[Federal Register Volume 80, Number 81 (Tuesday, April 28, 2015)]
[Proposed Rules]
[Pages 23455-23477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09851]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 80, No. 81 / Tuesday, April 28, 2015 / 
Proposed Rules  

[[Page 23455]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 205

[Document Number AMS-NOP-11-0009; NOP-11-04PR]
RIN 0581-AD08


National Organic Program; Origin of Livestock

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The U.S. Department of Agriculture's Agricultural Marketing 
Service (USDA AMS) proposes to amend the origin of livestock 
requirements for dairy animals under the USDA organic regulations. This 
proposed action would specify that a producer can transition dairy 
animals into organic production once. This proposed action would 
clarify that, after completion of this one-time transition, any new 
dairy animals that a producer adds to a dairy farm would need to be 
managed organically from the last third of gestation or sourced from 
dairy animals that already completed their transition into organic 
production. This proposed action would also clarify how breeder stock 
should be managed on organic livestock farms.

DATES: Comments must be received by July 27, 2015.

ADDRESSES: Interested parties may submit written comments on this 
proposed rule using one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Scott Updike, Agricultural Marketing Specialist, 
National Organic Program, USDA-AMS-NOP, Room 2646--So., Ag Stop 0268, 
1400 Independence Ave. SW., Washington, DC 20250-0268.
    Instructions: All submissions received must include the docket 
number AMS-NOP-11-0009; NOP-11-04PR, and/or Regulatory Information 
Number (RIN) 0581-AD08 for this rulemaking. Commenters should identify 
the topic and section of the proposed rule to which their comment 
refers. All commenters should refer to the GENERAL INFORMATION section 
for more information on preparing your comments. All comments received 
will be posted without change to http://www.regulations.gov.
    Docket: For access to the docket, including background documents 
and comments received, go to http://www.regulations.gov. Comments 
submitted in response to this proposed rule will also be available for 
viewing in person at USDA-AMS, National Organic Program, Room 2646--
South Building, 1400 Independence Ave. SW., Washington, DC, from 9 a.m. 
to 12 noon and from 1 p.m. to 4 p.m., Monday through Friday (except 
official Federal holidays). Persons wanting to visit the USDA South 
Building to view comments received in response to this proposed rule 
are requested to make an appointment in advance by calling (202) 720-
3252.

FOR FURTHER INFORMATION CONTACT: Andrew Perry, Director, Standards 
Division, Telephone: (202) 720-3252; Fax: (202) 205-7808.

SUPPLEMENTARY INFORMATION: 

Executive Summary

A. Purpose of Proposed Rule

    This proposed rule would create greater consistency in the 
implementation of a standard for the transition of dairy animals into 
organic production and for the management of breeder stock. AMS has 
determined that the current regulations regarding the transition of 
dairy animals and the management of breeder stock on organic operations 
need additional specificity and clarity to improve AMS' ability to 
efficiently administer the National Organic Program (NOP). A stated 
purpose of the Organic Foods Production Act of 1990 (OFPA) (7 U.S.C. 
6501-6522) is to assure consumers that organically produced products 
meet a consistent and uniform standard (7 U.S.C. 6501). This action 
would facilitate and improve compliance with and enforcement of the 
USDA organic regulations (7 CFR part 205) and maintain consumer trust 
in the consistency of the Organic seal.

B. Summary of Provisions

    This proposed rule would update the regulation by explicitly 
requiring that milk or milk products labeled, sold or represented as 
organic be from dairy animals organically managed since at least the 
last third of gestation, with a one-time exception for transition. This 
exception would allow a producer, as defined by the regulations, to 
transition nonorganic dairy animals to organic milk production one 
time, under specific conditions.
    This proposal would specify that a producer (e.g., an individual or 
corporation starting or operating a dairy farm) could transition 
nonorganic dairy animals to organic milk production one time over a 
single twelve-month period. The proposal would require that all 
transitioning animals end the transition process at the same time. This 
twelve-month period is consistent with OFPA's requirement that there be 
a minimum period of one year of organic management before milk from 
dairy animals can be sold as organic (7 U.S.C. 6509(e)(2)).
    This proposal would specify that, once the transition into organic 
production is complete, that a producer would not be allowed to conduct 
any additional transitions. After the transition, the producer would 
only be able to expand the number of dairy animals or replace culled 
dairy animals on any dairy farm in two ways: (1) Add dairy animals that 
had been under continuous organic management since the last third of 
gestation, or (2) add transitioned dairy animals that had already 
completed the transition on another dairy farm during that producer's 
one-time transition.
    The proposal would define a dairy farm as a specific premises with 
a milking parlor where at least one lactating animal is milked. For the 
purpose of this definition, a milking parlor should be considered a 
physical structure (e.g., barn, parlor) in which dairy animals are 
milked. Because the dairy farm definition, in part, drives the 
eligibility for a producer to transition animals to organic production, 
this action would mean that producers that only raise heifers for 
organic dairy farms would not be eligible to transition conventional 
animals to organic. Such producers do not milk animals and, therefore, 
would not be considered eligible for the one-time transition

[[Page 23456]]

exception. However, such producers could continue raising heifers for 
organic dairy farms as long as the animals were under continuous 
organic management from the last third of gestation.
    This proposed rule reiterates that breeder stock may be brought 
from a nonorganic operation onto an organic operation at any time. 
While the regulations prohibit organic livestock from being removed and 
managed on a nonorganic operation and subsequently returned to an 
organic operation (i.e., cycling in and out of organic production), 
this provision does not extend to nonorganic breeder stock that are 
themselves not certified or eligible for slaughter, sale, and labeling 
as organic. Further, OFPA specifically allows breeder stock to be 
purchased from any source if the stock is not in its last third of 
gestation. Consistent with OFPA and USDA organic regulations, a 
producer has flexibility in its sourcing and its management of 
nonorganic breeder stock after its organic calf is weaned and before it 
begins the last third of gestation for the next offspring. However, a 
producer must continue to prevent commingling of organic and nonorganic 
products and prevent contact of any organic production or products with 
prohibited substances (7 CFR 205.201(a)(5)). AMS is proposing 
additional provisions for organic management of breeder stock during 
the time when the breeder stock is directly contributing to the 
nourishment of organic offspring, from the last third of gestation 
through the end of the nursing period.

C. Costs and Benefits

    AMS estimates the following costs and benefits of this proposed 
rule.

------------------------------------------------------------------------
             Costs (range)                           Benefits
------------------------------------------------------------------------
$288,000-$935,000......................  Will create a consistent, level
This range indicates the estimated        playing field for all existing
 costs for dairy producers to purchase    organic dairy producers,
 organic replacement heifers instead of   regardless of how they
 transitioned heifers. (AMS had no data   transitioned into organic
 to estimate costs for dairy sheep and    production.
 goat farms) AMS believes the lower      Facilitates more consistent
 bound is a conservative estimate of      enforcement of organic dairy
 the costs and actual costs could be      standards.
 less. The upper limit accounts for an   Maintains consumer confidence
 assumed organic premium for organic      in the USDA organic seal.
 heifers. The difference between the
 lower bound and upper limit is
 believed to be an intra-industry
 transfer of costs and benefits, not a
 net cost.
------------------------------------------------------------------------

Table of Contents

I. General Information
    A. Does this action apply to me?
    B. What should I consider as I prepare my comments for AMS?
II. Background
    A. Dairy Transition
    B. Breeder Stock
    C. Development of Existing Standards
    D. Discussion of Past Comments Received
III. Overview of Proposed Amendments
    A. Dairy Transition
    i. Implementation Considerations
    B. Breeder Stock
    C. Additional Clarifications
    D. Other Amendments Considered
IV. Related Documents
V. Statutory and Regulatory Authority
    A. Executive Order 12866 and 13563
    i. Need for the Rule
    ii. Baseline
    iii. Alternatives Considered
    iv. Costs of Proposed Rule
    v. Benefits of Proposed Rule
    vi. Conclusions
    B. Executive Order 12988
    C. Regulatory Flexibility Act
    D. Executive Order 13175
    E. Paperwork Reduction Act
    F. Civil Rights Impact Analysis
VI. List of Subjects in 7 CFR Part 205

I. General Information

A. Does this action apply to me?

    You may be potentially affected by this action if you are engaged 
in the dairy industry. Potentially affected entities may include, but 
are not limited to:
     Individuals or business entities that are considering 
starting a new dairy farm and that plan to seek organic certification 
for that farm.
     Existing dairy farms that are currently certified organic 
under the USDA organic regulations.
     Existing conventional dairy farms that are considering 
converting their farm to certified organic production.
     Businesses engaged in raising heifers for sale to 
certified organic operations.
     Certifying agents accredited under the USDA organic 
regulations to certify organic livestock operations.
     Certifying agents accredited under the USDA organic 
regulations who may seek to certify transitioned dairy animals or 
transitional crops.
    This listing is not intended to be exhaustive, but rather provides 
a guide for readers regarding entities likely to be affected by this 
action. Other types of entities not listed in this section could also 
be affected. To determine whether you or your business may be affected 
by this action, you should carefully examine the proposed regulatory 
text. If you have questions regarding the applicability of this action 
to a particular entity, consult the person listed under FOR FURTHER 
INFORMATION CONTACT.

B. What should I consider as I prepare my comments for AMS?

    Your comments should clearly indicate whether or not they support 
the action being proposed for any or all of the items in this proposed 
rule. You should clearly indicate the reason(s) for the stated 
position. Your comments should also offer any recommended language 
changes that would be appropriate for your position. Please include 
relevant information and data to further support your position (e.g. 
scientific, environmental, industry impact information, etc.).
    Specifically, AMS is requesting comments on the following topics:
    1. The cost and benefit analysis presented, including assumptions 
and estimates, of limiting dairy transition to a one-time exception for 
a given producer;
    2. Procedures that certifying agents would use under this proposal 
to determine whether a producer is eligible for the one-time 
transition; and
    3. The proposed implementation approach for this rule.

II. Background

A. Dairy Transition

    AMS' National Organic Program (NOP) is authorized by OFPA. Through 
the NOP, AMS oversees national standards for the production and 
handling of organically produced agricultural products. This action is 
being taken by AMS to create greater consistency in the implementation 
of the origin of livestock requirements for organic dairy animals, and 
to facilitate and improve compliance with and enforcement of the USDA 
organic regulations. This action is also being taken to satisfy 
consumer expectations

[[Page 23457]]

that organic livestock meet a consistent and uniform standard.
    Section 6509 of OFPA authorizes the USDA to implement regulations 
regarding standards for organic livestock products, including the 
transition of dairy animals into organic production. OFPA establishes 
that in general, organic livestock will be managed organically since 
the last third of gestation (7 U.S.C. 6509(b)). As an exception for 
dairy animals, OFPA requires a minimum period of one year of organic 
management before milk from non-organic dairy animals can be sold as 
organic (7 U.S.C. 6509(e)(2)). OFPA also addresses the use of breeder 
stock on livestock farms (7 U.S.C. 6509(b)). Furthermore, OFPA 
authorizes the creation of the National Organic Standards Board (NOSB) 
to advise USDA about the implementation of standards and practices for 
organic production (7 U.S.C. 6518).
    The USDA organic regulations regarding the origin of livestock (7 
CFR 205.236(a)) require that all livestock products (e.g., meat, fiber) 
sold, labeled, or represented as being organic must be from livestock 
under continuous organic management from the last third of gestation 
onward. For dairy animals, the USDA organic regulations provide an 
exception at section 205.236(a)(2) that allows for the transition of a 
dairy herd into organic production as long as they are under continuous 
organic management for the one-year period prior to production of 
organic milk or milk products. During this one-year period, dairy 
animals may consume crops and forage from land which is in the third 
year of organic management and included in the organic system plan, but 
has not yet been certified organic (7 CFR 205.236(a)(2)(i)). Section 
205.236(a)(2)(iii) requires that once an entire distinct herd has 
transitioned to organic production, all dairy animals shall be managed 
organically from the last third of gestation.
    While the regulations allow for the transition of a conventional 
herd to organic milk production after one year of organic management, 
the regulations do not define a herd. As such, stakeholders have 
interpreted the term ``herd'' in a variety of ways. For example, some 
operations and certifying agents consider a herd to include all of the 
animals on the farm, whereas others consider a herd to be a group of 
animals on a farm that are managed together over time.
    Additionally, organic operations and certifying agents have 
interpreted the USDA organic regulations differently regarding when the 
transition of a herd into organic production should be considered 
complete. Some dairy operations continuously transition conventional 
dairy animals as new ``distinct'' herds into organic production. This 
can be a cost savings to a farmer because he or she does not have to 
purchase organic dairy animals to either expand their herd or replace 
their cull animals. Other dairy operations have only used the 
transition exception once when they initially converted a ``herd'' to 
organic production. Current practice also does not always align with 
the intent of the May 2003 NOSB recommendation and the regulations that 
dairy herd transition be used only one time, when a producer with a 
farm initially transitions from conventional to organic production. AMS 
is updating the transition exception through this proposed rulemaking.
    In July 2013, the USDA Office of Inspector General (OIG) published 
an audit report on organic milk operations stating that certifying 
agents were interpreting the origin of livestock requirements 
differently.\1\ According to the OIG report, three of the six 
certifiers interviewed by OIG allowed producers to continuously 
transition additional herds to organic milk production, while the other 
three certifiers did not permit this practice. OIG recommended that a 
proposed rule be issued to clarify the standard and ensure that all 
certifiers consistently apply and enforce the origin of livestock 
requirements. This proposed rule responds to the OIG finding on this 
issue.
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    \1\ The July 2013 Office of Inspector General (OIG) audit report 
on organic milk operations may be accessed at the following Web 
site: http://www.usda.gov/oig/webdocs/01601-0002-32.pdf.
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B. Breeder Stock

    OFPA states that breeder stock may be purchased from any source if 
such stock is not in the last third of gestation (7 U.S.C. 6509(b)). 
The USDA organic regulations define breeder stock as female livestock 
whose offspring may be incorporated into an organic operation at the 
time of their birth (7 CFR 205.2). OFPA and the regulations limit 
breeder stock to nonorganic females who may produce organic offspring 
if certain conditions are met. The regulations specify that such 
breeder stock may be brought from a nonorganic operation onto an 
organic operation at any time (7 CFR 205.236(a)(3)). If breeder stock 
is gestating and its offspring are to be raised as organic, the 
regulations require that the breeder stock be brought onto the facility 
no later than the last third of gestation and be under continuous 
organic management until the offspring are weaned from the breeder 
stock (7 CFR 205.236(a)).
    Stakeholders, through public comment to the NOSB and comments to 
NOP have expressed concern that some operations may bring breeder stock 
onto an organic operation, manage them organically for the last third 
of gestation so that the breeder stock can produce organic offspring, 
and then return that breeder stock to nonorganic management. Some 
stakeholders, including the NOSB, have suggested that such a practice 
does not align with a regulatory provision that prohibits livestock 
removed from an organic operation and subsequently managed on a 
nonorganic operation to be sold, labeled, or represented as organically 
produced (section 205.236(b)).\2\
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    \2\ National Organic Standards Board April 2003 Recommendation 
on Breeder Stock: Clarification of Rule. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3104547.
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C. Development of Existing Standards

    Between 1994 and 2006, the NOSB made six recommendations regarding 
origin of dairy animals; several of which included recommendations on 
the management of breeder stock.\3\ Between 1997 and 2000, AMS issued 
two proposed rules and a final rule regarding national standards for 
production and handling of organic products, including livestock and 
their products. 4 5 AMS also issued a proposed rule and 
final rule implementing congressional amendments to the OFPA regarding 
feed for transitioning dairy animals.\6\ The NOSB as well as the public 
commented on these rulemakings with regard to the origin of livestock 
and exception for transition. Key points from these actions that led to 
the development of the existing standards on origin of livestock are 
summarized below.
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    \3\ A complete listing of related documents and NOSB 
recommendations is found in Section III below.
    \4\ 62 FR 65850; 65 FR 13512.
    \5\ 65 FR 80548.
    \6\ 71 FR 32803.
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    (1) In June 1994, the NOSB recommended a series of provisions to 
address the source of livestock on organic farms. Within this 
recommendation, the NOSB stated that dairy stock be fed certified 
organic feeds and raised under organic management practices for not 
less than 12 months prior to the sale of their milk as organic.\7\
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    \7\ NOSB Final Recommendation, 2 June 1994. Available online at: 
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=stelprdc5058940.
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    (2) On December 16, 1997, AMS responded to the June 1994 NOSB

[[Page 23458]]

recommendation through publication of a proposed rule.\8\ The language 
contained within that proposed rule echoed the NOSB's recommendation. 
The proposal would have required that dairy animals must be on a 
certified organic facility beginning no later than 12 months prior to 
the production of milk or milk products sold, labeled, or represented 
as organic. The 1997 proposed rule also proposed that all feed provided 
to organic dairy livestock consist of organically produced and handled 
agricultural products, including pasture and forage. However, the 
proposed rule included a provision to allow nonorganic feed up to a 
maximum of 20 percent of the animal's diet. The 20 percent level was 
roughly representative of the nutrients provided from supplemental 
grain feeding, in addition to nutrients provided by pasture and forage. 
The proposed language also contained a provision that, if necessary, a 
herd of dairy livestock converting to organic management for the first 
time could be provided with nonorganic feed until 90 days prior to the 
production of organic milk or milk products. This proposed rule was 
never finalized.\9\
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    \8\ 62 FR 65850.
    \9\ Due to the volume and content of public comments submitted 
in response to the 1997 proposed rule, AMS withdrew the proposal and 
issued a second proposed rule prior to the final rule that 
established the National Organic Program (NOP) (published December 
21, 2000).
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    (3) In March 1998, the NOSB provided a second recommendation 
reaffirming its 1994 recommendation on the source of livestock.\10\ The 
March 1998 NOSB recommendation also recommended that livestock 
comprising part of a mixed crop/livestock operation should qualify to 
be certified organic at the end of the transition period.
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    \10\ NOSB Committee Report and Adopted Recommendations, 16 March 
1998. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=stelprdc5058929.
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    (4) On March 13, 2000, AMS published a proposed rule that would 
establish the USDA organic regulations.\11\ Within this proposed rule, 
AMS responded to the NOSB's March 1998 recommendation on the source of 
livestock. AMS proposed to require that livestock be under continuous 
organic management beginning no later than one year prior to the 
production of organic milk or milk products. Unlike AMS' 1997 proposal, 
the 2000 proposed rule did not include a provision for the allowance of 
nonorganic feed during the 12-month transition period.
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    \11\ 65 FR 13512.
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    (5) On June 12, 2000, the NOSB commented on the second proposed 
rule with respect to the origin of dairy livestock. The NOSB stated 
that livestock should be under organic management for one full year 
prior to the sale of organic milk with an exception for conversion of 
an entire, distinct herd into organic production. The NOSB laid out the 
following three conditions for conversion of a herd into organic 
production:
     For the first nine months of the final twelve-month dairy 
herd transition period, animals must be fed at least 80 percent feed 
that is either organic or self-raised transitional feed. The remaining 
20 percent could be nonorganic during those nine months.
     For the final three months, animals must be fed 100 
percent organic feed.
     Once a dairy operation has been converted to organic 
production, all dairy animals shall be under organic management from 
the last third of gestation, except that transitional feed raised on 
the farm may be fed to young stock up to 12 months prior to milk 
production.
    (6) On December 21, 2000, AMS published a final rule establishing 
the USDA organic regulations.\12\ Through this action, AMS finalized 
the origin of livestock provision, including a requirement that organic 
milk be produced from animals under organic management beginning no 
later than one year prior to the production of milk or milk products 
sold, labeled, or represented as organic. The rule further incorporated 
the exceptions recommended by the NOSB by allowing 80 percent organic 
feed and 20 percent nonorganic feed (i.e., the ``80/20'' rule) for 
transitioned animals. AMS did not include NOSB's recommendation 
allowing young stock to be fed transitional feeds. In the preamble to 
the final rule, AMS explained that such a provision would allow animals 
to transition at different times, rather than as a herd, thereby making 
it incompatible with the notion that the whole herd transition was a 
distinct one-time event.\13\ AMS further described that the exception 
to transition is a one-time opportunity for producers to implement a 
conversion strategy for an established discrete dairy herd in 
conjunction with the land resources that sustain it. This rule went 
into effect on February 20, 2001, and was fully implemented on October 
21, 2002.
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    \12\ 65 FR 80548.
    \13\ 65 FR 80570.
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    (7) In October 2002, the NOSB recommended that all replacement and 
expansion dairy animals be raised as organic from the last third of 
gestation onward. The NOSB believed that this would ensure consistency 
with the current regulations at section 205.236(a)(2)(iii). Their 
recommendation also included a provision for breeder stock (7 CFR 
205.236(a)(3)) requiring that breeder stock remain under organic 
management indefinitely after their introduction onto an organic farm; 
that is to say, the recommendation was to prohibit breeder stock from 
rotating in and out of organic management.
    (8) In May 2003, the NOSB recommended that following a transition, 
all dairy livestock, including replacement stock, remain under organic 
management from the last third of gestation onward.\14\ Concurrently, 
the NOSB made a separate recommendation regarding breeder stock.\15\ 
They recommended a requirement for operations to continuously manage 
all breeder stock as organic if they were brought onto an organic farm 
to produce organic offspring. The NOSB further advocated that the NOP 
issue guidance in the form of questions and answers to clarify the 
management of breeder stock to the industry.
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    \14\ National Organic Standards Board May 2003 Recommendation on 
Origin of Livestock: Recommendation for Rule Change (document dated 
April 2003). Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3104546.
    \15\ National Organic Standards Board May 2003 Recommendation on 
Breeder Stock: Clarification of Rule (document dated April 2003). 
Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3104547.
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    (9) In October 2003, a legal challenge was filed against USDA 
stating that, among other things, the OFPA required organic dairy 
animals be fed 100 percent organic feeds, and thus, the 80/20 rule for 
the transition of dairy animals was in violation of the statute.\16\
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    \16\ Harvey v. Veneman, 297 F.Supp. 2d 334 (D. Maine 2004).
---------------------------------------------------------------------------

    (10) On January 26, 2005, the U.S. Court of Appeals for the First 
Circuit issued a decision in the case.\17\ The court upheld the USDA 
organic regulations in general, but remanded the case to the lower 
court, for, among other things, the entry of a declaratory judgment 
with respect to the 80/20 dairy transition allowance, then codified in 
section 205.236(a)(2)(i) of the regulations. The lower court found the 
80/20 dairy transition provisions at section 205.236(a)(2)(i) to be 
contrary to the OFPA and in excess of the Secretary's rulemaking 
authority.\18\
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    \17\  Harvey v. Veneman, 396 F.3d 28 (1st Cir. 2005).
    \18\ Harvey v. Johanns. Civil No. 02-216-P-H. Consent Final 
Judgment and Order, 9 June 2005. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3013564&acct=noprulemaking.

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[[Page 23459]]

    (11) On November 10, 2005, Congress amended the OFPA to allow a 
special provision for transitioning dairy livestock to organic 
production (7 U.S.C. 6509(e)(2)(B)). This amendment provided a new 
provision to allow crops and forage from land included in the organic 
system plan of a farm that was in the third year of organic management 
to be consumed by the dairy animals on the farm during the 12 month 
period immediately prior to the sale of organic milk and milk products.
    (12) On April 27, 2006, AMS published a proposed rule entitled 
``Revisions to Livestock Standards Based on Court Order'' to address 
the November 2005 amendments to OFPA.\19\ AMS received nearly 12,400 
comments on the issue of dairy animal replacement during the comment 
period for this proposed rule. Additionally, in response to the April 
13, 2006, advanced notice of proposed rulemaking on access to pasture, 
AMS received over 325 comments on the issue of dairy animal 
replacement.\20\ Neither of these actions intended to address the dairy 
replacement or transition issue as an objective. Accordingly, the 
comments were not a part of subsequent rulemaking for either action as 
they were beyond the scope of these rules. They are, however, 
acknowledged and discussed in this proposed rule.
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    \19\ 71 FR 24820.
    \20\ 71 FR 19131.
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    (13) On May 12, 2006, the NOSB commented on the ``Revisions to 
Livestock Standards Based on Court Order (Harvey v. Johanns) and 2005 
Amendment to the Organic Foods Production Act of 1990'' proposed rule 
published April 27, 2006.\21\ The NOSB amended its May 2003 dairy 
replacement recommendation to read: ``Once a dairy operation has been 
converted to organic production, all dairy animals, including all young 
stock whether born on or brought onto the operation, shall be under 
organic management from the last third of the mother's gestation.''
---------------------------------------------------------------------------

    \21\ 71 FR 24820.
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    (14) On June 7, 2006, AMS published a final rule entitled 
``Revisions to Livestock Standards Based on Court Order'' to implement 
the November 2005 statutory change.\22\ The amendments reflected the 
new OFPA allowance permitting transitioning dairy animals to be fed 
feedstuffs from transitioning lands in their last of the three-year 
period (7 CFR 205.236(a)(2)(i)), as well as setting a termination date 
of June 9, 2007, for the existing 80/20 feed conversion rule (7 CFR 
205.236(a)(2)(ii)). In the preamble to the 2006 final rule, AMS noted 
that additional clarity could be provided regarding the transition of 
dairy animals into organic production.
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    \22\ 71 FR 32803.
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D. Discussion of Past Comments Received

    The approximately 12,725 combined comments received on the April 
2006 proposed rule addressing the court order and the April 2006 
advanced notice of proposed rulemaking on access to pasture provided 
AMS with information needed to develop this proposed action. In 
general, comments requested greater clarity on the parameters for 
transitioning dairy animals into organic production, and called for 
elimination of the ``two-track'' system. The ``two-track'' system 
refers to an April 2003 NOP statement that once an entire, distinct 
herd transitioned using the 80/20 provision (20% nonorganic feed in the 
12 months before milking), all offspring then had to be managed 
organically and no transitioned replacements could be purchased.\23\ 
The NOP also stated that, for those that did not use the 80/20 
provision, the dairy animals only needed to be under continuous organic 
management starting no later than 12 months prior to production (i.e., 
producers could continue to transition animals into organic over time).
---------------------------------------------------------------------------

    \23\ National Organic Program, Origin of Livestock Statement. 
April 11, 2003. Available online at www.regulations.gov under 
``Related Documents'' for docket number AMS-NOP-11-0009.
---------------------------------------------------------------------------

    The majority of commenters stated that the ``two-track'' system 
could be addressed by conveying that, once a dairy operation is 
certified organic, regardless of how that operation transitioned into 
organic, all new dairy animals added to that operation should be 
managed organically from the last third of gestation. Commenters stated 
that this principle should apply to those animals born on the farm and 
those purchased as replacement and expansion animals to increase herd 
size.
    Commenters stated that only allowing organic dairy operations to 
add animals who have been managed organically since the last third of 
gestation supports consumer confidence in the organic milk sector. They 
reiterated that consumers expect that organic milk is produced without 
the use of excluded methods and substances prohibited under the 
regulations (i.e., hormones, antibiotics, and certain animal 
medications), and believe that greater clarity on how animals can 
transition into organic production is needed. Some commenters stressed 
that organic dairy products were keystone products for consumer 
confidence and a major stepping-stone to additional purchases in other 
organic categories.
    Commenters stated that continued transition of conventional animals 
increases the supply of animals able to produce organic milk, depresses 
the value of organic heifers and limits the incentives to produce 
organic replacement animals. They also stated that the allowance to 
transition a large number of animals, rather than purchasing or raising 
animals as organic from last third of gestation, results in surplus 
organic heifer calves being sold into the conventional market. Some 
commenters stated that the practice of allowing some operations to 
transition conventional animals on a regular basis encouraged 
development of heifer development farms. They based this belief on the 
position that it is easier and cheaper to purchase transitioned animals 
from heifer development farms than it is to raise animals that are 
organic from birth. Commenters claimed that raising organic dairy 
animals is twice as expensive as raising conventional dairy animals 
during their first year of life. They contended that producers who sell 
organic calves and replace them with transitioned conventionally raised 
heifers, have an economic advantage over those who raise animals 
organically from birth, due to lower cost of conventional feed and 
ability to shorten the interval before milk production by purchasing 
older animals. Commenters believed that for the organic heifer market 
to develop, and for there to be more organic stock available at an 
appropriate market value, greater clarity is needed in the regulations 
to convey that organic heifers are required in every case, except for 
the one-time initial transition of a dairy operation.
    At the time of the 2006 proposed rule, commenters stated that at 
least nine U.S.-based certifying agents were requiring the dairy 
operations they certified (approximately 1,100 certified and 150 
transitioning operations) to manage all replacement dairy animals 
organically from the last third of gestation. This accounted for 
roughly 50% of the organic dairy operations at that time. Other 
certifying agents were allowing the other approximately 50% of dairy 
operations to transition conventional animals to organic on a continual 
basis. Commenters stressed that a main purpose of the OFPA was consumer 
assurance that organically produced products met a consistent

[[Page 23460]]

standard and that the current origin of livestock standard needs 
further specificity to meet that purpose.
    Since receiving these comments in response to the 2006 proposed 
rule, diverse stakeholders including trade associations, organic dairy 
producer groups, consumer organizations, and certifying agents continue 
to submit letters to NOP requesting greater clarity on the origin of 
livestock provisions of the regulations. In response to those requests, 
NOP engaged stakeholders in ongoing discussions over the last two years 
related to potential changes and any associated costs and benefits of 
these changes. AMS developed this proposed rule in response to the 
public comments and feedback we have received regarding the origin of 
livestock provisions.

III. Overview of Proposed Amendments

A. Dairy Transition

    AMS is proposing to add five new terms: Organic management, dairy 
farm, transitioned animal, transitional crop, and third-year 
transitional crop to those defined at section 205.2. Organic management 
would be defined as management of an organic production or handling 
operation in compliance with all applicable production and handling 
provisions under the regulations. Stakeholders have questioned whether 
the term ``organic management'' in the regulations is related to 
compliance with the regulations or to some other generic use or 
understanding of the term. Providing a definition for this term would 
confirm that its use is directly tied to the regulations. For example, 
the regulations allow crops and forage in their third year of organic 
management to be fed to livestock transitioning to organic production. 
In the case of crops and forage in their third year of organic 
management, this means that the land they are grown on must meet 
certain requirements of the regulations as it transitions into 
certified organic production (e.g., per section 205.202(b), no 
prohibited substances applied to land). Further, during the transition 
period for dairy animals, they must be under organic management in 
compliance with the regulations. This means producers need to meet all 
of the livestock requirements during that transition period (e.g., per 
section 205.237, provide animals with a specified amount of dry matter 
from pasture during the farm's grazing season).
    Under this proposal, AMS would define a dairy farm as a premises, 
which must have a milking parlor, where one or more lactating animals 
raised on that premises are milked. This definition is similar to the 
definitions of a dairy farm used by the AMS Dairy Grading Program.\24\
---------------------------------------------------------------------------

    \24\ USDA AMS. July 2011. Milk for Manufacturing Purposes and 
its Production and Processing. Recommended Requirements. Dairy 
Programs.
---------------------------------------------------------------------------

    This proposal would define a transitioned animal to clarify which 
animals are eligible to produce organic milk, but are not eligible for 
certification as organic slaughter stock or eligible for certification 
for purpose of organic fiber production. This definition supports the 
current requirement that meat or fiber come from animals under 
continuous organic management since the last third of gestation (7 CFR 
205.236(a)). The transitioned animal definition and its relevance to 
this action are discussed in more detail below.
    This proposal would define a transitional crop as any agricultural 
crop or forage from land, included in the organic system plan of a 
producer's operation, that has had no application of prohibited 
substances within one year prior to harvest of the crop or forage. 
Based upon this definition, AMS would add a related definition for 
third-year transitional crop. A third-year transitional crop would be 
defined as crops and forage from land, included in the organic system 
plan of a producer's operation, that has had no application of 
prohibited substances within 2 years prior to harvest of the crop or 
forage. Third-year transitional crops need to meet all other 
requirements of the regulations (e.g., soil fertility and crop nutrient 
management practice standard (section 205.203); use of organic seed if 
commercially available (section 205.204)). OFPA and the regulations 
currently allow producers to feed these third year transitional crops 
to dairy animals in transition (7 U.S.C. 6509(e)(2)(b); existing 
section 205.236(a)(2)(i)).
    AMS is proposing to amend the introductory text at section 
205.236(a)(2) to reflect that the one-time exception to transition to 
organic dairy production would be limited to a given producer. A 
producer is defined under the regulations as ``a person who engages in 
the business of growing or producing food, fiber, feed, and other 
agricultural-based consumer products'' (section 205.2). The regulations 
also define a person as an ``individual, partnership, corporation, 
association, cooperative or other entity'' (section 205.2). This 
definition is based on the definition of person under OFPA (7 U.S.C 
6502(15)). A producer must be a person as described in section 205.2 to 
be eligible for a one-time transition. Because the one-time transition 
is tied to the producer (i.e., a farm or business), employees of that 
producer are not themselves considered a producer utilizing a one-time 
transition. Under the proposal, such employees would retain their 
ability to establish a new business entity as a producer that may be 
eligible for its own one-time transition.
    In addition, while the definition of person includes cooperatives, 
cooperatives would not themselves seek a one-time exception to 
transition animals into organic production. There are business 
entities, including cooperatives, within the organic dairy sector that 
are typically certified as organic handlers, not as organic producers, 
and who would not meet the definition of a dairy farm. Instead, these 
entities contract with multiple organic producers for their milk 
supply. Under this proposal, the eligibility for a one-time transition 
is tied to a producer, as specified on an organic certificate, and they 
would need to meet the definition of a dairy farm and other proposed 
requirements.
    Dairy producers with multiple farms would need to make a decision 
about how to transition to organic production. Producers with multiple 
farms have a single twelve month period in which they may transition 
conventional dairy animals to organic milk production. During this 
transition period, these producers may transition all animals on all 
the farms, some of the animals on some of the farms, all the animals on 
one of the farms, or some of the animals on one of the farms. The 
producer would initiate the transition to organic milk production at 
least 12 months prior to completing the transition and obtaining 
organic certification. However, once the transition period ends, the 
producers may not themselves transition any additional animals into 
organic production. Instead, they would need to source animals as 
organically managed since the last third of gestation or those already 
transitioned to organic production on a different producer's dairy 
farm.
    The proposed amendments would replace the current text at section 
205.236(a)(2) to specify that each producer would be able to conduct 
one transition. To be eligible for a transition, the proposal language 
specifies that the producer must start a new organic dairy farm or 
transition an existing conventional dairy farm to organic 
certification. This transition would need to occur over a single, 
continuous 12-month period prior to production of milk or milk products 
that are to be sold, labeled, or represented as organic.

[[Page 23461]]

After completing a transition, that producer would not be able to 
transition any new animals into organic production.
    For example, if producer A already completed a transition on dairy 
farm A, then producer A would not be eligible to transition animals 
into organic production on dairy farm B. Under this proposal, once a 
producer completes its transition of dairy animals into organic 
production, a producer would have two options for bringing any new 
dairy animals onto a producer's organic dairy farm(s) (whether for 
expansion or replacement purposes): (1) Add animals that are under 
continuous organic management from the last third of gestation; or (2) 
add transitioned animals sourced from a certified organic dairy 
producer.
    Because the dairy farm definition, in part, would drive the 
eligibility for a producer to transition animals to organic production, 
producers that only raise heifers for organic dairy farms would not be 
eligible to transition conventional animals to organic. Such producers 
do not milk animals and, therefore, would not be eligible for a 
transition. Such producers could continue raising heifers for organic 
dairy farms as long as the animals were under continuous organic 
management from the last third of gestation.
    AMS considered alternatives to our proposal that would link the 
transitioned exception to a producer. These alternatives included 
linking the one-time transition exception to a dairy farm, an 
operation, persons responsibly connected, and the current unit of 
regulation, a herd. We did not choose the dairy farm by itself as the 
criterion for eligibility to transition because it would allow a given 
producer to transition dairy animals on multiple dairy farms over time. 
This proposal was drafted to create greater consistency in the 
implementation of the transition mechanism so that it is not used as a 
continual means of producing organic milk without purchasing organic 
stock once a producer has converted to organic production. Furthermore, 
AMS could not identify how a producer and a certifying agent could 
verify that a transition had not already occurred on a given dairy 
farm. This would be especially difficult as time went on and a dairy 
farm may have changed ownership multiple times. By linking the 
transition to a given producer, a producer (e.g., an individual or a 
corporation) can attest to a certifying agent as part of their 
application for certification that they have not already completed a 
dairy transition and certifying agents could verify such attestations 
by checking past certification records associated with that producer.
    AMS also considered linking the transition exception to the 
operation. Based on stakeholder feedback and past NOSB recommendations, 
the term ``operation'' is used at times, as is the term ``producer'', 
to describe how a one-time exception to transition into organic dairy 
production could be structured. Upon review, AMS is proposing to link 
the transition to a given producer rather than an operation because 
both producer and person are already defined under OFPA and the 
implementing regulations.
    Other stakeholders suggested limiting the transition such that 
after an operation completed its one-time transition, any persons 
responsibly connected to that operation could not transition additional 
animals into organic production. ``Responsibly connected'' is defined 
under the current regulations 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'' (7 CFR 205.2). This approach would require a person 
with an operation to list all persons responsibly connected to that 
operation to document the relationship various individuals had to the 
dairy farm. This approach would be difficult to document and difficult 
for a certifier to verify for the purpose of certification. This 
approach also would be overly prescriptive. For example, under this 
approach, new managers on a farm, who had never been part of a 
transition, would be restricted from starting a new dairy farm on a 
different location and completing their own transition of dairy animals 
into organic production. This approach could also restrict the ability 
for children of organic dairy producers to transition animals into 
organic production. Children could be ``responsibly connected'' to 
their parents' farm if they served as managers or partners. If their 
parents had already completed a transition, then these children, who 
were managers or partners, could not transition any additional animals 
if they bought that farm because they would be considered ``responsibly 
connected'' to the parents' operation. For these reasons, AMS is not 
proposing this approach. Rather, under the proposed language that a 
one-time exception is tied to a given ``producer'', employees, such as 
managers or partners, including children, could start up a new business 
entity with a dairy farm and be eligible for their own one-time 
transition.
    AMS also did not choose the current herd standard because a given 
operation can have a new herd every year, or even multiple per year, 
allowing farmers to transition new animals annually, if not more often. 
The intent of our proposal is to provide a clear, consistent standard 
that when implemented will reflect the NOSB recommendation to allow for 
a producer to use a one-time transition of animals into organic milk 
production. Providing a producer with a one-time exception to 
transition dairy animals to organic milk production best captures the 
intent of the NOSB's recommendation. It also supports the concept 
discussed in the 2000 final rule establishing the USDA organic 
regulations that transition to organic dairy should be a distinct, one-
time event for a producer.\25\
---------------------------------------------------------------------------

    \25\ 65 FR 80569-80570.
---------------------------------------------------------------------------

    Under the proposed amendments, any transition would need to meet 
certain conditions. Proposed section 205.236(a)(2)(i) would specify 
that dairy animals must be under continuous organic management during 
the 12-month transition period. This aligns with the provision in OFPA 
which requires that dairy animals be managed as organic for at least 12 
months prior to the production of organic milk.\26\ During the 12-month 
period, proposed section 205.236(a)(2)(ii) would specify that the 
producer should describe its transition approach as part of the organic 
system plan already required at section 205.200. Under existing section 
205.401, the producer must submit this organic system plan as part of 
an application for certification to a certifying agent. We are 
proposing this provision to ensure that applicants for organic 
certification can demonstrate their ability to comply early on in the 
certification process. The intent is to support communication between 
the applicant and the certifying agent about the transition approach 
and to minimize situations in which a producer approaches a certifying 
agent after 12 months of transitioning animals only to realize that 
they did not complete the transition as specified in the regulations.
---------------------------------------------------------------------------

    \26\ 7 U.S.C. 6509(e)(2)(A).
---------------------------------------------------------------------------

    This proposal would make minor revisions to a provision under the 
current regulations that allows dairy animals undergoing transition to 
consume ``third-year'' crops. The proposed provision would appear at 
section 205.236(a)(2)(iii) and would specify that, during the 12-month 
transition, dairy animals may consume third-year transitional crops 
which this proposal would define at section 205.2.

[[Page 23462]]

    During the development of this proposed rule, the exception for 
transitioning dairy animals raised the question about the eligibility 
of those animals and their offspring for certification as organic 
slaughter stock or for the purpose of organic fiber. Third-year crops 
and forages are allowed by OFPA as feed for transitioned animals that 
will produce organic milk.\27\ However, these crops are not yet 
certified organic and should be treated as nonorganic feeds when 
determining if an animal has been raised organically since the last 
third of gestation.
---------------------------------------------------------------------------

    \27\ 7 U.S.C. 6509(e)(2)(B).
---------------------------------------------------------------------------

    Therefore, to clarify the status of offspring born during and just 
after the transition period and whether they would be eligible for 
certification as organic slaughter stock or for organic fiber, AMS is 
proposing to add a definition for a transitioned animal at section 
205.2. Transitioned animal would be defined as: (1) Any dairy animal 
that transitioned during the one-time transition exception to organic 
milk production after 12 months of continuous organic management; (2) 
any offspring born during or after the 12- month transition period to a 
transitioned animal that, during its last third of gestation, consumes 
crops and forages in the third year of organic management; or (3) any 
offspring born during the one-time transition exception that themselves 
consume crops and forages in the third year of organic management. The 
proposed definition specifies that such animals must not be sold, 
labeled, or represented as organic slaughter stock or for the purpose 
of organic fiber.\28\ The current regulations already require that 
slaughter stock and livestock, with the exception of poultry and 
certain dairy animals, be under continuous organic management since the 
last third of gestation (7 CFR 205.236(a)). This proposed rule does not 
change, but rather reiterates how that requirement applies to animals 
that were part of a dairy transition. This term is used in proposed 
section 205.236(a)(2)(iv) which specifies that offspring must be 
considered transitioned animals if they were born during or after the 
12-month dairy herd transition period and not fed certified organic 
feed from the last third of gestation onward.
---------------------------------------------------------------------------

    \28\ Organic slaughter stock is defined in the regulations as 
any animal intended to be slaughtered for consumption by humans or 
other animals (7 CFR 205.2).
---------------------------------------------------------------------------

    For a producer and certifying agent to determine whether offspring 
is eligible for organic dairy, meat and/or fiber, the length of 
gestation for different dairy animals (e.g., cows, goats, sheep) and 
feed source must be considered. For offspring to be certified organic 
for meat and fiber, it must be under continuous organic management, 
including receiving certified organic feed, from the last third of 
gestation (7 CFR 205.236(a)). This requirement is reiterated through 
proposed section 205.236(a)(2)(v). A practical summary of how 
certifying agents and producers would apply the proposed amendments 
about the status of offspring at sections 205.236(a)(2)(iv)-(v) is 
shown in Table 1.

                             Table 1--Status of Offspring Part of a Dairy Transition
----------------------------------------------------------------------------------------------------------------
  Type of feed consumed by offspring                             Could it be certified    Could it be certified
 during transition or during its last     Is it considered a       to produce organic    to produce organic meat
          third of gestation             transitioned animal?            milk?                  or fiber?
----------------------------------------------------------------------------------------------------------------
Third year transitional crops........  Yes....................  Yes....................  No.
Certified organic crops..............  No.....................  Yes....................  Yes.
----------------------------------------------------------------------------------------------------------------

    Proposed section 205.236(a)(2)(vi) would require that all dairy 
animals for a given producer end the transition at the same time. AMS 
considered allowing dairy animals to have staggered transition periods, 
but chose not to allow that option as it could complicate the 
transition process. As a practical matter, a staggered transition would 
create more difficulty in animal management for the producer since 
animal transitions would start and end at different times. Furthermore, 
it would require more advanced records management creating a greater 
burden on the producer, more difficulty in overseeing the process, and 
increased room for error or potential violation. If a producer wants to 
bring in additional animals after the producer completes its 
transition, then the producer may use breeder stock or source organic 
dairy animals (either last third gestation animals or transitioned 
animals from a certified organic dairy farm that already completed its 
transition). If a producer decides to increase the number of animals 
undergoing transition during a one-time transition period, then the 
producer could (1) source organic dairy animals, or (2) source 
nonorganic animals and extend the transition period for all animals 
undergoing transition such that they end their transition together 
after 12-months of organic management.
    Proposed section 205.236(a)(2)(vii) would specify that dairy 
animals that completed the 12-month transition are transitioned animals 
as defined under section 205.2. In practical terms, this would mean 
that these dairy animals can produce organic milk, but are not eligible 
for certification as organic slaughter stock or for the purpose of 
organic fiber. This is consistent with the existing requirement at 
section 205.236(a) that, with the exception of poultry and dairy, 
livestock products must be from animals that are under continuous 
organic management since the last third of gestation.
    Proposed section 205.236(a)(2)(viii) would specify that, after the 
12 month transition period, transitioned animals may produce organic 
milk on any organic dairy farm as long as the animal is under 
continuous organic management at all times on a certified organic dairy 
farm. Movement of transitioned animals to other certified organic 
dairies would not affect the status of the animals to produce organic 
milk. Based on some stakeholder comments, AMS considered limiting 
transitioned animals to produce organic milk only on the dairy farm 
upon which they were transitioned. However, AMS believes that some 
movement or inter-farm sales of transitioned animals is reasonable and 
expected. For example, if an existing organic dairy producer purchased 
an adjoining organic farm, it may be necessary for that farmer's 
transitioned animals to leave their original premises of transition to 
take advantage of the new adjoining pastureland. Similarly, if an 
organic dairy producer wanted to move his/her operation to an updated 
organic facility on another property, it would create an excessive 
burden if transitioned animals were not permitted to move to the new 
facility. This provision will also allow

[[Page 23463]]

the transitioned dairy animals to continue producing organic milk if 
there is a change in ownership to a different producer, provided the 
dairy animals are under continuous organic management throughout this 
time.
    AMS is also proposing new section 205.236(ix) to specify that, 
after the 12-month period ends, any new dairy animal brought onto a 
producer's dairy farm(s) must be an animal under continuous organic 
management from the last third of gestation or a transitioned animal 
sourced from a certified organic dairy farm. This provision would 
ensure that, after a producer completes one transition on a dairy farm, 
that producer would not be allowed to themselves transition additional 
dairy animals into organic production on any dairy farm. This 
requirement supports the NOSB's intent that transition should be a one-
time event for producers to transition to organic dairy and is intended 
to create one standard that would be equally applied to all dairy 
operations once they have transitioned to certified organic production.
Implementation Considerations
    Certifying agents would have certain responsibilities under this 
proposed rule. Certifying agents would need to:
     Establish and maintain procedures for determining whether 
or not a producer (e.g. a new applicant for certification) is eligible 
to transition dairy animals into organic production and for determining 
whether offspring that are part of a transition are eligible to produce 
organic milk, meat or fiber;
     Ensure that certified organic dairy producers maintain 
sufficient records (7 CFR 205.103) to identify all organically managed 
animals, including whether they are transitioned animals and, thus, not 
eligible for certification as organic slaughter stock (7 CFR 
205.236(b)(2) and 205.236(c));
     Hire and/or train sufficient, qualified staff (7 CFR 
205.501(a)(4)) to examine production and certification history of 
certified organic dairy producers or applicants for certification which 
involve the transition of dairy animals from conventional to organic 
production; and
     Maintain records of applications for certification or 
certified operations, including records pertaining to the origin of all 
livestock, for at least 10 years from the date of their creation, 
pursuant to section 205.510(b)(2).
    Certifying agents already address many of these responsibilities 
through the current regulations. For example, certifying agents should 
have procedures in place to ensure that operations identify whether 
dairy animals are organically managed from the last third of gestation 
and, thus, potentially eligible for certification as organic slaughter 
stock, or transitioned into organic production, and, thus, not eligible 
as organic slaughter stock (section 205.236(b)(2) and (c)). The primary 
new responsibility for certifying agents will be establishing and 
implementing a procedure for determining whether a producer is eligible 
for a one-time transition. AMS is seeking comments from certifying 
agents on how these responsibilities are best implemented given the 
proposed action.
    In addition, organic livestock producers are already required to 
maintain records that fully disclose all activities and transactions of 
the certified operation in sufficient detail as to be readily 
understood and audited (7 CFR 205.103(b)(2)). Under existing 
regulation, section 205.236(c), organic producers must already maintain 
records sufficient to preserve the identity of all organically managed 
animals. Examples of records to verify compliance with the origin of 
livestock requirements include livestock purchase records, organic 
certificates for livestock purchased as organic, animal reproduction: 
breeding, birth and/or hatch records, and herd conversion/organic 
management records.\29\ Under this proposed rule, organic dairy 
producers would need to maintain the same records. There are no new 
records that would be required under this proposal. In accordance with 
Office of Management and Budget (OMB) regulations (5 CFR part 1320) 
that implement the Paperwork Reduction Act (44 U.S.C. 3501-3520) (PRA), 
the information collection requirements associated with the NOP, 
including the recordkeeping and reporting requirements related to 
origin of livestock, have been previously approved by OMB and assigned 
OMB control number 0581-0191.
---------------------------------------------------------------------------

    \29\ National Organic Program. March 2011. Organic Livestock 
Plan Template, Origin of Livestock: L2-page 1. Available online at: 
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5091032.
---------------------------------------------------------------------------

    AMS also recognizes that some producers and certifying agents will 
need time to implement any regulatory changes. Over the last several 
years, the NOSB and stakeholders have been engaged in extensive 
discussion about how organic dairies would need to change their 
practices as a result of any modification to the current USDA organic 
regulations. AMS is considering and seeking public comment on the 
following implementation proposal: Producers who are certified as of 
the effective date for any final action would be allowed to complete 
any transition that was already approved under their organic system 
plan by a certifying agent. However, as of the effective date, 
producers who are certified would be required to source or raise any 
new animals from last third of gestation or source animals already 
transitioned under another producer's one-time exception. As of the 
effective date, producers who are new applicants for organic 
certification (i.e., startup organic dairies or nonorganic dairies 
transitioning to organic production) would be allowed to use the 
transition exception once when first applying for organic 
certification.
    Under the current regulations at section 205.672, organic dairy 
animals can return to organic milk production if a Federal or state 
emergency pest or disease treatment program requires use of a 
prohibited substance. This allowance for re-transition is independent 
of the transition exception being proposed here. A dairy farm, that had 
not used its one-time exception to transition based on section 205.236, 
would retain that one-time exception to transition even if the farm 
used the section 205.672 allowance to re-transition after an emergency 
pest or disease treatment.
    Under the current regulations at section 205.290, organic 
producers, through their certifying agent, can request a temporary 
variance from the livestock practice standards for reasons such as 
natural disasters, severe weather and other business interruptions. The 
NOP Instruction on Processing Requests for Temporary Variances (NOP 
2606) \30\ clarifies the policy that variances will not be granted for 
feeding non-organic feed to livestock.
---------------------------------------------------------------------------

    \30\ NOP 2606. July 22, 2011. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5087115.
---------------------------------------------------------------------------

B. Breeder Stock

    Under this proposal, AMS would restructure section 205.236(a)(3) to 
reiterate that breeder stock may be brought from a nonorganic operation 
onto an organic operation at any time and to further clarify how 
breeder stock should be managed for the purpose of producing organic 
offspring.
    Consistent with an April 2003 NOSB recommendation on breeder stock, 
AMS considered amending the regulations at existing section 
205.236(a)(3) to require that breeder stock that was brought onto an 
organic farm, but subsequently was removed from organic management, be 
prohibited from returning as breeder

[[Page 23464]]

stock for the purpose of organic production. The NOSB recommendation 
suggests that allowing breeder stock to return to organic management 
after a period of nonorganic management does not align with a 
regulatory provision that prohibits livestock removed from an organic 
operation and subsequently managed on a nonorganic operation to be 
sold, labeled, or represented as organically produced (7 CFR 
205.236(b)).\31\
---------------------------------------------------------------------------

    \31\ National Organic Standards Board Recommendation May 2003 on 
Breeder Stock: Clarification of Rule. Available online at: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3104547.
---------------------------------------------------------------------------

    However, OFPA states that breeder stock may be purchased from any 
source (7 U.S.C. 6509(b)); there is no requirement in OFPA that the 
source be organic. Further, while the current regulations at section 
205.236(b)(1) prohibit livestock from being removed and subsequently 
managed on a nonorganic operation (i.e., cycling in and out of organic 
production), this provision does not extend to nonorganic breeder stock 
that are themselves not certified organic or eligible for slaughter, 
sale, and labeling as organic (7 CFR 205.236(b)(2)). Therefore, AMS 
does not believe that restrictions on how nonorganic breeder stock are 
managed outside of the last third of gestation through weaning of 
organic offspring are warranted.
    At proposed sections 205.236(a)(3) and 205.236(a)(3)(i), AMS is 
reiterating that breeder stock may be brought from a nonorganic 
operation onto an organic operation at any time as long as such breeder 
stock are on the organic operation no later than the last third of 
gestation. In practical terms, this means that between the end of 
nursing its organic offspring and the beginning of the last third of 
gestation for the next organic offspring, nonorganic breeder stock may 
be managed as the producer chooses. If a producer is managing 
nonorganic breeder stock on its organic operation, the current 
regulations already require that they implement practices to prevent 
contact of organic animals with prohibited substances (e.g., from 
certain fly tags that might be used with nonorganic breeder stock) (7 
CFR 205.201(a)(5)).
    AMS is proposing a provision related to organic management of 
breeder stock only when the breeder stock is directly contributing to 
the nourishment of organic offspring, from the last third of gestation 
through the end of the nursing period. Under proposed section 
205.236(a)(3)(ii), such breeder stock would need to be managed 
organically throughout the last third of gestation and the lactation 
period during which time they may nurse their own offspring. Allowing 
organic calves to nurse on nonorganic breeder stock as long as they are 
all under organic management supports the natural behavior of the 
animals (7 CFR 205.239(a)). Breeder stock may not be used as nurse cows 
on dairy farms to be a source of milk for other organic calves, though 
inadvertent suckling by non-offspring would not cause loss of organic 
status to the calves.

C. Additional Clarifications

    In conjunction with the proposed amendments discussed above, AMS is 
proposing additional amendments to provide greater clarity on the 
restrictions at sections 205.236(b)(1) and 205.236(b)(2). Section 
205.236(b)(1) states that livestock or edible livestock products that 
are removed from an organic operation and subsequently managed on a 
nonorganic operation may not be sold, labeled, or represented as 
organically produced. We are proposing the addition of ``non-edible'' 
to this provision to specify that non-edible animal products, such as 
animal fiber, are also subject to this provision. Section 205.236(b)(2) 
is proposed to be amended to specify that transitioned animals must not 
be sold, labeled, or represented as organic slaughter stock. This 
change is needed for consistency with the proposed definition for 
transitioned animal and the proposed provisions for dairy transition.
    We are also proposing a change to section 205.236(c) to reiterate 
that producers are responsible for maintaining records that show 
whether a dairy animal is a transitioned animal and, therefore, not 
eligible for certification as organic slaughter stock or for the 
purpose of organic fiber. Producers should already be tracking whether 
an animal is eligible for organic slaughter or fiber given the last 
third of gestation requirement. Table 2 provides an overview of all the 
proposed amendments.

D. Other Amendments Considered

    AMS recently received requests from stakeholders to consider 
providing an exception to transition fiber producing animals to organic 
fiber production, just as dairy animals can be transitioned to organic 
milk production. OFPA authorizes a transition for dairy animals 
entering organic milk production. As such, AMS is not proposing a 
transition for fiber under this proposed rule. In practical terms, this 
means that producers can transition sheep from conventional milk 
production to organic milk production, but would need to source animals 
organically managed since the last third of gestation in order to 
produce organic wool.

                                  Table 2--Proposed Action--Origin of Livestock
----------------------------------------------------------------------------------------------------------------
            Section title                  Current wording           Type of action          Proposed action
----------------------------------------------------------------------------------------------------------------
205.2................................  N/A....................  New terms added........  Dairy Farm, Organic
                                                                                          Management, Third-Year
                                                                                          Transitional Crop,
                                                                                          Transitional Crop,
                                                                                          Transitioned animal.
205.236(a)...........................  Livestock products that  No Change..............  N/A--Included for
                                        are to be sold,                                   Completeness.
                                        labeled, or
                                        represented as organic
                                        must be from livestock
                                        under continuous
                                        organic management
                                        from the last third of
                                        gestation or hatching:
                                        Except, That:
205.236(a)(1)........................  Poultry. Poultry or      No Change..............  N/A--Included for
                                        edible poultry                                    Completeness.
                                        products must be from
                                        poultry that has been
                                        under continuous
                                        organic management
                                        beginning no later
                                        than the second day of
                                        life;

[[Page 23465]]

 
205.236(a)(2)........................  Dairy animals. Milk or   Revision...............  Dairy animals. A
                                        milk products must be                             producer as defined in
                                        from animals that have                            Sec.   205.2 may
                                        been under continuous                             transition dairy
                                        organic management                                animals into organic
                                        beginning no later                                production only once.
                                        than 1 year prior to                              A producer is eligible
                                        the production of the                             for this transition
                                        milk or milk products                             only if the producer
                                        that are to be sold,                              starts a new organic
                                        labeled, or                                       dairy farm or converts
                                        represented as                                    an existing nonorganic
                                        organic, Except,                                  dairy farm to organic
                                                                                          production. A producer
                                                                                          must not transition
                                                                                          any new animals into
                                                                                          organic production
                                                                                          after completion of
                                                                                          this one-time
                                                                                          transition. This
                                                                                          transition must occur
                                                                                          over a continuous 12-
                                                                                          month period prior to
                                                                                          production of milk or
                                                                                          milk products that are
                                                                                          to be sold, labeled,
                                                                                          or represented as
                                                                                          organic, and meet the
                                                                                          following conditions:
205.236(a)(2)(i).....................  That, crops and forage   Revision...............  During the 12-month
                                        from land, included in                            period, dairy animals
                                        the organic system                                must be under
                                        plan of a dairy farm,                             continuous organic
                                        that is in the third                              management;
                                        year of organic
                                        management may be
                                        consumed by the dairy
                                        animals of the farm
                                        during the 12-month
                                        period immediately
                                        prior to the sale of
                                        organic milk and milk
                                        products; and
205.236(a)(2)(ii)....................  That, when an entire,    Revision...............  During the 12-month
                                        distinct herd is                                  period, the producer
                                        converted to organic                              should describe the
                                        production, the                                   transition as part of
                                        producer may, provided                            its organic system
                                        no milk produced under                            plan and submit this
                                        this subparagraph                                 as part of an
                                        enters the stream of                              application for
                                        commerce labeled as                               certification to a
                                        organic after June 9,                             certifying agent, as
                                        2007: (a) For the                                 required in Sec.
                                        first 9 months of the                             205.401;
                                        year, provide a
                                        minimum of 80-percent
                                        feed that is either
                                        organic or raised from
                                        the land included in
                                        the organic system
                                        plan and managed in
                                        compliance with
                                        organic crop
                                        requirements; and (b)
                                        Provide feed in
                                        compliance with Sec.
                                        205.237 for the final
                                        3 months.
205.236(a)(2)(iii)...................  Once an entire,          Revision...............  During the 12-month
                                        distinct herd has been                            period, dairy animals
                                        converted to organic                              and their offspring
                                        production, all dairy                             may consume third year
                                        animals shall be under                            transitional crops;
                                        organic management
                                        from the last third of
                                        gestation.
205.236(a)(2)(iv)....................  N/A....................  New section added......  Offspring born during
                                                                                          or after the 12-month
                                                                                          period are
                                                                                          transitioned animals
                                                                                          if they consume third-
                                                                                          year transitional
                                                                                          crops during the
                                                                                          transition or if the
                                                                                          mother consumes third
                                                                                          year transitional
                                                                                          crops during the
                                                                                          offspring's last third
                                                                                          of gestation;
205.236(a)(2)(v).....................  N/A....................  New section added......  Offspring born from
                                                                                          transitioning dairy
                                                                                          animals are organic if
                                                                                          they are under
                                                                                          continuous organic
                                                                                          management and if only
                                                                                          certified organic
                                                                                          crops and forages are
                                                                                          used from their last
                                                                                          third of gestation;
205.236(a)(2)(vi)....................  N/A....................  New section added......  All dairy animals must
                                                                                          end the transition at
                                                                                          the same time;

[[Page 23466]]

 
205.236(a)(2)(vii)...................  N/A....................  New section added......  Dairy animals that
                                                                                          complete the
                                                                                          transition are
                                                                                          transitioned animals
                                                                                          and must not be used
                                                                                          for organic livestock
                                                                                          products other than
                                                                                          organic milk;
205.236(a)(2)(viii)..................  N/A....................  New section added......  After the 12-month
                                                                                          period ends,
                                                                                          transitioned animals
                                                                                          may produce organic
                                                                                          milk on any organic
                                                                                          dairy farm as long as
                                                                                          the animal is under
                                                                                          continuous organic
                                                                                          management at all
                                                                                          times on a certified
                                                                                          organic operation; and
205.236(a)(2)(ix)....................  N/A....................  New section added......  After the 12-month
                                                                                          period ends, any new
                                                                                          dairy animal brought
                                                                                          onto a producer's
                                                                                          dairy farm(s) for
                                                                                          organic milk
                                                                                          production must be an
                                                                                          animal under
                                                                                          continuous organic
                                                                                          management from the
                                                                                          last third of
                                                                                          gestation or a
                                                                                          transitioned animal
                                                                                          sourced from another
                                                                                          certified organic
                                                                                          dairy farm.
205.236(a)(3)........................  Breeder stock.           Revision...............  Breeder stock.
                                        Livestock used as                                 Livestock used as
                                        breeder stock may be                              breeder stock may be
                                        brought from a                                    brought from a
                                        nonorganic operations                             nonorganic operation
                                        onto an organic                                   onto an organic
                                        operation at any time:                            operation at any time,
                                        Provided, that, if                                Provided, That the
                                        such livestock are                                following conditions
                                        gestating and the                                 are met:
                                        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.
205.236(a)(3)(i).....................  N/A....................  New section added......  Such breeder stock must
                                                                                          be brought onto the
                                                                                          operation no later
                                                                                          than the last third of
                                                                                          gestation if its
                                                                                          offspring are to be
                                                                                          raised as organic
                                                                                          livestock; and
205.236(a)(3)(ii)....................  N/A....................  New section added......  Such breeder stock must
                                                                                          be managed organically
                                                                                          throughout the last
                                                                                          third of gestation and
                                                                                          the lactation period
                                                                                          during which time they
                                                                                          may nurse their own
                                                                                          offspring.
205.236(b)...........................  The following are        No Change..............  N/A--Included for
                                        prohibited:                                       Completeness.
205.236(b)(1)........................  Livestock or edible      Revision...............  Livestock, edible
                                        livestock products                                livestock products, or
                                        that are removed from                             nonedible livestock
                                        an organic operation                              products such as
                                        and subsequently                                  animal fiber that are
                                        managed on a                                      removed from an
                                        nonorganic operation                              organic operation and
                                        may not be sold,                                  subsequently managed
                                        labeled or represented                            on a nonorganic
                                        as organically                                    operation may not be
                                        produced.                                         sold, labeled, or
                                                                                          represented as
                                                                                          organically produced.
205.236(b)(2)........................  Breeder or dairy stock   Revision...............  Breeder stock, dairy
                                        that has not been                                 stock, or transitioned
                                        under continuous                                  animals that have not
                                        organic management                                been under continuous
                                        since the last third                              organic management
                                        of gestation may not                              since the last third
                                        be sold, labeled, or                              of gestation may not
                                        represented as organic                            be sold, labeled, or
                                        slaughter stock.                                  represented as organic
                                                                                          slaughter stock.
205.236(c)...........................  The producer of an       Revision...............  The producer of an
                                        organic livestock                                 organic livestock
                                        operation must                                    operation must
                                        maintain records                                  maintain records
                                        sufficient to preserve                            sufficient to preserve
                                        the identity of all                               the identity of all
                                        organically managed                               organically managed
                                        animals and edible and                            animals, including
                                        nonedible animal                                  whether they are
                                        products produced on                              transitioned animals,
                                        the operation.                                    and edible and
                                                                                          nonedible animal
                                                                                          products produced on
                                                                                          the operation.
----------------------------------------------------------------------------------------------------------------


[[Page 23467]]

IV. Related Documents

    Documents related to this proposed rule include the Organic Foods 
Production Act of 1990, as amended, (7 U.S.C. 6501-6522) and its 
implementing regulations (7 CFR part 205). The NOSB deliberated and 
made the recommendations described in this proposal at public meetings 
announced in the following Federal Register Notices: (1) 67 FR 19375, 
(May 7, 2002); (2) 67 FR 54784, (September 17, 2002); (3) 67 FR 62949, 
(October 19, 2002); and (4) 68 FR 23277, (May 13, 2003). AMS also 
considered NOSB recommendations from June 2, 1994, and March 20, 1998, 
in the development of this proposed rule. NOSB meetings are open to the 
public and allow for public participation.
    AMS published a series of proposed rules that addressed, in part, 
the origin of livestock provisions at: (1) 62 FR 65850, (December 16, 
1997); (2) 65 FR 13512, (March 13, 2000); and (3) 71 FR 24820, (April 
27, 2006). Past final rules relevant to this topic were published at: 
(1) 65 FR 80548, (December 21, 2000); and 71 FR 32803, (June 7, 2006).

V. Statutory and Regulatory Authority

    The Organic Foods Production Act of 1990, as amended, authorizes 
AMS to administer the NOP (7 U.S.C. 6501-6502). Under the NOP, AMS 
oversees national standards for the production and handling of 
organically produced agricultural products. One of the purposes of OFPA 
is to assure consumers that organically produced products meet a 
consistent standard (7 U.S.C. 6501(2)). Section 6509 of the OFPA also 
requires that livestock to be slaughtered, sold or labeled as organic 
be managed in accordance with the Act, allows for the use of breeder 
stock, and provides for an exception to transition dairy stock to 
organic milk production.

 A. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives, and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated as a ``significant 
regulatory action'' under section 3(f) of Executive Order 12866, and, 
therefore, has been reviewed by the Office of Management and Budget 
(OMB).
Need for the Rule
    This action is necessary to create greater consistency in the 
implementation of a standard for the transition of dairy animals into 
organic production and for the management of breeder stock. AMS has 
determined that the current regulations regarding the transition of 
dairy animals and the management of breeder stock on organic operations 
need additional specificity and clarity to improve AMS' ability to 
efficiently administer the NOP. A stated purpose of the OFPA is to 
assure consumers that organically produced products meet a consistent 
and uniform standard (7 U.S.C. 6501). This action is being taken to 
facilitate and improve compliance and enforcement and to satisfy 
consumer expectations that organic livestock meet a consistent and 
uniform standard, regardless of how a producer transitioned into 
organic production.
    In a 2006 final rule related to this issue, AMS acknowledged that 
the regulations provide different allowances for replacing organic 
dairy animals dependent on how a producer transitioned to organic 
production.\32\ AMS further stated that, given the almost 13,000 
comments on the 2006 proposed rule, the issue remained a significant 
concern of the organic community, including organic dairy producers, 
certifying agents, trade organizations, and consumers. AMS developed 
this proposal in response to this stakeholder feedback.
---------------------------------------------------------------------------

    \32\ 71 FR 32804.
---------------------------------------------------------------------------

    Further, as cited in the July 2013 OIG audit of organic milk 
operations,\33\ implementation of the origin of livestock requirements 
continues to differ across producers and certifying agents. As part of 
this audit, some certifying agents conveyed that the current 
regulations create challenges in implementation such that some organic 
dairy producers may have a competitive advantage over others. 
Similarly, certifying agents and organic operations have recommended 
more detail in the regulations on the management of breeder stock to 
support implementation across the organic sector.
---------------------------------------------------------------------------

    \33\ The July 2013 Office of Inspector General (OIG) audit 
report on organic milk operations may be accessed at the following 
Web site: http://www.usda.gov/oig/webdocs/01601-0002-32.pdf.
---------------------------------------------------------------------------

    This action is also necessary to address the persistent requests to 
AMS for further developed origin of livestock standards that meet the 
expectations of the NOSB and the majority of stakeholders. Setting an 
enforceable practice standard would ensure consistency across the 
industry. Because organic products cannot be distinguished from 
nonorganic products based on sight inspection, consumers rely on 
process verification methods such as certification to a uniform 
standard to ensure that organic claims are true. For this reason, 
organic products have been described as ``credence goods'' in the 
economics literature.34 35 Credence goods have properties 
that are difficult to verify, both before and after purchase. Organic 
dairy products are an example of a ``credence good'' for which 
consistent implementation of a common production standard across the 
sector supports continued consumer confidence. This action would help 
maintain consumer trust in the organic seal. ``Customers'' includes 
both consumers purchasing organic milk, yogurt, butter, ice-cream, and 
cheese at retail markets and organic livestock producers purchasing 
organic dairy animals for their own operations.
---------------------------------------------------------------------------

    \34\ Caswell, Julie A. and Eliza M. Mojduszka. 1996. ``Using 
Informational Labeling to Influence the Market for Quality in Food 
Products.'' American Journal of Agricultural Economics. Vol. 78, No. 
5: 1248-1253.
    \35\ Zorn, Alexander, Christian Lippert, and Stephan Dabbert. 
2009. ``Economic Concepts of Organic Certification.'' Deliverable 5 
for Project CERTCOST: Economic Analysis of Certification Systems in 
Organic Food and Farming. http://www.certcost.org/Lib/CERTCOST/Deliverable/D11_D5.pdf.
---------------------------------------------------------------------------

    While a dairy transition is permitted by the OFPA, this proposed 
rule would limit dairy animal transition. As discussed, AMS received 
extensive comments in 2006 on the issue of dairy transition. Commenters 
stated that consumers expect that organic milk is produced without the 
use of excluded methods and substances prohibited under the regulations 
such as hormones, antibiotics, and certain pesticides. Market research 
suggests that these comments are indicative of a customer base who 
expects ``organic'' to be produced without the use of such substances. 
In 2013, a report assessing trends in the organic market stated that 
consumers identified ``absence of pesticides'', ``absence of growth 
hormones'', and ``absence of antibiotics'' as properties they associate 
with the term ``organic'' in 64%, 59%, and 55% of the responses 
respectively.\36\ Over

[[Page 23468]]

thirty percent of those surveyed for this report indicated that 
avoidance of prohibited substances motivated them to buy organic 
products.\37\ Based on past comments, stakeholders argue that sourcing 
or raising animals as organic from last third of gestation is better 
aligned with the expectation that animals producing organic milk have 
never received prohibited substances such as antibiotics or growth 
hormones.
---------------------------------------------------------------------------

    \36\ The Hartman Group, Inc., The Organic and Natural Consumer 
2013: Traits and Trends. The Cultural Context Around Behavior. Of 
1,569 respondents responding in 2012 to the question, ``From the 
following list, what properties do you think are implied or 
suggested by the term ``organic''?
    \37\ Ibid. Of 1,036 respondents responding in 2012 to the 
question about the reasons why they continue to purchase organic 
products, 38% stated to avoid products that rely on pesticides or 
other chemicals, 34% stated to avoid genetically modified products, 
34% stated to avoid products that rely on growth hormones, and 29% 
stated to avoid products that rely on antibiotics.
---------------------------------------------------------------------------

Baseline
    This baseline focuses on the current market and production of 
heifers and cows as the predominant portion of the industry that would 
be affected and for which data is available. The baseline and 
subsequent calculations do not include quantitative estimates for dairy 
production related to sheep or goats. AMS used multiple data sources to 
describe the baseline and build quantitative estimates for this 
proposed rule. The first source is the NOP list of all certified 
operations. In January of each calendar year, every certifying agent is 
required to submit an annual list of their certified operations to the 
NOP (7 CFR 205.501(a)(15)(ii)). The NOP consolidates this information 
once per year into a public, searchable database.\38\ Another source of 
data is the Organic Trade Association's (OTA) 2014 Organic Industry 
Survey. The Nutrition Business Journal conducts this survey on behalf 
of OTA to summarize market information and trends within the organic 
industry across food and non-food sectors.\39\ AMS also utilized 
information from the National Agricultural Statistics Service (NASS) 
2011 Organic Production Survey.\40\ The NASS data includes acreage, 
production and sales data for organic crops and livestock. USDA's 
Economic Research Service (ERS) also conducts the Agricultural Resource 
Management Survey (ARMS), which includes questions about organic 
production practices.\41\ In 2010, ERS conducted a supplemental ARMS 
that focused on organic dairy operations. AMS worked with ERS to 
analyze recent ARMS data and develop an estimation of organic dairy 
production practices and costs for this proposed rule. Finally, AMS 
used summary information from a 2013 ERS report on organic 
production.\42\ The ERS report was based on data from state and private 
certifying agents.
---------------------------------------------------------------------------

    \38\ The most recent list of certified operations may be found 
at the following link: http://apps.ams.usda.gov/nop/.
    \39\ Organic Trade Association (OTA)/Nutrition Business Journal, 
2014 Organic Industry Survey. Nutrition Business Journal conducted a 
survey between Jan 27, 2014 and April 5, 2014 to obtain information 
for their estimates. Over 200 organic firms responded to the survey. 
NBJ used secondary data from SPINS, Nielsen, and IRI to supplement 
the survey and build market statistics.
    \40\ The NASS survey may be found at the following link: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1859.
    \41\ The ERS ARMS survey information may be found at the 
following link: http://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-production-practices.aspx.
    \42\ The ERS 2013 Summary of Organic Production may be found at 
the following link: http://www.ers.usda.gov/data-products/organic-production.aspx.
---------------------------------------------------------------------------

The Organic Dairy Market
    According to the 2013 Organic Trade Association (OTA) Industry 
Survey, U.S. organic food, fiber, and agricultural product sales were 
over $32 billion in 2013, up 11.4 percent from 2012.\43\ Organic dairy 
is the second largest sector in organic retail sales (15.2%), after 
fruits and vegetables (36%). Sales of organic dairy products, including 
milk, cream, yogurt, cheese, butter, cottage cheese, sour cream, and 
ice-cream, reached almost $4.2 billion in 2012. Table 3 shows the 
organic dairy market characteristics by subcategory.
---------------------------------------------------------------------------

    \43\ OTA 2014 Organic Industry Survey.

                           Table 3--Organic Dairy Market--Retail Sales by Subcategory
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percentage of
                           Subcategory                              2013 Sales      2013 Growth    organic dairy
                                                                                     (percent)       sales \a\
----------------------------------------------------------------------------------------------------------------
Milk/Cream......................................................           2,813             7.3            62.7
Yogurt..........................................................           1,021            -0.2            22.8
Cheese..........................................................             331            18.9             7.4
Butter/Cottage Cheese/Sour Cream................................             261            17.9             5.8
Ice-Cream.......................................................              60            19.1             1.3
----------------------------------------------------------------------------------------------------------------
\a\ While Organic Trade Association's 2014 Organic Industry Survey included eggs as a subcategory for its
  summary on organic dairy sales, we have excluded the data on eggs from this table.

    While the majority of organic dairy products are marketed under 
regional or national brands, sales of products under private label 
arrangements accounted for between 30-40% of the organic dairy market 
in 2013.\44\ Both OTA's 2013 and 2014 Organic Industry Surveys cite 
drought and feed costs as the key constraints on market growth. 
However, constraints to market growth vary regionally and across 
different size operations. According to a 2009 ERS report that analyzed 
2005 ARMS data, 55% of farms in the West reported sourcing inputs as 
the most difficult aspect of organic milk production versus only 24% of 
farms in the Upper Midwest region and 19% of farms in the 
Northeast.\45\ This is likely correlated with size of operation since 
organic dairies in the West tend to be larger in size and, therefore, 
have increased feed demand. Certification and compliance were cited as 
the most difficult aspect of organic milk production for farms in the 
Upper Midwest and Northeast (51% and 32% respectively).
---------------------------------------------------------------------------

    \44\ Organic Trade Association (OTA)/Nutrition Business Journal, 
2013 Organic Industry Survey. Private label arrangements allow 
businesses to offer or sell their products under another company's 
brand name, often a store brand.
    \45\ Economic Research Service. 2009. Characteristics, Costs, 
and Issues for Organic Dairy Farming (pg. 33). Report by William 
McBride and Catherine Greene. Statistics based on 2005 ARMS data. 
Report available online at: http://www.ers.usda.gov/publications/err-economic-research-report/err82.aspx.
---------------------------------------------------------------------------

Overview of Organic Dairy Production
    Current dairy production and husbandry practices provide important 
context for the baseline and cost analysis. This section describes 
nonorganic and organic heifer development and highlights how they 
differ. Principles of management for other species would be similar, 
but the timing will be different. For example, a goat begins its first 
lactation at 1 year of age while a cow begins its first lactation at 2 
years of age.

[[Page 23469]]

    When a heifer calf is born on a dairy farm, the producer ensures 
that the calf receives colostrum, either from a bottle or nursing her 
dam. The heifer calf is then separated from the dam and placed in 
group, pair, or single housing. Some larger dairy producers contract 
with heifer development farms to raise replacement heifers. These 
heifer development farms pick up the heifer calves and raise them at 
another location until they are within a month or two of their first 
lactation. Heifer calves are raised on a diet of milk replacer or 
liquid milk with free choice roughages and grains. Once the calves have 
learned how to eat grains and roughages, the calves are weaned from the 
milk.
    After weaning, the heifers are developed to grow at a moderate pace 
until they are ready to be bred. During this time, the heifers may be 
raised on pasture, fed a complete ration or a mixture of both. Once the 
heifers are about 14 or 15 months of age, they are bred, gestate for 
about 9 months, and calve around 2 years of age. Usually once the 
heifers are bred or ``settled,'' they will be fed a diet which allows 
them to slowly grow in terms of frame size and body weight. As the 
heifer approaches her due date, she is termed a ``springer'' or is 
described as ``freshening.'' After she calves, she begins lactating, is 
moved to the milking herd and called a ``first calf heifer.''
    Organic producers follow similar timelines, but use some different 
practices. Organic producers must provide a feed ration comprised of 
certified organic agricultural feedstuffs. At this point in time, AMS 
is not aware of any certified organic milk replacer produced in the US. 
As a result, organically raised dairy calves must be fed organic milk. 
This makes the practice of sending young calves to heifer development 
farms less feasible for organic producers as these heifer development 
farms may not have access to certified organic milk. In addition, 
organic regulations require that all organically managed ruminants 
receive 30% of their dry matter intake from pasture during the grazing 
season, though dairy calves under 6 months of age are excluded from 
this provision. By the age of 6 months, dairy calves must be on pasture 
during the grazing season. Nonorganic calves do not have a pasture 
requirement.
    Organic producers must also follow certain health care practices. 
For example, organic producers may not use antibiotics to prevent 
disease. Instead, organic producers must prevent the animals from 
getting sick using other management practices such as vaccinations. 
However, if an animal does get sick, organic producers are required to 
use medication to restore the animal to health even if the animal loses 
organic status. Once the animal loses organic status, the animal could 
return to organic milk production only as part of a one-time transition 
with another producer.
    Organic producers also may not use hormonal methods to synchronize 
estrus. Nonorganic producers may use hormonal products to both initiate 
estrus and synchronize estrus among the heifers to aid in conception. 
Certain synchronization protocols allow for a timed breeding method 
that does not require observation of a standing heat to identify 
estrus.
    Dairy farms and heifer development farms which produce transitioned 
dairy animals are able to raise the heifer calves nonorganically until 
12 months before organic milk production begins. The pre-weaning phase 
of life is the time in which heifer calf mortality is the highest and 
the diet is the most expensive on a per calorie basis. Nonorganic 
practices to reduce mortality and expense during this pre-weaning phase 
include the use of milk replacer and, at times, antibiotics. By the 
time the dairy heifer reaches one year of age, most health threats are 
past and the animal is consuming a less expensive diet.
    AMS is not aware of any national survey that compares the culling 
rate of organic dairy animals with nonorganic dairy animals. In 2007, 
the USDA Animal and Plant Health Inspection Service (APHIS) conducted 
the National Animal Health Monitoring System (NAHMS) survey for dairy 
animals; a follow-up is planned for 2014.\46\ In this survey of dairy 
animals, the national rate of permanently removing a dairy animal from 
a farm was 23.6 percent. However, this included animals that were sold 
as replacement females to other dairies. This also excluded the 
percentage of animals which died. The percentage of cows culled did not 
vary depending upon the size of the producer nor did it vary depending 
upon the region of the U.S. in which the dairy was located. Most dairy 
cows were removed for udder problems or reproductive problems, followed 
by lameness or poor milking ability. Overall, mortality rates were 7.8% 
for un-weaned heifers, 1.8% for weaned heifers, and 5.7% for cows.
---------------------------------------------------------------------------

    \46\ USDA APHIS. NAHMS Dairy 2007 Part I: Reference of Dairy 
Cattle Health and Management Practices in the United States, 2007. 
This survey included both nonorganic and organic dairy animals. 
Available online at: http://www.aphis.usda.gov/wps/portal/banner/help?1dmy&urile=wcm%3apath%3a%2Faphis_content_library%2Fsa_our_focus%2Fsa_animal_health%2Fsa_monitoring_and_surveillance%2Fsa_nahms%2Fct_nahms_dairy_studies#dairy2014.
---------------------------------------------------------------------------

    From this information, an average dairy farm would sell 23.6% of 
its milking cattle and would lose 5.7% of its milking cattle to death. 
This would require that the average dairy farm in the U.S. be able to 
raise or purchase females that represent about 30% of the farm's herd 
size just to maintain current size. Based on this average national need 
for replacements, the overall U.S. dairy herd (both nonorganic and 
organic) would have excess replacement females available for 
development. At this rate, the organic milking herd should be able to 
be maintained by last third gestation replacement females. In addition, 
the organic milking herd should also provide a sufficient quantity of 
females if market conditions lead to an expansion of the number of 
organic dairy animals.
    Specific to organic production, the U.S. had approximately 1,850 
organic dairy farms that milked 200,000 cows in 2011.\47\ Of these 
farms, 1,823 farms were producing organic milk from dairy cows and 19 
farms were producing organic milk from goats. The number of certified 
organic sheep, buffalo, and bison dairy operations for that period is 
not known. This proposed action would apply to any animals (e.g., 
heifers/cows, goats, sheep) that produce milk for an organic operation. 
The baseline discussion and the following cost analysis focus on 
heifers and cows as the predominant portion of the industry affected by 
this proposed action and due to the limited data available on other 
types of dairy animals.
---------------------------------------------------------------------------

    \47\ USDA NASS. 2011. Census of Agriculture--Organic Production 
Survey. Available online at: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1859.
---------------------------------------------------------------------------

    Based on the NASS survey, Table 4 shows that the highest 
concentration of organic dairy farms is in the Northeast and Upper 
Midwest.

[[Page 23470]]



                       Table 4--Top States With Organic Dairy Farms Compared to Production
----------------------------------------------------------------------------------------------------------------
                                                                Percent of
                                                 Number of        U.S. of      Milk  production     Percent of
                                               organic dairy   organic dairy       (pounds)          U.S. milk
                                                   farms           farms                            production
----------------------------------------------------------------------------------------------------------------
United States...............................           1,823  ..............       2,797,845,926  ..............
Wisconsin...................................             397            21.7         313,991,661            11.2
Pennsylvania................................             236            12.9         148,704,869             5.3
New York....................................             235            12.9         218,597,110             7.8
Vermont.....................................             180             9.9         149,649,913             5.3
Texas.......................................               8             0.4         423,558,952            15.1
California..................................              72             3.9         469,148,296            16.8
----------------------------------------------------------------------------------------------------------------

    The four states with the largest number of certified organic dairy 
farms (Wisconsin, Pennsylvania, New York, and Vermont) account for 57 
percent of the total farms. However, those states represent less than 
30 percent of national organic milk production. By contrast, the West 
and Southwest account for the highest milk production per farm. The two 
highest-producing states (California and Texas) represented only 4.3 
percent of total certified organic dairy farms, while producing 31.9 
percent of the total organic milk nationally. According to 2010 ARMS 
data, the mean size of an organic dairy farm nationally was 77 cows. In 
the Northeast and the Upper Midwest, the mean number of organic cows 
per farm was 64. In the West, the mean number of organic cows per farm 
was 288. Both ARMS and NASS surveys demonstrate similar distributions 
of both farms and milk production. The 2010 ARMS data also shows that 
organic dairies averaged about 13,900 pounds of milk annually per cow, 
or a daily average of 46 pounds of milk per cow (assuming a 300-day 
lactation period).
    According to 2010 ARMS data, nearly 99 percent of the dairies 
responding to the organic dairy survey reported using replacement 
heifers that were born on the farm, with 96.5 percent reporting that 
the heifers were both born and raised on their operation. For the only 
3.5 percent of dairies that did not raise their replacement heifers on 
their operation, they presumably hired heifer development farms to 
raise the heifers prior to rejoining the herd. Of the farms reporting 
using replacement heifers born on the farm, the average number of 
replacement heifers sourced by this method was 31 head per farm. These 
heifers, born in 2010, would have been added to the milking herd in 
2012.
    Some dairy operations also bought replacement heifers. It is 
unknown whether these replacement heifers were certified organic when 
purchased or were nonorganic animals then transitioned into organic 
production. We would expect a mixture of certified organic heifers and 
transitioning heifers entering organic production that is dependent on 
the producer's current transition approach. Of the farms responding to 
the ARMS, 7.3 percent reported purchasing dairy cows and 5.3 percent 
reported buying replacement heifers. Farms that purchased milk cows 
purchased an average of 8 cows per farm and those that purchased 
heifers bought an average of 15 head.
    Overall, in 2010, organic dairy farms added 58,500 cows and heifers 
to their operations, with 95.7 percent of those born on the operation. 
The remainder of animals came from off farm sources and included milk 
cows, 1,100 head (1.8 percent), and heifers, 1,425 head (2.5 percent).
    Most organic dairies (91 percent) reported selling cull cows. Some 
dairy farms also reported selling milk cows and replacement heifers. Of 
the farms responding to the ARMS, 17.0 percent reported selling milk 
cows and 17.0 percent reported selling replacement heifers. Farms that 
sold milk cows sold an average of 14 cows per farm and those that sold 
replacement heifers sold an average of 11 head. Overall, dairies sold 
4,400 milk cows and 3,500 replacement heifers. Farms could have sold 
these animals into the nonorganic or organic market.
    Information on how many of replacement heifers bought were 
transitioned heifers and how many were managed organically from the 
last third of gestation is not available, and, therefore, AMS is not 
able to quantify the baseline. Certifying agents do not maintain 
aggregated data on what transition approach producers are currently 
implementing. Therefore, we do not have data on how many producers are 
bringing heifers into organic production as nonorganic animals and 
transitioning them into organic versus sourcing and managing animals as 
organic from the last third of gestation. However, the two largest 
producers of branded organic fluid milk both require their supplying 
dairies to supply milk from organic cows, as opposed to transitioning 
new nonorganic animals into organic production. Based on discussions 
with the industry, AMS assumes that, qualitatively, the vast majority 
of replacement heifers purchased is managed organically from the last 
third of gestation and, therefore, would not need to change practices 
due to this proposed action. We seek comment on this assumption and 
data on current industry practice to help refine our estimates.
    As discussed in the BACKGROUND section, under the current baseline, 
we know that producers differ in their transition strategies dependent 
on how the term ``herd'' in the regulations is interpreted and applied. 
The difference in transition approach across producers is, as 
previously discussed, due to both a lack of definition for what a 
``herd'' is and different interpretations of when the transition of a 
herd into organic production should be considered completed. Within the 
existing industry, there are some organic producers who transitioned a 
single ``herd'' of animals into organic production, consider their 
transition complete, and only source animals that are managed 
organically from the last third of gestation. There are other organic 
producers who transitioned their operation to organic, but continue to 
expand their operation by bringing nonorganic animals into organic 
production as additional ``herds''. In some cases, these operations 
have multiple fields on a given location or multiple locations under 
their business and, therefore, consider the herd in a given field or 
location as distinct for the purpose of their transition approach. For 
producers using this kind of multi-herd approach for their operation, 
the proposed action would require them to source organic animals or 
previously transitioned animals across all of their herds, regardless 
of location or multi-herd management strategy. This will, in turn, 
increase their costs as discussed in the cost analysis that follows.

[[Page 23471]]

Alternatives Considered
    As required by E.O. 12866, various alternatives were considered to 
achieve the objectives of this rule. The alternatives considered 
include: (Option A) revising the standard to allow producers to 
transition dairy animals into organic production over a 12-month period 
on a continuous basis; and (Option B) revising the standard to clearly 
convey that a producer with a dairy farm has a one-time exception over 
a 12-month period to transition dairy animals into organic production. 
These options are shown in Table 5 below.

                    Table 5--Alternatives Considered
------------------------------------------------------------------------
             Alternative                          Description
------------------------------------------------------------------------
Option A--Continuous Transition......  Revise standard to allow a
                                        producer to transition dairy
                                        animals into organic production
                                        over a 12-month period on a
                                        continuous basis.
Option B--Use ``Dairy Farm'' as Unit   Revise standard to tie the one-
 of Regulation.                         time transition exception to a
                                        given dairy farm (premises) over
                                        a 12-month period.
Option C--Proposed Rule..............  Revise standard to tie the one-
                                        time transition exception to a
                                        given producer with a dairy farm
                                        over a 12-month period.
------------------------------------------------------------------------

    As discussed, maintaining the status quo (i.e., the baseline unit 
of regulation as a ``herd'') does not further our objective to provide 
additional guidance to the organic dairy industry and, therefore, was 
not considered as a viable alternative. Since 2006, vast stakeholder 
comments have requested that AMS engage in rulemaking to support 
greater consistency in the application of the origin of livestock 
requirements across certifying agents and operations. In addition to 
stakeholder comments, the OIG identified this issue in its July 2013 
audit of organic milk operations and recommended that AMS undertaking 
rulemaking.
Option A
    The first alternative considered (Option A) would amend the 
regulations to specify that a producer could transition dairy animals 
into organic production over a 12-month period on a continuous basis. 
Under OFPA, a dairy animal from which milk or milk products will be 
sold or labeled as organically produced must be raised in accordance 
with OFPA for not less than the 12-month period immediately prior to 
the sale of such milk and milk products (7 U.S.C. 6509(e)(2)(A)). AMS 
could allow transition of any dairy animal into organic production, 
without further limitation, as long as it is organically managed for a 
12-month period prior to the sale of organic milk or milk products. In 
effect, this would mean that a producer could continuously transition 
conventional dairy animals into organic production on an ongoing basis, 
as opposed to allowing a producer to transition animals into organic 
production once.
    While this alternative could achieve the regulatory objective by 
setting a consistent and uniform standard across the organic dairy 
industry, numerous NOSB recommendations and stakeholder comments have 
not suggested this approach. Further, in assessing the baseline, this 
approach would increase the number of nonorganic animals transitioned 
into organic production. If the demand shifts to nonorganic animals for 
transition into organic production, this would reduce the current 
demand, and, thus, value of organic heifers. Further, because consumers 
expect milk to be produced without the use of certain inputs that can 
be used in nonorganic animals (e.g., antibiotics), this approach could 
have unknown, but likely negative, impacts on consumer confidence in 
the growing organic dairy sector.
Option B
    The second alternative considered (Option B) would amend the 
regulations to specify that a dairy farm, as defined by the regulation, 
could transition dairy animals into organic production one-time over a 
12-month period. This would mean that a transition could occur only 
once on a given premises. Under this alternative, a producer could 
transition dairy animals on multiple dairy farms over time as long as 
animals had not been previously transitioned on a given premises. For 
example, if dairy farm location X, Y, and Z had never had animals 
transitioned to organic on their respective premises, then producer A 
could conduct transition on each location (X, Y, and Z) once. If 
producer B then purchased these dairy farms from producer A, producer B 
could not complete a transition on these premises because the location 
had already experienced a one-time transition to organic.
    We did not choose this alternative because it would only meet the 
intent of this regulatory action in a limited way. While it would 
reduce the number of transitions over time, it would allow a given 
producer, with a single organic certificate, to transition dairy 
animals on multiple dairy farms. As discussed in the BACKGROUND 
section, this proposal was drafted to create greater consistency in the 
implementation of the transition mechanism so that it is not used as a 
continual means of producing organic milk without purchasing organic 
stock once a producer has converted to organic production. Furthermore, 
AMS could not identify how a producer and a certifying agent could 
verify that a transition had not already occurred on a given dairy 
farm. This would be especially difficult as time went on and a dairy 
farm may have changed ownership multiple times.
Option C
    The third alternative considered, and selected for this proposed 
action, would provide a limited exception (i.e., a one-time opportunity 
for producers) to transition dairy animals into organic production that 
aligns with both OFPA and the NOSB recommendations. While the NOSB 
recommendations do not provide the level of specificity needed to 
implement this approach, the intent of the NOSB is to require that, 
once an operation is certified organic, any new animals added to that 
operation should be organically managed since last third of gestation. 
This proposed rule would address the NOSB recommendation, adding 
specificity to ensure successful implementation of a uniform and 
consistent standard. AMS considered many options for how to best 
operationalize a one-time exception to transition dairy animals into 
organic production. These options include linking the one-time 
exception to a dairy farm, an operation, persons responsibly connected, 
and the current unit of regulation, a herd. For the reasons previously 
discussed in the OVERVIEW OF PROPOSED AMENDMENTS section, AMS is 
proposing to link the transition exception to a producer.

[[Page 23472]]

    Based on NOSB recommendations and almost 13,000 stakeholder 
comments, this approach would retain the opportunity for new producers 
to transition into organic dairy production and ensure that organic 
products meet a consistent standard to support consumer confidence. 
This approach would require a small number of dairy farms to change 
their current practices for sourcing dairy animals and, as a result, 
would impose some limited costs. This approach is also the more 
pragmatic to implement through the certification and verification 
process as compared to linking the one-time transition to a dairy farm 
(Option B). By linking the transition to a given producer (Option C), a 
producer (e.g., an individual or a corporation) can attest to a 
certifying agent as part of their application for certification that 
they have not already completed a dairy transition and certifying 
agents could verify such attestations by checking past certification 
records associated with that producer.
    The costs and benefits of this approach are discussed in more 
detail below.
Costs of Proposed Rule
    The proposed rule has the potential to increase production costs on 
dairy producers who currently purchase transitioned dairy animals as 
replacements, assuming that transitioned animals are currently being 
sold at a discount to organic replacement animals. Organic dairy 
farmers who regularly purchase transitioned dairy animals as 
replacements and organic operations in the process of expansion are 
likely to face higher costs of production if this rule were finalized 
as proposed. The cost of implementing the proposed rule will fall 
primarily on organic dairies that currently purchase transitioned 
heifers, although dairies currently purchasing organic heifers would be 
expected to pay higher prices in the short-term due to increased 
competition for these animals. Farms that sell their excess organic 
replacement heifers may see an increase in demand for their heifers 
while farms that exclusively raise their own organic replacement 
heifers would not be affected by the proposed rule.
    Overall, this cost analysis uses existing data on the number of 
replacement animals purchased on organic operations to estimate costs. 
Using data by organic operation differs from the proposed unit of 
regulation, which is by producer (i.e., a business entity). We do not 
have data explicitly available by producer. However, we believe that 
this analysis using data by organic operation would be similar to any 
analysis by producer because, in many cases, the operation and producer 
are functionally one in the same. Further, while we do not have data on 
multi-herd producers, this analysis assumes that costs will be 
equivalent on a per cow basis. We are seeking comment on these 
assumptions and any data relevant to sheep and goat dairy production.
Estimated Costs for Dairies
    The ARMS included the total amount spent on replacement heifers, 
but the survey did not distinguish between organic and transitioned 
heifers. For purposes of this analysis, we will assume that 25% to 50 
percent of all purchased heifers are transitioned heifers, or between 
360 and 720 head. This is a broad estimate though we believe that the 
proportion is likely smaller than 50% based on discussions with organic 
dairy producers. The survey results indicated that the average 
replacement heifer cost approximately $898. The University of Minnesota 
Farm Financial Database (FINBIN) includes the average replacement cost 
for organic heifers; between 2006 and 2012 the cost per head ranged 
between $1,200 and $1,900. Extension officials at the University of 
Vermont estimated that organic replacement heifers typically cost 
between $1,600 and $2,000.\48\ Data on the cost of transitioned heifers 
is not available. Using the upper end of these ranges ($2,000), the 
cost of purchasing organic replacement heifers of all weights would be 
$7.6 million per year. This is the total cost, not the additional cost 
of purchasing organic heifers instead of transitioned heifers, so the 
incremental costs will be considerably less. These costs only reflect 
dairy cattle. Costs for purchasing dairy sheep and goats are not 
included in this analysis.
---------------------------------------------------------------------------

    \48\ Conversation with Dr. Bob Parsons, Extension Associate 
Professor at University of Vermont, June 4, 2013.
---------------------------------------------------------------------------

    AMS previously contacted several state extension dairy experts who 
explained that supplies of organic replacement heifers and milk cows 
were in excess supply creating a soft demand.\49\ In addition, the ARMS 
shows that organic dairy farms retained 56,000 replacement heifers 
while selling 32,000 head as cull cattle, milk cows, or replacement 
heifers, indicating that there are ample supplies of replacement 
heifers available. Therefore, the additional demand for organic 
replacement heifers is not expected to lead to an increase in the price 
of replacement heifers. However, to be conservative in estimating the 
additional costs of the proposed rule, the analysis will assume that 
the increased demand will increase the cost of an organic replacement 
heifer by 25 percent, or $500.
---------------------------------------------------------------------------

    \49\ Conversations with Dr. Bob Parsons, Extension Associate 
Professor at University of Vermont, June 4, 2013; Bradley J. Heins, 
Assistant Professor of Organic Dairy Production at University of 
Minnesota, June 5, 2013; and A. Fay Benson, Small Dairy Support, 
Cornell University SCNY Regional Team, June 6, 2013.
---------------------------------------------------------------------------

    Because the price of transitioned heifers is not available, the 
analysis will use the cost of conventional springers \50\ as a 
substitute. Since the cost of a transitioned heifer is likely to be 
more than the cost of a conventional heifer, using the conventional 
springer price will generally overstate the cost of compliance with the 
proposed rule and so provide an upper bound of costs incurred.
---------------------------------------------------------------------------

    \50\ A springer is a heifer that is 7-9 months pregnant and will 
begin producing milk within 2 months.
---------------------------------------------------------------------------

    AMS Livestock, Poultry, and Grain Market News reports on five dairy 
auction markets \51\ in the U.S. Using the reports from the period May 
6, 2013 to June 5, 2013, the average auction price for Approved \52\ 
springers was $1,200 per head. The difference in cost between organic 
heifers and conventional heifers is $800 per head. As discussed, we 
assume that the cost of transitioned heifer is, at a minimum, 
equivalent to a conventional heifer. With the assumed $500 increase in 
cost of organic heifers, the total difference will be $1,300. The 
difference in cost between a transitioned heifer and an organic heifer 
is summarized in Table 6.
---------------------------------------------------------------------------

    \51\ The markets are the Mammoth Cave Dairy Auction, Smiths 
Grove, KY; Springfield Livestock Marketing Center, Springfield, MO; 
Producers Auction Yards, Norwood, MO; New Holland Sales Stables, New 
Holland, PA; and Toppenish Monthly Dairy Replacement Sale, 
Toppenish, WA.
    \52\ Dairy cattle are classified into four categories: Supreme, 
Approved, Medium, and Common. The most common category of springers 
sold is Approved.

[[Page 23473]]



                 Table 6--Difference in Cost Between a Transitioned Heifer and an Organic Heifer
----------------------------------------------------------------------------------------------------------------
                                                                    Low end of      High end of
                                                                       range           range        Value used
----------------------------------------------------------------------------------------------------------------
Cost of organic replacement heifer..............................          $1,200          $2,000          $2,000
Increased premium for organic heifer due to increased demand      ..............  ..............             500
 (assumed)......................................................
    Total cost of organic replacement heifer....................  ..............  ..............           2,500
                                                                 -----------------------------------------------
Cost of conventional heifer (used as lower bound for cost of               1,000           1,435           1,200
 transitioned heifer)...........................................
                                                                 -----------------------------------------------
    Cost difference per heifer..................................  ..............  ..............           1,300
----------------------------------------------------------------------------------------------------------------

    According to the NASS 2011 Certified Organic Production Survey, the 
U.S. had approximately 1,850 organic dairy farms that milked 200,000 
cows. Based on the NASS survey results for the total number of organic 
dairy operations and ARMS data on the number of replacement heifers 
purchased, we estimate the total increase in cost of purchasing organic 
heifers instead of transitioned heifers at a maximum of $935,000 per 
year with the assumption that 50% of replacement animals purchased are 
transitioned dairy animals and $468,000 per year with the assumption 
that 25% of replacement animals purchased are transitioned dairy 
animals. If the cost of organic replacement heifers does not increase 
due to current market conditions, the estimate of the total increase in 
cost is significantly less at $576,000 for the 50% assumption and 
$288,000 for the 25% assumption. The additional cost of purchasing 
organic heifers for replacement purposes is summarized in Table 7.

                          Table 7--Additional Cost Incurred To Purchase Organic Heifers
----------------------------------------------------------------------------------------------------------------
                                                                    Total additional cost for dairy producers
                                        Price difference used  -------------------------------------------------
                                                                     25% Assumption           50% Assumption
----------------------------------------------------------------------------------------------------------------
Low Estimate.........................  Uses $800 difference     $288,000...............  $576,000.
                                        between conventional
                                        and organic heifers.
High Estimate........................  Uses $1,300 difference   $468,000 ($180,000 of    $935,000 ($359,000 of
                                        ($800 above plus $500    which is an intra-       which is an intra-
                                        in assumed organic       industry transfer).      industry transfer.
                                        premium).
----------------------------------------------------------------------------------------------------------------

    The cost difference between the low and high estimate ($359,000 or 
$180,000) should not be considered a net cost, but rather an intra-
industry transfer. While some producers who need to purchase organic 
heifers will have additional costs if there is a $500 premium for these 
animals, this premium will stay within the organic dairy sector as a 
benefit to those producers supplying organic heifers. Any intra-
industry transfer is expected to benefit small operations as such 
operations tend to have more flexibility in capacity (e.g., available 
pasture) to accommodate raising organic replacement heifers for the 
organic market. This flexibility is less apparent for large operations. 
Furthermore, the actual costs of this action may be considerably less 
than the low estimate. This analysis is based on a conservative 
assumption that 50 percent of all purchased heifers are transitioned 
heifers. Based on discussions with organic dairy producers, we believe 
that this proportion is likely smaller which would decrease the low 
cost estimate.\53\ The costs of the proposed action will vary by size 
of operation because the proportion of dairies that source at least 
some of their replacement heifers from their own calves also varies by 
size of operation. Of the largest operations in the ARMS data, those 
with 200 or more cows, 96 percent reported that at least some of their 
replacement heifers were born on their operations. All operations with 
between 100 and 199 cows reported that at least some of their 
replacement heifers were born on their operations, and 99 percent of 
operations with fewer than 50 cows and those with between 50 and 99 
cows reported that at least some of their replacement heifers were born 
on their operations.
---------------------------------------------------------------------------

    \53\ Between April 2012 and December 2013, AMS staff contacted 8 
organic dairy producers of various sizes to determine the extent to 
which heifers are raised or purchased on their farms.
---------------------------------------------------------------------------

    Purchases of milk cows and replacement heifers also vary by size. 
Ten percent of operations with fewer than 50 cows reported purchasing 
milk cows, and the average number purchased was 6 head. Five percent of 
operations with between 50 and 99 cows reported purchasing milk cows, 
and the average number purchased was 14 head. Three percent of 
operations with between 100 and 199 cows reported purchasing milk cows, 
and the average number purchased was 10 head. No operations with 200 or 
more cows reported purchasing milk cows.
    The pattern is different for purchasing heifers. Four percent of 
operations with fewer than 50 cows reported purchasing heifers, and the 
average number purchased was 10 head. Seven percent of operations with 
between 50 and 99 cows reported purchasing heifers, and the average 
number purchased was 10 head. Three percent of operations with between 
100 and 199 cows reported purchasing heifers, and the average number 
purchased was 5 head. Eight percent of operations with 200 or more cows 
reported purchasing heifers, and the average number purchased was 76 
head. Based on a cost difference of $1,300 per head between 
transitioned replacement heifers and organic replacement heifers, and 
assuming that half of replacement heifers currently purchased are 
transitioned, dairies with fewer than 50 cows would pay an additional 
$270,000, dairies with between 50 and 99 cows would pay an additional 
$280,000, dairies with between 100 and 199 cows would pay an additional 
$30,000 and dairies with 200 or more cows would pay an additional 
$355,000. The costs by size of operation are summarized in Table 8.

[[Page 23474]]



                                           Table 8--Costs by Size of Operation for Purchasing Organic Heifers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Fewer than 50 cows                50-99 cows                   100-199 cows                200 or more cows
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Size of Operation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of operations that         4%..........................  7%..........................  3%..........................  8%.
 purchased replacement heifers.
Average number of replacement      10 head.....................  10 head.....................  5 head......................  76 head.
 heifers purchased.
Total cost for purchase of         $270,000....................  $280,000....................  $30,000.....................  $355,000.
 replacement heifers across size
 class.
Cost per operation (25% to 50%     $3,250-$6,500...............  $3,250-$6,500...............  $1,600-$3,250...............  $29,700-$49,400.
 transitioned heifers).
--------------------------------------------------------------------------------------------------------------------------------------------------------

Effects on Heifer Development Operations
    Heifer development operations raise heifers either from wet calves 
or weaned calves and generally sell them as springers at about 24 
months of age. To raise organic or transitioned heifers, these 
operations must have organic pasture available for the heifers to 
graze. Operations that raise transitioned heifers may have to increase 
their ownership or leasing of organic pasture to continue to operate at 
their current capacity since organic heifer calves will need access to 
organic pasture for a longer period than transitioned heifers will need 
access to pasture.
    Since the locations, numbers, and sizes of heifer development 
operations are not known, it is not possible to estimate the increased 
costs this will entail. However, it is possible that, to the extent 
that organic heifers sell at a premium to transitioned heifers, the 
increased costs may be at least partially offset by increases in 
revenues from selling organic replacement heifers. We are seeking data 
related to the likely impacts on heifer development operations and 
those for sheep and goats.
Effects on Consumers
    Nearly 99 percent of all dairies report that they source at least 
some of their replacement cows from their own calves, and only 4.3 
percent of all dairies purchase replacement heifers. The 95.7 percent 
of producers that do not purchase replacement heifers would not see an 
increase in costs. To replace purchased transitioned heifers, dairies 
would have to either raise their own replacements or buy them from an 
operation that sells organic replacement heifers. Since the current 
market for replacement heifers is soft and there are ample supplies, as 
detailed above, it is unlikely that the proposed rule would 
significantly increase producer, and therefore, milk costs to the 
consumer.
Benefits of the Proposed Rule
    This proposed rule would bring specificity and clarity to the 
regulations relating to the origin of dairy livestock and the 
management of breeder stock. Greater clarity and specificity will 
create uniform application of the practice standards applied in organic 
production and in turn will help maintain consumer confidence in 
purchasing organic products.
    The Organic Trade Association's (OTA) 2013 U.S. Families' Organic 
Attitudes and Beliefs tracking study identified that 13 percent of 
organic buyers surveyed who saw or heard a negative news story about 
organic chose to buy less organic foods. Further, nearly half of non-
buyers of organic products surveyed displayed a decrease in their 
average level of trust in organic products' authenticity from 5.3 on a 
10-point scale in 2012 to 4.4 in 2013.\54\
---------------------------------------------------------------------------

    \54\ Organic Trade Association. 2013. U.S. Families' Organic 
Attitudes and Beliefs: 2013 Tracking Study. www.ota.com.
---------------------------------------------------------------------------

Conclusions
    A clear and consistent standard for transition of dairy animals 
into organic production is needed and anticipated by dairy producers, 
consumers, trade associations, certifying agents, and the OIG. This 
proposed rule would provide a foundation for compliance and enforcement 
in support of fair competition among dairy producers through a single, 
well-defined standard. AMS is pursing the regulatory option that 
retains the opportunity for new producers to transition into organic 
dairy production once. In the event of emergencies, producers, through 
their certifiers could apply for a temporary variance provided for in 
section 205.290(a).
    AMS is seeking comments on the actual economic impacts, both costs 
and benefits, of this action on the industry. We are specifically 
interested in validating the accuracy of the number of farms impacted, 
validating the accuracy of the estimated number of replacement animals, 
and understanding the number and size of heifer development operations 
that may be affected by this action. The costs and benefits are 
summarized in the Executive Summary and were described in detail in 
this section.
    In addition, and in support of our validation efforts, we also are 
requesting comments on or submissions of applicable farm or industry 
data, data sources, reports, research and other relevant information 
that would help us better understand the full range of impacts of the 
rule on farm income and profitability.

B. Executive Order 12988

    Executive Order 12988 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. This proposed rule 
is not intended to have a retroactive effect.
    States and local jurisdictions are preempted under the OFPA 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 
6514(b) of the OFPA. States are also preempted under sections 6503 and 
6507 of the OFPA 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 6507(b)(2) of the OFPA, 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 6519(f) of the OFPA, this proposed rule would 
not

[[Page 23475]]

alter the authority of the Secretary under the Federal Meat Inspection 
Act (21 U.S.C. 601-624), the Poultry Products Inspection Act (21 U.S.C. 
451-471), or the Egg Products Inspection Act (21 U.S.C. 1031-1056), 
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. 301-399), nor the authority of the 
Administrator of the EPA under the Federal Insecticide, Fungicide and 
Rodenticide Act (7 U.S.C. 136-136(y)).
    Section 6520 of the OFPA 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 OFPA 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.

C. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612) 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.
    The RFA permits agencies to prepare the initial RFA in conjunction 
with other analyses required by law, such as the Regulatory Impact 
Analysis (RIA). AMS notes that several requirements to complete the RFA 
overlap with the RIA. For example, the RFA requires a description of 
the reasons why action by the agency is being considered and an 
analysis of the proposed rule's costs to small entities. The RIA 
describes the need for this proposed rule, the alternatives considered 
and the potential costs and benefits of this proposed rule. In order to 
avoid duplication, we combine some analyses as allowed in section 
605(b) of the RFA. As explained below, AMS expects that the entities 
that could be impacted by this proposed rule would qualify as small 
businesses. In the RIA, the discussion of alternatives and the 
potential costs and benefits pertain to impacts upon all entities, 
including small entities. Therefore, the scope of those analyses is 
applicable to the RFA. The RIA should be referred to for more detail.
    AMS has considered the economic impact of this proposed action on 
small entities. Small entities include producers transitioning into 
organic dairy production, existing organic dairy producers, and 
producers that raise replacement animals for organic dairies. AMS 
believes that the cost of implementing the proposed rule will fall 
primarily on organic dairies that currently purchase transitioned 
heifers, although dairies currently purchasing organic heifers would be 
expected to pay higher prices in the short-term due to increased 
competition for these animals. Farms that sell their excess organic 
replacement heifers may see an increase in demand for their heifers 
while farms that raise their own organic replacement heifers would not 
be affected by the proposed rule. AMS believes there may be a limited 
number of heifer development operations who could be impacted by this 
action. However, since the locations, numbers, and sizes of heifer 
development operations are not known, it is not possible to estimate 
the number of such entities and any increased costs for those entities.
    This proposed rule would also affect certifying agents that certify 
organic dairy operations. The Small Business Administration (SBA) 
defines small agricultural service firms, which includes certifying 
agents, as those having annual receipts of less than $7,000,000 (North 
American Industry Classification System Subsector 115--Support 
Activities for Agriculture and Forestry). There are currently 84 USDA-
accredited certifying agents; based on a query of the NOP certified 
organic operations database, there are approximately 53 certifying 
agents who are currently involved in the certification of organic 
dairies. AMS believes that these certifying agents would meet the 
criterion for a small business. While certifying agents are small 
entities that will be affected by this proposed rule, we do not expect 
these certifying agents to incur significant costs as a result of this 
action. Certifying agents already must comply with the current 
regulations, e.g., maintaining certification records for organic dairy 
operations. Their primary new responsibility under this proposal will 
be to determine, through the existing application process for organic 
certification, a producer's eligibility for a one-time transition into 
organic production.
    For the RFA analysis, AMS focused on estimating how different size 
organic dairy operations (small versus large) would be impacted as a 
result of purchasing all organic dairy replacement animals. As 
discussed above, we do not have data on heifer development operations 
that raise dairy replacement heifers and are unable to estimate the 
impacts on these entities. As defined by the SBA (13 CFR 121.201), 
small agricultural producers are defined as those having annual 
receipts of less than $750,000. AMS used this SBA criterion to identify 
large organic dairy operations, those with cash receipts of more than 
$750,000, and small operations, those with cash receipts of $750,000 or 
less. The ARMS dataset estimates that 95 percent had cash receipts 
below $750,000 and 5 percent had cash receipts above $750,000. Using 
the NASS estimate for the total number of organic dairy operations, AMS 
estimates that, in 2011, there were 91 large operations and 1,756 
operations that would be considered small under the SBA criterion.
    AMS notes that there is little variation in the proportion of 
organic dairies that source at least some of their replacement heifers 
from their own calves. Of the large operations, 96 percent reported 
that at least some of their replacement heifers were born on their 
operations. About 99 percent of small operations reported sourcing at 
least some of their replacement heifers from calves born on their 
operations.
    While the frequency of purchases of replacement heifers varied 
little by size, our analysis shows that the mean number of replacement 
heifers purchased was significantly different across size categories. 
Small operations were slightly less likely to buy replacement heifers 
(5.3 percent versus 5.5 percent). Of the small operations that 
purchased replacement heifers, the average number purchased was 10 
head, compared with an average purchase of 107 head for large 
operations. For this cost analysis, we assumed a cost difference of 
$1,300 per head between transitioned replacement heifers and organic 
replacement heifers and assumed that half of replacement heifers 
currently purchased are transitioned.\55\ Based on our analysis, AMS 
estimates that, under the proposed rule, small operations would 
collectively spend an additional $588,000 for heifers. Large operations 
would collectively pay an additional $347,000 for heifers. Of the 
operations that purchased heifers, the average additional cost per 
operation would be $6,300 for small operations

[[Page 23476]]

and $70,000 for large operations. AMS notes that this analysis assumed 
that there is no difference in the cost per head paid by large and 
small operations for purchases of replacement heifers. Table 9 
summarizes the cost analysis using the SBA criterion for small 
businesses (i.e., producers with less than $750,000 in cash receipts).
---------------------------------------------------------------------------

    \55\ The determination of a cost difference of $1,300 per head 
and the assumption about the proportion of replacement heifers that 
are transitioned is discussed in the RIA. See section on EO 12866 
and 13563.

 Table 9--Cost of Organic Replacement Heifers by SBA Criterion for Small
                               Businesses
------------------------------------------------------------------------
                                     Small operations   Large operations
                                       (<$750,000)        (>=$750,000)
------------------------------------------------------------------------
Total cost (all operations).......           $588,000           $347,000
Per operation purchasing                  3,150-6,300      35,000-70,000
 replacement heifers (25% to 50%
 transitioned replacements).......
------------------------------------------------------------------------

    To understand the potential costs in context, we used the higher 
average cost estimate per operation from Table 9 for the purchase of 
organic replacement heifers (i.e., $6,300 for small; $70,000 for large) 
and compared it to the average gross cash farm income for each size 
category. In 2011, the average gross farm cash income for small 
operations was $211,375, and $2,348,345 for large operations. For both 
small and large operations, the average additional costs imposed by the 
requirement to purchase organic replacement heifers accounts for 
approximately 2.9 percent of an operation's average gross cash farm 
income. AMS believes that any costs incurred by producers in complying 
with this proposed action would be offset by a stronger marketplace for 
organic dairy products. If implemented, this action would, as discussed 
in the benefits portion of the RIA, ensure that consumer expectations 
are met and support the growing market for these organic products. AMS 
believes that, over the long run, the economic impact on producers of 
not implementing this proposed rule would be greater than the economic 
impact of this proposed rule due to the need for greater consistency in 
applying the origin of livestock standard across the organic dairy 
sector.
    In addition, AMS has not identified any relevant Federal rules that 
are currently in effect that duplicate, overlap, or conflict with this 
proposed rule. This action provides additional clarity on the origin of 
livestock requirements that are specific and limited to the USDA 
organic regulations.

D. Executive Order 13175

    This proposed rule has been reviewed in accordance with the 
requirements of Executive Order 13175, ``Consultation and Coordination 
with Indian Tribal Governments.'' Executive Order 13175 requires 
Federal agencies to consult and coordinate with tribes on a government-
to-government basis on policies that have tribal implications, 
including regulations, legislative comments or proposed legislation, 
and other policy statements or actions that have substantial direct 
effects on one or more Indian tribes, on the relationship between the 
Federal Government and Indian tribes or on the distribution of power 
and responsibilities between the Federal Government and Indian tribes.
    AMS has assessed the impact of this rule on Indian tribes and 
determined that this rule may have tribal implications that require 
tribal consultation under EO 13175. If a Tribe requests consultation, 
AMS will work with the Office of Tribal Relations to ensure meaningful 
consultation is provided where changes, additions and modifications 
identified herein are not expressly mandated by Congress.

E. Paperwork Reduction Act

    No additional collection or recordkeeping requirements are imposed 
on the public by this proposed rule. Accordingly, OMB clearance is not 
required by the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, 
Chapter 35.

F. Civil Rights Impact Analysis

    AMS has reviewed this proposed rule in accordance with the 
Department Regulation 4300-4, Civil Rights Impact Analysis (CRIA), to 
address any major civil rights impacts the rule might have on 
minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, AMS has determined that 
this rule would only impact the organic practices of organic producers 
and that this rule has no potential for affecting producers in 
protected groups differently than the general population of producers. 
This rulemaking was initiated to clarify a regulatory requirement and 
enable consistent implementation and enforcement.
    Protected individuals have the same opportunity to participate in 
the NOP as non-protected individuals. The USDA organic regulations 
prohibit discrimination by certifying agents. Specifically, section 
205.501(d) of the current regulations for accreditation of certifying 
agents provides that ``No private or governmental entity accredited as 
a certifying agent under this subpart shall 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.'' Paragraph 205.501(a)(2) requires ``certifying agents to 
demonstrate the ability to fully comply with the requirements for 
accreditation set forth in this subpart'' including the prohibition on 
discrimination. The granting of accreditation to certifying agents 
under section 205.506 requires the review of information submitted by 
the certifying agent and an on-site review of the certifying agent's 
operation. Further, if certification is denied, section 205.405(d) 
requires that the certifying agent notify the applicant of their right 
to file an appeal to the AMS Administrator in accordance with section 
205.681. These regulations provide protections against discrimination, 
thereby permitting all producers, regardless of race, color, national 
origin, gender, religion, age, disability, political beliefs, sexual 
orientation, or marital or family status, who voluntarily choose to 
adhere to the rule and qualify, to be certified as meeting NOP 
requirements by an accredited certifying agent. This proposed rule in 
no way changes any of these protections against discrimination.

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, 7 CFR part 205 is 
proposed to be amended as follows:

PART 205--NATIONAL ORGANIC PROGRAM

0
1. The authority citation for 7 CFR part 205 continues to read:

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

0
2. Section 205.2 is amended by adding in alphabetical order definitions 
for

[[Page 23477]]

``dairy farm,'' ``organic management,'' third-year transitional crop,'' 
``transitional crop,'' and ``transitioned animal'' to read as follows:


Sec.  205.2  Terms defined.

* * * * *
    Dairy farm. A premises with a milking parlor where at least one 
lactating animal is milked.
* * * * *
    Organic management. Management of a production or handling 
operation in compliance with all applicable production and handling 
provisions under this part.
* * * * *
    Third-year transitional crop. Crops and forage from land, included 
in the organic system plan of a producer's operation, that has had no 
application of prohibited substances within 2 years prior to harvest of 
the crop or forage.
* * * * *
    Transitional crop. Any agricultural crop or forage from land, 
included in the organic system plan of a producer's operation, that has 
had no application of prohibited substances within one year prior to 
harvest of the crop or forage.
    Transitioned animal. A dairy animal that was converted to organic 
milk production in accordance with Sec.  205.236(a)(2); offspring borne 
to a transitioned animal that, during its last third of gestation, 
consumes third year transitional crops; or offspring borne during the 
one-time transition exception that themselves consume third year 
transitional crops. Such animals must not be sold, labeled, or 
represented as organic slaughter stock or for the purpose of organic 
fiber.
* * * * *
0
3. Section 205.236 is revised to read as follows:


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. A producer as defined in Sec.  205.2 may 
transition dairy animals into organic production only once. A producer 
is eligible for this transition only if the producer starts a new 
organic dairy farm or converts an existing nonorganic dairy farm to 
organic production. A producer must not transition any new animals into 
organic production after completion of this one-time transition. This 
transition must occur over a continuous 12-month period prior to 
production of milk or milk products that are to be sold, labeled, or 
represented as organic, and meet the following conditions:
    (i) During the 12-month period, dairy animals must be under 
continuous organic management;
    (ii) During the 12-month period, the producer should describe the 
transition as part of its organic system plan and submit this as part 
of an application for certification to a certifying agent, as required 
in Sec.  205.401;
    (iii) During the 12-month period, dairy animals and their offspring 
may consume third-year transitional crops;
    (iv) Offspring born during or after the 12-month period are 
transitioned animals if they consume third-year transitional crops 
during the transition or if the mother consumes third year transitional 
crops during the offspring's last third of gestation;
    (v) Offspring born from transitioning dairy animals are organic if 
they are under continuous organic management and if only certified 
organic crops and forages are used from their last third of gestation;
    (vi) All dairy animals must end the transition at the same time;
    (vii) Dairy animals that complete the transition are transitioned 
animals and must not be used for organic livestock products other than 
organic milk;
    (viii) After the 12-month period ends, transitioned animals may 
produce organic milk on any organic dairy farm as long as the animal is 
under continuous organic management at all times on a certified organic 
operation; and
    (ix) After the 12-month period ends, any new dairy animal brought 
onto a producer's dairy farm(s) for organic milk production must be an 
animal under continuous organic management from the last third of 
gestation or a transitioned animal sourced from another certified 
organic dairy farm.
    (3) Breeder stock. Livestock used as breeder stock may be brought 
from a nonorganic operation onto an organic operation at any time, 
Provided, That the following conditions are met:
    (i) Such breeder stock must be brought onto the operation no later 
than the last third of gestation if its offspring are to be raised as 
organic livestock; and
    (ii) Such breeder stock must be managed organically throughout the 
last third of gestation and the lactation period during which time they 
may nurse their own offspring.
    (b) The following are prohibited:
    (1) Livestock, edible livestock products, or nonedible livestock 
products such as animal fiber that are removed from an organic 
operation and subsequently managed on a nonorganic operation may not be 
sold, labeled, or represented as organically produced.
    (2) Breeder stock, dairy stock, or transitioned animals that have 
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, including whether they are transitioned animals, and edible 
and nonedible animal products produced on the operation.
0
4. Section 205.237 is amended by revising paragraph (a) to read as 
follows:


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 handled 
by operations certified to the NOP, except as provided in Sec.  
205.236(a)(2)(iii), except, that, synthetic substances allowed under 
Sec.  205.603 and nonsynthetic substances not prohibited under Sec.  
205.604 may be used as feed additives and feed supplements, Provided, 
That, all agricultural ingredients included in the ingredients list, 
for such additives and supplements, shall have been produced and 
handled organically.
* * * * *
0
5. Section 205.239 is amended by revising paragraph (a)(3) to read as 
follows:


Sec.  205.239  Livestock living conditions.

    (a) * * *
    (3) Appropriate clean, dry bedding. When roughages are used as 
bedding, they shall have been organically produced in accordance with 
this part by an operation certified under this part, except as provided 
in Sec.  205.236(a)(2)(iii), and, if applicable, organically handled by 
operations certified to the NOP.
* * * * *

    Dated: April 23, 2015.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2015-09851 Filed 4-27-15; 8:45 am]
BILLING CODE P