    (4) The substance's primary use is not as a preservative or to 
recreate or improve flavors, colors, textures, or nutritive value lost 
during processing, except where the replacement of nutrients is 
required by law;
    (5) The substance is listed as generally recognized as safe (GRAS) 
by Food and Drug Administration (FDA) when used in accordance with 
FDA's good manufacturing practices (GMP) and contains no residues of 
heavy metals or other contaminants in excess of tolerances set by FDA; 
and
    (6) The substance is essential for the handling of organically 
produced agricultural products.
    (c) Nonsynthetics used in organic processing will be evaluated 
using the criteria specified in the Act (7 U.S.C. 6517 and 6518).


Sec. 205.601  Synthetic substances allowed for use in organic crop 
production.

    In accordance with restrictions specified in this section, the 
following synthetic substances may be used in organic crop production:
    (a) As algicide, disinfectants, and sanitizer, including irrigation 
system cleaning systems.
    (1) Alcohols.
    (i) Ethanol.
    (ii) Isopropanol.
    (2) Chlorine materials--Except, That, residual chlorine levels in 
the water shall not exceed the maximum residual disinfectant limit 
under the Safe Drinking Water Act.
    (i) Calcium hypochlorite.
    (ii) Chlorine dioxide.
    (iii) Sodium hypochlorite.
    (3) Hydrogen peroxide.
    (4) Soap-based algicide/demisters.
    (b) As herbicides, weed barriers, as applicable.
    (1) Herbicides, soap-based--for use in farmstead maintenance 
(roadways, ditches, right of ways, building perimeters) and ornamental 
crops.
    (2) Mulches.
    (i) Newspaper or other recycled paper, without glossy or colored 
inks.
    (ii) Plastic mulch and covers (petroleum-based other than polyvinyl 
chloride (PVC)).
    (c) As compost feedstocks--Newspapers or other recycled paper, 
without glossy or colored inks.
    (d) As animal repellents--Soaps, ammonium--for use as a large 
animal repellant only, no contact with soil or edible portion of crop.
    (e) As insecticides (including acaricides or mite control).
    (1) Ammonium carbonate--for use as bait in insect traps only, no 
direct contact with crop or soil.
    (2) Boric acid--structural pest control, no direct contact with 
organic food or crops.
    (3) Elemental sulfur.
    (4) Lime sulfur--including calcium polysulfide.
    (5) Oils, horticultural--narrow range oils as dormant, suffocating, 
and summer oils.
    (6) Soaps, insecticidal.
    (7) Sticky traps/barriers.
    (f) As insect attractants--Pheromones.
    (g) As rodenticides.
    (1) Sulfur dioxide--underground rodent control only (smoke bombs).
    (2) Vitamin D3.
    (h) As slug or snail bait--None.
    (i) As plant disease control.
    (1) Coppers, fixed--copper hydroxide, copper oxide, copper 
oxychloride, includes products exempted from EPA tolerance, Provided, 
That, copper-based materials must be used in a manner that minimizes 
accumulation in the soil and shall not be used as herbicides.
    (2) Copper sulfate--Substance must be used in a manner that 
minimizes accumulation of copper in the soil.
    (3) Hydrated lime--must be used in a manner that minimizes copper 
accumulation in the soil.
    (4) Hydrogen peroxide.
    (5) Lime sulfur.
    (6) Oils, horticultural, narrow range oils as dormant, suffocating, 
and summer oils.
    (7) Potassium bicarbonate.
    (8) Elemental sulfur.
    (9) Streptomycin, for fire blight control in apples and pears only.
    (10) Tetracycline (oxytetracycline calcium complex), for fire 
blight control only.
    (j) As plant or soil amendments.
    (1) Aquatic plant extracts (other than hydrolyzed)--Extraction 
process is limited to the use of potassium hydroxide or sodium 
hydroxide; solvent amount used is limited to that amount necessary for 
extraction.
    (2) Elemental sulfur.
    (3) Humic acids--naturally occurring deposits, water and alkali 
extracts only.
    (4) Lignin sulfonate--chelating agent, dust suppressant, floatation 
agent.
    (5) Magnesium sulfate--allowed with a documented soil deficiency.
    (6) Micronutrients--not to be used as a defoliant, herbicide, or 
desiccant. Those made from nitrates or chlorides are not allowed. Soil 
deficiency must be documented by testing.
    (i) Soluble boron products.
    (ii) Sulfates, carbonates, oxides, or silicates of zinc, copper, 
iron, manganese, molybdenum, selenium, and cobalt.
    (7) Liquid fish products--can be pH adjusted with sulfuric, citric 
or

[[Page 80657]]

phosphoric acid. The amount of acid used shall not exceed the minimum 
needed to lower the pH to 3.5.
    (8) Vitamins, B1, C, and E.
    (k) As plant growth regulators--Ethylene--for regulation of 
pineapple flowering.
    (l) As floating agents in postharvest handling.
    (1) Lignin sulfonate.
    (2) Sodium silicate--for tree fruit and fiber processing.
    (m) As synthetic inert ingredients as classified by the 
Environmental Protection Agency (EPA), for use with nonsynthetic 
substances or synthetic substances listed in this section and used as 
an active pesticide ingredient in accordance with any limitations on 
the use of such substances.
    (1) EPA List 4--Inerts of Minimal Concern.
    (n)-(z) [Reserved]


Sec. 205.602  Nonsynthetic substances prohibited for use in organic 
crop production.

    The following nonsynthetic substances may not be used in organic 
crop production:
    (a) Ash from manure burning.
    (b) Arsenic.
    (c) Lead salts.
    (d) Sodium fluoaluminate (mined).
    (e) Strychnine.
    (f) Tobacco dust (nicotine sulfate).
    (g) Potassium chloride--unless derived from a mined source and 
applied in a manner that minimizes chloride accumulation in the soil.
    (h) Sodium nitrate--unless use is restricted to no more than 20% of 
the crop's total nitrogen requirement.
    (i)-(z) [Reserved]


Sec. 205.603  Synthetic substances allowed for use in organic livestock 
production.

    In accordance with restrictions specified in this section the 
following synthetic substances may be used in organic livestock 
production:
    (a) As disinfectants, sanitizer, and medical treatments as 
applicable.
    (1) Alcohols.
    (i) Ethanol--disinfectant and sanitizer only, prohibited as a feed 
additive.
    (ii) Isopropanol--disinfectant only.
    (2) Aspirin--approved for health care use to reduce inflammation
    (3) Chlorine materials--disinfecting and sanitizing facilities and 
equipment. Residual chlorine levels in the water shall not exceed the 
maximum residual disinfectant limit under the Safe Drinking Water Act.
    (i) Calcium hypochlorite.
    (ii) Chlorine dioxide.
    (iii) Sodium hypochlorite.
    (4) Chlorohexidine--Allowed for surgical procedures conducted by a 
veterinarian. Allowed for use as a teat dip when alternative germicidal 
agents and/or physical barriers have lost their effectiveness.
    (5) Electrolytes--without antibiotics.
    (6) Glucose.
    (7) Glycerin--Allowed as a livestock teat dip, must be produced 
through the hydrolysis of fats or oils.
    (8) Iodine.
    (9) Hydrogen peroxide.
    (10) Magnesium sulfate.
    (11) Oxytocin--use in postparturition therapeutic applications.
    (12) Parasiticides--Ivermectin--prohibited in slaughter stock, 
allowed in emergency treatment for dairy and breeder stock when organic 
system plan-approved preventive management does not prevent 
infestation. Milk or milk products from a treated animal cannot be 
labeled as provided for in subpart D of this part for 90 days following 
treatment. In breeder stock, treatment cannot occur during the last 
third of gestation if the progeny will be sold as organic and must not 
be used during the lactation period of breeding stock.
    (13) Phosphoric acid--allowed as an equipment cleaner, Provided, 
That, no direct contact with organically managed livestock or land 
occurs.
    (14) Biologics--Vaccines.
    (b) As topical treatment, external parasiticide or local anesthetic 
as applicable.
    (1) Iodine.
    (2) Lidocaine--as a local anesthetic. Use requires a withdrawal 
period of 90 days after administering to livestock intended for 
slaughter and 7 days after administering to dairy animals.
    (3) Lime, hydrated--(bordeaux mixes), not permitted to cauterize 
physical alterations or deodorize animal wastes.
    (4) Mineral oil--for topical use and as a lubricant.
    (5) Procaine--as a local anesthetic, use requires a withdrawal 
period of 90 days after administering to livestock intended for 
slaughter and 7 days after administering to dairy animals.
    (6) Copper sulfate.
    (c) As feed supplements--Milk replacers without antibiotics, as 
emergency use only, no nonmilk products or products from BST treated 
animals.
    (d) As feed additives.
    (1) Trace minerals, used for enrichment or fortification when FDA 
approved, including:
    (i) Copper sulfate.
    (ii) Magnesium sulfate.
    (2) Vitamins, used for enrichment or fortification when FDA 
approved.
    (e) As synthetic inert ingredients as classified by the 
Environmental Protection Agency (EPA), for use with nonsynthetic 
substances or a synthetic substances listed in this section and used as 
an active pesticide ingredient in accordance with any limitations on 
the use of such substances.
    (f) EPA List 4--Inerts of Minimal Concern.
    (g)-(z) [Reserved]


Sec. 205.604  Nonsynthetic substances prohibited for use in organic 
livestock production.

    The following nonsynthetic substances may not be used in organic 
livestock production:
    (a) Strychnine.
    (b)-(z) [Reserved]


Sec. 205.605  Nonagricultural (nonorganic) substances allowed as 
ingredients in or on processed products labeled as ``organic'' or 
``made with organic (specified ingredients or food group(s)).''

    The following nonagricultural substances may be used as ingredients 
in or on processed products labeled as ``organic'' or ``made with 
organic (specified ingredients or food group(s))'' only in accordance 
with any restrictions specified in this section.
    (a) Nonsynthetics allowed:
    (1) Acids.
    (i) Alginic.
    (ii) Citric--produced by microbial fermentation of carbohydrate 
substances.
    (iii) Lactic.
    (2) Bentonite.
    (3) Calcium carbonate.
    (4) Calcium chloride.
    (5) Colors, nonsynthetic sources only.
    (6) Dairy cultures.
    (7) Diatomaceous earth--food filtering aid only.
    (8) Enzymes--must be derived from edible, nontoxic plants, 
nonpathogenic fungi, or nonpathogenic bacteria.
    (9) Flavors, nonsynthetic sources only and must not be produced 
using synthetic solvents and carrier systems or any artificial 
preservative.
    (10) Kaolin.
    (11) Magnesium sulfate, nonsynthetic sources only.
    (12) Nitrogen--oil-free grades.
    (13) Oxygen--oil-free grades.
    (14) Perlite--for use only as a filter aid in food processing.
    (15) Potassium chloride.
    (16) Potassium iodide.
    (17) Sodium bicarbonate.
    (18) Sodium carbonate.
    (19) Waxes--nonsynthetic.
    (i) Carnauba wax.
    (ii) Wood resin.
    (20) Yeast--nonsynthetic, growth on petrochemical substrate and 
sulfite waste liquor is prohibited.
    (i) Autolysate.

[[Page 80658]]

    (ii) Bakers.
    (iii) Brewers.
    (iv) Nutritional.
    (v) Smoked--nonsynthetic smoke flavoring process must be 
documented.
    (b) Synthetics allowed:
    (1) Alginates.
    (2) Ammonium bicarbonate--for use only as a leavening agent.
    (3) Ammonium carbonate--for use only as a leavening agent.
    (4) Ascorbic acid.
    (5) Calcium citrate.
    (6) Calcium hydroxide.
    (7) Calcium phosphates (monobasic, dibasic, and tribasic).
    (8) Carbon dioxide.
    (9) Chlorine materials--disinfecting and sanitizing food contact 
surfaces, Except, That, residual chlorine levels in the water shall not 
exceed the maximum residual disinfectant limit under the Safe Drinking 
Water Act.
    (i) Calcium hypochlorite.
    (ii) Chlorine dioxide.
    (iii) Sodium hypochlorite.
    (10) Ethylene--allowed for postharvest ripening of tropical fruit.
    (11) Ferrous sulfate--for iron enrichment or fortification of foods 
when required by regulation or recommended (independent organization).
    (12) Glycerides (mono and di)--for use only in drum drying of food.
    (13) Glycerin--produced by hydrolysis of fats and oils.
    (14) Hydrogen peroxide.
    (15) Lecithin--bleached.
    (16) Magnesium carbonate--for use only in agricultural products 
labeled ``made with organic (specified ingredients or food group(s)),'' 
prohibited in agricultural products labeled ``organic''.
    (17) Magnesium chloride--derived from sea water.
    (18) Magnesium stearate--for use only in agricultural products 
labeled ``made with organic (specified ingredients or food group(s)),'' 
prohibited in agricultural products labeled ``organic''.
    (19) Nutrient vitamins and minerals, in accordance with 21 CFR 
104.20, Nutritional Quality Guidelines For Foods.
    (20) Ozone.
    (21) Pectin (low-methoxy).
    (22) Phosphoric acid--cleaning of food-contact surfaces and 
equipment only.
    (23) Potassium acid tartrate.
    (24) Potassium tartrate made from tartaric acid.
    (25) Potassium carbonate.
    (26) Potassium citrate.
    (27) Potassium hydroxide--prohibited for use in lye peeling of 
fruits and vegetables.
    (28) Potassium iodide--for use only in agricultural products 
labeled ``made with organic (specified ingredients or food group(s)),'' 
prohibited in agricultural products labeled ``organic''.
    (29) Potassium phosphate--for use only in agricultural products 
labeled ``made with organic (specific ingredients or food group(s)),'' 
prohibited in agricultural products labeled ``organic''.
    (30) Silicon dioxide.
    (31) Sodium citrate.
    (32) Sodium hydroxide--prohibited for use in lye peeling of fruits 
and vegetables.
    (33) Sodium phosphates--for use only in dairy foods.
    (34) Sulfur dioxide--for use only in wine labeled ``made with 
organic grapes,'' Provided, That, total sulfite concentration does not 
exceed 100 ppm.
    (35) Tocopherols--derived from vegetable oil when rosemary extracts 
are not a suitable alternative.
    (36) Xanthan gum.
    (c)-(z) [Reserved]


Sec. 205.606  Nonorganically produced agricultural products allowed as 
ingredients in or on processed products labeled as ``organic'' or 
``made with organic (specified ingredients or food group(s)).''

    The following nonorganically produced agricultural products may be 
used as ingredients in or on processed products labeled as ``organic'' 
or ``made with organic (specified ingredients or food group(s))'' only 
in accordance with any restrictions specified in this section.
    Any nonorganically produced agricultural product may be used in 
accordance with the restrictions specified in this section and when the 
product is not commercially available in organic form.
    (a) Cornstarch (native)
    (b) Gums--water extracted only (arabic, guar, locust bean, carob 
bean)
    (c) Kelp--for use only as a thickener and dietary supplement
    (d) Lecithin--unbleached
    (e) Pectin (high-methoxy)


Sec. 205.607  Amending the National List.

    (a) Any person may petition the National Organic Standard Board for 
the purpose of having a substance evaluated by the Board for 
recommendation to the Secretary for inclusion on or deletion from the 
National List in accordance with the Act.
    (b) A person petitioning for amendment of the National List should 
request a copy of the petition procedures from the USDA at the address 
in Sec. 205.607(c).
    (c) A petition to amend the National List must be submitted to: 
Program Manager, USDA/AMS/TMP/NOP, Room 2945, South Building, P.O. Box 
96456, Washington, DC 20090-6456.


Secs. 205.608-205.619  [Reserved]

State Organic Programs


Sec. 205.620  Requirements of State organic programs.

    (a) A State may establish a State organic program for production 
and handling operations within the State which produce and handle 
organic agricultural products.
    (b) A State organic program must meet the requirements for organic 
programs specified in the Act.
    (c) A State organic program may contain more restrictive 
requirements because of environmental conditions or the necessity of 
specific production or handling practices particular to the State or 
region of the United States.
    (d) A State organic program must assume enforcement obligations in 
the State for the requirements of this part and any more restrictive 
requirements approved by the Secretary.
    (e) A State organic program and any amendments to such program must 
be approved by the Secretary prior to being implemented by the State.


Sec. 205.621  Submission and determination of proposed State organic 
programs and amendments to approved State organic programs.

    (a) A State organic program's governing State official must submit 
to the Secretary a proposed State organic program and any proposed 
amendments to such approved program.
    (1) Such submission must contain supporting materials that include 
statutory authorities, program description, documentation of the 
environmental conditions or specific production and handling practices 
particular to the State which necessitate more restrictive requirements 
than the requirements of this part, and other information as may be 
required by the Secretary.
    (2) Submission of a request for amendment of an approved State 
organic program must contain supporting materials that include an 
explanation and documentation of the environmental conditions or 
specific production and handling practices particular to the State or 
region, which necessitates the proposed amendment. Supporting material 
also must explain how the proposed amendment furthers and is consistent 
with the purposes of the Act and the regulations of this part.
    (b) Within 6 months of receipt of submission, the Secretary will: 
Notify the State organic program's governing

[[Page 80659]]

State official of approval or disapproval of the proposed program or 
amendment of an approved program and, if disapproved, the reasons for 
the disapproval.
    (c) After receipt of a notice of disapproval, the State organic 
program's governing State official may submit a revised State organic 
program or amendment of such a program at any time.


Sec. 205.622  Review of approved State organic programs.

    The Secretary will review a State organic program not less than 
once during each 5-year period following the date of the initial 
program approval. The Secretary will notify the State organic program's 
governing State official of approval or disapproval of the program 
within 6 months after initiation of the review.


Secs. 205.623-205.639  [Reserved]

Fees


Sec. 205.640  Fees and other charges for accreditation.

    Fees and other charges equal as nearly as may be to the cost of the 
accreditation services rendered under the regulations, including 
initial accreditation, review of annual reports, and renewal of 
accreditation, shall be assessed and collected from applicants for 
initial accreditation and accredited certifying agents submitting 
annual reports or seeking renewal of accreditation in accordance with 
the following provisions:
    (a) Fees-for-service. (1) Except as otherwise provided in this 
section, fees-for-service shall be based on the time required to render 
the service provided calculated to the nearest 15-minute period, 
including the review of applications and accompanying documents and 
information, evaluator travel, the conduct of on-site evaluations, 
review of annual reports and updated documents and information, and the 
time required to prepare reports and any other documents in connection 
with the performance of service. The hourly rate shall be the same as 
that charged by the Agricultural Marketing Service, through its Quality 
Systems Certification Program, to certification bodies requesting 
conformity assessment to the International Organization for 
Standardization ``General Requirements for Bodies Operating Product 
Certification Systems'' (ISO Guide 65).
    (2) Applicants for initial accreditation and accredited certifying 
agents submitting annual reports or seeking renewal of accreditation 
during the first 18 months following the effective date of subpart F of 
this part shall receive service without incurring an hourly charge for 
service.
    (3) Applicants for initial accreditation and renewal of 
accreditation must pay at the time of application, effective 18 months 
following February 20, 2001, a nonrefundable fee of $500.00 which shall 
be applied to the applicant's fees-for-service account.
    (b) Travel charges. When service is requested at a place so distant 
from the evaluator's headquarters that a total of one-half hour or more 
is required for the evaluator(s) to travel to such place and back to 
the headquarters or at a place of prior assignment on circuitous 
routing requiring a total of one-half hour or more to travel to the 
next place of assignment on the circuitous routing, the charge for such 
service shall include a mileage charge administratively determined by 
the U.S. Department of Agriculture and travel tolls, if applicable, or 
such travel prorated among all the applicants and certifying agents 
furnished the service involved on an equitable basis or, when the 
travel is made by public transportation (including hired vehicles), a 
fee equal to the actual cost thereof. Travel charges shall become 
effective for all applicants for initial accreditation and accredited 
certifying agents on February 20, 2001. The applicant or certifying 
agent will not be charged a new mileage rate without notification 
before the service is rendered.
    (c) Per diem charges. When service is requested at a place away 
from the evaluator's headquarters, the fee for such service shall 
include a per diem charge if the employee(s) performing the service is 
paid per diem in accordance with existing travel regulations. Per diem 
charges to applicants and certifying agents will cover the same period 
of time for which the evaluator(s) receives per diem reimbursement. The 
per diem rate will be administratively determined by the U.S. 
Department of Agriculture. Per diem charges shall become effective for 
all applicants for initial accreditation and accredited certifying 
agents on February 20, 2001. The applicant or certifying agent will not 
be charged a new per diem rate without notification before the service 
is rendered.
    (d) Other costs. When costs, other than costs specified in 
paragraphs (a), (b), and (c) of this section, are associated with 
providing the services, the applicant or certifying agent will be 
charged for these costs. Such costs include but are not limited to 
equipment rental, photocopying, delivery, facsimile, telephone, or 
translation charges incurred in association with accreditation 
services. The amount of the costs charged will be determined 
administratively by the U.S. Department of Agriculture. Such costs 
shall become effective for all applicants for initial accreditation and 
accredited certifying agents on February 20, 2001.


Sec. 205.641  Payment of fees and other charges.

    (a) Applicants for initial accreditation and renewal of 
accreditation must remit the nonrefundable fee, pursuant to 
Sec. 205.640(a)(3), along with their application. Remittance must be 
made payable to the Agricultural Marketing Service, USDA, and mailed 
to: Program Manager, USDA-AMS-TMP-NOP, Room 2945-South Building, P.O. 
Box 96456, Washington, DC 20090-6456 or such other address as required 
by the Program Manager.
    (b) Payments for fees and other charges not covered under paragraph 
(a) of this section must be:
    (1) Received by the due date shown on the bill for collection;
    (2) Made payable to the Agricultural Marketing Service, USDA; and
    (3) Mailed to the address provided on the bill for collection.
    (c) The Administrator shall assess interest, penalties, and 
administrative costs on debts not paid by the due date shown on a bill 
for collection and collect delinquent debts or refer such debts to the 
Department of Justice for litigation.


Sec. 205.642  Fees and other charges for certification.

    Fees charged by a certifying agent must be reasonable, and a 
certifying agent shall charge applicants for certification and 
certified production and handling operations only those fees and 
charges that it has filed with the Administrator. The certifying agent 
shall provide each applicant with an estimate of the total cost of 
certification and an estimate of the annual cost of updating the 
certification. The certifying agent may require applicants for 
certification to pay at the time of application a nonrefundable fee 
which shall be applied to the applicant's fees-for-service account. The 
certifying agent may set the nonrefundable portion of certification 
fees; however, the nonrefundable portion of certification fees must be 
explained in the fee schedule submitted to the Administrator. The fee 
schedule must explain what fee amounts are nonrefundable and at what 
stage during the certification process fees become nonrefundable. The 
certifying agent shall provide all persons inquiring

[[Page 80660]]

about the application process with a copy of its fee schedule.


Secs. 205.643-205.649  [Reserved]

Compliance


Sec. 205.660  General.

    (a) The National Organic Program's Program Manager, on behalf of 
the Secretary, may inspect and review certified production and handling 
operations and accredited certifying agents for compliance with the Act 
or regulations in this part.
    (b) The Program Manager may initiate suspension or revocation 
proceedings against a certified operation:
    (1) When the Program Manager has reason to believe that a certified 
operation has violated or is not in compliance with the Act or 
regulations in this part; or
    (2) When a certifying agent or a State organic program's governing 
State official fails to take appropriate action to enforce the Act or 
regulations in this part.
    (c) The Program Manager may initiate suspension or revocation of a 
certifying agent's accreditation if the certifying agent fails to meet, 
conduct, or maintain accreditation requirements pursuant to the Act or 
this part.
    (d) Each notification of noncompliance, rejection of mediation, 
noncompliance resolution, proposed suspension or revocation, and 
suspension or revocation issued pursuant to Sec. 205.662, Sec. 205.663, 
and Sec. 205.665 and each response to such notification must be sent to 
the recipient's place of business via a delivery service which provides 
dated return receipts.


Sec. 205.661  Investigation of certified operations.

    (a) A certifying agent may investigate complaints of noncompliance 
with the Act or regulations of this part concerning production and 
handling operations certified as organic by the certifying agent. A 
certifying agent must notify the Program Manager of all compliance 
proceedings and actions taken pursuant to this part.
    (b) A State organic program's governing State official may 
investigate complaints of noncompliance with the Act or regulations in 
this part concerning organic production or handling operations 
operating in the State.


Sec. 205.662  Noncompliance procedure for certified operations.

    (a) Notification. When an inspection, review, or investigation of a 
certified operation by a certifying agent or a State organic program's 
governing State official reveals any noncompliance with the Act or 
regulations in this part, a written notification of noncompliance shall 
be sent to the certified operation. Such notification shall provide:
    (1) A description of each noncompliance;
    (2) The facts upon which the notification of noncompliance is 
based; and
    (3) The date by which the certified operation must rebut or correct 
each noncompliance and submit supporting documentation of each such 
correction when correction is possible.
    (b) Resolution. When a certified operation demonstrates that each 
noncompliance has been resolved, the certifying agent or the State 
organic program's governing State official, as applicable, shall send 
the certified operation a written notification of noncompliance 
resolution.
    (c) Proposed suspension or revocation. When rebuttal is 
unsuccessful or correction of the noncompliance is not completed within 
the prescribed time period, the certifying agent or State organic 
program's governing State official shall send the certified operation a 
written notification of proposed suspension or revocation of 
certification of the entire operation or a portion of the operation, as 
applicable to the noncompliance. When correction of a noncompliance is 
not possible, the notification of noncompliance and the proposed 
suspension or revocation of certification may be combined in one 
notification. The notification of proposed suspension or revocation of 
certification shall state:
    (1) The reasons for the proposed suspension or revocation;
    (2) The proposed effective date of such suspension or revocation;
    (3) The impact of a suspension or revocation on future eligibility 
for certification; and
    (4) The right to request mediation pursuant to Sec. 205.663 or to 
file an appeal pursuant to Sec. 205.681.
    (d) Willful violations. Notwithstanding paragraph (a) of this 
section, if a certifying agent or State organic program's governing 
State official has reason to believe that a certified operation has 
willfully violated the Act or regulations in this part, the certifying 
agent or State organic program's governing State official shall send 
the certified operation a notification of proposed suspension or 
revocation of certification of the entire operation or a portion of the 
operation, as applicable to the noncompliance.
    (e) Suspension or revocation. (1) If the certified operation fails 
to correct the noncompliance, to resolve the issue through rebuttal or 
mediation, or to file an appeal of the proposed suspension or 
revocation of certification, the certifying agent or State organic 
program's governing State official shall send the certified operation a 
written notification of suspension or revocation.
    (2) A certifying agent or State organic program's governing State 
official must not send a notification of suspension or revocation to a 
certified operation that has requested mediation pursuant to 
Sec. 205.663 or filed an appeal pursuant to Sec. 205.681, while final 
resolution of either is pending.
    (f) Eligibility. (1) A certified operation whose certification has 
been suspended under this section may at any time, unless otherwise 
stated in the notification of suspension, submit a request to the 
Secretary for reinstatement of its certification. The request must be 
accompanied by evidence demonstrating correction of each noncompliance 
and corrective actions taken to comply with and remain in compliance 
with the Act and the regulations in this part.
    (2) A certified operation or a person responsibly connected with an 
operation whose certification has been revoked will be ineligible to 
receive certification for a period of 5 years following the date of 
such revocation, Except, That, the Secretary may, when in the best 
interest of the certification program, reduce or eliminate the period 
of ineligibility.
    (g) Violations of Act. In addition to suspension or revocation, any 
certified operation that:
    (1) Knowingly sells or labels a product as organic, except in 
accordance with the Act, shall be subject to a civil penalty of not 
more than $10,000 per violation.
    (2) Makes a false statement under the Act to the Secretary, a State 
organic program's governing State official, or a certifying agent shall 
be subject to the provisions of section 1001 of title 18, United States 
Code.


Sec. 205.663  Mediation.

    Any dispute with respect to denial of certification or proposed 
suspension or revocation of certification under this part may be 
mediated at the request of the applicant for certification or certified 
operation and with acceptance by the certifying agent. Mediation shall 
be requested in writing to the applicable certifying agent. If the 
certifying agent rejects the request for mediation, the certifying 
agent shall provide written notification to the applicant for 
certification or certified operation. The written notification shall 
advise the

[[Page 80661]]

applicant for certification or certified operation of the right to 
request an appeal, pursuant to Sec. 205.681, within 30 days of the date 
of the written notification of rejection of the request for mediation. 
If mediation is accepted by the certifying agent, such mediation shall 
be conducted by a qualified mediator mutually agreed upon by the 
parties to the mediation. If a State organic program is in effect, the 
mediation procedures established in the State organic program, as 
approved by the Secretary, will be followed. The parties to the 
mediation shall have no more than 30 days to reach an agreement 
following a mediation session. If mediation is unsuccessful, the 
applicant for certification or certified operation shall have 30 days 
from termination of mediation to appeal the certifying agent's decision 
pursuant to Sec. 205.681. Any agreement reached during or as a result 
of the mediation process shall be in compliance with the Act and the 
regulations in this part. The Secretary may review any mediated 
agreement for conformity to the Act and the regulations in this part 
and may reject any agreement or provision not in conformance with the 
Act or the regulations in this part.


Sec. 205.664  [Reserved]


Sec. 205.665  Noncompliance procedure for certifying agents.

    (a) Notification. When an inspection, review, or investigation of 
an accredited certifying agent by the Program Manager reveals any 
noncompliance with the Act or regulations in this part, a written 
notification of noncompliance shall be sent to the certifying agent. 
Such notification shall provide:
    (1) A description of each noncompliance;
    (2) The facts upon which the notification of noncompliance is 
based; and
    (3) The date by which the certifying agent must rebut or correct 
each noncompliance and submit supporting documentation of each 
correction when correction is possible.
    (b) Resolution. When the certifying agent demonstrates that each 
noncompliance has been resolved, the Program Manager shall send the 
certifying agent a written notification of noncompliance resolution.
    (c) Proposed suspension or revocation. When rebuttal is 
unsuccessful or correction of the noncompliance is not completed within 
the prescribed time period, the Program Manager shall send a written 
notification of proposed suspension or revocation of accreditation to 
the certifying agent. The notification of proposed suspension or 
revocation shall state whether the certifying agent's accreditation or 
specified areas of accreditation are to be suspended or revoked. When 
correction of a noncompliance is not possible, the notification of 
noncompliance and the proposed suspension or revocation may be combined 
in one notification. The notification of proposed suspension or 
revocation of accreditation shall state:
    (1) The reasons for the proposed suspension or revocation;
    (2) The proposed effective date of the suspension or revocation;
    (3) The impact of a suspension or revocation on future eligibility 
for accreditation; and
    (4) The right to file an appeal pursuant to Sec. 205.681.
    (d) Willful violations. Notwithstanding paragraph (a) of this 
section, if the Program Manager has reason to believe that a certifying 
agent has willfully violated the Act or regulations in this part, the 
Program Manager shall send a written notification of proposed 
suspension or revocation of accreditation to the certifying agent.
    (e) Suspension or revocation. When the accredited certifying agent 
fails to file an appeal of the proposed suspension or revocation of 
accreditation, the Program Manager shall send a written notice of 
suspension or revocation of accreditation to the certifying agent.
    (f) Cessation of certification activities. A certifying agent whose 
accreditation is suspended or revoked must:
    (1) Cease all certification activities in each area of 
accreditation and in each State for which its accreditation is 
suspended or revoked.
    (2) Transfer to the Secretary and make available to any applicable 
State organic program's governing State official all records concerning 
its certification activities that were suspended or revoked.
    (g) Eligibility. (1) A certifying agent whose accreditation is 
suspended by the Secretary under this section may at any time, unless 
otherwise stated in the notification of suspension, submit a request to 
the Secretary for reinstatement of its accreditation. The request must 
be accompanied by evidence demonstrating correction of each 
noncompliance and corrective actions taken to comply with and remain in 
compliance with the Act and the regulations in this part.
    (2) A certifying agent whose accreditation is revoked by the 
Secretary shall be ineligible to be accredited as a certifying agent 
under the Act and the regulations in this part for a period of not less 
than 3 years following the date of such revocation.


Secs. 205.666-205.667  [Reserved]


Sec. 205.668  Noncompliance procedures under State organic programs.

    (a) A State organic program's governing State official must 
promptly notify the Secretary of commencement of any noncompliance 
proceeding against a certified operation and forward to the Secretary a 
copy of each notice issued.
    (b) A noncompliance proceeding, brought by a State organic 
program's governing State official against a certified operation, shall 
be appealable pursuant to the appeal procedures of the State organic 
program. There shall be no subsequent rights of appeal to the 
Secretary. Final decisions of a State may be appealed to the United 
States District Court for the district in which such certified 
operation is located.
    (c) A State organic program's governing State official may review 
and investigate complaints of noncompliance with the Act or regulations 
concerning accreditation of certifying agents operating in the State. 
When such review or investigation reveals any noncompliance, the State 
organic program's governing State official shall send a written report 
of noncompliance to the Program Manager. The report shall provide a 
description of each noncompliance and the facts upon which the 
noncompliance is based.


Sec. 205.669  [Reserved]

Inspection and Testing, Reporting, and Exclusion from Sale


Sec. 205.670  Inspection and testing of agricultural product to be sold 
or labeled ``organic.''

    (a) All agricultural products that are to be sold, labeled, or 
represented as ``100 percent organic,'' ``organic,'' or ``made with 
organic (specified ingredients or food group(s))'' must be made 
accessible by certified organic production or handling operations for 
examination by the Administrator, the applicable State organic 
program's governing State official, or the certifying agent.
    (b) The Administrator, applicable State organic program's governing 
State official, or the certifying agent may require preharvest or 
postharvest testing of any agricultural input used or agricultural 
product to be sold, labeled, or represented as ``100 percent organic,'' 
``organic,'' or ``made with organic (specified ingredients or food 
group(s))'' when there is reason to believe that the agricultural input 
or product has come

[[Page 80662]]

into contact with a prohibited substance or has been produced using 
excluded methods. Such tests must be conducted by the applicable State 
organic program's governing State official or the certifying agent at 
the official's or certifying agent's own expense.
    (c) The preharvest or postharvest tissue test sample collection 
pursuant to paragraph (b) of this section must be performed by an 
inspector representing the Administrator, applicable State organic 
program's governing State official, or certifying agent. Sample 
integrity must be maintained throughout the chain of custody, and 
residue testing must be performed in an accredited laboratory. Chemical 
analysis must be made in accordance with the methods described in the 
most current edition of the Official Methods of Analysis of the AOAC 
International or other current applicable validated methodology 
determining the presence of contaminants in agricultural products.
    (d) Results of all analyses and tests performed under this section:
    (1) Must be promptly provided to the Administrator; Except, That, 
where a State organic program exists, all test results and analyses 
shall be provided to the State organic program's governing State 
official by the applicable certifying party that requested testing; and
    (2) Will be available for public access, unless the testing is part 
of an ongoing compliance investigation.
    (e) If test results indicate a specific agricultural product 
contains pesticide residues or environmental contaminants that exceed 
the Food and Drug Administration's or the Environmental Protection 
Agency's regulatory tolerences, the certifying agent must promptly 
report such data to the Federal health agency whose regulatory 
tolerance or action level has been exceeded.


Sec. 205.671  Exclusion from organic sale.

    When residue testing detects prohibited substances at levels that 
are greater than 5 percent of the Environmental Protection Agency's 
tolerance for the specific residue detected or unavoidable residual 
environmental contamination, the agricultural product must not be sold, 
labeled, or represented as organically produced. The Administrator, the 
applicable State organic program's governing State official, or the 
certifying agent may conduct an investigation of the certified 
operation to determine the cause of the prohibited substance.


Sec. 205.672  Emergency pest or disease treatment.

    When a prohibited substance is applied to a certified operation due 
to a Federal or State emergency pest or disease treatment program and 
the certified operation otherwise meets the requirements of this part, 
the certification status of the operation shall not be affected as a 
result of the application of the prohibited substance: Provided, That:
    (a) Any harvested crop or plant part to be harvested that has 
contact with a prohibited substance applied as the result of a Federal 
or State emergency pest or disease treatment program cannot be sold, 
labeled, or represented as organically produced; and
    (b) Any livestock that are treated with a prohibited substance 
applied as the result of a Federal or State emergency pest or disease 
treatment program or product derived from such treated livestock cannot 
be sold, labeled, or represented as organically produced: Except, That:
    (1) Milk or milk products may be sold, labeled, or represented as 
organically produced beginning 12 months following the last date that 
the dairy animal was treated with the prohibited substance; and
    (2) The offspring of gestating mammalian breeder stock treated with 
a prohibited substance may be considered organic: Provided, That, the 
breeder stock was not in the last third of gestation on the date that 
the breeder stock was treated with the prohibited substance.


Secs. 205.673-205.679  [Reserved]

Adverse Action Appeal Process


Sec. 205.680  General.

    (a) Persons subject to the Act who believe they are adversely 
affected by a noncompliance decision of the National Organic Program's 
Program Manager may appeal such decision to the Administrator.
    (b) Persons subject to the Act who believe that they are adversely 
affected by a noncompliance decision of a State organic program may 
appeal such decision to the State organic program's governing State 
official who will initiate handling of the appeal pursuant to appeal 
procedures approved by the Secretary.
    (c) Persons subject to the Act who believe that they are adversely 
affected by a noncompliance decision of a certifying agent may appeal 
such decision to the Administrator, Except, That, when the person is 
subject to an approved State organic program, the appeal must be made 
to the State organic program.
    (d) All written communications between parties involved in appeal 
proceedings must be sent to the recipient's place of business by a 
delivery service which provides dated return receipts.
    (e) All appeals shall be reviewed, heard, and decided by persons 
not involved with the decision being appealed.


Sec. 205.681  Appeals.

    (a) Certification appeals. An applicant for certification may 
appeal a certifying agent's notice of denial of certification, and a 
certified operation may appeal a certifying agent's notification of 
proposed suspension or revocation of certification to the 
Administrator, Except, That, when the applicant or certified operation 
is subject to an approved State organic program the appeal must be made 
to the State organic program which will carry out the appeal pursuant 
to the State organic program's appeal procedures approved by the 
Secretary.
    (1) If the Administrator or State organic program sustains a 
certification applicant's or certified operation's appeal of a 
certifying agent's decision, the applicant will be issued organic 
certification, or a certified operation will continue its 
certification, as applicable to the operation. The act of sustaining 
the appeal shall not be an adverse action subject to appeal by the 
affected certifying agent.
    (2) If the Administrator or State organic program denies an appeal, 
a formal administrative proceeding will be initiated to deny, suspend, 
or revoke the certification. Such proceeding shall be conducted 
pursuant to the U.S. Department of Agriculture's Uniform Rules of 
Practice or the State organic program's rules of procedure.
    (b) Accreditation appeals. An applicant for accreditation and an 
accredited certifying agent may appeal the Program Manager's denial of 
accreditation or proposed suspension or revocation of accreditation to 
the Administrator.
    (1) If the Administrator sustains an appeal, an applicant will be 
issued accreditation, or a certifying agent will continue its 
accreditation, as applicable to the operation.
    (2) If the Administrator denies an appeal, a formal administrative 
proceeding to deny, suspend, or revoke the accreditation will be 
initiated. Such proceeding shall be conducted pursuant to the U.S. 
Department of Agriculture's Uniform Rules of Practice, 7 CFR part 1, 
Subpart H.

[[Page 80663]]

    (c) Filing period. An appeal of a noncompliance decision must be 
filed within the time period provided in the letter of notification or 
within 30 days from receipt of the notification, whichever occurs 
later. The appeal will be considered ``filed'' on the date received by 
the Administrator or by the State organic program. A decision to deny, 
suspend, or revoke certification or accreditation will become final and 
nonappealable unless the decision is appealed in a timely manner.
    (d) Where and what to file. (1) Appeals to the Administrator must 
be filed in writing and addressed to Administrator, USDA-AMS, Room 
3071-S, P.O. Box 96456, Washington, DC 20090-6456.
    (2) Appeals to the State organic program must be filed in writing 
to the address and person identified in the letter of notification.
    (3) All appeals must include a copy of the adverse decision and a 
statement of the appellant's reasons for believing that the decision 
was not proper or made in accordance with applicable program 
regulations, policies, or procedures.


Secs. 205.682-205.689  [Reserved]

Miscellaneous


Sec. 205.690  OMB control number.

    The control number assigned to the information collection 
requirements in this part by the Office of Management and Budget 
pursuant to the Paperwork Reduction Act of 1995, 44 U.S C. Chapter 35, 
is OMB number 0581-0181.


Secs. 205.691-205.699  [Reserved]

PARTS 206-209 [Reserved]

    Dated: December 13, 2000.
Kathleen A. Merrigan,
Administrator, Agricultural Marketing Service.

Appendixes to Preamble

Appendix A--Regulatory Impact Assessment for Final Rule Implementing 
the Organic Foods Production Act of 1990

    The following regulatory assessment is provided to fulfill the 
requirements of Executive Order 12866. This assessment consists of a 
statement of the need for national organic standards, a description 
of the baseline for the analysis, a summary of the provisions of the 
final U.S. Department of Agriculture (USDA) rule and the alternative 
approaches that were examined, and an analysis of the benefits and 
costs. Much of the analysis is necessarily descriptive of the 
anticipated effects of the final rule. Because basic market data on 
the prices and quantities of organic goods and the costs of organic 
production are limited, it is not possible to provide quantitative 
estimates of all benefits and costs of the final rule. The cost of 
fees and recordkeeping in the final USDA rule are quantified, but 
the anticipated benefits and other costs are not. Consequently, the 
analysis does not estimate the magnitude or the direction (positive 
or negative) of net benefits.
    Under the final rule, USDA will implement a program of uniform 
standards of production and certification, as mandated by the 
Organic Foods Production Act of 1990 (OFPA). The primary benefits 
from implementation of USDA's National Organic Program (NOP) are 
standardizing the definitions and the manner in which organic 
product information is presented to consumers, which may reduce the 
cost associated with enforcement actions in consumer fraud cases, 
and improved access to domestic and international markets from 
harmonizing the various State and private organic standards and 
elevating reciprocity negotiations to the national level.
    The costs of this rule are the direct costs for accreditation 
and the costs of complying with the specific standards in the 
proposal, including the reporting and recordkeeping requirements. 
Certifiers will be charged fees based on the actual costs of the 
accreditation work done by USDA staff. Smaller certifiers with less 
complex programs are expected to pay somewhat lower fees. Organic 
farmers, ranchers, wild-crop harvesters, and handlers will have to 
pay fees for organic certification from a State or private certifier 
but will not be charged any additional fees by USDA. The direct 
accreditation costs to an estimated 59 certifying agents (including 
all 49 current U.S. certifiers and an estimated 10 foreign agents) 
during the first 18 months following the final rule are estimated to 
be approximately $92,000 to $124,000 and are being subsidized with 
appropriated funds derived from the taxpayers. In addition, USDA 
will use appropriated funds to cover approximately $270,000-$448,000 
in hourly charges for site evaluation during this period and for 
other costs associated with starting up the NOP. The magnitude of 
other compliance costs for adhering to this regulation--including 
the costs of becoming familiar with and adopting the national 
standards--have not been measured. For organic farmers who adhere to 
State regulations or undergo third-party inspection and 
certification, the compliance cost may not be large. For those who 
don't, the costs may be more substantial. The impact of this 
regulation on small certifying agents and other small businesses has 
also not been measured but may be significant.
    To account for significant rule changes from the proposal and to 
reflect more up-to-date information, we revised some estimates of 
benefits and costs. We have raised our estimates of current 
certification fees and USDA accreditation fees. Also, we now project 
higher USDA accreditation fees after the 18-month implementation 
period. We revised our estimates of the certification fees charged 
by a representative set of public and private certifiers in the U.S. 
based on new data, and our new estimates are about 25 percent higher 
for small and midsized farmers. Small and midsized farmers are now 
estimated to pay $579 and $1,414 for their first-year certification, 
respectively. Accreditation costs after the 18-month implementation 
period are substantially above those estimated in the proposed rule, 
reflecting a slight increase in the government per diem travel 
allowance since the proposed rule was published and a change in the 
projected number of reviewers needed for site evaluations and 
renewals after the 18-month implementation period. In the proposed 
rule, USDA had projected that only one reviewer would be needed for 
site evaluations and renewals that took place after the 18-month 
implementation period but has changed that projection to two 
reviewers based on additional experience with the International 
Organization for Standardization (ISO Guide 65) program. We estimate 
that initial accreditation costs after the 18-month implementation 
period will range from $6,120 to $9,700, approximately double our 
estimate in the March 2000 proposed rule.
    Marginal changes have been made in the final rule, in response 
to comments on the March 2000 proposal, which generally clarify or 
add flexibility to producer and handler provisions or make them 
better reflect current industry standards. One key change was to 
raise the threshold for labeling products as ``made with organic 
ingredients'' from 50 percent organic content to 70 percent to be 
consistent with international industry standards. Although not 
quantified, we believe that this will increase the cost of the rule. 
Another key change was to reduce the transition period for a dairy 
operation to make a whole-herd conversion to organic production in 
order to make conversion affordable for a wider range of dairy 
farms, including smaller operations. Although not quantified, we 
believe that this will decrease the cost of the rule.

The Need for National Standards

    Over the last several decades, as market demand has grown from a 
handful of consumers bargaining directly with farmers to millions of 
consumers acquiring goods from supermarket shelves as well as market 
stalls, a patchwork of State and private institutions has evolved to 
set standards and verify label claims. Organically produced food 
cannot be distinguished visually from conventional food and cannot 
necessarily be distinguished by taste; therefore, consumers must 
rely on labels and other advertising tools for product information. 
Farmers, food handlers, and other businesses that produce and handle 
organically grown food have a financial incentive to advertise that 
information because consumers have been willing to pay a price 
premium for these goods. However, consumers face difficulties in 
discerning the organic attributes of a product, and many producers 
and handlers have sought third-party certification of organic 
claims.
    State and private initiatives have resulted in a fairly robust 
system of standards and certification, and the difficulties in 
consumer verification have been partially overcome by these 
initiatives. Private organizations, mostly nonprofits, began 
developing certification standards in the early 1970's as

[[Page 80664]]

a way to support organic farming, as well as to strengthen 
legitimate product claims. The first organization to offer third-
party certification, California Certified Organic Farmers, was 
formed in the early 1970's, and the first State regulations and laws 
on organic labeling were also passed in the 1970's. Currently, 13 
State and 36 private certification programs are operating in the 
United States, and about half the States currently have some form of 
regulation. While most States still do not mandate third-party 
certification and many organic producers still market goods without 
certification, large food processors, grain traders, and retailers 
are increasingly requiring certification, and many growers have 
turned to certification as a marketing tool.
    However, even with increasing pressure for growers to use third-
party certification services and increasing availability of these 
services from State and private certifiers, the discrepancies 
between the certifiers on organic standards and between the States 
on certification requirements have resulted in several impediments 
to market development. The patchwork of variable standards has made 
producer access to organic markets, international and domestic, 
uneven. The recent emergence of the industry-developed standards may 
have mitigated some domestic access problems, but two important 
impediments remain. They are: multiingredient certification disputes 
and barriers to foreign markets.

Difficulty Certifying Multiingredient Products

    Although the State and private organic standards that have 
developed over the last several decades have many areas of overlap, 
particularly for crop production, the differences have caused 
disagreements among certifying agents over whose standards apply to 
multiingredient organic processed products. These disagreements have 
created sourcing problems for food. Disagreements about standards 
also create sourcing problems for handlers of these multiingredient 
products. Certifying agents are able to negotiate and maintain 
reciprocity agreements at some cost. These reciprocity agreements 
specify the conditions under which certifying agents recognize each 
other's standards. Although new organic product offerings have 
emerged at a fast pace during the 1990's, this pace could eventually 
slow, assuming that the need for costly reciprocity agreements will 
continue to persist in the absence of national standards.

Barriers to Foreign Organic Markets

    In the absence of a national standard, U.S. producers have taken 
on costs of private accreditation or shipment-by-shipment 
certification required to gain access to some foreign markets such 
as the European Union (EU). However, even with these actions, U.S. 
organic products may have had some difficulties entering other 
foreign markets due to high information and search costs on the part 
of foreign buyers. Some foreign buyers of U.S. organic products may 
incur costs to determine the compatibility of standards. Such costs 
may have discouraged purchases of U.S. organic products.
    Congress passed the OFPA--Title XXI of the Food, Agriculture, 
Conservation and Trade Act of 1990, U.S.C. Title 7--largely to 
address these marketing problems. The OFPA mandates that the 
Secretary of Agriculture develop a national organic program, and 
USDA's statutory responsibility is the primary reason why USDA has 
carried out this rulemaking process. The OFPA requires the Secretary 
to establish an organic certification program for farmers, wild-crop 
harvesters, and handlers of agricultural products that have been 
produced using organic methods as provided for in the OFPA. This 
legislation requires the Secretary to establish and implement a 
program to accredit a State program official or any private person 
who meets the requirements of the Act as a certifying agent to 
certify that farm, wild-crop harvesting, or handling operations are 
in compliance with the standards set out in the regulation. As 
stated by the OFPA in section 6501, the regulations are for the 
following purposes: (1) To establish national standards governing 
the marketing of certain agricultural products as organically 
produced products, (2) to assure consumers that organically produced 
products meet a consistent standard, and (3) to facilitate 
interstate commerce in fresh and processed food that is organically 
produced.

Baseline

    After struggling to build market recognition and supply capacity 
for many decades, the organic farming industry became one the 
fastest growing segments of U.S. agriculture during the last decade. 
Certified organic cropland more than doubled in the United States 
between 1992 and 1997, and two organic livestock sectors-eggs and 
dairy-grew even faster (Greene, 2000a). USDA's Economic Research 
Service estimates that over 1.3 million acres of U.S. farmland were 
certified in 1997, and more recent data from some of the certifiers 
indicate that this momentum is continuing (Greene, 2000b). Although 
national estimates of the amount of uncertified organic acreage are 
not available, data from California, the largest U.S. producer of 
organic specialty crops, indicates that most of the State's organic 
acreage and about half of the growers were certified during the 
1997/98 crop year (Klonsky et al., 2000).
    Growth in U.S. sales of organic products during the 1990's 
mirrors the growth in acreage devoted to producing these goods. 
According to industry data, total organic product sales more than 
doubled between 1992 and 1996 to $3.5 billion in sales (table 1). 
More recent industry data on organic sales through natural product 
stores, the largest outlet for organic products, show annual sales 
growth continuing in the general range of 20-25 percent annually.
    The recent growth in organic production and sales has taken 
place in the absence of national organic standards but with industry 
expectation that these standards were forthcoming. While the U.S. 
organic industry is characterized by an array of certification, 
production, processing, and marketing practices, there are 
commonalities throughout the industry.

Certification

    The number of U.S. certification groups has fluctuated between 
40 and 50 during the last decade. Currently, 49 organizations--36 
private and 13 State--are advertising that they provide 
certification services to farmers, handlers (a category that USDA 
defines to include processors), retailers, or other segments of the 
food industry. Some certifiers provide services to multiple segments 
of the food industry. Private certifying agents range from small 
nonprofit associations that certify only a few growers to large for-
profit businesses operating in numerous States and certifying 
hundreds of producers. Typically, certifying agents review organic 
production plans, inspect the farm fields and facilities to be 
certified, periodically reinspect, and may conduct soil tests and 
tests for residues of prohibited substances. In some cases, 
certifying agents negotiate reciprocity agreements with other 
agents.
    State laws vary widely on organic certification and 
registration. Some States, such as California, require only that an 
organic producer register and make certification voluntary. Other 
States, including Texas, require certification by the State's own 
agents, while Minnesota and others accept certification by a private 
certifying agent. Approximately half of the States have laws that 
regulate organic production and processing. In many States producers 
may claim their product is organic but operate without certification 
or well-defined standards. Many organic producers in States with no 
State programs voluntarily secure third-party certification to well-
defined standards. Certification costs vary with farm size and 
across certifying agents. Illustrative certification costs are 
presented in tables 2A and 2B.
    Very few certifying agents operate with an external 
accreditation for the following reasons. There is no law which 
requires them to be accredited: the price may be unacceptably high 
in relation to expected benefits; the certifying agent may be unable 
to find an accrediting party willing to accredit the particular 
organic program the certifying agent is marketing; and State 
programs may believe that their status as a government entity 
obviates the need for external accreditation.
    In 1999, USDA began accrediting certifying agents as meeting ISO 
Guide 65. It is a valuable recognition that the certifying entity 
satisfies the business capacity standards of ISO Guide 65. EU 
authorities have accepted verification of certifying agents to ISO 
Guide 65 as an interim measure to facilitate exports pending the 
establishment of a national organic program.

Organic Crop and Livestock Production

    In 1997, farmers in 49 States used organic production systems 
and third-party organic certification services on over a million 
acres of farmland and were raising certified organic livestock 
production in nearly half the States, according to USDA data 
(Greene, 2000a). Two-thirds of the farmland was used for growing 
crops, with Idaho, California, North Dakota, Montana, Minnesota, 
Wisconsin, Iowa, and Florida as the top producers.

[[Page 80665]]

Colorado and Alaska had the most organic pasture and rangeland. 
California overwhelmingly had the most certified organic fruit and 
vegetable acreage in 1997, but farmers were growing small plots of 
certified organic vegetables for direct marketing to consumers in 
over half the States. About 2 percent of the U.S. apple, grape, 
lettuce, and carrot crops were certified organic in 1997, while only 
one-tenth of 1 percent of the U.S. corn and soybean crops were grown 
under certified organic farming systems. USDA has not estimated the 
amount of acreage devoted to organic production systems that has not 
been certified, although data from California suggest that a large 
number of farmers, mostly those with small operations, produce and 
market organic goods without third-party certification.
    Key production practices followed by certified organic producers 
include: abstaining from use of certain crop chemicals and animal 
drugs; ecologically based pest and nutrient management; segregation 
of organic fields and animals from nonorganic fields and animals; 
following an organic system plan with multiple goals, including 
sustainability; and recordkeeping to document practices and progress 
toward the plan's goals. Specific elements of organic production 
vary, but organic systems generally share a core set of practices. 
For example, the certification standards of virtually all State and 
private U.S. certifying agents prohibit the use of synthetic 
chemical pesticides or animal growth hormones. And most 
certification standards include a 3-year ban on the use of 
prohibited substances on cropland before production can be certified 
as organic.
    On the other hand, certification standards for organic livestock 
production have been more variable for pasture, feed, and other 
practices. Until 1999, the USDA Food Safety and Inspection Service 
(FSIS) withheld approval for the use of organic labels on meat and 
poultry products pending the outcome of this rulemaking. However, 
the Secretary announced a change in policy in January 1999. Meat and 
poultry products may be labeled ``certified organic by (name of the 
certifying agent)'' if handlers obtain prior label approval from 
FSIS and the claim meets certain basic criteria. Organic labels have 
been permitted on eggs and dairy products--which are regulated by 
the Food and Drug Administration (FDA)--throughout the 1990's, but 
most certifiers have not yet offered certification services for 
these products.
    We provide a summary of the New Hampshire organic program to 
highlight the similarities in the core set of practices. It is 
important to note that this discussion is intended to highlight the 
conceptual similarities between State and private programs and is 
not intended to suggest that these programs are identical to each 
other or to the NOP. Production standards include: a written 
rotation plan; tillage systems that incorporate organic matter 
wastes into the topsoil; compliance with limits on the sources of 
manure and the timing of its application; prohibitions on the use of 
certain substances (e.g., sewage sludge, synthetic sources of 
nitrates, synthetic growth regulators, and anhydrous ammonia); a 
list of accepted and prohibited weed and pest control practices; 
segregation of organic and nonorganic production; recordkeeping 
regarding fertilization, cropping, and pest management histories; 
separate sales records for organic and nonorganic production; and 
records of all laboratory analyses. Residue testing may be required 
if USDA believes that the products or soil used for producing 
certified products may have become contaminated with prohibited 
substances.
    The New Hampshire program requires growers to pay a $100 annual 
inspection fee and to provide a written description of their farm 
operation, including the size of the farm; a field map; a 3-year 
history of crop production, pest control, and fertilizer use; a crop 
rotation and a soil management plan; and a description of 
postharvest storage and handling methods. Applicants for 
certification must also agree to comply with regulations controlling 
the use of the New Hampshire certified organic logo.

Organic Food Handling

    In addition to growers, who actually produce and harvest 
products to be marketed as organic, there are handlers who transform 
and resell the organic products. Not all certifiers have standards 
for handling organic products. And some certifiers have standards 
for parts of the food marketing system, such as restaurants, which 
are not explicitly covered by the OFPA nor encompassed by this final 
regulation.
    Definitions of processing and handling differ across certifying 
agents and State laws. Some States, such as Washington, distinguish 
between a processor and a handler, specifying 21 actions which 
constitute processing and defining a handler as anyone who sells, 
distributes, or packs organic products. Other States do not 
distinguish between food processors and handlers. Under the final 
rule, the term, ``handler,'' includes processors but not final 
retailers of agricultural products that do not process agricultural 
products.

Organic Product Marketing

    The two largest marketing outlets for organically produced goods 
are natural foods stores and direct markets--which include farmers 
markets, roadside stands, and `community supported agriculture' 
arrangements--according to industry data. USDA does not have 
official national level statistics on organic retail sales, but an 
industry trade publication, the Natural Foods Merchandiser (NFM), 
reported estimates of total retail sales of organic foods for years 
1990-96 and continues to report estimates of natural product stores 
sales (table 1). The last NFM estimate of total organic sales 
through all marketing outlets was $3.5 billion in 1996 ($3.7 billion 
in 1999 dollars), less than one percent of total food expenditures 
by families and individuals that year.
    Natural foods stores increased in size and presence in the 
United States during the 1990's--many are now the size of 
conventional supermarkets--and about two-thirds of estimated total 
organic sales during the 1990's were through this outlet (table 1). 
Natural foods supermarkets, which are similar to conventional in the 
breadth of supermarket offerings and amount of total sales, 
accounted for close to 1 percent of total supermarket sales by 1997 
(Kaufman 1998). Organic product sales through the natural foods 
stores outlet, alone, in 1999 were estimated at $4 billion, and 
sales through this outlet increased about 20-25 percent annually 
through the 1990's.
    Direct-to-consumer market sales ranged from $270 to $390 million 
during the early 1990's, accounting for between 17 and 22 percent of 
total organic sales during this period, according to NFM estimates 
(table 1). Conventional food stores (mass markets) accounted for 6-7 
percent of total sales during this period, and export sales 
accounted for 3-8 percent of the total. A draft report on the U.S. 
organic export market, partly funded by USDA, indicates that current 
U.S. export sales are under 5 percent of total organic product sales 
(Fuchshofen and Fuchshofen 2000).
    The United States is both an importer and an exporter of organic 
foods. The United States does not restrict imports of organic foods. 
In fact, U.S. Customs accounts do not distinguish between organic 
and conventional products. The largest markets for organic foods 
outside the United States are in Europe, Japan, and Canada. There is 
increasing pressure, particularly in Europe and Japan, for U.S. 
exports to demonstrate that they meet a national standard rather 
than a variety of private and State standards. France, for example, 
has indicated to USDA that it prefers to negotiate with a single 
national organic program, rather than the dozens of different State 
and private certifying programs currently operating in the U.S.
    The EU is the largest market for organic food outside the United 
States. The organic food market in the EU was estimated to be worth 
$5.2 billion in 1997 (International Trade Centre UNCTAD/WTO 1999). 
The largest organic retail sales markets in the EU in 1997 were 
Germany ($1.8 billion), France ($720 million), and Italy ($750 
million). Large organic markets outside the EU include Canada and 
Australia, with approximately $60 million and $68 million, 
respectively, in organic retail sales in 1997 (Lohr 1998). Import 
share of the organic food market in Europe ranged from 10 percent in 
France to 70 percent in the United Kingdom, was 80 percent in 
Canada, and varied from 0 to 13 percent in various Australian 
States.
    Japan is another important market for U.S. organic products. 
Currently, Japan has voluntary labeling guidelines for 6 categories 
of nonconventional agricultural products: organic, transitional 
organic, no pesticide, reduced pesticide, no chemical fertilizer, 
and reduced chemical fertilizer. Total sales, including foods 
marketed as ``no chemical'' and ``reduced chemical,'' are forecast 
to jump 15 percent in 1999 to almost $3 billion. Imports of organic 
agricultural products were valued at $90 million in 1998. Given 
Japan's limited agricultural acreage, imports will likely provide an 
increasingly significant share of Japan's organic food supply (USDA 
FAS 1999a).
    Recently, these markets have adopted or are considering adoption 
of procedures that

[[Page 80666]]

may impede the importing of organic food. The EU regulations 
establishing the basis for equivalency in organic production among 
EU members and for imports from outside the EU were adopted in 1991 
(Council Regulation 2092/91). The EU regulations only allow imports 
from non-EU countries whose national standards have been recognized 
as equivalent to the EU standards (Commission Regulation 94/92).
    The Ministry of Agriculture, Forestry, and Fisheries (MAFF) in 
Japan recently announced proposed standards and third-party 
certification requirements. Under Japan's proposed standards, 
certifying agents from countries without national organic standards 
administered by a federal government will face additional financial 
and administrative costs.

Requirements of the Final Rule

    The final rule follows the structure established in the OFPA. By 
adopting this alternative, the Department is following the 
legislative direction in the OFPA. All products marketed as organic 
will have to be produced and handled as provided in the OFPA and 
these regulations. Compared to current organic practices, the final 
rule sets a somewhat more stringent system of requirements.
    Among many alternatives, two alternatives to the final rule are 
discussed in this section: continuation of the status quo and use of 
industry-developed standards. Given the statutory responsibility, 
USDA is implementing the requirements of the OFPA. However, under 
the status quo alternative, there would be no national standard or 
national program of accreditation and certification. No Federal 
funds would be used, there would be no transfer from Federal 
taxpayers at large to organic market participants, and there would 
be no Federal regulatory barriers to entry into organic production 
and handling. However, growers and handlers would still not have 
level access, under uniform standards, to the domestic market, and 
there may be significant enforcement gaps at the State level. 
International pressure for additional verification would continue to 
build and would be likely to lead to an increased use of public and 
private verification and accreditation services, which are provided 
on a user-fee basis with full cost recovery. Establishing 
reciprocity between certifying agents in the domestic organic market 
would continue to be costly and may stifle growth in trade of 
organic products, although the magnitude of these costs and their 
effects on growth are unknown. Without further analysis that 
includes quantification and monetization of benefits and costs, it 
is not clear whether the net benefits associated with this 
alternative are greater or less than those associated with the final 
rule.
    Under the other industry-developed standards alternative, USDA 
could eliminate the costs associated with establishing reciprocity 
in the domestic market and establish equivalency for access to 
international markets, but it would be difficult for industry to 
develop consensus standards. For example, the industry-developed 
standards recently proposed by the Organic Trade Association were 
developed with significant industry input but with little public 
comment. In contrast, several hundred thousand comments have been 
submitted in the course of the USDA rulemaking process. In addition, 
the OFPA mandated an advisory role for a 15-member National Organic 
Standards Board (NOSB), which has wide representation from the 
organic community and includes members who are farmers, handlers, 
retailers, environmentalists, consumers, scientists, and certifiers. 
The NOSB has assisted in developing the standards promulgated in 
this final rule and will play an advisory role for the NOP even 
after the final rule is in place. Without further analysis that 
includes quantification and monetization of benefits and costs, it 
is not clear whether the net benefits associated with this 
alternative are greater or less than those associated with the final 
rule.
    USDA's final rule will be implemented by the NOP staff in the 
Agricultural Marketing Service (AMS). Major features of the NOP 
include:

Accreditation and Certification

    The rule specifies the accreditation and certification process. 
Persons providing certification services for organic production and 
handling must be accredited by USDA through the NOP. Applicants for 
accreditation must document their abilities to certify according to 
the national standards and to oversee their client's compliance with 
the requirements of the OFPA and NOP regulations. Producers and 
handlers of organic products must be certified by an accredited 
certifying agent. Producers and handlers are required to document 
their organic plans and procedures to ensure compliance with the 
OFPA.
    All certifying agents would have to be accredited, and 
certification by producers and handlers would be mandatory. The 
exceptions are: (1) growers and handlers with gross organic sales of 
$5,000 or less would be exempt from certification, and (2) a 
handling operation may be exempt or excluded from certification 
according to provisions described in the rule's subpart B, 
Applicability.
    USDA will charge applicants for accreditation and accreditation 
renewal (required every 5 years) a $500 fee at the time of 
application. USDA will also charge applicants for costs over $500 
for site evaluation of the applicant's business. The applicant would 
be charged for travel costs, per diem expenses, and any 
miscellaneous costs incurred with a site evaluation. USDA will also 
charge accredited certifiers at an hourly rate to review their 
annual reports.
    Producers and handlers will not pay certification fees to USDA. 
Certification fees will be established by the accredited certifying 
agents. USDA will not set fees. The rule requires certifying agents 
to submit a copy of their fee schedules to USDA, post their fees, 
and provide applicants estimates of the costs for initial 
certification and for renewal of certification.

Production and Handling

    The rule establishes standards for organic production of crops 
and livestock and handling of organic products. These standards were 
developed from specific requirements in the OFPA, recommendations 
from the NOSB, review of existing organic industry practices and 
standards, public comments received on the 1997 proposal and 
subsequent issue papers, public meetings, and comments received on 
the 2000 proposal.
    The final rule establishes a number of requirements for 
producers and handlers of organic food. These requirements will 
affect farming operations, packaging operations, processing 
operations and retailers. Some of the major provisions are: (1) land 
requirements, (2) crop nutrient requirements, (3) crop rotation 
requirements, (4) pest management requirements, (5) livestock 
management requirements, (6) processing and handling requirements, 
and (7) commingling requirements.

National List

    The National List lists allowed synthetic substances and 
prohibited nonsynthetic substances that may or may not be used in 
organic production and handling operations. The list identifies 
those synthetic substances, which would otherwise be prohibited, 
that may be used in organic production based on the recommendations 
of the NOSB. Only those synthetic substances on the National List 
may be used. The National List also identifies those natural 
substances that may not be used in organic production, as determined 
by the Secretary based on the NOSB recommendations.

Testing

    When certifying agents have reason to believe organic products 
contain a prohibited substance, they may conduct residue tests.

Labeling

    The rule also states how organic products may be labeled and 
permitted uses of the USDA organic seal. In addition to the USDA 
seal and the certifying agent's seal, information on organic food 
content may be displayed. Small businesses that are certified may 
use the USDA seal.

Recordkeeping

    The rule requires certifying agents, producers, and handlers to 
keep certain records. Certifying agents are required to file 
periodic reports with USDA. Producers and handlers are required to 
notify and submit reports to their certifying agent. While 
recordkeeping is a standard practice in conventional and organic 
farming, the final rule adds recordkeeping and reporting 
requirements that do not exist for growers and handlers operating 
without certification. Similarly, certifying agents would face 
additional recordkeeping and reporting requirements, particularly 
those certifying agents operating without external accreditation. 
The rule permits certifying agent logos and requires the name of the 
certifying agent on processed organic foods.

Enforcement

    Organic operations that falsely sell or label a product as 
organic will be subject to civil penalties of up to $10,000 per 
violation. The provisions of the final regulation apply to all

[[Page 80667]]

persons who sell, label, or represent their agricultural product as 
organic, including operations that aren't certified, and the civil 
penalties of up to $10,000 apply to these operations as well. 
Certifying agents, State organic programs' governing State 
officials, and USDA will receive complaints alleging violations of 
the Act or these regulations. In States where there is no State 
organic program, USDA will investigate allegations of violations of 
the Act.

Number of Affected Parties and Projections

    In assessing the impacts of the rule, we have attempted to 
determine the number of certifying agents, private and State, that 
are currently operating and considered the factors likely to affect 
the number of certifying agents after the rule is implemented. We 
have attempted to determine the number of currently operating 
producers and handlers that would be affected. And, we have 
considered the factors that might affect the number of producers and 
handlers after the program has been implemented.
    For the analysis, USDA assumes the following:
    1. Forty-nine domestic certifying agents and ten foreign 
certifying agents will be affected by the regulation.
    2. Approximately 13,650 certified and noncertified organic 
producers will be affected by the regulation. With the assumed 
growth rate of 14 percent for certified organic producers and 
approximately 8 percent for noncertified organic producers, the 
number of organic producers will grow to 17,150 in 2002.
    3. Approximately 1,600 handlers of organic food will be affected 
by the regulation. This number will grow to 2,250 by 2002.

Certifying Entities

    We place the number of certifying agents currently operating at 
49, including 13 State programs. The number of certifying agents has 
remained fairly stable, between 40 and 50, for some years, with 
entries and exits tending to offset each other. For purposes of 
estimating the paperwork burden described elsewhere, we assume no 
growth in the number of domestic certifying agents but project 10 
foreign certifying agents will seek and receive USDA accreditation 
in the first 3 years of the program.

Organic Producers

    While some USDA data on the number of certified organic 
producers in the United States exist, no national data have been 
collected on the number of producers that produce and market organic 
goods without third-party certification. Organic farming was not 
distinguished from conventional agriculture in the last Census of 
Agriculture in 1997. USDA and Organic Farming Research Foundation 
(OFRF) data were used in the Regulatory Impact Analysis (RIA) of the 
March 2000 proposed rule to help estimate the number of certified 
U.S. growers affected by the regulation. California Department of 
Food and Agriculture (CDFA) data were used to help estimate the 
number of uncertified U.S. growers affected by the regulation. All 
three of these data sources have updated their estimates of the 
number of certified and uncertified organic producers since the RIA 
of the proposed rule was published earlier this year. However, the 
updated numbers do not indicate trends that would fundamentally 
alter the assumptions used in the RIA of the proposed rule to 
calculate the number of affected growers, and the estimates made for 
the March 2000 RIA are retained in this assessment of the final 
rule.
    USDA datum indicates the average annual growth rate in the 
number of U.S. certified organic growers between 1991 and 1994 was 
about 14 percent (Dunn 1995b). In April 2000, USDA's Economic 
Research Service estimated that 5,021 certified organic growers 
operated 1.347 million acres of U.S. farmland in 1997, indicating 
that the increase in acreage had outpaced the increase in growers, 
and showing only an 8 percent annual growth rate in growers between 
1994 and 1997 (Greene, 2000b). However, USDA's study indicated that 
the pace of growth in certified acreage had quickened considerably 
since 1997, with the amount of certified acreage increasing 38 to 
150 percent between 1997 and 1999 by several large certifying 
organizations across the U.S. And a nonprofit organic research 
foundation, OFRF, estimates that the number of certified organic 
producers in the certification organizations that they track--the 
ones that will release data to them--grew over 20 percent annually 
between 1997 and 1999, from 4,638 to 6,600 (OFRF 2000). Also, one 
certifier, Washington State, responded to our request for data on 
the growth rate, indicating that the number of certified organic 
producers has increased an average of 17 percent per year between 
1994 and 1999 in that State and noting that certification became 
mandatory by State law in 1993.
    In the March 2000 RIA, USDA estimated that the number of 
certified U.S. organic producers potentially affected by this 
legislation is approximately 9,350 in 2000 and will be approximately 
12,150 in 2002, based on a straight line projection of the 14-
percent annual growth rate trend shown by USDA data for 1991-1994. 
The period, 2000-2002, was chosen for analysis because it 
encompasses both the period of final rulemaking and the 18-month 
implementation period. Congress passed the OFPA in 1990, and the 14-
percent growth rate in certified growers during the 1991-1994 period 
reflects their expectation that national organic regulations were 
forthcoming. Since the recent estimates of industry growth during 
the 1990's are uneven and the actual growth rate in the number of 
growers who will become certified after this legislation is 
implemented is uncertain, the March 2000 estimates are retained in 
this assessment of the final rule.
    The March 2000 RIA also estimated the number of producers who 
are practicing organic agriculture but who are currently uncertified 
that would be affected by the rule. In California, where organic 
growers are required to register with the State but not to be 
certified, a large proportion of growers are uncertified. The most 
recent State data, for the 1997/98 crop year, indicate that 1,526 
growers registered as organic, but only 41 percent of them obtained 
third-party certification (Klonsky et al., 2000). While only a small 
percentage of growers in the lowest organic sales category (0-
$10,000), where the largest number of growers were clustered, 
obtained certification, three-quarters or more of the growers 
earning at least $50,000 obtained certification, and all of the 
growers in the highest sales class were certified. USDA did not use 
the California ratios of certified to uncertified growers in the 
March 2000 RIA to estimate the number of uncertified growers because 
the farming structure of California may not be representative of the 
Nation. For example, California sells at least three times more 
specialty crops than any other State in the United States and has an 
unusual registration program that many growers use instead of 
certification.
    USDA made two assumptions about uncertified production for the 
March 2000 estimate. The first assumption was that the rate of 
growth in uncertified production is less than the rate for certified 
farms because certification has value and organic producers would be 
expected to take advantage of the marketing advantages of 
certification. This assumption is consistent with California data 
that showed an increase in the percent of organic farmers obtaining 
certification between 1996/97 and 1997/98 in virtually every sales 
class (Klonsky et al. 2000). Second, the emergence of State 
certification programs with lower certification fees than private 
certification entities may have encouraged more organic producers to 
be certified. Based on these assumptions, USDA assumed that the 
number of uncertified organic producers is about 4,300 in 2000 and 
will be about 5,000 in 2002, making the total number of farms 
potentially affected by the rule about 13,650 in 2000 and 17,150 in 
2002.

Organic Handlers

    Little information exists on the number of organic product 
handlers, such as organic soup manufacturers, organic food packaging 
operations, organic food wholesalers, and feed millers. USDA has 
estimated that there were 600 entities in this category in 1994 
(Dunn 1995b). AMS estimated that the growth rate was 11 percent from 
1990 through 1994 (Dunn 1995b). More recent data from CDFA 
registration records suggest a growth rate of about 28 percent 
(California Department of Health Services 1999). For projection 
purposes, we use a growth rate of 20 percent and estimate there are 
about 1,600 in 2000 and there will be about 2,250 handlers in 2002. 
Reasons for growth include the general increase in organic 
production and growth in the market for processed organic foods, 
including multiingredient products. Again, these projections are 
based on limited data from the early 1990's, and growth may have 
slowed or increased. These estimates of organic product handlers are 
slightly higher that the estimates made in the March 2000 RIA 
because they include about 100 feed millers that were not included 
in the earlier calculation.

Retail Food Establishments

    Retailers of organic food are grocery stores, bakeries and other 
establishments that

[[Page 80668]]

process or prepare raw and ready-to-eat food. Most are not currently 
subject to either voluntary practices or mandatory standards of the 
organic industry. Although they are excluded from the certification 
requirements under the final rule, they are subject to other 
processing, handling, and other production related requirements of 
the final rule. Some of the grocery stores in the United States, 
particularly the natural foods stores, sell processed or prepared 
organic foods and will be affected by the these requirements. USDA 
does not have an estimate of the number of entities affected.

Foreign Entities

    In addition to domestic certifying agents, foreign certifying 
agents may also apply for accreditation under the NOP. At this time, 
we have no information regarding the number of foreign certifying 
agents that may seek USDA accreditation. Foreign applicants will 
face the same base costs for accreditation as domestic applicants 
but the overall levels of cost are expected to be higher due to the 
generally higher costs of foreign travel and per diem expenses for 
site evaluation and miscellaneous costs such as for translation of 
documents. For purposes of estimating the paperwork burden described 
elsewhere, we assume 10 foreign certifying agents will seek and 
obtain accreditation during the first 3 years of the program.

Benefits of the Final Rule

    The benefits of implementing national uniform standards of 
production and certification include: (1) Providing a common set of 
definitions on organic attributes and standardizing the manner in 
which the product information is presented, which may reduce the 
cost associated with enforcement actions in consumer fraud cases; 
(2) reduced administrative costs; and (3) improved access to organic 
markets. Not all benefits that may arise from the rule are 
quantifiable. Where economic data are available, they may relate to 
costs and are generally not adequate to quantify economic benefits. 
The regulatory changes in the final rule are not expected to reduce 
the benefits from those described under the March 2000 proposed 
rule.

Information

    Potential benefits to consumers as a result of the final rule 
include providing a common set of definitions on organic attributes 
and standardizing the manner in which the product information is 
presented. This standardization may reduce the cost associated with 
enforcement actions in consumer fraud cases.
    Organic products cannot be distinguished from conventionally 
produced products by sight inspection, and consumers rely on 
verification methods such as certification to ensure that organic 
claims are true. Self-policing by certifiers of growers and handlers 
that are certified has been difficult because some certifiers have 
been under pressure to use weak standards and lax enforcement 
procedures in order to keep their producer and processor clients 
from taking their business to other certifiers (Scowcroft 1998).
    Anecdotal evidence suggests that consumer fraud involving 
organic food does occur, and several States successfully pursued 
civil and criminal prosecution of these cases during the 1990's. The 
Attorney General of Minnesota successfully prosecuted felony charges 
in 1997 against the president of Glacial Ridge Foods, a wholesale 
supplier of beans and grains, for repackaging conventionally 
produced product and selling approximately $700,000 worth labeled as 
certified organic (Mergentime 1997). The San Diego City Attorney's 
office successfully prosecuted felony charges against Petrou Foods, 
Inc., an organic oil and vinegar distributor, for misbranding 
conventional product, based on an investigation by the California 
Department of Health Services (Scott 1997). Also the California 
Department of Food and Agriculture conducted spot checks of 51 
uncertified organic growers during the mid-1990's, based on 
complaints, and found 32 violations of California's organic 
standards (Farmers Market Outlook). However, only about half of the 
States have any organic legislation, and few of those States have 
laws with enough teeth to permit prosecution of organic fraud. In 
States without similar laws, the costs associated with remedies via 
the tort system may be high. The NOP established in this final rule 
is expected to fill in important State and regional gaps in 
enforcement in organic fraud cases.
    The USDA organic seal will also provide consumers a quick tool 
to verify that goods offered for sale as organic are in fact 
organic.

Reduced Administrative Costs

    The rule addresses the problem of existing certifying agents 
using different standards and not granting reciprocity to other 
certifying agents. By accrediting certifying agents, the rule 
establishes the requirements and enforcement mechanisms that would 
reduce inconsistent certification services and lack of reciprocity 
between certifying agents. In the current system, the certifying 
agent of a final product is not required to recognize the 
certification of an intermediate product. Both primary farmers and 
food handlers may face a risk of being unable to sell a certified 
organic product when more than one certifying agent is involved. By 
imposing a uniform standard of certification and production, the 
costs associated with establishing reciprocity between certifying 
agents will be eliminated, and the market dampening effects that 
these costs impose will be eliminated. Industry-wide training costs 
may also decrease. USDA's uniform standards of production and 
certification should enable organic inspectors to move more easily 
from one certifying agent to another than under the current system.

Domestic and International Markets

    The final rule is expected to improve access to domestic and 
foreign markets for organically produced goods. The current 
patchwork of differing State certification requirements and variable 
State and private standards has given producers and handlers uneven 
access to the domestic organic market and to the price premiums 
associated with this market. Livestock producers, in particular, may 
have limited their organic production because they lacked access to 
a State or private organic livestock certification program or were 
uncertain about the standards that would be implemented under the 
NOP.
    The final rule could also improve access to EU and other foreign 
markets for U.S. organic products. For example, the EU may determine 
that the NOP is acceptable vis-a-vis EU regulation 2092/91. Article 
11 of EU Reg. 2092/91 establishes the conditions under which organic 
products may be imported from third countries and addresses the 
framework for equivalency. The NOP is a national program that should 
be acceptable to the EU and other governments. Foreign acceptance of 
the U.S. national standard would reduce costs of negotiating and 
documenting shipment by shipment. Reducing these transaction costs 
may reduce entry costs for U.S. producers to foreign organic 
markets. These benefits would not accrue until after negotiations 
for an equivalency agreement have been held and completed 
successfully, which could be a lengthy process.
    An estimated 5 percent of total U.S. sales are from exports. 
Currently, despite restricted access to the European market, the 
United States is the most important non-EU supplier of organic 
products to EU countries (Foreign Agriculture Service (FAS), 1995). 
Import authorizations have been granted for a number of raw and 
processed commodities, including sunflowers, buckwheat, beans, 
sugar, and apples. Demand is strong throughout the European market, 
and the organic market share was 1-2 percent of total food sales in 
1997 (Collins 1999). Medium-term growth rate forecasts range from 5-
10 percent for Germany to 30-40 percent for Denmark, and is 20-30 
percent in most of the EU countries, according to the International 
Trade Centre UNCTAD/WTO. However, most analysts are basing their 
projected future growth rates on straight-line extrapolations of 
current sales and growth rates without understanding the underlying 
market mechanisms and price elasticities (Lohr 1998).

Costs of the Final Rule

    The costs of the regulation are the direct costs of complying 
with the specific standards. It is important to note that while some 
costs associated with accreditation and certification are 
quantified, costs stemming from other provisions of the final 
regulations are not. In addition, this is a short-run analysis. The 
analysis examines the costs that may be incurred through 2002. It is 
not possible at this time to conduct a longer run analysis because 
we do not know enough about the fundamental supply and demand 
relationships to make economically sound long-run projections.

Accreditation Costs

    USDA has identified 36 private certifying agents and 13 State 
programs providing certification in the United States. These 49 
entities are considered likely applicants during the first 18 months 
during which USDA will not charge application fees or hourly fees 
for accreditation. An unknown number of new entrants to the 
certifying business may also apply. However, over the last 10 years, 
the number of certifying agents

[[Page 80669]]

does not appear to have grown significantly, with the net effect of 
entries and exits maintaining a population of certifying agents at 
about 40-50.
    The final rule allows USDA to collect fees from certifying 
agents for USDA accreditation. The first proposal would have 
permitted USDA to collect fees from producers and handlers as well, 
but USDA decided that it would be administratively simpler to 
collect fees only from certifiers and would enable State programs 
that want to keep client costs low to be able to do so.
    Applicants for accreditation will be required to submit a 
nonrefundable fee of $500 at the time of application, which will be 
applied to the applicant's fees for service account. This means that 
the $500 fee paid at the time of application is credited against any 
subsequent costs of accreditation arising from the initial review 
and the site evaluation. The $500 fee is the direct cost to 
applicants who are denied accreditation based on the initial review 
of the information submitted with their application. Charges for the 
site evaluation visit will cover travel costs from the duty station 
of USDA employees, per diem expenses for USDA employees performing 
the site evaluation, an hourly charge (per each employee) for 
services during normal working hours (higher hourly rates will be 
charged for overtime and for work on holidays), and other costs 
associated with providing service to the applicant or certifying 
agent.
    At present, the base per diem for places in the United States is 
$85 ($55 for lodging and $30 for meals and incidental expenses). Per 
diem rates are higher than $85 in most large cities and urbanized 
places, but over half of the current U.S. certifiers are located in 
places that have an $85 per diem rate, and that is the rate used to 
calculate average certifier expenses in table 3. A review of 
domestic travel by USDA staff during fiscal year 1999 indicates 
transportation costs ranging from $500 to $600 per person. 
Miscellaneous costs are estimated to add another $50 to each site 
visit.
    The hourly rate that USDA anticipates charging for accreditation 
is the rate that USDA currently charges for services under the 
Quality Systems Certification Program (QSCP). Our preliminary 
estimate that this rate will be no more than $95 per hour is 
presented to give the public some indication of the rate that will 
be charged following the 18-month transition period. QSCP is an 
audit-based program administered by AMS, which provides meat 
producers, handlers (packers and processors), and other businesses 
in the livestock and meat trade with the opportunity to have special 
processes or documented quality management systems verified. The 
procedures for accreditation evaluation are similar to those used to 
certify other types of product or system certification programs 
under QSCP.
    Accreditation will include verification of adherence to ISO 
Guide 65 and the regulations. Although much of the site evaluation 
for accreditation will involve comparisons against ISO Guide 65, 
additional hours will be required because USDA will be evaluating 
additional aspects of the applicant's operation to determine if the 
applicant is qualified to perform as an accredited agent for the 
NOP. Based on experience with the QSCP and more limited experience 
performing audits verifying that certifying agents meet ISO Guide 
65, we project that a site evaluation visit for small applicants 
with a simple business structure will require 3 days of review, and 
for those large applicants with more complex business structure will 
require 5 days of review.
    USDA will use two reviewers for each site evaluation visit 
during the 18-month implementation period, as well as for new 
applicants after that period. One reviewer will come from the QSCP 
audit staff and will be familiar with the ISO Guide 65 verification; 
the other reviewer will come from the NOP staff and will be familiar 
with requirements of the organic program. The two will conduct the 
site evaluation jointly. Two reviewers will also be needed for the 
site evaluation visits for the accreditation renewals, which will 
take place every 5 years. In the proposed rule, USDA had projected 
that only one reviewer would be needed for site evaluations and 
renewals that took place after the 18-month implementation period 
but has changed that projection based on additional experience with 
the ISO Guide 65 program.
    During the 18-month implementation period, applicants will be 
charged for travel and per diem costs for two persons and for 
miscellaneous expenses but will not be charged application fees or 
hourly fees. The estimated expenditures for these initial 
accreditations is $1,560-$2,100, with $510-$850 for per diem 
expenses, $1,000-$1,200 for travel expenses, and $50 for 
miscellaneous expenses (table 3). The cost of initial site 
evaluation visits will vary with the cost of travel from the USDA 
reviewer's duty station to the applicant's place of business. In 
general, more distant and remote locations will involve higher 
travel costs.
    USDA estimates the costs of a site evaluation visit after the 
transition period may average $6,120-$9,700, depending on the 
characteristics of the applicant, including $4,500-$7,600 for the 
hourly site evaluation charges that are not billed to the certifier 
during the first 18 months (table 3). USDA has received appropriated 
funds to pay for the hourly site evaluation charges only during the 
first 18 months of the program.
    Currently, few private certifying agents are operating with 
third-party accreditation. Fetter (1999) reports that in a sample of 
18 certification programs, four programs were accredited, and one 
had accreditation pending. All of these were large, private 
certifying agents. Those certifying agents currently accredited by 
third parties will likely pay less for USDA accreditation. In its 
first proposal, USDA stated at FR 62:65860, ``We are aware that 
certifiers currently may pay in excess of $15,000 for accreditation 
by a private organization.'' Commenters thought this figure was too 
high. One commenter, which operates the International Federation of 
Organic Agriculture Movements (IFOAM) Accreditation Programme under 
license to IFOAM, stated, ``It is possible that the largest 
programme operating a chapter system with activities in many 
countries (which is included in their IFOAM evaluation) paid this 
amount in their first year. On the other hand the average cost to a 
medium sized certifier works out at around $3000 to $4000 per 
year.'' Another commenter stated, ``At the present time IFOAM 
accreditation costs less than $10,000/year for the largest certifier 
and $3-5,000 for smaller certifiers.''
    The 18-month NOP implementation period affects the distribution 
of program costs between the organic industry and the taxpayer. Some 
of the costs of accreditation would be absorbed by the NOP operation 
budget appropriated by Congress. In effect, the taxpayers are 
subsidizing the organic industry. Without this subsidy, the total 
cost of accreditation would approach $1 million.
    The direct accreditation costs to an estimated 59 certifying 
agents (including all 49 current U.S. certifiers and an estimated 10 
foreign certifiers) during the first 18 months following the final 
rule, are approximately $92,000 to $124,000. This figure is derived 
from the per-firm costs in table 3. In addition, USDA will use 
appropriated funds to cover approximately $270,000-$448,000 in 
hourly charges for site evaluation. USDA will also use appropriated 
funds to cover the costs of producing and publishing an 
accreditation handbook in several languages, translating USDA 
reports to foreign clients, and developing and funding a peer review 
panel to evaluate NOP's adherence to its accreditation procedures. 
And if more than the estimated 59 certifiers apply for accreditation 
during the first 18 months of the program, USDA will use 
appropriated funds to cover additional hourly charges for site 
evaluation.
    Private certifying agents and State programs that do not mirror 
the regulation may incur additional costs to change their programs 
to adopt the national standards. The discussion on the effect of the 
regulation on existing State programs is in ``State Program Costs.'' 
The cost associated with changing existing private certifying 
programs is not quantified.
    Also, certifying agents who have been operating without third 
party accreditation will face new costs. For certifying agents who 
currently obtain third-party accreditation, the direct costs of USDA 
accreditation, which are only incurred every 5 years, may be lower 
on an annual basis compared to the direct costs for third-party 
certification of $3,000-$5,000 per year indicated by the commenters. 
The direct costs for certifying agents obtaining accreditation 
during the first 18 months, when USDA will not impose an application 
fee or hourly charges, will be limited to travel, per diem, and 
miscellaneous expenses.
    A national accreditation program may shrink the market for a 
third-party accreditation. Certifying agents will have little 
incentive to maintain or seek a second accreditation by a private 
organization unless that accreditation sufficiently enhances the 
market value of the certifying agent's services. Thus, the market 
will determine whether other accrediting entities continue to have a 
U.S. market for their services.
    Training programs are currently offered by the Independent 
Organic Inspectors Association (IOIA), an organization of

[[Page 80670]]

approximately 165 organic certification inspectors, and by some of 
the larger certifying agents (IOIA). Costs to existing certifying 
agents to provide additional training to other staff are difficult 
to measure in the absence of information on current staff skill 
levels or the existence of formal training other than inspector 
training. Some agencies rely on volunteer staff who may have had no 
formal training, but the extent of this practice is unknown. AMS 
intends to offer assistance to certifying agents, producers, and 
handlers by providing accreditation training for certification 
agents and other printed material that would enable participants to 
better understand the regulations. In addition, AMS intends to 
continue open and frequent communication with certifying agents and 
inspectors to provide as much information as possible to aid them in 
fulfilling the requirements of the regulations.
    The OFPA requires that private certifying agents furnish 
reasonable security for the purpose of protecting the rights of 
participants in the organic certification program. It is expected 
that there will be costs to certifying agents from these 
requirements.
    Implementation of the final rule will also impose a less 
tangible cost on some certifiers. Some private certifiers have 
advertised their program and logo as representing higher standards 
than other programs. The brand value associated with the logos of 
these certifiers will be lost when uniform standards are implemented 
as part of the national program. However, certifiers will still be 
able to distinguish themselves to clients based on the quality of 
their services and other characteristics.
    A key change was made in the final rule, based on comments to 
the March 2000 proposal, to make the standard used by certifiers to 
determine maximum allowable pesticide residues (the level above 
which a product could not be called organic) consistent with the 
current industry standard and with NOSB recommendations. In the 
final rule, the standard will be set at 5 percent of the pesticide 
residue tolerances calculated by the Environmental Protection Agency 
(EPA). This change could conceptually reduce costs, but the 
magnitude of this reduction is uncertain.

Certification Costs

    Under the final rule, USDA will not impose any direct fees on 
producers and handlers. Certifying agents will establish a fee 
schedule for their certification services that will be filed with 
the Secretary. Certifying agents will provide all persons inquiring 
about the application process with a copy of their fees. The 
certifying agent will provide each applicant with an estimate of the 
total cost of certification and an estimate of the annual costs of 
updating the certification. Under the proposed rule, certifiers 
could charge a maximum of $250 at the time of application, but under 
the final rule, certifiers are not limited in the amount of 
certification fees that they may charge at the time of application.
    Some States charge minimal fees for certification by subsidizing 
operating costs from general revenues. The majority of certifying 
agents structure their fee schedules on a sliding scale based on a 
measure of size, usually represented by the client's gross sales of 
organic products but sometimes based on the acres operated (Fetter 
1999 and Graf and Lohr 1999). Some certifying agents charge an 
hourly rate for inspection and audit services.
    Graf and Lohr have applied fee schedules provided by ten 
certifying agents to four hypothetical farms, small, medium, large, 
and a super farm. Tables 2A and 2B summarizes the fees that Graf and 
Lohr found by applying schedules of each certifying agent to 
hypothetical farms. Total first-year costs and subsequent-year 
(renewal) costs for certification are shown. The average cost for 
each size class should be interpreted with care because it is not 
weighted by the number of clients certified. In their study, the 
Texas Department of Agriculture program is the low-cost certifying 
agent for all-size operations. The high-cost certifying agent 
differs across farm sizes. None of these certification programs 
mentions costs for residue testing, which the NOP will require in 
the form of preharvest testing when there is reason to believe that 
agricultural products have come into contact with prohibited 
substances. Preharvest testing is expected to be infrequent. Some 
certifying agents currently require soil nutrient testing and water 
quality testing. The estimated total initial costs for a producer or 
handler to become certified are presented in table 3.
    We have not extended the average costs reported in Tables 2A and 
2B to aggregate certification costs for all organic farms because 
the number of organic farms is not known with precision, nor is 
their geographic location, and there are no data to distribute the 
population of organic farms across size classes. The data from 
California suggest that a large number of small farmers produce and 
market organic goods without third-party certification, but those 
data may not be representative of the national trend. Although many 
of the smallest farms would qualify for the small farm exemption 
from certification, if consumers accept the labeling practices 
required by this final rule, small farmers may obtain certification 
to stay in the organic market, which may involve some cost.
    In response to comments, the March 2000 proposal was changed to 
provide that if a conflict of interest is identified within 12 
months of certification, the certifying agent must reconsider the 
application and may reinspect the operation if necessary. 
Additionally, if a conflict of interest is identified, the 
certifying agent must refer the operation to a different accredited 
certifying agent. These provisions would likely increase costs to 
certifiers; however, the magnitude of this increase is unknown.

Production and Handling Costs

    Producers and handlers currently active in the organic industry 
may bear costs under the national standards. We believe that while 
most provisions of the program mirror current industry practices, 
there are some differences. In addition to the cost associated with 
becoming familiar with the national program, any adjustments 
stemming from these differences will result in costs. These costs 
were qualitatively discussed in the March 2000 RIA for major 
provisions of the rule and are described below. The March 2000 
proposal adhered closely to recommendations from the NOSB and 
largely reflected current industry standards. Marginal changes have 
been made in the final rule in response to comments on the March 
2000 proposal. These changes have been made in concert with NOSB 
recommendations and, in general, have been made to clarify or add 
flexibility to producer and handler provisions or to make them 
better reflect current industry standards.

Producers

    Producers of organic food will face numerous provisions that 
will regulate their production methods. As indicated in the Baseline 
section, many of the requirements are currently followed by 
certified organic farmers. Farming operations that are not certified 
but are registered with a State government, such as California, 
receive copies of the State laws to which they must comply. The 
costs associated with adjusting to provisions in the final rule may 
be minimal for certified and State-registered growers but may be 
more substantial for noncertified organic producers that do not 
follow a specific set of guidelines or regulations. Some organic 
producers are neither certified nor registered and, therefore, may 
not practice the requirements in the final rule. Major provisions of 
the final rule--the withdrawal period required for land to be free 
of prohibited substances, National List, animal drug use, and 
residue tests--are discussed to illustrate costs; other provisions 
may also impose additional costs.
    A 3-year withdrawal period, during which prohibited materials 
cannot be applied to a field to be certified as organic, is 
currently required by most private and State organic standards, and 
the final rule also specifies a 3-year period. The effect of this 
provision on the currently certified organic farming operations may 
be minimal, but the effect on farming operations that are neither 
certified nor registered may be significant. Farming operations that 
have completed a 3-year withdrawal period will not be affected by 
this requirement. To stay in the organic industry, those who have 
not completed the 3-year period must comply with this requirement. 
They may incur the cost of organic production for a significant 
length of time, yet not be allowed to sell their products as 
organic. Hence, some small organic operations may exit the industry.
    The impact of the National List, which lists allowed synthetic 
substances and prohibited nonsynthetic substances that may or may 
not be used in organic production and handling operations, will be 
determined by how the national standards differ from current 
certification standards and from actual practice. Lists of approved 
synthetic materials, including soil amendments and pesticides, vary 
from one certification program to another, but a detailed analysis 
of specific differences in the various existing materials lists 
shows them to be overlapping in most cases with each other and with 
the National List. The degree of overlap should mitigate the costs 
for certified operations, but

[[Page 80671]]

farming operations, particularly those that aren't certified, may 
need to make some adjustments to comply with the list. These 
adjustments will impose costs on these operations. The magnitude of 
the costs resulting from these adjustments is not quantified.
    Where livestock standards have been adopted by existing State 
programs and by private certifying agents, most prohibit the use of 
animal drugs except for the treatment of a specific disease 
condition, and use of animal drugs is generally prohibited within 90 
days prior to the sale of milk or eggs as organic. Some State and 
private certifiers allow the use of animal drugs in animals for 
slaughter under certain conditions, while others prohibit the use of 
animal drugs. The standards in the final rule would prohibit the 
sale as organic of edible products derived from an animal treated 
with antibiotics or other unapproved substances. The standards may 
not differ from existing State or private standards in prohibiting 
the use of drugs on healthy animals. However, the effect of this 
provision may differ among certified and registered organic farms. 
The effect on the certified farming operations is unknown. We assume 
that this provision may have costs, but the magnitude of these costs 
is not quantified.
    Additional costs may be imposed by several further changes to 
the March 2000 proposal. These changes involve the use of treated 
lumber, confinement requirements, and the commercial availability of 
ingredients in products labeled ``organic.''
    The replacement of lumber treated with prohibited substances 
that comes into contact with soil, crops, or livestock under organic 
management with treated lumber is now specifically prohibited in 
organic systems. Since the use of lumber treated with prohibited 
substances for the purpose of preventing degradation is not a common 
practice in livestock production, this prohibition is not expected 
to increase producer costs substantially. The exact magnitude of any 
increase is uncertain and mainly dependent upon the number of 
producers seeking organic certification that currently use treated 
lumber in their operations and are planning to replace that lumber.
    The confinement provisions in the March 2000 proposal have been 
slightly modified. Access to the outdoors is now an explicitly 
required element for all organically raised livestock. We expect 
this change to have a minor impact on overall producer costs, since 
we assume most producers raising organic livestock already provide 
access to the outdoors. Additionally, the term, ``pasture,'' has 
been defined to emphasize that livestock producers must manage their 
land to provide nutritional benefit to grazing animals while 
maintaining or improving soil, water, and vegetative resources of 
the operation. To the extent producers desiring to raise organic 
livestock do not currently manage pasture in this manner, we expect 
livestock production costs to increase.
    The organic plan now requires using organically produced minor 
agricultural ingredients unless not commercially available. This 
applies to the previously allowed 5-percent nonorganic agricultural 
and other ingredients in products labeled ``organic.'' Handlers of 
organically produced minor ingredients, especially herbs and spices, 
are likely to benefit from this market incentive, while producers of 
nonorganic minor ingredients will likely be adversely affected. 
Producers will also realize a burden associated with providing the 
documentation of commercial availability for ingredients in the 5-
percent component. Since the criteria to determine commercial 
availability will be developed after additional comments and 
information are considered, the magnitude of the cost and benefit 
implications from this standard are currently unquantifiable but 
will likely be largely dependent upon the stringency of the 
developed criteria.
    Producers will also have administrative costs for reporting and 
recordkeeping, although producers who currently are active in the 
organic industry already perform most of these administrative 
functions, and additional costs to them would depend upon the extent 
to which their current practices are different from the requirements 
of the final rule. The annual reporting and recordkeeping burden on 
producers is estimated at 24 hours for certified producers and 1 
hour of recordkeeping for small producers who choose to operate as 
exempt entities and is valued at $23 per hour.
    Other provisions of the final rule, such as those on residue 
testing, livestock housing and feed, and health care practices, may 
vary enough from those followed by some growers that they may impose 
costs due to the variability in current housing, feed, and health 
care practices, but lacking information, we have not quantified 
these costs.
    There were also several key changes made in the final rule, 
based on comments to the March 2000 proposal, that will add 
flexibility to producer standards. A specific type of production 
facility was required for composting manure in the proposal, and 
this provision has been modified to ensure that manure is adequately 
composted while allowing variation in the type of facility that is 
used. Also, the transition period of a dairy operation to make a 
whole-herd conversion to organic production has been reduced in 
order to make conversion affordable for a wider range of dairy 
farms, including smaller operations. Finally, the requirement that 
slaughter stock sold, labeled, or represented as organic be under 
continuous organic management from birth was changed to require 
continuous organic management from the last third of gestation. This 
change is also expected to provide possible cost savings and added 
flexibility for producers.

Handlers

    Handlers of organic food are defined and regulated differently 
across different certifying agents and States. Due to this 
variability, handlers may incur some cost associated with complying 
with the requirements of the regulation. Several key changes were 
made in the final rule, based on comments to the March 2000 
proposal, to make handler standards more consistent with current 
industry standards. The proposal prohibited the addition of sulfites 
to wine as required by OFPA. The statute has been changed since 
March, and the final rule will permit added sulfites in wine labeled 
``made with organic grapes,'' consistent with industry standards and 
NOSB recommendations.
    Also, the March proposal required products labeled ``made with 
organic ingredients'' to have ingredients that were at least 50 
percent organic, and this threshold has been raised to 70 percent in 
the final rule. Some certifiers set their thresholds at 50 percent, 
others at 70 percent, while others restrict labeling to individual 
ingredients only. The international industry standard outside the 
United States is set at 70 percent. The threshold is set at 70 
percent in the final rule inresponese to comments received on the 
proposal and to be consistent with international standards, which 
will help ease export of U.S. organic product into those markets. 
Alternatively, to the extent handlers do not currently meet the 70-
percent threshold to label products ``made with organic 
ingredients,'' handlers may incur additional costs to reach the 
threshold or exit the industry. The magnitude of those effects is 
unknown.
    In addition to the labeling requirement, a handler's current use 
of nonsynthetic and synthetic substances may change in response to 
the final rule. The March 2000 proposal provided for the use of any 
prohibited substance to prevent or control pests. This provision has 
been changed to first limit the use of nonsynthetic and synthetic 
substances to substances which are on the National List before 
allowing the use of any synthetic substance. To the extent to which 
handlers are now required to consider substances on the National 
List before using a prohibited substance and these substances on the 
National List are priced differently from the substance otherwise 
used, handlers may incur a change in production costs. This 
requirement may increase costs on handlers, but the magnitude of 
this increase is unknown.
    In addition, the commercial availability requirement in the 
final rule, described in the producer costs section, may also create 
a burden on handlers to consistently apply the standard. To the 
extent to which sourcing organically produced ingredients in excess 
of 95 percent of the finished product is more expensive than 
sourcing nonorganically produced ingredients, handlers seeking the 
``organic'' label for their products will incur additional costs. As 
previously described, the magnitude of the cost implications from 
this standard is currently unquantifiable but will likely be largely 
dependent upon the stringency of the standard that is developed.
    Handlers will also have administrative costs for reporting and 
recordkeeping, although handlers who currently are active in the 
organic industry already perform most of these administrative 
functions, and additional costs to them would depend upon the extent 
to which their current practices are different from the requirements 
of the final rule. The annual reporting and recordkeeping burden on 
handlers is estimated at 63 hours for certified handlers and 1 hour 
of recordkeeping for small handlers who choose to operate as exempt 
entities and is valued at $23 per hour.

[[Page 80672]]

Retail Food Establishments

    Most retailers are not currently subject to either voluntary 
practices or mandatory standards of the organic industry. Retailers 
that have organic processing operations, such as organic food delis 
and bakeries, are not required to be certified in the final rule. 
However, retailers will be subject to requirements such as 
prevention of contamination of organic products with prohibited 
substances, and commingling organic with nonorganic products. 
Obtaining certification and complying with these provisions will 
incur some cost.

Labeling Costs

    Certified handlers will have to comply with requirements 
regarding the approved use of labels. In addition, any producers, 
handlers, and retailers who are not currently certified but who 
package organic products are also subject to the labeling 
requirements. The estimated annual cost for handlers to determine 
the composition of 20 products to be reported on labels is 
$1,647,000. This figure is based on an average of 1 hour per product 
per handler and an hourly cost of $27. Similarly, certified handlers 
will have to design their labels to comply with the regulation. This 
is expected to take 1 hour per label at $27 per hour for a 
compliance cost of $1,647,000. Total label costs for handlers are 
$3.3 million. Any changes to existing labels and new labels that 
need to conform to the regulation will incur a cost. The costs 
associated with these activities are not quantified. Hence, the 
lower bound on the labeling cost is approximately $4 million.

State Program Costs

    The national program may impose additional costs on States by 
requiring changes in their existing programs. The rule encompasses 
most of the principles of existing State programs. However, there 
are also departures.
    Where State standards are below Federal standards or where 
elements of the Federal standards are missing from a State program, 
these States would be required to make changes in their programs 
that they might otherwise not make. Where State programs have 
standards in addition to the Federal standards and they are not 
approved by the Secretary, States also would be required to make 
changes in their programs. States without organic standards or whose 
current standards either would conform to those of the national 
program or would be approved by the Secretary would not incur 
additional costs resulting from required changes. Currently, USDA 
cannot predict which States may be required to adjust their existing 
programs.
    States that conduct certification activities will be charged for 
accreditation, something none of them pay for now. The cost 
associated with this provision is discussed in the Accreditation 
section.

Enforcement costs

    Enforcement costs will fall upon USDA's NOP, States operating 
State organic programs, and on State and private certifying agents. 
Certifying agents will review clients' operations and will notify 
clients of deficiencies. Certifying agents can initiate suspension 
or revocation of certification. Certifying agents will be aware of 
these overhead costs, and we assume that they will establish fee 
schedules that will cover these costs. Actual costs to certifying 
agents for enforcement activities will depend on the number of 
clients, how well informed clients are of their obligations, and 
client conduct. State certifying agents will face the same 
obligations and types of costs as private certifying agents.
    In States operating State organic programs (SOP), State 
enforcement costs are costs associated with ensuring that certified 
operations fulfill their obligations. These States will bear the 
costs of investigating complaints, monitoring use of the State 
organic seal and organic labeling, and taking corrective action when 
needed. These States will bear costs related to reviewing an 
applicant's or certified operation's appeal and for administrative 
proceedings. Many of these activities are already a routine part of 
the certification program in States that have programs, and USDA 
will fill in gaps in enforcement in States that choose not to have 
programs.
    USDA's enforcement costs are costs associated with ensuring that 
certifying agents fulfill their obligations. In States without an 
organic program, USDA will bear the costs of investigating 
complaints, monitoring use of the USDA organic seal and organic 
labeling, and taking corrective action when needed. USDA will bear 
costs related to reviewing an applicant's or certified or accredited 
operation's appeal and for administrative proceedings. USDA expects 
to effectively carry out its enforcement responsibilities using 
funds that are already allocated for operating the NOP. To the 
extent to which we did not estimate the likely noncompliance rate, 
the cost associated with enforcement remains unknown.

Reporting and Recordkeeping Costs

    The Paperwork Reduction Act of 1995 requires an estimate of the 
annual reporting and recordkeeping burden of the NOP. The estimated 
annual reporting and recordkeeping burden reported is approximately 
$13 million. This figure should be understood within the context of 
the requirements of the Paperwork Reduction Act. The Paperwork 
Reduction Act requires the estimation of the amount of time 
necessary for participants to comply with the regulation in addition 
to the burden they currently have. Information gathered by AMS in 
auditing activities in conjunction with ISO Guide 65 verifications 
leads us to believe that the paperwork burden on current certifying 
agents and certified operators will be 10 to 15 percent greater than 
their current business practices as a result of this final rule.
    Certifying Agents. The regulation will impose administrative 
costs on certifying agents for reporting and recordkeeping. The 
actual amount of the additional administrative costs that would be 
imposed by the rule is expected to be different for those entities 
that would begin their activities only after the national program is 
implemented. Certifying agents that 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 regulation. An estimate of the cost of 
compliance is the annual reporting and recordkeeping burden 
documented in the Paperwork Reduction Act of 1995 analysis. Table 4 
shows the estimated annual costs for certifying agents. Certifying 
agencies each have an estimated burden of 1,068 hours valued at 
roughly $27,729.
    The following list describes several of the most significant 
administrative requirements or optional submissions and the probable 
resources required for compliance. Details on the reporting and 
recordkeeping burdens estimated for each item are in the paperwork 
analysis.
    1. A list of farmers, wild-crop harvesters, and handlers 
currently certified. This information can be compiled from existing 
records. After implementation, certifying agents will be required to 
submit on a quarterly basis a list of operations certified during 
that quarter.
    2. A copy of procedures used for certification decisions, 
complying with recordkeeping requirements, maintaining 
confidentiality of client's business-related information, preventing 
conflicts of interest, sampling and residue testing, training and 
supervising personnel, and public disclosure of prescribed 
information concerning operations they have certified and laboratory 
analyses. These policies may have to be created or modified to 
conform to the regulation.
    3. Documentation on the qualifications of all personnel used in 
the certification operation, annual performance appraisals for each 
inspector and personnel involved in the certification, and an annual 
internal program evaluation. Existing certifying agents may already 
perform these operations. New certifying agents will have to 
establish procedures to achieve these things.
    4. Documentation on the financial capacity and compliance with 
other administrative requirements (e.g., fee structure, reasonable 
security to protect the rights of the certifying agent's clients as 
provided in the NOP, and business relationships showing absence of 
conflicts of interest). Some of this information can be compiled 
from existing records, e.g., fee schedules, and some may be 
generated from other sources.
    5. Copies must be submitted to USDA of all notices that are 
issued on certification denial, noncompliance, and suspension or 
revocation of certification. This requirement will be fulfilled 
simultaneously with sending notices to applicants or clients.
    6. An annual report to the Administrator including an update of 
previously submitted business information, information supporting 
any requested changes in the areas of accreditation, and steps taken 
to respond to previously identified concerns of the Administrator 
regarding the certifying agent's suitability for continued 
accreditation. The annual report requirement will draw on records 
created in the normal course of business.
    7. Retention of records created by the certifying agent 
regarding applicants and

[[Page 80673]]

certified operations for not less than 10 years, retention of 
records obtained from applicants and certified operations for not 
less than 5 years, and retention of other records created or 
received for USDA accreditation for not less than 5 years. This 
activity requires records, database management capabilities, and 
resources (storage space, file cabinets, electronic storage, etc.). 
In an informal inquiry, AMS found that most existing certifying 
agents currently retain records for at least 10 years and use both 
electronic and paper storage. We believe that this requirement will 
not pose an additional burden on existing certifying agents.
    8. Public access to certification records, such as a list of 
certified farmers and handlers, their dates of certification, 
products produced, and the results of pesticide residue tests. This 
requirement will have minimal impact given the requirements for 
retaining records.
    9. Providing program information to certification applicants. To 
comply with this requirement, certifying agents may need to modify 
existing standards and practices. The criteria for qualified 
personnel in the rule may likely result in an increase in labor 
costs for some existing certifying agents and, initially, an 
increase in training costs. The amount of additional costs to these 
certifying agents would depend on the level of expertise among 
current certification agency staff, the extent to which certifying 
agents currently rely on volunteers, and the current costs of 
training certification staff.
    Producers and Handlers. The regulation will impose 
administrative costs on producers and handlers for reporting and 
recordkeeping. The actual amount of the additional administrative 
costs that would be imposed by the final rule is expected to be 
different for those entities that would begin their activities only 
after the national program is implemented. Producers 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. An estimate of the cost of compliance is the annual 
reporting and recordkeeping burden documented in the Paperwork 
Reduction Act of 1995 analysis.
    The following list describes several administrative requirements 
or optional submissions and the probable resources required for 
compliance.
    1. Establish, implement, and update annually an organic 
production or handling plan. Organic plans are a standard feature in 
the organic industry and are required by certifying agents. Thus, 
producers and handlers who are already involved in organics can rely 
on their current plan with revisions as needed to meet elements of 
the national program which are new to them or differ from their 
current practice. Although producers and handlers are generally 
aware of the goals of organic plans, current practice may fall short 
of the rigor that will be required by the national program. New 
producers and handlers will have higher costs because they will have 
to prepare a plan from scratch.
    2. Maintain records pertaining to their organic operation for at 
least 5 years and allow authorized representatives of the Secretary, 
the applicable State organic program's governing State official, and 
the certifying agent access to records. Existing organic producers 
and handlers maintain records. New producers and handlers will have 
to develop records systems. Access is expected to be infrequent, 
will require little time of the certified entity, and will not 
require buildings or equipment other than what is required for 
storing records.
    3. Notify the certifying agent as required (e.g., when drift of 
a prohibited substance may have occurred) and complete a statement 
of compliance with the provisions of the NOP. Notifications are 
expected to be infrequent.
    The total reporting burden includes creation and submission of 
documents. It covers the greatest amount of reporting burden that 
might occur for any single creation or submission of a document 
during any one of the first 3 years following program 
implementation; i.e., 2000, 2001, and 2002. The total estimated 
reporting burden reflects the average burden for each reporting 
activity that might occur in 1 year of this 3-year period.
    The total recordkeeping burden is the amount of time needed to 
store and maintain records. For the purpose of measuring the 
recordkeeping burden, the year 2002 is used as the reporting year 
for which the largest number of records might be stored and 
maintained.
    The annual reporting and recordkeeping burden on producers, 
handlers, and certifying agents is summarized in table 4. The annual 
burden on certified producers is estimated at 24 hours and $552. 
Certified handlers have an estimated burden of 63 hours valued at 
$1,449. The burden on small producers and handlers who choose to 
operate as exempt entities is minimal, 1 hour of recordkeeping 
valued at $23. If this cost is applied to the total estimated number 
of affected producers, the reporting and recordkeeping cost would be 
$5,260,100 in 2000 and $6,835,554 in 2002. By applying this cost 
figure to the estimated total number of affected handlers, the 
reporting and recordkeeping cost would be $2,143,002 in 2000 and 
$3,013,552 in 2002.

Barriers to Entry--Importers of Organic Products

    Currently, there are no Federal restrictions on importing 
organic products to the United States in addition to those 
regulations applying to conventional products. If the imposition of 
the NOP decreases the importation of organic food into the United 
States, then this regulatory action may result in some cost.

Small Business Ramifications

    USDA's final rule has an 18-month period during which applicants 
for accreditation would not be billed for hourly services. The 
rationale for this transition period is to reduce the costs to 
certifying agents and, thus, increase the prospect that certifying 
agents, producers, and handlers will be able to afford to 
participate in the national program. The choice of 18 months is 
intended to provide sufficient time for parties desiring 
accreditation to submit their application and prepare for a site 
evaluation.
    USDA will operate the program partially with appropriated funds, 
in effect sharing the cost of the program between taxpayers and the 
organic industry, to respond to public concerns regarding the 
effects of the regulation on small businesses. Thousands of comments 
were received opposing the first proposal's fee provisions with most 
focusing on the substantial impact on small certifying agents.
    Congress has expressed public policy concern with the impacts of 
regulations on small entities generally and with the impacts on the 
NOP regulations on small entities particularly. The Small Business 
Regulatory Enforcement Fairness Act of 1996 and the Regulatory 
Flexibility Act express Congressional concern regarding regulatory 
burden on small businesses. The Report from the Committee on 
Appropriations regarding the Agriculture, Rural Development, Food 
and Drug Administration, and Related Agencies Appropriations Bill, 
2000, includes the following language (U.S. Senate 1999):

    ``The Committee continues to recognize the importance of organic 
markets for small farmers and fishermen. The Committee expects the 
Secretary to construct a national organic program that takes into 
consideration the needs of small farmers and fishermen. * * * 
Furthermore, the Committee expects that of the funding available for 
the National Organic Program, necessary funds should be used to 
offset the initial costs of accreditation services, a subsidy 
necessary due to the lack of expertise in the Department of 
Agriculture in the areas of organic accreditation and insufficient 
data on the industry.''

    Certifying agents applying for accreditation during the first 18 
months following the final regulation will face lower direct costs 
than subsequent applicants. The cost for later applicants for 
accreditation will be higher because they will have to pay a $500 
application fee and hourly charges for completing their site 
evaluation. The requirement for accreditation was established in the 
OFPA in 1990 and the accreditation program was part of the 1997 
proposal. Because in this final rule, USDA is using appropriated 
funds to cover some of the costs of initial accreditation during the 
first 18 months of the program, certifying agents may set lower fees 
initially benefiting the producers and handlers who are certified 
during this period.
    It is important to note that many small organic operations may 
not be certified currently. In California, for example, many small 
farms are registered but not certified. Even if certifying agents 
pass on the cost savings of the 18-month period provision to 
applicants for certification, the cost of certification may be 
higher than the cost of registration. Hence, becoming a certified 
operation for small organic producers and handlers may be more 
costly than the current practices.
    The costs imposed on small operations may be mitigated by a 
$5000 certification exemption to aid the smallest organic 
operations. However, these operations are

[[Page 80674]]

still subject to other requirements of the regulation. To the extent 
that these requirements differ from their current practices, 
complying with the national standards may be costly for exempt 
operations.
    In addition, the certification exemption allowed under the 
regulation includes limits on what an exempt operation may do. 
Without the certification, small organic operations may not display 
the USDA seal and may not use a certifying agent's seal. If the 
consumers of organic food view the seals as important information 
tools on organic food; that is, if consumers of organic products 
insist on only certified organic products, the inability of small 
operations to display these seals may prevent them from realizing 
the price premiums associated with certified organic products.

Industry Composition

    The imposition of the national standards may change the 
composition of the organic industry. Even with the small business 
exemptions, some small organic operations may choose to exit the 
industry, and small organic operations may also be discouraged from 
entering the industry, resulting in a higher concentration of larger 
firms. On the other hand, it may be easier for small operations to 
comply with certain NOP standards, such as the livestock standards 
that prohibit confinement production systems and require 100 percent 
organic feed. And State and Federal certification and conservation 
cost-share programs and other government programs may help lower the 
impact on small producers.

References

Byng, John. 1994. UK and European Community (EC) Legislation. In 
Handbook of Organic Food Processing and Production. Simon Wright 
(ed.). pp. 17-30. Glasgow: Blackie Academic and Professional.
California Department of Health Services (DHS). 1999. Report on the 
Registration of California Organic Processed Food Firms. Sacramento: 
State of California. September 1999. Figures obtained via personal 
communication with DHS.
California Department of Health Services. 1995. Report on the 
Registration of California Organic Processed Food Firms. Sacramento: 
State of California.
Collins, Shane. 1999. ``Rosy future forecast for Europe's organic 
market,'' Eurofruit Magazine, September.
Dunn, Julie Anton. 1995a. Organic Food and Fiber: An Analysis of 
1994 Certified Production in the United States. U.S. Department of 
Agriculture, Agricultural Marketing Service. Dunn, Julie Anton. 
1995b. ``Organic Foods Find Opportunity in Natural Foods Industry,'' 
Food Review, Vol. 18, Issue 3, Sep.-Dec.
Dunn, Julie Anton. 1997. AgriSystems International Reports Certified 
Organic production in the United States: Half a Decade of Growth. 
AgriSystems International: Wind Gap, PA. Emerich, Monica. 1996. 
Industry Growth: 22.6%. Natural Foods Merchandiser (June): 1-39. 
Farmers Market Outlook. 1996. ``Waiting for Organic Inspections,'' 
September-October issue.
Farmers Market Outlook. Various issues. www.seasonalchef.com/orgnews1.htm.
Fetter, Robert T. 1999. Economic Impacts of Alternative Scenarios of 
Organic Products Regulation. Senior Honors Thesis. University of 
Massachusetts, Amherst, MA.
Fuchshofen, Winfried and Silke Fuchshofen. 2000. ``Export Study for 
U.S. Organic Products into Asia and Europe,'' Draft Report, Organic 
Insights, Inc.
Graf, Anita and Luanne Lohr. 1999. ``Analysis of certification 
program costs,'' Working Paper, Fund for Rural America project, 
Market Development for Organic Agriculture Products, Grant No. 97-
36200-5.
Greene, Catherine. 2000a. ``U.S. Organic Farming,'' USDA, Economic 
Research Service Issues Center, www.ers.usda.gov.
Greene, Catherine. 2000b. ``U.S. Organic Agriculture Gaining 
Ground,'' Economic Research Service, U.S. Department of Agriculture, 
Agricultural Outlook, AGO-270, April.
Hammitt, James K. 1990. Risk Perceptions and Food Choice: An 
Exploratory Analysis of Organic--Versus Conventional-Produce Buyers. 
Risk Analysis, Vol. 10, No. 3: 367-374.
Hammitt, James K. 1993. Consumer Willingness to Pay to Avoid 
Pesticide Residues. Statistica Sinica, 3.
Independent Organic Inspectors Association. 1996. IOIA 1996 
Membership Directory. Winona, MN.
International Trade Centre UNCTAD/WTO. 1999. Organic Food and 
beverages: World Supply and Major European Markets. Geneva: ITC, 
xiv, 271 p.
Jolly, Desmond A., Howard G. Schutz, Katherine V. Diaz-Knauf, and 
Jagjeet Johal. 1989. Organic Foods: Consumer Attitudes and Use. Food 
Technology (November): 60-66.
Jolly, Desmond A. 1991. Differences Between Buyers and Nonbuyers of 
Organic Produce and Willingness to Pay Organic Price Premiums. 
Journal of Agribusiness (Spring): 97-111. Kaufman, Phil. 1998. 
``Natural Foods Supermarkets Gaining in Popularity,'' Economic 
Research Service, U.S. Department of Agriculture, FoodReview, Volume 
21, Issue 3, September-December.
Klonsky, Karen and Laura Tourte. 1995. Statistical Review of 
California's Organic Agriculture, 1992-93. Report prepared for the 
California Department of Food and Agriculture Organic Program. 
Cooperative Extension, Department of Agricultural Economics, 
University of California, Davis.
Klonsky, Karen and Laura Tourte. 1998a. Statistical Review of 
California's Organic Agriculture, 1992-95. Report prepared for the 
California Department of Food and Agriculture Organic Program. 
Cooperative Extension, Department of Agricultural Economics, 
University of California, Davis.
Klonsky, Karen and Laura Tourte. 1998b. Organic Agricultural 
Production in the United States: Debates and Directions. Amer. J. 
Agr. Econ. Vol. 80, No. 5: 1119-1124.
Klonsky, Karen, Laura Tourte, Robin Kozloff, and Benjamin Shouse. 
2000. Statistical Review of California Organic Agriculture, 1995-98, 
forthcoming.
Lohr, Luanne. 1998. Implications of Organic Certification for Market 
Structure and Trade. Amer. J. Agr. Econ. Vol. 80, No. 5: 1125-1129.
Mergentime, Ken. 1997. ``Organic Fraud Case Deepens; Possible Link 
Causes OCIA Turmoil,'' the Natural Foods Merchandiser, March.
Mergentime, Ken and Monica Emerich. 1995. Organic Sales Jump Over $2 
Billion Mark in 1994.
Natural Foods Merchandiser (June): 74-76.
Mergentime, Ken and Monica Emerich. 1996. Widening Market Carries 
Organic Sales to $2.8 Billion in 1995. Natural Foods Merchandiser 
(June): 36-38.
Misra, Sukant, Chung L. Huang, and Stephen L. Ott. 1991. Georgia 
Consumers' Preference for Organically Grown Fresh Produce. Journal 
of Agribusiness (Fall): 53-65.
National Commission on Small Farms. 1998, A Time to Act: A Report of 
the USDA National Commission on Small Farms, Miscellaneous 
Publication 1545, January.
Natural Foods Merchandiser. 1995. Organic Update: Reciprocity 
Controversies Intensify, Exacerbating Certifier/Manufacturer 
Tensions. April.
Organic Farming Research Foundation. 1999. Final Results of the 
Third Biennial National Organic Farmers' Survey. E. Walz, Program 
Coordinator. Santa Cruz, CA.
Organic Farming Research Foundation. 2000. ``Organic Certifiers 
Directory,'' on-line publication, www.ofrf.org.
Park, Timothy A. and Luanne Lohr. 1996. Supply and Demand Factors 
for Organic Produce. American Journal of Agricultural Economics, 
Vol. 78 (August): 647-655.
Scott, Mary. 1997. ``Olive Oil Company Accused of Fraud,'' Natural 
Foods Merchandiser, December.
Scott, Mary. 1997. ``OFMA Activists Urge States to Enact Organic 
Laws,'' Natural Foods Merchandiser, May.
Scowcroft, Bob. 1998. ``Organic Standards and Enforcement: The 
Public's Right to Know,'' Organic Farming Research Foundation, 
Information Bulletin Newsletter, Number 5, Summer Issue.
Thompson, Gary D. 1998. Consumer Demand for Organic Foods: What We 
Know and What We Need to Know. Amer. J. Agr. Econ. Vol. 80, No. 5: 
1113-1118.
Underhill, S. E. and E. E. Figueroa. 1993. Consumer Preferences for 
Non-Conventionally Grown Produce. Paper presented at the Valuing 
Food Safety and Nutrition Conference, organized by the NE-165 
Regional Research Project. Alexandria, VA, June 2-4.
USDA Foreign Agricultural Service. 1995. Agricultural Situation: 
Agricultural Highlights, Winter 1995. Report from Austria. Code 24, 
Sequence No. 007.
USDA Foreign Agricultural Service. 1995. Agricultural Situation: 
Organic Food.

[[Page 80675]]

Report from Germany. Code 24, Sequence No. 011.
USDA Foreign Agricultural Service. 1996. Agricultural Situation: 
Organic Food Market Potential and Regulations. Report from France. 
Code 24, Sequence No. 002.
USDA Foreign Agricultural Service. 1999a. Report on organic 
agriculture in Japan. Attache report JA91234. October 5.
USDA Foreign Agricultural Service. 1999b. Report on organic 
agriculture in France. Attache report FR9070. October 18.
U.S. Senate. 1999. Report 106-80. Agriculture, Rural Development, 
Food and Drug Administration, and Related Agencies Appropriation 
Bill 2000. Committee on Appropriations. Page 56.
Weaver, Robert D., David J. Evans, and A. E. Luloff. 1992. Pesticide 
Use in Tomato Production: Consumer Concerns and Willingness-to-Pay. 
Agribusiness, Vol. 8 No. 2: 131-142. Table 1.

                                                      Table 1.--U.S. Organic Product Sales, 1990-99
                                                                      ($ billions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Natural
                                                                                   Export/      Mass       Natural      foods                    Total
                          Year                             Export      Direct      direct      market       foods      stores    Total sales     sales
                                                                                  subtotal                 stores     (1999 $)                 (1999 $)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1990...................................................  ..........  ..........  ..........  ..........  ..........  ..........         1           1.27
1991...................................................        0.04        0.27        0.31        0.09        0.85        1.04         1.25        1.53
1992...................................................        0.07        0.32        0.39        0.12        1.03        1.22         1.54        1.83
1993...................................................        0.11        0.36        0.47        0.14        1.29        1.49         1.90        2.19
1994...................................................        0.20        0.39        0.60        0.17        1.54        1.73         2.31        2.60
1995...................................................         \1\         \1\        0.71        0.21        1.87        2.04         2.79        3.05
1996...................................................  ..........  ..........         \1\         \1\         \1\         \1\         3.5         3.72
1997...................................................  ..........  ..........  ..........  ..........         \2\  ..........  ...........  ..........
1998...................................................  ..........  ..........  ..........  ..........        3.28        3.35  ...........  ..........
1999...................................................  ..........  ..........  ..........  ..........        4.00        4.00  ...........  ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
 Source: Natural Foods Merchandiser, New Hope Communications.--= Not reported.
\1\ New Hope Communications reported a combined estimate for export and direct sales in 1995 and reported a different set of subcategories in 1996 and
  has reported only on sales in natural foods stores since 1996.
\2\ New Hope Communications did not estimate natural product store sales in 1997, but the Hartman Group estimated these sales at $4.9 billion.


                     Table 2A.--First-Year Certification Costs, From GRAF and LOHR Analysis
                                                    (dollars)
----------------------------------------------------------------------------------------------------------------
                      Certifying agent                         Small farm  Medium farm   Large farm   Super farm
----------------------------------------------------------------------------------------------------------------
CCOF........................................................          850        1,750        4,850       51,250
FVO.........................................................          698        1,737        5,214       51,550
FOG.........................................................          810        1,860        4,860       51,210
NOFA-VT.....................................................          335          535          585          585
NC/SCS......................................................          700          900        1,000        2,000
OGBA........................................................        1,290        3,300       12,300       33,296
OTCO-In.....................................................          608        1,603        2,517      150,300
OTCO-Out....................................................          768        1,698        2,852       12,052
OCIA-WI.....................................................          315        1,590        6,090       75,090
OCIA-VA.....................................................          258          320          495        1,745
TDA.........................................................           90          155          200          575
WSDA........................................................          480        1,555        3,040       12,480
                                                             ---------------------------------------------------
    Average cost............................................          579        1,414        3,623      33,276
----------------------------------------------------------------------------------------------------------------
 Notes:
 CCOF--California Certified Organic Farmers
 FVO--Farm Verified Organic
 FOG--Florida Certified Organic Growers & Consumers
 NOFA-VT--Northeast Organic Farming Association--Vermont
 NC/SCS--NutriClean/Scientific Certification Systems
 OBBA--Organic Growers and Buyers Association
 OTCO-In--Oregon Tilth Certified Organic, inside Oregon
 OTCO-Out--Oregon Tilth Certified Organic, outside Oregon
 OCIA-WI--Organic Crop Improvement Association, Wisconsin chapter
 OCIA-VA--Organic Crop Improvement Association, Virginia chapter
 TDA--Texas Department of Agriculture
 WSDA--Washington State Department of Agriculture
 Small farm--25 acres with annual sales of $30,000.
 Medium farm--150 acres with annual sales of $200,000.
 Large farm--500 acres with annual sales of $800,000.
 Super farm--3,000 acres with annual sales of $10,000,000.


[[Page 80676]]


                   Table 2B.--Subsequent-Year Certification Costs, From GRAF and LOHR Analysis
                                                    (dollars)
----------------------------------------------------------------------------------------------------------------
                      Certifying agent                         Small farm  Medium farm   Large farm   Super farm
----------------------------------------------------------------------------------------------------------------
CCOF........................................................          425        1,300        4,350       50,550
FVO.........................................................          510        1,499        4,851       51,187
FOG.........................................................          325          845        2,525       25,525
NOFA-VT.....................................................          300          500          550          550
OTCO-In.....................................................          454        1,611        2,362       11,363
OTCO-Out....................................................          424        1,353        2,207       11,208
OCIA-WI.....................................................          290        1,565        6,065       75,065
OCIA-VA.....................................................          233          295          470        1,720
TDA.........................................................           90          155          200          515
WSDA........................................................          330        1,375        2,800       12,000
NC/SCS......................................................          700          900        1,000        2,000
    Average cost............................................          371        1,036        2,489      21,971
----------------------------------------------------------------------------------------------------------------
Notes:
CCOF--California Certified Organic Farmers
FVO--Farm Verified Organic
FOG--Florida Certified Organic Growers & Consumers
NOFA-VT--Northeast Organic Farming Association--Vermont
NC/SCS--NutriClean/Scientific Certification Systems
OBBA--Organic Growers and Buyers Association
OTCO-In--Oregon Tilth Certified Organic, inside Oregon
OTCO-Out--Oregon Tilth Certified Organic, outside Oregon
OCIA-WI--Organic Crop Improvement Association, Wisconsin chapter
OCIA-VA--Organic Crop Improvement Association, Virginia chapter
TDA--Texas Department of Agriculture
WSDA--Washington State Department of Agriculture
Small farm--25 acres with annual sales of $30,000.
Medium farm--150 acres with annual sales of $200,000.
Large farm--500 acres with annual sales of $800,000.
Super farm--3,000 acres with annual sales of $10,000,000.


           Table 3.--Costs of Accreditation and Certification
------------------------------------------------------------------------
 
------------------------------------------------------------------------
       Estimated costs to certifying agents during first 18 months
------------------------------------------------------------------------
Application fee \1\........................  $0.
Site evaluation costs (two person team):
    Per diem (3 to 5 days at $85/day)......  $510 to $850.
    Travel (domestic)......................  $1,000 to $1,200.
    Hourly charges (not billed during the    $0.
     first 18 months).
    Miscellaneous charges (copying, phone,   $50.
     and similar costs).
                                            ----------------------------
        Total..............................  $1,560 to $2,100.
------------------------------------------------------------------------
  Estimated costs to certifying agents for initial accreditation after
                             first 18 months
------------------------------------------------------------------------
Site evaluation costs (two person team):
    Per diem (3 to 5 days).................  $510 to $850.
    Travel (domestic)......................  $1,000 to $1,200.
    Hourly charges (24 to 40 hours at $95/   $4,560 to $7,600.
     hour).
    Miscellaneous charges (copying, phone,   $50.
     and similar costs).
                                            ----------------------------
        Total..............................  $6,120 to $9,700.
        Annual review fees for certifying    $190 to $760.
         agents (2 to 8 hours at $95/hour)
         \2\.
------------------------------------------------------------------------
           Estimated costs to producers for certification \3\
------------------------------------------------------------------------
Certification fee (renewals)...............  $730.
------------------------------------------------------------------------
            Estimated costs to handlers for certification \4\
------------------------------------------------------------------------
Certification fee (initial certification)..  $2,337.
Certification fee (renewals)...............  $1,665.
------------------------------------------------------------------------
\1\ Nonrefundable fee that will be applied to the applicant's fee-for-
  service account.
\2\ Certifying agents are required to submit annual reports to USDA.
  Review of these reports is expected to range from 2 to 8 hours at an
  approximate rate of $95 per hour.
\3\ Estimated certification fees are calculated from Graf and Lohr 1999
  which, for a selection of certification agents, provides certification
  costs for four hypothetical farm sizes: (1) small farm (family farm):
  25 acres, $30,000 annual sales, 5 hours to certify; (2) medium farm
  (cottage industry): 150 acres, $200,000 annual sales, 6 hours to
  certify; (3) large farm (commercial farm): 500 acres, $800,000 annual
  sales, 8 hours to certify; and (4) super farm: 3,000 acres,
  $10,000,000 annual sales, 16 hours to certify. Our estimated
  certification fees only include those charged for small and medium
  farms because most organic producers fall into these categories as
  defined by Graf and Lohr. In the 1997 OFRF survey, 90 percent of
  respondents had gross organic farming income of less than $250,000,
  with 82 percent less than $100,000.

[[Page 80677]]

 
The average current certification cost for most organic producers is
  about $1,025 for the first year of certification ($579 for small and
  $1,414 for medium farms) and about $705 for subsequent years ($371 for
  small and $1,036 for medium farms). Approximately $25 is added to
  cover the costs associated with the National Organic Program for an
  estimated first-year certification fee of $1,000 and subsequent-year
  certification fee of $730 for producers. Larger producers could expect
  higher fees.
\4\ Because Graf and Lohr do not estimate certification fees for
  handlers, we estimate these fees by applying a ratio of handler-to-
  producer certification fees from the regulatory impact assessment from
  1997. The ratio is 2:28 and results in estimated fees of $2,337 and
  $2,665, respectively.


      Table 4.--Estimated Annual Reporting and Recordkeeping Burden
------------------------------------------------------------------------
                                   Annual
      Type of respondent         hourly per    Hourly rate   Annual cost
                                 respondent
------------------------------------------------------------------------
Certified producer............            24           $23          $552
Certified handler.............            63            23         1,449
Exempt producers and handlers.             1            23            23
Certifying agency.............         1,068            27       27,729
------------------------------------------------------------------------
Note: Estimates derived from Paperwork Reduction Act of 1995 analysis.

Appendix B--Unfunded Mandates Reform Act

    This rule has been reviewed under the Unfunded Mandates Reform 
Act (Pub. L. 104-4). The Act requires that agencies prepare a 
qualitative and quantitative assessment of the anticipated costs and 
benefits before issuing any rule that may result in annual 
expenditures by State, local, and tribal governments, in the 
aggregate, or by the private sector of $100 million (adjusted 
annually for inflation) in any 1 year. According to the Act, the 
term, ``Federal mandate,'' means any provision in legislation, 
statute, or regulation that would impose an enforceable duty upon 
State, local, or tribal governments or the private sector, except a 
duty arising from participation in a voluntary Federal program.
    The National Organic Foods Production Act (OFPA) of 1990 
mandates that the Secretary develop a national organic program to 
accredit eligible governing State officials or private persons as 
certifying agents who would certify producers or handlers of 
agricultural products that have been produced using organic methods 
as provided for in the OFPA. The OFPA also permits a governing State 
official to voluntarily establish a State organic program (SOP) if 
the program is approved by the Secretary and meets the requirements 
of the OFPA. The OFPA does not require that States establish their 
own SOP's or that State, local, or tribal governments or the private 
sector become accredited; therefore, the OFPA is not subject to the 
Unfunded Mandates Reform Act because it is a voluntary program.
    Although the U.S. Department of Agriculture has determined that 
this rule is not subject to the Unfunded Mandates Reform Act, USDA 
has sought to consider the rule's impact on various entities. USDA 
prepared a Regulatory Impact Assessment (RIA) that is discussed in 
the section entitled ``Executive Order 12866'' (also attached as an 
appendix to this regulation). The RIA consists of a statement of the 
need for the action, an examination of alternative approaches, and 
an analysis of the benefits and costs. Much of the analysis is 
necessarily descriptive of the anticipated impacts of the rule. 
Because basic market data on the prices and quantities of organic 
goods and services and the costs of organic production are limited, 
it is not possible to provide quantitative estimates of all benefits 
and costs of the rule. The cost of fees and recordkeeping required 
by USDA are quantified, but the anticipated benefits are not. 
Consequently, the analysis does not contain an estimate of net 
benefits.
    The analysis employed in reaching a determination that this rule 
is the least costly and least burdensome to the regulated parties is 
discussed in the sections entitled ``The Regulatory Flexibility Act 
and the Effects on Small Businesses'' and ``Paperwork Reduction Act 
of 1995.'' The rule has been designed to be as consistent as 
possible with existing industry practices, while satisfying the 
specific requirements of the OFPA.
    We have had numerous occasions during which to communicate with 
various entities during the development of the rule; States, for 
example. Currently, there are 32 States with some standards 
governing the production or handling of organic food and 13 States 
with organic certifying programs. Representatives of State 
governments have participated in public meetings with the National 
Organic Standards Board, while the NOP staff has made presentations, 
received comments, and consulted with States and local and regional 
organic conferences, workshops, and trade shows. States have been 
actively involved in training sessions for organic inspectors; 
public hearings concerning standards for livestock products during 
1994; a national Organic Certifiers meeting on July 21, 1995; a 
USDA-hosted meeting on February 26, 1996; a State certifiers meeting 
in February 1999; and an International Organization for 
Standardization (ISO) 65 assessment training session for certifiers 
in April-May 1999. More detail about contact with States regarding 
this rule is in the Federalism section. It is unknown at this time 
how many States, if any, might voluntarily establish their own SOP's 
pursuant to the OFPA and the regulations.

Appendix C--Final Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
agencies to consider the economic impact of each rule on small 
entities and evaluate 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 market. The purpose is to fit regulatory actions to the scale of 
businesses subject to the action.
    1. Need for and objectives of the National Organic Rule.
    Currently, organic certification is voluntary and self-imposed. 
Members of organic industries across the United States 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 36 
private and 13 State organic certification agencies (certifying 
agents) in the United States, each with its own standards and 
identifying marks.
    Some existing private certifying agents are concerned that 
States might impose registration or licensing fees which would limit 
or prevent private certification activities in those States. 
Labeling problems have confronted manufacturers of multiingredient 
organic food products containing ingredients certified by different 
certifying agents because reciprocity agreements have to be 
negotiated between certifying agents. Consumer confusion may exist 
because of the variety of seals, labels, and logos used by 
certifying agents and State programs. Also, there is no industrywide 
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 producers and 
handlers in 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 in the late 1980's, the organic 
industry attempted to establish a national voluntary organic 
certification program. At that time, the industry could not develop 
consensus on the standards that should be adopted, so Congress was 
petitioned by the Organic Trade Association to establish national 
standards for organic food and fiber products.
    In 1990, Congress enacted the Organic Foods Production Act of 
1990, as amended (7 U.S.C. 6501 et seq.) (OFPA). The OFPA

[[Page 80678]]

requires all agricultural products labeled as ``organically 
produced'' to originate from farms or handling operations certified 
by a State or private agency that has been accredited by USDA.
    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 
Program (NOP) is the result of the OFPA.
    Recently, the Organic Trade Association published American 
Organic Standards, Guidelines for the Organic Industry (AOS). 
However, not all participants in the organic industry elected to 
participate in developing the AOS. Many certifying agents preferred 
to wait for implementation of the national standards, and some 
certifying agents disagree with portions of the AOS. For these 
reasons, USDA will implement a regulation for the NOP.
    2. Summary of the significant issues raised by public comments 
in response to the Initial Regulatory Flexibility Analysis (IRFA), a 
summary of agency assessment of such issues, and a statement of any 
changes made in the final rule as a result of such comments.
    Although we received many individual comments in reference to 
the proposed rule's IRFA, they were, for the most part, variations 
of several form letters. Most of the concern on the part of 
commenters regarded the fees that small certifying agents would be 
subject to under the rule.

Comments Accepted

    (1) We received numerous comments to the effect that the fees, 
recordkeeping, and paperwork requirements for producer and handler 
certification must be kept as low as possible while still offering a 
quality certification program. We believe that we have made every 
effort in this rule to minimize the cost and paperwork burden to 
certifiers and certified operations as much as possible. We have 
permitted certifiers and certified operations to develop their own 
recordkeeping and reporting systems--so long as they conform to the 
needs of the program. For the most part, the paperwork and 
recordkeeping requirements for certified operations conform to the 
requirements that they presently face under existing certification 
programs. In order to minimize the cost to the industry of 
transitioning to a system where certifying agents are accredited 
(assuming that there will be a learning curve as agents familiarize 
themselves with the requirements of accreditation), we have waived 
the per-hour cost that USDA will charge to conduct an accreditation 
review for the first 18 months of the program.
    (2) In the proposed rule, we requested comment on the benefits 
of an exemption for small certifiers similar to that for small 
producers. We received comments in opposition to such an exemption 
because commenters wanted to maintain documented verification of 
standards that is afforded by certification and accreditation. They 
felt that exemptions weakened the organic system in its ability to 
assure consumers of products that meet a consistent standard. We 
concurred with this comment and have not developed an exemption for 
certifiers in the final rule.

Comments Rejected

    (3) We received comments suggesting that, in order to lower the 
direct cost of accreditation to smaller certifier applicants, we 
should eliminate on-site visits during accreditation or extend the 
time beyond the initial on-site visit for a subsequent visit. 
Although eliminating the on-site visits would certainly lower the 
applicant's costs, we have not made the change to reduce or 
eliminate on-site visits. We did not see how USDA could make an 
informed decision about whether or not to continue to accredit a 
certifying agent without complete access to the relevant records 
documenting the agent's business practices. This can only be 
efficiently done through a site visit.
    (4) We received numerous comments that the fees proposed by USDA 
will result in certification fees that are excessive for small 
farming operations. The commenters suggested that USDA impose fees 
on a sliding scale based on a farmer's income so as not to drive 
these farmers out of business and deprive consumers of the benefits 
of these operations. We received a similar comment to the Fees 
section of the proposed rule, and our response is the same. Although 
one of our top priorities is assisting the small farmer, AMS is 
primarily a user-fee-based Federal agency. We are aware that our 
accreditation fees will figure into the fees that certifiers charge 
their clients. However, the fee we will charge to accredit an 
applicant is based not on earning profits, but on recovery of costs. 
In addition, our waiver of the hourly service charges for 
accreditation during the first 18 months of the program should help 
to keep the cost of accreditation to certifying agents down. We 
believe the requirements that fees charged by a certifying agent 
must be reasonable and that certifiers must file a fee schedule for 
approval by the Administrator will help to keep costs under control. 
Since certifiers are required to provide their approved fee 
schedules to applicants for certification, the applicants will be 
able to base their selection of certifying agent on price if the 
applicants so choose. In addition, nothing in the regulations 
precludes certifying agents from pricing their services on a sliding 
scale so long as their fees are consistent and nondiscriminatory and 
are approved during the accreditation process.
    (5) Other commenters were concerned that in the rule USDA 
neglects to establish ``reasonable fees'' annually for farm/site/
wild crop production and handling operation certification. 
Commenters did not believe that a valid Regulatory Flexibility Act 
analysis could be made without the annual farm and handling 
operation fee projection. We have not established guidelines for 
what constitutes a ``reasonable fee'' in the final rule. Accredited 
certifying agents will be required to submit a proposed fee schedule 
as a part of their application. At that time, we will work with 
applicants for accreditation to ensure that their fees are 
appropriate. In addition, certifying agents will be required to send 
a copy of their fee schedule to anyone who requests one. This will 
allow operations that wish to be certified to shop around and will 
provide a disincentive for accredited agents to price themselves out 
of the market.
    3. Description of and an estimate of the number of small 
entities to which the rule will apply.
    Small business size standards, Standard Industrial Code (SIC) 
(13 CFR part 121), are developed by an interagency group, published 
by the Office of Management and Budget, and used by the Small 
Business Administration (SBA) to identify small businesses. These 
standards represent the number of employees or annual receipts 
constituting the largest size that a for-profit enterprise (together 
with its affiliates) may be and remain eligible as a small business 
for various SBA and other Federal Government programs.
    There are three categories of operations that contain small 
business entities that would be affected by this rule: Certifying 
agents, organic producers, and/or organic handlers. The term, 
``certifying agent,'' means the chief executive officer of a State 
or, in the case of a State that provides for the statewide election 
of an official to be responsible solely for the administration of 
the agricultural operations of a State, such official and any person 
(including private entities) who is accredited by the Secretary as a 
certifying agent for the purpose of certifying a farm or handling 
operation as a certified organic farm or handling operation.
    According to the most complete data available to USDA's 
Agricultural Marketing Service (AMS), there are 49 certifying agents 
(36 private and 13 State) in the United States. More than half of 
the private and State certifying agents certify both producers and 
handlers, while the others certify only producers. Over three-
fourths of private and State certifying agents each certify fewer 
than 150 producers and 20 handlers. The number of certifying agents 
has remained fairly stable, between 40 and 50, for some years, with 
entries and exits tending to offset each other. The NOP staff 
anticipates that, in addition to the 49 domestic certifying agents, 
10 foreign certifying agents may seek accreditation during the 
initial phase of the program.
    Small businesses in the agricultural services sector, such as 
certifying agents, include firms with average annual revenues of 
less than $5 million (SIC Division A Major Group 7). Based on SBA's 
small business size standards for the agricultural services sector, 
it is not likely that many, if any, of the 49 domestic certifying 
agents have annual revenue greater than $5 million. All private, 
nonprofit certifying agents would be considered small by SBA's 
standards. Based on anecdotal information, only a few private, for-
profit, certifying agents might be categorized as large businesses. 
In addition, the 13 State certifying agents, although not exceeding 
the revenue threshold, would not be considered to be small entities 
under the Act as only government jurisdictions with populations 
under 50,000 are considered to

[[Page 80679]]

be small entities under section 601(5). Therefore, at least 30 
certifying agents would qualify as a small business.
    The term, ``producer,'' means a person who engages in the 
business of growing or producing food or feed. It is more difficult 
to establish the number of organic producers. Organic farming was 
not distinguished from conventional agriculture in the 1997 Census 
of Agriculture. There are sources which give insight into the number 
of producers. The Organic Farming Research Foundation (OFRF), a 
California-based nonprofit organization, has conducted three 
nationwide surveys of certified organic producers from lists 
provided by cooperating certifying agents. The most recent survey 
applies to the 1997 production year (1).'' 
{time} {time} {time}  OFRF sent its 1997 survey to 4,638 names and 
received 1,192 responses. Because OFRF did not obtain lists from all 
certifying organizations or their chapters (55 out of a total of 64 
identified entities provided lists), its list count is likely an 
understatement of the number of certified organic producers. Note 
that the estimated number of organic producers includes only 
certified organic farms. Comments filed in response to the first 
proposal and studies indicate that the total number of organic farms 
is higher.
    Dunn has estimated the number of certified organic producers in 
the United States (2, 3) Dunn's 1995 work, a USDA study, estimated 
the number of certified producers at 4,060 in 1994; this estimate 
was used in the first proposal. Dunn's 1997 work reported 4,060 
certified organic farms in 1994 and 4,856 in 1995.
    Data collected by AMS indicate that the number of organic 
farmers increased about 12 percent per year during the period 1990 
to 1994. OFRF survey efforts indicate that growth has continued, 
although it is not clear whether the growth rate has changed. 
Similarly, growth in retail sales, the addition of meat and poultry 
to organic production, and the possibility of increased exports 
suggest that the number of operations has continued to increase. 
Lacking an alternative estimate of the growth rate for the number of 
certified organic producers, we use the average growth rate of about 
14 percent from Dunn's 1997 study. The true rate of growth could be 
higher or lower. Applying the 14-percent growth rate to Dunn's 
estimate of certified producers in 1995 gives an estimate of 8,200 
organic producers for 1999.
    An adjustment is needed to account for the number of producers 
who are practicing organic agriculture but who are not certified and 
who would be affected by this regulation. We assume that the number 
of organic but not certified producers in 1999 is about 4,000. This 
assumption is based on very limited information about the number of 
registered but not certified organic producers in California in 
1995. Thus, the total number of certified organic producers used in 
assessing the impact of the rule is 12,176.
    Producers with crop production (SIC Division A Major Group 1) 
and annual average revenues under $500,000 are small businesses. 
Producers with livestock or animal specialities are also considered 
small if annual average revenues are under $500,000 (SIC Division A 
Major Group 2), with the exception of custom beef cattle feedlots 
and chicken eggs, which are considered small if annual average 
revenues are under $1,500,000.
    Based on SBA's small business size standards for producers, it 
is likely that almost all organic producers would be considered 
small. The OFRF survey asked for the producer's total gross organic 
farming income during 1997. Only 35 (less than 3 percent) of the 
survey respondents reported gross income greater than $500,000, the 
SBA's cutoff between small and large businesses. Over 70 percent 
reported gross income of less than $50,000. The OFRF survey does 
caution readers about potential survey ``errors.'' It is 
particularly important to emphasize potential ``non-response 
error''; that is, it is unknown if those who responded to the survey 
accurately represent the entire population of certified organic 
growers. Also, some producers combine organic and conventional 
production on the same operation, some with total sales that may 
exceed $500,000. However, it is likely that a majority of organic 
producers would be considered small. We have estimated that there 
would be 12,176 producers certified in the first year and of those 
97 percent, or 11,811, based on OFRF's survey results, would qualify 
as a small business.
    The term, ``handler,'' means any person engaged in the business 
of handling agricultural products, excluding final retailers of 
agricultural products that do not process agricultural products. 
Little information exists on the numbers of handlers and processors. 
USDA has estimated that there were 600 entities in this category in 
1994. In California, there were 208 registered organic processed 
food firms in 1995 and 376 in 1999, a growth rate of 20 percent (4). 
We assume that this growth rate is applicable to the U.S. and 
project 2,077 certified handlers in 2001. This figure includes 100 
livestock feed handlers who would become certified organic. Again, 
the rate of growth could be higher or lower.
    In handling operations, a small business has fewer than 500 
employees (SIC Division D Major Group 20). It is also likely that 
the vast majority of handlers would be considered small, based on 
SBA's small business size standards for handlers. Based on informal 
conversations with organic certifying agents, currently, about 25 
(about 2 percent) of the estimated 1,250 organic handlers in 1999 
had more than 500 employees. This includes firms that handle or 
process both organic and conventional foods. We have estimated that 
2,077 handlers would be certified organic in the first year. Based 
on this information, 98 percent or 2,035 would qualify as a small 
business.
    4. An estimate of the projected reporting, recordkeeping, and 
other compliance requirements of the rule, including an estimate of 
the classes of small entities which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report or record.
    The reporting, recordkeeping, and compliance requirements of the 
rule will directly affect three sectors of the organic industry that 
contain small business entities: accredited certifying agents, 
organic producers, and organic handlers. We have examined the 
requirements of the rule as it pertains to each of these entities, 
however several requirements to complete this Regulatory Flexibility 
Analysis (RFA) overlap with the Regulatory Impact Assessment (RIA) 
and the Paperwork Reduction Act (PRA) section. In order to avoid 
duplication, we combine some analyses as allowed in section 605(b) 
of the Act. This RFA provides information specific to small 
entities, while the RIA or PRA should be referred to for more 
detail. For example, the RFA requires an analysis of the rule's 
costs to small entities. The RIA provides an analysis of the 
benefits and costs of this regulation. This RFA uses the RIA 
information to estimate the impact on small entities. Likewise, the 
RFA requires a description of the projected reporting, 
recordkeeping, and other compliance requirements of the final rule. 
The PRA section estimates the reporting and recordkeeping 
(information collection) requirements that would be required by this 
rule from individuals, businesses, other private institutions, and 
State and local governments. The burden of these requirements is 
measured in terms of the amount of time required of program 
participants and its cost. This RFA uses the PRA information to 
estimate the burden on small entities.

Certifying Agents

    We have identified 36 private certifying agents and 13 State 
programs providing certification. These 49 domestic entities are 
considered likely applicants during the first 12 months, as are an 
estimated 10 foreign certifying agents. An unknown number of new 
entrants to the certifying business may also apply. However, over 
the last 10 years, the number of certifying agents does not appear 
to have grown significantly, with the net effect of entries and 
exits maintaining a population of U.S.-based certifying agents at 
about 40 to 50. Of the 49 domestic certifying agents, based on 
information discussed previously, we estimate that 30 of the 36 
private certifying agents are small businesses.
    The recordkeeping and paperwork requirements are outlined in the 
Paperwork Reduction Act section. The requirements for small and 
large certifying agents are identical. The recordkeeping and 
paperwork requirements for accreditation will be a new burden to 
most agents as the majority of them have not been accredited in the 
past. However, the actual amount of the additional administrative 
costs that would be imposed by the final rule is expected to be 
different for those entities that would begin their activities only 
after the national program is implemented. Certifying agents that 
currently are active in the organic industry already perform most of 
these required 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. Because the rule does not require any particular system 
or technology, it does not discriminate against small businesses. 
The ability of an agent to carry out the paperwork and recordkeeping 
sections of the rule will be more dependant on the

[[Page 80680]]

administrative skill and capacity of their particular organization 
than their size. We did not receive significant comments about the 
paperwork requirements of the proposed rule that would indicate that 
they will be onerous for small certifying agents.
    Certifying agents will be the front line in monitoring and 
ensuring that certified operations stay in compliance with the Act 
and the regulations. However, most of the compliance requirements, 
with the exception of some reporting requirements, are consistent 
with what certifiers are currently expected to do. Like the 
paperwork and reporting requirements, the additional costs to an 
agent will depend on how different their current practices are from 
the final regulation.
    The final, and probably most significant, area in which 
certifying agents are affected by the rule is in the fees that they 
must pay for accreditation. Certifying agents will be assessed for 
the actual time and travel expenses necessary for the NOP to perform 
accreditation services, including initial accreditations, 5-year 
renewals of accreditation, review of annual reports, and changes to 
accreditation. Although the fees have not been set yet, we are using 
as a starting point the hourly fees that are charged for the 
voluntary, fee-for-service program provided by AMS to certification 
bodies requesting conformity assessment to the ISO Guide 65, 
``General Requirements for Bodies Operating Product Certification 
Systems.'' We expect that at the time the NOP's final rule is 
implemented, the fees will be approximately $95 per hour with higher 
overtime and holiday rates. Certifying agents will also be charged 
for travel, per diem, and other related costs associated with 
accreditation. To ease the financial burden of accreditation during 
the 18 month transition period after the NOP has been implemented, 
USDA will not impose hourly charges on certifying agents. The direct 
costs for certifying agents to obtain accreditation will be limited 
to per diem and transportation costs to the site evaluation. Review 
of the certifying agent's annual report is anticipated to range from 
2 to 8 hours at the ISO Guide 65 hourly rate. Also, if certifying 
agents wish to become accredited in additional areas for which they 
were not accredited previously, a site evaluation (with associated 
fees) will be necessary. Detail about the expected costs of 
accreditation can be found in the RIA.
    Several factors will influence the amount of time needed to 
complete an accreditation audit. An operation in which documents are 
well organized and that has few nonconformities within the quality 
system will require less time for an audit than an organization in 
which documents are scattered and there are many nonconformities 
(7). Similarly, in a followup audit, operations that lack 
organization in their documents and that had a large number of 
nonconformities during previous audits will require a greater amount 
of time. The scope of a followup audit is to verify the correction 
of nonconformities and to evaluate the effectiveness of the 
corrections. Certifying agents are able to control these cost 
factors by making certain that documents are well organized and by 
educating themselves about quality systems.
    The complexity of a certification agency's organization also 
will affect the time needed to complete an audit. An agency with a 
central office in which all certification activities take place will 
require less time for document review and site evaluation than a 
chapter organization or a business structured so that responsibility 
for making certification decisions is delegated outside of the 
central office. In the latter cases, the auditors' document review 
would require additional time and site evaluation that would extend 
from the central office to one or more of the chapters or to the 
site to which the certification decision making is delegated.
    Other factors determine the amount of time needed to complete an 
accreditation audit. For an agency with numerous clients, auditors 
may need to spend more time reviewing client files or examining 
business operations than they would have to spend for a smaller 
agency. Audit of an agency with a large number of processor clients 
may require an extended amount of time to follow audit trails, 
confirm that organic ingredients remain segregated from nonorganic 
ingredients, and establish that foreign-produced ingredients 
originate from approved entities. Finally, the complexity of the 
agricultural practices certified could influence the amount of time 
necessary to complete an accreditation audit. An agency whose 
certification covers only producers who grow and harvest one crop 
per field per year, such as wheat or sugar beets, could quickly be 
audited. An agency whose producers grow several different crops per 
field per year or an agency that certifies producers of crops and 
livestock as well as handlers would require a greater amount of 
time.
    All of these factors will affect both small and large certifying 
agents. A small certifying agent could be assumed to have a less 
complex organization or have fewer clients, and, thus, potentially 
less time would be necessary for review. However, other factors, 
such as the degree of paperwork organization or the complexity of 
the agricultural practices certified, may influence the time needed 
for review for any size of business.
    Currently, relatively few certifying agents have third-party 
accreditation because accreditation of certifying agents is 
voluntary. Fetter reports that in a sample of 18 certification 
programs, selected to include six large, private programs, six 
smaller private programs, and six State programs, four programs were 
accredited and one had accreditation pending (8). All of these were 
large private certifying agents. Three of the certifying agents 
identified by Fetter as accredited requested ISO Guide 65 
assessments by USDA and have been approved for selling organic 
products into the international market. Those certifying agents 
currently accredited by third parties will likely pay less for USDA 
accreditation because their documents are organized and they have 
fewer nonconformities.
    It is expected that all certifying agents will set their fee 
schedule to recover costs for their certification services, 
including the costs of accreditation. The larger the number of 
clients per certifying agent, the more fixed costs can be spread 
out. It is possible, however, that small certifying agents could be 
significantly affected by this final rule and may not be able to 
continue in business from a financial standpoint.

Costs to Producers and Handlers

    The OFPA established a small farmer exemption from certification 
and submission of organic plans for small producers with a maximum 
of $5,000 in gross sales of organic products. For purposes of the 
exemption, the OFPA defines a ``small farmer'' as those who sell no 
more than $5,000 annually in value of agricultural products. In this 
rule, we have clarified that the exemption applies to producers and 
handlers who sell no more than $5,000 annually in value of organic 
products (9). In addition, handling operations are exempt if they: 
Are a retail food establishment that handles organically produced 
agricultural products but does not process them; handles 
agricultural products that contain less than 70 percent organic 
ingredients by weight of finished product; or does not use the word, 
``organic,'' on any package panel other than the information panel 
if the agricultural product contains at least 70 percent organic 
ingredients by weight of finished product.
    A handling operation or specific portion of a handling operation 
is excluded from certification if it handles packaged certified 
organic products that were enclosed in their packages or containers 
prior to being acquired and remain in the same package and are not 
otherwise processed by the handler, or it is a retail food 
establishment that processes or prepares on its own premises raw and 
ready-to-eat food from certified organic products.
    According to the OFRF survey, 27 percent of currently certified 
farms that responded to the survey would fall under the producer 
exemption. This percentage does not take into account those organic 
farms that are not currently certified by a private or State 
certifying agent. A study of California organic farms found that, of 
all organic farms (10) in 1994-95, about 66 percent have revenues 
less than $10,000 (11). If California is representative and the 
distribution within the sub-$10,000 category is uniform, then a 
third of the farms would be classified as small for purposes of the 
statutory exemption with annual sales less than $5,000. Based on the 
California study and the OFRF survey results, we estimate that 
between 25 and 33 percent of organic producers are small and would 
qualify for exemption from the certification requirements.
    We have estimated that there are 4,801 small organic producers 
and 173 handlers that will be exempt from certification (this figure 
does not include excluded operations). These operations would be 
required to comply with the production and handling standards and 
labeling requirements set forth under the NOP. They do not have to 
meet the paperwork requirements of certification and they must only 
keep records that document compliance with the law for 3 years 
(rather than 5 for certified operations. We anticipate that this 
exemption will be used primarily by small market gardeners and 
hobbyists who grow and process produce and other agricultural 
products for sale at farmers

[[Page 80681]]

markets and roadside stands to consumers within their communities.
    Exempt producers will be allowed to market their products as 
organically produced without being certified by a certifying agent. 
Products marketed by exempt producers cannot be represented as 
certified organic or display the USDA organic seal. Products 
produced or handled on an exempt operation may be identified as 
organic ingredients in a multiingredient product produced by the 
exempt operation, but they may not be identified as organic in a 
product processed by others. These limitations may discourage some 
small producers from seeking exemption, who instead may choose to 
become certified. In this case, the costs of certification would 
apply. The value associated with having organic certification may 
outweigh the costs of certification.
    As with accredited certifying agents, the regulation will impose 
administrative costs on certified producers and handlers for 
reporting, recordkeeping, residue testing, and other compliance 
requirements. The actual amount of the additional administrative 
costs that would be imposed by the final rule is expected to be 
different for those entities that become certified only after the 
national program is implemented. Producers 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 
differ from the requirements of the final regulation. Projected 
reporting, recordkeeping, and other compliance requirements of 
certifying agents are discussed in greater detail in the PRA and the 
RIA. The only distinction made in the final rule between large and 
small entities for reporting, recordkeeping, and compliance is for 
operators who produce less than $5000 per year in organic products 
as stated above.
    As with the certifying agents, most of the concern this rule 
generated for small certified operations revolves around fees. Under 
this rule, USDA will not impose any direct fees on producers and 
handlers. Certifying agents will establish a fee schedule for their 
certification services that will be filed with the Secretary and 
posted in a place accessible to the public. Certifying agents will 
provide all persons inquiring about the application process with a 
copy of their fees. The certifying agent may only charge those fees 
that it has filed with the Secretary. Furthermore, the certifying 
agent will provide each applicant with an estimate of the total cost 
of certification and an estimate of the annual costs of updating the 
certification.
    Currently, supply and demand for certification services 
determine the fees charged in most areas. Some States charge minimal 
fees for certification and instead subsidize operating costs from 
general revenues. According to separate studies by Fetter, and Graf 
and Lohr, the majority of certifying agents structure their fee 
schedules on a sliding scale based on a measure of size, usually 
represented by the client's gross sales of organic products but 
sometimes based on the acres operated. Some certifying agents charge 
an hourly rate for inspection and audit services.
    Graf and Lohr's study indicates that even small farms require 
significant time for the certification process, and this time does 
not increase proportionately as farm size increases. None of the 
existing certification programs mention costs for residue testing, 
which the NOP will require in the form of preharvest testing when 
there is reason to believe that agricultural products have come into 
contact with prohibited substances. Preharvest testing is expected 
to be infrequent. Certifiers will recover the costs of preharvest 
testing through explicit charges to the producer whose crop is 
tested or through a generally higher fee structure that spreads the 
expected costs of tests over all clients.
    This rule imposes no requirements that would cause certifying 
agents that are presently using a sliding-scale type fee schedule to 
abandon their current fee system. Certifying agents could recover 
their net additional costs by increasing their flat-fee component, 
their incremental charges, or both. Because accreditations are 
renewed only every 5 years, certifying agents will have 5 years to 
recover their net new costs. Certifying agents who become accredited 
during the first year of the program would have fewer direct costs 
to recover because they will not be charged the application fee and 
hourly charges for accreditation services.
    Those currently receiving voluntary certification will likely 
see a modest increase as the certifying agent passes on its cost 
incurred under the NOP. Those not currently receiving certification 
and producing over $5,000 annually in organic products will be 
required to become certified, and they will incur the actual costs 
of certification.
    Some States, such as Texas and Washington, charge producers and 
handlers nominal fees for certification, and it is possible that 
more States might provide certification services as the NOP is 
implemented. Other States, such as Minnesota, have cost-share 
programs to help offset costs for organic producers.

Conclusion

    This rule will primarily affect small businesses. We have, 
therefore, attempted to make the paperwork, recordkeeping, and 
compliance provisions as flexible as possible without sacrificing 
the integrity of the program. We are not requiring specific 
technologies or practices and with the 18-month phase-in of the 
program we are attempting to give both certifying agents and 
certified operators an opportunity to adapt their current practices 
to conform with the rule. Because we have attempted to make the rule 
conform with existing industry standards, including ISO guide 65 for 
certification and ISO guide 61 for accreditation, the changes for 
most organizations and operations should be relatively 
straightforward.
    The fees required for accreditation will be the most significant 
change faced by most operations--and this was apparent in the 
comments received. While we understand the concerns of the affected 
organizations, in order to administer an accreditation program, it 
is necessary that we recover our costs. We are hoping that the 
elimination of the hourly charges in the first round of 
accreditation will help to alleviate some of this burden.
    1. Organic Farming Research Foundation. 1999. Final Results of 
the Third Biennial National Organic Farmers' Survey. Santa Cruz, CA.
    2. Dunn, Julie Anton. 1995. Organic Food and Fiber: An Analysis 
of 1994 Certified Production in the United States. U.S. Department 
of Agriculture, Agricultural Marketing Service.
    3. Dunn, Julie Anton. 1997. AgriSystems International Reports 
Certified Organic Production in the United States: Half a Decade of 
Growth. AgriSystems International: Wind Gap, PA.
    4. California Department of Health Services (DHS). 1995. Report 
on the Registration of California Organic Processed Food Firms. 
Sacramento: State of California. September 1999 figures obtained via 
personal communication with California DHS.
    5. Graf, Anita and Luanne Lohr. 1999. Analysis of certification 
program costs. Working Paper, Fund for Rural America project, Market 
Development for Organic Agriculture Products, Grant No. 97-36200-5.
    6. During the first 18 months, site evaluation for initial 
accreditation will be conducted jointly by two reviewers. Two 
reviewers offers: (1) Anticipated faster turn-around; (2) different 
areas of expertise--one reviewer would come from the Quality Systems 
Certification Program audit staff and would be familiar with ISO 
Guide 65 verification, while the other reviewer would come from the 
NOP staff and would be familiar with the requirements of the 
program; and (3) consistency with the organic industry's desire to 
have reviewers from both areas of expertise during ISO Guide 65 
assessments. AMS would consider sending one reviewer, rather than 
two, for the site evaluation of small certification agents if an 
individual possessing both reviewing skill and knowledged of the NOP 
is available. We anticipate only one reviewer would be required 
after the 18-month transition period.
    7. Adequate advance notice will be given to certifying agents to 
allow them the opportunity to organize their records prior to the 
audit and minimize the costs of accreditation.
    8. Fetter, Robert T. 1999. Economic Impacts of Alternative 
Scenarios of Organic Products Regulation. Senior Honors Thesis. 
University of Massachusetts, Amherst, MA.
    9. We asked for comments on the first proposal as to whether the 
current statutory limitation of $5,000 for exemption from 
certification should be raised to $10,000 or to another amount and 
why such an increased monetary limitation for exemption from 
certification would be appropriate. Few commenters offered 
recommendations as to a maximum sales volume to exempt producers. 
Amounts ranged from $2,000 to $50,000, with a few suggesting $10,000 
and $20,000 exemptions. These proposed exemption levels and 
justifications in comments received are not sufficiently consistent 
enough for us to recommend changing the statute requirement of the 
$5,000 maximum sales volume exemption.

[[Page 80682]]

    10. California State law requires organic farmers to register 
with the State. Certification is voluntary at the current time.
    11. Klonsky, Karen, and Laura Tourte. 1998. Statistical Review 
of California's Organic Agriculture, 1992-95. Report prepared for 
the California Department of Food and Agriculture Organic Program. 
Cooperative Extension, Department of Agricultural Economics, 
University of California, Davis.

Appendix D--Executive Order 12988, Civil Justice Reform

    Executive Order 12988, Civil Justice Reform, instructs each 
executive agency to adhere to certain requirements in the 
development of new and revised regulations in order to avoid unduly 
burdening the court system. The revised proposal was reviewed under 
this Executive Order. No comments were received on that review, and 
no additional related information has been obtained since then. This 
rule is not intended to have retroactive effect.
    States and local jurisdictions are preempted under section 2115 
of the Organic Foods Production Act (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 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 toward 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 
regulation 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.

Appendix E--Executive Order 13132, Federalism

    This final rule has been reviewed under Executive Order 13132, 
Federalism. This Order requires that regulations that have 
federalism implications provide a federalism impact statement that: 
(1) Demonstrates the Agency consulted with the State and local 
officials before developing the final rule, (2) summarizes State 
concerns, (3) provides the Agency's position supporting the need for 
the regulation, and (4) describes how the concerns of State 
officials have been met. The Order indicates that, where National 
standards are required by Federal statutes, Agencies shall consult 
with appropriate State and local officials in developing those 
standards.
    The Organic Foods Production Act (OFPA) of 1990 (7 U.S.C. 6501 
et seq.) establishes national standards regarding the marketing of 
agricultural products as organically produced, assures consumers 
that organically produced products meet a consistent standard, and 
facilitates interstate commerce in fresh and processed food that is 
organically produced. There has been a great deal of support for 
this law and these regulations from the organic community.
    OFPA and these regulations do preempt State statutes and 
regulations related to organic agriculture. OFPA establishes 
national standards regarding the marketing of agricultural products 
as organically produced, assures consumers that organically produced 
products meet a consistent standard, and facilitates interstate 
commerce in fresh and processed food that is organically produced. 
Currently, 32 States have organic statutes on their books and have 
implemented them to various degrees. However, the Act contemplates a 
significant role for the States and, in fact, envisions a 
partnership between the States and the Federal Government in meeting 
the requirements of the Statute. The Act allows the States to 
determine the degree to which they are involved in the organic 
program. States may choose to: (1) Carry out the requirements of the 
Act by establishing a State organic program (SOP) and becoming 
accredited to certify operations, (2) establish an SOP but utilize 
private accredited certifying agents, (3) become accredited to 
certify and operate under the National Organic Program (NOP) as 
implemented by the Secretary, or (4) not play an active role in the 
NOP. 7 U.S.C. 6507 provides that States may establish an SOP 
consistent with the national program. SOP's may contain more 
restrictive requirements than the NOP established by the Secretary 
of Agriculture. To be more restrictive, SOP's must: further the 
purposes of the Act, be consistent with the Act, not discriminate 
against organic products of another State, and be approved by the 
Secretary.
    Because implementation of OFPA will have a significant effect on 
many States' existing State statutes and programs, the U.S. 
Department of Agriculture (USDA) has reached out to States and 
actively sought their input throughout the entire process of 
developing the organic rule. On publication of the first proposal on 
December 16, 1997, an announcement and information packet 
summarizing the proposal was sent to more than 1,000 interested 
parties, including State governors and State department of 
agriculture secretaries, commissioners, or directors. Over a period 
of 6 years, numerous meetings were held to provide States an 
opportunity to provide information and feedback to the rule. In 
1994, States were invited to participate in four public hearings 
held in Washington, DC; Rosemont, IL; Denver, CO; and Sacramento, 
CA, to gather information to guide development of standards for 
livestock products. States were also provided the opportunity to 
comment specifically on State issues at a National Organic 
Certifiers meeting held on July 21, 1995. They were invited to 
discuss accreditation issues at a meeting held on February 26, 1996. 
Following the publication of the first proposal, State and local 
jurisdictions had the opportunity to provide input at four listening 
sessions held in February and March 1998 in Austin, TX; Ames, IA; 
Seattle, WA; and New Brunswick, NJ. A meeting to discuss the role of 
States in the NOP was held in February 1999. A State organic 
certifiers meeting to discuss State issues was held at a March 2000 
meeting with the National Association of State Organic Programs.
    USDA also drew extensively on the expertise of States and the 
organic industry by working closely with the National Organic 
Standards Board. The Board met 12 times before publication of the 
proposed rule on December 16, 1997, and met five times during 1998 
and 1999 and two times in 2000. States were invited to attend each 
of these meetings, and official State certifier representatives 
participated in Board deliberations in meetings held in July 1998, 
July 1999, and March 2000.
    Public input sessions were held at each meeting to gather 
information from all interested persons, including State and local 
jurisdictions. NOP staff also received comments and consulted with 
States at public events. They made presentations, received comments, 
and consulted with States at local and regional organic conferences 
and workshops and at national and international organic and natural 
food shows. States were consulted in training sessions held for 
organic inspectors, as well as numerous question and answer sessions 
at speaking engagements of the Agricultural Marketing Service (AMS) 
Administrator, the NOP Program Manager, and NOP staff.
    In addition, during August and September 2000, the Administrator 
and NOP staff engaged in extensive efforts to discuss the proposed 
rule. While many organizations declined opportunities for these 
briefings, AMS staff did meet with the National

[[Page 80683]]

Conference of State Legislatures (NCSL) and, at their request, in 
lieu of a meeting, provided information to the National Governor's 
Association (NGA). NGA and NCSL representatives stated they were 
aware of the development of the final rule but offered no comments 
during these consultations beyond those submitted by the individual 
States during the proposed rule's comment period. In addition, 
between August and October 2000, NOP staff had telephone or e-mail 
contact with the State organic program directors or other State 
department of agriculture representatives in 25 States to determine 
the scope and status of each State's organic program in the context 
of the issuance of the final rule. These State representatives 
stated that they were eagerly awaiting the publication of the final 
rule and had already begun adjusting their programs to conform with 
the March 2000 proposed rule in anticipation of the publication of 
the final rule. Finally, States have had the opportunity to comment 
on two proposed rules. More than 275,000 comments were received on 
the first proposal, and 40,000 on the second proposed rule-including 
extensive comments from twelve State departments of agriculture, one 
State legislator, two members of Congress, and the National 
Association of State Organic Programs.
    Through this outreach and consultation process, States have both 
provided general feedback to the rule and expressed several specific 
concerns about how this rule will affect State programs. 
Overwhelmingly, States were extremely supportive of the March 2000 
proposed rule. With a few exceptions, most notably who should bear 
the cost of enforcement of an SOP, States are supportive of the 
Federal legislation. We did not receive a single comment from a 
State that indicated that there should not be a national organic 
program.
    The most prevalent issues they raised regarding the March 2000 
proposed rule as to how this rule will affect organic programs in 
their States, along with USDA's response, are described below. We 
received no direct comments from States on the Federalism section in 
the proposed rule. Many of these concerns and others are addressed 
in more detail in the relevant sections of the rule.

Applicability

    Regarding section 205.100(b), five States currently offer a 
``transition to organic'' label for producers who are in the process 
of becoming certified. Many of these States would like to continue 
to offer this label. However, OFPA does not authorize a ``transition 
to organic'' label. Although the States (or private certifiers) are 
free to come up with a different label for these farmers, they 
cannot utilize the term, organic, in any seal or labeling associated 
with the conversion period. There is no change in this provision 
from the proposed rule.

Accreditation

    Regarding section 205.501(a), many States wanted the NOP to add 
an additional subsection to the Accreditation section requiring 
certifiers to prove that they can carry out a State's more 
restrictive standards in order to be accredited to certify in that 
State. AMS concurs with this suggestion and has added a new 
paragraph 205.502(a)(20) requiring the certifying agent to 
demonstrate its ability to comply with a State's additional 
requirements.
    Regarding section 205.501(b), there was strong support by all of 
the States for the provision that States with SOP's are able to have 
higher standards than the NOP for operations within their State. 
However, there was not consensus among the States on the prohibition 
on private certifiers requiring more stringent standards.
    Although most supported the prohibition on private certifiers 
imposing additional requirements as a condition of certification 
because they perceived that it lowered barriers to farmers and 
processors in their States, three States were strongly opposed to 
this provision. Because having a consistent national standard is one 
of the primary purposes of the legislation, there is no change in 
this provision from the proposed rule.

State Programs

    There was general confusion about what is the difference between 
a State organic certification program and an SOP. In addition, some 
States wanted the scope of the NOP's oversight for State organic 
activities to be limited to certification. A State organic 
certification program is equivalent to a private or foreign 
certification program. States wishing to certify operations in their 
State must apply to the NOP for accreditation.
    An SOP, on the other hand, requires the State to submit a plan 
to the NOP for approval to, in effect, administer the NOP within 
their State. Included in this is the opportunity to include 
requirements that differ from the NOP. In creating an SOP, a State 
is also agreeing to take on enforcement activities that would 
otherwise be the responsibility of the NOP. One exception to a 
State's enforcement authority is that States with SOP's do not have 
jurisdiction over the accreditation of certifying agents and cannot 
revoke accreditation. They can investigate and report accreditation 
violations to the NOP. States with only an accredited certification 
program are only responsible for the level of enforcement that all 
accredited certifying agents, State, private, or foreign, are 
required to take on.
    Regarding section 205.620(c), several States want broader 
language than ``unique environmental conditions'' to be the basis 
for a State to have the right to establish more restrictive 
requirements under an SOP. AMS does not concur. There is no change 
to this language in the final rule. It is the opinion of AMS that 
the current language is broad enough to cover the scope of more 
restrictive requirements as authorized by OFPA.
    Regarding section 205.620(d), many States want it to be optional 
for States with SOP's to take on enforcement obligations; several 
want funding from USDA for enforcement activities. AMS does not 
concur with this change. AMS does not envision that participation 
under the NOP will impose additional fiscal costs on States with 
existing organic programs, other than the costs of accreditation.
    Regarding section 205.621(b), several States commented that 
States with SOP's should not be required to publish proposed changes 
to their programs in the Federal Register for public comment. AMS 
concurs with this comment. This language was an oversight from the 
first proposed rule.

Fees

    A few States commented that the proposed fees for accreditation 
could cost more than some States could afford to pay. They made some 
suggestions for reducing accreditation fees, ranging from no fees (a 
completely federally funded program) to charging reduced rates for 
travel or eliminating hourly charges. AMS has no plans to change the 
fee structure. As in the proposed rule, hourly charges for 
accreditation will be waived for all applicants in the first 18 
months of the program to facilitate the conversion to a national 
accreditation system.

[[Page 80684]]

Compliance

    Regarding section 205.665, several States wanted to know what 
their authority was to revoke the accreditation of private 
certifiers in their State who do not meet additional State standards 
under an SOP. An SOP's governing State official is authorized to 
review and investigate complaints of noncompliance with the Act or 
regulations concerning accreditation of certifying agents operating 
in their State. If they discover a noncompliance, they shall send a 
written report to the NOP program manager. Because accreditation is 
a Federal license, States do not have the authority to revoke a 
certifying agent's accreditation. There is no change in this section 
from the proposed rule

Appeals

    Regarding section 205.668(b), several State commenters want 
appeals from SOP's to go to State district court rather than Federal 
district court. AMS disagrees. The Act provides that a final 
decision of the Secretary may be appealed to the U.S. District Court 
for the district in which the person is located. AMS considers an 
approved SOP to be the NOP for that State. As such, AMS considers 
the governing State official of such State program to be the 
equivalent of a representative of the Secretary for the purpose of 
the appeals procedures under the NOP. Because the final decision of 
the governing State official is considered the final decision of the 
Secretary, under the Act it is then appealable to the U.S. District 
Court, not the State district court.
    Regarding section 205.680, State commenters want a process by 
which people who feel they were adversely affected by the organic 
program in a State with an SOP may appeal to the SOP's governing 
State official, rather than the Administrator. AMS has amended the 
language in section 205.680 to clarify to whom an appeal is made 
under various situations. If persons believe that they were 
adversely affected by a decision made by the NOP Program Manager, 
they appeal to the Administrator. If they were adversely affected by 
a decision made by a certifying agent (State, private, or foreign), 
they appeal to the Administrator unless they are in a State with an 
SOP, in which case, they appeal to the SOP's governing State 
official. If persons believe that they were adversely affected by a 
decision made by a representative of an SOP, they appeal such 
decision to the SOP's governing State official or such official's 
designee.

[FR Doc. 00-32257 Filed 12-20-00; 8:45 am]
BILLING CODE 3410-02-P